This is a summary of the fourth quarter fiscal 2008 earnings call conducted by FedEx Corp. (FDX) on June 18, 2008
Management:
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Chairman, President & CEO: Frederick W. Smith
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CFO & Executive VP: Alan B. Graf, Jr.
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Executive VP, Marketing Development: T. Michael Glenn
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Executive VP, General Counsel & Secretary Christine P. Richards
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Executive VP FedEx Information Services: Robert B. Carter
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Vice President Investor Relations: Mickey Foster
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President & CEO of FedEx Express: David J. Bronczek
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President & CEO of FedEx Ground: David F. Rebholz
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President & CEO of FedEx Freight:Douglas G. Duncan
Key investor issues:
- Revenue was $9.87 billion, up 8% from $9.15 billion the previous year.
- Net loss of $241 million or 96 cents a share, down from last year''s net income of $610 million or $1.96 a share.
Full year highlights:
- Revenue was $38.0 billion, up 8% from $35.2 billion in 2007.
- Net income was $1.13 billion or $3.60 a share, down 44% from last year''s $2.02 billion or $6.48 a share.
- Capital spending amounted to $2.9 billion.
Fourth Quarter Highlights:
Revenue of $9.87 billion, up 8% from $9.15 billion the previous year as 6% growth in FedEx International Priority® (IP) and FedEx Ground shipments were mostly offset by continued declines in U.S. domestic express shipments.
- The firm realized a net loss of $241 million or 96 cents a share, down from last year''s net income of $610 million or $1.96 a share as as a result of the Kinko''s-related charge.
- Results were also impacted by the continued escalation of fuel prices, and the weak U.S. economy, which limited demand for U.S. domestic express and copy and print services.
Segmental Analysis:
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FedEx Express revenue of $6.37 billion, was up 9% from last year''s $5.83 billion and operating income was $426 million, down 31% from $613 million last year
- IP package revenue grew 16% as IP revenue per package grew 11%, primarily due to higher fuel surcharges and favorable exchange rates.
- IP average daily package volume grew 6%, led by increases in volume from Asia, the United States and Europe.
- U.S. domestic revenue per package increased 9% due to increased fuel surcharges and higher rate per pound, while package volume declined by 3%.
- Operating income and margin were negatively impacted by softness in the U.S. economy, escalating fuel prices and one fewer operating day, which more than offset the benefits of international revenue growth and exchange rates.
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FedEx Ground revenue of $1.72 billion, was up 8% from last year''s $1.58 billion while operating income came in at $203 million, down 26% from $274 million a year ago on declining margins.
- FedEx Ground average daily package volume grew 6% year over year due to increased commercial business and the growth of its FedEx Home Delivery service.
- Yield improved 4% primarily due to the general rate increase, higher fuel surcharges and extra service revenues.
- Operating income and margin were lower due to a negative net fuel impact, investments to expand network capacity and costs to enhance and defend the independent contractor model.
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FedEx Freight revenue of $1.31 billion, was up 5% from last year''s $1.25 billion.
- Operating income was $99 million, down 21% from $125 million a year ago as the operating margin of 7.6%, dropped from 10.0% the previous year due to the impact of increased fuel costs.
- Less-than-truckload (LTL) average daily shipments increased 3% year over year and improved sequentially throughout the quarter
- LTL yield improved 4% year over year primarily due to increased fuel surcharges and higher base rates.
- FedEx National LTL will continue to serve the long-haul market as a separate operating company, with its general office in Lakeland, Fla.
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FedEx Services revenue which includes the operations of FedEx Office and FedEx Global Supply Chain Services, was down 1% year over year due primarily to lower copy and print revenues.
- The changes at FedEx Office are designed to focus the division on profitable core revenue growth and incremental shipping volume, which contributes about $1 billion of revenues annually to FedEx Express and FedEx Ground.
- FedEx Services expenses net of revenues, increased year over year due to higher marketing and information technology costs and increased net operating costs at FedEx Office associated with network expansion and service improvement activities.
Outlook for Fiscal 2009:
- FedEx projects earnings to be 80 cents to $1.00 per diluted share in the first quarter in contrast to $1.58 per diluted share a year ago when crude oil averaged about $70 per barrel and the U.S. economy was stronger.
- The company is currently targeting fiscal 2009 earnings of $4.75 to $5.25 per diluted share.
The operating environment for fiscal 2009 is expected to be very difficult due to the weak U.S. economy and extremely high fuel prices.
- FedEx will focus on reducing expenses and remaining cash flow positive, and will continue to take positive steps to improve the customer experience across the portfolio of services.
-The capital spending forecast for the year is less than $3 billion, which includes significant investments in more fuel-efficient aircraft.
Key questions and answers from the fourth quarter fiscal 2008 earnings call conducted by FedEx Corp. (FDX) on June 18, 2006
John Barnes:
Concerning your capital expenditures and fleet replacement, can you talk in detail in terms of what magnitude of cap ex pullback you would consider if the current economic trends were to persist for the balance of this year or maybe into 2009?
Alan B. Graf, Jr. We have over the last several years developed a strong cash flow, we are going to have very strong cash flow in 2009, our EBITDA is going to be positive. If we needed to we could reduce our cap ex to below our depreciation levels, but having said that we certainly would like to get 757s and 777s into our fleet as rapidly as possible because of their energy efficiency.
