Mickey Foster Frederick W. Smith - Founder, Executive Chairman, Chief Executive Officer and President T. Michael Glenn - Executive Vice President of Market Development & Corporate Communications, Chief Executive Officer of Fedex Services and President of Fedex Services Alan B. Graf - Chief Financial Officer and Executive Vice President David J. Bronczek - Chief Executive Officer of FedEx Express and President of FedEx Express William J. Logue - Chief Executive Officer and President David F. Rebholz - Chief Executive Officer of FedEx Ground Package System Inc and President of FedEx Ground Package System Inc

Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division Justin B. Yagerman - Deutsche Bank AG, Research Division Nathan Brochmann - William Blair & Company L.L.C., Research Division J. Bruce Chan - Stifel, Nicolaus & Co., Inc., Research Division Helane R. Becker - Dahlman Rose & Company, LLC, Research Division Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division William J. Greene - Morgan Stanley, Research Division Kevin W. Sterling - BB&T Capital Markets, Research Division Keith Schoonmaker - Morningstar Inc., Research Division Christian Wetherbee - Citigroup Inc, Research Division Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division Scott H. Group - Wolfe Trahan & Co. Brandon R. Oglenski - Barclays Capital, Research Division Christopher J. Ceraso - Crédit Suisse AG, Research Division David Vernon - Sanford C. Bernstein & Co., LLC., Research Division

Good day, everyone, and welcome to the FedEx Corporation First Quarter Fiscal Year 2013 Earnings Conference Call. Today's call is being recorded. At this time, I will turn the call over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.

Good morning, and welcome to FedEx Corporation's First Quarter Earnings Conference Call. I would like to remind everyone that our Investors and Lenders Meeting will be held here in Memphis on Tuesday and Wednesday, October 9 and 10. Therefore, we ask that you please save your cost reduction and profit improvement questions, which we will cover in great detail for the October meeting. The first quarter earnings release and our statistical supplement book are on our website at fedex.com. This call is being broadcast from our website, and the replay and podcast will be available for approximately 1 year. Joining us on the call today are members of the media. [Operator Instructions] 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 within the meaning of the Act. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our press releases and filings with the SEC. To the extent we disclose any non-GAAP financial measures on this call, please refer to the Investor Relations portion of our website at fedex.com for a reconciliation of such measures to the 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, President and CEO of FedEx Services; Chris Richards, Executive Vice President, General Counsel and Secretary; Dave Bronczek, President and CEO of FedEx Express; Dave Rebholz, President and CEO of FedEx Ground; and Bill Logue, President and CEO of FedEx Freight. And now our Chairman, Fred Smith, will share his views on the quarter.

Thank you, Mickey. Welcome to our discussion of operating and financial results for the first quarter of fiscal year 2013. Following my remarks, Mike Glenn will highlight our views on the economy, and Alan Graf will detail our financial results and outlook. In the quarter just ended, while FedEx Ground and FedEx Freight improved their profitability in the first quarter, the slowdown in the global economy and global trade constrained revenue growth at FedEx Express and affected overall earnings. We have significant efforts under way to reduce cost in the Express segment, some of which we'll talk about today and all of which we'll talk about in detail at our Investors and Lenders Meeting on 9 and 10 of October, and we hope most of you can come to that meeting. Now let me turn it over to Mike Glenn.

Thank you, Fred. On the economic front, we continue to see modest growth in the global economy. Our calendar year '12 U.S. GDP growth forecast is 2.2% and 1.9% for calendar year '13, which is 0.5 points lower than our fourth quarter earnings forecast. For industrial production, we expect a growth of 4.2% in calendar year '12, slightly below last quarter, and 3% in calendar year '13, 0.5 points lower than our fourth quarter forecast. Our global GDP forecast is 2.3% for calendar '12 and 2.7% for calendar '13, 0.3 points lower than our last call. Turning to yield and revenue management, excluding the impact of fuel, year-over-year Express domestic package yield increased over 4.4%. The increase was driven by pricing and rate discount improvement, followed by favorable service and customer mix changes. The Ground package yield increased 3.6%, excluding the impact to fuel. Year-over-year increase was driven by lift and discount improvements, followed by an increase in extra services charges. Excluding fuel, International package yield declined 2.3% year-over-year due to the impact of exchange rate. And finally, excluding the impact of fuel, FedEx rate yield per hundredweight increased 2.4% year-over-year. The increase was primarily driven by pricing rate changes. And now I'll turn it over to Alan Graf.

