FedEx Newsroom

FedEx Newsroom

FedEx Corp. First Quarter Earnings Surge

September 17, 2010

FedEx Corp. (NYSE: FDX) today reported earnings of $1.20 per diluted share for the first quarter ended August 31, up 107% from $0.58 per diluted share a year ago.

"Strong demand for our services resulted in higher volumes and better revenue per shipment at FedEx Express and FedEx Ground," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "This increased demand comes from improved global economic conditions and the benefit provided by the strength and flexibility of our unparalleled global networks, which we've improved during the downturn to deliver even more reliability and value to our customers."

First Quarter Results

FedEx Corp. reported the following consolidated results for the first quarter:

Revenue of $9.46 billion, up 18% from $8.01 billion the previous year

Operating income of $628 million, up 99% from $315 million last year

Operating margin of 6.6%, up from 3.9% the previous year

Net income of $380 million, up 110% from $181 million a year ago

Earnings increased as a result of strong FedEx International Priority (IP) growth at FedEx Express, continued growth at FedEx Ground and a benefit from the net impact of higher fuel surcharges. The reinstatement of certain employee compensation programs, higher pension, medical and aircraft maintenance expenses, and an operating loss at FedEx Freight dampened the quarter's solid results.

FedEx Freight to Combine Operations

FedEx will combine its FedEx Freight and FedEx National LTL operations effective January 30, 2011. This action will increase efficiencies and reduce operational costs. Additionally, it will provide customers a choice of priority or economy less-than-truckload (LTL) freight services across all lengths of haul from one integrated company. This change, along with the company's ongoing yield management initiatives, is expected to substantially improve the profitability of the FedEx Freight segment in fiscal 2012.

The estimated cost of this program is $150 to $200 million, primarily related to charges that will be recorded in the second and third quarters of fiscal 2011. These charges will include severance costs associated with personnel reductions, lease terminations and certain non-cash charges. The net cash effect from the one-time cost of these actions is expected to be immaterial over time due to anticipated proceeds from asset sales. As a result of this combination, headcount is expected to be reduced by approximately 1,700 full-time employees and approximately 100 facilities will be closed.

Outlook

FedEx projects earnings to be $1.15 to $1.35 per diluted share in the second quarter and $4.80 to $5.25 per diluted share for fiscal 2011, up from the company's previous estimate of $4.60 to $5.20 per diluted share. This guidance excludes any FedEx Freight combination costs, and also assumes the current market outlook for fuel prices and continued moderate growth in the global economy. The company reported earnings of $1.10 per diluted share in last year's second quarter. The capital spending forecast for fiscal 2011 has increased to $3.5 billion, primarily due to anticipated aircraft purchases for continued international growth.

The earnings ranges above exclude the costs from the FedEx Freight combination. Including the expected cost of this program, $0.14 to $0.18 per diluted share for the second quarter and $0.30 to $0.40 per diluted share for fiscal 2011, earnings are expected to be $0.97 to $1.21 per diluted share for the second quarter and $4.40 to $4.95 per diluted share for fiscal 2011. The actual cost will be dependent on the number and timing of employee departures and lease terminations.

"We expect continued strong demand for our package transportation services through at least December," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "Shippers of high value-added goods, especially in the technology sector, know that we have unmatched air express capacity to deliver quickly and reliably for them, even when demand surges. We expect the yield improvement initiatives we have underway, coupled with the current high utilization of our planes, vehicles and facilities, will drive higher earnings, margins and returns."

FedEx Express Segment

For the first quarter, the FedEx Express segment reported:

Revenue of $5.91 billion, up 20% from last year's $4.92 billion

Operating income of $357 million, up 243% from $104 million a year ago

Operating margin of 6.0%, up from 2.1% the previous year

IP average daily package volume increased 19%, led by exports from Asia. IP revenue per package grew 4% primarily due to higher fuel surcharges and weight per package. IP Freight pounds increased 41%, led by exports from Latin America, Asia and the U.S., with revenue per pound up 10%. U.S. domestic revenue per package grew 7% due to higher fuel surcharges, weight per package and rate per pound, while average daily package volume increased 3%.

Operating profit and margin improvements were driven by volume and yield growth, particularly in higher margin IP package and freight services, along with a benefit from the net impact of higher fuel surcharges. Results also include higher compensation, benefits and aircraft maintenance expenses.

FedEx Express added a tenth daily scheduled transpacific flight in August, and an eleventh such flight earlier this week, providing needed capacity between Asia and the United States. There are currently six Boeing 777Fs operating on strategic, long-range international routes, providing best-in-market cut-off times. Two additional Boeing 777Fs, delivered in August, are scheduled to go into international service in October.

