Operating results increased despite the impact of severe winter weather. Results also include a negative net impact from fuel. These headwinds were partially offset by the benefit from one additional operating day in each transportation segment.During the third quarter, the company entered into accelerated share repurchase agreements to repurchase an aggregate of $2.0 billion of the company’s common stock. Share repurchases had a minimal positive impact on third quarter earnings per diluted share. Outlook FedEx projects earnings to be $2.25 to $2.50 per diluted share in the fourth quarter and $6.55 to $6.80 per diluted share for fiscal 2014. This outlook reflects share repurchases made to date, but does not include any benefit from additional share repurchases. Share repurchases are expected to continue, but the timing will be at the company’s discretion. The outlook also assumes the market outlook for fuel prices and continued moderate economic growth. The capital spending forecast for fiscal 2014 is now $3.8 billion, down $200 million from the previous forecast. “While severe winter weather often affects our third-quarter results, the impact from multiple severe storms and frigid temperatures was significantly more pronounced this year and we are reducing our full-year earnings per share guidance as a result of the weather impact,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “The $1.6 billion profit improvement plan at FedEx Express remains on track despite the near-term impact of weather. Our accelerated stock repurchase program initiated in January reflects our confidence in achieving our financial goals.” FedEx Express Segment For the third quarter, the FedEx Express segment reported: • Revenue of $6.67 billion, down slightly from last year’s $6.70 billion • Operating income of $135 million, up 14% from $118 million a year ago
• Operating margin of 2.0%, up from 1.8% the previous yearRevenue decreased slightly due to lower freight revenue, lower fuel surcharges and the impact from weather. U.S. domestic revenue per package was up slightly, as higher rates and weight per package were mostly offset by lower fuel surcharges. U.S. domestic average daily package volume increased slightly. International export revenue per package increased 1%, as higher base yields were partially offset by lower fuel surcharges, unfavorable exchange rates, and the ongoing demand shift toward lower-yielding international services. FedEx International Priority ® (IP) average daily volume declined 5%, due to a drop in lower-yielding distribution services. IP average daily volume, excluding these distribution services, was essentially flat. FedEx International Economy ® average daily volume grew 8%. Operating results increased year over year despite the impact of weather, which reduced operating income by an estimated $70 million compared to the prior year. Benefiting the quarter were higher base package yields, lower pension expense, one additional operating day and ongoing cost reduction activities, partially offset by lower freight revenue and the negative net impact of fuel. FedEx Ground Segment For the third quarter, the FedEx Ground segment reported: • Revenue of $3.03 billion, up 10% from last year’s $2.75 billion • Operating income of $477 million, up 2% from $467 million a year ago • Operating margin of 15.7%, down from 17.0% the previous year FedEx Ground average daily volume grew 8% 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 rate increases and higher residential surcharges, partially offset by lower fuel surcharges. FedEx SmartPost average daily volume increased 2%. FedEx SmartPost net revenue per package increased 3% due to rate increases and service mix, partially offset by higher postage rates and lower fuel surcharges.
Operating income increased due to higher volume and revenue per package. The third quarter was favorably impacted by Cyber Week, which was in the second quarter last year, as well as one additional operating day. The favorability was significantly offset by an estimated $40 million year-over-year impact on operating income from weather, as well as increased network expansion costs and the negative net impact of fuel.FedEx Freight Segment For the third quarter, the FedEx Freight segment reported: • Revenue of $1.35 billion, up 9% from last year’s $1.24 billion • Operating income of $29 million, up from $4 million a year ago • Operating margin of 2.2%, up from 0.3% the previous year Less-than-truckload (LTL) average daily shipments and weight per shipment increased 7% and 2%, respectively. LTL revenue per hundredweight decreased 2% primarily due to changes in shipment characteristics and lower fuel surcharges. Operating income improved as the positive impacts of higher shipment volumes, heavier average weight per shipment, greater utilization of rail in the Economy service offering and one additional business day were partially offset by the impact of weather. Effective March 31, 2014, FedEx Freight will increase certain U.S. and other shipping rates by an average of 3.9%. 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 $45 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 2014 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 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, our ability to execute on our business realignment program, 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 historical and expected financial performance requires an understanding of the factors underlying that performance and our judgments about the likelihood that particular factors will repeat. Excluding charges associated with the business realignment program from prior period results will allow for more accurate comparisons of the company’s third quarter 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.
|Q3 FY2013 Diluted Earnings Per Share|
|Business Realignment Costs||(0.09||)|
|*Does not sum to total due to rounding|