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July 16, 1998

FDX Corp. Announces Fiscal 1998 and Fourth Quarter Earnings

HONG KONG, July 16, 1998 -- FDX Corp. today reported fourth quarter earnings per share of US$1.14 and record earnings of US$3.91 per share for the full year excluding merger expenses.

FDX Fourth Quarter Results

Revenues for the fourth quarter were US$4,078.0 million, 2.9% more than the fiscal period's US$3,961.2 million and 11.0% more than the calendar period's US$3,673.8 million. Net income for the quarter excluding merger expenses was US$170.7 million or US$1.14 per share. Net income was US$134.6 million or US$0.91 per share in last year's fiscal period and US$144.9 million or US$0.98 per share in last year's calendar period excluding non-recurring items.

Non-recurring charges related to the restructuring of Viking's operations were US$225 million in the fiscal Q4 period and US$85 million in the calendar Q4 period.

Explanatory Note

FDX Corp. prior year earnings per share are shown two ways to allow comparisons with last year. Column A is the prior year EPS comparison made in accordance with the rules of the Securities and Exchange Commission (SEC) using the pooling of interests method of accounting. It combines Federal Express Corp.'s (FedEx) fourth quarter period (Mar. 1997-May 1997) with Caliber System, Inc.'s (Caliber) fourth quarter period (Sep. 8, 1996-Dec. 31, 1996) which for Caliber represents the fourth quarter of its full annual period ended Dec. 31, 1996. Caliber's fourth quarter will be included in the FDX Corp. fiscal year ended May 31, 1997 and is referred to as the "fiscal period" in this release. Column B is an unaudited prior year comparison on a like-calendar basis except there are four more shipping days in Caliber's current period than in Caliber's prior year period. Column B is referred to as the "calendar period" in this release.

FDX FY98 Results

For the full year, revenues were US$15.9 billion, 11.5% more than the fiscal period's US$14.2 billion and 11.3% more than the calendar period's US$14.3 billion. FY98 net income excluding merger expenses was US$582.7 million or US$3.91 per share. Net income was US$371.1 million or US$2.52 per share in last year's fiscal period and US$372.8 million or US$2.53 per share in last year's calendar period excluding non-recurring items.

Non-recurring charges related to the acquisition of Caliber System, Inc. were US$88 million in FY98. Non-recurring charges related to the restructuring of Viking's operations were US$225 million in the fiscal FY97 period and US$310 million in the calendar 1997 period.

Explanatory Note

FDX Corp. prior year earnings per share are shown two ways to allow comparisons with last year. Column A is the prior year EPS comparison made in accordance with the rules of the Securities and Exchange Commission (SEC) using the pooling of interests method of accounting. It combines FedEx's FY97 period (June 1996-May 1997) with Caliber System, Inc.'s (Caliber) FY96 period (Jan. 1, 1996-Dec. 31, 1996). Caliber's 1996 fiscal year results will be included in the FDX Corp. fiscal year ended May 31, 1997 and is referred to as the "fiscal period" in this release. Column B is an unaudited prior year comparison on a like-calendar basis. Column B is referred to as the "calendar period" in this release.

"FY98 was a milestone year for FDX Corporation and its subsidiaries for three reasons," said executive vice president and chief financial officer Alan B. Graf, Jr. "First, FedEx's January acquisition of Caliber System, Inc. and the creation of FDX Corporation now provide customers with a broader array of global shipping and logistics services, at service levels unsurpassed in the industry. Second, FedEx, the company that invented the express industry, celebrated its 25th year of industry leadership. Last, FDX Corp. had record earnings, due to strong volume growth and healthy yield increases at FedEx and RPS and a dramatic improvement in operations at Viking. FY98 net income was up more than 50% from last year's fiscal and calendar periods excluding merger expenses and non-recurring items at Viking."

During FY98, FDX incurred approximately US$40 million in consulting fees, internal staff costs and other expenses due to continuing Year-2000 compliance programs. Full-year results also include the impact of the additional volume received by FedEx and RPS during the 12 operating days of the UPS strike. The Company estimates that the additional revenue resulting from the strike added approximately US$0.25 per share to consolidated first quarter 1998 earnings.

Federal Express Corp.'s U.S. Domestic Volume, Earnings Higher

Federal Express Corp.'s (FedEx) U.S. domestic revenue for the quarter was US$2,502.1 million, up 13.0% from last year's US$2,213.4 million. U.S. domestic operating income for the quarter rose 24.7% to US$239.2 million from US$191.9 million a year ago.

