Mickey Foster - VP, IR Frederick Smith - Chairman & CEO David Bronczek - President & COO Alan Graf - EVP & CFO Christine Richards - EVP, General Counsel & Secretary Robert Carter - EVP, FedEx Information Services and CIO Don Colleran - EVP, Chief Sales Officer Rajesh Subramaniam - EVP, Chief Marketing & Communications Officer Henry Maier - President & CEO of FedEx Ground Michael Ducker - President & CEO of FedEx Freight

Good day, everyone, and welcome to the FedEx Corporation Fourth Quarter Fiscal Year 2017 Earnings Conference Call. Today's call is being recorded. If you have any questions for the conference call, please email them to ir@fedex.com. Only questions submitted by e-mail will be discussed on the call for today. At this time, I'd like turn the call over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.

Good afternoon, and welcome to FedEx Corporation's fourth quarter earnings conference call. The fourth quarter earnings release, stat book and earnings presentation slides are on our website at fedex.com. This call is being streamed from our website, and the replay and presentation slides will be available for about one year. Written questions are welcome via e-mail. Our e-mail address is ir@fedex.com. When you send your questions, please include your full name and contact information. Preference will be given to inquiries of a long-term strategic nature. I'd 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 such as projections regarding future performance 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. Please refer to the Investor Relations portion of our website at fedex.com for a reconciliation of the non-GAAP financial measures discussed on the call to the most directly comparable GAAP measures. Joining us on the call today are Fred Smith, Chairman, Dave Bronczek, President and Chief Operating Officer; Alan Graf, Executive Vice President and CFO; Chris Richards, Executive Vice President, General Counsel and Secretary; Rob Carter, Executive Vice President, FedEx Information Services and CIO; Don Colleran, Executive Vice President, Chief Sales Officer, FedEx Corporation; Raj Subramaniam, Executive Vice President, Chief Marketing and Communications Officer for FedEx Corporation; Henry Maier, President and CEO of FedEx Ground; and Mike Ducker, President and CEO of FedEx Freight. And now Fred Smith will share his views on the quarter.

Thank you, Mickey. Good afternoon, and welcome to our call. Strong fourth quarter results completed an outstanding fiscal 2017. We boosted long-term value for share owners, delivered an outstanding peak season with our highest ever volumes and service levels, invested heavily in several strategic areas and managed yields and volumes extremely well. Revenues surpassed $60 billion for the fiscal year. Adjusted earnings were a record $12.30 per share. Continued investments, integration and innovations should improve margins, cash flows, returns and earnings per share over the next several years. Modernizing the FedEx aircraft fleet and expanding FedEx Ground capacity continue to be major strategic programs, while the integrations of TNT, FedEx Supply Chain and FedEx CrossBorder are filling strategic gaps in our global portfolio. FY '17 saw many FedEx innovations such as expanding our network of convenient, pick-up and drop-off locations, advanced IT technologies and new services. We enter FY '18 confident FedEx Corporation will continue to deliver outstanding value and opportunities for share owners, customers and team members. In this regard, thanks as always to our more than 400,000 members of the FedEx team around the world for their commitment to our Purple Promise, which states simply, I will make every FedEx experience outstanding. Now I'll turn the call over to my colleagues, Raj, Alan and Dave, for their perspectives. After which, we will answer a number of your questions.

