Alan Graf - Chief Financial Officer and Executive Vice President Frederick Smith - Founder, Executive Chairman, Chief Executive Officer and President David Rebholz - Chief Executive Officer of FedEx Ground Package System Inc and President of FedEx Ground Package System Inc T. Glenn - Executive Vice President of Market Development & Corporate Communications, Chief Executive Officer of FedEx Services and President of FedEx Services Mickey Foster - Vice President Investor Relations Christine Richards - Executive Vice President, General Counsel and Secretary David Bronczek - Chief Executive Officer of FedEx Express and President of FedEx Express

Derek Rabe - Morgan Keegan & Company, Inc. David Ross - Stifel, Nicolaus & Co., Inc. John Barnes - RBC Capital Markets, LLC William Greene - Morgan Stanley Peter Nesvold - Bear Stearns Jeffrey Kauffman - Sterne Agee & Leach Inc. Justin Yagerman - Deutsche Bank AG Edward Wolfe - Wolfe Trahan & Co. Garrett Chase - Barclays Capital Ken Hoexter - BofA Merrill Lynch Thomas Wadewitz - JP Morgan Chase & Co Scott Malat - Goldman Sachs Group Inc. David Vernon - Sanford C. Bernstein & Co., Inc. Christian Wetherbee - Citigroup Inc Keith Schoonmaker - Morningstar Inc. Jon Langenfeld - Robert W. Baird & Co. Incorporated Christopher Ceraso - Crédit Suisse AG Kevin Sterling - BB&T Capital Markets Peter S. Jacobs Scott Flower - Macquarie Research Jason Seidl - Dahlman Rose & Company, LLC Nathan Brochmann - William Blair & Company L.L.C. Matthew Brooklier - Piper Jaffray Companies

Good day, everyone, and welcome to the FedEx Corporation's Fourth Quarter and Fiscal Year-End 2011 Earnings Conference Call. Today's call is being recorded. And now at this time, it's my pleasure to turn the conference over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.

Good morning, and welcome to FedEx Corporation's Fourth Quarter and Year-End Earnings Conference Call. The fourth quarter earnings release and our 25-page Stat Book are on our website at fedex.com. This call is being broadcast from our website, and the replay and podcast download will be available for approximately one year. Joining us on the call today are members of the media. During our question-and-answer session, callers will be limited to one question, so we can accommodate all those who would like to participate. I want to remind all listeners that FedEx Corporation desires to take advantage of the Safe Harbor provisions of the Private Securities Litigation Reform Act. Certain statements in this conference call may be considered forward-looking statements within the meaning of the Act. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our press releases and filings with the SEC. In our earnings release, we include non-GAAP financial measure, which we may discuss on this call. Please refer to the release available on our website for a further discussion of this measure and a reconciliation of it to the most directly comparable GAAP measure. To the extent we disclose any other non-GAAP financial measure on this call, please refer to the Investor Relations portion of our website at fedex.com for a reconciliation of such measures to the most directly comparable GAAP measures. Joining us on the call today are Fred Smith, Chairman, President and CEO; Alan Graf, Executive Vice President and CFO; Mike Glenn, President and CEO of FedEx Services; Chris Richards, Executive Vice President, General Counsel and Secretary; Rob Carter, Executive Vice President, Fedex Information Services and CIO; Dave Bronczek, President and CEO of FedEx Express; Dave Rebholz, President and CEO of FedEx Ground; and Bill Logue, President and CEO of FedEx Freight. And now our Chairman, Fred Smith, will share his views on the quarter, followed by Alan Graf. After Alan, we will have questions and answers.

Thank you, Mickey. Good morning, and welcome to our discussion of operating and financial results for the fourth quarter and full year of fiscal 2011 and our outlook for a promising FY '12. During fiscal '11, an improved economy, strong customer demand and decisive management actions increased volumes and yields across all transportation segments. We believe FedEx is well positioned for strong earnings in 2012, given the positive momentum, moderate economic growth and diminishing cost headwinds. The impact of fuel prices, as always, will influence the pace of growth. We believe that the near-term softness in the economy will be temporary as fuel prices have retreated from their April highs and the Japanese economy recovers. Going forward, we see stronger economic growth. We believe the industrial sector will lead growth in the United States and overseas in the next 2 years, supporting shipping demand. Emerging markets are generally sound and outperforming the pace of growth in development -- developed countries. These growth trends played to our strengths as the world's largest all cargo and Express air carrier with an unmatched global network. Now fiscal year '11 was clearly a turnaround year coming off of the significant recession that we experienced. And FedEx laid a strong foundation for growth with solid improvements in FedEx International Priority shipments at FedEx Express; outstanding volume, yield and operating margins at FedEx Ground; and FedEx Freight's return to profitability in the fourth quarter. We invested for the future, strengthening our networks, improving our already higher levels of service, growing our international business and restoring benefits to team members. FedEx Express continues to attract significant new business from high-tech, high value-added global customers who appreciate the faster transit and later cutoff times offered by our new 777 service and overall international advantages. We will continue to invest in critical long-term projects as part of our global strategy to position us for stronger growth in the future. We expect higher margin revenue from international operations to approach U.S. domestic revenues at FedEx Express in FY '12 for the first time in our history. In FY '11, FedEx Express completed one acquisition in India and announced another in Mexico, giving us more robust domestic transportation networks and added capabilities in these important global markets. Express also added Colombia to our growing network of international direct-served countries, a move that should provide even greater service and growth opportunities for us in the fourth largest market in Latin America. FedEx Ground continues to speed transportation lanes, expand the FedEx SmartPost offering and improve market share. And at FedEx Freight, we successfully reorganized operations and now have a highly differentiated service that will drive profitability in FY '12 and beyond. The opening of our new Colorado Springs data center is the latest example of our overall IT modernization to leverage advanced technologies for the benefit of our customers. We believe our unique centralized customer support functions such as sales, customer service and information technology enables FedEx Services to provide an unsurpassed bundle of transportation and business service offerings and solutions to customers worldwide. FedEx is on strong financial footing. We believe we did the right things during the downturn and are now beginning to capitalize on those actions. We are focused on long-term success. In closing my remarks, I'd like to remind you, we remain committed to our long-term goals of growing our revenue, achieving 10-plus operating margins -- 10-plus percent operating margins, increasing our earnings per share significantly, improving cash flow and increasing returns on invested capital. And now let me turn it over to Alan Graf, our Chief Financial Officer. Alan?

