Mickey Foster – VP of IR Fred Smith – Chairman Mike Glenn – President & CEO FedEx Services Alan Graf – EVP & CFO Dave Bronczek – President & CEO FedEx Express Henry Maier – President & CEO of FedEx Ground Chris Richards – EVP, General Counsel & Secretary

Rob Salmon – Deutsche Bank Ben Hartford – Robert W. Baird & Company, Inc. Chris Wetherbee – Citigroup Ken Hoexter – BofA Merrill Lynch Kelly Dougherty – Macquarie Capital Scott Schneeberger – Oppenheimer & Co. Bill Greene – Morgan Stanley Allison Landry – Credit Suisse Scott Group – Wolfe Research Thomas Kim – Goldman Sachs Brandon Oglenski – Barclays Capital Jeff Kauffman – Buckingham Research Group David Vernon – Sanford C. Bernstein & Company, Inc. Bruce Chen – Stifel Nicolaus David Campbell – Thompson Davis & Company Keith Schoonmaker – Morningstar

Good day, and welcome to the FedEx Corporation first quarter FY ‘15 earnings conference call. Today's call is being recorded. At this time, I'll turn the call over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.

Good morning, and welcome to FedEx Corporation's first quarter earnings conference call. The first quarter earnings release and our stat book are on our website at FedEx.com. This call is being broadcast from our website, and the replay and podcast will be available for about 1 year. Joining us on the call today are members of the media. During our question and answer session, callers will be limited 1 question in order to allow us to accommodate all those who would like to participate. If you're listening to the call through our live webcast, feel free to submit your question via e-mail or as a message on stocktwits.com. For e-mail please include your full name and contact information with your question and send it to our IR@fedex. com address. To send a question via stocktwits.com, please be sure to include $FedEx in the message. Preference will be given to inquiries of a long-term strategic nature. 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. To the extent we disclose any non-GAAP financial measures 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, 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, Henry Maier, 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.

Thank you, Mickey. Good morning, everyone, and welcome to our discussion of results for the first quarter of FY ‘15. As you can see in the press release, FedEx is off to a good start for the fiscal year thanks to the strong performance of Ground, solid volume and revenue increases at Freight and volume and yield growth at Express. We expect continued revenue and earnings growth in FY ‘15, assuming moderate global economic growth and stable fuel prices. It's clear more customers are relying on FedEx because they appreciate the competitive advantages provided by our portfolio of solutions. FedEx Ground's performance was driven primarily by higher average daily volume as a result of increasing eCommerce. At FedEx Freight, increased revenue per shipment and strong LTL shipment growth drove operating margins higher. FedEx Express' operating income and margin improved, and we are confident we will achieve our profit improvement program goals. Now, let me turn the call over to Mike Glenn for his thoughts on the economy, after which Alan Graf will provide more detail on the first quarter earnings. Mike?

Thank you, Fred, and good morning. With private sector demand accelerating and fiscal austerity winding down, our expectation for real GDP growth is to average around 3% for the remainder of this year and next. Our US GDP forecast is now 2.1% for calendar 2014 and 3.1% for calendar 2015. We have increased our expectations for industrial production growth to 4.1% this year and 3.8% in calendar 2015. The global economy has improved, although it certainly remains a multi-speed world. The US is leading the way and emerging markets are picking up. We expect global growth of 2.6% in calendar 2014 and 3.1% for calendar 2015. Now, let me make a few comments regarding the Company's yield performance. Excluding the impact of fuel, year-over-year express domestic yield increased 0.5% in the first quarter. This increase was driven by product mix and rate and discount. The ground package yield increased 3% year-over-year in the first quarter, excluding the impact of fuel. The ground yield has improved steadily due to rate and discount and product mix. Excluding fuel, international export express package yield increased 1.9%, which was primarily driven by product mix. And finally, excluding the impact of fuel, yield per shipment increased 1.2% at FedEx Freight, which was driven by rate and discount and changes in weight per shipment. As noted in the press Release, FedEx Express, FedEx Ground and FedEx Freight will be increasing shipping rates an average of 4.9% effective January 5 of 2015. FedEx Ground will also be implementing the new dimensional weight policy previously announced to include packages less than 3 cubic feet, which will also be effective on January 5. And finally, just a couple comments on peak season. We're expecting another record peak season in terms of delivery volume. Peak will once again be compressed this year with Cyber Monday falling on December 1. We've been in active dialogue with our retail and etail customers all year to understand their peak shipping needs and plan our operations accordingly. We expect more than 50,000 seasonal positions to be added for the upcoming peak across the FedEx operating companies. This includes package handler, helpers, drivers and other support positions. Based upon our growth expectations and network expansion, the majority of those seasonal workers will have the opportunity to continue working for us after the holiday season. So, now let me turn it over to Alan Graf for a few comments.

