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Final Comparison Report Ups And Fed Ex

4674 words - 19 pages

This paper will provide a final report on the 2 publicly traded companies, Federal Express (FedEx) and United Parcel Services (UPS). These companies have been doing well in providing package shipping and delivery for businesses and consumers. The information included in this paper will illustrate the company overviews, their products, services, and highlights their most recent annual reports. These reports are intended to provide investors, creditors, and shareholders a glimpse into the financial successes and challenges a company goes through in a given year, with a look ahead into their future growth strategy. It will include both cash flow statements and ratio analysis. In addition, this ...view middle of the document...

Ratios will be compared to industry benchmarks in an effort to further interpret the data.Cash Flow Statement for UPS and FEDEXFedEx had several areas that raised a flag such as deferred income taxes and other non-cash items. In 2003 FedEx had 329 million, in 2004 negative (8), and in 2005 63 million this is due to a tax settlement claim received in 2004. "Our effective tax rate was 37.4% in 2005, 36.5% in 2004, and 38.0% in 2003. The 37.4% effective tax rate in 2005 was favorably impacted ($12 million tax benefit or $0.04 per diluted share) by the onetime reduction of a valuation allowance on foreign tax credits arising from certain of our international operations as a result of the passage of the American Jobs Creation Act of 2004 and by a lower effective state tax rate"(FedEx p.39)."In February 2005, the Sixth Circuit Court of Appeals reaffirmed the favorable ruling from the U.S. District Court in Memphis regarding the tax treatment of jet engine maintenance costs, previously received during the first quarter of 2004. The district court held that these costs were ordinary and necessary business expenses and properly deductible in our income tax returns. As a result of the District Court ruling, FedEx recognized a one-time benefit of $26 million, net of tax, or $0.08 per diluted share in the first quarter of 2004, primarily related to the reduction of accruals and the recognition of interest earned on amounts previously paid to the IRS. These adjustments affected both net interest expense ($30 million pre-tax) and income tax expense ($7 million). FedEx expected to receive a refund payment of approximately $80 million (before income taxes of approximately $16 million) from the U.S. government in the first quarter of 2006, which is included in current receivables"(FedEx p.39). FedEx had an increase in interest expense due the effect of borrowing for the acquisition of FedEx Kinko's and a prior year favorable adjustment. Net interest expense decreased slightly in 2004 due to the offset increases to interest expense of the tax case described below. (FedEx, p. 39).FedEx had $435 million of business realignment costs during 2004. No material costs for these programs were incurred in 2005. On May 31, 2004, they had remaining business realignment related accruals of $28 million. On May 31, 2005, these accruals had decreased to $7 million due to cash payments made in 2005 (FedEx p.39). "During the second quarter of 2005, the United States Department of Transportation ("DOT") issued a final order in its administrative review of the FedEx Express claim for compensation under the Air Transportation Safety and System Stabilization Act ("Act"). The DOT determined that FedEx Express was entitled to $72 million of compensation and because FedEx had previously received $101 million under the Act, they demanded repayment of $29 million, which was made in December 2004. Because FedEx could no longer conclude that collection of the entire $119 million of such...

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