Thank you, Fred, and good morning, everyone. EPS in the fourth quarter surged 32% to $1.75 per share compared to $1.33 last year. Overall revenue grew 12% to $10.6 billion due to continued strong yield improvement in all transportation segments, volume growth of Ground and International Express shipments and Freight's return to profitability. Looking first at the Express segment. Revenue grew 13% to $6.6 billion, while operating income increased 4% to $429 million. Operating income improvements were driven by strong yield growth and by 6% growth in IP package shipments and 13% in International Priority and International Economy pounds. U.S. domestic package yields increased 10% and IP package yields increased 8%. Notably, base yield improvements provided more than half of the increase. Results were limited by increased retirement plan expenses and the reinstatement of certain compensation programs. Looking now at the Ground segment. Revenues climbed 15% to $2.26 billion, while operating income soared 31% to $417 million. Operating margins hit an all-time quarterly record of 18.4%. Revenue per package increased 7% primarily due to yield management actions. And package volume grew 6%, driven by increases in the business-to-business market and Home Delivery service. SmartPost average daily volumes surged 24% due to growth in e-commerce, while yields increased 8%. Looking at Freight. This segment returned to profitability with operating income of $42 million in the quarter, which was primarily due to the higher LTL yield which climbed 13%, or 9% excluding fuel surcharges. LTL yields have increased sequentially in each of the past 4 quarters. LTL average daily shipments decreased 8% as the result of proactive yield management actions. Our balance sheet strengthened again as cash flow from operations improved. "End of the year" debt was approximately $1.7 billion while our cash on hand was greater than $2.3 billion. This is after capital spending of $3.4 billion and $480 million in contributions to our U.S. pension plans in FY '11. Our effective tax rate for FY '11 was 35.9% compared to 37.5% in FY '10. This was primarily due to increased permanently reinvested foreign earnings and a lower state tax rate. Looking ahead to FY '12, we have provided initial earnings guidance of $6.35 to $6.85 per share. We expect strong demand for our services, driven by moderate growth in the global economy and ongoing yield improvement actions to drive this significant improvement in earnings. FedEx Express International services and FedEx Ground services are anticipated to be the primary drivers of growth during 2012. We expect our FedEx Freight segment to be profitable throughout the fiscal year. Our outlook is dependent on continued strengthening in global economic conditions, the pace of which is uncertain due to several factors, including the impact of higher fuel prices on demand. While cost headwinds and pension plan and maintenance and repairs will abate significantly, we expect higher incentive compensation expense as a result of the higher earnings will retard our growth somewhat. At Express, we expect a strong improvement in operating income and margin. Revenue growth will be driven by continued growth in our international service as international economic conditions continue to improve at a faster rate than in the U.S. We also anticipate improvement in both domestic and international yields again through ongoing yield management activities. Productivity enhancements such as improving on-road productivity and sort efficiency will also help drive the improved performance. At Ground, we expect strong operating income growth due to efficiency improvements such as automated operational planning systems and improved transit time across numerous shipping lanes. Segment revenue growth will be led by continued growth in commercial, Home Delivery and SmartPost volumes resulting in additional market share gains. SmartPost is expected to continue to strengthen its market position by continuing to leverage the FedEx Ground network to insert at the optimal United States Postal Service entry point. Yields for FedEx Ground are also expected to improve as a result of our yield management initiatives and improved market penetration for our FedEx Home Delivery services. As I said earlier, at Freight, we expect to be profitable throughout the year due to our continued yield management initiatives and the successful integration of our operations and optimization of our LTL network. Freight will improve profitability through reduction of empty miles and circuity and by increasing the use of rail. We expect yield improvement across all services and customer segments due to our unique value position and yield management initiatives. In FY '12, our capital expenditures will increase to $4.2 billion as we remain on the offense. We are excited about the opportunities ahead. Nearly 60% of our capital spending is designated for growth initiatives. At Express, we will invest to expand our global aviation network, as well as our Asian and European networks to improve our reach in service capabilities. At Ground, we are investing in further network expansion, transit time improvements and productivity enhancing technologies. At Freight, capital spending will increase significantly this year as we replace vehicles and revenue handling equipment. We are also investing in IT infrastructure and technology upgrades across the corporation to improve reliability and efficiency. While this level of capital spending will be higher than the 6% to 8% of revenue that we think is sustainable to meet our long-term growth goals, we are taking advantage of the Tax Relief Act to invest in our networks, to extend our competitive advantage and drive better margins, cash flows and returns long term. We are committed to investing in critical long-term strategic projects focused on enhancing and broadening our service offerings that position us for stronger growth as global economic conditions continue to improve. Even with higher planned capital spending in fiscal '12, margins, cash flows and returns are expected to improve year-over-year. So all up, I think we're going to have a great year in FY '12 with earnings up a projected 30% to 40% over our adjusted FY '11 EPS. Our Express IP, International Priority network is unparalleled in its ability to serve global trade. Our Ground network is the fastest, and Freight has returned to profitability with a unique offering of services. FedEx Office performance will improve as we modernize our retail network and improve our reach in the channel to offer our services both in the store and online in a better way. I want to thank the team members at FedEx for all their efforts in FY '11 as we all look forward to an outstanding performance in FY '12. With that, I want to thank you for your interest in FedEx, and we are happy to answer your questions.

