FedEx Corp. Reports Fourth Quarter and Full Year Earnings


MEMPHIS, Tenn., June 18, 2008 ... FedEx Corp. (NYSE: FDX) today reported a loss of $0.78 per diluted share for the fourth quarter ended May 31, compared to earnings of $1.96 per diluted share a year ago. The quarter’s results include the previously announced charge of $891 million ($696 million, net of tax, or $2.22 per diluted share) related predominately to one-time, noncash asset impairment charges. These charges were associated with the decision to minimize the use of the Kinko’s trade name and a reduction in the value of the goodwill resulting from the Kinko’s acquisition. Last year’s fourth quarter included a $0.06 per diluted share net benefit from a settlement with Airbus related to the A380 aircraft order cancellation. Excluding these items, earnings were $1.45 per diluted share in the fourth quarter compared to $1.90 per diluted share a year ago.

“Record high fuel prices and the weak U.S. economy dampened volume growth and substantially affected our bottom line,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “Despite the challenging conditions, our team members continue their outstanding performance in support of our customers, as service levels and morale remain high. We will continue to reduce expenses to match volume and revenue expectations.”

Fourth Quarter Results

FedEx Corp. reported the following consolidated results for the fourth quarter:

  • Revenue of $9.87 billion, up 8% from $9.15 billion the previous year
  • Operating loss of $163 million, down from income of $1.01 billion last year
  • Net loss of $241 million, down from last year’s net income of $610 million

Total combined average daily package volume in the FedEx Express and FedEx Ground segments grew 1% year over year for the quarter, as 6% growth in FedEx International Priority® (IP) and FedEx Ground shipments were mostly offset by continued declines in U.S. domestic express shipments.

Fourth quarter operating results declined as a result of the Kinko’s-related charge, as well as the continued escalation of fuel prices, and the weak U.S. economy, which limited demand for U.S. domestic express and copy and print services.

Full Year Results

FedEx Corp. reported the following consolidated results for the full year:

  • Revenue of $38.0 billion, up 8% from $35.2 billion the previous year
  • Operating income of $2.08 billion, down 37% from $3.28 billion last year
  • Net income of $1.13 billion, down 44% from last year’s $2.02 billion
  • Earnings per share of $3.60, down 44% from $6.48 per share a year ago

Capital spending for fiscal 2008 was $2.9 billion. Fiscal 2007 results also included costs associated with upfront compensation and benefits under the new pilot labor contract at FedEx Express, which reduced second quarter earnings by approximately $0.25 per diluted share. Excluding the above items, earnings were $5.83 per diluted share for the year compared to $6.67 per diluted share a year ago.


Earnings are difficult to predict in light of very volatile and high fuel prices and an uncertain economic outlook. FedEx projects earnings to be $0.80 to $1.00 per diluted share in the first quarter. This is in contrast to $1.58 per diluted share a year ago when crude oil averaged about $70 per barrel and the U.S. economy was stronger. The company is currently targeting fiscal 2009 earnings of $4.75 to $5.25 per diluted share. This guidance incorporates the current high fuel prices and the related impact on fuel surcharges, which are reducing demand for FedEx services and impacting yield across the company’s transportation segments. This outlook assumes no additional increases to current fuel prices and no further weakening in the economy.

“The operating environment for fiscal 2009 is expected to be very difficult due to the weak U.S. economy and extremely high fuel prices,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer.

“However, we will focus on reducing expenses and remaining cash flow positive, and will continue to take positive steps to improve the customer experience across our portfolio of services.”

The capital spending forecast for the year is less than $3 billion, which includes significant investments in more fuel-efficient aircraft.

FedEx Express Segment

For the fourth quarter, the FedEx Express segment reported:

  • Revenue of $6.37 billion, up 9% from last year’s $5.83 billion
  • Operating income of $426 million, down 31% from $613 million last year
  • Operating margin of 6.7%, down from 10.5% the previous year

IP package revenue grew 16% for the quarter, as IP revenue per package grew 11%, primarily due to higher fuel surcharges and favorable exchange rates. IP average daily package volume grew 6%, led by increases in volume from Asia, the United States and Europe. U.S. domestic revenue per package increased 9% due to increased fuel surcharges and higher rate per pound, while package volume declined by 3%.

Operating income and margin were negatively impacted by continued softness in the U.S. economy, escalating fuel prices and one fewer operating day, which more than offset the benefits of international revenue growth and exchange rates. Last year’s fourth quarter results benefited from the Airbus A380 settlement.

FedEx Ground Segment

For the fourth quarter, the FedEx Ground segment reported:•

  • Revenue of $1.72 billion, up 8% from last year’s $1.58 billion
  • Operating income of $203 million, down 26% from $274 million a year ago
  • Operating margin of 11.8%, down from 17.3% the previous year

FedEx Ground average daily package volume grew 6% year over year in the fourth quarter due to increased commercial business and the continued strong growth of its FedEx Home Delivery service. Yield improved 4% primarily due to the general rate increase, higher fuel surcharges and extra service revenues.

Operating income and margin were lower due to a negative net fuel impact, investments to expand network capacity and costs to enhance and defend the independent contractor model. There was one fewer operating day in this year’s fourth quarter.

FedEx Freight Segment

For the fourth quarter, the FedEx Freight segment reported:

  • Revenue of $1.31 billion, up 5% from last year’s $1.25 billion
  • Operating income of $99 million, down 21% from $125 million a year ago
  • Operating margin of 7.6%, down from 10.0% the previous year

Less-than-truckload (LTL) average daily shipments increased 3% year over year and improved sequentially throughout the quarter, with market share gains mitigating the impact of the weak U.S. economy. LTL yield improved 4% year over year primarily due to increased fuel surcharges and higher base rates.

Operating income and margin decreased in the quarter due to the net impact of increased fuel costs and last July’s fuel surcharge rate reduction, as well as higher purchased transportation costs due to increased utilization and higher rates paid to third-party providers. There were two fewer operating days in this year’s fourth quarter.

On January 1, 2009, FedEx Freight will close its San Jose, Calif. General office. The general office for the combined regional LTL operations will be located in Harrison, Ark. This move will drive efficiencies and enhance the customer experience. The cost of this move will be immaterial to financial results. FedEx National LTL will continue to serve the long-haul market as a separate operating company, with its general office in Lakeland, Fla.

FedEx Services Segment

FedEx has changed the name of FedEx Kinko’s to FedEx Office. The new name better describes the wide range of services available at its retail centers and takes full advantage of the FedEx brand. The centers will be rebranded during the next several years. The goodwill impairment charge discussed above reflects a decline in the fair value of the FedEx Office unit in light of current economic conditions, the unit’s recent and forecasted financial performance and the decision to reduce the rate of store expansion. These one-time, non-cash charges have not been allocated to the other operating segments.

The components of the charges are as follows (in millions):

Trade name: $515

Goodwill: 367

Other: 9

Total: $891

These changes at FedEx Office are the latest in a series of moves designed to more sharply focus the division on profitable core revenue growth and incremental shipping volume, which contributes about $1 billion of revenues annually to FedEx Express and FedEx Ground.

Revenue for the FedEx Services segment in the quarter, which includes the operations of FedEx Office and FedEx Global Supply Chain Services, was down 1% year over year due primarily to lower copy and print revenues.

FedEx Services expenses, which are reallocated to the transportation segments net of revenues, increased year over year due to higher marketing and information technology costs and increased net operating costs at FedEx Office associated with network expansion and service improvement activities.

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 $38 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 290,000 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

Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and fourth quarter fiscal 2008 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 June 18 are available on the company’s Web site at 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, the impact of high fuel prices, 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.