Good day, everyone and welcome to the FedEx Corporation Third Quarter Earnings Call. Today's call is being recorded. At this time, I would like to turn the call over to the Vice President of Investor Relations, Mr. Mickey Foster for opening remarks and introductions. Please go ahead.

Good morning and welcome to the FedEx Corporation third quarter earnings conference call. The earnings release and stat book are on our website at FedEx.com. This call is being broadcast from 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 and so we can accommodate all those who would like to participate. We are planning an Investors and Lenders Meeting next week, here in Memphis, on Tuesday, March 27 and Wednesday, March 28. We have over 100 analysts pre-registered and we look forward to seeing you. For those who are not able to come to Memphis, this meeting will also be webcast. 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 expressed or implied by such forward-looking statements. For additional information on these factors, please refer to FedEx Corporation's and its subsidiaries' press releases and filings with the SEC including, but not limited to, its reports on Forms 10-K and 10-Q. In our earnings release, we may include certain non-GAAP financial measures. We may discuss these non-GAAP financial measures on this call. Please refer to our earnings release available on our website for a further discussion of these measures and a reconciliation of them to the most directly comparable GAAP measures. To the extent we disclose any other non-GAAP financial measures on this call, please refer to the Investor Relations' portion of the website at fedex.com for a reconciliation of such measures to the most directly comparable GAAP measures. 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 Federal Express; Dave Rebholz, President and CEO of FedEx Ground; Doug Duncan, President and CEO of FedEx Freight; and Ken May, President and CEO of FedEx Kinko's. And now our Chairman, Fred Smith, will share his views on the quarter followed by Alan Graf. After Alan, we will have questions and answers.

Thank you very much, Mickey and good morning. I thank all of you for joining our earnings conference call for the third quarter of fiscal 2007. FedEx produced solid financial results this quarter despite a challenging economic environment. The U.S. economy grew at a lower rate than expected in the third quarter and we saw continued adjustments in the automobile and housing markets. I believe, however, this represents a healthy transition for the economy as it phases into a more sustainable growth rate. While economic conditions change quarter-to-quarter and year-to-year, we believe that the four macroeconomic trends driving global commerce will steadily continue. These are: 1) High-tech and high value-added goods will continue to increase as a percentage of total economic output in the manufacturing sector. 2) Smaller economies will integrate into one worldwide interdependent economy. 3) As the economy becomes increasingly global, it will become more fast-paced. 4) The growth of Internet and e-commerce remains a vital growth engine for businesses. Now, FedEx is in an excellent position to take full advantage of these global economic growth trends and to deliver overall outstanding financial results in the long run. We believe we're investing wisely to broaden and strengthen our transportation and information networks to benefit our shareowners, customers, and the FedEx workforce. And we are producing an outstanding expansion effort in our retail FedEx Kinko's network as well. Several important corporate developments announced recently will stand FedEx in good stead for years to come. Just yesterday, as I am sure most of you have seen in the media, we announced what surely will be a milestone in FedEx history, a domestic express service in China. Our new domestic service is expected to be fully operational in June. It will serve China's fast growing economy with a guaranteed next-business-day time-definite…

Thank you, Fred and good morning everyone. I have just a few brief comments today before we open it up for Q&A. I would like to start out with what we saw in the third quarter versus what we had anticipated when we gave you our guidance last December. First, our revenue growth was slower than we had anticipated, most notably at Express and long-haul LTL freight due to the economic conditions that Fred discussed. We think we are in a little bit of a soft patch at the moment. As most of you know, the incremental margins on incremental revenue are very sensitive. As we see revenues slowing, we are simply unable to adjust our cost structure quickly enough during a quarter to make up for the lost revenue. And that had a negative impact on us. Additionally, weather was much worse than we had anticipated; significantly impacting revenue on its own, as well as we incurred additional expenses to catch up on the operational side. Offsetting these two items were the fact that our net fuel impact was significantly less painful than we had thought it would be. It was still a very significant drag, but not as much as we had anticipated when we gave you the guidance. And lastly, we had some good news in the tax area due to the conclusion of various state and federal audits and appeals during the quarter that we had not anticipated when we gave you that guidance. So that explains a little bit about the third quarter. Secondly, I want to talk a little bit about our '08 outlook and my comments in the press release. In case you haven't seen them, I said that FedEx earnings growth in our upcoming fiscal 2008, excluding the 2007 net impact of…