[Operator Instructions] And we'll go first to Tom Wadewitz of JP Morgan. Thomas Wadewitz - JP Morgan Chase & Co: Wondered if you could give us a sense of the pattern of economic growth that you saw through the quarter. Did you see some slowing in the quarter on a kind of month-by-month basis? And then when you look at your guidance for fiscal '12, if you just look at where the midpoint is, what kind of an economic growth assumption is that for domestic? Is that assumed 1% GDP or how conservative is the GP assumption within the midpoint of that fiscal '12 range? T. Glenn: Tom, this is Mike Glenn. There is no question that we're in a soft patch right now largely due to transitory issues such as the Japan supply chain disruptions. Obviously, we had a tremendous amount of weather impact, and the oil prices that were on the rise during the quarter. So we had some economic challenges during the quarter. We expect the GDP to accelerate through the calendar year. Our projections on a quarter-by-quarter basis for GDP in the second quarter is 1.9%; third quarter, 3.5%; and then the fourth quarter, 3.4%. So for calendar '11, we're anticipating 2.5% GDP growth; and in calendar '12, 3.0% GDP growth, with industrial production around 4.2%, 4.3%.

Our next question will come from John Barnes of RBC Capital Markets. John Barnes - RBC Capital Markets, LLC: Real quick on your aircraft outlook, there were some conversation recently about you also may be taking a look at the 767 [767-400ERF]. Could you just talk about what your aircraft plans are on a go forward basis between the 777 [Boeing 777F], the 757 [Boeing 757] and any potential other new aircraft you might add to the fleet?

Yes, John, this is Dave Bronczek. We're always looking at ways to improve our efficiencies on fuel and capacity and payload. And so of course, everything that's out there in the marketplace from Boeing and Airbus, we're taking a hard look at to make sure that it makes a financial sense for us going forward. Right now, of course, we're in the transition period of the 727 to the 757s. We have 37 of those flying at the moment. We purchased 57 of them. And of course, the 777s, we have 12. In revenue operations, we've purchased 13. So to your specific point, we're looking at all the opportunities and the options that are out there for us.

Our next question will come from Justin Yagerman of Deutsche Bank. Justin Yagerman - Deutsche Bank AG: If I had to poke any holes of the report, I'd say that Express volumes felt like they were a little weaker than we might have expected. If I had to break that down, how much of that relative -- and obviously you don't know where my model was, but relative to maybe what you guys thought you would have done when you were coming into the quarter, would you say it's due to price action? And how much was due to the transitory issues, Mike, you were describing in the economy? T. Glenn: Justin, I would say, it's the combination of both. But let me say, we're very pleased with the balance that we saw during the quarter with volume growth and the tremendous job that our sales and marketing team did in executing our yield improvement program. So we would take that balance every quarter. Having said that, there is no question that the soft patch that I spoke of earlier had an impact on domestic Express volumes as fuel surcharges certainly increased during the quarter. But let me state again, we're very pleased with the balance of the volume in the domestic Express system with the yield growth that we saw.

Let me just add on to my colleague, Mike Glenn. Of course, the yields were significant for us this quarter. The yields in the domestic network is up 10%, and that's been our stated goal and objectives. We're very pleased with that performance.

Our next question will come from Matt Brooklier of Piper Jaffray. Matthew Brooklier - Piper Jaffray Companies: Looking at your Ground margin, I think you did something like an 18.4%. Maybe talk to the component that were enabled you to get that margin above 18%. And then maybe talk to, in fiscal 2012, your expectations for the Ground margin. And is this kind of the run rate going forward or was there some benefits during the quarter? Maybe just a little bit more color at Ground.