Thank you, Mike and good morning, everyone. We had an outstanding first quarter with EPS of $2.10 a share and 8.5% operating margin. Revenue growth from increased volumes and yields drove a significant increase in earnings for each of our transportation segments. Our sales team is executing on improved revenue quality strategy at a very high level. In Q1, we repurchased 5.3 million shares of FedEx common stock and completed the share repurchase program that we announced in FY ‘14. The repurchase program had a $0.15 per share year-over-year positive impact on our EPS this quarter. To improve the transparency of our results, this year we ceased allocating the costs associated with our corporate headquarters division to our transportation segments. These costs are now included in corporate, eliminations and other in our segment reporting and reconciliations. A reserve for a legal contingency was recorded at corporate in Q1, causing the increase in these unallocated costs versus the prior year. Looking at our segments, at Express, operating income increased 35% and operating margin increased 130 basis points. Revenue growth in our US and international export package business drove higher income, partially offset by higher maintenance expense and lower freight revenues. The profit improvement programs also contributed to the improvement in operating income for Express. US domestic volumes increased 5% in Q1, driven by both overnight box and deferred service offerings. International economy volumes increased 3%. International priority volumes were up 1%. Overall, international export revenue per package increased 3%. Turning to Ground. Average daily volume increased 6% during the quarter from continued growth in our home delivery service and commercial business. Smart Post average daily volume was down 10% due to lower volume from a major customer; however, Smart Post revenue per package increased 10% from rate increases and improved customer mix, partially offset by higher postage costs. Volumes increased 8%, excluding the changes in shipping patterns from a major customer. Ground segment operating income increased 13% and operating margin increased to 18.4% on higher revenue per package and volumes. Higher network expansion costs partially offset Ground's increase in operating income as we continue to invest in the high margin, high ROIC growing Ground businesses. At Freight, it was a great quarter, with operating margin of 10.4%, up 340 basis points from last year. Operating income and operating margin increased from higher less than truckload revenue per shipment, higher average daily LTL shipments and solid cost management. Freight saw higher demand for both its priority and economy service offerings in the quarter, which drove an 11% increase in average daily LTL shipments. Turning to our outlook, and based on the economic outlook that Mike talked about, we reaffirm our FY ‘15 earnings per share forecast of $8.50 to $9 a share. Our outlook depends on key external factors, including fuel prices and the pace of improvement in the global economy. Revenue and earnings are expected to continue – revenue and earnings growth are expected to continue into the second quarter and the remainder of FY ‘15, driven by ongoing improvements at all of our operating companies, along with continued volume and yield improvements. Profit improvement programs that we announced in FY ‘13 will add to our FY ‘15 results as we continue to execute on them. FY ‘15 will see the full benefit of a voluntary buyout program which was completed in May. We should also see additional cost savings from sourcing and procurement. Every new 767 replacement aircraft should add about $10 million annually to profits. We have 4 767s in service currently and expect to have another 12 delivered by the end of FY ‘15. There are many other initiatives that we are working on at Express. In short, we are progressing as planned with the profit improvement programs. We had an excellent quarter, and we are looking forward to a very good year. Now, we will open up the call for questions.

Thank you. [Operator Instructions] We'll take our first question from Rob Salmon with Deutsche Bank. Rob Salmon – Deutsche Bank: Hi, good morning. How are you doing, guys?

Good. Rob Salmon – Deutsche Bank: Alan, I'll let someone else have at the guidance given the strong results in the first quarter, and I'll direct this question to you, Fred. I'm trying to think about the significant growth that the industry keeps talking about in terms of wide bodied passenger aircraft and how you guys think about your aircraft renewal opportunity, given the incremental capacity that's coming on and your experiences using third party line haul to date in the international economy package? And your thoughts in terms of where these aircraft are going to be coming on in different lanes, if that provides you the opportunity to potentially reduce the asset intensiveness of the aircraft fleet over time?

Well, I think it's early. It's 1 quarter. Our guidance does show 26% to 33% increase in EPS, which is a little bit less than the first quarter or the second half will be a little bit tougher comparison as we really start to hit our stride in the second half of FY ‘14. I'm comfortable with where we are now, and we'll talk about it again in December.

Thank you. Our next question comes from Ben Hartford with Robert W. Baird.