Thank you. (Operator Instructions). We'll go first to Ken Hoexter with Merrill Lynch.

Great, good morning. I just wanted to clarify one thing before I get to my questions. Fred said, "I just want to reiterate long-term goals," and he said 10% operating margins. Is that a change from your 10% plus or was that just an oversight?

I thought I said Ken, 10% plus.

Okay great. Then just Alan on the fiscal '08, when you look ahead and kind of noted that maybe a little bit lower growth in, mainly from auto and housing, is there anything more than that? Those were kind of down and expected to be down double-digits, are they getting noticeably weaker? I just want to understand where you are seeing the shifts within the economy that you're adjusting that near-term target or if it's average target for '08?

Well, I think, what we are seeing right now, Ken, at least in our view is a run down in inventories. And our Chief Economist believes that it will probably be late summer before that starts to build up. And once it starts to build back up, the economy should be on a better track than it is now. Although it's still growing, we need a little bit higher growth rate to get to those double-digit EPS growth numbers.

Okay. And then, looking at the results more specifically for the quarter, it looked like we saw probably more additional weakness at the LTL freight than expected. And you noted that there were some losses from the national side. Is that really just from startup costs? Or is that just from the overall freight weakness? I want to understand the mix of what's driving that and if that's going to spread into what we see at Express and Ground?

Ken this is Doug Duncan. It's interesting. We've got two different companies going in different directions here. The regional LTL companies have a well-established value proposition and we are able to mitigate much of the trucking downturn with market share gains. And they've got great networks and are able to control costs to lower volumes. They actually performed exceptionally well. The problem with national is we got caught in the middle of investing and re-engineering a network in this downturn. We specifically chose the third quarter, which is the slowest quarter, to make these adjustments, so we wouldn't impact the customers. But we didn't plan for the downturn in the industry. So, we got caught at national at a time when we were re-engineering and adding costs and not able to take costs down to match the volume. That's a short-term phenomenon. This value proposition is largely complete or at least the first phases of it. And I think, we will be in a position to grow that business and then begin to take market share much the way we've done in the regional network in the quarters to come.

Thank you. Our next question comes from Jon Langenfeld with Robert W. Baird.

Good morning. Could you talk a little bit about the international trends? Do you see the same sort of slowing there? I know you have a number of things going on there in terms of the business you are targeting and the yield strategies. So, could you just expand on that?

Yeah Jon, this is Dave Bronczek. First of all, let me say that Fred is right in pointing out the tremendous acquisitions that we put into our portfolio. China, India and the United Kingdom are going to continue to help fuel our very strong international performance around the world. We're very excited about all three of those. But to your point, we had good growth in U.S. outbound. We had good growth in Europe. We had good growth in Latin America. We had growth across the board in international, a little bit softer in the Asia-Pacific market, similar to the United States. But we are anticipating that to bounce back very quickly.

Okay, very good. And then just jumping over the LTL side, Doug, how has pricing held up on the regional side and the national side, respectively?

Well, pricing to me always seems very competitive in the LTL business. But when I look at the yields, we had very solid yield growth. The retention of the general rate increase and the contract renewals are all very positive. So, when I look at that, I'd have to say that it's pretty tame at the moment. It feels competitive, though.

Thank you. Our next question comes from Bill Greene with Morgan Stanley.

