EX-99.1 2 c14172exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
Exhibit 99.1
FOR IMMEDIATE RELEASE
FedEx Corp. Reports Third Quarter Earnings
MEMPHIS, Tenn., March 17, 2011 ... FedEx Corp. (NYSE: FDX) today reported earnings of $0.73 per diluted share for the third quarter ended February 28. Excluding costs related to the previously announced combination of the company’s FedEx Freight and FedEx National LTL operations, third quarter earnings were $0.81 per diluted share, compared to $0.76 per diluted share a year ago.
“Continued growth in the global economy is driving solid revenue gains in our transportation businesses,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “We expect strong demand for our services to boost our financial performance in our fourth quarter.”
Third Quarter Results
FedEx Corp. reported the following consolidated results for the third quarter:
  •   Revenue of $9.66 billion, up 11% from $8.70 billion the previous year
 
  •   Operating income of $393 million, down 6% from $416 million last year
 
  •   Operating margin of 4.1%, down from 4.8% the previous year
 
  •   Net income of $231 million, down 3% from $239 million a year ago
While yields grew in all transportation segments, unusually severe winter storms during the quarter disrupted operations, decreased shipping volume and increased costs, impacting year-over-year results by approximately $0.12 per diluted share. Earnings were also reduced by costs related to the January 30, 2011 combination of FedEx Freight and FedEx National LTL operations, including lease termination costs and severance expenses. The reinstatement of merit salary increases, increases in pension and medical costs, higher aircraft maintenance expenses and the full reinstatement of 401(k) company-matching contributions also impacted earnings.
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Outlook
FedEx projects earnings to be $1.66 to $1.83 per diluted share in the fourth quarter and an adjusted $4.83 to $5.00 per diluted share for fiscal 2011. The company’s forecast assumes the current market outlook for fuel prices and continued moderate growth in the global economy. Earnings could be affected by the impact of the ongoing political turmoil in the Middle East and North Africa on fuel prices and the economy. Also, the near-term impact of the earthquake and tsunami in Japan on operational costs, shipping patterns and the global economy is currently uncertain. The annual guidance excludes FedEx Freight combination costs and a second quarter legal reserve. Including costs from the FedEx Freight combination and the legal reserve, earnings are expected to be $4.49 to $4.66 per diluted share for fiscal 2011. The company reported earnings of $1.33 per diluted share in last year’s fourth quarter. The capital spending forecast for fiscal 2011 remains $3.5 billion.
“Successful yield management initiatives helped drive significant revenue growth across our transportation segments in the third quarter, although results were dampened by severe winter storms and higher-than-expected fuel costs,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “Our FedEx Ground segment had record third quarter results. In addition, we are very pleased with the execution of the new FedEx Freight strategy, which is expected to drive FedEx Freight’s return to profitability in the fourth quarter. More broadly, we expect continued positive yield trends to improve revenues and margins in the fourth quarter and in fiscal 2012.”
FedEx Express Segment
For the third quarter, the FedEx Express segment reported:
  •   Revenue of $6.05 billion, up 11% from last year’s $5.44 billion
 
  •   Operating income of $178 million, down 33% from $265 million a year ago
 
  •   Operating margin of 2.9%, down from 4.9% the previous year
FedEx International Priority® (IP) average daily package volume increased 5%, led by exports from Asia and Europe. IP revenue per package grew 7% due to improved weight per package, rate increases and higher fuel surcharges. IP freight pounds increased 21% with revenue per pound up 3%. U.S. domestic average daily package volume increased 2% and revenue per package grew 5% due to higher fuel surcharges, rate increases and improved weight per package.
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Operating income and margin were negatively impacted by increased aircraft maintenance, the reinstatement of certain employee compensation programs, higher employee benefits expenses and the negative impact of severe winter weather, which more than offset strong revenue growth.
During the quarter FedEx completed the acquisition of the logistics, distribution and express businesses of AFL Pvt. Ltd. and its affiliate, Unifreight India Pvt. Ltd. This acquisition provides FedEx more robust domestic transportation and added capabilities in India. The acquisition had no material impact on segment financial results for the quarter.
FedEx Ground Segment
For the third quarter, the FedEx Ground segment reported:
  •   Revenue of $2.18 billion, up 14% from last year’s $1.91 billion
 