Let me go in and answer the question that was just answered – just asked before, before you make the question about the fleet planning. Dave will put some color on this, but basically, our strategy is to have an unparalleled proprietary priority network, and then we do use the underbellies, as you mentioned, for our economy service. And we are very cognizant of the lift that's out there, that's planned to be out there and it's very sophisticated planning process that goes into it that determines what sort of aircraft that we acquire. Now, having said that, I think Alan's made this point. We're not buying any airplanes other than to modernize our fleet. And these airplanes are very profit accretive, as Alan mentioned to you, and the 777s in the international business are just unprecedented in the type of operating capabilities and competitive advantage we have. So, let me turn it over to Dave to put more color on it.

Thanks, Fred. It's a great question. Our 777s provide us the global powerhouse that FedEx Express is the best in the world. We have the latest cutoff times and the earliest arrival times all over the world coming out of Asia, into the United States into the Middle East, into Europe. The 777s are replacing the MD11s. The MD11s are coming back to the United States. The 767s are actually replacing, as Fred pointed out, older used airplanes that we're getting tremendous fuel efficiency, operating efficiency, maintenance efficiency out of the 767s back here in the United States. The combination of both of these planes into our fleet has provided us a tremendous opportunity to grow our profits and improve our service around the world.

Now that other question.

From Ben Hartford with Robert W. Baird. Ben Hartford – Robert W. Baird & Company, Inc.: Hi, good morning, guys. Alan, could I get your perspective on – piggybacking on that, to the extent that CapEx is going to remain focused on fleet replacement and not growth and you guys continue to execute on this plan within Express. Clearly, you have the cash flow capability coming, you're done with the buyback. Can you talk a little bit about how you're thinking about managing excess cash going forward between the dividend and a potential new share repurchase authorization? Thanks.

I don't have anything to say today about new share repurchase authorization other than the fact that we talk about this at every single Board meeting and we will continue to do that. We have stated that we want to continue to increase our dividend. We understand our dividend yield is sub par. Part of that is because of the outstanding stock performance. But we will continue to increase our dividends at some level as our strategy and objective, and so we'll see where we get. We're very pleased with the stock buyback program that we recently executed, and we will keep our eye on that as well, but that's a Board decision.

Thank you. We'll go next to Chris Wetherbee with Citi. Chris Wetherbee – Citigroup: Great, thanks, good morning. Wanted to touch a little bit on the pricing environment. When you think about turning the page into calendar 2014 with dimensional pricing coming in and obviously, the GRIs announced last night, some of them were a bit higher than last year, LTLs a little bit faster than the annual cycle. Just wanted to get a rough sense when you think about across the spectrum of your products and capacity being a little bit tighter, how should we be thinking about the pricing environment as it sets up for calendar 2015?

Well, FedEx bases all pricing decisions on current market conditions, the economic environment and things of that nature, and we feel the changes that we put in place are appropriate. They allow us to continue to invest in the value that we're providing our customers. And of course, always, our objective is to strike the right balance between yield improvement and volume growth to contribute to the bottom line, and I think we have successfully done that. That's really the backdrop on which all these pricing decisions are made, and we feel very comfortable with the announcement yesterday. We think it's appropriate given the market conditions and the economic environment. And again, our sales team is executing very crisply on the strategy to strike that right balance.

Our next question comes from Ken Hoexter with Banc of America Merrill Lynch. Ken Hoexter – BofA Merrill Lynch: Great, good morning. Solid start on the year here. Can you just talk about the progress of maybe some of the expense cost reductions in the profit improvement plan in terms of the SG&A and the progress of the facility, some reallocation you had talked about or consolidations? And then, did you mention there was a one-time charge within the corporate allocation? Can you delve on that too? Thanks.

Well, Ken, I'll start and I'll turn it over to Dave. I'm very pleased with where we are on our cost reduction program. We are basically exceeding it in every category. Had we not done what we did, our costs would have been significantly higher this quarter than they were and our earnings would have been a lot lower. I'm also proud of the fact that we've done it and we still have been able to maintain and increase our service levels and not give up on that, which is a very integral part of what we try to do every day. We will continue to work hard on that. We continue to find additional opportunities everywhere. Everyone is focused on it. We know we have a profit improvement program to hit but also, I think we are getting to world class in terms of cost management, in terms of our management. So, I'm going to turn it over to Dave.

Thanks, Alan. Yes, I'm extremely proud of our Express team. Around the world, they've executed flawlessly. As has been mentioned twice already, we're on plan, projected to be on target. For the run out rate in FY ‘15 we had a solid quarter, and going forward, we are expecting the same kinds of results in terms of exceeding our plan. On top of that, I wanted to say that in terms of the parts of the profit improvement plan, you mentioned the voluntary buyout, the SG&A. We're 100% in on that already, so that's already rolling into FY ‘15. Our fleet modernization is rolling out as we had planned, and as Alan pointed out, probably ahead of plan in many, if not all, of these categories. We have our focus and we have our eyes set on achieving those kinds of results going forward. We know what's expected, and our team is executing.