Thank you, Mike, and good morning, everyone. For FedEx Corporation, revenues and operating income increased slightly in the first quarter due to improved profitability at FedEx Freight, the strong performance at FedEx Ground and partially offset by the impact of reduced demand for priority services at FedEx Express. Revenues increased 3% to $10.8 billion primarily due to yield increases, which Mike discussed, and higher volumes at FedEx Ground and FedEx Freight. Our EPS closed at $1.45 per share, which was a little better than we anticipated 2 weeks ago, slightly down year-over-year due to the tough global economy. Looking at Ground, revenues increased 8% to $2.5 billion as a result of yield and volume growth at FedEx Ground and volume growth at FedEx SmartPost. Average daily volume at FedEx Ground increased 5% to 3.9 million packages per day due to market share gains, resulting from continued growth in our commercial business and our FedEx Home Delivery service. FedEx SmartPost volumes grew 18% to 1.7 million packages per day as a result of growth in e-commerce. Ground operating income increased 9% to $445 million due to yield and package volume growth, and operating margin improved year-over-year to 18.1%. Turning to Express, although Express revenues increased, operating income and margin decreased due to declining U.S. domestic package volumes, the demand shift toward lower-yielding International Economy services and increased depreciation and employee benefits expenses, which more than offset significant ongoing cost containment activities. Recent acquisitions and exchange rate fluctuations affected both revenue and expense but had little net impact on operating income for the quarter. Fuel costs decreased 8% during the first quarter due to decreases in the average price per gallon of jet fuel and lower aircraft fuel usage. Based on a static analysis of the net impact of year-over-year charges in…

[Operator Instructions] We'll take our first question from Tom Wadewitz from JPMorgan. Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: So I wanted to ask you about how you think international trends will develop the next couple of quarters. You seem to be cutting the guidance for the full year fairly aggressively relative to what seems to be about a 0.5-percentage-point cut in your overall economic view. So I'm wondering if you can give us some more thoughts on what your assumptions are within International and how you think that the, I guess, the trade-down effect will take place, if that's going to be a continuing issue going forward and if that's part of the reason that your guidance has come down as much as it has.

Tom, this is Dave Bronczek. I'll start off, then Mike Glenn will add some color to it. First, on the International numbers, and I think it was appropriate that we split them out now. And I already talked about the International Priority and the deferred, the economy, you can see sort of what happened in our mix shift, a 2% down in our very high, very profitable International Priority packages. And a dramatic increase, 13% in deferred, that actually grew and drove our linehaul per -- the pounds went up 4% this quarter. So we're taking a hard look at it, and you'll see some of the decisions we've made on moving some of our traffic on the ocean through FTN, our customers have talked to us about that. Putting the right freight in the right networks. We're very pleased that the customers are talking to us about their package content, their high-tech customers, and in terms of their value per pound and their shipments so that we make sure we get the right network for the right customer at the right price for the right profit. So yes, we were a little bit surprised that the International deferred package volume went up so much, and it drove some of our linehaul an increase of 4% in our pounds. But that's a good thing as we adjust our network.

Tom, I'd just add that when we see weakness in the economy, not unlike what happens in the United States, we see a shift from our Premium Services in the Priority network to deferred services to take advantage of lower transit times and lower rates. That's just one way that customers manage their supply chains in difficult economic conditions, so I think that's what we're seeing.

This is Fred Smith. Let me weigh in here, Tom. I mean, fundamentally, what's happening is that exports around the world have contracted, and the policy choices in Europe and the United States and China are having an effect on global trade. Global trade has grown faster than GDP, except for the 2000, 2001 meltdown and 2008 and 2009, for 25 years. And over the last few months, that has not been the case. So that's what's really going on, is that exports and trade have gone down at a faster rate than GDP has.

