Federal Express 2009 Annual Report Download - page 55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
53
A $1 billion revolving credit agreement is available to fi nance
our operations and other cash fl ow needs and to provide sup-
port for the issuance of commercial paper. This revolving credit
agreement expires in July 2010. Our revolving credit agreement
contains a fi nancial covenant, which requires us to maintain a
leverage ratio of adjusted debt (long-term debt, including the
current portion of such debt, plus six times rentals and landing
fees) to capital (adjusted debt plus total common stockholders’
investment) that does not exceed 0.7 to 1.0. Our leverage ratio
of adjusted debt to capital was 0.6 to 1.0 at May 31, 2009. As of
May 31, 2009, no commercial paper was outstanding and the
entire $1 billion under the revolving credit facility was available
for future borrowings.
We issue other financial instruments in the normal course
of business to support our operations. Letters of credit at
May 31, 2009 were $606 million. The amount unused under
our primary $500 million letter of credit facility totaled
$45 million at May 31, 2009. This facility expires in July 2010. These
instruments are required under certain U.S. self-insurance pro-
grams and are also used in the normal course of international
operations. The underlying liabilities insured by these instruments
are refl ected in our balance sheets, where applicable. Therefore,
no additional liability is refl ected for the letters of credit.
Our capital lease obligations include leases for aircraft and
facilities. Our facility leases include leases that guarantee the
repayment of certain special facility revenue bonds that have
been issued by municipalities primarily to fi nance the acquisition
and construction of various airport facilities and equipment. These
bonds require interest payments at least annually, with principal
payments due at the end of the related lease agreement.
Note 7: Leases
We utilize certain aircraft, land, facilities, retail locations and
equipment under capital and operating leases that expire at vari-
ous dates through 2040. We leased 13% of our total aircraft fl eet
under capital or operating leases as of May 31, 2009, compared
with 14% as of May 31, 2008. In addition, supplemental aircraft
are leased by us under agreements that provide for cancella-
tion upon 30 days’ notice. Our leased facilities include national,
regional and metropolitan sorting facilities, retail facilities and
administrative buildings.
The components of property and equipment recorded under capi-
tal leases were as follows (in millions):
May 31,
2009 2008
Aircraft $ 50 $ –
Package handling and
ground support equipment 165 165
Vehicles 17 20
Other, principally facilities 147 150
379 335
Less accumulated amortization 300 290
$ 79 $ 45
Rent expense under operating leases was as follows (in millions):
For years ended M ay 31,
2009 2008 2007
Minimum rentals $ 2,047 $ 1,990 $ 1,916
Contingent rentals (1) 181 228 241
$ 2,228 $ 2,218 $ 2,157
(1) Contingent rentals are based on equipment usage.
A summary of future minimum lease payments under capital
leases and noncancelable operating leases with an initial or
remaining term in excess of one year at May 31, 2009 is as fol-
lows (in millions):
Operating Leases
Aircraft
Capital and Related Facilities and Total Operating
Leases Equipment Other Leases
2010 $ 164 $ 512 $ 1,247 $ 1,759
2011 20 526 1,086 1,612
2012 8 504 947 1,451
2013 119 499 817 1,316
2014 2 472 694 1,166
Thereafter 15 2,458 4,894 7,352
Total 328 $ 4,971 $ 9,685 $ 14,656
Less amount
representing interest 34
Present value of net
minimum lease
payments $ 294
The weighted-average remaining lease term of all operating
leases outstanding at May 31, 2009 was approximately six years.
While certain of our lease agreements contain covenants gov-
erning the use of the leased assets or require us to maintain
certain levels of insurance, none of our lease agreements include
material fi nancial covenants or limitations.
FedEx Express makes payments under certain leveraged operating
leases that are suffi cient to pay principal and interest on certain
pass-through certifi cates. The pass-through certifi cates are not
direct obligations of, or guaranteed by, FedEx or FedEx Express.
Note 8: Preferred Stock
Our Certifi cate of Incorporation authorizes the Board of Directors,
at its discretion, to issue up to 4,000,000 shares of preferred stock.
The stock is issuable in series, which may vary as to certain rights
and preferences, and has no par value. As of May 31, 2009, none
of these shares had been issued.