We did take a legal reserve at corporate in the first quarter, and it was for an immaterial amount.

Our next question comes from Kelly Dougherty with Macquarie Capital. Kelly Dougherty – Macquarie Capital: Good morning, thanks for taking the question. I just wanted to follow up on the pricing question earlier, especially in light of what we've seen from the post office recently. I guess two things. How do you help us think about the magnitude of the yield impact from the price increases and the dim weight changes? And then just some thoughts on what you think about the move by the post office to aggressively cut price to gain share and how that plays into your market share strategy and the outlook for margins at Ground?

Well, first, let me say, we don't comment on specific pricing actions by our competitors. We make all of our pricing decisions independent, based upon market conditions and economic conditions, as I mentioned earlier. Having said that, we have a tremendous portfolio of services which allow us to effectively serve the eCommerce market. I think we've demonstrated the ability to develop a strategy that really targets the right kind of growth within the eCommerce segment that contributes to the bottom line and supports our yield strategy. So, we're very comfortable with our strategy there. We're very comfortable with our growth opportunities there. Regarding the specific impact of decisions like dimensional weight, it would be extremely difficult to speculate on the impact of that because we're working with customers right now to alter their packaging so that they have more efficient packaging, which is good for sustainability and certainly fits with our corporate social responsibility programs. As those changes are made, and let me remind you, we announced that change 6 months early to give customers plenty of time to respond to that, and many are taking advantage of our packaging lab to redesign packaging to be more efficient, which we like. So, at this stage, it would be impossible to speculate on that, but let me just say, we're very comfortable with our position going forward.

Hi, Kelly, this is Henry Maier. Ground margins in the first quarter were reflective of better revenue quality, cost control, and ensuring every package was in the right network. We expect to continue to deliver industry-leading margins and as I've told you on this call before, the Ground team would not be satisfied with anything less than margins in the high teens.

We'll take our next question from Scott Schneeberger with Oppenheimer. Scott Schneeberger – Oppenheimer & Co.: Thanks, good morning. Just following up on that last point, in the Ground margins, very nice revenue growth. Pretty consistent with what we were expecting, but those margins were nice. You just hit a few of the areas. I know there is some OpEx going on with network expansion. Was there any change to – in ebb or flow in the quarter, and how do you anticipate that going forward as an impact on margins? Thanks.

Well, I don't think there was any change. We expect to spend roughly $1.2 billion in CapEx this year, 85%, 90% is all for capacity. We are right on plan in terms of our plans to bring those new facilities on. And I think as we said in the past, we manage roughly 150 real estate projects a year in anticipation of peak.

Our next question comes from Bill Greene with Morgan Stanley. Bill Greene – Morgan Stanley: Hi there, good morning. Mike, can I ask you about the international side? We saw the package volumes turn up a bit. In your experience, do product launches like iPhone 6 or these sorts of things have a material effect on that part of the business for FedEx? Or is it that this is just an iteration of a new product so it wouldn't have the same kind of effect that we've seen in the past?

Bill, it has some impact, but more in the area that it relates to, our FedEx Trade Networks Company. There's been a change in the way companies position inventory for product launches. There's much more forward deployment of that inventory, using forwarding capacity to stage product in the US. And then we work with companies to then deploy the product to either retail locations or individual consumers. So, those product launches are now more likely to show up in the domestic businesses, and they really are surges. They are 1 to 2 day surges now, based upon the product launch. Now, having said all that, there is the after market effect of accessories and things of that nature which do flow through the system but don't have the impact of the product launch itself in terms of number of units. You really need to think – rethink the way those – or think differently about those product launches now as much more, the product is forward deployed.

This is Fred Smith. We've got a couple of questions over the internet. One from Art Hatfield with Raymond James. How should we think about margin goals for Express, given the change corporate cost allocation? I don't think that the latter has much effect on what our goal is. Our goal is to have all 3 of our major transport sectors operating at double-digit margins, and we're confident that we can do so. Obviously in this quarter, we had 2 out of the 3, but significant progress at Express. Another question from Shelby Holiday at Bloomberg. In addition to adding seasonal employees, what else is FedEx doing to ensure a smooth peak season 2014? I think if we answered that question fully, we would spend the next 2 hours talking to you about it. The peak planning begins in January/February each year, after peak season. There are just scores of things that are done at each of the FedEx operating companies to accommodate a smooth peak season. Contrary to some of the popular press, we actually had an outstanding peak season last year, with the exception of a couple of weather events. And the CEOs have reported at DSMC that they're prepared for peak season this year and hopefully, the weather will be accommodating. There's a question about the long-term strategy for handling the shift to B2C. I think Mike Glenn answered that, quite frankly. We've done a great job of understanding what parts of the B2C business make sense and that are profitable We've got a broad portfolio of solutions, our customers want to buy it – these solutions and in great profusion. And then entry into emerging markets, of course, as you know, we bought a wonderful company in Mexico. We bought a great company in Brazil. We have an outstanding operation in India. We have an excellent domestic operation in China and recently received, after a long delay, the licenses to continue to grow that business. So, we have a major focus on emerging markets as well. So, we'll now take other questions from the moderator.

