FedEx Corp. Reports Fourth Quarter and Full-Year Earnings
Fiscal 2018 |
Fiscal 2017 |
|||||||||||
As Reported |
Adjusted |
As Reported |
Adjusted |
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Revenue | |
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||||||||
Operating income | |
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Operating margin | 8.6% | 11.5% | 10.1% | 11.1% | ||||||||
Net income | |
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Diluted EPS | |
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This year’s and last year’s quarterly and full-year consolidated results have been adjusted for:
Fiscal 2018 |
Fiscal 2017 |
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Impact per diluted share |
Fourth |
Full |
Fourth |
Full |
||||||||||||||||
|
$ |
1.40 |
$ |
1.39 |
$ |
— |
$ |
— |
||||||||||||
TNT Express integration expenses |
0.39 |
1.36 |
0.32 |
0.91 |
||||||||||||||||
|
0.01 |
0.02 |
0.09 |
0.09 |
||||||||||||||||
Mark-to-market (MTM) retirement plan accounting and other pension adjustments |
|
(0.03 |
) |
(0.03 |
) |
(0.02 |
) |
(0.02 |
) |
|||||||||||
Net |
— |
(4.22 |
) |
— |
— |
|||||||||||||||
FedEx Ground legal matters | — | — | 0.05 | 0.05 | ||||||||||||||||
“I am proud of the financial and operational results
Fourth quarter operating results benefited from higher base rates, increased volume and the favorable net impact of fuel at each transportation segment. Accelerated wage increases for certain hourly employees partially offset these benefits.
Fourth quarter net results include a
Full-Year Results
Fiscal 2018 |
Fiscal 2017 |
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As Reported |
Adjusted |
As Reported |
Adjusted |
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Revenue | |
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|
|
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Operating income | |
|
|
|
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Operating margin | 7.4% | 8.7% | 8.4% | 9.0% | ||||||||
Net income | |
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Diluted EPS | |
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Full-year net results include tax benefits of
- A
$1.6 billion benefit from the Tax Cuts and Jobs Act (TCJA), which has three primary components:- A provisional benefit of
$1.15 billion ($4.22 per diluted share) from the remeasurement of the company’s netU.S. deferred tax liability for lower tax rates; - A benefit of approximately
$200 million ($0.75 per diluted share) from an incremental pension contribution made in the third quarter and deductible against the company’s prior year taxes at 35%; and - A benefit of approximately
$265 million ($0.97 per diluted share) attributable to the phase-in of the reduced tax rate applied to the company’s earnings.
- A provisional benefit of
- A net benefit of
$255 million ($0.94 per diluted share) from corporate structuring transactions as part of the ongoing integration ofFedEx Express and TNT Express; and - A benefit of
$225 million ($0.83 per diluted share) from foreign tax credits associated with distributions to theU.S. from the company’s offshore operations.
Capital spending for fiscal 2018 was
For the year, the company repurchased 4.3 million shares of
Outlook
New pension accounting rules will be in effect starting in fiscal 2019 that will impact operating margin but not net income or earnings per share. For reference, comparable measures for fiscal 2018 that have been recast to reflect application of the new rules are provided below.
For fiscal 2019,
- Revenue growth of approximately 9%;
- Operating margin of approximately 7.9% (compared to a recast fiscal 2018 operating margin of 6.5%);
- Operating margin of approximately 8.5% excluding TNT Express integration expenses (compared to a recast fiscal 2018 operating margin of 7.8% excluding TNT Express integration expenses and
FedEx Supply Chain goodwill and other asset impairment charges); - Earnings of
$15.65 to$16.25 per diluted share before year-end MTM retirement plan accounting adjustments; - Earnings of
$17.00 to$17.60 per diluted share before year-end MTM retirement plan accounting adjustments and excluding TNT Express integration expenses; - ETR of approximately 25% prior to year-end MTM retirement plan accounting adjustments, which is higher than the fiscal 2018 ETR due to tax benefits from transactions and TCJA impacts that will not reoccur during fiscal 2019; and
- Capital spending of
$5.6 billion .