Thank you, Fred, and good afternoon, everyone. I open with our economic update and outlook and discuss our performance and business conditions in each segment, including revenue, volume and yield, and then provide some commentary on broader industry trends. We see moderate growth in the global economy. We expect U.S. GDP growth of 2.2% in calendar year '17 and 2.5% in calendar year '18. Consumer spending is solid. Investment and trade are rebounding, and measures of business confidence remain high. We see industrial production growth of 1.9% this year and 2.5% next year. For the global economy, we forecast GDP growth of 2.7% for calendar year '17 and 2.8% for calendar year '18. Now I'll review revenue, volume and yield trends by segment. We remain focused on pricing strategies that allow us to grow volumes and increase yields across the portfolio. The U.S. Domestic Express package revenue grew 7% year-over-year in Q4. The yield per package increased 7%. Yield, excluding fuel surcharge, increased 4%, and Domestic Express package volume grew 0.3% year-over-year during the quarter. FedEx international export package revenue increased 8% year-over-year in Q4 and increased 4% if excluding fuel. FedEx International Priority volume increased 5%, while International Economy volume grew 6%. The international export package yields increased 2%. Excluding fuel and exchange rate impact, the yields were flat. The Ground segment revenue increased by 9% year-over-year in the fourth quarter, while average daily volume increased 3% year-over-year. Yield per package increased 7%. When you exclude fuel, the yield per package increased 6%. For the Freight segment, revenue increased 6% year-over-year in Q4. Average daily LTL shipments were flat, and this was partially driven by a stronger emphasis on pricing improvement. The revenue per LTL shipment increased 6%. Excluding the impact of fuel surcharge revenue, the revenue per LTL shipment was up 4%. Now preparation is underway for the 2017 peak holiday shipping season. The expectation is for another record peak season with multiple days that'll set records for package pickup and delivery. We continue to work directly with relatively small number of large customers that drive the majority of the surge and demand to ensure that we have appropriate pricing related to volume expectations and capacity needs. We are focused on ensuring that we are compensated for the investments we make to deliver outstanding service during peak. We continue to consider additional peak pricing changes but have not made a final decision in this regard. We also continue to experience growth in demand for large, heavy package delivery as a growing array of items are now being sold online. Furniture, mattresses, sports and exercise equipment are increasingly moving to the FedEx Ground network for residential delivery. This trend has accelerated over the past 12 months, and we have made adjustments to facilities and investments in sortation technology that enable outstanding service for these larger packages. We're continuing to analyze pricing and surcharges for oversized packages to ensure that we have appropriate pricing for the service provided. Now I'll turn the call over to Alan Graf.