And we'll take our next question from Justin Yagerman.

So piggybacking here on Tom's question a little bit, I'm just trying to reconcile the outlook. I understand that over the last quarter and over the last several quarters, we've seen this contraction. But what we're hearing in the tech and telecom world is about all of these different product launches: Windows 8, iPhone 5, iPad Mini, if that gets released in the back half. These should be all high-value, high-priority goods. I guess the big question is whether or not there's demand there for it. Your guidance would imply that there really isn't and that we're not going to see that pickup in the International Priority side of things, where you really get that margin expansion. Is that what you're hearing from your customers? Is that just based on a gut feel right now? Can you give us a little bit of insight into why you think this big step down as we head into what should otherwise be a fairly productive time of year?

Well, let me elaborate on what I said just a moment ago. I mean, systemically, the policy choices that have been made in Europe and the United States and China are having effect on world trade. The episodial product launches that you refer to, we've been talking about for 2 years. And we are carrying a huge amount of that traffic, but it is episodial. At the same time that you have that going on, you have a declining value per pound. In a lot of electronic equipment, you have fuel going up, partially in response to the quantitative easing. I mean, as the Fed puts more money out there, people put more money into commodities and drive the price up. So you have products that are getting lower in value per pound, which is the key correlation for goods being moved by air. And so they're going on the water to an improved container liner system that's been developed over the last few years. So you've got a lot of things that are going on there, and the product launch of Apple's and Microsoft is not going to provide the type of sustained growth in the international trade that the world has seen historically. So when that turns back around I think is directly related to the economic macro system in Europe, North America and particularly in China.

We'll take our next question from Nate Brochmann from William Blair & Co. Nathan Brochmann - William Blair & Company L.L.C., Research Division: I wanted to talk just -- and follow up on that a little bit, maybe, Fred. I mean, what's your long-term view of global trade and the opportunities to get that going again? And I understand all the near-term policy issues and obviously fully agree with that, and those are big headwinds. But what do you think in terms of the long-term opportunities to get that going again, and how do you think of global trade and then the investments kind of long term?

I think that, that remains to be seen. I mean, the global trading economy is still the largest single economy in the world. But over the last several months, particularly as we went into this fiscal year, it's been disappointing, and I think it's reflective of the low growth in the United States. You've got contraction going on in Europe. And because of North America and Europe, China's export economy, which has been driven by the consumer economies in the United States, North America and Europe, are reflected in the lower trade numbers. So I think until some of these macro issues get resolved, you'll see the relatively low international trade numbers. Now having said that, we're actually taking market share. We'll talk about this at the October 9 and 10 meeting. We're taking market share in the intercontinental trading area. The problem is, as Dave pointed out, the mix of traffic, the configuration of our networks was set on one set of assumptions, and those have turned out to be correct. So you'll see at the October 9 and 10 meeting, where we have a significant initiative under way in Express to take huge amounts of money out of the Express networks, reflecting what I just told you about.

And we'll take our next question from David Ross from Stifel, Nicolaus. J. Bruce Chan - Stifel, Nicolaus & Co., Inc., Research Division: This is actually Bruce Chan on for David Ross. I just wanted to change gears a little bit and talk about Freight. You all did a nice job there. Your margins were certainly better than we expected, and it looks like much of that came from progress on the expense side, although maybe revenue per hundredweight was a little bit less than what we had assumed. I'm wondering if you can comment on the yield environment. Are you seeing any softening there of the pricing momentum that carriers seem to have been enjoying up till now, or is that somewhat of a mix effect or an issue with the composite economy and priority figure?

I think our sales team is doing an outstanding job balancing the traffic growth levels and yield improvement in the Freight sector. Yields in any one quarter are impacted by a variety of issues. Since a tremendous amount of the traffic is contract-based, we deal with contracts that come up during any given quarter, and so we have an opportunity to influence different amounts of traffic during any given quarter. There's also some mix issues there. We saw strong growth in the Economy segment and not as much in the Priority segment, but we're really pleased with the job that our sales team is doing managing yields in the Freight segment.

