FedEx Corp. Reports Fourth Quarter and Full-Year Earnings

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FedEx Corp. Reports Fourth Quarter and Full-Year Earnings


These actions include enhancing FedEx Ground capabilities, speed and efficiency; improving FedEx Express hub automation; modernizing our FedEx Express air fleet; integrating TNT Express; and reducing unit costs and increasing productivity.”Fourth quarter operating income was negatively affected by lower FedEx International Priority package and freight revenues at FedEx Express, higher costs at FedEx Ground and business realignment costs primarily associated with the U.S.-based voluntary employee
FedEx Corp. Reports Fourth Quarter and Full-Year Earnings Cached Page below :
Company: FedEx, Activity: FedEx, Date: 2019-06-25
Keywords: News, fedex, companies, billion, earnings, reports, tnt, integration, fourth, Express, corp, measures, 2019, nongaap, quarter, fullyear, financial, fiscal


FedEx Corp. Reports Fourth Quarter and Full-Year Earnings

FedEx Corp. Reports Fourth Quarter and Full-Year Earnings

MEMPHIS, Tenn., June 25, 2019 … FedEx Corp. today reported the following consolidated results for the fourth quarter ended May 31 (adjusted measures exclude the items listed below for the applicable year):

Fiscal 2019 Fiscal 2018 As Reported

(GAAP) Adjusted

(non-GAAP) As Reported

(GAAP) Adjusted

(non-GAAP) Revenue $17.8 billion $17.8 billion $17.3 billion $17.3 billion Operating income $1.32 billion $1.72 billion $1.33 billion $1.85 billion Operating margin 7.4% 9.6% 7.7% 10.7% Net (loss) income ($1.97 billion) $1.32 billion $1.13 billion $1.60 billion Diluted (loss) EPS ($7.56) $5.01 $4.15 $5.91

This year’s and last year’s quarterly and full-year consolidated results have been adjusted for:

Cost/(Benefit) per diluted share Fiscal 2019 Fiscal 2018 Fourth Quarter Full Year Fourth Quarter Full Year Mark-to-market retirement plan

accounting adjustment $11.33 $11.22 ($0.03) ($0.03) TNT Express integration expenses 0.26 1.18 0.39 1.36 Business realignment costs 0.91 0.91 — — FedEx Ground legal matter — 0.16 — — Net U.S. deferred tax liability

remeasurement — 0.02 — (4.22) FedEx Supply Chain goodwill

and other asset impairments — — 1.40 1.39 FedEx Logistics legal matters — — 0.01 0.02

“Fiscal 2019 was a year of both challenge and change for FedEx,” said Frederick W. Smith, FedEx Corp. chairman and CEO. “We are proud of our team members, who are responding with positive actions and innovative solutions that will make FedEx even stronger and more successful in the future. FedEx enters fiscal 2020 with a sharp focus on extending our lead as the premier global transportation and logistics company and on making the necessary investments today to capture the significant market opportunities we see for the future. These actions include enhancing FedEx Ground capabilities, speed and efficiency; improving FedEx Express hub automation; modernizing our FedEx Express air fleet; integrating TNT Express; and reducing unit costs and increasing productivity.”

Fourth quarter operating income was negatively affected by lower FedEx International Priority package and freight revenues at FedEx Express, higher costs at FedEx Ground and business realignment costs primarily associated with the U.S.-based voluntary employee buyout program. Partially offsetting these factors were the benefits from U.S. volume growth, increased revenue per shipment at FedEx Freight and FedEx Ground, lower variable incentive compensation expenses and a favorable net impact of fuel at all transportation segments.

The higher FedEx Ground costs were primarily related to increased purchased transportation rates and the January launch of year-round, six-day-per-week operations. Last year’s results for FedEx Express included an $85 million gain on the sale of a non-core business of TNT Express.

The pre-tax noncash mark-to-market (MTM) retirement plan accounting adjustment of a net $3.9 billion loss was due to a lower discount rate, changes in actuarial estimates and lower-than-expected asset returns. The discount rate decrease (42 basis points) contributed $1.8 billion to the net loss.