Hi, I am wondering on Ground, you had volume growth that far exceeded GDP growth. So, obviously you are still taking share there. How long do you think you can maintain that sort of growth rate?

This is Dave Rebholz. If I can speak in the general terms of growth, we did see as has been pointed out in the last week of December a softening across the board, more on our trajectory than on the actual growth rate. So, we've had strong growth rates. More indicative of the economy is our Ground product, which certainly slowed by several percentage points, while our Home Delivery continued to expand and has incredibly healthy double-digit growth rate. We have seen a firming up in the Ground products' growth rate year-over-year, and we are very confident moving forward. We have not seen any significant losses, and we continue to acquire additional business.

And so, is the negative operating leverage in the quarter related to the growth in Home Delivery, just a lower contribution product?

No. I think across the board, we were positioned moving into our peak season after the prior peak to ensure that our customers recognized our value proposition. We were caught late in December with a fairly substantial reduction in growth. And while we get the marginal benefit of our operating model, we never saw a pick-up as we did last year moving into the January and February timeframe, which was unusual. And then there were other cost relationships to fuel surcharge, et cetera that put us in a different position. But it was not related to the growth at Home Delivery alone.

Okay. And then Alan, can I just ask one question on CapEx? Conceptually as we look to '08, if the earnings growth is slowing, would it be reasonable to also assume that you would slow the rate of investment? Is that how we should think about it?

Well, I don't think that we are talking about that kind of a significant economic growth decline. We just see it as a little bit slower than we need to hit a 10% to 15% EPS growth rate. We're going to continue to follow our plans on the 757 and 777, an expansion in China, growth in the Ground, build-out of the national network, and expansion at Kinko's. And so, all of those are going to continue. And we are going to carefully balance here in the next couple of months as we finalize our plan, these short-term negative impact on earnings that some of these long-term high ROIC projects have. And we will have more to say about that next time we meet.

Thank you. Our next question comes from Tom Wadewitz with J.P. Morgan.

Good morning. I have, first, a question I think for Alan. As you look at the comments you provided on fiscal '08, I think there is some concern about the slowing economy. What type of assumptions do you have to say that you are below that 10% to 15% historical earnings range? Is it a 1% to 2% GDP? And then, if you do see the inventory reduction play out and pick up in second half, then is there actually a reasonable potential that you get back into that 10% to 15% range?

Well, I think you've just hit it precisely. What we think we see right now, which is about the same here through our first fiscal quarter, which is through the summer, we'll probably start out behind that target. If it picks up, we should get back at least on a quarterly basis, back into those ranges. But for the year, if we have a slow start it might be difficult to reach that 10% to 15%. We will just have to see. We'll be keeping you updated closely on that and that's where we are looking at right now.

Okay. And then the second question is on the slowing in IP growth. Is there any impact? Are there any competitive pressures going on there? Or is it really purely some slowing out of Asia, and we're just going to watch that and see if IP should pick up along with that?

Yes, you are right. There's no competitive pressure there. It was just the overall economic effect and you'll start to see that growing again. So, you are correct on the second part of your question.

Okay. Thank you.

Thank you. Our next question comes from Jordan Alliger with Deutsche Bank.

Hi, morning. Just a couple of things. One, can you maybe talk a little bit more about some of the expectations you have for the China domestic express service in terms of the financial implications, sort of a timing of it ramping up?

Yeah. This is Dave again. We are very excited about it. As you know, we started our domestic China operations out of Guangzhou on May 28-June 1, which of course is very much like the United States in the sense that you bundle the express and the domestic in China like the United States. Our customer base there is very excited about it. And we have a lot of opportunity to continue to grow. The international part of our business is moving to Guangzhou, China. And of course, the combination of those two powerful networks there will help all of the international growth.

Jordan, this is Alan. Definitely, there will be a drag on '08 earnings there. But long term, I wouldn't expect that drag to last more than 12 to 18 months. We will get back up on a profit plane there and should have a very strong domestic business.