FedEx Ground Segment

For the first quarter, the FedEx Ground segment reported:

Revenue of $1.96 billion, up 13% from last year's $1.73 billion

Operating income of $287 million, up 37% from $209 million a year ago

Operating margin of 14.6%, up from 12.1% the previous year

FedEx Ground average daily package volume grew 7% in the first quarter driven by increases in the business-to-business market and FedEx Home Delivery. Yield increased 5% primarily due to higher fuel surcharges and package weight. FedEx SmartPost average daily volume increased 9%, with net yield increasing 19%. The increase in FedEx SmartPost yield was primarily due to lower postage costs as a result of increased deliveries to U.S. Postal Service final destination facilities and increased fuel surcharges.

Operating income and margin increased due to higher package yield and volume, as well as a benefit from the net impact of higher fuel surcharges and lower self-insurance expenses.

FedEx Freight Segment

For the first quarter, the FedEx Freight segment reported:

Revenue of $1.26 billion, up 28% from last year's $982 million

Operating loss of $16 million, compared with operating income of $2 million a year ago

Operating margin of (1.3%), compared with 0.2% the previous year

LTL average daily shipments increased 29% and yield declined 3% year over year primarily due to the effects of discounted pricing in contracts signed in fiscal 2010. However, yields increased 4% from the fourth quarter as a result of the company's recent yield management initiatives to improve pricing.

Operating losses in the quarter were driven by lower yields and higher volume-related costs, as significantly higher shipment levels required increased purchased transportation and other expenses.

FedEx Services Segment

FedEx Services segment revenue for the first quarter, which included the operations of FedEx Office, was down 8% year over year, due to the September 1, 2009 realignment of FedEx SupplyChain Systems into the FedEx Express segment and declines in copy product revenues.

Corporate Overview

FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services.

With annual revenues of $36 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 280,000 team members to remain "absolutely, positively" focused on safety, the highest ethical and professional standards and the needs of their customers and communities. For more information, visit news.fedex.com .

Additional information and operating data are contained in the company's annual report, Form 10-K, Form 10-Qs and first quarter fiscal 2011 Statistical Book. These materials, as well as a Webcast of the earnings release conference call to be held at 8:30 a.m. EDT on September 16 are available on the company's Web site at www.fedex.com/us/investorrelations . A replay of the conference call Webcast will be posted on our Web site following the call.

Certain statements in this press release 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. Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, legal challenges or changes related to FedEx Ground's owner-operators, new U.S. domestic or international government regulation, the impact from any terrorist activities or international conflicts, our ability to effectively operate, integrate and leverage acquired businesses, changes in fuel prices and currency exchange rates, our ability to match capacity to shifting volume levels and other factors which can be found in FedEx Corp.'s and its subsidiaries' press releases and filings with the SEC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

TO GAAP FINANCIAL MEASURES

The company believes that meaningful analysis of our financial performance requires an understanding of the factors underlying that performance and our judgments about the likelihood that particular factors will repeat. Excluding the expected costs of the combination of FedEx Freight and FedEx National LTL operations from our earnings guidance will allow more accurate comparisons to prior periods of our expected operating performance in fiscal 2011. As required by SEC rules, the tables below present a reconciliation of our presented non-GAAP measures to the most directly comparable GAAP measures.

 

             
             

Fiscal 2011 Second Quarter and Full-Year Earnings Guidance

 
             
      Q2 Diluted   FY 2011 Diluted  
     

EPS Guidance

 

EPS Guidance

 

Non-GAAP Measure

   

$1.15 to $1.35

 

$4.80 to $5.25

 

FedEx Freight Combination Costs

   

 

(0.18 to 0.14)

 

 

(0.40 to 0.30)

 

GAAP Measure

   

$0.97 to $1.21

 

$4.40 to $4.95

 
             
   
   
FEDEX CORP. FINANCIAL HIGHLIGHTS  
                 
                 
First Quarter Fiscal 2011  
(In millions, except earnings per share and FTEs)  
(Unaudited)  
                 
      Three Months Ended  
      August 31  
        2010       2009     %  
Revenue:                
FedEx Express segment     $ 5,912     $ 4,924     20 %  
FedEx Ground segment       1,961       1,730     13 %  
FedEx Freight segment       1,258       982     28 %  
FedEx Services segment       415       451     (8 %)  
Other & eliminations       (89 )     (78 )   NM    
Total Revenue       9,457       8,009     18 %  
                 
Operating Expenses:                
Salaries and employee benefits       3,803       3,377     13 %  
Purchased transportation       1,327       1,054     26 %  
Rentals and landing fees       601       578     4 %  
Depreciation and amortization       479       495     (3 %)  
Fuel       887       666     33 %  
Maintenance and repairs       517       401     29 %  
Other       1,215       1,123     8 %  
Total Operating Expenses       8,829       7,694     15 %  
                 