Full-Year Results

FedEx Corp. reported the following consolidated results for the full year (adjusted measures exclude the items listed above for the applicable year):

Fiscal 2019 Fiscal 2018 As Reported

(GAAP) Adjusted

(non-GAAP) As Reported

(GAAP) Adjusted

(non-GAAP) Revenue $69.7 billion $69.7 billion $65.5 billion $65.5 billion Operating income $4.47 billion $5.22 billion $4.27 billion $5.14 billion Operating margin 6.4% 7.5% 6.5% 7.8% Net income $540 million $4.13 billion $4.57 billion $4.17 billion Diluted EPS $2.03 $15.52 $16.79 $15.31

Capital spending for fiscal 2019 was $5.5 billion.

During fiscal 2019, the company repurchased 6.6 million shares of FedEx common stock for approximately $1.5 billion.

Outlook

During fiscal 2020, operating income at FedEx Ground and FedEx Freight is expected to increase due to higher revenues. At FedEx Express, macroeconomic weakness and trade uncertainty, continued mix shift to lower-yielding services and a strategic decision to not renew a customer contract will negatively impact operating income.

FedEx is unable to forecast the fiscal 2020 year-end MTM retirement plan accounting adjustment. As a result, the company is unable to provide a fiscal 2020 earnings per share or effective tax rate (ETR) outlook on a GAAP basis.

For fiscal 2020, FedEx forecasts:

A low-single-digit percentage point increase in diluted earnings per share prior to the year-end MTM retirement plan accounting adjustment compared with fiscal 2019’s earnings of $13.25 per diluted share prior to the year-end MTM retirement plan accounting adjustment;

A mid-single-digit percentage point decline in diluted earnings per share prior to the year-end MTM retirement plan accounting adjustment and excluding estimated TNT Express integration expenses compared with fiscal 2019’s adjusted earnings of $15.52 per diluted share;

A higher ETR in the range of 23-25% prior to the year-end MTM retirement plan accounting adjustment; and

Capital spending of $5.9 billion.

Total TNT Express integration program expenses through fiscal 2021 are now estimated to be approximately $1.7 billion, of which $350 million is expected to be incurred in fiscal 2020.

These forecasts assume moderate U.S. economic growth, the company’s current fuel price expectations, no further weakening in international economic conditions from the company’s current forecast and no additional adverse developments in international trade policies and relations. FedEx’s ETR and earnings per share outlooks are based on the company’s current interpretations of the Tax Cuts and Jobs Act (TCJA) and related regulations and guidance, and are subject to change based on future guidance, as well as FedEx’s ability to defend its interpretations.

“Our fiscal 2020 performance is being negatively affected by continued weakness in global trade and industrial production, especially at FedEx Express,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “While we are adjusting our costs to mitigate revenue weakness and market shifts, we will continue to invest in areas that expand our capabilities, improve our long-term efficiencies and reduce our cost to serve.”

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 $70 billion, the company offers integrated business solutions 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 450,000 team members to remain 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 and Statistical Books. These materials, as well as a webcast of the earnings release conference call to be held at 5:30 p.m. EDT on June 25, 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 Securities and Exchange Commission (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, a significant data breach or other disruption to our technology infrastructure, anti-trade measures and changes in international trade policies and relations, our ability to successfully integrate the businesses and operations of FedEx Express and TNT Express in the expected time frame and at the expected cost and to achieve the expected benefits from the combined businesses, our ability to successfully implement our business strategy and effectively respond to changes in market dynamics, the impact of the United Kingdom’s vote to leave the European Union and the terms of its withdrawal if it ultimately occurs, changes in fuel prices or currency exchange rates, our ability to match capacity to shifting volume levels, evolving or new U.S. domestic or international government regulation or regulatory actions, future guidance, regulations, interpretations or challenges to our tax positions relating to the TCJA and our ability to defend our interpretations of the TCJA, our ability to effectively operate, integrate, leverage and grow acquired businesses, legal challenges or changes related to owner-operators engaged by FedEx Ground and the drivers providing services on their behalf, disruptions or modifications in service by, or changes in the business or financial soundness of, the U.S. Postal Service, the impact of any international conflicts or terrorist activities, our ability to successfully mitigate unique operational and regulatory risks relating to developments in technology 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 MEASURES

TO GAAP FINANCIAL MEASURES

Fourth Quarter and Full-Year Fiscal 2019 and Fiscal 2018 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 our adjusted fourth quarter and adjusted full-year fiscal 2019 and 2018 consolidated operating income and margin, net (loss) income and diluted (loss) earnings per share, and adjusted fourth quarter and adjusted full-year fiscal 2019 and 2018 FedEx Express segment operating income and margin. These financial measures have been adjusted to exclude the impact of the following items (as applicable):