Okay. And then just a follow up, I think you mentioned in your comments aside from some concern about the rate of the economic growth in terms of target growth for earnings in '08. You also mentioned planned investments in businesses. I am just sort of wondering, I don't know if you could quantify some of those? Obviously China would be part of it, probably the National LTL network. Just trying to get a sense, how much is the costs to build out for the future as opposed to just the economic side?

Yeah. I think when you look at the acquisitions that we made, let me go back to Kinko's and then Ken May can jump in here. We are going to continue very aggressive expansion plan at Kinko's, which will essentially eat up all their margin improvement, they otherwise would have, in fiscal '08. So, you are going to see a very similar running rate. Fred mentioned that on our last call. ANC, as we integrated into the European network, will have a significant revenue stream, but a significantly low margin, which will drag down Express margins a bit. Same with our acquisition in India. And the startup of the 757s, which we have now started to acquire and will be putting through mod, obviously have some impact as well. None of these are huge risk items and they are very manageable. But they are just all occurring at a time when we wish we had a 3.5% GDP growth, which we just don't see.

Thank you. Our next question comes from Art Hatfield with Morgan Keegan.

Pretty much all of my questions have been answered. Thank you, guys.

Thank you. (Operator Instructions). We'll go to David Ross with Stifel Nicolaus.

Good morning, gentlemen. I had a question, mainly for Doug. I guess on FedEx freight volumes, excluding Watkins because there was, a lot of stuff going on there, how volumes tracked in December, January and February? I am assuming that they were down to probably mid single-digits in December and low single-digits in January and February. Could you just talk how they tracked through the quarter?

Well, February was the weakest volume quarter, but I think you need to go back and look. Our competitors were all negative in the fourth calendar quarter last year, while we remained positive. So, my bet is, we are still taking considerable market share, which is helping us offset the downturn in the trucking industry, at least for the regional group, and we will soon be there for the national.

And then, I noticed that LTL rates are going up 5.59%, April 2nd, and it seems to be pretty healthy rate increase. Just remind me how much of your business is on your old tariff?

It’s pretty to close to half. It's spread half between tariff and contracts. And of course, this 5.59% is down from 5.95% last year, and though I think we are the only ones that issued a press release on this, I think you'll find that in the middle of the road with most of our competitors.

Thank you very much.

We'll go next to Adam Thalhimer with BB&T Capital Markets Adam Thalhimer - BB&T Capital Markets: Good morning guys, thanks for taking my question. First one here, I might have missed this in your prepared commentary, but can you talk a little bit about how March looks? Have you seen any kind of pick-up in volumes in March?

This is Alan, Adam. Our fourth fiscal quarter is usually our seasonally strongest, and I think it's evidenced by the range that we gave you, although its $0.05 lower than the previous range we had given you in December. A part of that is due to the tax rate, due to the China acquisition. So we're still feeling very good about our fourth quarter. We'd like to see a little bit higher economic growth, a little bit sooner to help us get in to '08 on a better foot. But we are seeing a very strong fourth quarter at the moment. Adam Thalhimer - BB&T Capital Markets: Okay. And then you mentioned in your prepared commentary that you didn't have enough time to ratchet back on our costs when you saw the decline in volumes. In your view, how long would you need -- how long does that process take?

Well, we are able to ratchet it back some. But on the margins there are very high incremental positive or incremental negative margins when you go a little bit above what you've planned in your revenue or a little bit below it. We're always able to handle a little bit more volume than we have planned for and that drops to the bottom line at a very good rate, certainly much higher than our average margin. Unfortunately, the same thing happens on the down side. So revenue came up short. I think the operating companies did a fabulous job of managing their costs, but it's simply not enough time to reengineer these big networks to completely match that revenue decline from what we had planned it to be.