Operating Income (Loss):                
FedEx Express segment       357       104     243 %  
FedEx Ground segment       287       209     37 %  
FedEx Freight segment       (16 )     2     NM    
Total Operating Income       628       315     99 %  
                 
Other Income (Expense):                
Interest, net       (18 )     (18 )   NM    
Other, net       (7 )     (3 )   NM    
Total Other Income (Expense)       (25 )     (21 )   NM    
                 
Income Before Income Taxes       603       294     105 %  
                 
Provision for Income Taxes       223       113     97 %  
                 
Net Income     $ 380     $ 181     110 %  
                 
Diluted Earnings Per Share     $ 1.20     $ 0.58     107 %  
                 
Weighted Average Common and Common Equivalent Shares                
      315       312     1 %  
                 
Capital Expenditures     $ 1,012     $ 880     15 %  
                 
Average Full-Time Equivalents (in thousands)       252       239     5 %  
                 
                 
     
     
FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS
           
           
First Quarter Fiscal 2011
(In millions)
           
           
    August 31, 2010    

ASSETS

  (Unaudited)   May 31, 2010  
           
Current Assets          
Cash and cash equivalents   $ 1,709     $ 1,952    
Receivables, less allowances     4,135       4,163    
Spare parts, supplies and fuel, less allowances     377       389    
Deferred income taxes     529       529    
Prepaid expenses and other     286       251    
Total current assets     7,036       7,284    
           
Property and Equipment, at Cost     31,773       31,302    
Less accumulated depreciation and amortization     17,094       16,917    
Net property and equipment     14,679       14,385    
           
Other Long-Term Assets          
Goodwill     2,211       2,200    
Other assets     1,286       1,033    
Total other long-term assets     3,497       3,233    
           
    $ 25,212     $ 24,902    
           

LIABILITIES AND STOCKHOLDERS' INVESTMENT

         
           
Current Liabilities          
Current portion of long-term debt   $ 251     $ 262    
Accrued salaries and employee benefits     1,081       1,146    
Accounts payable     1,423       1,522    
Accrued expenses     1,786       1,715    
Total current liabilities     4,541       4,645    
           
Long-Term Debt, Less Current Portion     1,668       1,668    
           
Other Long-Term Liabilities          
Deferred income taxes     902       891    
Pension, postretirement healthcare and other benefit obligations     1,693       1,705    
Self-insurance accruals     960       960    
Deferred lease obligations     828       804    
Deferred gains, principally related to aircraft transactions     263       267    
Other liabilities     152       151    
Total other long-term liabilities     4,798       4,778    
           
Commitments and Contingencies          
           
Common Stockholders' Investment          
Common stock, $0.10 par value, 800 million shares authorized     31       31    
Additional paid-in capital     2,302       2,261    
Retained earnings     14,270       13,966    
Accumulated other comprehensive loss     (2,386 )     (2,440 )  
Treasury stock, at cost     (12 )     (7 )  
Total common stockholders' investment     14,205       13,811    
           
    $ 25,212     $ 24,902    
           
           
             
             
FEDEX CORP. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
             
             
First Quarter Fiscal 2011
(In millions)
(Unaudited)
             
      Three Months Ended  
      August 31  
        2010       2009    
             
Operating Activities:            
Net income     $ 380     $ 181    
Noncash charges:            
Depreciation and amortization       479       495    
Other, net       98       122    
Changes in operating assets and liabilities, net       (161 )     100    
             
Net cash provided by operating activities       796       898    
             
Investing Activities:            
Capital expenditures       (1,012 )     (880 )  
Proceeds from asset dispositions and other       3       26    
             
Net cash used in investing activities       (1,009 )     (854 )  
             
Financing Activities:            
Principal payments on debt       (12 )     (508 )  
Dividends paid       (38 )     (34 )  
Other, net       9       (8 )  
             
Net cash used in financing activities       (41 )     (550 )  
             
Effect of exchange rate changes on cash       11       3    
             
Net decrease in cash and cash equivalents       (243 )     (503 )  
             
Cash and cash equivalents at beginning of period       1,952       2,292    
Cash and cash equivalents at end of period     $ 1,709     $ 1,789    
             
             
 
 

FEDEX EXPRESS SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

                   
First Quarter Fiscal 2011
(Dollars in millions)
(Unaudited)
                     
          Three Months Ended  
          August 31  

FINANCIAL HIGHLIGHTS

        2010       2009     %  
                     
Revenue       $ 5,912     $ 4,924     20 %  
                     
Operating Expenses:                  
  Salaries and employee benefits         2,258       2,043     11 %  
  Purchased transportation         369       255     45 %  
  Rentals and landing fees         403       385     5 %  
  Depreciation and amortization         255       252     1 %  
  Fuel         754       571     32 %  
  Maintenance and repairs         352       261     35 %  
  Intercompany charges         513       469     9 %  
  Other         651       584     11 %  
  Total Operating Expenses         5,555       4,820     15 %  
                     
