FedEx Corp. (NYSE: FDX) today reported earnings of $2.65 per
diluted share ($2.90 per diluted share on an adjusted basis) for
the first quarter ended August 31, compared to earnings of $2.42
per diluted share a year ago.
During the quarter, the company incurred TNT Express integration
and Outlook restructuring program costs of $68 million ($45
million, net of tax, or $0.17 per diluted share). In addition, the
company incurred $28 million ($21 million, net of tax, or $0.08 per
diluted share) of intangible asset amortization expense for TNT
Express.
“The integration of TNT Express is proceeding smoothly, and the
level of team members’ engagement is outstanding,” said Frederick
W. Smith, FedEx Corp. chairman, president and chief executive
officer. “Managing our operating companies as a portfolio of
customer solutions helped FedEx achieve strong financial and
operating results in the quarter, especially given the global
economy’s continued low growth.”
First Quarter Results
FedEx Corp. reported the following consolidated results for the
first quarter (adjusted measures exclude TNT Express integration
and Outlook restructuring program costs and intangible asset
amortization expense):
Fiscal 2017
Fiscal 2016
As Reported
(GAAP)
Adjusted
(non-GAAP)
As Reported
(GAAP)
Revenue $14.7 billion $14.7 billion $12.3 billion Operating income
$1.26 billion $1.36 billion $1.14 billion Operating margin 8.6%
9.3% 9.3% Net income $715 million $780 million $692 million Diluted
EPS $2.65 $2.90 $2.42
Operating results rose compared to last year due to higher base
yields at FedEx Express and FedEx Ground, volume growth at FedEx
Ground and ongoing cost efficiencies at FedEx Express. These
factors were partially offset by integration and restructuring
program costs and intangible asset amortization at TNT Express, and
higher network expansion costs at FedEx Ground.
During the quarter, the company acquired 1.4 million shares of
FedEx common stock.
Earnings Guidance
FedEx is unable to forecast the fiscal 2017 year-end
mark-to-market pension accounting adjustments. As a result, the
company is unable to provide unadjusted earnings guidance. Adjusted
earnings for fiscal 2017 are projected to be $10.85 to $11.35 per
diluted share before year-end mark-to-market pension accounting
adjustments. This forecast includes TNT Express results and assumes
moderate economic growth. Excluding TNT Express-related integration
and Outlook restructuring program costs and TNT Express intangible
asset amortization, FedEx forecasts fiscal 2017 earnings of $11.85
to $12.35 per diluted share. The capital spending forecast for the
fiscal year, which includes TNT Express, remains $5.6 billion.
“Our team is extremely excited about the TNT Express
integration, and we are discovering many possibilities for
achieving high returns,” said Alan B. Graf, FedEx Corp. executive
vice president and chief financial officer. “As we integrate these
networks and take advantage of the unmatched road capabilities of
TNT Express, I am confident there is going to be a tremendous
opportunity to increase the earnings of FedEx Corporation.”
2017 Rate Increases
As previously announced, effective January 2, 2017, FedEx
Express will increase shipping rates by an average of 3.9%, while
FedEx Ground, FedEx Home Delivery and FedEx Freight will increase
shipping rates by an average of 4.9%. The FedEx Express and FedEx
Ground U.S. domestic dimensional weight divisor will also change
from 166 to 139. Effective February 6, 2017, FedEx Express and
FedEx Ground fuel surcharges will be adjusted on a weekly basis
compared to the current monthly adjustment. Details of all changes
to rates and surcharges are available at fedex.com/rates2017.
FedEx Express Segment
For the first quarter, the FedEx Express segment reported
(adjusted measures exclude TNT Express integration costs):
Fiscal 2017
Fiscal 2016
As Reported
(GAAP)
Adjusted
(non-GAAP)
As Reported
(GAAP)
Revenue $6.66 billion $6.66 billion $6.59 billion Operating income
$624 million $646 million $545 million Operating income YOY change
%
14%
19%
Operating margin 9.4% 9.7% 8.3%
FedEx Express revenue increased slightly as improved base
yields, higher package volume and increased freight pounds more
than offset lower fuel surcharges and unfavorable currency exchange
rates. U.S. domestic package volume increased 1% due to growth in
overnight box and envelope volumes. FedEx International Economy
volume grew 1%, while FedEx International Priority volume decreased
1%. Average daily freight pounds increased 8% due to higher U.S.
Postal Service volume.
FedEx Express operating results improved due to higher base
yields and ongoing cost efficiencies. As-reported results include
$22 million of expenses related to the integration of TNT Express.
Fuel and currency exchange rates had a minimal impact on the
quarter’s results.
TNT Express Segment
For the first quarter, the TNT Express segment reported
(adjusted measures exclude TNT Express integration and Outlook
restructuring program costs and intangible asset amortization
expense):
Fiscal 2017
As Reported
(GAAP)
Adjusted
(non-GAAP)
Revenue $1.80 billion $1.80 billion Operating (loss)/income ($14)
million $34 million Operating margin (0.8%) 1.9%
The TNT Express as-reported results include $28 million of
intangible asset amortization expense and $20 million of
integration and Outlook restructuring program costs.
FedEx Ground Segment
For the first quarter, the FedEx Ground segment reported:
Fiscal
2017 Fiscal 2016
Change Revenue $4.29 billion $3.83 billion 12%
Operating income $610 million $537 million 14% Operating margin
14.2% 14.0% 0.2 pts
Revenue increased due to higher volume and revenue per package.
FedEx Ground average daily volume grew 10% in the first quarter,
driven by e–commerce and commercial package growth. FedEx Ground
yield increased 2% due to higher base yields partially offset by
lower fuel surcharges.
Operating results improved due to higher volumes, increased
yields and lower self-insurance costs, partially offset by higher
network expansion costs and increased purchased transportation
rates including higher postage.
FedEx Freight Segment
For the first quarter, the FedEx Freight segment reported:
Fiscal
2017 Fiscal 2016
Change Revenue $1.66 billion $1.60 billion 4%
Operating income $135 million $132 million 2% Operating margin 8.1%
8.2% (0.1 pts)
Revenue increased as less-than-truckload (LTL) average daily
shipment growth of 8% more than offset the impact of lower fuel
surcharges and weight per shipment.
Operating results benefited from higher shipment volumes and a
favorable rentals comparison, as last year’s results included a
charge related to a facility closure. These benefits were offset by
lower revenue per LTL shipment.
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 $58 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 400,000
team members to remain "absolutely, positively" focused on safety,
the highest ethical and professional standards and the needs of
their customers and communities. To learn more about how FedEx
connects people and possibilities around the world, please visit
about.fedex.com.
Additional information and operating data are contained in the
company’s annual report, Form 10-K, Form 10-Qs, Form 8-Ks,
Statistical Books and first quarter fiscal 2017 Earnings
Presentation. These materials, as well as a webcast of the earnings
release conference call to be held at 5:00 p.m. EDT on September
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.
The Investor Relations page of our website, investors.fedex.com,
contains a significant amount of information about FedEx, including
our SEC filings and financial and other information for investors.
The information that we post on our Investor Relations website
could be deemed to be material information. We encourage investors,
the media and others interested in the company to visit this
website from time to time, as information is updated and new
information is posted.
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, our ability
to successfully integrate the business and operations of FedEx
Express and TNT Express in the expected time frame, a significant
data breach or other disruption to our technology infrastructure,
changes in fuel prices or currency exchange rates, legal challenges
or changes related to FedEx Ground’s owner-operators and the
drivers providing services on their behalf, new U.S. domestic or
international government regulation, our ability to effectively
operate, integrate and leverage acquired businesses, disruptions or
modifications in service by, or changes in the business of, the
U.S. Postal Service, the impact from any terrorist activities or
international conflicts, 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 FedEx Corp.’s filings with
the SEC. Any forward-looking statement speaks only as of the date
on which it is made. We do not undertake or assume any obligation
to update or revise any forward-looking statement, whether as a
result of new information, future events or otherwise.
RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
First Quarter Fiscal 2017
Results
The company reports its financial results in accordance with
accounting principles generally accepted in the United States
(“GAAP” or “reported”). We have supplemented the reporting of our
financial information determined in accordance with GAAP with
certain non-GAAP (or “adjusted”) financial measures, including
adjusted consolidated operating income and margin, net income and
earnings per share, as well as adjusted FedEx Express segment and
TNT Express segment operating income and margin. These financial
measures have been adjusted to exclude the impact of certain
transactions (as applicable):
- TNT Express integration and Outlook
restructuring program costs; and
- TNT Express intangible asset
amortization.
We expect to incur significant expenses over the next few years
in connection with our integration of TNT Express and the Outlook
restructuring program. We have adjusted the applicable financial
measures to exclude these items because we generally would not
incur such costs and expenses as part of our continuing operations.
The integration expenses are predominantly incremental costs
directly associated with the integration of TNT Express, including
professional fees, advertising expenses, legal expenses and travel.
Internal salaries, wages, and benefits costs are included only to
the extent the individuals are assigned full-time to integration
activities. The Outlook restructuring program is a TNT Express
legacy program that includes various initiatives focused on yield
management, improved operational efficiency and productivity and
improved customer service.
We will also have recurring intangible asset amortization
expenses. The company and TNT Express incurred, and will continue
incurring, these expenses solely as a result of the company’s
acquisition of TNT Express and the related purchase accounting
treatment. We excluded intangible asset amortization from the
company’s and TNT Express’s fiscal 2017 first quarter financial
results to help investors understand the impact of these expenses
on TNT Express’s base business and to facilitate the overall
comparability of the company’s consolidated financial results. We
will not adjust our financial results for intangible asset
amortization beginning in fiscal 2018 because the company’s and TNT
Express’s financial results will be comparable year-over-year at
that time. Given the timing and complexity of the TNT Express
acquisition, the presentation of TNT Express in the company’s
financial statements, including the allocation of the purchase
price, is preliminary and will likely change in future periods,
perhaps significantly, as fair value estimates of the assets
acquired and liabilities assumed are refined during the measurement
period. We will complete our purchase price allocation no later
than the fourth quarter of 2017.
We believe these adjusted financial measures facilitate more
meaningful analysis and more accurate comparisons of our ongoing
business operations because they exclude items that enhance
comparability to prior periods, may not be indicative of, or are
unrelated to, the company’s and our business segments’ core
operating performance, and are better measures for assessing trends
in our underlying businesses. These adjustments are consistent with
how management views our businesses. Management uses these non-GAAP
financial measures in making financial, operating and planning
decisions and evaluating the company’s and each business segment’s
ongoing performance.
Fiscal 2017 Earnings
Guidance
Our fiscal 2017 earnings guidance is a non-GAAP financial
measure because it excludes the fiscal 2017 year-end mark-to-market
(“MTM”) pension accounting adjustments, projected fiscal 2017 TNT
Express integration and Outlook restructuring program costs, and
projected fiscal 2017 TNT Express intangible asset amortization. We
have provided this non-GAAP earnings guidance measure for the same
reasons that were outlined above for historical non-GAAP
measures.
We are unable to predict the amount of the year-end MTM pension
accounting adjustments, as they are significantly impacted by
changes in interest rates and the financial markets, so such
adjustments are not included in our earnings guidance. For this
reason, a full reconciliation of our fiscal 2017 earnings guidance
to the most directly comparable GAAP measure is impracticable. It
is reasonably possible, however, that our fourth quarter fiscal
2017 MTM pension accounting adjustments could have a material
impact on our fiscal 2017 consolidated financial results. The last
table included below outlines the impact of the items that are
excluded from our earnings guidance, other than the year-end MTM
pension accounting adjustments.
First Quarter
Fiscal 2017
FedEx
Corporation
Dollars in millions, except EPS
Operating
Income
Net
DilutedEarnings
Income
Margin
Taxes2
Income1
Per Share
Non-GAAP measure $ 1,360 9.3 % $ 457 $ 780 $ 2.90 TNT Express
integration and Outlook restructuring program costs
(68
)
(0.5
%)
(23
)
(45
)
(0.17
)
TNT Express intangible asset amortization
(28
)
(0.2
%)
(7
)
(21
)
(0.08
)
GAAP measure $ 1,264
8.6 %
$ 427
$ 715
$ 2.65
FedEx Express
Segment
Dollars in millions
Operating
Income Margin Non-GAAP measure $ 646 9.7 % TNT
Express integration costs
(22 )
(0.3 %)
GAAP measure $
624 9.4
%
TNT Express
Segment
Dollars in millions
Operating Income/
(Loss)
Margin
Non-GAAP measure $ 34 1.9 % TNT Express integration and Outlook
restructuring program costs
(20
)
(1.1
%)
TNT Express intangible asset amortization
(28
) (1.6 %) GAAP
measure ($14 )
(0.8 %)
Fiscal 2017
Earnings Guidance
Dollars in millions, except EPS
Adjustments
Diluted Earnings
Per Share
Earnings per diluted share with adjustments $11.85 to $12.35
TNT Express integration and Outlook
restructuring program costs
($275)
Income tax effect2
92 Net of tax effect ($183) (0.68) TNT Express intangible asset
amortization ($115)
Income tax effect2
29 Net of tax effect ($ 86) (0.32)
Earnings per diluted share without
adjustments3
$10.85 to $11.35
Notes: 1 – Does not sum to total due to rounding.
2 – Income taxes are based on the company’s approximate
statutory tax rates applicable to each transaction. 3 –
This is a non-GAAP measure because the
year-end mark-to-market pension accounting adjustments, which are
impracticable to calculate at this time, are excluded.
The financial section of this release is
provided on the company's website at investors.fedex.com
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160920006779/en/
FedEx Corp.Media Contact:Jess Bunn, 901-818-7463orInvestor
Contact:Mickey Foster, 901-818-7468Home Page: fedex.com
FedEx (NYSE:FDX)
Historical Stock Chart
From Apr 2024 to May 2024
FedEx (NYSE:FDX)
Historical Stock Chart
From May 2023 to May 2024