|FedEx Corp. Reports Strong Third Quarter Earnings Growth|
|FedEx Ground Operating Income Increases 43%
MEMPHIS, Tenn., March 22, 2012 ... FedEx Corp. (NYSE: FDX) today reported earnings of $1.65 per diluted share for the third quarter ended February 29, which includes a $0.10 per share reversal of a reserve associated with a legal matter at FedEx Express. Last year's third quarter earnings were $0.73 per diluted share, which included $0.08 per diluted share in costs related to the combination of the company's FedEx Freight and FedEx National LTL operations. Excluding these one-time items, earnings were $1.55 per diluted share in the third quarter, compared to $0.81 per diluted share a year ago.
"FedEx Corp. results were driven by improving yields, record holiday package shipping and exceptional performance at FedEx Ground," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "We expect our solid performance to continue in our fourth quarter, capping off a strong fiscal year."
Third Quarter Results
FedEx Corp. reported the following consolidated results for the third quarter:
Operating income improved due to the continued strong performance of FedEx Ground driven by higher yields and volumes, as well as significantly improved results at FedEx Freight. Operating income also reflects the positive year-over-year impact, predominately at FedEx Express, of a benefit from the timing lag that exists between when fuel prices change and when indexed fuel surcharges automatically adjust. The company also benefitted from a lower tax rate and mild winter weather.
FedEx projects earnings to be $1.75 to $2.00 per diluted share in the fourth quarter and an adjusted $6.35 to $6.60 per diluted share for fiscal 2012. This guidance assumes the current market outlook for fuel prices and moderate growth in the global economy. Including the FedEx Express legal reserve reversal, earnings are expected to be $6.43 to $6.68 per diluted share for fiscal 2012. The company reported earnings of $1.75 per diluted share in last year's fourth quarter. The capital spending forecast for fiscal 2012 remains $4.2 billion.
"We are pleased with the improved performance at FedEx Ground and FedEx Freight during our third quarter," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "We are evaluating actions to adjust our FedEx Express U.S. domestic network capacity and improve efficiency."
FedEx Express Segment
For the third quarter, the FedEx Express segment reported:
U.S. domestic revenue per package grew 9% due to higher rate per pound and fuel surcharges, while average daily package volume decreased 4%. International priority (IP) revenue per package grew 5% due to higher fuel surcharges and package weights, while average daily package volume decreased 1%. IP freight average daily pounds increased 4% with revenue per pound up 2% due to higher fuel surcharges. In total, IP average daily package and freight pounds increased 2% and revenue increased 6% year-over-year.
Operating income and margin improved in the quarter, reflecting the year-over-year benefit of the fuel surcharge timing lag and the reversal of a $66 million reserve associated with a legal matter. One additional operating day benefitted this year's results, while prior year results were negatively impacted by severe winter weather.
FedEx Ground Segment
For the third quarter, the FedEx Ground segment reported:
FedEx Ground average daily package volume grew 5%, driven by increases in FedEx Home Delivery services as well as the business-to-business market. Revenue per package increased 8% primarily due to increased rates and higher fuel surcharges. FedEx SmartPost average daily volume increased 13% primarily due to growth in e-commerce. FedEx SmartPost revenue per package increased 5% primarily due to increased fuel surcharges.
Operating income and margin increased primarily due to increased revenue per package and volume growth. During the year, we continued to shorten transit times by accelerating various lanes throughout the U.S. and Canada, which has led to consistently high on-time service.
FedEx Freight Segment
For the third quarter, the FedEx Freight segment reported:
Less-than-truckload (LTL) yield increased 6% due to higher LTL fuel surcharges and base yield improvement. LTL average daily shipments increased 2% reflecting sequential improvement during the quarter and favorable comparisons due to severe winter weather in the prior year.
The operating results in the quarter improved significantly as a result of the positive impacts from higher yield and volume, milder winter weather, one additional business day, and ongoing improvements in operational efficiencies. In the prior year quarter, the segment incurred one-time costs of $43 million due to the January 30, 2011 combination of the FedEx Freight and FedEx National LTL operations.
FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $42 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 300,000 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 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 March 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.
Media Contact: Jess Bunn 901-818-7463
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 reversal of a reserve associated with a legal matter at FedEx Express from current results and the costs of the combination of FedEx Freight and FedEx National LTL operations from our prior period third quarter earnings, net of applicable incentive compensation impacts, will allow for more accurate comparisons of our third quarter operating performance. 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 2012 Full-Year Earnings Guidance