Fiscal 2016 ‘a historic year of significant
accomplishments’
FedEx Corp. (NYSE: FDX) today reported a loss of $0.26 per
diluted share for the fourth quarter ended May 31 compared to a
loss of $3.16 per diluted share a year ago. With adjustments,
FedEx’s fourth quarter earnings were $3.30 per diluted share
compared to adjusted earnings of $2.66 per diluted share a year
ago.
This year’s and last year’s quarterly consolidated earnings have
been adjusted for:
Impact per diluted share
Fourth Quarter
Fiscal 2016 Fiscal 2015
Mark-to-market pension accounting adjustments
($3.47)
($4.88)
TNT Express expenses and operating results
from the date of acquisition
(0.34)
—
FedEx Ground legal matter (0.02) (0.47) Tax impact – corporate
restructuring for TNT integration
0.28
—
Aircraft impairment and related charges
—
(0.62)
Changes in segment reporting — 0.15
“Fiscal 2016 was a successful year for FedEx in many ways,” said
Frederick W. Smith, FedEx Corp. chairman, president and chief
executive officer. “Of particular note was our corporate operating
margin improvement. Our May 25 acquisition of TNT Express capped a
historic year of significant accomplishments that benefited
shareowners, team members and customers, and strongly positions
FedEx for long-term profitable growth.”
Fourth Quarter Results
FedEx Corp. reported the following consolidated results for the
fourth quarter:
Fiscal 2016
Fiscal 2015
As Reported
(GAAP)
Adjusted
(non-GAAP)
As Reported
(GAAP)
Adjusted
(non-GAAP)
Revenue $13.0 billion $13.0 billion $12.1 billion $12.1 billion
Operating (loss) income
($68 million)
$1.51 billion
($1.32 billion)
$1.28 billion
Operating margin (0.5%) 11.7% (10.9%) 10.5% Net (loss) income ($70
million) $897 million ($895 million) $753 million Diluted EPS
($0.26) $3.30 ($3.16) $2.66
Operating results benefited from improved yield management, the
continued positive impacts from profit improvement program
initiatives at FedEx Express and strong volume growth at FedEx
Ground. One additional operating day and the positive net impact of
fuel also benefited results.
During the quarter, the company acquired 3.8 million shares of
FedEx common stock at an average price of $156.21.
Full Year Results
FedEx Corp. reported the following consolidated results for the
full year:
Fiscal 2016
Fiscal 2015
As Reported
(GAAP)
Adjusted
(non-GAAP)
As Reported
(GAAP)
Adjusted
(non-GAAP)
Revenue $50.4 billion $50.4 billion $47.5 billion $47.5 billion
Operating income $3.08 billion $5.01 billion $1.87 billion $4.26
billion Operating margin 6.1% 10.0% 3.9% 9.0% Net income $1.82
billion $3.02 billion $1.05 billion $2.57 billion Diluted EPS $6.51
$10.80 $3.65 $8.95
Operating results benefited from profit improvement program
initiatives at FedEx Express, e-commerce growth and the positive
net impact of fuel. Two additional operating days also benefited
the company’s transportation segments. These factors were partially
offset by lower-than-anticipated revenue at FedEx Freight. Network
expansion costs and self-insurance expenses at FedEx Ground and
higher incentive compensation accruals also negatively impacted
overall results.
Capital spending for fiscal 2016 was $4.8 billion.
For the year, the company acquired 18.2 million shares of FedEx
common stock at an average price of $149.35.
Outlook
FedEx is unable to forecast the fiscal 2017 year-end
mark-to-market pension accounting adjustments as well as TNT
Express financial results, including the combined impact of
integration expenses and financing costs. As a result, the company
is unable to provide unadjusted earnings guidance. Adjusted
earnings for fiscal 2017 are projected to be $11.75 to $12.25 per
diluted share excluding TNT Express financial results net of
integration expenses and financing costs, and the mark-to-market
pension accounting adjustments. The outlook assumes continued
moderate economic growth.
Capital spending for fiscal 2017 is expected to be approximately
$5.1 billion, which includes ongoing expansion of the FedEx Ground
network and planned aircraft deliveries to support the FedEx
Express fleet modernization program. Investments in TNT Express are
not included in this forecast.
