FedEx Corp. Reports Fourth Quarter Earnings
Quarterly consolidated earnings have been adjusted for previously announced changes in pension accounting (\$4.88 per diluted share), aircraft impairments (\$0.62 per diluted share), a legal reserve increase (\$0.47 per diluted share) and changes in segment reporting (favorable \$0.15 per diluted share).
"Fiscal 2015 was a transformative year for FedEx with outstanding financial results driving expanded long-term value for shareowners,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “Significant acquisitions announced in the year promise to strengthen our portfolio of services and change what’s possible for customers. I am very proud of the FedEx team for its accomplishments and look forward to a successful fiscal 2016."
FedEx also announced today that independent members of its Board of Directors have approved a change to FedEx’s Corporate Governance Guidelines to increase the mandatory retirement age for directors from age 72 to age 75, effective immediately. “This change is consistent with the market trend of increasing the mandatory retirement age for board members,” said David P. Steiner, FedEx Corporation’s Lead Independent Director.
As previously disclosed, prior year amounts have been recast to conform to the current year presentation reflecting the pension accounting changes and allocation of corporate headquarters costs.
Fourth Quarter Results
FedEx Corp. reported the following consolidated results for the fourth quarter:
|
Fiscal 2015 |
Fiscal 2014 | |||
|
Adjusted |
As Reported |
Adjusted |
As Reported | |
|
Revenue |
\$12.1 billion |
\$12.1 billion |
\$11.8 billion |
\$11.8 billion |
|
Operating Income |
\$1.28 billion |
(\$1.32 billion) |
\$1.22 billion |
\$1.26 billion |
|
Operating Margin |
10.5% |
(10.9%) |
10.3% |
10.7% |
|
Net Income (loss) |
\$753 million |
(\$895 million) |
\$753 million |
\$780 million |
|
Diluted EPS (loss) |
\$2.66 |
(\$3.16) |
\$2.54 |
\$2.62 |
|
YOY share |
\$0.12 |
(\$0.14) |
\$0.13 |
\$0.13 |
Adjusted operating income improved 5% during the quarter, due to base yield growth in all three transportation segments, higher ground and U.S. domestic express volume, and benefits from profit improvement program initiatives. These improvements offset increased employee variable incentive compensation and unfavorable net impacts from fuel and weather.
Full Year Results
FedEx Corp. reported the following consolidated results for the full year:
|
Fiscal 2015 |
Fiscal 2014 | |||
|
Adjusted |
As Reported |
Adjusted |
As Reported | |
|
Revenue |
\$47.5 billion |
\$47.5 billion |
\$45.6 billion |
\$45.6 billion |
|
Operating Income |
\$4.26 billion |
\$1.87 billion |
\$3.59 billion |
\$3.82 billion |
|
Operating Margin |
9.0% |
3.9% |
7.9% |
8.4% |
|
Net Income |
\$2.57 billion |
\$1.05 billion |
\$2.19 billion |
\$2.32 billion |
|
Diluted EPS |
\$8.95 |
\$3.65 |
\$7.05 |
\$7.48 |
|
YOY share |
\$0.53 |
\$0.14 |
\$0.07 |
\$0.08 |
Adjusted operating results increased sharply during the year due to higher volumes and base yields in all three transportation segments, benefits from profit improvement program initiatives and a favorable net fuel impact. This was partially offset by increased incentive compensation and higher aircraft maintenance expense.
Capital spending for fiscal 2015 was \$4.3 billion.
Outlook
For fiscal 2016, FedEx projects adjusted earnings to be \$10.60 to \$11.10 per diluted share before year-end mark-to-market pension accounting adjustments, driven by continued improvement in base pricing and benefits from our profit improvement program. The outlook assumes continued moderate economic growth and does not include any operating results or costs related to TNT Express.
Capital spending for fiscal 2016 is expected to be approximately \$4.6 billion, which includes expansion of the FedEx Ground network and planned aircraft deliveries to support the FedEx Express fleet modernization program.
“Our operating performance significantly improved in fiscal 2015 as we focused on revenue quality and executed on our profit improvement program initiatives,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “We expect strong earnings growth in fiscal 2016 as we continue to focus on improving performance and successfully executing our profit improvement initiatives.”
