“We are steadfastly committed to the $1.7 billion of annual profit improvement actions, primarily at FedEx Express, which we announced in October,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “We expect to begin to see the benefits of these actions in fiscal 2014, with a significant portion of the profit improvement achieved by the end of fiscal 2015. Meanwhile, the mounting uncertainty in the U.S. related to fiscal policies and their potential to impact earnings by further restraining economic growth is a concern.”FedEx Express Segment For the second quarter, the FedEx Express segment reported: • Revenue of $6.86 billion, up 4% from last year’s $6.58 billion • Operating income of $230 million, down 33% from $342 million a year ago • Operating margin of 3.4%, down from 5.2% the previous year Revenue increased primarily due to this year’s business acquisitions and growth at FedEx Trade Networks, as core express revenue growth was constrained by global economic conditions and the impact of Superstorm Sandy. U.S. domestic revenue per package grew 1% as higher rate per pound was partially offset by lower fuel surcharges. U.S. domestic average daily package volume declined 2%. FedEx international export average daily package volume grew 6% driven by increases in FedEx International Economy ® (IE) from Europe and Asia and by increases in FedEx International Priority ® (IP) from Asia. Higher growth in international deferred services continued, with IE volume growing 14%, while IP volume increased 3% during the quarter. International export revenue per package fell 4% due to the demand shift toward lower-yielding international services and lower fuel surcharges. Operating income and margin were lower due to the demand shift toward lower-yielding international services, the negative year-over-year impact of net fuel changes, increased depreciation expense, the effects of Superstorm Sandy and higher pension costs. These were partially offset by the favorable impact of cost containment actions.
FedEx Express has entered into an agreement to purchase four additional 767-300 freighters as part of the company’s continued fleet modernization efforts. This brings the total 767-300 orders to 50, with deliveries beginning in fiscal 2014. In concert with this commitment, two 777 freighter deliveries were deferred from fiscal 2015 to fiscal 2016 in order to better match capacity timing to global demand.FedEx Ground Segment For the second quarter, the FedEx Ground segment reported: • Revenue of $2.59 billion, up 11% from last year’s $2.34 billion • Operating income of $412 million, up 4% from $398 million a year ago • Operating margin of 15.9%, down from 17.0% the previous year FedEx Ground average daily volume grew 8% in the second quarter driven by increases in both FedEx Home Delivery and business-to-business services. Revenue per package increased 2% due to increased rates and higher extra service revenue. FedEx SmartPost average daily volume increased 17% primarily due to growth in e-commerce. FedEx SmartPost net revenue per package increased 2% due to a change in service mix and to rate increases, partially offset by higher postage rates. Operating income increased due to higher volume and revenue per package, partially offset by higher contractor rates, increased network expansion costs and the effects of Superstorm Sandy. Operating margin decreased primarily due to lower fuel surcharges paired with higher purchased transportation expenses related to increased fuel costs. FedEx Freight Segment For the second quarter, the FedEx Freight segment reported: • Revenue of $1.38 billion, up 4% from last year’s $1.33 billion • Operating income of $76 million, up 90% from $40 million a year ago • Operating margin of 5.5%, up from 3.0% the previous year Less-than-truckload (LTL) yield increased 2% due to FedEx Freight Economy base yield improvement. LTL average daily shipments increased 2% due to higher customer demand for the FedEx Freight Economy service offering in all lengths of haul.
Operating income and margin increased primarily due to higher yield, volume growth and operational efficiencies within the company’s integrated network.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 $43 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 second quarter fiscal 2013 Statistical Book. These materials, as well as a webcast of the earnings release conference call to be held at 8:30 a.m. EST on December 19 are available on the company’s website at investors.fedex.com. A replay of the conference call webcast will be posted on our website 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.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURESThe company believes that meaningful analysis of our expected financial performance requires an understanding of the factors underlying that expected performance and our judgments about the likelihood that particular factors will repeat. Excluding the costs associated with the company’s voluntary cash buyouts will allow for more accurate comparisons of our expected operating performance. As required by SEC rules, the table below presents a reconciliation of our presented non-GAAP measure to the most directly comparable GAAP measure.
|FY 2013 Diluted EPS Guidance|
|Non-GAAP Measure||$6.20 to $6.60|
|Voluntary Buyout Program||1.29 to 1.09|
|GAAP Measure||$4.91 to $5.51|