“Our strong operating cash flow generation allowed us to invest
in FedEx’s future this past year,” said Alan B. Graf, Jr., FedEx
Corp. executive vice president and chief financial officer. “We
executed on numerous capital projects and completed the acquisition
of TNT Express, our largest ever. We were especially pleased with
FedEx Express’s continued improvement in operating margin, which
was 11.3% in the fourth quarter.”
FedEx Express Segment
For the fourth quarter, the FedEx Express segment reported:
Fiscal
2016 Fiscal 2015
Change Revenue $6.72 billion $6.70 billion —
Operating income $757 million $322 million 135% Operating margin
11.3% 4.8% 6.5 pts Adjusted operating income $757 million $598
million 27% Adjusted operating margin 11.3% 8.9% 2.4 pts
Revenue increased slightly as improved yield management and the
benefit of one additional operating day more than offset lower fuel
surcharges and unfavorable currency exchange rates.
Operating results improved due to yield management efforts, the
ongoing benefits from profit improvement program initiatives and
one additional operating day. Fuel had a positive year-over-year
net impact on the quarter, while currency exchange rate changes had
little net impact. Prior year results include the impact of
aircraft impairment and related charges.
FedEx Ground Segment
For the fourth quarter, the FedEx Ground segment reported:
Fiscal
2016 Fiscal 2015
Change Revenue $4.29 billion $3.57 billion 20%
Operating income $656 million $603 million 9% Operating margin
15.3% 16.9% (1.6 pts)
Revenue increased due to a 10% increase in FedEx Ground volume
and a 7% improvement in revenue per package driven by the recording
of FedEx SmartPost revenues on a gross basis versus the previous
net treatment. Revenue per package was also favorably impacted by
increased rates, partially offset by lower fuel surcharges.
Operating income grew due to higher volumes and increased
revenue per package as well as the benefit of one additional
operating day. These factors were partially offset by higher
operating costs and network expansion expenses. Operating margin
decreased due to the change in FedEx SmartPost revenue
reporting.
FedEx Freight Segment
For the fourth quarter, the FedEx Freight segment reported:
Fiscal
2016 Fiscal 2015
Change Revenue $1.61 billion $1.57 billion 2%
Operating income $137 million $137 million — Operating margin 8.5%
8.7% (0.2 pts)
Revenue increased as less-than-truckload (LTL) average daily
shipment growth of 8% and the benefit from an additional operating
day more than offset the impact from lower fuel surcharges and
weight per shipment.
Operating income was unchanged, as improved operating
efficiencies, higher revenue, and an additional operating day were
offset by increased salaries and employee benefits expense and the
impact from lower weight 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 $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. 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 2016 Statistical Book. These materials, as
well as a webcast of the earnings release conference call to be
held at 5:00 p.m. EDT on June 21, 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 effectively operate, integrate and leverage acquired businesses,
our ability to execute on our profit improvement initiatives, 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,
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 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.
The financial section of this release is provided on the
company's website at investors.fedex.com.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
Fiscal 2016 and Fiscal 2015
Results
The company reports its financial results in accordance with
accounting principles generally accepted in the United States
(“GAAP” or referred to herein as “reported”). We have supplemented
the reporting of our financial information determined in accordance
with GAAP with certain non-GAAP financial measures, including,
“adjusted” consolidated operating income and margin, net income and
earnings per share, as well as “adjusted” FedEx Express segment
operating income and margin for fourth quarter and full-year fiscal
2015.
We believe these non-GAAP (or “adjusted”) financial measures
provide additional information to assist investors in understanding
and assessing the company’s and our business segments’ ongoing
performance and financial results (including progress on our profit
improvement initiatives), as well as assessing our prospects for
future performance. We believe these adjusted financial measures
facilitate more meaningful analysis and more accurate 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 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. In
addition, our Board of Directors, upon the recommendation of its
Compensation Committee, has approved the exclusion of these items
for purposes of our incentive compensation plans.
