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FedEx Newsroom

FedEx Corp. Reports Higher Revenue and Earnings

September 22, 2011

MEMPHIS, Tenn., September 22, 2011 … FedEx Corp. (NYSE: FDX) today reported earnings of $1.46 per diluted share for the first quarter ended August 31, compared to $1.20 per diluted share a year ago, a year-over-year increase of 22%.

“Revenue and earnings increased significantly in the quarter due to strong FedEx Ground performance, improved FedEx Freight results and the continued success of the company’s yield management actions,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “While the economic environment is challenging, we remain confident FedEx will improve earnings, margins and cash flows this fiscal year.”
 
First Quarter Results
 
FedEx Corp. reported the following consolidated results for the first quarter:
 
• Revenue of $10.52 billion, up 11% from $9.46 billion the previous year
• Operating income of $737 million, up 17% from $628 million last year
• Operating margin of 7.0%, up from 6.6% the previous year
• Net income of $464 million, up 22% from last year’s $380 million
 
During the quarter, improved FedEx Ground and FedEx Freight results offset the effect of slowing global economic growth, which especially impacted volume levels and drove lower productivity at FedEx Express. Results also reflect wage increases, higher funding of incentive compensation programs and the reinstatement of full 401(k) company-matching contributions.
 
Outlook
 
FedEx projects earnings to be $1.40 to $1.60 per diluted share in the second quarter and $6.25 to $6.75 per diluted share for fiscal 2012, compared to the company’s previous full year forecast of $6.35 to $6.85 per diluted share. This guidance assumes the current market outlook for fuel prices and moderate growth in the global economy. The company reported earnings of $0.89 per diluted share in last year’s second quarter, which included charges of $0.27 per diluted share. The capital spending forecast for fiscal 2012 remains $4.2 billion.
 
“The U.S. and global economy grew at a slower rate than we anticipated during the quarter,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “While FedEx Ground and FedEx Freight achieved improved operating results despite lower than expected growth, the more rapid decline in demand for FedEx Express services, particularly from Asia, outpaced our ability to reduce operating costs. We have slightly reduced our earnings forecast to reflect current business conditions and are aggressively working to adjust our cost structure to match demand levels.”
 
The company plans to begin acquiring FedEx common shares. A total of 5.7 million shares may be repurchased under existing share repurchase authorizations. The repurchases will be subject to market conditions and will be made from time to time either in the open market or through private transactions in accordance with the requirements of the Securities and Exchange Commission. The company’s repurchase program may be suspended, discontinued or resumed at any time.
 
2012 Rate Increases
 
FedEx Express will increase shipping rates by a net average of 3.9% for U.S. domestic, U.S. export and U.S. import services effective January 2, 2012. The full average rate increase of 5.9% will be partially offset by adjusting the fuel price threshold at which the fuel surcharge begins, reducing the fuel surcharge by two percentage points. The FedEx Ground and FedEx SmartPost pricing changes for 2012 will be announced later this year. FedEx Freight implemented a 6.75% general rate increase on September 6, 2011.
 
FedEx Express Segment
 
For the first quarter, the FedEx Express segment reported:
 
• Revenue of $6.59 billion, up 12% from last year’s $5.91 billion
• Operating income of $288 million, down 19% from $357 million a year ago
• Operating margin of 4.4%, down from 6.0% the previous year
 
U.S. domestic revenue per package grew 13% due to higher fuel surcharges, yield management actions and increased weight per package, while average daily package volume declined 3%. FedEx International Priority® (IP) revenue per package grew 16% due to higher fuel surcharges, the favorable impact of exchange rates, yield management actions and increased weight per package. IP average daily package volume decreased 4% driven by declines from Asia. IP freight pounds increased 3% with revenue per pound up 7% due to higher fuel surcharges and the favorable impact of exchange rates. In total, IP package and freight pounds increased 2% and revenue increased 11% year-over-year.
 
Operating income and margin decreased as package volume declines accelerated during the quarter due to slowing global economic growth. The package volume declines were more pronounced in certain premium services. Expense reductions related to volume also accelerated during the quarter but only partially offset increases in wages, incentive compensation programs, benefits and fixed costs.
 
