MEMPHIS, Tenn., March 17, 2020 ... FedEx Corp. today reported the following consolidated results for the third quarter ended February 29 (adjusted measures exclude the items listed below for the applicable fiscal year):
| Fiscal 2020 | Fiscal 2019 | |||
| As Reported (GAAP) | Adjusted (non-GAAP) | As Reported (GAAP) | Adjusted (non-GAAP) | |
| Revenue | $17.5 billion | $17.5 billion | $17.0 billion | $17.0 billion |
| Operating income | $411 million | $483 million | $911 million | $984 million |
| Operating margin | 2.4% | 2.8% | 5.4% | 5.8% |
| Net income | $315 million | $371 million | $739 million | $797 million |
| Diluted EPS | $1.20 | $1.41 | $2.80 | $3.03 |
This year’s and last year’s quarterly consolidated results have been adjusted for:
| Impact per diluted share | ||
| Fiscal 2020 | Fiscal 2019 | |
| TNT Express integration expenses | $0.21 | $0.21 |
| Business realignment costs | — | 0.01 |
“The COVID-19 pandemic is having a significant impact around the world,” said Frederick W. Smith, FedEx Corp. chairman and chief executive officer. “We continue to deliver for our customers and are ready to support increased demand for our International Express export services due to the significant reductions in intercontinental air capacity. While the global economic impact from recent social-distancing mandates is uncertain, we remain well positioned to assist our customers as they work to manage their supply chains and inventories. We will continue to support efforts to combat the pandemic.”
Operating results declined due to weaker global economic conditions including the impact of the coronavirus, higher self-insurance accruals, an unfavorable variable incentive compensation comparison, increased FedEx Ground costs from expanded service offerings, the loss of business from a large customer, a continuing mix shift to lower-yielding services and a more competitive pricing environment. These factors were partially offset by the benefits from volume growth at FedEx Ground, an additional operating weekday, increased yields at FedEx Freight and the shifting of Cyber Week into December.
Last year’s net income included tax benefits of $90 million ($0.34 per diluted share) from the recognition of certain loss carry forwards. This was partially offset by a tax expense of $50 million ($0.19 per diluted share) related to new lower rates in the Netherlands applied to deferred tax balances.
“We are suspending our fiscal 2020 earnings forecast for our consolidated and segment results due to the uncertainty caused by the coronavirus pandemic,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “To mitigate these near-term headwinds and position the company for future earnings growth, we are attacking costs throughout the company by managing capacity, retiring our oldest and least-efficient aircraft, integrating TNT Express, and lowering our residential delivery costs by having FedEx Ground deliver FedEx SmartPost and certain day-definite FedEx Express packages.”
Corporate Overview
FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenue 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 475,000 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 March 17, 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 and underlying assumptions. 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; anti-trade measures and additional changes in international trade policies and relations; a significant data breach or other disruption to our technology infrastructure; 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, effectively respond to changes in market dynamics and achieve the anticipated benefits and associated cost savings of such strategies and actions; widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus pandemic; the impact of the United Kingdom’s withdrawal from the European Union; our ability to match capacity to shifting volume levels; changes in fuel prices or currency exchange rates; the impact of intense competition; 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 Tax Cuts and Jobs Act (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 service providers 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 quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography; 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
Third Quarter Fiscal 2020 and Fiscal 2019 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 third quarter fiscal 2020 and 2019 consolidated operating income and margin, net income and diluted earnings per share, and adjusted third quarter fiscal 2020 and 2019 FedEx Express segment operating income and margin. These financial measures have been adjusted to exclude the impact of the following items (as applicable):
- TNT Express integration expenses incurred in fiscal 2020 and 2019; and
- Business realignment costs incurred in fiscal 2019.
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 third quarter fiscal 2020 and 2019 consolidated financial measures and the FedEx Express segment third quarter fiscal 2020 and 2019 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 employee benefits, travel and advertising expenses. Internal salaries and employee benefits 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.
Costs related to business realignment activities (including the U.S.-based voluntary employee buyout program announced in fiscal 2019) are excluded from our third quarter fiscal 2019 consolidated non-GAAP financial measures because they are unrelated to our core operating performance and to assist investors with assessing trends in our underlying businesses.
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 Securities and Exchange Commission rules, the tables below present a reconciliation of our presented non-GAAP financial measures to the most directly comparable GAAP measures.
Third Quarter Fiscal 2020
| FedEx Corporation | ||||||||||||||
| Dollars in millions, except EPS |
|
|
|
| ||||||||||
| GAAP measure | $411 | 2.4% | $105 | $315 | $1.20 | |||||||||
| TNT Express integration expenses3 | 72 | 0.4% | 16 | 56 | 0.21 | |||||||||
| Non-GAAP measure | $483 | 2.8% | $121 | $371 | $1.41 | |||||||||
| FedEx Express Segment | ||||||
| Dollars in millions |
| |||||
| GAAP measure | $137 | 1.5% | ||||
| TNT Express integration expenses | 62 | 0.7% | ||||
| Non-GAAP measure | $199 | 2.2% | ||||
Third Quarter Fiscal 2019
| FedEx Corporation | ||||||||||||||
| Dollars in millions, except EPS |
|
|
|
| ||||||||||
| GAAP measure | $911 | 5.4% | $192 | $739 | $2.80 | |||||||||
| TNT Express integration expenses3 | 69 | 0.4% | 14 | 55 | 0.21 | |||||||||
| Business realignment costs5 | 4 | — | 1 | 3 | 0.01 | |||||||||
| Non-GAAP measure | $984 | 5.8% | $207 | $797 | $3.03 | |||||||||
| FedEx Express Segment | ||||||
| Dollars in millions |
| |||||
| GAAP measure | $389 | 4.3% | ||||
| TNT Express integration expenses | 56 | 0.6% | ||||
| Non-GAAP measure | $445 | 4.9% | ||||
Notes:
1 – Income taxes are based on the company’s approximate statutory tax rates applicable to each transaction.
2 – Effect of “total other (expense) income” on net income amount not shown.
3 – These expenses, including restructuring charges, were recognized at FedEx Corporate and FedEx Express.
4 – Does not sum to total due to rounding.
5 – Business realignment costs are recognized at FedEx Corporate.