For the reasons set forth above, we have supplemented the
presentation of our reported fourth quarter and full-year fiscal
2016 and 2015 consolidated operating income and margin, net income
and earnings per share, and reported fourth quarter and full-year
fiscal 2015 FedEx Express segment operating income and margin, with
similar measures that exclude the impact of certain transactions
(as applicable):
- The year-end mark-to-market (“MTM”)
accounting adjustments (non-cash) for our defined benefit pension
and other postretirement plans;
- The adjustment in “Corporate,
eliminations and other” resulting from the change in recognizing
expected return on plan assets for our defined benefit pension and
other postretirement plans at the segment level associated with the
adoption of MTM accounting in fiscal 2015;
- Expenses in connection with the
settlement of (and certain expected losses relating to) independent
contractor litigation matters involving FedEx Ground, net of
recognized insurance recovery;
- Expenses in connection with the
settlement of a U.S. Customs and Border Protection matter involving
FedEx Trade Networks, net of recognized insurance recovery;
- Expenses associated with the
acquisition, financing and integration of TNT Express N.V. (“TNT
Express”) and its operating results from the date of acquisition,
net of any tax impact, including the income tax impact of an
internal corporate restructuring to facilitate the integration of
FedEx Express and TNT Express that is presented as a separate item
herein; and
- Aircraft impairment and related charges
incurred in the fourth quarter of fiscal 2015.
As required by Securities and Exchange Commission rules, the
tables below present a reconciliation of our presented non-GAAP
measures to the most directly comparable GAAP measures. The
non-GAAP measures supplement and should be read together with, and
are not an alternative or substitute for, our reported financial
results. 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.
Fiscal 2017 Earnings
Guidance
Our fiscal 2017 earnings guidance, as well as any forecast of
the underlying effective tax rate, is a non-GAAP financial measure
because it excludes the fiscal 2017 year-end MTM pension accounting
adjustments and fiscal 2017 TNT Express financial results,
including the combined impact of integration expenses and financing
costs. 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. 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 and effective tax
rate.
We acquired TNT Express on May 25, 2016, and we are in the very
beginning of the process of integrating TNT Express with our FedEx
Express operations, which will occur over several years. With our
acquisition of TNT Express, we now have full access to TNT
Express’s business operations and plans. Fiscal 2017 will be a year
of transition as we obtain a full understanding of TNT Express’s
businesses, develop a business plan and validate and refine our
integration plan for TNT Express using our well-established
methodologies and processes. Moreover, we are uncertain how
integration activities will impact TNT Express’s base business,
including how integration activities will impact TNT Express’s
previously announced transformation and turnaround strategy,
Outlook. In addition, given the timing and complexity of the TNT
Express acquisition, the presentation of TNT Express in our
financial statements, including the allocation of the purchase
price, is preliminary and will likely change in future periods,
perhaps significantly. We plan to complete our purchase price
allocation no later than the fourth quarter of fiscal 2017. As a
result, we are unable at this time to forecast TNT Express’s fiscal
2017 financial results, including the combined impact of
integration expenses and financing costs. Therefore, these results
are not included in our earnings guidance. It is reasonably
possible, however, that fiscal 2017 TNT Express financial results,
including the combined impact of integration expenses and financing
costs, could have a material impact on our fiscal 2017 consolidated
financial results and effective tax rate.
For these reasons, a reconciliation of our fiscal 2017 earnings
guidance to the most directly comparable GAAP measure is
impracticable.