Bruce, this is Bill. Let me jump in for a second. Again, as Mike said, we're very pleased with our quarter. I mean, volume was up 4% all up, yield up 2%. A lot of the focus we have is on making sure that as -- the customer's embracing our new offering in choice, and that's clear. And our objective is to make sure that whether customer picks a priority or economy shipment in any length of haul, that we'll be profitable. So very focused, and a lot of our -- we made a lot of changes back in July on our network design, and it's all designed for that. So as far as the quarter, we're very happy about it. The yield is a -- as Mike said, is a very important focus for us, and the sales team is doing a nice job of managing the environment out there. And as far as the pricing environment, again, I think it's rational, and we're very focused on them.

And our next mission comes from Helane Becker from Dahlman Rose. Helane R. Becker - Dahlman Rose & Company, LLC, Research Division: So just to understand something with respect to the lower growth and the GDP outlook and so on and so forth, does this in any way change your thought process about international expansion? I mean, I think one of the big things is the revenue growth you saw with some of the recent acquisitions, would this in any way change that?

This is Dave Bronczek. No, thanks for the question, though, Helane. No, we're actually adding some super express freighters in October and November, one out of Taipei that gives our customers there 2.5 hours of later service and cutoffs for them into North America and into Europe and actually another one that starts in October out of Munich that comes up into Milan and directly heads into our hub here in Memphis. So our customers continue to see great value and great service, and we keep adding more and more traffic. As we pointed out before, the shift has been different, so we're going to spend a lot of time with you on October talking about our international network and how it redesigns around the mix and the product types that we have going forward so that we're much more profitable while we gain more volume and more business.

I should add, though, that those super express freighters Dave talked about are not additions of capacity. They are changed routings in order to take advantage of the 777's nonstop capabilities and give our customers better value. And going back to the question about Apple and Microsoft and so on, these product launches, a part of what Dave is saying to you, we manage that by adding extra sections and extra capacity. So we have been very reluctant in the recent past to add scheduled capacity and meet these requirements with variable capacity. And that's probably going to be the case for the foreseeable future. I mean, we'll probably put up very little incremental schedule capacity. And Dave, you might want to add to that.

No, that's right, Fred. And of course, our FedEx Trade Networks organization is becoming very, very successful at bundling the customers' products, and a lot more traffic is moving on the ocean now in our same technology, great value-added service. So we'll talk a lot about all of these initiatives that we have going forward. I think you'd be very pleased with how profitable our International divisions around the world become.

Okay, we've got -- Mickey gave me some e-mail questions from Ken Hoexter. Let me give Dave Rebholz one of these. Where do you see Ground margins trending from here? If volumes and pricing continue on this path, can they operate at a 20% level?

This is Dave. Clearly, our goal is to be moving towards 20-plus percent. We see an expanded growth of our product across all product lines that we have, both Ground, Home and SmartPost. We feel that we have the right cost structure in place to be able to manage through that process. Each and every quarter is a different set of circumstances, but quite frankly, I think we've proven to you that we're fairly consistent and we're very successful at producing the kind of financial returns. And as we continue to gain market share, I have nothing but very positive and very comfortable feelings as we move forward to achieve the goals that have been set out for us.

And we'll take our next question from Ben Hartford from Robert W. Baird. Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division: I'm wondering if you could talk a little bit about yield expectations in the International Express segment, kind of paying mind to the fact that capacity utilization among the more heavyweight air freight providers still appears to be pressured. Capacity has come out of the market, but as you guys have talked about, volume is weak, and as we understand, there's going to be some capacity redeployment potentially into these lanes as well. So can you talk a little bit about what the expectations are for the yield dynamics in that segment over the course of the next couple of quarters?

This is Mike Glenn. I think the main thing is our goal is to strike the right balance between yield improvement and volume growth to maximize the operating profit within each segment of our business. The main issue that has put pressure on yields in the International segment is the mix shift that Dave talked about earlier, where we're seeing strong growth in our deferred services and a slight decline in our priority services. Obviously, as the economy remains weak, it is tougher to grow those Premium Services in our -- in the priority network. So we'll have to manage through that going forward, but that's the main issue putting pressure on yields at this point.

