FedEx Corp. Reports Fourth Quarter and Full-Year Earnings
Fiscal 2019 |
Fiscal 2018 |
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As Reported |
Adjusted |
As Reported |
Adjusted |
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Revenue | |
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Operating income | |
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Operating margin | 7.4% | 9.6% | 7.7% | 10.7% | ||||||||
Net (loss) income | ( |
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Diluted (loss) EPS | ( |
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This year’s and last year’s quarterly and full-year consolidated results have been adjusted for:
Fiscal 2019 |
Fiscal 2018 |
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Cost/(Benefit) per diluted share |
Fourth |
Full |
Fourth |
Full |
||||||||||||
Mark-to-market retirement plan accounting adjustment |
$ |
11.33 |
$ |
11.22 |
( |
) |
( |
) |
||||||||
TNT Express integration expenses |
0.26 |
1.18 |
0.39 |
1.36 |
||||||||||||
Business realignment costs | 0.91 | 0.91 | — | — | ||||||||||||
FedEx Ground legal matter | — | 0.16 | — | — | ||||||||||||
Net |
— |
0.02 |
— |
(4.22 |
) |
|||||||||||
|
— |
— |
1.40 |
1.39 |
||||||||||||
FedEx Logistics legal matters | — | — | 0.01 | 0.02 | ||||||||||||
“Fiscal 2019 was a year of both challenge and change for FedEx,” said
Fourth quarter operating income was negatively affected by lower FedEx International Priority package and freight revenues at FedEx Express, higher costs at FedEx Ground and business realignment costs primarily associated with the
The higher FedEx Ground costs were primarily related to increased purchased transportation rates and the January launch of year-round, six-day-per-week operations. Last year’s results for FedEx Express included an
The pre-tax noncash mark-to-market (MTM) retirement plan accounting adjustment of a net
Full-Year Results
Fiscal 2019 |
Fiscal 2018 |
|||||||||||
As Reported |
Adjusted |
As Reported |
Adjusted |
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Revenue | |
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Operating income | |
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Operating margin | 6.4% | 7.5% | 6.5% | 7.8% | ||||||||
Net income | |
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Diluted EPS | |
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Capital spending for fiscal 2019 was
During fiscal 2019, the company repurchased 6.6 million shares of FedEx common stock for approximately
Outlook
During fiscal 2020, operating income at FedEx Ground and FedEx Freight is expected to increase due to higher revenues. At FedEx Express, macroeconomic weakness and trade uncertainty, continued mix shift to lower-yielding services and a strategic decision to not renew a customer contract will negatively impact operating income.
FedEx is unable to forecast the fiscal 2020 year-end MTM retirement plan accounting adjustment. As a result, the company is unable to provide a fiscal 2020 earnings per share or effective tax rate (ETR) outlook on a GAAP basis.
For fiscal 2020, FedEx forecasts:
- A low-single-digit percentage point increase in diluted earnings per share prior to the year-end MTM retirement plan accounting adjustment compared with fiscal 2019’s earnings of
$13.25 per diluted share prior to the year-end MTM retirement plan accounting adjustment; - A mid-single-digit percentage point decline in diluted earnings per share prior to the year-end MTM retirement plan accounting adjustment and excluding estimated TNT Express integration expenses compared with fiscal 2019’s adjusted earnings of
$15.52 per diluted share; - A higher ETR in the range of 23-25% prior to the year-end MTM retirement plan accounting adjustment; and
- Capital spending of
$5.9 billion .
Total TNT Express integration program expenses through fiscal 2021 are now estimated to be approximately
These forecasts assume moderate
“Our fiscal 2020 performance is being negatively affected by continued weakness in global trade and industrial production, especially at FedEx Express,” said
Corporate Overview
Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs, Form 8-Ks and
The Investor Relations page of our website, investors.fedex.com, contains a significant amount of information about FedEx, including our
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, a significant data breach or other disruption to our technology infrastructure, anti-trade measures and changes in international trade policies and relations, 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 and effectively respond to changes in market dynamics, the impact of the United Kingdom’s vote to leave the
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 2019 and Fiscal 2018 Results
The company reports its financial results in accordance with accounting principles generally accepted in
- The fiscal 2019 and 2018 year-end MTM retirement plan accounting adjustments for our defined benefit pension and other postretirement plans;
- TNT Express integration expenses incurred in fiscal 2019 and 2018;
- Business realignment costs incurred in fiscal 2019;
- Fiscal 2019 charges related to a legal matter involving FedEx Ground;
- Net
U.S. deferred tax liability remeasurement during fiscal 2018 and the fiscal 2019 revision to the remeasurement; -
FedEx Supply Chain goodwill and other asset impairment charges incurred in fiscal 2018; and - Fiscal 2018 charges related to certain
U.S. Customs and Border Protection matters involving FedEx Logistics.
