Federal Express 2011 Annual Report Download - page 54

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10: COMPUTATION OF EARNINGS
PER SHARE
The calculation of basic and diluted earnings per common share for
the years ended May 31 was as follows (in millions, except per share
amounts):
NOTE 11: INCOME TAXES
The components of the provision for income taxes for the years ended
May 31 were as follows (in millions):
Our current federal income tax expenses in 2011, 2010, and 2009
were significantly reduced by accelerated depreciation deductions
we claimed under provisions of the Tax Relief and the Small Business
Jobs Acts of 2010, the American Recovery and Reinvestment Tax Act
of 2009, and the Economic Stimulus Act of 2008. Those acts, designed
to stimulate new business investment in the U.S., accelerated our
depreciation deductions for new qualifying investments, such as our
new Boeing 777 freighter (“B777F”) aircraft. These are timing benefits
only, in that the depreciation would have otherwise been recognized in
later years.
Pre–tax earnings of foreign operations for 2011, 2010 and 2009 were
$472 million, $555 million and $106 million, respectively, which
represent only a portion of total results associated with international
shipments.
A reconciliation of the statutory federal income tax rate to the effec-
tive income tax rate for the years ended May 31 was as follows:
Our 2011 rate was lower than our 2010 rate primarily due to increased
permanently reinvested foreign earnings and a lower state tax rate
driven principally by favorable audit and legislative developments. Our
2009 rate was significantly impacted by goodwill impairment charges
that are not deductible for income tax purposes.
The significant components of deferred tax assets and liabilities as of
May 31 were as follows (in millions):
2011 2010 2009
Basic earnings per common share:
Net earnings allocable to common shares(1) $ 1,449 $ 1,182 $ 97
Weighted–average common shares 315 312 311
Basic earnings per common share $ 4.61 $ 3.78 $ 0.31
Diluted earnings per common share:
Net earnings allocable to common shares(1) $ 1,449 $ 1,182 $ 97
Weighted–average common shares 315 312 311
Dilutive effect of share–based awards 2 2 1
Weighted–average diluted shares 317 314 312
Diluted earnings per common share $ 4.57 $ 3.76 $ 0.31
Anti–dilutive options excluded from
diluted earnings per common share 9.3 11.5 12.6
(1) Net earnings available to participating securities were immaterial in all periods presented.
2011 2010 2009
Current provision (benefit)
Domestic:
Federal $ 79 $ 36 $ (35)
State and local 48 54 18
Foreign 198 207 214
325 297 197
Deferred provision (benefit)
Domestic:
Federal 485 408 327
State and local 12 15 48
Foreign (9) (10) 7
488 413 382
$ 813 $ 710 $ 579
2011 2010 2009
Statutory U.S. income tax rate 35.0 % 35.0 % 35.0 %
Increase resulting from:
Goodwill impairment – – 48.0
State and local income taxes,
net of federal benefit 1.7 2.4 1.9
Other, net (0.8) 0.1 0.7
Effective tax rate 35.9 % 37.5 % 85.6 %
2011 2010
Deferred
Tax
Assets
Deferred
Tax
Liabilities
Deferred
Tax
Assets
Deferred
Tax
Liabilities
Property, equipment,
leases and intangibles $ 274 $ 2,675 $ 377 $ 2,157
Employee benefits 1,016 34 783 36
Self–insurance accruals 519 – 416 –
Other 422 269 490 238
Net operating loss/credit
carryforwards 172 – 142 –
Valuation allowances (151) – (139) –
$ 2,252 $ 2,978 $ 2,069 $ 2,431