FedEx Corp. (NYSE: FDX) today reported earnings of $3.75 per
diluted share ($4.25 per diluted share on an adjusted basis) for
the fourth quarter ended May 31, compared to a loss of $0.26 per
diluted share (earnings of $3.30 per diluted share on an adjusted
basis) a year ago.
This year’s and last year’s quarterly
consolidated earnings have been adjusted for:
Impact per diluted share
Fourth Quarter
Fiscal 2017 Fiscal
2016 Mark-to-market (“MTM”) pension accounting
adjustments
($0.02
)
$
3.47
TNT Express integration expenses 0.32 — FedEx Trade Networks legal
matters 0.09 — TNT Express intangible asset amortization
0.06
—
FedEx Ground legal matters 0.05 0.02 TNT Express expenses and
operating results from the date of acquisition
—
0.34
Tax impact – legal entity restructuring for TNT integration
—
(0.28
)
“Strong fourth quarter results completed a record fiscal 2017,”
said Frederick W. Smith, FedEx Corp. chairman and chief executive
officer. “We enter fiscal 2018 confident FedEx Corp. will continue
to deliver outstanding value and opportunities for shareowners,
customers, and team members for years to come.”
Fourth Quarter Results
FedEx Corp. reported the following consolidated
results for the fourth quarter (adjusted measures exclude the items
listed above for the applicable fiscal year):
Fiscal 2017
Fiscal 2016
As
Reported(GAAP)
Adjusted(non-GAAP)
As
Reported(GAAP)
Adjusted(non-GAAP)
Revenue $15.7 billion $15.7 billion $13.0 billion $13.0 billion
Operating income (loss)
$1.58 billion
$1.76 billion
($68 million)
$1.51 billion
Operating margin 10.1% 11.2% (0.5%) 11.7%
Net income (loss)
$1.02 billion $1.15 billion ($70 million) $897 million Diluted EPS
$3.75 $4.25 ($0.26) $3.30
Operating results benefited from higher base rates, increased
package volume and the inclusion of TNT Express results. Net income
and earnings per share reflect tax benefits of $104 million, or
$0.37 per diluted share, related to the implementation of new
foreign currency tax regulations, the adoption of a new accounting
standard for share-based payments, and certain transactions related
to the TNT Express integration.
Full-Year Results
FedEx Corp. reported the following consolidated
results for the full year (adjusted measures exclude the items
listed above for the applicable fiscal year):
Fiscal 2017
Fiscal 2016
As
Reported(GAAP)
Adjusted(non-GAAP)
As
Reported(GAAP)
Adjusted(non-GAAP)
Revenue $60.3 billion $60.3 billion $50.4 billion $50.4 billion
Operating income $5.04 billion $5.48 billion $3.08 billion $5.01
billion Operating margin 8.4% 9.1% 6.1% 10.0% Net income $3.00
billion $3.33 billion $1.82 billion $3.02 billion Diluted EPS
$11.07 $12.30 $6.51 $10.80
Operating results benefited from higher base rates, increased
volume, continued cost management at FedEx Express and the
inclusion of TNT Express results. Tax benefits from the
implementation of new foreign currency tax regulations and the
adoption of a new accounting standard for share-based payments also
benefited results. These factors were partially offset by TNT
Express integration and restructuring expenses and network
expansion costs at FedEx Ground.
Capital spending for fiscal 2017 was $5.1 billion, as certain
FedEx Ground expansion projects were deferred to fiscal 2018.
For the year, the company acquired 2.96 million shares of FedEx
common stock at an average price of $172.13.
Outlook
FedEx is unable to forecast the fiscal 2018 year-end MTM pension
accounting adjustments. As a result, the company is unable to
provide fiscal 2018 earnings guidance on a GAAP basis.
Before year-end MTM pension accounting adjustments, earnings are
projected to be $12.45 to $13.25 per diluted share for fiscal 2018.
This forecast assumes moderate economic growth. The earnings
forecast before year-end MTM pension accounting adjustments and
excluding TNT Express integration expenses, including restructuring
charges, is $13.20 to $14.00 per diluted share for fiscal 2018.
These forecasts include an estimated $65 million of TNT Express
intangible asset amortization expense.
Capital spending for fiscal 2018 is expected to be approximately
$5.9 billion, which includes an increase in planned aircraft
deliveries to support the FedEx Express fleet modernization program
and continued investments in FedEx Ground automation and capacity
expansion, including certain projects deferred from fiscal
2017.