  •   Operating income of $325 million, up 26% from $258 million a year ago
 
  •   Operating margin of 14.9%, up from 13.5% the previous year
FedEx Ground average daily package volume grew 6% in the third quarter driven by increases in the business-to-business market and FedEx Home Delivery. Yield increased 5% primarily due to rate increases and higher fuel surcharges. FedEx SmartPost average daily volume increased 17% due to growth in e-commerce, gains in market share and the introduction of new service offerings. FedEx SmartPost yield increased 7% primarily due to lower postage costs resulting from increased deliveries to U.S. Postal Service final destination facilities and increased fuel surcharges.
Operating income and margin increased primarily due to higher package yield and volume. Current year results were also favorably impacted by one additional operating day.
FedEx Freight Segment
For the third quarter, the FedEx Freight segment reported:
  •   Revenue of $1.12 billion, up 8% from last year’s $1.04 billion
 
  •   Operating loss of $110 million, compared with an operating loss of $107 million a year ago
 
  •   Operating margin of (9.8%), compared with (10.3%) the previous year
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Less-than-truckload (LTL) yield increased 11% primarily due to yield management initiatives. LTL average daily shipments decreased 6% as a result of the yield management initiatives and the severe winter weather.
On January 30, 2011, FedEx Freight and FedEx National LTL combined operations, launching a new unified LTL freight network that offers customers the choice of two levels of service—FedEx Freight® Priority and FedEx Freight® Economy—from a single company. As a result of this combination, the segment incurred one-time costs of $43 million during the quarter and $130 million fiscal year-to-date due primarily to lease termination costs and severance expenses.
The operating loss in the quarter included the costs associated with the combination of the FedEx Freight and FedEx National LTL operations. Severe winter weather also significantly impacted results. The segment benefited from one additional operating day during the quarter.
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 $38 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 third 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 March 17 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.
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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.
Media Contact: Jess Bunn 901-818-7463
Investor Contact: Mickey Foster 901-818-7468
Home Page: fedex.com
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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 a reserve associated with a legal matter in the second quarter and the costs of the combination of FedEx Freight and FedEx National LTL operations from our third quarter earnings and our full-year earnings guidance, net of applicable incentive compensation impacts, will allow more accurate comparisons to prior periods of our third quarter operating performance and our expected operating performance for 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 Third Quarter Earnings
         
    Q3 Diluted  
    Earnings Per Share  
 
        
Non-GAAP Measure
   $ 0.81  
 
        
FedEx Freight Combination Costs
     (0.08 )
 
      
 
        
GAAP Measure
   $ 0.73  
 
      
Fiscal 2011 Full-Year Earnings Guidance
         
    FY 2011 Diluted  
    EPS Guidance  
 
        
Non-GAAP Measure
   $ 4.83 to $5.00  
 
        
FedEx Freight Combination Costs
     (0.27 )
 
        
ATA Legal Reserve
     (0.07 )
 
      
 
        
GAAP Measure
   $ 4.49 to $4.66  
 
      
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FEDEX CORP. FINANCIAL HIGHLIGHTS
Third Quarter Fiscal 2011
(In millions, except earnings per share and FTEs)
(Unaudited)
                                                 
    Three Months Ended     Nine Months Ended  
    February 28     February 28  
    2011     2010     %     2011     2010     %  
Revenue:
                                                
FedEx Express segment
   $ 6,049     $ 5,440       11 %   $ 17,953     $ 15,678       15 %
FedEx Ground segment
     2,184       1,910       14 %     6,222       5,477       14 %
FedEx Freight segment
     1,123       1,040       8 %     3,602       3,090       17 %
FedEx Services segment
     397       406       (2 %)     1,246       1,322       (6 %)
Other & eliminations
     (90 )     (95 )     5 %     (271 )     (261 )     (4 %)
 
                                        
Total Revenue
     9,663       8,701       11 %     28,752       25,306       14 %
 
                                                
Operating Expenses:
                                                
Salaries and employee benefits
     3,828       3,549       8 %     11,410       10,350       10 %
Purchased transportation
     1,446       1,220       19 %     4,163       3,429       21 %
Rentals and landing fees
     621       593       5 %     1,850       1,764       5 %
Depreciation and amortization
     493       488       1 %     1,474       1,470       0 %
Fuel
     1,049       810       30 %     2,874       2,220       29 %
Maintenance and repairs
     480       404       19 %     1,470       1,215       21 %
Impairment and other charges
     21       —     NM       88       —     NM  
Other
     1,332       1,221       9 %     3,933       3,556       11 %
 
                                        
Total Operating Expenses
     9,270       8,285       12 %     27,262       24,004       14 %
 
                                                
Operating Income (Loss):
                                                
FedEx Express segment
     178       265       (33 %)     799       714       12 %
FedEx Ground segment
     325       258       26 %     908       705       29 %
FedEx Freight segment
     (110 )     (107 )     (3 %)     (217 )     (117 )     (85 %)
 
                                        
Total Operating Income
     393       416       (6 %)     1,490       1,302       14 %
 
                                                
Other Income (Expense):
                                                
Interest, net
     (24 )     (19 )     26 %     (65 )     (52 )     25 %
Other, net
     (9 )     (16 )     (44 %)     (25 )     (28 )     (11 %)
 
                                        
Total Other Income (Expense)
     (33 )     (35 )     (6 %)     (90 )     (80 )     13 %
 
                                                
Pretax Income
     360       381       (6 %)     1,400       1,222       15 %
 
                                                
Provision for Income Taxes
     129       142       (9 %)     506       457       11 %
 
                                        
 
                                                
Net Income
   $ 231     $ 239       (3 %)   $ 894     $ 765       17 %
 
                                        
 
                                                
Diluted Earnings Per Share
   $ 0.73     $ 0.76       (4 %)   $ 2.82     $ 2.43       16 %
 
                                        
 
                                                
Weighted Average Diluted Common and Common Equivalent Shares
     317       315       1 %     316       314       1 %
 
                                                
Capital Expenditures
   $ 643     $ 432       49 %   $ 2,703     $ 1,981       36 %
 
                                                
Average Full-Time Equivalents (000s)
     259       250       4 %     255       244       5 %

 

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FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS
Third Quarter Fiscal 2011
(In millions)
                 
    Feb. 28, 2011        
    (Unaudited)     May 31, 2010  
ASSETS
                
 
                
Current Assets
                
Cash and cash equivalents
   $ 1,359     $ 1,952  
Receivables, less allowances
     4,478       4,163  
Spare parts, supplies and fuel, less allowances
     413       389  
Deferred income taxes
     540       529  
Prepaid expenses and other
     448       251  
 
            
Total current assets
     7,238       7,284  
 
                
Property and Equipment, at Cost
     33,078       31,302  
Less accumulated depreciation and amortization
     17,750       16,917  
 
            
Net property and equipment
     15,328       14,385  
 
                
Other Long-Term Assets
                
Goodwill
     2,321       2,200  
Other assets
     1,315       1,033  
 
            
Total other long-term assets
     3,636       3,233  
 
            
 
                
 
   $ 26,202     $ 24,902  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
                
 
                
Current Liabilities
                
Current portion of long-term debt
   $ 18     $ 262  
Accrued salaries and employee benefits
     1,143       1,146  
Accounts payable
     1,590       1,522  
Accrued expenses
     1,823       1,715  
 
            
Total current liabilities
     4,574       4,645  
 
                
Long-Term Debt, Less Current Portion
     1,667       1,668  
 
                
Other Long-Term Liabilities
                
Deferred income taxes
     1,328       891  
Pension, postretirement healthcare and other benefit obligations
     1,598       1,705  
Self-insurance accruals
     976       960  
Deferred lease obligations
     769       804  
Deferred gains, principally related to aircraft transactions
     252       267  
Other liabilities
     158       151  
 
            
Total other long-term liabilities
     5,081       4,778  
 
                
Commitments and Contingencies
                
 
                
Common Stockholders’ Investment
                
Common stock, $0.10 par value, 800 million shares authorized
     31       31  
Additional paid-in capital
     2,408       2,261  
Retained earnings
     14,709       13,966  
Accumulated other comprehensive loss
     (2,256 )     (2,440 )
Treasury stock, at cost
     (12 )     (7 )
 
            
Total common stockholders’ investment
     14,880       13,811  
 
            
 
                
 
   $ 26,202     $ 24,902  
 
            

 

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FEDEX CORP. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Third Quarter Fiscal 2011
(In millions)
(Unaudited)
                 
    Nine Months Ended  
    February 28  
    2011     2010  
 
                
Operating Activities:
                
Net income
   $ 894     $ 765  
Noncash charges:
                
Depreciation and amortization
     1,474       1,470  
Other, net
     662       363  
Changes in operating assets and liabilities, net
     (573 )     (690 )
 
            
 
                
Cash provided by operating activities
     2,457       1,908  
 
                
Investing Activities:
                
Capital expenditures
     (2,703 )     (1,981 )
Business acquisitions, net of cash acquired
     (96 )     —  
Proceeds from asset dispositions and other
     15       31  
 
            
 
                
Cash used in investing activities
     (2,784 )     (1,950 )
 
                
Financing Activities:
                
Principal payments on debt
     (262 )     (632 )
Dividends paid
     (113 )     (103 )
Other, net
     75       29  
 
            
 
                
Cash used in financing activities
     (300 )     (706 )
 
            
 
                
Effect of exchange rate changes on cash
     34       5  
 
            
 
                
Net decrease in cash and cash equivalents
     (593 )     (743 )
 
                
Cash and cash equivalents at beginning of period
     1,952       2,292  
 
            
Cash and cash equivalents at end of period
   $ 1,359     $ 1,549  
 
            

 

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FEDEX EXPRESS SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS
Third Quarter Fiscal 2011
(Dollars in millions)
(Unaudited)
                                                 
    Three Months Ended     Nine Months Ended  
    February 28     February 28  
    2011     2010     %     2011     2010     %  
FINANCIAL HIGHLIGHTS
                                                
Revenue
   $ 6,049     $ 5,440       11 %   $ 17,953     $ 15,678       15 %
 
                                                
Operating Expenses:
                                                
Salaries and employee benefits
     2,321       2,136       9 %     6,832       6,215       10 %
Purchased transportation
     386       292       32 %     1,143       830       38 %
Rentals and landing fees
     424       397       7 %     1,254       1,178       6 %
Depreciation and amortization
     267       254       5 %     787       757       4 %
Fuel
     898       694       29 %     2,454       1,903       29 %
Maintenance and repairs
     330       261       26 %     1,002       789       27 %
Intercompany charges
     498       497       0 %     1,523       1,436       6 %
Other1
     747       644       16 %     2,159       1,856       16 %
 
                                        
Total Operating Expenses
     5,871       5,175       13 %     17,154       14,964       15 %
 
                                        
 
                                                
Operating Income
   $ 178     $ 265       (33 %)   $ 799     $ 714       12 %
 
                                        
 
                                                
Operating Margin
     2.9 %     4.9 %   (2.0 pts)     4.5 %     4.6 %   (0.1 pts)
 
                                                
OPERATING STATISTICS
                                                
 
                                                
Operating Weekdays
     62       62       —       190       190       —  
 
                                                
AVG DAILY VOLUME / POUNDS
                                                
Average Daily Package Volume (000s):
                                                
 
                                                
U.S. Overnight Box
     1,218       1,190       2 %     1,194       1,157       3 %
U.S. Overnight Envelope
     631       601       5 %     627       608       3 %
U.S. Deferred
     952       949       0 %     887       876       1 %
 
                                        
Total U.S. Domestic Package
     2,801       2,740       2 %     2,708       2,641       3 %
International Priority
     558       530       5 %     569       511       11 %
International Domestic
     337       317       6 %     338       315       7 %
 
                                        
Total Average Daily Packages
     3,696       3,587       3 %     3,615       3,467       4 %
 
                                        
 
                                                
Average Daily Freight Pounds (000s):
                                                
 
                                                
U.S.
     8,000       7,906       1 %     7,447       7,217       3 %
International Priority
     3,131       2,577       21 %     3,158       2,427       30 %
International Airfreight
     1,262       1,184       7 %     1,248       1,230       1 %
 
                                        
Total Avg Daily Freight Pounds
     12,393       11,667       6 %     11,853       10,874       9 %
 
                                        
 
                                                
YIELD
                                                
Revenue Per Package:
                                                
 
                                                
U.S. Overnight Box
   $ 20.05     $ 19.16       5 %   $ 19.81     $ 18.73       6 %
U.S. Overnight Envelope
     10.87       10.70       2 %     10.68       10.41       3 %
U.S. Deferred
     12.60       11.77       7 %     12.29       11.53       7 %
 
                                        
Total U.S. Domestic Package
     15.45       14.74       5 %     15.23       14.43       6 %
International Priority
     57.07       53.23       7 %     55.06       52.59       5 %
International Domestic
     7.54       7.22       4 %     7.33       7.12       3 %
 
                                        
Composite Package Yield
   $ 21.01     $ 19.76       6 %   $ 20.77     $ 19.39       7 %
 
                                        
 
                                                
Revenue Per Freight Pound:
                                                
 
                                                
U.S.
   $ 1.14     $ 1.07       7 %   $ 1.14     $ 1.07       7 %
International Priority
     2.12       2.06       3 %     2.09       1.97       6 %
International Airfreight
     0.88       0.84       5 %     0.88       0.79       11 %
 
                                        
Composite Freight Yield
   $ 1.36     $ 1.26       8 %   $ 1.37     $ 1.24       10 %
 
                                        
 
                                                
Average Full-Time Equivalents (000s)
     136       130       5 %     133       127       5 %
 
     
1 -   Current year includes a $66 million reserve for a legal matter.

