Company promises improved results for 2013
FedEx Corp. reported earnings of $1.73 per diluted share for the fourth quarter ended May 31, which includes a previously announced $0.26 per diluted share non-cash aircraft impairment charge at FedEx Express. Excluding this charge, earnings were $1.99 per diluted share in the fourth quarter compared to $1.75 per diluted share a year ago.
“FedEx delivered strong earnings results for fiscal 2012 due to the outstanding performance by FedEx Ground, our new value proposition at FedEx Freight and improved yields across all transportation segments,” said Frederick W. Smith, FedEx Corp. Chairman, President and CEO. “In fiscal 2013, we will continue our focus on improving our operating efficiencies and our financial performance across all of our businesses, while simultaneously enhancing our service capabilities. We remain absolutely committed to higher earnings, margins, cash flows and returns.”
Before impairment charges, FedEx reported consolidated revenues of $11.0 billion for Q4 (versus $10.6 billion in the year-ago period), operating income of $990 million (versus $888 million in the year-ago period), and net income of $634 million (versus $558 million in the year-ago period).
As announced on June 4, 2012, during the quarter FedEx Express permanently retired from service 18 Airbus A310-200 aircraft and 26 related engines, as well as six Boeing MD10-10 aircraft and 17 related engines. As a consequence, a non-cash impairment charge of $134 million ($84 million, net of tax, or $0.26 per diluted share) was recorded in the fourth quarter. The decision to permanently retire these aircraft will better align the U.S. domestic air network capacity of FedEx Express to match current and anticipated shipment volumes.
For the year ended May 31, 2012, before impairment charges, FedEx reported consolidated revenues of $42.7 billion (versus $39.3 billion in the year-ago period), operating income of $3.28 billion (versus $2.38 billion in the year-ago period), and net income of $2.09 billion (versus $1.45 billion in the year-ago period).
“We are focused on improving margins in all businesses, although we face certain cost increases in fiscal 2013,” said Alan B. Graf, Jr., FedEx Corp. Executive Vice-President and CFO. “These headwinds include higher employee-related costs, including higher pension expenses of approximately $150 million due to a historically low discount rate on our May 31, 2012 measurement date, as well as higher depreciation costs. We expect to mitigate these challenges by reducing costs and improving efficiencies, and are continuing to evaluate additional actions to substantially improve FedEx Express margins.”
FedEx projects earnings to be $1.45 to $1.60 per diluted share in the first quarter and $6.90 to $7.40 per diluted share for fiscal 2013. This earnings guidance does not include the impacts of the significant cost reduction programs currently under review that should be announced in the fall. The company’s outlook assumes U.S. GDP growth of 2.2 per cent and world GDP growth of 2.6 per cent during the fiscal year. Capital spending for fiscal 2013 is expected to decline to $3.9 billion, with fewer aircraft deliveries at FedEx Express and increased investment in the high-margin, high-return FedEx Ground business.
Meanwhile, FedEx announced on August 13 that it will offer voluntary buyouts at FedEx Express and FedEx Services to reduce its number of non-operational staff, to cope with the effects of lower shipping volumes and customer demands for lower-cost shipping options. Further details will likely be announced in October.