These forecasts assume moderate economic growth. The company’s ETR and earnings per share outlook is based on current TCJA interpretative guidance and is subject to change based on future guidance.
“Our fiscal 2019 results will benefit from our continued focus on revenue quality as well as from synergy realization as we make progress in combining TNT Express with FedEx Express,” said
Aircraft Fleet Modernization
FedEx Trade Networks Realignment
Effective in the fourth fiscal quarter, the company realigned the specialty services companies
FedEx Express Segment
For the fourth quarter, the FedEx Express segment reported (adjusted measures exclude TNT Express integration expenses):
Fiscal 2018 |
Fiscal 2017 |
|||||||||||
As Reported |
Adjusted |
As Reported |
Adjusted |
|||||||||
Revenue | |
|
|
|
||||||||
Operating income | |
|
|
|
||||||||
Operating income YOY change % |
11% |
13% |
|
|
||||||||
Operating margin | 10.3% | 11.5% | 10.1% | 11.0% | ||||||||
Revenue increased 9% due to higher yields across the global portfolio of package and freight services, as well as higher freight pounds. Operating results improved due to higher revenue, an
FedEx Ground Segment
For the fourth quarter, the FedEx Ground segment reported:
Fiscal 2018 | Fiscal 2017 | Change | |||||||
Revenue | |
|
12% | ||||||
Operating income | |
|
18% | ||||||
Operating margin | 17.3% | 16.4% | 0.9 pts | ||||||
Strong revenue growth was driven by average daily package volume growth of 6% and higher base rates. Operating results improved due to the benefits from revenue growth and ongoing cost management, partially offset by higher purchased transportation rates and increased staffing and network expansion costs.
FedEx Freight Segment
For the fourth quarter, the FedEx Freight segment reported:
Fiscal 2018 | Fiscal 2017 | Change | |||||||
Revenue | |
|
16% | ||||||
Operating income | |
|
35% | ||||||
Operating margin | 9.4% | 8.1% | 1.3 pts | ||||||
Revenue increased due to revenue per shipment growth of 8% and average daily shipment growth of 8%. Operating results improved primarily due to higher revenue per shipment.
Corporate Overview
Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs, Form 8-Ks,
The Investor Relations page of our website, investors.fedex.com, contains a significant amount of information about
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, our ability to successfully integrate the businesses and operations of FedEx Express and TNT Express in the expected time frame or at the expected cost, changes in fuel prices or currency exchange rates, our ability to match capacity to shifting volume levels, new
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 2018 and Fiscal 2017 Results
The company reports its financial results in accordance with accounting principles generally accepted in
-
FedEx Supply Chain goodwill and other asset impairment charges incurred in fiscal 2018; - TNT Express integration expenses incurred in fiscal 2018 and 2017;
- Fiscal 2018 and 2017 charges related to certain pending
U.S. Customs and Border Protection matters involvingFedEx Trade Networks ; - Fiscal 2018 and 2017 year-end MTM retirement plan accounting and other pension adjustments for our defined benefit pension and other postretirement plans;
- Net
U.S. deferred tax liability remeasurement during fiscal 2018; and - Expenses incurred in fiscal 2017 in connection with the settlement of (and certain expected losses relating to) independent contractor litigation matters involving FedEx Ground.
The goodwill and other asset impairment charges at
We have incurred and 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 2018 and 2017 consolidated financial measures and the FedEx Express segment fourth quarter fiscal 2018 and 2017 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, 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 any restructuring charges at TNT Express.
The provisional benefit from the remeasurement of our net
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 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
Recast Fiscal 2018 Operating Margin and Fiscal 2019 Operating Margin, Earnings Per Share and ETR Forecasts
Our recast fiscal 2018 operating margin (to reflect application of the new pension accounting rules that will be in effect starting in fiscal 2019) that excludes fiscal 2018 TNT Express integration expenses and
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 recast fiscal 2018 operating margin and our fiscal 2019 operating margin, 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 adjustments, as they are significantly impacted by changes in interest rates and the financial markets, so such adjustments are not included in our fiscal 2019 EPS and ETR forecasts. For this reason, a full reconciliation of our fiscal 2019 EPS and ETR forecasts to the most directly comparable GAAP measures is impracticable. It is reasonably possible, however, that our fiscal 2019 year-end MTM retirement plan accounting adjustments could have a material impact on our fiscal 2019 consolidated financial results and ETR.