All right. Well, Matt, the Ground picture is good. We have superior competitive advantage. We're able to get a premium in the marketplace for our 23% advantage over our newest competitor or only competitor. I feel very good about that. As a result, the sales team has been able to deliver. I think after 3 or 4 years of the downturn in the economy and having to have to give up pricing position, we firmed up, as Mike said earlier. We're certainly not being piggish about it, but we are getting our fair value for what we do. Number two, I can tell you that I am always challenged and recognize that the preferable point in my life would be 20% margin. Having said that, we've got really good volume growth. The key drivers were the yield growth, again, as the result of the superior value that we offer. Number three, we had a couple of one-off events that benefited us, but that continued to trend in a positive way for the last 2 years. Our insurance, our safety record, and fundamentally, we had a little offset to fuel, but in our world, the fuel matches pretty closely. Any given year can be $10 million up, $10 million down. So -- and then last but not the least, we have properly invested in our capital requirements to ensure that we're not building up for 3 weeks of the year even though we performed 3 weeks of the year. We throw labor at it. And that margin value is important, it's about a point. So in other words, if you keep multiple capital projects going at large-scale. Do I think we can get better? Absolutely. I mean, there's no question about it. We're in the driving position here, and our customers are recognizing the fact that we just continue to get better at what we do.

Our next question will come from Nate Brochmann of William Blair & Company. Nathan Brochmann - William Blair & Company L.L.C.: I wanted to kind of stay on the Ground theme a little bit, along with that and talk a little bit bigger picture in terms of SmartPost and the e-commerce benefits. It seems that, that's getting to be a little bit bigger of a driver, and was wondering if you could give us an outlook for the growth, the strategy there and the opportunity. T. Glenn: This is Mike. SmartPost is a key part of our residential delivery portfolio. Obviously, there are a lot of very lightweight items that move to residences that are perfect for the SmartPost network, which is why we invested in that network and have continued to invest in that network going forward. It gives us a distinct competitive advantage because it offers the right price point for the right value delivery system and complements our Home Delivery network very well. It allows us to focus the Home Delivery network on heavier packages, and many of which that require unique features that only FedEx offers such as day-definite delivery, appointment delivery and things of that nature. So it is a strong combination of services, complemented by our Express residential delivery services, which offers unique value for e-commerce customers.

Our next question will come from David Ross of Stifel, Nicolaus. David Ross - Stifel, Nicolaus & Co., Inc.: The question I have is on the FedEx Freight division. Bill, if you could just talk about how the integration has gone. It's nice that you all are profitable in the quarter. Is there still kind of some lagging, things that need to be done, tweaks that need to be made that are kind of near-term margin benefits that we should see in the next couple quarters?

David, first of all, 120 days into it, very pleased where we are with the progress. Obviously, we had the -- starting out in the first few weeks of February, we had the weather challenges, but the team has just done a fabulous job of responding to the new network and the design. Customer response has been very good. Choice, we gave them choice, they're using choice, and it's nice to see priority economy being used in all lengths of haul across the network. The efficiencies continue to get better week over week as the team kind of learns the new design. And the good news is that we have plenty of opportunity as we go forward now with the -- once we now start to stabilize after a full quarter, we see where our volume flows are and the opportunities going forward now is continued improvement of the design of the network, which will really help our efficiencies long term. So very positive where we are, very excited. The team has done a great job and thinks the future are bright.

Our next question will come from Kevin Sterling of BB&T Capital Markets. Kevin Sterling - BB&T Capital Markets: Looking at your Express segment, maybe diving down a little bit to get a little more granular, your International domestic volumes were up an impressive 15.5% in the quarter. Can you talk a little bit about what's driving this? Is it manufacturing moving further inland in places like China?

Yes, thanks, Kevin. This is Dave Bronczek. Yes, you're right. China obviously, is leading the pack, but we've had good success in Canada domestic, the U.K. domestic and of course, we're expanding in India. But China domestic for sure, coupled with our China business coming up onto the rest of the world, and the combination of those 2 is a great value proposition for our customers. And while I'm on the topic, I should comment on the superior performance we've had in international. We had an all-time record-setting quarter for International Priority this year, and that's on top of last year's fourth quarter, which grew average daily volume 23%. So you combine that with this year's fourth quarter, it's our all-time record volume for International Priority. But on the domestic front in international, we're doing well across the board and with double digits.

Our next question will come from Jason Seidl with Dahlman Rose. Jason Seidl - Dahlman Rose & Company, LLC: First question has to do with the economic commentary you gave. You've mentioned some of the impacts were transitory in nature in the quarter and that fuels coming into Japan should come back. Have you seen some of these impacts already? Or is this just stuff that you're going to expect to see as the quarter progresses here in 1Q fiscal 2012?

If you're talking about have we seen an improvement in this regard, obviously, oil prices have already pulled back somewhat and we're through the tough season on the weather. We're still seeing some impacts of the Japan supply chain initiative. But clearly, those were significant factors for us during the fourth quarter.

Our next question will come from Jeff Kauffman of Sterne Agee. Jeffrey Kauffman - Sterne Agee & Leach Inc.: Real solid numbers. A question more for Alan. Alan, you mentioned the cap spending going to be a little higher than normal. It looks like based on your guidance, about $3 billion should be the normal level. How long do you think it takes us to get back there? And when you look at the $1.7 billion of debt, do you feel the company is underleveraged at all given what's going on in the world? And what are your thoughts there?