Thank you, Raj, and good afternoon, everyone. We finished the year strong with adjusted EPS of $12.30, up 14%. Results benefited from higher base rates and increased package volume. Also, Express continued to manage costs while integrating TNT. These factors were partially offset by higher network expansion costs at Ground. FY '17 capital expenditures were $5.1 billion, and several Ground network expansion projects were deferred into '18 and beyond. We repurchased nearly 3 million shares in FY '17 at an average price of $172.13. As of May 31, we have approximately 16 million remaining shares authorized for repurchase. We raised our FY '17 dividend, and last week, we announced that we were boosting our FY '18 dividend by 25% to $0.50 per share per quarter. Looking at FedEx Corp.'s fourth quarter FY '17 results. Adjusted earnings were $4.25 per share, up 29% year-over-year, and our adjusted consolidated operating margin was 11.2%. The improvement in operating results was driven by higher base rates, increased package volume and the inclusion of TNT's results. Net income and earnings per share reflect tax benefits of $104 million or $0.37 per diluted share related to the implementation of new foreign currency tax regulations, the adoption of a new accounting standard for share-based compensation and certain transactions related to the TNT integration. For FedEx Express - for Q4, Express achieved record operating profit and adjusted operating margin climbed to 12.7%. Express results increased with higher base rates and package volume, a positive net benefit from fuel and the continued benefit of cost management initiatives. I also want to point out that, for the first time since the segment was formed, Express achieved double-digit adjusted operating margins for the full year. U.S. domestic yields were up 7%, as Raj mentioned, as we continue to focus on revenue quality. International volumes were strong, especially out of Asia. For TNT Q4, I can tell you that the integration is on track. TNT revenues were $1.9 billion with an adjusted operating profit of $83 million. Adjusted operating margin was 4.4%. Adjustments to operating income for Q4 included integration and restructuring expenses of $37 million as well as intangible asset amortization of $20 million. We'd like to remind everyone that starting Q1 FY '18, we will no longer report Express and TNT separately. Instead, we will report the combined results as one FedEx Express segment. Ground operating margin in Q4 was 15%. Operating income increased due to higher yields and volume, partially offset by network expansion and staffing costs as well as increased self-insurance reserves. In addition, FedEx Supply Chain continues to negatively impact segment margins. The outlook for FedEx Ground is we remain focused on balancing yield and volume growth. This quarter, we are rolling out new technology to optimize our Ground delivery options for SmartPost. We are continuing to roll out the ISP model to all 50 states and expect a complete transition to the ISP model in the second half of calendar year '20. Ground has made significant investments in capacity and automation and will continue to invest in FY '18. We expect CapEx to be slightly higher for Ground in FY '18 due to projects that were moved out of FY '17. Freight Q4 results saw revenue quality improving. Year-over-year, Freight yield growth has improved sequentially as Freight continues to work toward a better balance of volume, pricing and capacity. Operating results were slightly lower due to higher salaries and wages and increased information technology expenses that offset the benefit from the higher base rates. Looking now towards FY '18 and FedEx Corp. financial guidance points. The earnings forecast before year-end mark-to-market pension accounting adjustments and excluding TNT integration and restructuring expenses was $13.20 to $14 per diluted share for FY '18. This forecast includes estimated TNT intangible asset amortization expense of $65 million. Our guidance assumes moderate economic growth. Beginning FY '18, we will recast our FY '17 non-GAAP financial results to include TNT intangible asset amortization of $74 million or $0.21 per share. Our full year FY '17 effective tax rate was 34.6%. Our FY '18 earnings guidance assumes an effective tax rate between 32% and 35% on a GAAP basis. Our FY effective tax rate will likely be higher in the first quarter and vary from quarter to quarter as tax benefits and costs related to the TNT integration are recognized and we continue with our new tax structure. Over time, we believe the TNT acquisition should improve our international profits and contribute to a reduction in our effective tax rate. Our capital spending forecast for FY '18 is approximately $5.9 billion, which includes an increase in planned aircraft deliveries to support the FedEx Express fleet modernization program and continued investments in FedEx Ground automation and capacity expansion, including projects that were deferred from FY '17. For FY '17, we contributed $2 billion to our tax-qualified U.S. domestic pension plans, which was $1.5 billion more than what was required. For FY '18, we plan to contribute approximately $1 billion to our U.S. domestic pension plans. As we discussed last quarter, we are targeting operating income improvement at the new FedEx Express segment of $1.2 billion to $1.5 billion in FY '20 versus FY '17 assuming moderate economic growth as well as current accounting and tax rules. And now Dave Bronczek will give you an update on our progress with TNT.