The fiscal 2019 and 2018 year-end MTM retirement plan accounting adjustments for our defined benefit pension and other postretirement plans;

TNT Express integration expenses incurred in fiscal 2019 and 2018;

Business realignment costs incurred in fiscal 2019;

Fiscal 2019 charges related to a legal matter involving FedEx Ground;

Net U.S. deferred tax liability remeasurement during fiscal 2018 and the fiscal 2019 revision to the remeasurement;

FedEx Supply Chain goodwill and other asset impairment charges incurred in fiscal 2018; and

Fiscal 2018 charges related to certain U.S. Customs and Border Protection matters involving FedEx Logistics.

The MTM retirement plan accounting adjustments, business realignment costs, litigation- and legal-related matters and goodwill and other asset impairment charges at FedEx Supply Chain are excluded from our fourth quarter and full-year fiscal 2019 and 2018 consolidated non-GAAP financial measures, as applicable, because they are unrelated to our core operating performance and to assist investors with assessing trends in our underlying businesses.

We have incurred and expect to incur significant expenses through fiscal 2021, and may incur additional expenses thereafter, in connection with our integration of TNT Express. We have adjusted our fourth quarter and full-year fiscal 2019 and 2018 consolidated financial measures and the FedEx Express segment fourth quarter and full-year fiscal 2019 and 2018 financial measures to exclude TNT Express integration expenses because we generally would not incur such expenses as part of our continuing operations. The integration expenses are predominantly incremental costs directly associated with the integration of TNT Express, including professional and legal fees, salaries and wages, and travel and advertising expenses. Internal salaries and wages are included only to the extent the individuals are assigned full-time to integration activities. The integration expenses also include any restructuring charges at TNT Express.

The provisional benefit from the remeasurement of our net U.S. deferred tax liability as of the date of the enactment of the TCJA and the fiscal 2019 revision to the provisional benefit are excluded from our full-year fiscal 2019 and 2018 consolidated non-GAAP financial measures, as applicable, because the provisional benefit resulted from the non-recurring impact of a significant change in the U.S. federal statutory income tax rate due to the enactment of the TCJA on our overall deferred tax position, which accumulated over many reporting periods prior to enactment. The adjustments to our full-year fiscal 2019 and 2018 consolidated financial measures related to the TCJA include only this transitional impact.

We have not included the benefit attributable to the phase-in of the reduced tax rate applied to our fiscal 2019 and 2018 earnings in the adjustment because the impact of the reduced tax rate on current year earnings will be ongoing. Additionally, we have not included the benefit from our incremental pension contribution made in February 2018 and deductible against our prior year taxes at 35% in the adjustment because the contribution was made in connection with our ongoing pension management strategy. Finally, we have not included the provisional benefit related to the one-time transition tax on previously deferred foreign earnings in the adjustment because the amount of this provisional benefit at the end of fiscal 2018 was not material to our overall tax position.

We believe these adjusted financial measures facilitate analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of, or are unrelated to, the company’s and our business segments’ core operating performance, and may assist investors with comparisons to prior periods and 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.

Our non-GAAP financial measures are intended to supplement and should be read together with, and are not an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of our financial statements should not place undue reliance on these non-GAAP financial measures. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. As required by SEC rules, the tables below present a reconciliation of our presented non-GAAP financial measures to the most directly comparable GAAP measures.

Fiscal 2020 Earnings Per Share and Effective Tax Rate Forecasts

Our fiscal 2020 earnings per share (EPS) forecast is a non-GAAP financial measure because it excludes the fiscal 2020 year-end MTM retirement plan accounting adjustment and estimated fiscal 2020 TNT Express integration expenses, and, for fiscal 2019, excludes the year-end MTM retirement plan accounting adjustment, TNT Express integration expenses, business realignment costs, costs related to a FedEx Ground legal matter and the revision to the provisional benefit from the remeasurement of our net U.S. deferred tax liability included in our fiscal 2018 earnings. Our fiscal 2020 effective tax rate (ETR) forecast is a non-GAAP financial measure because it excludes the impact of the fiscal 2020 year-end MTM retirement plan accounting adjustment.