This is Fred Smith. I just want to point out again something I have emphasized over the years. We have a lot of variability in our cost related to our incentive compensation. And to some degree that provides us with a buffer, and that’s the way it should be. So, even though it’s hard for us in the short term to ratchet down expenses, just a full stop so to speak. We do have a lot of built-in shock absorbers, which is what allows us to produce very good results even in periods of slow economic growth like we’ve experienced here in the last two or three months. Now, if things persist, then we can take even stronger action. But as I said in my comments there, I think the macro economic situation is pretty good. Clearly the economy was having a lot of inflationary pressures, a lot of speculative pressures. And it appears to us based on what our economist, Gene Huang, is saying that we may very well be navigating through a soft landing here if this inventory correction plays out. And then, come the summer and early fall, people start accumulating inventory again. And we have a very good window on that. I think overall it has been remarkable that the slowdown has been as well managed as it has been.

Thank you. Our next question comes from Jason Seidl with Credit Suisse.

Good morning, gentlemen. A quick question, you mentioned in your release that revenue per package for IP grew 4%. But you said most of that was due to favorable exchange rates. If you exclude exchange rates, where was that at?

Yeah, the revenue per package on IP was 7%. It was 4% on volume and 3% on yields. On the exchange, Alan, do you want to cover that?

Well, when I look at the yield decomposition for IP, we had probably about two-thirds of exchange rate. We also had very strong weight and rate per pound improvement, and we had a decline in the fuel surcharge. So, if we had the fuel surcharge just flat, we would have seen significantly better IP yield performance. So, we are very pleased with that.

Okay. Thank you so much, gentlemen.

We'll go next to Donald Broughton with A.G. Edwards.

Good morning, gentlemen. You've changed the way you classified the International Priority, International Freight, given us a little bit more granularity. You usually don’t do that without a reason. So, I am wondering why the added insights into how we are generating revenue there?

Yeah, this is Dave Bronczek again. We changed the same kind of methodology when we got big enough in our estimations on domestic freight. We moved it into that category. It's the same rational for international freight. It grew significantly large enough, so we thought we would separate it out for you.

Yeah, this is Alan. We started out keeping all the IP in one bucket because it was all door-to-door. And what we've now, we've seen that we have enough freight that goes door-to-door that we wanted to show you separately how big those operations were and to go give a better view on the pure package count and the pure package yield. So it was a management tool for us and hopefully gives a better insight for you.

We also just announced in this first calendar quarter a significant expansion of our International Priority Freight and International Economy Freight service areas. We're now up I think to over 130 countries. So, it just became a significant business of and by itself and deserves separate identification.

And so as it grows, we'll be able to see it highlighted better. That makes sense. Can you tell me geographically where most of the growth has been coming from recently?

On the international front, of course, Asia-Pacific is always a growth market for us and it continues to be. Europe has been performing exceptionally well. Latin America has been very strong and U.S. outbound as well.

Well, I don't think you left anybody out?

The only point I made --

That's the point.

This is Fred Smith, again. I think it's very important though that you focus on the fact that Asia-Pacific plays a very unique role in that. It is for all intents and purposes the manufacturing basin for the United States. So, as the automotive and housing sectors have gone into this correction mode, it is the transpacific eastbound business that has been most effective. And we are still growing in that sector, which is very important. But it's not growing at the rates that it was prior to this economic slowdown. And that's not true, for instance, in the transatlantic range because there you have two economies that sort of trade goods, where there are specializations in one area and other brands and luxury goods and so forth. But that's not the way the market is in the transpacific lane. It’s mostly eastbound in nature with manufactured goods coming into the United States. And increasingly, the same thing is true of Asia to Europe, also reflected now in a trade imbalance with Asia, particularly China, and Europe, which has been much noted by the newspapers here. Not just the United States anymore, it’s Europe, as well where Asia is becoming the manufacturing bastion.

And just to add to the last comments that Fred put forward, it’s my opening comment. And I wanted you to understand and make the point that around the world, we continue to grow our international business in every region.

