OutlookFedEx projects earnings to be an adjusted $1.90 to $2.10 per diluted share in the fourth quarter and an adjusted $6.00 to $6.20 per diluted share for fiscal 2013 before charges related to the company’s business realignment. Costs of the benefits provided under the voluntary buyout program will be recognized in the period that eligible employees accept their offers, predominantly in the fourth fiscal quarter. Including the third quarter costs, the company now expects the fiscal 2013 pretax cost of the voluntary buyout program to range from approximately $450 million to $550 million in cash expenditures, or $0.89 to $1.09 per diluted share, with some additional costs expected in fiscal 2014. Actual costs will depend on employee acceptance rates. Including the business realignment costs, earnings are expected to be $0.94 to $1.34 per diluted share in the fourth quarter and $4.91 to $5.31 per diluted share for fiscal 2013. This guidance assumes the current market outlook for fuel prices. The capital spending forecast for fiscal 2013 is now $3.6 billion, compared to $3.9 billion in the company’s previous forecast. In last year’s fourth quarter, the company reported earnings of $1.99 per diluted share, excluding a $0.26 per diluted share non-cash aircraft impairment charge at FedEx Express. Including this charge, earnings were $1.73 per diluted share. “Our lower-than-expected results for the quarter and reduced full-year earnings outlook were driven by third quarter international revenues declining approximately $100 million versus our guidance primarily due to accelerating customer preference for lower-yielding international services, lower rate per pound and weight per shipment,” said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer. “We expect these international revenue trends to continue. We have other actions under way beyond those already included in our profit improvement program. Some of these additional actions may involve temporarily or permanently grounding aircraft, which could result in asset impairment or other charges in future periods.”
“In early February, a number of officers and managing directors, primarily at FedEx Services and FedEx Express, accepted voluntary buyouts, and on February 15, thousands more team members were notified of their eligibility for the buyout program. This program is one of the first steps in a process that will help FedEx Express achieve necessary cost structure reductions and improved efficiency. In addition to continued profit improvements in the base businesses at FedEx Ground and FedEx Freight, our profit improvement programs are targeting annual profitability improvement at FedEx Express of $1.6 billion by the end of fiscal 2016, from the fiscal year 2013 base business. Collectively, these initiatives are expected to increase margins, improve cash flows and increase our competitiveness,” said Graf.Stock Repurchase Program Authorization Increase The FedEx Corp. board of directors has authorized the repurchase of up to 10 million shares of FedEx Corp. common stock. These shares augment the remaining 188 thousand shares authorized for purchase under existing share repurchase programs. It is expected that the additional share authorization will primarily be utilized to offset equity compensation dilution over the next several years. Purchases may be made in the open market and in negotiated or block transactions. FedEx had 317 million shares outstanding as of February 28, 2013. FedEx Express Segment For the third quarter, the FedEx Express segment reported: • Revenue of $6.70 billion, up 2% from last year’s $6.54 billion • Operating income of $118 million, down 66% from $349 million a year ago • Operating margin of 1.8%, down from 5.3% the previous year Revenue increased due to this year’s business acquisitions and growth at FedEx Trade Networks, while core express revenue was constrained by continued demand shift toward lower-yielding international services. U.S. domestic revenue per package grew 1% as higher rate per pound and weight per package were offset by lower fuel surcharges, while average daily package volume increased 1%. Higher growth in international deferred services continued, with FedEx International Economy ® volume growing 12%, while FedEx International Priority ® volume increased 2% during the quarter. International export revenue per package fell 3% due to the demand shift to lower-yielding international services, lower rates and lower fuel surcharges. Operating income and margin were significantly lower due to the demand shift to lower-yielding international services, the prior year reversal of a $66 million reserve associated with a legal matter, the negative impact of one fewer operating day, higher pension cost and increased depreciation expense. Costs associated with the business realignment program also negatively impacted operating results by $34 million.
FedEx Ground SegmentFor the third quarter, the FedEx Ground segment reported: • Revenue of $2.75 billion, up 11% from last year’s $2.48 billion • Operating income of $467 million, up from $465 million a year ago • Operating margin of 17.0%, down from 18.8% the previous year FedEx Ground average daily volume grew 10% in the third quarter, as growth in both FedEx Home Delivery and business-to-business services was driven by market share gains. Revenue per package increased 1% due to increased rates and higher residential surcharges, partially offset by lower package weights and fuel surcharge. FedEx SmartPost average daily volume increased 26% primarily due to growth in e-commerce. FedEx SmartPost net revenue per package was down 1% due to higher postage rates, partially offset by rate increases. Operating income increased slightly, while operating margin was lower, as the benefit of higher volume and revenue per package was mostly offset by higher purchased transportation, a favorable self-insurance adjustment in the prior year, higher network expansion costs, one fewer operating day and intercompany charges of $9 million associated with the business realignment program. FedEx Freight Segment For the third quarter, the FedEx Freight segment reported: • Revenue of $1.24 billion, up from last year’s $1.23 billion • Operating income of $4 million, compared with an operating loss of $1 million a year ago • Operating margin of 0.3%, up from (0.1%) the previous year Less-than-truckload (LTL) yield increased 2% due to FedEx Freight Economy base yield improvement. LTL average daily shipments increased 1% due to higher customer demand for the FedEx Freight Economy service offering in all lengths of haul. Even though the quarter had two fewer operating days, operating income and margin increased due to higher yield, volume growth and continued operational efficiencies within the company’s integrated network.
Corporate OverviewFedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $44 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 2013 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 20 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, the employee acceptance rate of the voluntary buyout offers, 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 MEASURES|
|Q3 FY2013 Diluted Earnings Per Share||Q3 FY2012 Diluted Earnings Per Share||Q4 FY2012 Diluted Earnings Per Share|
|Business Realignment Costs||(0.09||)||—||—|
|Legal Reserve Reversal||—||0.10||—|
|Fiscal 2013 Earnings Guidance|
|Q4 FY2013 Diluted EPS Guidance||FY2013 Diluted EPS Guidance|
|Non-GAAP Measure||$1.90 to $2.10||$6.00 to $6.20|
|Business Realignment Costs||0.96 to 0.76||1.09 to 0.89|
|GAAP Measure||$0.94 to $1.34||$4.91 to $5.31|