As discussed above, the provisional benefit from the remeasurement of our net
The table included below titled “Fiscal 2019 Earnings Per Share Outlook” outlines the impacts of the items that are excluded from our fiscal 2019 EPS forecast, other than the year-end MTM retirement plan accounting adjustments. Additionally, the tables below titled “Fiscal 2018 Recast Operating Margin for Pension Accounting Change” and “Fiscal 2019 Operating Margin Forecast” present reconciliations of our presented non-GAAP measures to the most directly comparable GAAP measures.
Fourth Quarter Fiscal 2018
|
||||||||||||||||||||||||
Dollars in millions, except EPS |
Operating |
Income |
Net |
Diluted |
||||||||||||||||||||
Income |
Margin |
Taxes1,2 |
Income2,3 |
Per Share2 |
||||||||||||||||||||
GAAP measure |
$ |
1,490 |
8.6 |
% | $ | 231 | $ | 1,127 | $ | 4.15 | ||||||||||||||
|
380 |
2.2 |
% |
1 |
379 |
1.40 |
||||||||||||||||||
TNT Express integration expenses5 |
136 |
0.8 |
% |
30 |
106 |
0.39 |
||||||||||||||||||
|
1 |
— |
(1 |
) |
2 |
0.01 |
||||||||||||||||||
MTM retirement plan accounting and other pension adjustments6 |
(10 |
) |
(0.1 |
%) |
(1 |
) |
(9 |
) |
(0.03 |
) |
||||||||||||||
Non-GAAP measure | $ | 1,997 | 11.5 | % | $ | 261 | $ | 1,604 | $ | 5.91 | ||||||||||||||
FedEx Express Segment |
||||||||
Dollars in millions |
Operating |
|||||||
Income |
Margin2 |
|||||||
GAAP measure | $ | 990 | 10.3 | % | ||||
TNT Express integration expenses | 110 | 1.1 | % | |||||
Non-GAAP measure | $ | 1,100 | 11.5 | % | ||||
Full-Year Fiscal 2018
|
||||||||||||||||||||||||
Dollars in millions, except EPS |
Operating |
Income |
Net |
Diluted |
||||||||||||||||||||
Income |
Margin |
Taxes1,2 |
Income2,3 |
Per Share |
||||||||||||||||||||
GAAP measure | $ | 4,870 | 7.4 | % | ( |
) | $ | 4,572 | $ | 16.79 | ||||||||||||||
|
380 |
0.6 |
% |
1 |
379 |
1.39 |
||||||||||||||||||
TNT Express integration expenses5 |
477 |
0.7 |
% |
105 |
372 |
1.36 |
||||||||||||||||||
|
8 |
— |
2 |
6 |
0.02 |
|||||||||||||||||||
MTM retirement plan accounting and other pension adjustments6 |
(10 |
) |
— |
(1 |
) |
(9 |
) |
(0.03 |
) |
|||||||||||||||
Net |
— |
— |
1,150 |
(1,150 |
) |
(4.22 |
) |
|||||||||||||||||
Non-GAAP measure | $ | 5,725 | 8.7 | % | $ | 1,039 | $ | 4,169 | $ | 15.31 | ||||||||||||||
Fourth Quarter Fiscal 2017
|
||||||||||||||||||||||||
Dollars in millions, except EPS |
Operating |
Income |
Net |
Diluted |
||||||||||||||||||||
Income |
Margin |
Taxes1 |
Income3 |
Per Share |
||||||||||||||||||||
GAAP measure | $ | 1,581 | 10.1 | % | $ | 440 | $ | 1,020 | $ | 3.75 | ||||||||||||||
MTM retirement plan accounting adjustments6 |
(24 |
) |
(0.1 |
%) |
(18 |
) |
(6 |
) |
(0.02 |
) |
||||||||||||||
TNT Express integration expenses5 |
124 |
0.8 |
% |
37 |
87 |
0.32 |
||||||||||||||||||
|
39 |
0.2 |
% |
15 |
24 |
0.09 |
||||||||||||||||||
FedEx Ground legal matters |
22 |
0.1 |
% |
9 |
13 |
0.05 |
||||||||||||||||||