Our next question comes from Allison Landry with Credit Suisse. Allison Landry – Credit Suisse: Thanks, good morning. In response to an earlier question on returns to shareholders, the dividend hike and a potential buyback and that you are consistently talking about it at the Board meetings, I was just wondering if you could just remind us when the next Board meeting will take place?

Allison, our annual meeting is a week from Monday. Allison Landry – Credit Suisse: Okay, thank you.

Our next question comes from Scott Group with Wolfe Research. Scott Group – Wolfe Research: Thanks, good morning guys. Alan, one of the questions earlier about the profit improvement plan, I think you said that you're now tracking ahead of the plan or something to that effect. And that seems to be a change from some of the commentary you were giving last year, and so I want to understand that a little bit more in terms of what's changing to give you confidence that you're now above plan? Is it additional costs that you're finding? Is it maybe you think pricing could become a bigger part of this? Or what is really driving the confidence that you now can be better than the $1.6 billion?

Scott, I think what I said was on the cost side, we were ahead. There's still a long way to go here, and we just reported a 5.4% margin. We've got a long way to go to hit this profit improvement plan. I'm very pleased on the cost side. As I mentioned in my opening remarks, I'm extremely pleased with our execution of our improved revenue quality strategy, which we've all talked about and continue to talk about on these calls and are working very hard inside the Company. We need to get paid adequately for the services that we're providing. We have stabilized the Express network, we're not expanding it. And we are continuing to work to improve the revenue quality on those international flights, which is a key part of our profit improvement program. But it's also probably one of the hardest parts of the profit improvement program, because we don't see the global trade situation today as we did in October of 2012 when we announced the program. We're doubling down on everything else, and I'm very confident on the cost side. I am confident that we are on track at the PIP, but we've got 7 more quarters ahead of us.

Our next question comes from Thomas Kim with Goldman Sachs. Thomas Kim – Goldman Sachs: Thanks. Can you talk a little bit more about the state of international express markets by region? We're seeing Asia seemingly rebounding nicely; Europe is much more mixed, and some of the data actually looks like it's rolling over. And if you could comment to what extent you're seeing different commodities drive the growth, that would also be appreciated. For the two, one of the earlier questions, to what extent is the tech launches that we're seeing driving the growth, and do you think that there's anything beyond tech that's going to sustain the growth? And I appreciate your comment that it's – I'm referring to comments from perhaps other companies that continuously refer to the rebound, particularly out of Asia, about tech launches driving some of the growth that some of your peers have been seeing, thanks.

This is Dave Bronczek. I'll let Mike go back and talk about the tech launches, but in terms of our regions around the world, they've all performed very well. As you pointed out, Asia Pacific rebounded nicely. For us, Europe is performing very well. We've opened up 109 stations in the last 2 years, and the business is performing exactly as we had hoped it would. And I think around the world, we're very pleased with the progress we're making. I do think Alan's point is right. The global economy is still probably softer than we would like to see it; but that being said, we're performing well in it. On the international revenue side, our yields are strong and our volume is strong, especially in our box volume. It's also strong in our domestic business. Our box volume and overnight box is up 9%. Deferred boxes are up 7%. The overnight letters are – is what's down slightly. When you look at our mix of products and our drivers of profit improvement, that's all benefiting us. I should add 1 other thing. One that you can see and one that you can't see, probably. In aircraft maintenance, it's a timing issue for us. And you can see that it's our number 1 expense item in terms of incremental expense year-over-year. On fuel, and we talk about fuel all the time, and I know you all do, it was slightly positive, it was not material, and I think that's important to note.