Well, Jeff, I would tell you that part of the reasons for our increase in FY '12 is that we are going to take advantage of the Tax Relief Act and we get to write-off 100% or 50% of a lot of these assets. And we had them in our long-range plans. So some of that has been moved forward to take advantage of that, quite frankly. And so that should start to mitigate next fiscal year. But also, as I said earlier, I mean, we really like the opportunities that are in front of us and we see a lot of growth in most of our segments that we're very excited about. We had starved freight for a little while because they weren't making any money and it's time to get our equipment replaced there. So I think it's a combination of all of that. But we should, in the long run, be very comfortable in the 6% to 8% of revenue for the foreseeable future. And as far as being underleveraged, that will depend on how you want to read our balance sheet once the new lease accounting rules takes place. As you recall, back in the early days when we were cash flow negative, we financed a lot of this company with aircraft leveraged leases. We leased an awful lot of property around the world. So that adds to our leverage. So I think we're about right for where we are at the moment. And we'll be revisiting that in the next couple of years as we continue to build our positive cash flow.

Our next question comes from Chris Ceraso of Crédit Suisse. Christopher Ceraso - Crédit Suisse AG: I have a question about the guidance on 2 points. First, if you could give us some color around the cost headwinds that you said are subsiding. Are these costs that are actually declining or just not going up to the same degree they did from '10 to '11? And then just on the tax rate, what's the expectation implied in your 2012 guidance?

Chris, I think in the guidance, we're pretty comfortable in there, that it's a wide range, it's $0.50. But fact of the matter is, is that I've missed 3 straight quarters, and that's due to volatility of fuel prices mainly. So if fuel prices stay where they are and the economy is -- performs like Mike has described it, we should be pretty well into the range. And if things get volatile on fuel and it spikes and the economy is not quite so good, we'll be in the lower end of the range, quite obviously. That's why we've set it up that way. What was your second question? Christopher Ceraso - Crédit Suisse AG: Well, the question was about the cost headwinds. What are the specific ones you said should be subsiding, is it fuel?

Well, no, it's not fuel. As I've said in my opening statement, 2 of the really spectacular ones this year were our pension costs and our maintenance costs on airplanes at Express. We expect maintenance to be almost flat year-over-year, just a small little increase. And our pension expense will actually be flat in FY '12 versus FY '11 despite a 61 basis point drop in the discount rate. Our performance of our portfolio was so strong that we're able to hold that flat. So those are completely gone. Offsetting that in '12 will, of course, the 401(k) reinstatement for the full year. Obviously, merit increases in healthcare. And then also, we still are not at our target variable comp and bonus programs yet, but we should be if we hit this range. So that will be a little bit of headwind in FY '12. So you'll see that reflected in Express's improvement in their margins substantially. Freight will improve theirs because of the project advance and their new system.

Our next question comes from Peter Nesvold of Jefferies & Company. Peter Nesvold - Bear Stearns: I just had question on some of the expenses year-over-year. I think though, if I take a step back and I look at -- and what you're outlining, 30% to 40% earnings growth in the GDP scenario of 2.5% to 3%, which is pretty remarkable. As you mentioned, you're going into a period of easier expense comps. But -- and kind of point taken that yields matter more than volumes, but if the macro backdrop continues to fade and the volumes aren't there, are there still costs -- and perhaps you can hopefully point to a few specific line items where you can still take expenses out of the business in order to stay within at least the lower end of that range if the GDP scenario ends up being below the 2.5% type range.

This is Fred Smith speaking. Let me reiterate a point that we made several times and I spent a lot of time at our Investor Meeting last fall talking about, and that's our built-in shock absorbers. We have constructed FedEx recognizing that it's basically tied to the macroeconomy, and it's a cyclical company. And it's a company that, as Alan mentioned, requires a lot of capital assets. Accordingly, our structure allows us to flex down and the shock absorbers basically benefit the shareholders because these variable compensation programs, utilization of various fully depreciated assets in good times that can be put on the ground or in the yards. So we have all of that built in. And in fact, as Alan mentioned, as we go into FY '12, we are actually funding a lot of these programs, plus, we are funding significant expansions in the Express networks in Asia and EMEA. So managing down in any kind of a reasonable growth scenario is not a particular problem for FedEx. That's one of these important things that we think is a strategic decision that we made many years ago, and you just saw it during the recession. The company remained profitable during the worst downturns since the Great Depression. Now that wasn't without pain in a lot of orders, including people around this table and our frontline folks and the hours we flew and on down the line. But we have a pretty good system built in, in. On the economy, let me just remind everybody on the call that while we have a wonderful economist, Gene Huang, and great analytical capabilities, which is what Mike is talking to you about, unlike most economic forecasters, FedEx is actually talking to hundreds of thousands of customers. This is information that's infantry based. It's not 50,000 feet, it's based on what the folks that provide our volume are telling us. And the key driver of our business is industrial production. And in that regard, there's no question, as Mike said, we went through a brief soft patch here. About 40%, we would say, was related to the run-up in fuel price. And I can tell you having gone through this 6 times now in FedEx's history, when you get to the fuel prices of $4 a gallon at the pump, people began to retard their behavior. About 40% of it, we think, is related to the horrible tragedy in Japan and the interdiction of certain supply chains and reconfigurations just not being able to produce because the component parts weren't there, and about 20% was just sentiment related to these factors. So as the price of fuel is mitigated, some of the issues related to Japan have been improved, we believe that our economic outlook is reasonably correct.