Operating Income       $ 357     $ 104     243 %  
                     
Operating Margin         6.0 %     2.1 %   3.9 pts  
                     
                     

OPERATING STATISTICS

                 
                     
Operating Weekdays         65       65     "    
                     

AVG DAILY VOLUME / POUNDS

                 
Average Daily Package Volume (000s):                  
  U.S. Overnight Box         1,168       1,128     4 %  
  U.S. Overnight Envelope         624       617     1 %  
  U.S. Deferred         846       823     3 %  
  Total U.S. Domestic Package         2,638       2,568     3 %  
  International Priority         566       475     19 %  
  International Domestic         323       293     10 %  
  Total Average Daily Packages         3,527       3,336     6 %  
                     
Average Daily Freight Pounds (000s):                  
  U.S.         6,908       6,584     5 %  
  International Priority         3,027       2,142     41 %  
  International Airfreight         1,240       1,297     (4 %)  
  Total Avg Daily Freight Pounds         11,175       10,023     11 %  
                     

YIELD

                 
Revenue Per Package:                  
  U.S. Overnight Box       $ 19.65     $ 18.16     8 %  
  U.S. Overnight Envelope         10.64       10.17     5 %  
  U.S. Deferred         12.01       11.23     7 %  
  Total U.S. Domestic Package         15.07       14.02     7 %  
  International Priority         53.70       51.61     4 %  
  International Domestic         7.04       7.05     (0 %)  
  Composite Package Yield       $ 20.52     $ 18.76     9 %  
                     
Revenue Per Freight Pound:                  
  U.S.       $ 1.16     $ 1.05     10 %  
  International Priority         2.06       1.87     10 %  
  International Airfreight         0.87       0.72     21 %  
  Composite Freight Yield       $ 1.38     $ 1.18     17 %  
                     
Average Full-Time Equivalents (000s)         132       125     6 %  
                   
                   
     
     
FEDEX GROUND SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS
               
               
First Quarter Fiscal 2011
(Dollars in millions)
(Unaudited)
               
      Three Months Ended
      August 31
        2010       2009     %

FINANCIAL HIGHLIGHTS

           
               
Revenue   $ 1,961     $ 1,730     13 %
               
Operating Expenses:            
  Salaries and employee benefits     307       282     9 %
  Purchased transportation     782       693     13 %
  Rentals     62       58     7 %
  Depreciation and amortization     82       85     (4 %)
  Fuel     1       1     "  
  Maintenance and repairs     44       38     16 %
  Intercompany charges     221       184     20 %
  Other     175       180     (3 %)
  Total Operating Expenses     1,674       1,521     10 %
               
Operating Income   $ 287     $ 209     37 %
               
Operating Margin     14.6 %     12.1 %   2.5 pts
               
               

OPERATING STATISTICS

           
               
Operating Weekdays     65       65     "  
               
Average Daily Package Volume (000s)            
  FedEx Ground     3,534       3,311     7 %
  FedEx SmartPost     1,100       1,009     9 %
               
Yield (Revenue Per Package)            
  FedEx Ground   $ 7.99     $ 7.60     5 %
  FedEx SmartPost   $ 1.68     $ 1.41     19 %
               
               
       
       
FEDEX FREIGHT SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS  
                     
                     
First Quarter Fiscal 2011  
(Dollars in millions)  
(Unaudited)  
                     
          Three Months Ended  
          August 31  
            2010       2009     %  

FINANCIAL HIGHLIGHTS

                 
                     
Revenue       $ 1,258     $ 982     28 %  
                     
Operating Expenses:                  
  Salaries and employee benefits         600       507     18 %  
  Purchased transportation         204       118     73 %  
  Rentals and landing fees         34       29     17 %  
  Depreciation and amortization         48       55     (13 %)  
  Fuel         131       94     39 %  
  Maintenance and repairs         46       34     35 %  
  Intercompany charges         109       52     110 %  
  Other         102       91     12 %  
  Total Operating Expenses         1,274       980     30 %  
                     
Operating (Loss) Income         ($16 )   $ 2     NM    
                     
Operating Margin         (1.3 %)     0.2 %   (1.5 pts)  
                     
                     

OPERATING STATISTICS

                 
                     
LTL Operating Weekdays         65       65     "    
                     
LTL Shipments Per Day (000s)         91.8       71.4     29 %  
Weight Per LTL Shipment (lbs)         1,134       1,109     2 %  
LTL Revenue/CWT       $ 17.32     $ 17.87     (3 %)  

 

You may also like: