FedEx Corp. (NYSE: FDX) today reported the following
consolidated results for the fourth quarter ended May 31 (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
$17.4 billion
$17.4 billion
$17.8 billion
$17.8 billion
Operating income
$475 million
$907 million
$1.32 billion
$1.72 billion
Operating margin
2.7%
5.2%
7.4%
9.6%
Net (loss) income
($334 million)
$663 million
($1.97 billion)
$1.32 billion
Diluted (loss) EPS
($1.28)
$2.53
($7.56)
$5.01
This year’s and last year’s quarterly and full-year consolidated
results have been adjusted for:
Impact per diluted share
Fiscal 2020
Fiscal 2019
Fourth Quarter
Full Year
Fourth Quarter
Full Year
Mark-to-market retirement plan accounting
adjustment
$2.22
$2.22
$11.33
$11.22
Goodwill and other asset impairment
charges
1.40
1.58
—
—
TNT Express integration expenses
0.18
0.80
0.26
1.18
Business realignment costs
—
—
0.91
0.91
FedEx Ground legal matter
—
—
—
0.16
Net U.S. deferred tax liability
remeasurement
—
—
—
0.02
“Though our fiscal fourth quarter performance was severely
affected by the COVID-19 pandemic, I am extremely proud of the
herculean efforts of our team members,” said Frederick W. Smith,
FedEx Corp. chairman and CEO. “With safety as the first priority,
these men and women provided essential transportation of critical
supplies across the globe and delivered peak-level e-commerce
volumes in the United States. As a result of the strategic
investments we have made to enhance our capabilities and
efficiencies, FedEx is well positioned to support and benefit from
the reopening of the global economy.”
Virtually all revenue and expense line items were affected by
the COVID-19 pandemic during the quarter. While commercial volumes
were down significantly due to business closures across the globe,
there were surges in residential deliveries at FedEx Ground and in
transpacific and charter flights at FedEx Express, which required
incremental costs to serve. The company also incurred an
approximate $125 million increase in operating costs related to
personal protective equipment and medical/safety supplies, as well
as additional security and cleaning services to protect our team
members and ensure we are safely providing essential services for
our customers.
Additionally, operating results were negatively affected by one
fewer operating weekday, increased costs to expand services, higher
bad debt expense, increased self-insurance accruals and the loss of
business from a large customer. These factors were partially offset
by the strong residential delivery volume growth at FedEx Ground,
increased revenue per shipment at FedEx Freight, a favorable net
impact of fuel and lower variable incentive compensation
expenses.
Fourth quarter results include goodwill and other asset
impairments of approximately $370 million, primarily related to
goodwill impairment at FedEx Office. The COVID-19 pandemic resulted
in temporary store closures and declining print revenue at FedEx
Office during the fourth quarter and is expected to continue to
negatively impact its near-term operating performance. The
quarter’s results also include a pre-tax noncash mark-to-market
(MTM) retirement plan accounting adjustment of a net $794 million
loss. The negative impact from a 64 basis point decrease in the
discount rate more than offset the benefit from stronger than
expected asset returns.
Net income includes a tax benefit of $71 million related to the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
provision which allows tax losses to be offset against income from
prior years that was taxed at higher rates. This benefit was mostly
offset by a non-cash tax expense of $51 million due to a change in
deferred tax balances related to foreign operations.
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 2020
Fiscal 2019
As Reported (GAAP)
Adjusted (non-GAAP)
As Reported (GAAP)
Adjusted (non-GAAP)
Revenue
$69.2 billion
$69.2 billion
$69.7 billion
$69.7 billion
Operating income
$2.42 billion
$3.12 billion
$4.47 billion
$5.22 billion
Operating margin
3.5%
4.5%
6.4%
7.5%
Net income
$1.29 billion
$2.49 billion
$540 million
$4.13 billion
Diluted EPS
$4.90
$9.50
$2.03
$15.52
Capital spending for fiscal 2020 was $5.9 billion.
Outlook
FedEx is not providing an earnings forecast for fiscal 2021 as
the timing and pace of an economic recovery are uncertain.