"In the U.S., FedEx's express package growth rate accelerated, helping FedEx report record fourth quarter results," said Graf. "The 10.5% year-over-year increase in average daily U.S. domestic volume was coupled with a 2.9% increase in revenue per package. U.S. domestic cost per package rose 1.7%, primarily due to increased salaries, employee benefits, maintenance and trucking expenses."

International operating income for the fourth quarter was US$21.5 million on international segment revenues of US$923.5 million. In last year's fourth quarter, the international segment reported operating income of US$59.4 million on revenues of US$854.9 million.

"FedEx's international operations returned to profitability in the fourth quarter, although international results continue to be hurt by weakness in Asia," said Graf. "Despite the Asian economic downturn, FedEx International Priority^® (IP) service experienced double-digit growth for the twentieth consecutive quarter - IP volume grew 10.7% in the quarter, with IP's revenue per package increasing 0.9%.

"The international airfreight market continues to reflect industry overcapacity," Graf continued, "as our airfreight revenue declined US$13.3 million despite a 5.5% increase in total pounds shipped. Currency declines during the quarter reduced international operating income by approximately US$10 million."

FedEx's total revenues for the quarter were US$3,425.7 million, 11.6% higher than last year's US$3,068.3 million. Operating income for the quarter was US$260.7 million compared to US$251.3 million a year ago.

"In this year's fourth quarter, fuel prices were approximately US$0.12 per gallon less than a year ago, reducing fuel expenses by US$28.3 million" Graf said. "In last year's fourth quarter, revenue generated by the temporary two percent surcharge to all express packages totaled US$41.6 million."

Sales of FedEx's aircraft noise-reduction kits contributed US$30.1 million to fourth quarter 1998 U.S. domestic operating income, compared to US$28.8 million in last year's fourth quarter. For FY98, hushkits contributed US$127.2 million to U.S. domestic operating income compared toUS$87.4 million a year ago.

RPS, Inc. Reports Record Volume and Service Levels

RPS revenues for the quarter were US$437.1 million, compared to US$449.9 million in the prior year fiscal period and US$348.0 million in the prior year calendar period. On a per day basis, revenue increased 18.4% after adjusting for 14 additional shipping days in last year's fiscal period and 17.8% after adjusting for four fewer shipping days in last year's calendar period.

Operating income was US$47.3 million compared to US$50.3 million in the fiscal period and US$38.3 million in the calendar period. Operating income improved 14.6% over last year's fiscal period and 15.9% over last year's calendar period after adjusting for the shipping day difference.

"Demand for RPS service remains very strong and revenue per package continues to increase," said Graf. "RPS is realizing excellent growth in their higher yielding services, with the improved mix responsible for much of the increase in revenue per package. A new money-back guarantee on all commercial ground deliveries, to be implemented July 27, 1998, and record on-time service levels ensure that RPS will remain the value leader in the business-to-business, small package market."

Viking Freight, Inc.'s Ongoing Operations Continue to Improve

Viking's operating income for the quarter was US$5.9 million on revenues of US$89.0 million, compared to an operating loss of US$276.4 million including asset impairment charges on revenues of US$300.4 million in the fiscal period and a loss of US$104.7 million including restructuring charges on revenues of US$156.1 million in the calendar period.

"Viking's performance continues to show considerable improvement from the previous year," said Graf. "Service levels for the quarter were outstanding, while operating income excluding non-recurring items improved US$57.3 million over last year's fiscal period and US$25.6 million over last year's calendar period. Viking's outstanding operating performance has recently been recognized by both shippers and industry trade organizations - during the quarter Viking was named "Regional LTL Carrier of the Year" by the National Small Shipments Traffic Conference (NASSTRAC) and readers of the Logistics Management and Distribution Report awarded Viking a "Quest for Quality Award" for their superb LTL service to the western U.S."

FDX Corp., a US$16 billion holding company, provides comprehensive transportation, logistics and supply chain management solutions. FDX Corp. operating subsidiaries are Federal Express Corp., the world's largest express transportation company; RPS, Inc., a business-to-business ground small package carrier; Roberts Express, Inc., a critical-shipment carrier; Viking Freight, Inc., a less-than-truckload carrier operating principally in the western U.S.; Caliber Logistics, Inc., a contract logistics provider; and Caliber Technology, Inc., a supplier of information services.