Non-GAAP measure | $ | 1,742 | 11.1 | % | $ | 483 | $ | 1,138 | $ | 4.19 | ||||||||||||||
FedEx Express Segment |
||||||||
Dollars in millions |
Operating |
|||||||
Income |
Margin |
|||||||
GAAP measure | $ | 888 | 10.1 | % | ||||
TNT Express integration expenses | 83 | 0.9 | % | |||||
Non-GAAP measure | $ | 971 | 11.0 | % | ||||
Full-Year Fiscal 2017
|
||||||||||||||||||||||||
Dollars in millions, except EPS |
Operating |
Income |
Net |
Diluted |
||||||||||||||||||||
Income |
Margin |
Taxes1 |
Income3 |
Per Share2 |
||||||||||||||||||||
GAAP measure | $ | 5,037 | 8.4 | % | $ | 1,582 | $ | 2,997 | $ | 11.07 | ||||||||||||||
MTM retirement plan accounting adjustments6 |
(24 |
) |
— |
(18 |
) |
(6 |
) |
(0.02 |
) |
|||||||||||||||
TNT Express integration expenses5 |
327 |
0.5 |
% |
82 |
245 |
0.91 |
||||||||||||||||||
|
39 |
0.1 |
% |
15 |
24 |
0.09 |
||||||||||||||||||
FedEx Ground legal matters |
22 |
— |
9 |
13 |
0.05 |
|||||||||||||||||||
Non-GAAP measure | $ | 5,401 | 9.0 | % | $ | 1,670 | $ | 3,273 | $ | 12.09 | ||||||||||||||
Fiscal 2018 Recast Operating Margin for Pension Accounting Change
Operating |
|||
GAAP measure | 7.4% | ||
Pension accounting change | (0.9%) | ||
Recast GAAP measure | 6.5% | ||
TNT Express integration expenses5 | 0.7% | ||
|
0.6% |
||
Recast non-GAAP measure7 | 7.8% | ||
Fiscal 2019 Operating Margin Forecast
Operating |
|||||
GAAP measure | 7.9% | ||||
TNT Express integration expenses | 0.6% | ||||
Non-GAAP measure | 8.5% | ||||
Fiscal 2019 Earnings Per Share Outlook
Dollars in millions, except EPS |
Adjustments |
Diluted Earnings |
||||
Earnings per diluted share before year-end MTM retirement plan accounting adjustments (non-GAAP)8 |
|
|
||||
TNT Express integration expenses | |
|||||
Income tax effect1 |
(85) | |||||
Net of tax effect | |
1.35 | ||||
Earnings per diluted share with adjustments8 |
|
|
||||
Notes:
1 | – | Income taxes are based on the company’s approximate statutory tax rates applicable to each transaction, and for fiscal 2018 and 2019, give consideration to the effects of the TCJA on the fiscal 2018 and 2019 rates. | ||
2 | – | Does not sum to total due to rounding. | ||
3 | – | Effect of “Total other (expense) income” on net income amount not shown. | ||
4 | – | |
||
5 | – | These expenses, including restructuring charges at TNT Express, were recognized at FedEx Corporate and FedEx Express. | ||
6 | – | MTM retirement plan accounting adjustments reflect the year-end adjustment to the valuation of the company’s defined benefit pension and other postretirement plans. MTM retirement plan accounting and other pension adjustments include the one-time |
||
7 | – | The expenses related to the |
||
8 | – | The year-end MTM retirement plan accounting adjustments, which are impracticable to calculate at this time, are excluded. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180619006292/en/
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