FedEx will continue to manage network capacity, making
adjustments as needed to align with volumes and operating
conditions. FedEx will also remain focused on last-mile
optimization, including the continued rollout of the FedEx Express
initiative to utilize FedEx Ground for the transport and delivery
of select day-definite FedEx Express residential packages within
the U.S. FedEx Ground will complete the integration of FedEx
SmartPost packages into standard FedEx Ground operations by peak
season.
TNT Express integration expenses are estimated to total
approximately $1.7 billion through the completion of the physical
network integration in fiscal 2022, of which $175 million is
expected to be incurred this fiscal year.
Capital expenditures for fiscal 2021 are targeted to be
approximately $4.9 billion, a $1 billion year-over-year decline,
due primarily to reduced vehicle replacement spending and delayed
facility investments.
The company does not anticipate making contributions to its
tax-qualified U.S. domestic pension plans during fiscal 2021,
following voluntary contributions of $1 billion during each of the
last two fiscal years.
“We have reduced our planned capital spending where possible and
have taken actions to mitigate the impact of the pandemic,” said
Alan B. Graf, Jr., FedEx Corp. executive vice president and chief
financial officer. “While the near-term outlook is unclear, we
expect to benefit from the global recovery as we leverage the
strength of our unmatched air network and U.S. residential
capabilities, our yield management efforts and multiple initiatives
to improve our financial performance.”
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 $69 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 500,000
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 5:00 p.m. EDT on
June 30, 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. Forward-looking statements
include those preceded by, followed by or that include the words
“will,” “may,” “could,” “would,” “should,” “believes,” “expects,”
“anticipates,” “plans,” “estimates,” “targets,” “projects,”
“intends” or similar expressions. 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, the negative impacts of the
COVID-19 pandemic; 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; the impact of the United
Kingdom’s withdrawal from the European Union; changes in fuel
prices or currency exchange rates; our ability to match capacity to
shifting volume levels; 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, including our ability to defend
our interpretations of the Tax Cuts and Jobs Act (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; an increase in self-insurance accruals
and expenses; 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.
The financial section of this release is provided on the
company's website at investors.fedex.com.
RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES TO GAAP FINANCIAL MEASURES
Fourth Quarter and Full-Year 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 fourth quarter and adjusted full-year fiscal 2020 and 2019
consolidated operating income and margin, net (loss) income and
diluted (loss) earnings per share, and adjusted fourth quarter and
adjusted full-year 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):
- The fiscal 2020 and 2019 year-end MTM retirement plan
accounting adjustments for our defined benefit pension and other
postretirement plans;
- Goodwill and other asset impairment charges in fiscal
2020;
- TNT Express integration expenses incurred in fiscal 2020 and
2019;
- Business realignment costs incurred in fiscal 2019;
- Fiscal 2019 charges related to a legal matter involving FedEx
Ground; and
- Net U.S. deferred tax liability remeasurement revision during
fiscal 2019.
The MTM retirement plan accounting adjustments, goodwill and
other asset impairment charges, business realignment costs, and
charges related to a legal matter involving FedEx Ground are
excluded from our fourth quarter and full-year fiscal 2020 and 2019
consolidated and FedEx Express segment non-GAAP financial measures,
as applicable, because they are unrelated to our core operating
performance and/or to assist investors with assessing trends in our
underlying businesses.
We have incurred and expect to incur significant expenses
through fiscal 2022 in connection with our integration of TNT
Express. We have adjusted our fourth quarter and full-year fiscal
2020 and 2019 consolidated and FedEx Express segment 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 fiscal 2019 revision to the provisional benefit from the
remeasurement of our net U.S. deferred tax liability as of the date
of the enactment of the TCJA is excluded from our full-year fiscal
2019 consolidated non-GAAP financial measures because the
provisional benefit resulted from the non-recurring impact of a
significant change in the U.S. federal statutory income tax rate
due to the enactment of the TCJA on our overall deferred tax
position, which accumulated over many reporting periods prior to
enactment. The adjustment to our full-year fiscal 2019 consolidated
financial measures related to the TCJA includes only a revision to
this transitional impact.
As previously disclosed, the provisional benefit from the
remeasurement of our net U.S. deferred tax liability included in
our fiscal 2018 earnings was an estimate subject to adjustment
during a 12-month measurement period ending in fiscal 2019. The
exclusion of adjustments to this provisional benefit from our
full-year fiscal 2019 non-GAAP financial measures is consistent
with our presentation of the effects of the initial provisional
benefit in our fiscal 2018 non-GAAP earnings measures.