FedEx Ground Segment
 
For the first quarter, the FedEx Ground segment reported:
 
• Revenue of $2.28 billion, up 16% from last year’s $1.96 billion
• Operating income of $407 million, up 42% from $287 million a year ago
• Operating margin of 17.9%, up from 14.6% the previous year
 
FedEx Ground average daily package volume grew 5% in the first quarter driven by increases in the business-to-business market as well as the FedEx Home Delivery service. Revenue per package increased 9% primarily due to higher fuel surcharges and yield management actions.  FedEx SmartPost average daily volume increased 29% due to growth in e-commerce and gains in market share.  FedEx SmartPost revenue per package increased 5% primarily due to increased fuel surcharges.
 
Operating income and margin increased primarily due to higher package yield and increased volume.
 
FedEx Freight Segment
 
For the first quarter, the FedEx Freight segment reported:
 
• Revenue of $1.33 billion, up 6% from last year’s $1.26 billion.
• Operating income of $42 million, compared with an operating loss of $16 million a year ago
• Operating margin of 3.2%, up from (1.3%) the previous year
 
Less-than-truckload (LTL) yield increased 11% primarily due to higher LTL fuel surcharges and ongoing yield management actions. LTL average daily shipments decreased 7% as a result of the yield management actions.
 
Operating income in the quarter was driven by strong yield growth and efficiencies resulting from the January 30, 2011 combination of the FedEx Freight and FedEx National LTL operations.
 
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 $40 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 290,000 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 2012 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 22 are available on the company’s Web site at investors.fedex.com. 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.
 
 
FEDEX CORP. FINANCIAL HIGHLIGHTS
 
 
First Quarter Fiscal 2012
(In millions, except earnings per share and FTEs)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
August 31
 
 
2011
 
2010
 
%
Revenue:
 
 
 
 
 
 
FedEx Express segment
 
$
6,592
 
 
$
5,912
 
 
12
%
FedEx Ground segment
 
 
2,278
 
 
 
1,961
 
 
16
%
FedEx Freight segment
 
 
1,328
 
 
 
1,258
 
 
6
%
FedEx Services segment
 
 
411
 
 
 
415
 
 
(1
%)
Other & eliminations
 
 
(88
)
 
 
(89
)
 
(1
%)
Total Revenue
 
 
10,521
 
 
 
9,457
 
 
11
%
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
Salaries and employee benefits
 
 
4,004
 
 
 
3,803
 
 
5
%
Purchased transportation
 
 
1,518
 
 
 
1,327
 
 
14
%
Rentals and landing fees
 
 
620
 
 
 
601
 
 
3
%
Depreciation and amortization
 
 
509
 
 
 
479
 
 
6
%
Fuel
 
 
1,244
 
 
 
887
 
 
40
%
Maintenance and repairs
 
 
551
 
 
 
517
 
 
7
%
Other
 
 
1,338
 
 
 
1,215
 
 
10
%
Total Operating Expenses
 
 
9,784
 
 
 
8,829
 
 
11
%
 
 
 
 
 
 
 
Operating Income (Loss):
 
 
 
 
 
 
FedEx Express segment
 
 
288
 
 
 
357
 
 
(19
%)
FedEx Ground segment
 
 
407
 
 
 
287
 
 
42
%
FedEx Freight segment
 
 
42
 
 
 
(16
)
 
NM
 
Total Operating Income
 
 
737
 
 
 
628
 
 
17
%
 
 
 
 
 
 
 
Other Income (Expense):
 
 
 
 
 
 
Interest, net
 
 
(11
)
 
 
(18
)
 
(39
%)
Other, net
 
 
(2
)
 
 
(7
)
 
(71
%)
Total Other Income (Expense)
 
 
(13
)
 
 
(25
)
 
(48
%)
 
 
 
 
 
 
 
Income Before Income Taxes
 
 
724
 
 
 
603
 
 
20
%
 
 
 
 
 
 
 
Provision for Income Taxes
 
 
260
 
 
 
223
 
 
17
%
 
 
 
 
 
 
 
Net Income
 
$
464
 
 
$
380
 
 
22
%
 
 
 
 
 
 
 
Diluted Earnings Per Share
 
$
1.46
 
 
$
1.20
 
 
22
%
 
 
 
 
 
 
 
Weighted Average Common and Common Equivalent Shares
 
 
318
 
 
 