“Investments to modernize our aircraft fleet and expand our
FedEx Ground capacity are supporting our strong earnings growth,”
said Alan B. Graf, Jr., FedEx Corp. executive vice president and
chief financial officer. “We are very optimistic about fiscal 2018
as evidenced by our earnings outlook.”
FedEx Express Segment
For the fourth quarter, the FedEx Express
segment reported (adjusted measures exclude TNT Express integration
expenses):
Fiscal 2017
Fiscal 2016
As
Reported(GAAP)
Adjusted(non-GAAP)
As
Reported(GAAP)
Revenue $7.18 billion $7.18 billion $6.72 billion Operating income
$863 million $909 million $757 million Operating income YOY change
%
14%
20%
Operating margin 12.0% 12.7% 11.3%
Revenue increased 7% primarily due to increased package volume,
driven by international export growth of 5%, and higher base
rates.
Operating results increased primarily due to higher base rates,
increased package volume, a positive net benefit from fuel and the
continued benefit of cost management initiatives. As-reported
results include $46 million of expenses related to the integration
of TNT Express.
TNT Express Segment
For the fourth quarter, the TNT Express segment
reported (adjusted measures exclude integration expenses, including
restructuring charges, and intangible asset amortization
expense):
Fiscal 2017
As
Reported(GAAP)
Adjusted(non-GAAP)
Revenue $1.91 billion $1.91 billion Operating income $26 million
$83 million Operating margin 1.4% 4.4%
The TNT Express as-reported results include $37 million of
integration expenses, including restructuring charges, and $20
million of intangible asset amortization expense.
FedEx Ground Segment
For the fourth quarter, the FedEx Ground
segment reported:
Fiscal 2017
Fiscal 2016
Change Revenue $4.68 billion $4.29 billion 9%
Operating income $702 million $656 million 7% Operating margin
15.0% 15.3% (0.3 pts)
Revenue increased due primarily to higher base rates and average
daily package volume growth of 3%.
Operating income increased due to higher yields and volume,
partially offset by network expansion and staffing costs as well as
increased self-insurance reserves.
FedEx Freight Segment
For the fourth quarter, the FedEx Freight
segment reported:
Fiscal 2017
Fiscal 2016
Change Revenue $1.70 billion $1.61 billion 6%
Operating income $133 million $137 million (3%) Operating margin
7.8% 8.5% (0.7 pts)
Revenue increased due to higher base rates and fuel surcharges.
Average daily shipments were flat as the company focuses on
improving revenue quality.
Operating results decreased slightly as higher salaries and
wages and increased information technology expenses offset the
benefit from higher base rates.
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 $60 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. 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,
Statistical Books and fourth quarter fiscal 2017 Earnings
Presentation. These materials, as well as a webcast of the earnings
release conference call to be held at 5:00 p.m. EDT on June 20, 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, our ability
to successfully integrate the businesses and operations of FedEx
Express and TNT Express in the expected time frame, our ability to
match capacity to shifting volume levels, changes in fuel prices or
currency exchange rates, a significant data breach or other
disruption to our technology infrastructure, legal challenges or
changes related to FedEx Ground’s owner-operators and the drivers
providing services on their behalf, new U.S. domestic or
international government regulation, our ability to effectively
operate, integrate and leverage acquired businesses, disruptions or
modifications in service by, or changes in the business of, the
U.S. Postal Service, the impact from any terrorist activities or
international conflicts 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.
RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
Fourth Quarter and Full-Year Fiscal
2017 and Fiscal 2016 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 2017 and 2016
consolidated operating income and margin, net income and diluted
earnings per share, and adjusted fourth quarter and adjusted
full-year fiscal 2017 FedEx Express segment and TNT Express segment
operating income and margin. These financial measures have been
adjusted to exclude the impact of the following items (as
applicable):
- Year-end MTM pension accounting
adjustments (non-cash) for our defined benefit pension and other
postretirement plans;
- TNT Express integration expenses
incurred in fiscal 2017;
- Expenses incurred in fiscal 2016 in
connection with the settlement of a U.S. Customs and Border
Protection matter involving FedEx Trade Networks, net of recognized
insurance recovery;
- Fiscal 2017 charges related to certain
pending U.S. Customs and Border Protection matters involving FedEx
Trade Networks;
- TNT Express intangible asset
amortization;
- Expenses incurred in fiscal 2016 and
2017 in connection with the settlement of (and certain expected
losses relating to) independent contractor litigation matters
involving FedEx Ground (net of recognized insurance recovery for
fiscal 2016); and
- Expenses incurred in fiscal 2016
associated with the acquisition, financing and integration of 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 legal entity restructuring to facilitate the integration
of FedEx Express and TNT Express that is presented as a separate
item herein.