Ken Hoexter of Bank of America Merrill Lynch has our next question. Ken Hoexter - BofA Merrill Lynch: Fred, I think you just answered the question I had, which is on the Express volumes, what was the impact of the fuel exposure. But maybe if we can come back to Freight, it sounded like you were saying there that the progress was going well into 120 days. Can you talk about what is less of the merger impact on the margins here? How much further can we see these rebound? Can we see these get back to double-digit levels based on kind of your early post-merger analysis?

Ken, this is Bill. Again, as we said, we're 120 days into it. We're very pleased where we are. We continue to build our plan. Our long-term goal is double-digit margins, and that's our focus. As we move through it, we're going to take it quarter-over-quarter because again, we have network adjustments continuing to make as we move on for the redesign. And again, as I've tried to stress there was -- as we see the volume patterns from our customers, now it gives us a clear view of the new world we're in and how we continue to make those appropriate adjustments. And again, Mike's team has done a great job on the yield side and continues to do a great job there. So the yield front going in the right direction and our continued quarter-over-quarter tweaking and adjusting our network as we move forward will really be the value that we'll bring to the team here as we move forward. So again, double-digit margin is our goal, our objective. We're working towards that. And again, it will take us steps to get there.

Our next question will come from Art Hatfield of Morgan Keegan. Derek Rabe - Morgan Keegan & Company, Inc.: This is actually Derek Rabe, in for Art. Just -- most of my questions have been answered. Just wanted to -- I know it's early, but any early thoughts on peak season developments for this year?

It's certainly early to really start that. We have started planning and having some conversations with customers, but they have not released their forecasts. I would say the encouraging news on that front as oil prices subside, we do anticipate consumer spending to be stronger in the second half of the year. So hopefully, we'll see some of that going into peak season, but it's a bit early to make that call.

Our next question will come from Chris Wetherbee of Citi. Christian Wetherbee - Citigroup Inc: Maybe a question for you, Dave, on the Express volume side. Just curious to get your view on the progress of volumes in Asia as the quarter progressed and kind of where we stand now relative to recovery and maybe kind of parsing out what you're seeing specifically related to Japan impact, and then what we're seeing from a Chinese standpoint. Just curious if you're seeing any slowing materially there. Obviously, a lot of growth in that sector.

Okay, thanks for the question, Chris. Well, as I mentioned before, Asia Pacific did very well. They had double-digit growth, actually leading the way for our record-setting quarter this quarter on all-up average daily volume. China, obviously, is a big part of that. China domestic, as well. So I would say that not only in Asia and APAC generally, but around the world, we've had good volume growth sequentially over last year's fourth quarter, which was our highest quarter that we've had prior to this quarter. So I'm optimistic. I think that the customers see the value proposition of our 777s that we've put in, with the later cutoffs that we provided them and access to the rest of the world connecting to our hubs around the rest of the world, not just the United States, but in Europe. So I just came back from Asia Pacific, in fact, and the mood is very optimistic.

Let me add that inventory to sales ratios at this point are still quite lean in the supply chain, which bodes well for us. Having said that, consumer spending has been down. As I mentioned earlier, we anticipate that to increase going forward which should help us with the combination of the lean inventories.

Our next question will come from Jon Langenfeld of Baird. Jon Langenfeld - Robert W. Baird & Co. Incorporated: Can you talk about the weight per shipment move in Express and what you're seeing there, as well as what you're seeing on weight per shipment in Ground?

We saw -- in terms of its contribution to our improvements in yield in Express, domestic, it was the second largest component behind the improvement, behind the rate and discount changes. In Ground, we saw a modest contribution to yield improvement as a result of the weight per package, and it was also a key factor in international as well. So overall, positive contribution to yield improvement, but not nearly as big as the rate and discount changes.

Our next question will come from Bill Greene with Morgan Stanley. William Greene - Morgan Stanley: Mike, just 2 quick data questions for you. First on pricing, the numbers that we saw Alan sort of suggest about half of the improvement in yield and domestic and international came from pricing. Should we think of that as a high watermark? Or is that sort of a sustainable level because it seems a bit higher than at least history? And then, any comments you can give us on June volumes just so we have a sense for how this quarter is tracking? T. Glenn: Bill, keep in mind, we made one significant change with our -- in our pricing back in January, where we changed the dimensional weight factor, which contributed significantly to the uptick in the yields. That was part of the rate and discount. Having said that, our sales team has done a phenomenal job retaining our general rate increase. Certainly have been successful in contract renegotiations of getting higher than historical trend increases built into the contract. So it's a combination of things. The one item that will not repeat itself is the change in the dimensional weight factor, which was put in place in January. So that's the one differential. I would expect going forward, you'd see more stabilization and certainly above trend yield improvement because it continues to be the primary objective for our sales team and they've done a phenomenal job in that, and I expect them to continue to do so. But we will not have the dimensional weight change taking place again this January. It's early to call the quarter. Obviously, we don't forecast month by month, but I would say, it's relatively stable to what we have been seeing towards the latter part of the fourth quarter.