Let me comment again, just to make sure there's a clear understanding of my comments regarding product launches. Over the last couple of years, there has been a change in the strategy regarding product launches. This is not a FedEx strategy; let me be clear, this is a market strategy. More of these companies are electing to build time into their product launch planning to allow them to take advantage of more traditional freight networks to forward deploy the product and move the product into the United States or other markets and stage that inventory for the launch itself. That is changing the mix of traffic. And this is not only affecting FedEx, it's affecting the entire transportation market in terms of how this product is forward deployed. So, I want to make sure I'm clear about that. Now, having said all that, once the product launch occurs, then other inventory moves through more traditional channels and specifically, accessories moves through more traditional channels. The real impact of the change in product launches is a removal from the international perspective of the large bubble that took place early in the product launch cycle, and that has now smoothed out quite a bit. The bubble then takes place as a result of that, for example, in the US, when the product starts moving through the US network to achieve, advance or to fulfill advance orders, either through the retail stores or direct to individuals. It has been a change in strategy by the companies that are launching these products. And obviously, we're responding well, and we are very comfortable with our position because of the portfolio of services that we provide. Just quickly, you asked about the segments that were driving international growth. These are typically consumer-driven services, manufacturing durables, of which these high-tech products would be part of that. Those are the areas where we see a lot of growth, and wholesale durables as well.

Our next question comes from Brandon Oglenski with Barclays. Brandon Oglenski – Barclays Capital: Yes, good morning, everyone, and congratulations on the good quarter. I think this question is going to be for Fred or Mike. We talk a lot about trying to shape customer behavior with the dim weight change, trying to get smaller boxes into the system. But wouldn't one of the best levers be some form of realtime pricing where you can really start to manage the peaks and valleys in the network? And what's really limiting the industry from shifting to more of a realtime pricing model?

Well, again, we work with our customers very specifically about the pricing that they have on a contractual basis, based upon the forecasted demand and the volume that they anticipate. That's one reason why January – excuse me, December 26th we start focusing on the next year for peak season. When we go into a contractual negotiation with a customer, if that customer has a peaking factor, for example, of 3 times, that would imply that they will give us about 3 times as much volume, for example, in the month of December that they would the other 11 months. That information is known on the front end, and our negotiations are based upon that. This is not a situation where we get surprised by the lumpiness, if you will, of a customer's volume. We know that going into a negotiation. Obviously, we won't rule out other pricing tactics. We announced a change to our dim weight policy based upon the change in market conditions and the economic environment, and I'm sure there will be future changes along those lines. But I want to be real clear, we have a great deal of understanding and data to support pricing decision and contractual negotiations based upon the forecasted volume that customers give us. A lot of our discounts are also volume based, so if the volume goes up or down, we adjust those discounts accordingly. There's a tremendous amount of science that goes into revenue management, and we are world class at that. Our pricing science group is outstanding. And that's really one of the reasons why that data feeds our growth strategy and that's one of the reasons why we've been able to sustain a balance between volume growth and yield improvements contributed to bottom line expansion.

Thank you. Our next question comes from Jeff Kauffman from Buckingham Research. Jeff Kauffman – Buckingham Research Group: Thank you very much and congratulations. Alan, I just wanted to take 10 steps back here. You raised your global IP outlook, you had a very strong quarter. Fuel prices seem to be a little bit better, costs ahead of plan, yet the guidance remains in line. Can you help me connect the dots on that?

Well, when I gave you this guidance at the end of last year, we had factored all that into the guidance. As I said, we were very pleased with the first quarter, second half is a little bit tougher. I have no idea about peak season weather yet, which could swing us quite a bit. As I said, we'll have more to say about this at the end of December when we have that basically mostly behind us, and we'll see where that is.

Our next question comes from David Vernon with Bernstein Research. David Vernon – Sanford C. Bernstein & Company, Inc.: Thanks for taking the question. Mike, a question for you on the domestic yields. David mentioned that the box volume was up 9%. That's the best quarterly figure that I can see back in my model. And I was just trying to get a sense for what the underlying rate development was and what you think is really driving that, whether it's macro, maybe response to lower prices. Any other shifts that are going in there to drive the outstanding volume growth in overnight box?

There are a couple issues that are in play here. One is Express is certainly benefiting from the growth of eCommerce, which we've said previously on this call. Secondarily, as part of profit improvement plan, Dave Bronczek and I, along with our teams, have really developed a targeted growth strategy that is targeting specific amounts of growth opportunities at targeted yields which we feel, if we're able to achieve that, is going to benefit his bottom line. And our sales team is executing that strategy perfectly. So, Dave and I work very closely together, we monitor all the opportunities, all the pipelines to make sure that we're achieving our desired goals. And again, hats off to our sales team for executing that strategy.

Our next question comes from Bruce Chen with Stifel. Bruce Chen – Stifel Nicolaus: Yes, thank you gentlemen. You alluded to another compressed peak season in your prepared remarks. I'm wondering with what's going on over on the West Coast with the ILWU, it seems that a lot of shippers have been prepositioning inventory, and I don't just mean tech product launches here. I'd like to get your view on whether that should affect your volumes going into peak and as far as last minute inventory supplements, whether that's been a factor in your preparations. Thank you.