Fair enough gentlemen. Look forward to seeing you next week.

Thank you. We'll take our next question from Gary Chase with Lehman Brothers.

Good morning, guys. Alan, can I just ask you, in answering one of the questions that you took before, you mentioned that March was looking good and you are feeling pretty good about the fourth quarter, obviously, your best seasonally. But when you think on a seasonally-adjusted basis, has the total business improved at all in the fourth quarter? I am trying to get a sense of whether some of the things that you are pointing towards risks in that long-term goal in '08, are something that you see on the horizon as opposed to what you are seeing today?

Well, a couple of things on that one. First, when you come out of the holidays, we always slow up. We plan for it and manage to it. As we get back into the late February and into March, things start to pick up and they have started to pick up. They are not yet at what we had planned a year ago for them to be, but they're much better now that we've had a little running rate here. We are managing our costs much better here in the fourth quarter, and we'll continue to do that into '08. So, it’s a combination of how we are operating, as well as the seasonality. But we are a little bit behind our plan in terms of our revenues. But that plan was put to bed almost a year ago now, and had assumed a higher GDP than what we are seeing.

And may be I could just ask Mike. On the domestic express side, you've been talking a lot about revenue management. When do we get beyond that impact and start to look at volume comparisons that are sort of apples-to-apples year-on-year?

Well, we are more or less at that point, and I think had we not seen the changes in the economy that had been discussed this morning, we would have been back on a positive growth track. And certainly, the weather coming out of the peak season, which really impacted February in a significant way, has really put a lot of noise level in those growth rates. So, when we get back on a proper plan in terms of economic growth, you should see normal year-over-year comparisons.

Thank you. Our next question comes from Scott Flower with Banc of America Securities

Yeah, good morning all. I wanted to just get a sense and may be this is for Mike Glenn, and I know that you would have to do it in a more detailed way. If I adjust for fuel surcharge year-over-year drops, it looks like the domestic yield environment is quite firm to improving. How would you typify the domestic air and ground yield environment?

Well, my comments would really mirror a little bit of what Doug said. I think we are always dealing in a competitive environment out there, but nothing unusual compared to what we’ve seen in the last six to nine months. As typically the case, you see some aggressive pricing on an account-by-account basis, but in the market as a whole, I would characterize it as a firm environment.

Okay. And then, I guess the second question and this would either be for Dave or Alan. So, is there any way you can help us try to understand what the international acquisitions in terms of DTW is, as well as, perhaps the two smaller ones would do in terms of the IP volume or revenue growth rates? Obviously, that would be different than just thinking about the organic market growth. Is there any way you can help us frame that, so we can think about that going forward from where we are today?

Well Scott, in terms of the IP, obviously the reason that we are buying these things is to improve our service in those areas and to significantly enhance our IP growth out of there. Since we don’t detail for you individual IP growth areas, we probably will not do that. But going forward in fiscal '08, given that we are now in domestic businesses in the U.S., Canada, the UK and China, we will probably start to break out those domestic packages and show you that impact going forward. It will have a positive impact on IP. But until we can get through all the integrations, it's going to be a while before its going to have a significant impact.

Thank you. We'll take our next question from Edward Wolfe with Bear Stearns.

Good morning guys. Alan, to get below a 10% to 15% growth, the long-term growth rate in fiscal '08, the implication that I can only come up with is that both Express and Ground margins would be down year-over-year. Am I looking at your assumptions on that? Or is there something about Express where you've been managing to limited growth where Express margins could extend even in the scenario of a less friendly economy?

Ed, I am working on that right now. We are not at the end of our planning cycle and we'll just have to get there. But certainly there is a possibility to that but I am not going to say that that's going to happen yet, and we'll have more to say in the fourth quarter.