And our next question comes from William Greene from Morgan Stanley.

Alan, can I ask you for just a little bit of color around some of the guidance numbers? If we look at the second quarter, it's quite a bit below what normal sort of sequential change would suggest. And if we sort of follow that through, it kind of leads to either an assumption that there's a pickup you're assuming in the second half or we'll be toward the low end of that guidance number. So is it fuel in the second quarter that's causing that below-seasonality, or maybe you can add some color around kind of near term and long term?

Well, I think the key here is what we've talked about several times. When IP is in a declining mode and IE package is in a strong growth mode, that's a big factor, and we think that's going to continue. I mean we took significant haircuts, that Mike mentioned earlier, to our calendar year '13 numbers. And so we see the economy not improving from here. And I watched Mr. Fisher this morning, the ex-Fed member, saying that he thought the economy was at stall, at current. And I think that it's -- not a voting member, he's still currently there. I think that's what we're seeing. So we anticipate more of the same in the second quarter for Express. And also, we'll have some fuel headwinds versus the previous year at Express the way the fuel surcharges and our bands are working out in terms of price increases in the lag. So fuel's definitely an impact, but not going to see much improvement in Express in the second quarter as we keep our service levels high. And we'll be telling you in October what we're going to do and when we're going to do it at Express. So those are the 2 keys.

Our next question comes from Kevin Sterling from BB&T Capital Markets. Kevin W. Sterling - BB&T Capital Markets, Research Division: You guys have spent a lot of time talking about customer shifting to deferred services. Are you seeing more customers maybe taking a step further and shift from the air to the ocean? And, Mr. Smith, you briefly mentioned you guys are taking market share. Does that imply that maybe you've taken market share from the freight forwarder community as you build out the FedEx Trade Networks?

Well, what's going on in the movement of goods internationally in the Air Cargo segment, the door-to-door Express part of it is taking share from the traditional airport-to-airport cargo segment, and that's going to create a lot of issues as a tremendous amount of capacity that's been brought into the market, a lot of new aircraft by the traditional airport-to-airport providers, whether they're combination carriers or the pure freighter operators, that market is not growing at all. And, in fact, in the last several months, it's almost contracted about, what, 3%, I think? Something along those lines. So that's what I was talking about that Express is taking market share, and there are 3 major Express networks. We're the biggest in terms of transporting goods by air, and then you have UPS and DHL. And then there is clearly a diversion of traffic from traditional airport-to-airport air freight onto the water, and that's being caused by the falling value per pound of the traffic that's being moved. I mean we all benefit, particularly in the electronics sector, with improved pricing because of technology. Well, the thing that is most correlated to air freight demand or the air cargo market demand is the value per pound. So there is traffic that's moving onto the water because of that, and at the same time, over the last 10 years, the container liner services have gotten a lot better. I mean, there's now daily service from almost every major port in Asia to the major ports in the United States and Europe. This will be even more pronounced once the Panama Canal has expanded to the so-called Panamax-sized ships in 2014. So that's what I was talking about market share. The Express segment is taking market share from the traditional air freight segment, and the traditional air freight segment is losing some traffic to the sea freight area. And that's our strategy. We're participating in both of those, with FedEx Trade Networks in the sea freight area, which has been a major expansion effort over the last few years. It's really fantastic what our team has done there. And we're now an increasingly big player in that segment. And at the same time, our Express system has grown, but the customer has selected the less expensive of the 2 services that we offer, and it's -- we have to modify our system and our capacity to reflect that changed demand. So long answer, but you have to understand a lot. Dave, you want to add something?

And to add to that, our FedEx Trade Networks organization has done a tremendous job of opening up, I think we're up to 51 markets, 125 cities now. And, of course, the visibility and the technology that we provide at FedEx across the board in all of our networks is something that the customers value very much. So when they're moving on the ocean, they still see the visibility, they still see the tracking, they still see the reliability of the service commitment on deliveries. So it's a movement for our customers that adds more value to them, and we'll be talking more about that in October.

Our next question comes from Keith Schoonmaker from Morningstar.