This is Mike again. It's certainly an issue that we're monitoring, but I would say at this stage, based upon the feedback from our customers, we don't expect that to have a material impact on our peak season at this point.

Our next question comes from David Campbell with Thompson Davis & Company. David Campbell – Thompson Davis & Company: Yes, thanks for taking the question. I – some of the international companies see China as more of an import freight business, much more of an import business than an export business as it has been for the last 10 years. Do you see the same thing going on there? And of course, that import business has a lot to do with the intra Asia growth. Just wondering how you were positioning the Company to participate in that growth.

This is Dave Bronczek. As you know, we've been in China for over 2 decades now, and we've had – 3 decades now. We've had growth in our international segment and that continues to grow; the 777s continue to add more value to customers all around the world with later cutoffs there in China, feeding the rest of the world. We have an excellent intra Asia network off of our hub in Guangzhou, China, and then we have a domestic business in China. So, we're actually playing in and succeeding in every segment of the Chinese marketplace. And thankfully, we've been in business there for a long time and have a great reputation and great management team. And so to your question, we're seeing international export growth, we're seeing domestic intra-region growth and domestic China growth.

This is Alan, I have a question from Ryan Novak from Citadel about the $35 million year-over-year increase in the new corporate eliminations and the other line. That is largely the result of the legal reserve that we took. We are being maniacal about our corporate headquarters costs and trying to keep them down, which is why we are now reporting it separately so that we can show you transparency on the progress we have there as well. Sometimes those costs tend to get lost in chargebacks, and now we are focused on it.

Thank you. Our next question come from Kelly Dougherty with Macquarie Capital. Kelly Dougherty – Macquarie Capital: Thanks. Just wanted to get your thoughts on the pace of trade down from priority to economy and how it might differ domestically versus internationally. Do you think we've hit a point where there's stabilization? Maybe the delta between the 2 has leveled out at a good level that we can assume going forward? And then how are you assuming this trend as part of the Express profit improvement plan?

Well, this is Dave Bronczek. I'll start off, and then Mike can add some color. What we feel at Express in that FedEx is the same trend and the same way of business conducted around the world as it is in the United States. People look for different means of transportation, and we have them all at FedEx in our portfolio. So, we're not surprised. We're actually right in line. We've actually tweaked our model, if you will, so we can take advantage of the global economic activity in the deferred space, and that's performing well for us. In the Express overnight space, very much like the United States, we think the global marketplace is the same.

Yes, and let me just say, our mission is to work with customers to deliver solutions to them, leveraging the entire bundle of services that we provide in order to deliver the value that they need to improve their performance. So when they win, we win. We really look for opportunities to work with customers to make their supply chains as efficient as possible. A lot of the transition has occurred. Would I say it's over? No. Customers are always looking for ways to tweak their supply chains but clearly, we've seen – I think the economic situation starting in 2008 drove a lot of that. Obviously, as the economy improves, I think you'll probably see less focus on that and hopefully more focus on growth from our customers. But clearly, they will continue to look to refine their supply chains.

Let me just add a point to this, because I believe this has been an area of confusion on the part of a lot of people for a long time. What drives the selection of Express over Ground is not the fact that there's a Ground alternative and Express alternative. It's the nature of the product being shipped and the need of the shipper that's making the transaction. So, a defibrillator going for an operation is going to go Express. The plug-in to – of a charger for a new product that might be introduced by the electronics industry is almost certainly going to go Ground. As the market grows, there is a percentage of the traffic by virtue of the nature of the product and the consequences of the item being delivered in a short time will pay Express rates for Express service. And for some reason, several years ago, there was a large body of thought that everything was going to go Ground. We tried to tell people that that wasn't the case, and I think that what you see in the marketplace now is a more stable picture as some of this trade down has occurred, as Mike mentioned. But there is a certain percentage of the parcel traffic and the freight traffic, whether it's international, domestic, it's going to go Express. And we have the greatest Express Company in the world, and we've mentioned over and over again, we intend to get the Express Company back up to earning at the level that it should.

Our next question comes from Keith Schoonmaker with Morningstar. Keith Schoonmaker – Morningstar: Comments on the call sound quite positive regarding international activity, and year-over-year comps and international volume and yield are positive. You've mentioned you expect international trade to continue to grow faster, but I've also noted that Fred speaks a fair bit on risks of heightened protectionism. And I wonder if you're detecting some relief, or can you give insight into sources of expected trade despite these obstacles?

