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FedEx Corporation (FDX)

F1Q2011 Earnings Call Transcript

September 16, 2010 8:30 am ET


Mickey Foster – VP, IR

Fred Smith – Chairman, President and CEO

Alan Graf – EVP and CFO

Chris Richards – EVP, General Counsel and Secretary

Mike Glenn – President and CEO of FedEx Services

Dave Bronczek – President and CEO of FedEx Express

Dave Rebholz – President and CEO of FedEx Ground

Bill Logue – President and CEO of FedEx Freight


Tom Wadewitz – JP Morgan

Gary Chase – Barclays Capital

Rob Pickels – Manning & Napier

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Ken Hoexter – Bank of America/Merrill Lynch

Justin Yagerman – Deutsche Bank

Matthew Brooklier – Piper Jaffray

Art Hatfield – Morgan Keegan

David Ross – Stifel Nicolaus

Jon Langenfeld – Robert W. Baird

Edward Wolfe – Wolfe Research

Scott Malat – Goldman Sachs

Christopher Ceraso – Credit Suisse

Scott Flower – Macquarie Securities



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Good day, everyone, and welcome to the FedEx Corporation first quarter earnings conference call. Today's call is being recorded. At this time, I'll turn the call over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.

Mickey Foster

Good morning, and welcome to FedEx Corporation's first quarter earnings conference call. I would like to remind everyone that we are having an investor meeting here in Memphis in less than two weeks on Tuesday and Wednesday, September 28 and 29. If you're not registered, please do so right away. The first quarter earnings release and 25-page Stat Book are on our website at This call is being broadcast from our website and the replay and podcast download will be available for approximately one year.

Joining us on the call today are members of the media. During our question-and-answer session, callers will be limited to one question and a follow-up, so we can accommodate all those who would like to participate.

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.

In our earnings release, we include certain non-GAAP financial measures, which we may discuss on this call. Please refer to the release available on our website for further discussion of these measures and a reconciliation of them to the most directly comparable GAAP measures.

To the extent we disclose any other non-GAAP financial measures on this call, please refer to the Investor Relations portion of our website at for a reconciliation of such measures to the most directly comparable GAAP measures.

Joining us on the call today are, Fred Smith, Chairman, President and CEO; Alan Graf, Executive Vice President and CFO; Chris Richards, Executive Vice President, General Counsel and Secretary; Mike Glenn, President and CEO of FedEx Services; Rob Carter, Executive Vice President, FedEx Information Services and CIO; 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, followed by Alan Graf. After Alan, we will have question-and-answers.

Fred Smith

Thank you, Mickey, and good morning and welcome to our conference call to discuss earnings for the first quarter of fiscal year '11.

Improved global economic conditions fueled strong demand for our services, increasing volumes and revenue per package at FedEx Express and FedEx Ground. We expect a phase of somewhat slower economic growth going forward. The recovery began a year ago and we believe slower growth is consistent with historical business cycles. In any case, the economic environment and growth prospects are much improved from a year ago. We believe drivers of sustainable growth are in place such as stronger corporate balance sheets and pent-up demand. We are confident economic activities will continue to expand.

FedEx is taking full advantage of the global economic recovery because of the action we've taken to manage our cost, strategically invest in key global growth markets, acquire more efficient aircrafts, streamline our networks and focus on our customers. We are optimistic about being able to improve our earnings in the years to come and resuming our growth trajectory that was the case prior to the recession.

Of significant importance is that global trade continues to rebound in volume and value. We are seeing signs of a solid holiday shipping season, as many of our customers selling high-tech and high value added goods trade up for faster premium service to meet their customer’s demands.

In August, FedEx Express added a 10th scheduled transpacific flight and earlier this week an 11th flight providing needed capacity between Asia and the United States. Next month, we plan to increase capacity again by adding new 777 Freighters to take the place of MD-11 aircraft in the Asian markets.

Synergies within the FedEx Express global network allow us to efficiently increase capacity even beyond the amount of lift we had with new aircraft such as the 777. These cost effective synergies include adjusting schedules, adding day turn routes and using weekend availability to provide lift with the same aircraft enabling us to handle increasing volumes stemming from current strong demand for international shipping.

Load factors in the international airfreight market continue to be the highest since the year 2000. The largest economy in the world is the economy of Global Trade, and the fastest growing element in Global Trade is the movement of high-tech and high value added items on a fast cycle basis.

Global economic activity continues to expand led by the industrial sector in countries such as China, India, Mexico and Brazil. With key investments in global markets, we see the world economy as a prime source of continued growth. Domestically, FedEx Ground is gaining volumes and market share while increasing yields. Customers appreciate its speed and high service levels.

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