I wanted to follow up more on FTN network development. I think the latest K mentioned 130 offices, and you say 125 locations. This must be 100 more than just 2 or 3 years ago. And I recognize you'll continuously position offices to capture shifting trade patterns. But could you please comment on sort of near term, what kind of expansion is required before the network is sort of completed?

Well, we're in very good shape right now. You're right. We've added over 100 cities, probably, in the last 3 years, and we're in very good shape right now in all the major markets around the world. We'll add some more. We'll continue to open more cities. But by and large, in the main ports and the main lanes, we're already there and just adding customers. And with our bundled capability internationally, it's really positive and up. We have a lot of upside potential with FTN.

This is Alan. Look, we're going to continue to build scale at FTN, and we're going to continue the expansion. But there is not a customer out there right now that FTN can't compete for, which is a position we haven't been in until just recently. So that's going to be an important part of our game plan, as Fred mentioned.

We'll take our next question from Christian Wetherbee from Citi.

Question maybe on the domestic side, just looking at the Express side from a volume standpoint. When you look at the 5% decline there, I was just wondering if you could give some color around the trade-down you may be seeing out of Express and into the Ground and maybe how much of that 5% is kind of being captured there relative to the overall weakness in the economy. You try to parse that out, maybe a little bit more color on that would be great.

Sure. I'll let Dave get some specifics. This is Alan. I'm going to just say again and iterate this, we manage the U.S. domestic business as a portfolio. And if you combine our Ground and Express domestic businesses, you have one heck of a great profit story. And in fact, Express domestic's profitability is good, even despite there's a 5% volume decline, because we're managing the heck out of it. So I'll turn it over to Dave.

Yes, I'll answer that, then Mike Glenn will jump in, too. Alan's exactly right. I mean, our FTEs, and you can see that, is down 3% year-over-year. It's 3,450 FTEs. The service has never been better. The quality of our customer care has never been better. Our linehaul in the United States is down 2% as well. So -- and our Aircraft Maintenance is better. So across the board, we've been diligent at reducing our cost commensurate with where the volume is, but the volume is between Express and Ground at FedEx, so that's a good thing.

Christian, I think it's important to point out that almost 1/2 the year-over-year decline during this quarter was due to one customer in the cell phone industry shifting from a total Express solution to a combination of Ground and SmartPost in order to manage their supply chain during this economic period. Beyond that, the weakness has been relatively broad-based among industry sectors and is largely economic-based.

Our next question comes from Jeff Kauffman from Sterne Agee. Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division: A fair amount of my questions have been answered at this point. What I'd like to do is drill down a little bit more into your international forecast change. There was a slide you put out, I think over the summer, where you were looking for Eurozone to contract about 0.5% and emerging markets to grow at about just over 5%. I was speaking to a gentleman from China the other day who had expressed to me that he had thought that the Chinese economy was going to be stronger in the fourth quarter and first quarter and they were seeing changes in real estate market, what have you. Could you talk a little bit more about where you've incrementally changed outside of the U.S. and in particular, with some of your emerging markets?

Just from an economic perspective, as I mentioned, our global forecast is -- for calendar year '12 is 2.3%. In the developed countries, we're expecting 1.3%; in emerging markets, which is 5.1%. Again, this is slightly lower than we were last quarter. In '13, we're looking for 2.7%. Again, developed countries, 1.5%, and emerging markets, 5.7%. We've certainly seen a growth slowdown in the emerging Asia sector in the first half of Q1, but that's probably run its course, and domestic demand remains robust in the global headwind -- into global headwinds. But obviously, there are a lot of policy issues that will impact that.

I can tell you this on China. The locomotive that has driven China's growth is its export industries. And with the situation in Europe and, to a lesser degree, in North America, that is a significant issue for the Chinese economy. Now the consumer consumption in China is not increasing at a significant rate, contrary to everybody's hopes. While exports from, say, the United States into China have grown, they are dwarfed by the exports from China into the United States. And as the big economies in Europe and the U.S. have grown or contracted -- grown at a far lesser rate or, in the case of certain European countries, have contracted, that's reflected in the numbers in China. And you can't escape that. I've been somewhat amused watching some of the China observers, I think, completely underestimate the effects of the slower exports on the overall China economy.