Our next question will come from Gary Chase with Barclays Capital. Garrett Chase - Barclays Capital: Wondered if I could ask Mike to elaborate a little bit further on the weight per package. If you look at history, it looks like a very substantial change in that metric this quarter. And I'm wondering, is that largely a domestic phenomenon? Is there something in the business mix that would have explained a big uptick like that? And then most importantly, is that something that we should expect to be sustainable looking forward? T. Glenn: Well, there are couple of issues here. One is the product mix issue is a key contributor to that. Again, recall, we made the change in the dimensional weight, which certainly has an impact on that in terms of how a package is rated. But the change in mix is the primary driver there that we have seen. Again, you have to remember, part of our yield management strategy is to manage the mix of traffic that we get, the customer mix, as well as the product mix, and to ensure we're getting appropriate retention of our general rate increase that we're managing the various surcharge adjustments for any individual customers. So this is a multifaceted effort, again, which has been executed extremely well by our sales team and our revenue management team. So -- but the real issue there is the product mix.

Our next question will come from Keith Schoonmaker of Morningstar. Keith Schoonmaker - Morningstar Inc.: I'm in interested in Mr. Smith's opinions on potential implications to the firm from some of the aggressive proposals we're seeing from the National Labor Relations Board, situations like Boeing selecting where it builds a plant or organizing election timing rules, please.

Well, I think rather than me opining on that because you're getting into an area of legal issues, let me ask our General Counsel, if you wouldn't mind, Christine Richards, to comment because she's more up to speed on those things than I am.

As far as we're concerned, the recent announced rule changes that have been proposed will be something we're commenting on going forward. It is unfortunate that at a time where the commitment of this country to secret ballot elections and freedom of speech is well established that a federal agency would be undertaking changes that would do many things that would deprive employers of these basic rights. We're disappointed in the announcement that we expect today with respect to the National Labor Relations Board's proposed changes on elections, and we'll be commenting on those as we go forward.

Our next question will come from Ed Wolfe of Wolfe Trahan. Edward Wolfe - Wolfe Trahan & Co.: On the maintenance side, it seems like your maintenance costs as a percentage of revenue were down for probably the first time in 5 or 6 quarters. You've talked about this for a while. Would you say you've now turned the corner on the maintenance? And is there any kind of guidance, Dave, around that you can give us in terms of either absolute, how we should think about maintenance expense or as a percentage of revenue directionally going forward?

This is Dave. Yes, obviously, we've turned the corner there and the 3% is more in-line with what we normally would expect the planes out of the desert and the engine maintenance that goes with it and so forth that we've talked about for several quarters is behind us now. Our maintenance numbers now are in Alan's guidance going forward for FY '12, but I'll let Alan opine on that.

I think the other thing, a couple of other things, obviously, as we add newness to the fleet with the 777s and retire the old 727 hanger queens, that's helping. And also there's just been a tremendous amount of productivity improvement in our maintenance operation at Express, particularly in the aviation group, have done a fantastic job. We're starting to see a lot of productivity gains from our investments and redesigns of some of our programs. And that's in FY '12, and I just expect it to not be a headwind at all for us in FY '12.

Yes, let me just add my comments to Alan's point. Again, Greg Hall, our Head of Aircraft Maintenance, and all of our aircraft mechanics have done a fabulous job at improving our overall efficiencies and productivity and how they manage that whole very difficult process. So hats off to all of them.

Our next question will come from Scott Flower, Macquarie Securities. Scott Flower - Macquarie Research: Just a follow-up, I know it's been asked different ways, but I'm just wondering, Mike, if you look at the different businesses and different volumes and different products, did this progress in a way in the quarter and into June that gives you confidence in your economic outlook? I'm just trying to get a sense of how you saw perhaps some of the disruptions and oil price impacts and how you saw those playing out in your volumes as you look prospectively versus what you actually saw in the numbers. T. Glenn: Scott, I'm not sure how I can provide more clarity. I think Fred was very specific in terms of the percent impact in terms of the major items that resulted in the soft patch that we're currently seeing. But obviously, oil prices was a big part of that, disruptions in the Japan supply chain were a big part of that. While that is recovering, we still are seeing impacts of that and we're not back up to speed in that regard. The sentiment on the consumer side continues to be an issue. As a result, our forecast for consumer spending in the first half of this calendar year is lower than it is in the second half as we believe that, that will improve in the second half of the year. So that's been the biggest issue. Those have been the biggest 3 factors that we've been saying that have resulted in this soft patch. So we're confident given this GDP forecast that we will be able to achieve the balance between volume growth and yield improvement to hit the range that Alan has talked about.

Our next question comes from Peter Jacobs of Jacobs Broel Asset Management. Peter S. Jacobs: My first question is on IP growth for 2011. I think Mike gave a number for 2012 of 4.2% but I was curious about what it was for 2011. And then additionally, Fred, could you talk a little more about the international split with FedEx Express and the revenue there and where it was in the fourth quarter? And to what extent it might exceed domestic revenue in 2012? T. Glenn: Let me clarify the number that I gave was for industrial production, and our calendar year '11 forecast is 4.2% and our calendar year '12 forecast is 4.3%. So that IP relates to industrial production. And on the IP growth, specifically your question, we grew 6% this quarter and 9% on yields for 15% for revenue, and that's on the back of last year's fourth quarter of 23% growth. So the combination of those led us to our record quarter.