Okay. Thank you, Alan, and good afternoon, everyone. During the fourth quarter, we marked a significant milestone with the 1-year anniversary of our acquisition of TNT. This first year produced tremendous progress, and the integration of FedEx Express and TNT is on track as Alan just mentioned. We continue to remain extremely confident in the long-term value of this deal for our shareholders, for our customers and team members. While our integration journey will continue over the next 3 years, the Year 1 anniversary serves as an excellent opportunity to highlight our work during FY '17 as we look to prepare for our integration plans for FY '18. As we reflect on progress in FY '17, it is important to continue to frame the size and scope of this effort. At $4.9 billion, the TNT acquisition is the largest in FedEx history, and we are working to combine the TNT group, which includes 54,000 employees, their operations across 200 countries and more than 1 million shipments daily within FedEx Express. The momentum from our progress in FY '17 has produced tremendous excitement within our teams, and we are focused on delivering the opportunities and the benefits provided by this combination. As we have discussed previously, the acquisition of TNT provides extensive benefits to FedEx, including rapidly accelerating our European and global growth, substantially enhancing our global footprint by leveraging TNT's low-cost road networks in Europe, in the Middle East and in Asia and expanding, of course, our customer capabilities and solutions. As you know, the integration is a key driver of the FedEx Express FY '20 operating income improvement target of $1.2 billion to $1.5 billion. Integration synergies will be realized through an optimized pick-up and delivery operation, the operation of integrated global Express networks, improvement in the efficiency of staff functions and of course, revenue growth. Collectively, these factors position us to deliver unmatched service for our combined customers, significantly improve our cost and overall, offer a best-in-class portfolio of services focused on improved market share, improved yields and of course, improved profitability. With that backdrop, I would like to take a few moments to highlight the exceptional progress we have made in FY '17. We successfully integrated 64 countries around the world in FY '17. And beyond these 64 countries, 5 additional significant countries are underway as we speak, including Canada, Japan, Spain, the United Arab Emirates and the United States. Our integration in the United States and Canada will be complete this month, and the remaining 3 will be finished in the first half of FY '18. In April, one of the first tangible and very important steps in connecting the FedEx Express and TNT world networks was realized with the successful launch of our new Boeing 777 FedEx flight from TNT's hub in Liege [ph] Belgium to the FedEx world hub in Memphis. This new flight brings benefits to approximately 100,000 existing TNT customers around the globe by providing access to the robust FedEx network in the United States and Canada with improved transit times, broader service coverage and much higher weight capabilities. We've also delivered key back-office initiatives in FY '17, particularly in the IT environment. Two of these are critical. We put both of these operations in, in the fourth quarter. These include technology to provide ability to handle FedEx Express packages in the TNT network and TNT packages in the FedEx network and technology that allows the management of customer inquiries across the world to use the same common service platform. Each of these IT initiatives significantly benefit our customers and of course, our employees. All of these accomplishments were made possible by our outstanding team. And on the people side, our leadership teams are in place, and we continue to benefit from the TNT personnel. As of this past June 1, 40% of our integrated international officer and director positions are now in place, and 40% of them are TNT executives. We have outstanding leadership in place to drive the integration. In addition, our work in FY '17 has produced key learning’s that will leverage our FY '18 as we focus our efforts on more complex but much, much higher-value countries being integrated around the globe. We learn valuable lessons in FY '17 that can be applied to the upcoming countries in FY '18 and beyond. The execution of our FY '18 integration work is in full swing now, and during the fourth quarter, we launched integration activities across many additional countries, including many of our largest direct-serve businesses, particularly in Europe. Our focus for country integration in FY '18 will turn to more complex but much higher-value markets. Now to illustrate this point, these countries represent significant value as they represent approximately 80% of our revenue and 80% of our employees within Europe. FY '17 has been very productive for us in this complex multi-year integration. We are pleased with the progress that we have made and are extremely excited about the next steps in FY '18 as we continue to bring these two fantastic businesses together. And with that, I believe we are ready for questions. I'll turn it over to Mickey.

Okay. Fred?

Okay. We're going to take these questions in the order in which they were sent in for this call. Helane Becker. Can you talk about what you're seeing in the B2B business? I feel like clients are laser focused on B2C and ignoring B2B. Are you seeing growth there? Raj?

Helane, the short answer to your question is yes. As you all know, B2B traffic represents a majority of our business, and we just reported strong revenue growth in all our major business segments, domestic, Express, international, Ground and Freight for the quarter.

There's a question from Jairam Nathan of Daiwa. We've seen labor availability issues driving cost up significantly in some regions of the world. Is FedEx experiencing similar issues? And would the industry be able to raise prices on e-commerce deliveries to offset cost increases? Alan?

We have a great balance between wage and benefit increases offset by productivity gains resulting from investments in IT and automation and volume increases. So not an issue for us at the moment.

Next question is from Brian Ossenbeck. What is the latest status on the integration of Ground? Henry?

We expect to have more than 90% of the network to have Ground and residential packages sorted in the same building by 2020. The key to this is technology and the integration of sortation tools and technology across the network.

I should have said on the questions, we're going to take them in the order that we received them, but several of you sent in several questions. So we're going to take your first question and then move down the list, so we get as many individual questioners as we can. And then we'll come back to the second, in some cases, third question if we get a chance to. This is from Scott Schneeberger of Oppenheimer. Please address the drivers and the sustainability of the recent improvements in global airfreight markets and how FedEx is positioning strategically to capitalize on the momentum. And I might point out that this mirrors a similar question from Scott Group of Wolfe Research, so I'm going to ask Dave Bronczek to answer that. David Cunningham, the CEO of Express, is actually in Asia at the moment. Dave?