The MTM retirement plan accounting adjustments, business realignment costs, litigation- and legal-related matters and goodwill and other asset impairment charges at
We have incurred and expect to incur significant expenses through fiscal 2021, and may incur additional expenses thereafter, in connection with our integration of TNT Express. We have adjusted our fourth quarter and full-year fiscal 2019 and 2018 consolidated financial measures and the FedEx Express segment fourth quarter and full-year fiscal 2019 and 2018 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 wages, and travel and advertising expenses. Internal salaries and wages are included only to the extent the individuals are assigned full-time to integration activities. The integration expenses also include any restructuring charges at TNT Express.
The provisional benefit from the remeasurement of our net
We have not included the benefit attributable to the phase-in of the reduced tax rate applied to our fiscal 2019 and 2018 earnings in the adjustment because the impact of the reduced tax rate on current year earnings will be ongoing. Additionally, we have not included the benefit from our incremental pension contribution made in
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
Fiscal 2020 Earnings Per Share and Effective Tax Rate Forecasts
Our fiscal 2020 earnings per share (EPS) forecast is a non-GAAP financial measure because it excludes the fiscal 2020 year-end MTM retirement plan accounting adjustment and estimated fiscal 2020 TNT Express integration expenses, and, for fiscal 2019, excludes the year-end MTM retirement plan accounting adjustment, TNT Express integration expenses, business realignment costs, costs related to a FedEx Ground legal matter and the revision to the provisional benefit from the remeasurement of our net
We have provided these non-GAAP financial measures for the same reasons that were outlined above for historical non-GAAP measures. These items are excluded from our fiscal 2020 EPS and ETR forecasts, as applicable, for the same reasons described above for historical non-GAAP measures.
We are unable to predict the amount of the year-end MTM retirement plan accounting adjustment, as it is significantly impacted by changes in interest rates and the financial markets, so such adjustment is not included in our fiscal 2020 EPS and ETR forecasts. It is reasonably possible, however, that our fiscal 2020 year-end MTM retirement plan accounting adjustment could have a material impact on our fiscal 2020 consolidated financial results and ETR. Additionally, for comparison purposes, we have presented fiscal 2019 EPS prior to the year-end MTM retirement plan accounting adjustment in the “Outlook” section of this earnings release.
Fourth Quarter Fiscal 2019 |
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Dollars in millions, except EPS |
|
|
|
||||||||||||||||||||
Operating |
Income |
Net |
Diluted |
||||||||||||||||||||
Income |
Margin1 |
Taxes2 |
Income3 |
Per Share4 |
|||||||||||||||||||
GAAP measure | $ | 1,316 | 7.4 | % | ( |
) | ( |
) | ( |
) | |||||||||||||
MTM retirement plan accounting adjustment5 |
|
— |
— |
|
902 |
2,981 |
11.33 |
||||||||||||||||
Business realignment costs6 |
316 |
1.8 |
% |
76 |
240 |
0.91 |
|||||||||||||||||
TNT Express integration expenses7 |
|
84 |
0.5 |
% |
16 |
68 |
0.26 |
||||||||||||||||
Non-GAAP measure | $ | 1,716 | 9.6 | % | $ | 409 | $ | 1,320 | $ | 5.01 | |||||||||||||
FedEx Express Segment |
||||||
Dollars in millions |
Operating |
|||||
Income |
Margin |
|||||
GAAP measure | |
8.1% | ||||
TNT Express integration expenses | 68 | 0.7% | ||||
Non-GAAP measure | |
8.8% | ||||
Full-Year Fiscal 2019 |
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|
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Dollars in millions, except EPS |
Diluted |
||||||||||||||||||||
Operating |
Income |
Net |
Earnings |
||||||||||||||||||
|
Income |