The MTM accounting-related adjustments are excluded from our
fourth quarter and full-year fiscal 2017 and 2016 non-GAAP
financial measures because these non-cash items are unrelated to
our core operating performance.
We expect to incur significant expenses over the next few years
in connection with our integration of TNT Express. We have adjusted
our fourth quarter and full-year fiscal 2017 financial measures and
the FedEx Express segment and TNT Express segment fourth quarter
and full-year fiscal 2017 financial measures to exclude these items
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,
advertising expenses and travel. Internal salaries and wages are
included only to the extent the individuals are assigned full-time
to integration activities. The integration expenses also include
restructuring charges at TNT Express.
The litigation- and legal-related matters are excluded from our
fourth quarter and full-year fiscal 2017 and 2016 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 also have recurring intangible asset amortization expenses at
TNT Express. The company and TNT Express incurred, and will
continue incurring, these expenses solely as a result of the
company’s acquisition of TNT Express and the related purchase
accounting treatment. We excluded intangible asset amortization
from our fourth quarter and full-year fiscal 2017 non-GAAP
financial results and the TNT Express segment’s fourth quarter and
full-year fiscal 2017 non-GAAP financial results to help investors
understand the impact of these expenses on TNT Express’s base
business and to facilitate the overall comparability of the
company’s consolidated financial results. We will not adjust our
financial results for intangible asset amortization beginning in
fiscal 2018 because the company’s financial results will be
comparable year-over-year at that time. Beginning in fiscal 2018,
we will recast our fiscal 2017 non-GAAP financial results to
include TNT Express intangible asset amortization.
The TNT Express expense items, as well as the income tax impact
of an internal corporate legal entity restructuring to facilitate
the integration of FedEx Express and TNT Express, are excluded from
our fourth quarter and full-year fiscal 2016 non-GAAP financial
measures because these items impacted the year-over-year
comparability of our financial statements and are not related to
our core operating performance. We excluded TNT Express operating
results from the date of acquisition from our fourth quarter and
full-year fiscal 2016 non-GAAP financial measures because it was
acquired on May 25, 2016 (six days before the end of our fiscal
year), and its financial results were immaterial from the date of
acquisition and not presented as a separate segment.
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 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 2018 Earnings
Guidance
Our fiscal 2018 earnings guidance is a non-GAAP financial
measure because it excludes the fiscal 2018 year-end MTM pension
accounting adjustments and projected fiscal 2018 TNT Express
integration expenses, including restructuring charges at TNT
Express. We have provided this non-GAAP earnings guidance measure
for the same reasons that were outlined above for historical
non-GAAP measures.
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. For this
reason, a full reconciliation of our fiscal 2018 earnings guidance
to the most directly comparable GAAP measure is impracticable. It
is reasonably possible, however, that our fourth quarter fiscal
2018 MTM pension accounting adjustments could have a material
impact on our fiscal 2018 consolidated financial results. The last
table included below outlines the impact of the items that are
excluded from our earnings guidance, other than the year-end MTM
pension accounting adjustments.