315
 
 
1
%
 
 
 
 
 
 
 
Capital Expenditures
 
$
1,110
 
 
$
1,012
 
 
10
%
 
 
 
 
 
 
 
Average Full-Time Equivalents (in thousands)
 
 
259
 
 
 
252
 
 
3
%
 
 
 
FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
 
 
First Quarter Fiscal 2012
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
August 31, 2011
 
 
ASSETS
 
(Unaudited)
 
May 31, 2011
 
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
$
1,959
 
 
$
2,328
 
Receivables, less allowances
 
 
4,624
 
 
 
4,581
 
Spare parts, supplies and fuel, less allowances
 
 
418
 
 
 
437
 
Deferred income taxes
 
 
610
 
 
 
610
 
Prepaid expenses and other
 
 
352
 
 
 
329
 
Total current assets
 
 
7,963
 
 
 
8,285
 
 
 
 
 
 
Property and Equipment, at Cost
 
 
34,224
 
 
 
33,686
 
Less accumulated depreciation and amortization
 
 
18,404
 
 
 
18,143
 
Net property and equipment
 
 
15,820
 
 
 
15,543
 
 
 
 
 
 
Other Long-Term Assets
 
 
 
 
Goodwill
 
 
2,435
 
 
 
2,326
 
Other assets
 
 
1,620
 
 
 
1,231
 
Total other long-term assets
 
 
4,055
 
 
 
3,557
 
 
 
 
 
 
 
 
$
27,838
 
 
$
27,385
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
Current portion of long-term debt
 
$
301
 
 
$
18
 
Accrued salaries and employee benefits
 
 
1,245
 
 
 
1,268
 
Accounts payable
 
 
1,563
 
 
 
1,702
 
Accrued expenses
 
 
1,872
 
 
 
1,894
 
Total current liabilities
 
 
4,981
 
 
 
4,882
 
 
 
 
 
 
Long-Term Debt, Less Current Portion
 
 
1,367
 
 
 
1,667
 
 
 
 
 
 
Other Long-Term Liabilities
 
 
 
 
Deferred income taxes
 
 
1,441
 
 
 
1,336
 
Pension, postretirement healthcare and other benefit obligations
 
 
2,123
 
 
 
2,124
 
Self-insurance accruals
 
 
964
 
 
 
977
 
Deferred lease obligations
 
 
824
 
 
 
779
 
Deferred gains, principally related to aircraft transactions
 
 
240
 
 
 
246
 
Other liabilities
 
 
184
 
 
 
154
 
Total other long-term liabilities
 
 
5,776
 
 
 
5,616
 
 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
Common Stockholders’ Investment
 
 
 
 
Common stock, $0.10 par value, 800 million shares authorized
 
 
32
 
 
 
32
 
Additional paid-in capital
 
 
2,547
 
 
 
2,484
 
Retained earnings
 
 
15,648
 
 
 
15,266
 
Accumulated other comprehensive loss
 
 
(2,501
)
 
 
(2,550
)
Treasury stock, at cost
 
 
(12
)
 
 
(12
)
Total common stockholders’ investment
 
 
15,714
 
 
 
15,220
 
 
 
 
 
 
 
 
$
27,838
 
 
$
27,385
 
 
 
 
FEDEX CORP. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 
 
 
 
 
 
 
 
 
First Quarter Fiscal 2012
(In millions)
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
 
August 31
 
 
2011
 
2010
 
 
 
 
 
Operating Activities:
 
 
 
 
Net income
 
$
464
 
 
$
380
 
Noncash charges:
 
 
 
 
Depreciation and amortization
 
 
509
 
 
 
479
 
Other, net
 
 
211
 
 
 
98
 
Changes in operating assets and liabilities, net
 
 
(324
)
 
 
(161
)
 
 
 
 
 
Net cash provided by operating activities
 
 
860
 
 
 
796
 
 
 
 
 
 
Investing Activities:
 
 
 
 
Capital expenditures
 
 
(1,110
)
 
 
(1,012
)
Business acquisitions, net of cash acquired
 
 
(111
)
 
 
"
 
Proceeds from asset dispositions and other
 
 
5
 
 
 
3
 
 
 
 
 
 
Net cash used in investing activities
 
 
(1,216
)
 