We have provided these non-GAAP financial measures for the same reasons that were outlined above for historical non-GAAP measures. These items are excluded from our fiscal 2020 EPS and ETR forecasts, as applicable, for the same reasons described above for historical non-GAAP measures.

We are unable to predict the amount of the year-end MTM retirement plan accounting adjustment, as it is significantly impacted by changes in interest rates and the financial markets, so such adjustment is not included in our fiscal 2020 EPS and ETR forecasts. It is reasonably possible, however, that our fiscal 2020 year-end MTM retirement plan accounting adjustment could have a material impact on our fiscal 2020 consolidated financial results and ETR. Additionally, for comparison purposes, we have presented fiscal 2019 EPS prior to the year-end MTM retirement plan accounting adjustment in the “Outlook” section of this earnings release.

Fourth Quarter Fiscal 2019

FedEx Corporation Dollars in millions, except EPS Operating

Income

Margin1

Income Taxes2

Net (Loss) Income3 Diluted (Loss) Earnings

Per Share 4 GAAP measure $1,316 7.4% ($585) ($1,969) ($7.56) MTM retirement plan accounting adjustment5 — — 902 2,981 11.33 Business realignment costs6 316 1.8% 76 240 0.91 TNT Express integration expenses7 84 0.5% 16 68 0.26 Non-GAAP measure $1,716 9.6% $409 $1,320 $5.01

FedEx Express Segment Dollars in millions Operating Income Margin GAAP measure $776 8.1% TNT Express integration expenses 68 0.7% Non-GAAP measure $834 8.8%

Full-Year Fiscal 2019

FedEx Corporation Dollars in millions, except EPS Operating

Income

Margin 1

Income Taxes2

Net Income3 Diluted Earnings

Per Share8 GAAP measure $4,466 6.4% $115 $540 $2.03 MTM retirement plan

accounting adjustment5 — — 902 2,981 11.22 TNT Express integration expenses7 388 0.6% 74 314 1.18 Business realignment costs6 320 0.5% 77 243 0.91 FedEx Ground legal matter 46 0.1% 3 43 0.16 Net U.S. deferred

tax liability remeasurement — — (4) 4 0.02 Non-GAAP measure $5,220 7.5% $1,167 $4,125 $15.52

FedEx Express Segment Dollars in millions Operating Income Margin GAAP measure $2,123 5.7% TNT Express integration expenses 325 0.9% Non-GAAP measure $2,448 6.6%

Fourth Quarter Fiscal 2018

FedEx Corporation Dollars in millions, except EPS Operating

Income

Margin

Income Taxes1,2

Net Income1,3 Diluted Earnings

Per Share 1 GAAP measure $1,328 7.7% $231 $1,127 $4.15 FedEx Supply Chain goodwill and other asset impairments9 380 2.2% 1 379 1.40 TNT Express integration expenses7 136 0.8% 30 106 0.39 FedEx Logistics legal matters 1 — (1) 2 0.01 MTM retirement plan accounting adjustment5 — — (1) (9) (0.03) Non-GAAP measure $1,845 10.7% $261 $1,604 $5.91

FedEx Express Segment Dollars in millions Operating Income Margin 1 GAAP measure $867 9.0% TNT Express integration expenses 110 1.1% Non-GAAP measure $977 10.2%

Full-Year Fiscal 2018

FedEx Corporation Dollars in millions, except EPS Operating

Income

Margin

Income Taxes1,2

Net Income1,3 Diluted Earnings

Per Share GAAP measure $4,272 6.5% ($219) $4,572 $16.79 FedEx Supply Chain goodwill and other asset impairments9 380 0.6% 1 379 1.39 TNT Express integration expenses7 477 0.7% 105 372 1.36 FedEx Logistics legal matters 8 — 2 6 0.02 MTM retirement plan accounting adjustment5 — — (1) (9) (0.03) Net U.S. deferred tax liability remeasurement — — 1,150 (1,150) (4.22) Non-GAAP measure $5,137 7.8% $1,039 $4,169 $15.31

FedEx Express Segment Dollars in millions Operating Income Margin GAAP measure $2,105 5.8% TNT Express integration expenses 380 1.1% Non-GAAP measure $2,485 6.9%

Notes:


Company: FedEx, Activity: FedEx, Date: 2019-06-25
Keywords: News, fedex, companies, billion, earnings, reports, tnt, integration, fourth, Express, corp, measures, 2019, nongaap, quarter, fullyear, financial, fiscal


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