I guess the way I am really asking that question is, you've been so steady with the Express margin improvement and it hasn't been about volume. It has been about improving processes, getting better customers in there within Express, moving customers from product-to-product and so forth. Is the comment though that if the economy slows enough that even with some preparation, it's possible that margin flattens out? Or are you saying longer term there is not as much Express margin improvement still left in front of us?

Well your premise is wrong. You said it hasn't been about volume, that's flat wrong. IP volume is growing significantly and has been the biggest contributor to the improvement in the Express operating margins. And like I said, I am not ready to say one way or the other about the margins in the very near term. Over the long run, I am still just as confident as I have always been, and that will continue to drive well past the 10% for the company and for Express.

Okay. Second question on fuel, can you give us a sense of how much fuel worked against you during the quarter in the different businesses?

Like we've been talking about all along, we had the phenomenon where fuel surcharge declined and the price per gallon went up. So, it was a significant negative on a year-over-year basis. Over time, hopefully that will even out. I am not going to quantify it precisely.

And Ed, this is Fred Smith. The other thing that you left out of your question there and as Alan has mentioned twice now, is that we are funding a number of programs in Express, which if we are not doing, we'd fall completely to the bottom line. One of them is the China domestic service that would be a drag on margin. There are expansions in the intercontinental network that are contemplated and those rarely make money in their first year. That goes into the calculation. The integration of our Indian and UK acquisition and things of that nature. So you shouldn't forget that because that's right off the top of the margin.

Thank you. Our next question comes from David Campbell with Thompson, Davis & Company. David Campbell - Thompson, Davis & Company: Yes, I wanted to ask about Kinko's. Is there any plan to get Kinko's up to previous profit margins?

Yeah, this is Ken May. Fred had mentioned in our last conference call, the period of a significant investment that we are making at Kinko's, trying to continue to integrate this business and to extract the value from it. During the period, the last three quarters, we've opened up 150 new stores. And so, the profit drag as a result of those new stores as well as our investment in wages and in training are having an impact on our margins. Going forward, we plan to continue the expansion. So, I think it's going to be a few years before you’ll see us being able to harvest from that investment. David Campbell - Thompson, Davis & Company: Okay. And finally, the conversion of 727s to 757s operations, you mentioned as a cost, but that is supposed to be reducing fuel costs and other costs relative to the operations of the old 727s, is that not right?

Of course that's right, David, but it doesn’t happen in one year. It happens over the time. It's a long-term ROIC project, but we've got to do a significant amount of pilot training, conversion of the aircraft, rescheduling the network, and all those things have upfront costs that we can't get back in the first year on maintenance, crew pay, and the fuel benefits. David Campbell - Thompson, Davis & Company: Okay.

That's another program in Express that has cost against those margins, which again settled down in the out years and go to the bottom line. David Campbell - Thompson, Davis & Company: Thank you.

We'll take our next question from Ken Hoexter with Merrill Lynch.

Hi, I just wanted to see if you could break out what your international growth would have been without these acquisitions?

Yeah, we could, but we are not going to go there.

Okay. Thank you.

And we'll go next to Scott Flower with Banc of America Securities.

I think, Fred mentioned this, and so I'm just curious. On the around-the-world flights, have those broken into profitability? Just where are we on those? I know that there is something obviously you’ve put in place a couple of years ago, and I just wanted to get a sense to where those stand in terms of development?

Yeah, this is Dave. The eastbound around-the-world, of course, as Alan pointed out before, these usually take a year to 18 months. That was our business plan. We are right on plan, actually exceeded our plan on the eastbound around-the-world flight. We are very, very pleased with both the westbound and the eastbound around-the-world financial performance.

Great, thank you.

And this will conclude our question-and-answer session. I would like to turn the conference over to Mickey Foster for any additional or closing comments.

Well, thank you very much for your participation in our third quarter earnings release conference call. Please feel free to call anyone on the Investor Relations' team if you have any additional questions. Thanks again. Good bye.

This does conclude today's conference. Thank you for your participation. You may now disconnect.