 
(1,009
)
 
 
 
 
 
Financing Activities:
 
 
 
 
Principal payments on debt
 
 
(17
)
 
 
(12
)
Dividends paid
 
 
(41
)
 
 
(38
)
Other, net
 
 
32
 
 
 
9
 
 
 
 
 
 
Net cash used in financing activities
 
 
(26
)
 
 
(41
)
 
 
 
 
 
Effect of exchange rate changes on cash
 
 
13
 
 
 
11
 
 
 
 
 
 
Net decrease in cash and cash equivalents
 
 
(369
)
 
 
(243
)
 
 
 
 
 
Cash and cash equivalents at beginning of period
 
 
2,328
 
 
 
1,952
 
Cash and cash equivalents at end of period
 
$
1,959
 
 
$
1,709
 
 
 
 
FEDEX EXPRESS SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Quarter Fiscal 2012
(Dollars in millions)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
August 31
FINANCIAL HIGHLIGHTS
 
2011
 
2010
 
%
 
 
 
 
 
 
 
Revenue
 
$
6,592
 
 
$
5,912
 
 
12
%
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
Salaries and employee benefits
 
 
2,413
 
 
 
2,258
 
 
7
%
Purchased transportation
 
 
449
 
 
 
369
 
 
22
%
Rentals and landing fees
 
 
423
 
 
 
403
 
 
5
%
Depreciation and amortization
 
 
282
 
 
 
255
 
 
11
%
Fuel
 
 
1,077
 
 
 
754
 
 
43
%
Maintenance and repairs
 
 
380
 
 
 
352
 
 
8
%
Intercompany charges
 
 
548
 
 
 
513
 
 
7
%
Other
 
 
732
 
 
 
651
 
 
12
%
Total Operating Expenses
 
 
6,304
 
 
 
5,555
 
 
13
%
 
 
 
 
 
 
 
Operating Income
 
$
288
 
 
$
357
 
 
(19
%)
 
 
 
 
 
 
 
Operating Margin
 
 
4.4
%
 
 
6.0
%
 
(1.6 pts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Weekdays
 
 
65
 
 
 
65
 
 
"
 
 
 
 
 
 
 
 
AVG DAILY VOLUME / POUNDS
 
 
 
 
 
 
Average Daily Package Volume (000s):
 
 
 
 
 
 
U.S. Overnight Box
 
 
1,134
 
 
 
1,168
 
 
(3
%)
U.S. Overnight Envelope
 
 
596
 
 
 
624
 
 
(4
%)
U.S. Deferred
 
 
829
 
 
 
846
 
 
(2
%)
Total U.S. Domestic Package
 
 
2,559
 
 
 
2,638
 
 
(3
%)
International Priority
 
 
543
 
 
 
566
 
 
(4
%)
International Domestic1
 
 
445
 
 
 
323
 
 
38
%
Total Average Daily Packages
 
 
3,547
 
 
 
3,527
 
 
1
%
 
 
 
 
 
 
 
Average Daily Freight Pounds (000s):
 
 
 
 
 
 
U.S.
 
 
6,969
 
 
 
6,908
 
 
1
%
International Priority
 
 
3,132
 
 
 
3,027
 
 
3
%
International Airfreight
 
 
1,165
 
 
 
1,240
 
 
(6
%)
Total Avg Daily Freight Pounds
 
 
11,266
 
 
 
11,175
 
 
1
%
 
 
 
 
 
 
 
YIELD
 
 
 
 
 
 
Revenue Per Package:
 
 
 
 
 
 
U.S. Overnight Box
 
$
22.24
 
 
$
19.65
 
 
13
%
U.S. Overnight Envelope
 
 
11.64
 
 
 
10.64
 
 
9
%
U.S. Deferred
 
 
13.57
 
 
 
12.01
 
 
13
%
Total U.S. Domestic Package
 
 
16.97
 
 
 
15.07
 
 
13
%
International Priority
 
 
62.30
 
 
 
53.70
 
 
16
%
International Domestic1
 
 
7.16
 
 
 
7.04
 
 
2
%
Composite Package Yield
 
$
22.67
 
 
$
20.52
 
 
10
%
 
 
 
 
 
 
 
Revenue Per Freight Pound:
 
 
 
 
 
 
U.S.
 