FedEx Express Segment
For the fourth quarter, the FedEx Express segment reported:
|
Fiscal 2015 |
Fiscal 2014 1 |
Change | |
|
Revenue |
\$6.70 billion |
\$7.00 billion |
(4%) |
|
Adjusted operating income |
\$598 million |
\$534 million |
12% |
|
Adjusted operating margin |
8.9% |
7.6% |
1.3 pts |
|
Operating income |
\$322 million |
\$534 million |
(40%) |
|
Operating margin |
4.8% |
7.6% |
(2.8 pts) |
|
1 – There were no adjustments to fourth quarter fiscal 2014 results. | |||
During the fourth quarter, FedEx Express permanently retired 15 aircraft and 21 related engines, and adjusted the retirement schedule of an additional 23 aircraft and 57 engines. These actions resulted in \$276 million of impairment and related charges, of which \$246 million was noncash. These charges are excluded from this year’s adjusted operating income and margin.
Revenue decreased 4% as lower fuel surcharges and unfavorable currency exchange rates more than offset base yield and volume growth. U.S. domestic package volume grew 2%, driven by a 3% increase in overnight box. U.S. domestic revenue per package declined 4%, with lower fuel surcharges offsetting improved base rates. International export volume was down 1%, as FedEx International Economy grew 3% while FedEx International Priority® declined 2%. International export revenue per package decreased 8%, as lower fuel surcharges and unfavorable currency exchange rates more than offset higher base rates.
Adjusted segment operating results improved due to higher base yield and U.S. domestic volume growth, the benefit from profit improvement program initiatives and lower international expenses due to currency exchange rates. These benefits were partially offset by an unfavorable net fuel impact, higher incentive compensation and a negative impact from weather.
FedEx Ground Segment
For the fourth quarter, the FedEx Ground segment reported:
|
Fiscal 2015 |
Fiscal 2014 |
Change | |
|
Revenue |
\$3.57 billion |
\$3.01 billion |
19% |
|
Operating income |
\$603 million |
\$601 million |
– |
|
Operating margin |
16.9% |
20.0% |
(3.1 pts) |
Revenue increased due to the inclusion of GENCO results and higher ground volume and revenue per package. Ground yield increased 2% due to higher dimensional weight charges and increased rates, partially offset by lower fuel surcharges. Ground average daily volume grew 5% in the quarter, primarily driven by growth in residential deliveries. FedEx SmartPost average daily volume decreased 1% due to the reduction in volume from a major customer. FedEx SmartPost revenue per package increased 7% due to rate increases and improved customer mix, partially offset by higher postage costs.
Segment operating margin declined due predominantly to the inclusion of GENCO results and increased self-insurance reserves.
FedEx Freight Segment
For the fourth quarter, the FedEx Freight segment reported:
|
Fiscal 2015 |
Fiscal 2014 |
Change | |
|
Revenue |
\$1.57 billion |
\$1.55 billion |
1% |
|
Operating income |
\$137 million |
\$130 million |
5% |
|
Operating margin |
8.7% |
8.4% |
0.3 pts |
LTL revenue per shipment improved 2% due to higher rates from ongoing yield initiatives, significantly offset by lower fuel surcharges. Less-than-truckload (LTL) average daily shipments were flat.
Segment operating results improved primarily due to the positive impact of higher LTL revenue per 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 \$47 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 325,000 team members 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, Form 8-Ks and fourth quarter fiscal 2015 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 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.
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 execute on our profit improvement programs, 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.
TO GAAP FINANCIAL MEASURES
The company believes that meaningful analysis of our financial performance requires an understanding of the factors underlying that performance, including an understanding of items that are non-operational or non-recurring in nature. Excluding the credit associated with the segment reporting change, amounts associated with changes in pension accounting, aircraft impairment and related charges at FedEx Express and a legal reserve increase from results will assist investors in understanding and allow for more accurate comparisons of the company’s and its segments’ core operating performance. Where applicable, the impacts of these events are shown net of incentive compensation impacts. As required by SEC rules, the tables below present a reconciliation of our presented non-GAAP measures to the most directly comparable GAAP measures. The inability to predict the amount of any future year-end mark-to-market pension accounting adjustments and the amount and timing of any operating results and integration planning and acquisition-related costs with respect to TNT Express makes a reconciliation of the forecasts for adjusted earnings per diluted share and the adjusted effective tax rate impracticable.