 

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FEDEX GROUND SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS
Third Quarter Fiscal 2011
(Dollars in millions)
(Unaudited)
                                                 
    Three Months Ended     Nine Months Ended  
    February 28     February 28  
    2011     2010     %     2011     2010     %  
FINANCIAL HIGHLIGHTS
                                                
 
                                                
Revenue
   $ 2,184     $ 1,910       14 %   $ 6,222     $ 5,477       14 %
 
                                                
Operating Expenses:
                                                
Salaries and employee benefits
     329       289       14 %     954       859       11 %
Purchased transportation
     911       771       18 %     2,538       2,197       16 %
Rentals
     68       63       8 %     197       184       7 %
Depreciation and amortization
     84       83       1 %     249       251       (1 %)
Fuel
     5       3       67 %     9       6       50 %
Maintenance and repairs
     40       41       (2 %)     126       119       6 %
Intercompany charges
     221       207       7 %     669       587       14 %
Other
     201       195       3 %     572       569       1 %
 
                                        
Total Operating Expenses
     1,859       1,652       13 %     5,314       4,772       11 %
 
                                        
 
                                                
Operating Income
   $ 325     $ 258       26 %   $ 908     $ 705       29 %
 
                                        
 
                                                
Operating Margin
     14.9 %     13.5 %   1.4 pts     14.6 %     12.9 %   1.7 pts
 
                                                
OPERATING STATISTICS
                                                
 
                                                
Operating Weekdays
     63       62       2 %     191       190       1 %
 
                                                
Average Daily Package Volume (000s)
                                                
FedEx Ground
     3,882       3,674       6 %     3,751       3,526       6 %
FedEx SmartPost
     1,736       1,489       17 %     1,433       1,248       15 %
 
                                                
Yield (Revenue Per Package)
                                                
FedEx Ground
   $ 8.16     $ 7.75       5 %   $ 8.01     $ 7.63       5 %
FedEx SmartPost
   $ 1.70     $ 1.59       7 %   $ 1.70     $ 1.53       11 %

 

11

 

FEDEX FREIGHT SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS
Third Quarter Fiscal 2011
(Dollars in millions)
(Unaudited)
                                                 
    Three Months Ended     Nine Months Ended  
    February 28     February 28  
    2011     2010     %     2011     2010     %  
FINANCIAL HIGHLIGHTS
                                                
 
                                                
Revenue
   $ 1,123     $ 1,040       8 %   $ 3,602     $ 3,090       17 %
 
                                                
Operating Expenses:
                                                
Salaries and employee benefits
     562       532       6 %     1,746       1,552       13 %
Purchased transportation
     178       191       (7 %)     567       477       19 %
Rentals
     29       29       —       94       85       11 %
Depreciation and amortization
     48       49       (2 %)     158       150       5 %
Fuel
     145       112       29 %     409       310       32 %
Maintenance and repairs
     44       36       22 %     135       105       29 %
Intercompany charges
     106       99       7 %     323       249       30 %
Impairment and other charges1
     21       —     NM       88       —     NM  
Other
     100       99       1 %     299       279       7 %
 
                                        
Total Operating Expenses
     1,233       1,147       7 %     3,819       3,207       19 %
 
                                        
 
                                                
Operating Loss
   $ (110 )   $ (107 )     (3 %)   $ (217 )   $ (117 )     (85 %)
 
                                        
 
                                                
Operating Margin
     (9.8 %)     (10.3 %)   0.5 pts     (6.0 %)     (3.8 %)   (2.2 pts)
 
                                                
OPERATING STATISTICS
                                                
 
                                                
LTL Operating Weekdays
     62       61       2 %     189       188       1 %
 
                                                
LTL Shipments Per Day (000s)
     78.3       83.4       (6 %)     86.6       79.1       9 %
Weight Per LTL Shipment (lbs)
     1,151       1,133       2 %     1,133       1,124       1 %
LTL Revenue/CWT
   $ 18.66     $ 16.82       11 %   $ 18.04     $ 17.24       5 %
     
1 -   Current year includes charges associated with the combination of FedEx Freight and FedEx National LTL operations, which became effective January 30, 2011.

 

12