FedEx Ground Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day, everyone, and welcome to the January 10, 2008, conference call hosted by FedEx. At this time, I'll turn the conference over to the Vice President of Investor Relations, Mr. Mickey Foster. Please go ahead, sir.

MICKEY FOSTER, VP OF IR, FEDEX CORPORATION: Good afternoon and welcome to FedEx Corporation's conference call. This call is being broadcast on our website, and the replay will be available for approximately one year.

Joining us on the call today are members of the media. During our question-and-answer session, callers will be limited to one question and a follow-up so we can accommodate all those who would like to participate.

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, such as statements relating to management's views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from historical experience or from future results express or implied by such forward-looking statements. For additional information on these factors, please refer to FedEx Corporation's and subsidiary press releases and filings with the SEC.

Joining us on the call today are Fred Smith, Chairman, President and CEO; Alan Graf, Executive Vice President and CFO; Mike Glenn, Executive Vice President, Market Development and Corporate Communications; 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; Dave Rebholz, President and CEO of FedEx Ground; and Doug Duncan, President and CEO of FedEx Freight.

And now our Chairman, Fred Smith.

FRED SMITH, CHAIRMAN, PRESIDENT AND CEO, FEDEX CORPORATION: Thank you very much, Mickey, and good afternoon, ladies and gentlemen. Let me apologize on the front end for having a bit of a midwinter cold, but I'll do my best.

The last time we chatted was the morning of December 20, during our quarterly earnings call. Later that day, we got a preliminary notification from the Internal Revenue Service about a preliminary finding related to the classification of our owner-operators at FedEx Ground. The next day we filed our 10-Q, and over the holidays we received some questions which we answered and sent out some more information.

The reason we're having this call today is primarily to give us the opportunity to address the speculative and, in some cases, unfounded reporting regarding this issue. I wanted to give you a chance to catch up on this directly with me and our management team.

First, I want to tell you that today, tomorrow and every day going forward, our customers will continue to receive the level of absolutely, positively service that FedEx has delivered for 35 years. That is true in every sector of our business.

Now, specifically to our FedEx Ground segment, we have full confidence that we will continue to provide excellent service. We just finished our peak season, and at FedEx Ground we delivered record volumes and we posted our best service levels ever. Morale at FedEx Ground remains at very high levels.

Now, I know there have been a lot of questions recently about our ground business. We believe the business model we use is good for our contractors and good for our customers. As you know, there are millions of people in this country who have chosen to work for themselves. I personally believe that's what freedom is all about.

We've given that entrepreneurial opportunity to thousands of contractors to own, grow and expand their own business and provide financial security to themselves and their families. This model provides quality service at a very competitive price for our customers.

I've been in this business for 35 years, and I know that continuing success in any business means constant change and evolution to meet customer needs. Let me give you one recent example. Last fall, in California, we announced incentives for contractors to become multi-route contractors or sell their route. Virtually all of our 735 single-route contractors accepted this offer. From the point of view of our California customers, this transition has been business as usual.

I want to point out that on a national level, more than half of all ground packages are delivered through multi-route contractor arrangements, so this isn't new to us. This is only one of many ways we have adjusted our business over the years to meet evolving conditions and customer needs. Our track record on this is very clear. We will continue to do what it takes to make us the ground shipper of choice for our customers.

On this matter, with the IRS preliminary …