Margin1 |
Taxes2 |
Income3 |
Per Share8 |
||||||||||||||||
GAAP measure | $ | 4,466 | 6.4 | % | $ | 115 | $ | 540 | $ | 2.03 | |||||||||||
MTM retirement plan accounting adjustment5 |
|
— |
— |
902 |
2,981 |
11.22 |
|||||||||||||||
TNT Express integration expenses7 |
388 |
0.6 |
% |
74 |
314 |
1.18 |
|||||||||||||||
Business realignment costs6 |
320 |
0.5 |
% |
77 |
243 |
0.91 |
|||||||||||||||
FedEx Ground legal matter |
|
46 |
0.1 |
% |
|
3 |
|
43 |
|
0.16 |
|||||||||||
Net |
|
— |
— |
|
|
(4 |
) |
|
|
4 |
|
0.02 |
|||||||||
Non-GAAP measure | $ | 5,220 | 7.5 | % | $ | 1,167 | $ | 4,125 | $ | 15.52 | |||||||||||
FedEx Express Segment |
||||||||
Dollars in millions |
Operating | |||||||
Income |
Margin |
|||||||
GAAP measure | $ | 2,123 | 5.7 | % | ||||
TNT Express integration expenses | 325 | 0.9 | % | |||||
Non-GAAP measure | $ | 2,448 | 6.6 | % | ||||
Fourth Quarter Fiscal 2018 |
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|
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Dollars in millions, except EPS |
|
|
|
||||||||||||||||||||
Operating |
Income |
Net |
Diluted |
||||||||||||||||||||
Income |
Margin |
Taxes1,2 |
Income1,3 |
Per Share1 |
|||||||||||||||||||
GAAP measure | $ |
1,328 |
7.7 |
% | $ |
231 |
$ |
1,127 |
$ |
4.15 |
|||||||||||||
|
|
380 |
2.2 |
% |
1 |
379 |
1.40 |
||||||||||||||||
TNT Express integration expenses7 |
136 |
0.8 |
% |
30 |
106 |
0.39 |
|||||||||||||||||
FedEx Logistics legal matters |
1 |
— |
(1 |
) |
2 |
0.01 |
|||||||||||||||||
MTM retirement plan accounting adjustment5 |
— |
— |
(1 |
) |
(9 |
) |
(0.03 |
) |
|||||||||||||||
Non-GAAP measure | $ | 1,845 | 10.7 | % | $ | 261 | $ | 1,604 | $ | 5.91 |
FedEx Express Segment |
||||||||
Dollars in millions |
Operating |
|||||||
Income |
Margin1 |
|||||||
GAAP measure | $ | 867 | 9.0 | % | ||||
TNT Express integration expenses | 110 | 1.1 | % | |||||
Non-GAAP measure | $ | 977 | 10.2 | % | ||||
Full-Year Fiscal 2018
|
|||||||||||||||||||||||
Dollars in millions, except EPS |
|||||||||||||||||||||||
Operating |
Income | Net |
Diluted |
||||||||||||||||||||
Income |
Margin |
Taxes1,2 |
Income1,3 |
Per Share | |||||||||||||||||||
GAAP measure | $ | 4,272 | 6.5 | % | ( |
) | $ | 4,572 | $ | 16.79 | |||||||||||||
|
|
380 |
0.6 |
% |
1 |
379 |
1.39 |
||||||||||||||||
TNT Express integration expenses7 |
477 |
0.7 |
% |
105 |
372 |
1.36 |
|||||||||||||||||
FedEx Logistics legal matters |
8 |
— |
2 |
6 |
0.02 |
||||||||||||||||||
MTM retirement plan accounting adjustment5 |
|
— |
— |
(1 |
) |
(9 |
) |
(0.03 |
) |
||||||||||||||
Net |
— |
— |
1,150 |
(1,150 |
) |
(4.22 |
) |
||||||||||||||||
Non-GAAP measure | $ | 5,137 | 7.8 | % | $ | 1,039 | $ | 4,169 | $ | 15.31 | |||||||||||||
FedEx Express Segment |
||||||
Dollars in millions |
Operating |
|||||
Income |
Margin |
|||||
GAAP measure | |
5.8% | ||||
TNT Express integration expenses | 380 | 1.1% | ||||
Non-GAAP measure | |
6.9% | ||||
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 and give consideration to the effects of the TCJA on the applicable rates.
3 – Effect of “Total other (expense) income” on net income amount not shown.
4 – Does not sum to total due to difference in weighted-average number of shares outstanding used to calculate EPS in accordance with GAAP.
5 – 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. For the fourth quarter and full-year fiscal 2018 periods, the MTM retirement plan accounting adjustment includes the one-time
6 – Business realignment costs are recognized at FedEx Corporate.
7 – These expenses, including restructuring charges, were recognized at FedEx Corporate and FedEx Express.
8 – Fiscal 2019 diluted earnings per share prior to the year-end MTM retirement plan accounting adjustment was
9 –
View source version on businesswire.com: https://www.businesswire.com/news/home/20190625005962/en/
Media Contact:
Investor Contact:
Home Page: fedex.com
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