Fourth Quarter
Fiscal 2017
FedEx
Corporation
Dollars in millions, except EPS
Operating
Income
Net
DilutedEarnings
Income
Margin
Taxes1
Income2
Per Share
GAAP measure $ 1,581 10.1 %
$ 440 $ 1,020 $ 3.75 MTM
pension accounting adjustments3
(24
)
(0.1
%)
(18
)
(6
)
(0.02
)
TNT Express integration expenses4
124
0.8
%
37
87
0.32
FedEx Trade Networks legal matters
39
0.2
%
15
24
0.09
TNT Express intangible asset amortization
20
0.1
%
4
16
0.06
FedEx Ground legal matters
22
0.1
%
9
13
0.05
Non-GAAP measure $ 1,762 11.2 % $ 487 $ 1,154 $ 4.25
FedEx Express
Segment
Dollars in millions
Operating
Income
Margin
GAAP measure $ 863 12.0 % TNT
Express integration expenses
46
0.7 % Non-GAAP measure $ 909 12.7 %
TNT Express
Segment
Dollars in millions
Operating
Income
Margin
GAAP measure $ 26 1.4 % TNT
Express integration expenses 37 1.9 % TNT Express intangible asset
amortization
20 1.1
% Non-GAAP measure $ 83 4.4 %
Full-Year Fiscal
2017
FedEx
Corporation
Dollars in millions, except EPS
Operating
Income
Net
DilutedEarnings
Income
Margin
Taxes1
Income2
Per Share5
GAAP measure $ 5,037 8.4 %
$ 1,582 $ 2,997 $ 11.07
MTM pension accounting adjustments3
(24
)
—
(18
)
(6
)
(0.02
)
TNT Express integration expenses4
327
0.5
%
82
245
0.91
TNT Express intangible asset amortization
74
0.1
%
17
57
0.21
FedEx Trade Networks legal matters
39
0.1
%
15
24
0.09
FedEx Ground legal matters
22
—
9
13
0.05
Non-GAAP measure $ 5,475 9.1 % $ 1,687 $ 3,330 $ 12.30
FedEx Express
Segment
Dollars in millions
Operating
Income
Margin
GAAP measure $ 2,678 9.8 % TNT
Express integration expenses
117
0.4 % Non-GAAP measure $ 2,795 10.2 %
TNT Express
Segment
Dollars in millions
Operating
Income
Margin
GAAP measure $ 84 1.1 % TNT
Express integration expenses 89 1.2 % TNT Express intangible asset
amortization
74 1.0
% Non-GAAP measure $ 247 3.3 %
Fourth Quarter
Fiscal 2016
FedEx
Corporation
Dollars in millions, except EPS
Operating
Income
Net
DilutedEarnings
Income5
Margin
Taxes1
Income2
Per Share5
GAAP measure ($ 68 ) (0.5 %)
($111 ) ($ 70 ) ($0.26 )
Tax impact – legal entity restructuring
for TNT integration
—
—
76
(76
)
(0.28
)
MTM pension accounting adjustments3
1,498
11.6
%
552
946
3.47
TNT expenses and operating results6
66
0.5
%
(13
)
91
0.34
FedEx Ground legal matter
11
0.1
%
4
6
0.02
Non-GAAP measure $ 1,506 11.7 % $ 508 $ 897 $ 3.30
Full-Year Fiscal
2016
FedEx
Corporation
Dollars in millions, except EPS
Operating
Income
Net
DilutedEarnings
Income5
Margin5
Taxes1,5
Income2
Per Share
GAAP measure $ 3,077 6.1 %
$ 920 $ 1,820 $ 6.51 Tax
impact – legal entity restructuring for TNT integration
—
—
76
(76
)
(0.27
)
MTM pension accounting adjustments3
1,498
3.0
%
552
946
3.39
FedEx Ground legal matters7
256
0.5
%
97
158
0.57
TNT expenses and operating results6
115
0.2
%
6
125
0.45
FedEx Trade Networks legal matter7
69
0.1
%
26
43
0.15
Non-GAAP measure $ 5,014 10.0 % $ 1,678 $ 3,016 $ 10.80
Fiscal 2018
Earnings Guidance
Dollars in millions, except EPS
Adjustments
Diluted EarningsPer
Share
Earnings per diluted share before MTM
pension accounting adjustments (non-GAAP)8
$12.45 to $13.25
TNT Express integration expenses $ 275
Income tax effect1
(71 ) Net of tax effect $ 204 0.75 Earnings per
diluted share with adjustments8
$13.20 to $14.00
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 –
MTM pension accounting adjustments reflect
the year-end noncash adjustment to the valuation of the company’s
defined benefit pension and other postretirement plans.
4 – These expenses, including restructuring charges at TNT Express,
were recognized at FedEx Corporate, FedEx Express and TNT Express.
5 – Does not sum to total due to rounding. 6 – TNT Express’s
operating results are immaterial from the time of acquisition (May
25, 2016). 7 – Net of recognized insurance recovery. 8 – The
year-end MTM pension accounting adjustments, which are
impracticable to calculate at this time, are excluded.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170620006447/en/
FedEx Corp.Media Contact:Jess Bunn, 901-818-7463orInvestor
Contact:Mickey Foster, 901-818-7468Home Page: fedex.com
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