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FedEx (FDX)

Q1 2012 Earnings Call

September 22, 2011 8:30 am ET


Alan B. Graf - Chief Financial Officer and Executive Vice President

David J. Bronczek - Chief Executive Officer of FedEx Express and President of FedEx Express

Christine P. Richards - Executive Vice President, General Counsel and Secretary

David F. Rebholz - Chief Executive Officer of FedEx Ground Package System Inc and President of FedEx Ground Package System Inc

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T. Michael Glenn - Executive Vice President of Market Development & Corporate Communications, Chief Executive Officer of FedEx Services and President of FedEx Services

Mickey Foster - Vice President Investor Relations

Frederick W. Smith - Founder, Executive Chairman, Chief Executive Officer and President


James Corridore - S&P Equity Research

Ken Hoexter - BofA Merrill Lynch, Research Division

William J. Greene - Morgan Stanley, Research Division

Seth Lowry

Peter Nesvold - Bear Stearns

Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division

Keith Schoonmaker - Morningstar Inc., Research Division

Garrett L. Chase - Barclays Capital, Research Division

David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division

Donald Broughton - Avondale Partners, LLC, Research Division

Kevin W. Sterling - BB&T Capital Markets, Research Division

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Scott Group - Wolfe Research

Arthur W. Hatfield - Morgan Keegan & Company, Inc., Research Division

Urs Dür - Lazard Capital Markets LLC, Research Division

Christopher J. Ceraso - Crédit Suisse AG, Research Division

Jason H. Seidl - Dahlman Rose & Company, LLC, Research Division

Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division

Matthew Brooklier - Piper Jaffray Companies, Research Division

Justin B. Yagerman - Deutsche Bank AG, Research Division

Robert F. Pickels - Manning & Napier Advisors, Inc

Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division



Good day, everyone and welcome to the FedEx Corporation First Quarter Fiscal Year 2012 Earnings Conference Call. Today's call is being recorded. At this time, I will 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. The first quarter earnings release and our 25-page Stat Book are on our web site at This call is being broadcast from our web site, 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 in order to allow us to accommodate all those who would like to participate. Next quarter, we will enhance our earnings call by taking written questions the morning of the release through our web site in addition to questions on the call. I want to remind all listeners that FedEx Corporation desires to take advantage of the Safe Harbor provision 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. To the extent we disclose any non-GAAP financial measures on the call, please refer to the Investor Relations portion of the web site 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; Mike Glenn, President and CEO of FedEx Services; Chris Richards, Executive Vice President, and General Counsel and Secretary; Rob Carter, Executive Vice President of 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 Fred Smith will share his views on the quarter, followed by Alan Graf. After Alan, we will conduct a question-and-answer session.

Frederick W. Smith

Thank you, Mickey. Good morning, and welcome to our discussion of operating and financial results for the first quarter of fiscal year 2012. Revenue and earnings increased significantly in the quarter due to strong FedEx Ground performance, improved FedEx Freight performance and the continued success of the company's yield management actions. While there's been considerable speculation that the economy has or will soon enter a recession, this is not our view at present. We expect sluggish economic growth will continue largely due to a lack of confidence that U.S. and European policymakers will effectively address current economic challenges. Slowing global economic growth affected volume and operating performance at FedEx Express in the first quarter. Accordingly, we've taken actions to manage through a period of lower demand for shipping, particularly in International Express. We have many options that allow us to flex our operations up or down to balance capacity and demand such as reducing the number of airplanes in service and other related activities when demand slows. While economic environment is challenging, we remain confident FedEx will improve earnings, improve margins and cash flows this fiscal year.

During this first quarter, a few highlights. FedEx Express completed its acquisition of MultiPack, a Mexican domestic express package delivery company and launched domestic next-business-day service in Columbia's major cities. FedEx Freight added new markets in Mexico. FedEx Express enhanced service between Asia and Europe and within the FedEx Express AsiaOne network. In India, we broadened the reach of FedEx branded domestic services. In 2 years, we've grown Domestic Express Services from 16 origin cities and 58 destination cities to 116 origin cities and 331 destinations. FedEx Trade Networks, our international ocean and air forwarding company, opened 3 new offices in Munich, Bucharest, Romania, and Chengdu in China. FedEx Office enhanced its portfolio of mobile business solutions with a first-to-market feature allowing customers to retrieve files from their Google accounts for convenient printing from where ever their files are stored. And last month, FedEx delivered about 200,000 pounds of high-nutrient food in response to the famine in Somalia for UNICEF. FedEx, in this regard, donated more than 5 million pounds of shipping last year to various causes around the world.

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