Fourth Quarter
Fiscal 2016
FedEx Corporation
Dollars in millions, except EPS
Operating
Income
Taxes2
Net
Income/
(Loss)
Diluted
Earnings/
(Loss)
Per
Share1
Income/
(Loss)1
Margin
Non-GAAP measure3 $ 1,506 11.7 % $ 508 $ 897 $ 3.30 MTM
pension accounting adjustments4 (1,498 ) (11.6 %) (552 ) (946 )
(3.47 ) TNT expenses and operating results5 (66 ) (0.5 %) 13 (91 )
(0.34 ) Tax impact – corporate restructuring for TNT integration
—
—
(76
)
76
0.28
FedEx Ground legal matter
(11 )
(0.1 %) (4
) (6 )
(0.02 ) GAAP measure3
($ 68 )
(0.5 %)
($111 ) ($
70 )
($0.26 )
Full Year Fiscal
2016
FedEx Corporation
Dollars in millions, except EPS
Operating
Income
Taxes1,2
Net
Income
Diluted
Earnings
Per
Share
Income1
Margin1
Non-GAAP measure3 $ 5,014 10.0 % $ 1,678 $ 3,016 $ 10.80 MTM
pension accounting adjustments4 (1,498 ) (3.0 %) (552 ) (946 )
(3.39 ) TNT expenses and operating results5 (115 ) (0.2 %) (6 )
(125 ) (0.45 ) Tax impact – corporate restructuring for TNT
integration
—
—
(76
)
76
0.27
FedEx Ground legal matters6 (256 ) (0.5 %) (97 ) (158 ) (0.57 )
FedEx Trade Networks legal matter6
(69
) (0.1 %)
(26 ) (43
) (0.15 ) GAAP
measure3
$ 3,077
6.1 % $
920 $
1,820 $
6.51
Fourth Quarter
Fiscal 2015
FedEx Corporation
Dollars in millions, except EPS
Operating
Income
Taxes1,2
Net
Income/
(Loss)
Diluted
Earnings/
(Loss)
Per
Share
Income/
(Loss)
Margin1
Non-GAAP measure3 $ 1,275 10.5 % $ 426 $ 753 $ 2.66 Segment
reporting change7 67 0.5 % 25 42 0.15 MTM pension accounting
adjustments4 (2,190 ) (18.1 %) (808 ) (1,382 ) (4.88 ) Aircraft
impairment and related charges (276 ) (2.3 %) (101 ) (175 ) (0.62 )
FedEx Ground legal matter
(197 )
(1.6 %) (64
) (133 )
(0.47 ) GAAP measure3
($1,321 )
(10.9 %)
($521
)
($895
)
($3.16 )
Dollars in millions
FedEx Express
Operating
Income
Margin
Non-GAAP measure $ 598 8.9 % Aircraft impairment and related
charges
(276 ) (4.1
%) GAAP measure8
$
322 4.8
%
Full Year Fiscal
2015
FedEx Corporation
Dollars in millions, except EPS
Operating
Income
Taxes1,2
Net
Income
Diluted
Earnings
Per
Share
Income
Margin1
Non-GAAP measure3 $ 4,264 9.0 % $ 1,451 $ 2,572 $ 8.95 Segment
reporting change7 266 0.6 % 98 168 0.58 MTM pension accounting
adjustments4 (2,190 ) (4.6 %) (808 ) (1,382 ) (4.81 ) Aircraft
impairment and related charges (276 ) (0.6 %) (101 ) (175 ) (0.61 )
FedEx Ground legal matter
(197 )
(0.4 %) (64
) (133 )
(0.46 ) GAAP measure3
$ 1,867
3.9 % $
577 $
1,050 $
3.65
Dollars in millions
FedEx Express
Operating
Income
Margin
Non-GAAP measure $ 1,860 6.8 % Aircraft impairment and related
charges
(276 ) (1.0
%) GAAP measure8
$
1,584 5.8
%
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. The
taxes associated with TNT Express expenses also include the impact
from non-deductible expenses incurred as part of the
acquisition.
3 – Effect of “Total other (expense) income” on net income amount
not shown. 4 – MTM pension accounting adjustments reflect the
year-end noncash adjustment to the valuation of the company’s
defined benefit pension and other postretirement plans. 5 – TNT
Express’s operating results are immaterial from the time of
acquisition (May 25, 2016). 6 – Net of recognized insurance
recovery. 7 – Represents the adjustment in “Corporate, eliminations
and other” resulting from the change in recognizing expected return
on plan assets for our defined benefit pension and other
postretirement plans at the segment level associated with the
adoption of MTM accounting. 8 – The most directly comparable GAAP
measure is segment operating income.
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FedEx Corp.Media Contact:Jess Bunn, 901-818-7463orInvestor
Contact:Mickey Foster, 901-818-7468Home Page: fedex.com
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