Jeff, this is Dave. And to add something else that you'll see in October that you probably don't see now is we've, on purpose, added a lot of investments in Europe. Our organic European plan, it's -- is very successful, and you're going to see a lot of the benefit to that. And also, in Asia, organically, in terms of more salespeople, more stations that we've opened. So it's -- we've added some costs and some investments that we are very confident will pay off in a big way, and you'll see more of that as well. So that's somewhat into our numbers too that you probably can't see at the moment.

And we'll take our next question from Scott Group from Wolfe Trahan. Scott H. Group - Wolfe Trahan & Co.: So first, thanks for the breakout of IP versus economy. It's helpful, and if you have any more history going back before fiscal '12, it'd be helpful for us. And then my question is on the restructuring. So there's been this view that I think it'll be largely a domestic Express restructuring. Is there a chance now that it can be broader and touch International to help manage some of the structural headwinds we're seeing as we see the shift from International Priority to Economy? Can you do much to address the cost structure of an Economy product versus a Priority product?

Well, first, let me clarify something. The management of FedEx has never used the term restructuring. That's something that you have mentioned and the media has mentioned. We intend to take a significant amount of cost out of the Express system, and on October 9 and 10, you'll see how we're doing that. But it's not the -- we're not going to lay off people and we're not going to take some Draconian steps. All of the things are very well-thought-out, and we're very confident we can achieve them, and I think you'll be surprised at the magnitude. The organic expansion in Europe and China, they make great contributions with IP or IE. That's not the issue with the domestic operations. The issue is the linehaul operations, because it costs the same amount of money to put up a unit of capacity whether you're flying it full of IP or IE. And so I think you will see, commensurate with the outlook that we're talking about, FedEx Express being very cautious about adding capacity, unless it's competitively differentiated, and then moving the lower-yielding traffic into the right network, which is what Dave was talking about. But we'll see you on October 9 and 10, and you'll get a lot of detail on that.

Just to finish the thought up, yes, there will be a significant amount of SG&A reduction around all FedEx Corporation on top of what we're doing at Express, and that would be my part of the show.

Yes, and Alan's right, and Fred, of course, is right. We're going to talk about international opportunities there and how our linehaul and our networks reposition to handle the right products in the right network. The same is true in the United States. We have worked on this for many months, and you'll be, I think, surprised, as Fred pointed out, the magnitude of the numbers. And, of course, our aircraft fleets, we're going to talk a lot about that as well. That's been a big upside to our profitability going forward, too.

Our next question comes from Brandon Oglenski from Barclays.

Maybe just to follow up on the themes that we're hearing on this call, should we be thinking this push towards deferred air products is more structural in nature? The shippers tried in these softer times, what are some of the fences that you guys can enact when things maybe get a little bit more urgent in the future to push people back into those higher-revenue segments?

The movement between Priority and Economy is essentially driven by the macroeconomic situation relative to the capacity. And so if the economic outlook changes, people buy the Priority Services in order to assure that they get moved on the time frame that they're looking at. It's really an arbitrage. Now having said that, on a systemic basis, as the price of fuel has gone up inexorably, almost, over the last decade, what you're seeing are these big trends that I talked about a little earlier. The air cargo market in its traditional definition is not growing. The door-to-door Express portion of it is growing relative to the overall market, and the -- a lot of traffic is moving onto the water because moving goods by air is very energy-intensive. So a huge part of these things, of what's going on, is driven by the price of fuel, and that's going to change people's decisions on manufacturing and supply chains. So we're going to talk about that on October 9 and 10. But you can't have jet fuel going up to close to $4 a gallon on occasion without it having a big effect on the choices people make in terms of the speed, price trade-off and the decision as to whether to move bulk commodities by air or on the water.

Our next question comes from Chris Ceraso from Crédit Suisse. Christopher J. Ceraso - Crédit Suisse AG, Research Division: Actually, that leads into my question. It seems like you're in a bit of a tough spot where there are some secular shifts, like you said, towards ocean away from air. And at the same time, you also need to make your air network more fuel-efficient, so you're upgrading your air fleet. But in the short run, that seems to be leaving you with very little excess cash flow. You're running close to 9% CapEx as a percent of sales. Do you expect it to persist at that level, leaving you with limited free cash flow over the next 2 or 3 years?