Fourth Quarter Fiscal 2015
|
FedEx Corporation | ||||||||||
|
Dollars in millions, except EPS |
|
|
Diluted Earnings/ (Loss) Per Share | |||||||
|
Non-GAAP Measure |
\$1,275 |
10.5% |
\$753 |
\$2.66 | ||||||
|
Segment reporting change1 |
67 |
0.5% |
42 |
0.15 | ||||||
|
Mark-to-market pension |
(2,190) |
(18.1%) |
(1,382) |
(4.88) | ||||||
|
Aircraft impairment |
(276) |
(2.3%) |
(175) |
(0.62) | ||||||
|
Legal Reserve |
(197) |
(1.6%) |
(\$133) |
(0.47) | ||||||
|
GAAP Measure |
(\$1,321) |
(10.9%) |
(\$895) |
(\$3.16) | ||||||
|
Dollars in millions |
| |||||||
|
Non-GAAP Measure |
\$598 |
8.9% | ||||||
|
Aircraft impairment and related charges |
(276) |
(4.1%) | ||||||
|
GAAP Measure4 |
\$ 322 |
4.8% | ||||||
Full Year Fiscal 2015
| FedEx Corporation | ||||||||||||
|
Dollars in millions, except EPS |
|
|
| |||||||||
|
Non-GAAP Measure |
\$4,264 |
9.0% |
\$2,572 |
\$8.95 | ||||||||
|
Segment reporting change1 |
266 |
0.6% |
168 |
0.58 | ||||||||
|
Mark-to-market pension |
(2,190) |
(4.6%) |
(1,382) |
(4.81) | ||||||||
|
Aircraft impairment |
(276) |
(0.6%) |
(175) |
(0.61) | ||||||||
|
Legal Reserve |
(197) |
(0.4%) |
(133) |
(0.46) | ||||||||
|
GAAP Measure |
\$1,867 |
3.9% |
\$1,050 |
\$3.65 | ||||||||
|
Dollars in millions |
| |||||||
|
Non-GAAP Measure |
\$1,860 |
6.8% | ||||||
|
Aircraft impairment and related charges |
(276) |
(1.0%) | ||||||
|
GAAP Measure4 |
\$1,584 |
5.8% | ||||||
Fourth Quarter Fiscal 2014
|
FedEx Corporation | ||||||||||
|
Dollars in millions, except EPS |
|
|
Diluted Earnings Per Share3 | |||||||
|
Non-GAAP Measure |
\$1,220 |
10.3% |
\$753 |
\$2.54 | ||||||
|
Segment reporting change1 |
59 |
0.5% |
36 |
0.12 | ||||||
|
Mark-to-market pension |
(15) |
(0.1%) |
(9) |
(0.03) | ||||||
|
GAAP Measure |
\$1,264 |
10.7% |
\$780 |
\$2.62 | ||||||
Full Year Fiscal 2014
|
FedEx Corporation | ||||||||||
|
Dollars in millions, except EPS |
|
|
Diluted Earnings Per Share | |||||||
|
Non-GAAP Measure |
\$3,593 |
7.9% |
\$2,190 |
\$7.05 | ||||||
|
Segment reporting change1 |
237 |
0.5% |
143 |
0.46 | ||||||
|
Mark-to-market pension |
(15) |
0.0% |
(9) |
(0.03) | ||||||
|
GAAP Measure |
\$3,815 |
8.4% |
\$2,324 |
\$7.48 | ||||||
Notes
| 1 | – | At the segment level, the expected return on assets (EROA) has been set at 6.5%, which will equal the company’s consolidated EROA assumption in fiscal 2016. In fiscal years where the consolidated EROA is greater than 6.5% the difference is reflected as a credit at Corporate. The segment reporting change reflects this credit. |
| 2 | – | Mark-to-market pension accounting adjustments reflect the year-end noncash adjustment to the valuation of the company’s defined benefit retirement plans. |
| 3 | – | Does not sum to total due to rounding. |
| 4 | – | The most directly comparable GAAP measure is segment operating income. |
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