MEMPHIS, Tenn., September 17, 2009 -- FedEx Corp. (NYSE: FDX) today reported earnings of $0.58 per diluted share for the first quarter ended August 31, compared to $1.23 per diluted share a year ago.
“Better-than-expected FedEx International Priority® volume, decisive management actions and our dedicated team members helped drive financial performance above our initial expectations in the first quarter,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “For more than a year, we have vigilantly managed costs without sacrificing service, invested wisely and minimized job losses so that FedEx will emerge a stronger, more profitable company as the global economic recovery takes hold.”
First Quarter Results
FedEx Corp. reported the following consolidated results for the first quarter:
• Revenue of $8.01 billion, down 20% from $9.97 billion a year ago
• Operating income of $315 million, down 50% from $630 million last year
• Operating margin of 3.9%, down from 6.3% the previous year
• Net income of $181 million, down 53% from last year’s $384 million
Revenue and profitability continued to be negatively affected year over year by the global recession. Fuel was also a significantly negative factor in the quarter, primarily due to the substantial decline in fuel surcharges year over year. Strict cost controls and one additional operating day at each of the transportation segments benefited results.
FedEx reiterates its earnings expectation of $0.65 to $0.95 per diluted share in the second quarter, which reflects the current outlook for fuel prices and acontinued modest recovery in the global economy. A substantial decline is expected from $1.58 per diluted share a year ago, when the company significantly benefited from rapidly declining fuel prices and the timing lag that exists between when fuel prices change and when indexed fuel surcharges automatically adjust. The company’s capital spending forecast remains $2.6 billion.
“While we see signs of improvement in the economy, the year-over-year comparisons will remain very difficult for our second quarter,” said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer. “We remain focused on managing our expenses and generating positive cash flow.”
2010 Rate Increase
FedEx Express will increase shipping rates by an average of 5.9% for U.S. domestic and U.S. export services, effective January 4, 2010. The rate increase will be partially offset by adjusting the fuel price at which the fuel surcharge begins, reducing the fuel surcharge by two percentage points. Additional changes will be made to other FedEx Express surcharges, details of which can be found at www.fedex.com/us/2010rates. The FedEx Ground and FedEx SmartPost rate and surcharge changes for 2010 will be announced later this year.
FedEx Express Segment
For the first quarter, the FedEx Express segment reported:
• Revenue of $4.92 billion, down 23% from $6.42 billion a year ago
• Operating income of $104 million, down 70% from $345 million last year
• Operating margin of 2.1%, down from 5.4% the previous year
U.S. domestic package revenue declined 22%, driven by a 23% drop in revenue per package due to lower fuel surcharges, rate per pound and weight per package. U.S. domestic package volume grew slightly. FedEx International Priority (IP) package revenue declined 22%. IP revenue per package declined 20% due to lower fuel surcharges, unfavorable exchange rates and lower package weights, while IP package volume fell 4%. Results were negatively impacted by continued global economic weakness and substantially lower fuel surcharges, partially offset by gains from DHL's exit from the U.S. domestic package market. Expenses improved due to lower fuel prices and consumption, continued reductions in flight hours, labor hours, purchased transportation and other aggressive actions to control spending.
FedEx Ground Segment
For the first quarter, the FedEx Ground segment reported:
• Revenue of $1.73 billion, down 2% from last year’s $1.76 billion
• Operating income of $209 million, up 7% from $196 million a year ago
• Operating margin of 12.1%, up from 11.1% the previous year
FedEx Ground average daily package volume was down 1% compared to the prior year. Yield decreased 3% primarily due to lower fuel surcharges. FedEx SmartPost average daily volume grew 73% largely due to market share gains, including gains from DHL’s exit from the U.S. domestic package market. FedEx SmartPost yield decreased 34% due to changes in customer and service mix.
FedEx Freight Segment
For the first quarter, the FedEx Freight segment reported:
• Revenue of $982 million, down 27% from last year’s $1.35 billion
• Operating income of $2 million, down 98% from $89 million a year ago
• Operating margin of 0.2%, down from 6.6% the previous year
Less-than-truckload (LTL) average daily shipments decreased 14% and yield decreased 13% year over year, reflecting the continued weak economy and resulting excess industry capacity, as well as an increasingly competitive pricing environment. LTL yield was also negatively impacted by lower fuel surcharges. Average daily LTL shipments improved sequentially month over month throughout the quarter.
Operating income and margin decreased in the quarter due to the lower average daily LTL shipments and the competitive pricing environment,partially offset by cost-reduction actions.
FedEx Services Segment
FedEx Services segment revenue for the first quarter, which included the operations of FedEx Office and FedEx Global Supply Chain Services, was down 12% year over year, primarily due to declines in copy product revenues.
FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $34 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 275,000 employees and contractors 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 first quarter fiscal 2010 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 September 17 are available on the company’s Web site at www.fedex.com/us/investorrelations. A replay of the conference call Webcast will be posted on our Web site 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.