Yes. Thanks, Fred. Actually, FedEx Express is perfectly positioned with our product portfolio. We have door-to-door express. We have the general commodity service. We have Express Freight service. And I think Raj maybe have mentioned it already, but our International Priority volume grew 5% in the quarter. Our deferred traffic grew 6% in the quarter. Airfreight grew 11%. Our volume weight grew 25%. So we're right in the middle of this growth in this activity in a global basis. And Raj and I talked about it earlier. Would you like to add a little bit to that, Raj?

Sure. Scott, there are many factors that influence the global airfreight market, including GDP, trade, air capacity, currency exchange, et cetera, as you know. But it's important to delineate the door-to-door air express segment was the traditional air cargo segment. The air express segment has continued to grow faster than the air cargo segment in good times and in not-so-good times, and FedEx is extremely well positioned to succeed in this area with the combination of our unmatched global flight network and an array of commercial carriers to improve primarily our deferred traffic. So thanks.

So from Amit Mehrotra of Deutsche Bank, has there been any competitive response in Europe from DHL and or UPS? The answer to that is, of course, there's been a competitive response from them and in turn, a competitive response against them from us. It's a highly competitive business, particularly between the large global networks operated by FedEx, UPS and DHL. But I think our results speak for themselves, and we're quite confident in our current competitive positioning. Here is a - golly, Jairam, you guess hard with the number. Let me go down to somebody that haven't got one. Ben Hartford of Baird. What opportunity does FDX see from the development of block chain technology and implications with regard to trade finance and customs brokerage? Rob Carter?

Well, in addition to finance, we see broad applicability of block chain to handle things like identity management, authenticity, pedigree and custody. So we're deeply engaged in block-chain technologies, understanding their implications for custodial control and for many of the things that we do. It's an exciting set of breakthroughs in technology, and we're staying very close to the leading edge of that.

Questions here on CapEx from Donald Brodner of Broaden Capital or Hatfield and Management Peak Advisors, Scott Group of Wolfe Research, Tom Wadewitz of UBS and Helane Becker of Cowen. So Alan, why don't you take that? I hope everybody heard that. I had my mic off. There's a lot of questions on CapEx, about 5 of them, so Alan's going to consolidate all of them.

Okay. Yes, there's questions about our process, about the significant increase year-over-year, which, previously, we had told you there probably wouldn't be one. So let me try to cover them all here and just bear with me. I'll try to hit every one of them. And if I don't get it exactly right, get back to Mickey, and we'll get you exactly what you're looking for. We have a large and growing capital-intensive business with many opportunities to invest. We have an extremely rigorous process that's designed to ensure that all of our capital expense and acquisition investments will provide strong positive cash flows and increase our returns over time. We use very conservative assumptions, and senior management is involved in all capital spending. Having said that, a lot of times, we talk about capital as a percent of revenue, and that is not a number that we manage to. It is a resulting number. We're managing to what we think our EBITDA is going to be and our after tax cash flows and what the opportunities we see out there to grow our businesses and our business lines to improve efficiency. We've got to take into consideration tax law, and certainly, bonus depreciation has driven us to spend more capital the last couple of years than otherwise would have been the case. Whatever the global GDP is going to be, we've given you some numbers that we think is still going to be moderate where we can get a competitive advantage and where it helps our long-term strategy. I think, again, the record speaks for itself. Our previous investments have been paying off, and the opportunities that we see in front of us in '18 are very clear. Most of the increase year-over-year is at the Express segment. We're going to take advantage of some opportunities on the fleet side of the house that we see possibly in front of us. Ground will have a slight increase, and Freight will actually have a decrease. So that explains the change, largely the under-spending of Ground in '17 and the increase in Express in '18 is why we're up to $5.9 billion. But we like what we're investing in, and it's going to be a key part of hitting the $1.2 billion to $1.5 billion target that we've laid out for you in FY '20.