Well, you're correct. I think we had on the investor website several speeches I gave last spring. The reality is that perhaps the most important thing that's been done since the end of World War II was American leadership to open up markets and lift, literally, billions of people out of poverty. It's the American consumer, combined with the Chinese liberalization, that has created this incredible prosperity for millions and hundreds of millions of Chinese. India began to become more market oriented in the 1990s, Brazil did. But recently, as I point out in those speeches, there's been a real increase in the number of protectionist measures around the world and a lack of leadership on the part of the United States in moving towards more open markets. As you know, there was just a very disappointing result in the negotiations that was, in essence, vetoed by India. And so the United States will have to resume that mantle of leadership, yet trade promotion authority really push these various initiatives that underway. There are 4 major initiatives that the treaty negotiations of the United States is involved in today. But absent that, I think you're going to see a very difficult environment for trade around the world if these protectionist measures continue to proliferate.

Our next question comes from Thomas Kim with Goldman Sachs. Thomas Kim – Goldman Sachs: Thanks for letting me ask another question. Alan, I was wondering about the dividend side. Can you help us frame about how you're thinking about what would be deemed adequate? Are you thinking about more of a yield, or are you thinking about more of a payout ratio?

Both. I think we just need to continue to improve it until we get up into a range where people who are interested in dividends and dividend yields would be more interested in our shares than they are today. It's what Mickey is after me about every 5 minutes, so we'll continue to do that. I think every year for many a number of years now we've increased at our May/June Board meeting, and we'll take it up again this year.

Our next question comes from the Scott Group with Wolfe Research. Scott Group – Wolfe Research: Thanks for the follow-up. One for Henry on the Ground side. We saw margin expansion for the first time in a bunch quarters. Are you comfortable that we're through the overhang of the capital expansion cost and we can start seeing Ground margin improvement? And do you see any impact from the outcome in California on the contractor side that could lead to more legal costs or could lead you to change the contract remodel?

Well, the answer to the first question is that we've probably got another year of increased capital before we're over the hump here in terms of the capacity that – or building out the capacity we view we need going forward in the network. Most of that expenditure is in the area of hubs and automated satellites. All of our hubs are automated. I think the thing that's important for the folks on the call to understand is we are expanding the footprint of our auto satellites pretty aggressively here because of the capacity it gives us, the flexibility it gives us. Particularly when we see volumes spike up at peak and the ability long term of those facilities to lower our costs, both in terms of lower line haul expense and fewer handlings. I think there's 1 more year here and then you'll see CapEx go back to something that we will consider to be, quote, normal, unquote. I'm going to let Chris answer the question on California.

Hi, Scott. In light of legal and regulatory developments in several states, we've taken a number of steps in recent years to enhance the operating agreements with all of the independent businesses that contract with Ground to provide transportation services. These independent businesses agree to remain incorporated and in good standing in the states in which they do business and to treat their personnel as employees and to comply with all applicable Federal and State laws. That being said, we have announced we are transitioning to new independent service provider agreements in California, Oregon, Washington and Nevada.

Our next question comes from Ken Hoexter with Banc of America Merrill Lynch. Ken Hoexter – BofA Merrill Lynch: Hi, great. Good morning. Just a follow-up on the charge that you mentioned before. Is that anything related to the California move to contractors as employees, or is that a completely separate? And being a large charge, can you maybe provide some details on that? Chris Richards, FedEx Corporation - EVP, General Counsel & Secretary 76 Ken, it's Chris Richards. While we do not agree with the 9th Circuit decision, we have established an accrual for the estimated probable loss in these cases that was required to be recognized pursuant to applicable accounting standards.

Our next question comes from Rob Salmon with Deutsche Bank. Rob Salmon – Deutsche Bank : Yes, thanks for the follow-up. Henry, just to piggyback on Scott's earlier question, with the changes that have been announced in California, should we be thinking about any sort of incremental cost to the Company as you execute there? Or can this be like some of the changes in the past where we actually saw margins expand due to efficiencies that you gained?

Well, Rob, we've currently transitioned to 17 states. We don't expect any change here. Any additional costs we would see in terms of the transition would be immaterial. I guess the answer is no, I don't think you should read anything into this. In fact, if you look at the 17 states that we previously transitioned, our service actually improved, so no.

Seeing no further questions in queue, I'd like to turn the call back over to Mr. Mickey Foster for any additional or closing remarks.

Thank you for your participation in the FedEx Corporation's first quarter earnings release conference call. Feel free to call anyone on the Investor Relations team if you have additional questions about FedEx. Thank you very much.

Ladies and gentlemen, thank you for your participation. This will conclude today's conference.