Federal Express 2009 Annual Report Download - page 11

9
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Overview of Financial Section
The fi nancial section of the FedEx Corporation (“ FedEx” ) Annual
Report (“ Annual Report”) consists of the following M anagement’s
Discussion and Analysis of Results of Operations and Financial
Condition (“MD&A”), the Consolidated Financial Statements and
the notes to the Consolidated Financial Statements, and Other
Financial Information, all of which include information about our
signifi cant accounting policies, practices and the transactions
that underlie our fi nancial results. The following MD&A describes
the principal factors affecting the results of operations, liquidity,
capital resources, contractual cash obligations and the critical
accounting estimates of FedEx. The discussion in the fi nancial
section should be read in conjunction with the other sections
of this Annual Report and our detailed discussion of risk factors
included in this MD&A.
ORGANIZATION OF INFORMATION
Our MD&A is comprised of three major sections: Results
of Operations, Financial Condition and Critical Accounting
Estimates. These sections include the following information:
• Results of Operations includes an overview of our consolidated
2009 results compared to 2008, and 2008 results compared to
2007. This section also includes a discussion of key actions and
events that impacted our results, as well as a discussion of our
outlook for 2010.
• The overview is followed by a fi nancial summary and analysis
(including a discussion of both historical operating results and
our outlook for 2010) for each of our reportable transportation
segments.
• Our fi nancial condition is reviewed through an analysis of key
elements of our liquidity, capital resources and contractual cash
obligations, including a discussion of our cash fl ow statements
and our fi nancial commitments.
• We conclude with a discussion of the critical accounting esti-
mates that we believe are important to understanding certain
of the material judgments and assumptions incorporated in our
reported fi nancial results.
DESCRIPTION OF BUSINESS
We provide a broad portfolio of transportation, e-commerce and
business services through companies competing collectively,
operating independently and managed collaboratively, under
the respected FedEx brand. Our primary operating companies
include Federal Express Corporation (“FedEx Express” ), the
world’s largest express transportation company; FedEx Ground
Package System, Inc. (“ FedEx Ground”), a leading provider of
small-package ground delivery services; and FedEx Freight
Corporation, a leading U.S. provider of less-than-truckload (“LTL”)
freight services. Our FedEx Services segment provides customer-
facing sales, marketing, information technology and customer
service support to our transportation segments. In addition, the
FedEx Services segment provides customers with retail access
to FedEx Express and FedEx Ground shipping services through
FedEx Offi ce and Print Services, Inc. (“FedEx Offi ce”). These
companies represent our major service lines and form the core
of our reportable segments. See “ Reportable Segments” for fur-
ther discussion.
The key indicators necessary to understand our operating results
include:
• the overall customer demand for our various services;
• the volumes of transportation services provided through our
networks, primarily measured by our average daily volume and
shipment weight;
• the mix of services purchased by our customers;
• the prices we obtain for our services, primarily measured by
yield (revenue per package or pound or revenue per hundred-
weight for LTL freight shipments);
• our ability to manage our cost structure (capital expenditures
and operating expenses) to match shifting volume levels; and
• the timing and amount of fl uctuations in fuel prices and our
ability to recover incremental fuel costs through our fuel
surcharges.
The majority of our operating expenses are directly impacted by
revenue and volume levels. Accordingly, we expect these operat-
ing expenses to fl uctuate on a year-over-year basis consistent
with the change in revenues and volume. The following discus-
sion of operating expenses describes the key drivers impacting
expense trends beyond changes in revenues and volume.
Except as otherwise specifi ed, references to years indicate our
fi scal year ended May 31, 2009 or ended May 31 of the year ref-
erenced and comparisons are to the prior year. References to our
transportation segments include, collectively, our FedEx Express,
FedEx Ground and FedEx Freight segments.