Federal Express 2011 Annual Report Download - page 28

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MANAGEMENT’S DISCUSSION AND ANALYSIS
CONTRACTUAL CASH OBLIGATIONS AND OFF–BALANCE SHEET ARRANGEMENTS
The following table sets forth a summary of our contractual cash obligations as of May 31, 2011. Certain of these contractual obligations are
reflected in our balance sheet, while others are disclosed as future obligations under accounting principles generally accepted in the United
States. Except for the current portion of long–term debt and capital lease obligations, this table does not include amounts already recorded in
our balance sheet as current liabilities at May 31, 2011. Accordingly, this table is not meant to represent a forecast of our total cash expendi-
tures for any of the periods presented.
We have certain contingent liabilities that are not accrued in our balance
sheet in accordance with accounting principles generally accepted in the
United States. These contingent liabilities are not included in the table
above.
We have other long–term liabilities reflected in our balance sheet,
including deferred income taxes, qualified and nonqualified pension
and postretirement healthcare plan liabilities and other self–insurance
accruals. The payment obligations associated with these liabilities are
not reflected in the table above due to the absence of scheduled maturi-
ties. Therefore, the timing of these payments cannot be determined,
except for amounts estimated to be payable within 12 months, which are
included in current liabilities. Included in the table above are anticipated
quarterly contributions to our U.S. Pension Plans totaling approximately
$500 million for 2012 that begin in the first quarter.
Open purchase orders that are cancelable are not considered uncon-
ditional purchase obligations for financial reporting purposes and are
not included in the table above. Such purchase orders often represent
authorizations to purchase rather than binding agreements. See Note
16 of the accompanying consolidated financial statements for more
information.
Operating Activities
In accordance with accounting principles generally accepted in the
United States, future contractual payments under our operating leases
(totaling $14.0 billion on an undiscounted basis) are not recorded in
our balance sheet. Credit rating agencies routinely use information
concerning minimum lease payments required for our operating leases
to calculate our debt capacity. The amounts reflected in the table above
for operating leases represent future minimum lease payments under
noncancelable operating leases (principally aircraft and facilities) with an
initial or remaining term in excess of one year at May 31, 2011. In the
past, we financed a significant portion of our aircraft needs (and certain
other equipment needs) using operating leases (a type of “off–balance
sheet financing”). At the time that the decision to lease was made, we
determined that these operating leases would provide economic benefits
favorable to ownership with respect to market values, liquidity or after–
tax cash flows.
The amounts reflected for purchase obligations represent noncancelable
agreements to purchase goods or services that are not capital–related.
Such contracts include those for printing and advertising and promotions
contracts.
Payments Due by Fiscal Year (Undiscounted)
(in millions) 2012 2013 2014 2015 2016 Thereafter Total
Operating activities:
Operating leases $ 1,794 $ 1,654 $ 1,465 $ 1,354 $ 1,192 $ 6,533 $ 13,992
Non–capital purchase obligations and other 209 97 35 24 11 132 508
Interest on long–term debt 126 98 97 78 78 1,659 2,136
Quarterly contributions to our U.S. Pension Plans 500 – – – – – 500
Investing activities:
Aircraft and aircraft–related capital commitments 1,480 1,086 781 569 584 1,470 5,970
Other capital purchase obligations 210 8 8 6 – – 232
Financing activities:
Debt – 300 250 – – 989 1,539
Capital lease obligations 25 119 2 2 2 13 163
Total $ 4,344 $ 3,362 $ 2,638 $ 2,033 $ 1,867 $ 10,796 $ 25,040