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 SEC rules, the tables
below present a reconciliation of our presented non-GAAP financial
measures to the most directly comparable GAAP measures.
Fourth Quarter Fiscal
2020
FedEx Corporation
Operating
Income
Net (Loss)
Diluted (Loss)
Earnings
Dollars in millions, except EPS
Income
Margin
Taxes1
Income2
Per Share3
GAAP measure
$475
2.7%
$15
($334)
($1.28)
MTM retirement plan accounting
adjustment4
—
—
211
583
2.22
Goodwill and other asset impairment
charges5
369
2.1%
3
366
1.40
TNT Express integration expenses6
63
0.4%
15
48
0.18
Non-GAAP measure
$907
5.2%
$244
$663
$2.53
FedEx Express Segment
Operating
Dollars in millions
Income
Margin7
GAAP measure
$338
3.9%
TNT Express integration expenses
54
0.6%
Non-GAAP measure
$392
4.6%
Full-Year Fiscal 2020
FedEx Corporation
Operating
Income
Net
Diluted Earnings
Dollars in millions, except EPS
Income
Margin
Taxes1
Income2
Per Share
GAAP measure
$2,417
3.5%
$383
$1,286
$4.90
MTM retirement plan accounting
adjustment4
—
—
211
583
2.22
Goodwill and other asset impairment
charges5
435
0.6%
19
416
1.58
TNT Express integration expenses6
270
0.4%
61
209
0.80
Non-GAAP measure
$3,122
4.5%
$674
$2,494
$9.50
FedEx Express Segment
Operating
Dollars in millions
Income
Margin
GAAP measure
$996
2.8%
TNT Express integration expenses
222
0.6%
Asset impairment charges
66
0.2%
Non-GAAP measure
$1,284
3.6%
Fourth Quarter Fiscal
2019
FedEx Corporation
Operating
Income
Net (Loss)
Diluted (Loss)
Earnings
Dollars in millions, except EPS
Income
Margin7
Taxes1
Income2
Per Share3
GAAP measure
$1,316
7.4%
($585)
($1,969)
($7.56)
MTM retirement plan accounting
adjustment4
—
—
902
2,981
11.33
Business realignment costs8
316
1.8%
76
240
0.91
TNT Express integration expenses6
84
0.5%
16
68
0.26
Non-GAAP measure
$1,716
9.6%
$409
$1,320
$5.01
FedEx Express Segment
Operating
Dollars in millions
Income
Margin
GAAP measure
$769
8.1%
TNT Express integration expenses
68
0.7%
Non-GAAP measure
$837
8.8%
Full-Year Fiscal 2019
FedEx Corporation
Operating
Income
Net
Diluted Earnings
Dollars in millions, except EPS
Income
Margin7
Taxes1
Income2
Per Share
GAAP measure
$4,466
6.4%
$115
$540
$2.03
MTM retirement plan accounting
adjustment4
—
—
902
2,981
11.22
TNT Express integration expenses6
388
0.6%
74
314
1.18
Business realignment costs8
320
0.5%
77
243
0.91
FedEx Ground legal matter
46
0.1%
3
43
0.16
Net U.S. deferred tax liability
remeasurement
—
—
(4)
4
0.02
Non-GAAP measure
$5,220
7.5%
$1,167
$4,125
$15.52
FedEx Express Segment
Operating
Dollars in millions
Income
Margin
GAAP measure
$2,176
5.8%
TNT Express integration expenses
325
0.9%
Non-GAAP measure
$2,501
6.7%
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 –
Does not sum to total due to difference in
weighted-average number of shares outstanding used to calculate EPS
in accordance with GAAP.
4 –
The MTM retirement plan accounting
adjustment reflects the year-end adjustment to the valuation of the
company’s defined benefit pension and other postretirement
plans.
5 –
Goodwill impairment charges are not
deductible for income tax purposes.
6 –
These expenses were recognized at FedEx
Corporate and FedEx Express.
7 –
Does not sum to total due to rounding.
8 –
Business realignment costs are recognized
at FedEx Corporate.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200630006000/en/
Media Contact: Jenny Robertson 901-434-4829 Investor Contact:
Mickey Foster 901-818-7468 Home Page: fedex.com
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