Federal Express 2009 Annual Report Download - page 66

FEDEX CORPORATION
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Note 16: Commitments
Annual purchase commitments under various contracts as of
May 31, 2009 were as follows (in millions):
Aircraft-
Aircraft (1) Related (2) Other (3) Total
2010 $ 710 $ 254 $ 648 $ 1,612
2011 765 26 137 928
2012 527 – 111 638
2013 425 – 62 487
2014 466 – 11 477
Thereafter 1,924 – 125 2,049
(1) Our obligation to purchase 15 of these aircraft (Boeing 777 Freighters, or B777Fs) is
conditioned upon there being no event that causes FedEx Express or its employees not
to be covered by the Railway Labor Act of 1926, as amended.
(2) Primarily aircraft modifi cations.
(3) Primarily vehicles, facilities, computers, advertising and promotions contracts and for 2010,
a total of $350 million of required quarterly contributions to our U.S. domestic pension plans.
The amounts refl ected in the table above for purchase commit-
ments represent noncancelable agreements to purchase goods
or services. Commitments to purchase aircraft in passenger
confi guration do not include the attendant costs to modify these
aircraft for cargo transport unless we have entered into non-
cancelable commitments to modify such aircraft. Open purchase
orders that are cancelable are not considered unconditional pur-
chase obligations for fi nancial reporting purposes and are not
included in the table above.
In December 2008, we reached an agreement with Boeing to
defer the delivery of certain B777F aircraft by up to 17 months.
The rescheduled delivery dates have been refl ected in the table
above. In addition, in January 2009, we exercised our option with
Boeing to purchase an additional 15 B777F aircraft and obtained
an option to purchase an additional 15 B777F aircraft. Our obli-
gation to purchase these additional aircraft is conditioned upon
there being no event that causes FedEx Express or its employees
not to be covered by the Railway Labor Act of 1926, as amended.
Accordingly, we have now agreed, subject to the above contrac-
tual condition, to purchase a total of 30 B777F aircraft and hold an
option to purchase an additional 15 B777F aircraft.
Deposits and progress payments of $544 million have been made
toward aircraft purchases, options to purchase additional air-
craft and other planned aircraft-related transactions. These
deposits are classified in the “ Intangible and other assets”
caption of our consolidated balance sheets. Our primary air-
craft purchase commitments include the B757 in passenger
confi guration, which will require additional costs to modify for
cargo transport, and the new B777F aircraft. In addition, we
have committed to modify our DC10 aircraft for two-man cockpit
confi gurations. Future payments related to these activities are
included in the table above. Aircraft and aircraft-related con-
tracts are subject to price escalations. The following table is
a summary of the number and type of aircraft we are commit-
ted to purchase as of May 31, 2009, with the year of expected
delivery:
B757 B777F M D11 Total
2010 12 4 2 18
2011 16 4 – 20
2012 8 3 – 11
2013 – 3 – 3
2014 – 3 – 3
Thereafter – 13 – 13
Total 36 30 2 68
Note 17: Contingencies
Wage-and-Hour. We are a defendant in a number of lawsuits
containing various class-action allegations of wage-and-hour
violations. The plaintiffs in these lawsuits allege, among other
things, that they were forced to work “off the clock,” were not
paid overtime or were not provided work breaks or other benefi ts.
The complaints generally seek unspecifi ed monetary damages,
injunctive relief, or both.
In February 2008, one of these wage-and-hour cases, Wiegele
v. FedEx Ground, was certifi ed as a class action by a California
federal court, and in April 2008, the U.S. Court of Appeals for the
Ninth Circuit denied our petition to review the class certifi ca-
tion ruling. The plaintiffs in Wiegele represent a class of FedEx
Ground sort managers and dock service managers in California
from May 10, 2002 to the present. The plaintiffs allege that FedEx
Ground has misclassified the managers as exempt from the
overtime requirements of California wage-and-hour laws and is
correspondingly liable for failing to pay them overtime compensa-
tion and provide them with rest and meal breaks. Subject to court
approval, the plaintiffs have agreed to dismiss the sort managers,
leaving only the dock service managers in the class.
In September 2008, in another one of these wage-and-hour
cases, Tidd v. Adecco USA, Kelly Services and FedEx Ground,
a Massachusetts federal court conditionally certifi ed a class
limited to individuals who were employed by two temporary
employment agencies and who worked as temporary pick-
up-and-delivery drivers for FedEx Ground in the New England
region within the past three years. Potential claimants must vol-
untarily “ opt in” to the lawsuit in order to be considered part
of the class. In addition, in the same opinion, the court granted
summary judgment in favor of FedEx Ground with respect to the
plaintiffs’ claims for unpaid overtime wages. Accordingly, as to
FedEx Ground, the conditionally certifi ed class of plaintiffs is now
limited to a claim of failure to pay regular wages due under the
federal Fair Labor Standards Act.
In April 2009, in another one of these wage-and-hour cases, Bibo
v. FedEx Express, a California federal court granted class certifi -
cation, certifying several subclasses of FedEx Express couriers
in California from April 14, 2006 (the date of the settlement of
the Foster class action) to the present. The plaintiffs allege that
FedEx Express violated California wage-and-hour laws after the
date of the Foster settlement. In particular, the plaintiffs allege,