$
1.31
 
 
$
1.16
 
 
13
%
International Priority
 
 
2.21
 
 
 
2.06
 
 
7
%
International Airfreight
 
 
1.02
 
 
 
0.87
 
 
17
%
Composite Freight Yield
 
$
1.53
 
 
$
1.38
 
 
11
%
 
 
 
 
 
 
 
Average Full-Time Equivalents (000s)
 
 
136
 
 
 
132
 
 
3
%
 
 
 
 
 
 
 
1 – International Domestic includes the operations of a February 2011 business acquisition in India and a July 2011 business acquisition in Mexico.
 
 
 
FEDEX GROUND SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Quarter Fiscal 2012
(Dollars in millions)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
August 31
 
 
2011
 
2010
 
%
FINANCIAL HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
FedEx Ground
 
$
2,116
 
 
$
1,839
 
 
15
%
FedEx SmartPost
 
 
162
 
 
 
122
 
 
33
%
Total Revenues
 
 
2,278
 
 
 
1,961
 
 
16
%
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
Salaries and employee benefits
 
 
351
 
 
 
307
 
 
14
%
Purchased transportation
 
 
886
 
 
 
782
 
 
13
%
Rentals
 
 
66
 
 
 
62
 
 
6
%
Depreciation and amortization
 
 
93
 
 
 
82
 
 
13
%
Fuel
 
 
2
 
 
 
1
 
 
NM
 
Maintenance and repairs
 
 
44
 
 
 
44
 
 
"
 
Intercompany charges
 
 
241
 
 
 
221
 
 
9
%
Other
 
 
188
 
 
 
175
 
 
7
%
Total Operating Expenses
 
 
1,871
 
 
 
1,674
 
 
12
%
 
 
 
 
 
 
 
Operating Income
 
$
407
 
 
$
287
 
 
42
%
 
 
 
 
 
 
 
Operating Margin
 
 
17.9
%
 
 
14.6
%
 
3.3 pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Weekdays
 
 
65
 
 
 
65
 
 
"
 
 
 
 
 
 
 
 
Average Daily Package Volume (000s)
 
 
 
 
 
 
FedEx Ground
 
 
3,722
 
 
 
3,534
 
 
5
%
FedEx SmartPost
 
 
1,415
 
 
 
1,100
 
 
29
%
 
 
 
 
 
 
 
Yield (Revenue Per Package)
 
 
 
 
 
 
FedEx Ground
 
$
8.73
 
 
$
7.99
 
 
9
%
FedEx SmartPost
 
$
1.76
 
 
$
1.68
 
 
5
%
 
 
 
FEDEX FREIGHT SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Quarter Fiscal 2012
(Dollars in millions)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
August 31
 
 
2011
 
2010
 
%
FINANCIAL HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
1,328
 
 
$
1,258
 
 
6
%
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
Salaries and employee benefits
 
 
578
 
 
 
600
 
 
(4
%)
Purchased transportation
 
 
207
 
 
 
204
 
 
1
%
Rentals
 
 
28
 
 
 
34
 
 
(18
%)
Depreciation and amortization
 
 
44
 
 
 
48
 
 
(8
%)
Fuel
 
 
165
 
 
 
131
 
 
26
%
Maintenance and repairs
 
 
50
 
 
 
46
 
 
9
%
Intercompany charges
 
 
109
 
 
 
109
 
 
"
 
Other
 
 
105
 
 
 
102
 
 
3
%
Total Operating Expenses
 
 
1,286
 
 
 
1,274
 
 
1
%
 
 
 
 
 
 
 
Operating Income (Loss)
 
$
42
 
 
 
($ 16
)
 
NM
 
 
 
 
 
 
 
 
Operating Margin
 
 
3.2
%
 
 
(1.3
%)
 
4.5 pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
 
LTL Operating Weekdays
 
 
65
 
 
 
65
 
 
"
 
 
 
 
 
 
 
 
LTL Shipments Per Day (000s)
 
 
85.0
 
 
 
91.8
 
 
(7
%)
Weight Per LTL Shipment (lbs)
 
 
1,157
 
 
 
1,134
 
 
2
%
LTL Revenue/CWT
 
$
19.29
 
 
$
17.32
 
 
11
%
 
 
 

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