Well, I don't know where you came up with the term limited cash flow. I think our cash flow's very strong. And we have done 2 major things with the Express fleet. One is we have deferred deliveries of the 777s, because we are not going to escalate the scheduled aircraft in the near term, and we have accelerated the replacement of the MD-10s with 767s, which provide a high ROIC, and they're 30% more fuel-efficient. And we're going to continue to do that. And the reason we're going to continue to do that is because we have such strong cash flows. I mean, our EBITDA is going to be very large this year, so it's not like we're not making money. I mean, we've given a $6.20 to $6.60 range. And if you do the math, I think you'll find out our cash flows are very strong.

And our next question comes from David Vernon from Bernstein. David Vernon - Sanford C. Bernstein & Co., LLC., Research Division: Just a question on the domestic volume change. It looks like the deferred volumes are the weakest of the bunch, and I'm wondering if that was sort of a customer-specific thing or if that is something else that's going on in the U.S. domestic landscape.

David, this is Mike. As I mentioned earlier, almost half the decline in the Express domestic segment was due to one large customer who shifted from a largely deferred Express solution to Ground and SmartPost as a way to optimize their supply chain during the weaker economy. So that was the primary driver during the quarter regarding the deferred traffic. David Vernon - Sanford C. Bernstein & Co., LLC., Research Division: So you're not seeing a greater than sort of market decline in deferred outside of that one large account?

We're certainly seeing some pressure on deferred traffic levels. As you would expect to see any time when you have a weak economy, there's some trade-down from deferred to Ground. There's some trade-down from Ground to Freight in the larger shipments. So certainly the economy is having an effect on that, but the primary issue is one large customer.

Let me just say what I've said on a couple of occasions here, and again, we'll talk more about it in October. The company doesn't view its individual segments as stand-alone businesses. I mean, we manage the system as part of a portfolio. And I think we've been pretty good in forecasting where the market was going. I mean, that's why we bought Caliber, that's why we upgraded FedEx Ground so that it's now the fastest ground system out there. It's making a lot of money. It's because we understood that that's where the market was going. As Dave Bronczek mentioned, we've expanded over the last 3 years our FedEx Trade Network significantly, so we're now a major player in a much broader international trade marketplace than we were just a few years ago. I think the one thing that has changed faster than we would have anticipated, and it is directly related to the policy choices made at the governmental level, is the price of fuel. And the price of fuel, if you plot it over the last 10 years, it's really quite astounding. And it's a little bit like a frog being boiled quickly or boiled slowly. I mean, it jumps out if you boil it quickly. But when you do it slowly, it sits there and gets cooked. So the world economy has absorbed an incredible increase in the price of fuel, and that has had very big implications on the way people think about supply chains on their decisions to move ocean or whether they move things by air. There's a great logistician up at MIT that said if it keeps going, the places where you ought to put manufacturing plants are Mexico and Eastern Europe. So it's not by accident that FedEx made a great acquisition in Mexico, which is just going barnburners, the MultiPack, and in Poland, in OPEC. So I think the only thing that's been at issue here is that the growth rates have been far below what everyone would have wanted because of policy choices. And secondarily, the increased price of fuel combined with those macroeconomic issues have slowed the growth of exports and, secondarily, they've made people trade down, whether it's in the domestic market or in the U.S. market. But none of this was -- we didn't miss any of it. We did all of the right things. It's just here late in the last few months, it's been very disappointing in terms of the macroeconomic environment.

And ladies and gentlemen, that concludes today's conference. I would like to turn the conference back over to Mickey Foster for any closing remarks.

Thank you for your participation in our first quarter earnings release conference call. We look forward to seeing you at our Investor Meeting here in Memphis on October 9 and 10. Please feel free to call anyone on the Investor Relations team if you have any additional questions about FedEx. Thank you.

Once again, ladies and gentlemen, that concludes today's conference. We appreciate your participation today.