Okay. Allison Landry of Credit Suisse. About a year ago, you implemented an additional surcharge on unauthorized oversized Ground shipments, which, at the time, represented about 10% of Ground volumes. Can you talk about whether you've seen any slowdown in the growth of these packages, if they still account for some or percentage of total volumes? And if it has not, do you expect to take any further price action? Raj or Henry will take that.

Well, Allison, as I said in my opening remarks, we continue to experience a growth in demand for oversized packages. And if anything, the trend has accelerated. And as I said earlier, we're continuing to look at opportunities on the pricing front and we will make those changes as needed.

So I'm going to give Jairam Nathan of Daiwa another shot at this, but I'm going to consolidate 3 of your questions into 1. I think you want to know everything about Mike Ducker, including his hat size here on the Freight side. But do you see faster adoption of technology by the trucking industry offering a competitive advantage over railroads and the intermodal market? With regard to LTL, would the company be depending on autonomous driving by truck manufacturers and Silicon Valley software companies? And what is FedEx strategy or thinking with regard to technological advancements like self-driving trucks and drones? So Mike Ducker, answer all of those as you would like.

Yes, sir. Thanks for the question, Jairam. First of all, we believe that the faster adoption of technology will greatly improve the efficiencies and the customer experience in the trucking industry. And as a result, it should drive value and differentiation. Secondly, we're investing heavily in many forms of artificial intelligence or AI with multiple companies, most importantly, our investment in safety systems in the area of advanced driver assist systems that include platooning and telematics among many others. And while the work that our drivers do behind the wheel today, we believe that it may change and evolve. But there'll still be a driver behind the wheel to take control in emergency circumstance for the foreseeable future. Safety is our most important initiative here, and we believe the safety system should be mandated by federal regulation, which is why we strongly support the adoption of 33-foot trailers, which have proven to be much safer than the current 28 footers. And finally, as far as our strategy goes, innovation has been a hallmark of FedEx since our founding. We're on the leading edge of all these new technologies. So in addition to safety, the technology investments we're making will improve our overall efficiencies and our customer experience.

I need to correct myself on one item. Freight's CapEx will increase in '18 over '17. I picked up a bad number. My apologies, Mike. I wasn't cutting your budget.

Thank you, sir.

So we have a number of questions surrounding the peak surcharge and peak season pricing and yields in residential e-commerce. So Ari Ashe of Transport Topics asked this week, your chief rival, UPS, announced a $0.27 to $0.97 package fee during the Christmas holiday season. Does FedEx plan to do the same thing? From Christian Wetherbee of Citi, will you implement a similar initiative around peak season pricing as UPS announced yesterday? How positive a sign is it that UPS is beginning to push harder on price? And from David Vernon of Bernstein, how much room does the company see in its ability to drive up yields in residential e-commerce? And what are the driving or constraining factors? So I'll ask Raj to deal with all those.

Okay. As I've mentioned before, we are continuing to work on several different options for peak pricing, but we have not made a final decision in this regard. I'm not ready to make an announcement yet. In terms of overall revenue volume and yields, we continue to focus on our pricing strategy as it allows us to balance volumes and increase yields across the portfolio. And again, to that question, all I can say is our results speak louder than any words that I can use.

So questions from Lee Klaskow of Bloomberg Intelligence. Is the Freight network better suited to handle, I think, the large, oversized shipments? Are you pushing those shipments through that network? So I guess, the answer to that is it depends on the nature of the shipment. I - it's clear when we get them whether it should be a Ground shipment or a Freight shipment. We do have value-added services in the Freight sector. Mike, you want to speak this?

Well, certainly. The characteristics of the shipment make a big difference and it -- as does the yield per shipment that we get out of it. So some of them come to us. A lot of them go to Henry at FedEx Ground as it stands today.

Now we are at FedEx Freight acquiring a significant number of the smaller 24 foot straight trucks with lifts because a fair amount of FedEx Freight shipments are going into neighbourhoods, and those are more compatible. So as the market turns more towards these oversized deliveries, I think you'll see FedEx Freight lean into that space in a big way.