And you asked a comment about the mix between international revenues and domestic revenues at Express. For a long time, we have been building up our capabilities at FedEx ground, speeding up lanes. We've sped up, how many, Dave Rebholz, over the last 3 or 4 years?

We have roughly 63% of all lanes -- sorry, Fred, I didn't have the mic up. We have roughly 63% of every lane that we service has been sped up over the last 4 or 5 years.

So the reason that's important in a discussion of the mix of international and domestic at Express is that we've made our ground network faster and many of our customers can use the lower-cost ground network to fulfill many of their needs. And the Express business is becoming and will become ever more international in nature. We've stated repeatedly over the last several years, there really isn't any domestic Express business and International Express business. It's just the Express business. And those things that need time definite transportation, whether it's from Sioux City to Miami or from Singapore to Milan, will use the Express network. And I would imagine if you fast forward 5 years from now, the percentage of revenues at Express will be significantly more in the international column than in the domestic column. And the incremental margins in the Express international business are much better than the domestic business, which is why we keep saying to you that we have a high confidence level that our margins will improve in the Express business. Now I want to also emphasize that even with the favorable outlook at Express, we're investing a lot of money in network development this year. You don't turn a profit when you add these network enhancements generally in the first month or 2. So we are investing in Asia and in Europe, and we still have good progress in our Express column for FY '12 in the guidance that Alan gave you. But that's what you can expect at Express in the years to come. International will surpass the domestic revenues and then substantially exceed it as a total of overall revenues in Express.

Our next question will come from Scott Malat of Goldman Sachs. Scott Malat - Goldman Sachs Group Inc.: You gave a lot of detail around margins. I'm really looking at the Express margins. Everything looked great. The pricing was really strong. I guess I was a little surprised that the margins were a bit lower than I would have thought. If you do exclude the jet fuel, the operating cost per package in Express is up around 6.5% year-over-year. I know you mentioned some compensation headwinds. The purchase trans was up, I don't know, 24% in Express. Can you just help us think about some of the larger buckets or other areas of Express that caused some pressure or help us quantify that for at least this quarter?

This is Fred Smith speaking. I'm going to say a couple of things here and then ask Dave to talk about it. Again, we are making investments in the Express business, and we don't quite look at the thing -- the overall situation the way some of you folks do. With the performance that we're achieving in Ground and the return to profitability of FedEx Freight, we have the capability to speed up some of the investments in Express. So we'd look at this to some degree as a portfolio play and the EPS is the number that drives us much more than the segment number. So when we saw how well we were doing, we actually made the decision to make some investments in the Express business in our European expansion, in particular, in our Asian network, our intra-China business is growing substantially and in the healthcare sector. So to some degree, I guess, the blunt way to put it is, we could have reported our margins in Express had we not made the investments. And so Dave, you want to talk a little more about that?

Yes, all of that is correct, Fred, it's 100% correct. And adding a little bit more color to some of the fourth quarter issues, specifically as Alan mentioned already, the 401(k) and the pension, of course, were big headwinds for us in our fourth quarter and actually fuel in spite of the fact that we generated more revenue off the surcharge, still hurt our margins. The fuel price this year in the fourth quarter on the jet fuel was $3.34. It was up $0.98, 42% over last year's fourth quarter. So fuel actually did hurt our margins slightly in the fourth quarter. But all of that being said, Fred is generally right about the whole infrastructure and investment in our value proposition. Due to the 24% number, because that's in your report there, a significant number in that 24% is our FTN, FedEx Trade Networks, transition to revenue and expenses so the revenue was up offsetting the expenses, quite frankly, there. Exchange hurt us a little bit there. And then other than that, we had overall purchase transportation to support our international volumes. So it looks high, but it's artificially high because primarily, FTN is in that number.

Our next question will come from David Campbell of Thompson, Davis & Company.

Yes, I think the last answer to the last question pretty much explained the situation where the company is focusing its growth initiatives for the long term in 2012 in the international arena does have an impact on Express profits. Because the way you're guiding it, it looks to me like there's not a lot of growth in Express profitability in fiscal 2012. Is that the way I should conclude it?

No, David, this is Alan. Express operating margins and operating income are going to be up substantially in FY '12 from FY '11.

And our final question will come from Dave Vernon of Sanford C. Bernstein. David Vernon - Sanford C. Bernstein & Co., Inc.: I just have a short question about the 757 and 727 transition. Can you talk about specifically what percentage of the flying that used to be done by 727s has now been transitioned to 75s and when you think that that will be done?

Yes, a great question. By FY '16, I just got an update on it this week, we'll be completely out of the 727s. And the sooner, the better. Obviously the 757s, we have 37 of them flying now. We purchased 57 in total. And the faster we can get those 757s into the network, the better off will be on the operating profit, fuel savings, reliability and every other thing. Thank you for the question.

That does conclude today's question-and-answer session for today. At this time, I'd like to turn the conference back over to Mickey Foster for any additional or closing remarks.

Thank you for your participation on the earnings release conference call, and please feel free to call anyone on the IR team if you have any additional questions. Thank you very much.

And again, that does conclude today's conference for today. We'd like to thank you for your participation.