David Ross of Stifel wants to know, are you approaching this year's peak season in U.S. any differently than in prior years, if so, how, if not, why not? I'll ask Raj to speak to that. All I would say is, as I said in my remarks, we had the best peak season in terms of service in the company's history, so our operations folks did a great job of planning for it. Raj?

Well, I have nothing much more to add than to say that we continue to work directly with our - some of our key customers in terms of making sure we have the right forecast for peak season so we can provide outstanding service. By the same token, we're also working with a small number of large customers that drive the majority of the surge. And so we should at least make sure that we have the appropriate pricing in place, so we get compensated for the investments we make as well. And as I said before, we continue to look at other changes, but no decision has been made in that regard.

So we have 3 questions about Ground margins, one from Jack Atkins of Stephens, similar 1 from Christian Wetherbee of Citi and Scott Group with Wolfe, who had previous questions, so we'll say this as a Jack Atkins, Stephens question. So Henry, Ground margins?

We remain committed to mid-teens margins at FedEx Ground. We expect FY '18 operating profit and cash flows to exceed FY '17.

So we have a question from Brandon Oglenski of Barclays. For the past decade, FedEx appeared to focus on achieving high volume growth, especially in the Ground segment. However, in the past year, pricing appears to have accelerated, while volume growth has been slower. Was this by design? Let me take that. Of course, it was by design.

You get all the hard ones.

Yes. Well, I'd take the Chairman's prerogative of getting those puzzlers. How much incremental pricing opportunity exists with customers before incentivizing a shift to other competitors? Well, Brandon, that's the nature of the beast. I mean, we're constantly trying to get that maximization between volume and yield. We have lots of pricing science. On many occasions, I've told folks that come to visit us at FedEx, when they ask what are they missing, and I generally say that. You miss the extreme sophistication of the pricing that we have inside our marketing group under Raj. And so we're constantly tweaking that. Second thing I'd like to point out, which I'm sure sounds like a broken record to many of you, is we do not manage FedEx Corporation to achieve the maximum results in any quarter or even any fiscal year in all segments. We manage it as a portfolio. In fact, we were talking the other day in our Strategic Management Committee that we now have 240 different services of 1 sort or another. So Ground was really knocking out of the park for a number of years, and we used the opportunity when Dave was the CEO of Express to make enormous improvements in the Express network, including an indigenous expansion in Europe. And we had the opportunity to make the TNT acquisition, which we did. And the Express margins are widening now, and I have said for the last several years, and I think we have proven this, that we expect all of our activities at the corporation level to improve margins, cash flows, EPS and returns on investment. And we have done that. And I said it again today, which I would remind you about for FedEx Corporation. So here's another one on large items in the Ground network, increased investments for gym equipment and furniture in Ground. You want to speak to that, Henry? There's another one here from - that was a repeat question, I think, from Jairam Nathan about progress in automating jobs being done manually, and in particularly in FedEx Ground loading and unloading of trucks. So why don't you combine the 2 of those and speak to them?

Okay. This is Henry Maier. As Raj said, we continue to see large-sized packages continue to grow. That's just the nature of e-commerce. We are making investments in material handling and lifting technologies to address that. We review hub designs over the normal course of business that account for package size. So that would divert packages, for instance, that we would have to handle manually today to a more automated mode.

Chris Kondracki of Kondracki Advisory. How is FedEx Fulfillment going? Can you share some specific sales figures and margins? Henry?

Well, I would say that FedEx Fulfillment is executing our expectations. We, on June 6, opened up a second facility in Fontana, California, which gives FedEx Fulfillment customers the ability to reach 94% of the U.S. population in 2 days or less. And we will continue to grow those facilities in capacity as customer demand dictates.

So there's a question, again, a second one from Scott Group. Why did GENCO revenue inflect negative year-over-year? Any customer losses?

Yes, as a matter of fact, there was. There was one customer loss that lapped the year there, so nothing out of the ordinary there. We make those portfolio decisions all the time at the FedEx Supply Chain.

There were numerous questions from various folks, some of whom were second and third questions about the implications of e-commerce packages picked up from stores and what the implications are for FedEx. We move many, many millions of items in the stores today, packages and pallets. And some of them, I'm sure, are picked up, and the vast majority of them are sold off the shelves. And similarly, we move a lot from fulfillment centers straight to customer’s doors. So I think there is, quite frankly, this view of what FedEx does through the lens of e-commerce and particularly, residential or individual e-commerce. And the company is certainly involved in that, but the bigger story is the enormous upstream network operated by FedEx. And there's only one other one of a similar size and scope, and that is UPS. Of course, DHL is really big internationally but not so big in the U.S. anymore. So for those of you who've never seen it, I'd invite you to go to fedex.com/dream and punch on the e-commerce film down there. I think it's about 2 minutes and 30-some seconds, and you will see the size and scope of the upstream networks of FedEx. And what the basic business of this company is along with our value-added logistic services is to pick up, transport and deliver from any address in the world to any other address in 1 to 2 business days. And I think we're connecting something like 92% plus of the world's GDP in that fashion. So several quarters ago, I talked about Metcalfe's Law, and that upstream network is the primary value add that FedEx brings. These days, because of the marvellous e-commerce revolution, almost all of the focus is on last-mile and residential deliveries. And there, the largest player is the United States Postal Service, and they are the biggest provider of retail light packages to homes done in conjunction with mail delivery. So a lot of these things get very jumbled up, and so we can't answer your questions because the questions don't correspond to the way the real world is. They correspond only to the sort of popular view of the logistics business being all about residential e-commerce. And it is not. It is far, far larger than that, and that leads to the statistics that Raj gave you. And I felt I needed to, again, make that comment because a lot of these questions are sort of directed to this. Well, people are picking up things in stores, and they're been ordered by an e-commerce transaction and separated to be picked up. And I think on the margin, that's important but not nearly as important as some people think who follow this industry. So CapEx, are you buying more aircraft? What new planes are you adding? Dave can follow up on this. I think that you're probably focusing on the fact that we pulled 2 planes forward. So Dave, you want to comment on that?

Yes, that's right, and Alan pointed it out already. I mean, we have pulled 2 planes forward with Boeing, and we're in the middle of talking to Boeing about future opportunities of course. But the Boeing 777s are so valuable to us on a global basis. It connects the Asian, Chinese market overnight to the United States without a fuel or tech stop right into our hub in Memphis. So of course it was a good opportunity for us, and we took advantage of it.

There are some questions about Amazon. I think I answered that in my rather long-winded thing. I mean, Amazon is a fantastic company, and it delivers things to all of us. And there is -- we deliver a lot of things that are ordered over the Amazon website. We move things for Amazon and so forth, but there is far too much focus on that as opposed to the larger part of FedEx' business. There was some question here about overnight box volumes declined 5%. That was due to one customer who changed their distribution pattern. Yes, I think that we'll sort of kind of end up here with one question. I'll let Alan do it. Again, there are a couple of questions about Ground expansion, but I think we basically answered all of those. You want to add something, Raj?

Yes, I just wanted to just clarify that the overnight box –volume declined 0.5%.

Yes, 0.5%. I'm sorry, I misspoke, 0.5%, not 5%. But that was due to the change in patterns of one customer. So the last one, we'll give it to Scott Group of Wolfe Research. Henry said that Ground probably will improve but didn't answer about Ground margins. And Scott, we're probably never going to answer you about it. That's why I keep saying this is FedEx Corporation and not FedEx Ground conference call. Henry told you that FedEx Ground would - is shooting for mid-teen margins. We're shooting at the corporate level for increased margins, cash flows, returns on capital, and we believe we will deliver that. And our corporate margins are expected to improve this year. So I think that is about all the questions that we have, and I'll turn it back over to Mickey.

Okay. Thank you very much for your participation in FedEx Corporation's Fourth Quarter Earnings Release Conference Call. Feel free to call anyone on the Investor Relations team if you have additional questions about FedEx. Thank you. And that concludes today's presentation. We thank you all for your participation, and you may now disconnect.