The FINANCIAL — FedEx Corp. on June 17 reported adjusted earnings of $2.66 per diluted share for the fourth quarter ended May 31, compared to adjusted earnings of $2.54 per diluted share a year ago.
For fiscal 2015, adjusted earnings were $8.95 per diluted share, compared to $7.05 per diluted share a year ago. Without adjustments, FedEx reported a loss of $3.16 per diluted share for the fourth quarter compared to a profit of $2.62 per diluted share a year ago, and earnings of $3.65 per diluted share for the full fiscal year, compared to $7.48 per diluted share last year, according to FedEx.
Quarterly consolidated earnings have been adjusted for previously announced changes in pension accounting ($4.88 per diluted share), aircraft impairments ($0.62 per diluted share), a legal reserve increase ($0.47 per diluted share) and changes in segment reporting (favorable $0.15 per diluted share).
“Fiscal 2015 was a transformative year for FedEx with outstanding financial results driving expanded long-term value for shareowners,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “Significant acquisitions announced in the year promise to strengthen our portfolio of services and change what’s possible for customers. I am very proud of the FedEx team for its accomplishments and look forward to a successful fiscal 2016.”
FedEx also announced today that independent members of its Board of Directors have approved a change to FedEx’s Corporate Governance Guidelines to increase the mandatory retirement age for directors from age 72 to age 75, effective immediately. “This change is consistent with the market trend of increasing the mandatory retirement age for board members,” said David P. Steiner, FedEx Corporation’s Lead Independent Director.
As previously disclosed, prior year amounts have been recast to conform to the current year presentation reflecting the pension accounting changes and allocation of corporate headquarters costs.
Adjusted operating income improved 5% during the quarter, due to base yield growth in all three transportation segments, higher ground and U.S. domestic express volume, and benefits from profit improvement program initiatives. These improvements offset increased employee variable incentive compensation and unfavorable net impacts from fuel and weather.
Adjusted operating results increased sharply during the year due to higher volumes and base yields in all three transportation segments, benefits from profit improvement program initiatives and a favorable net fuel impact. This was partially offset by increased incentive compensation and higher aircraft maintenance expense.
Capital spending for fiscal 2015 was $4.3 billion.
Outlook
For fiscal 2016, FedEx projects adjusted earnings to be $10.60 to $11.10 per diluted share before year-end mark-to-market pension accounting adjustments, driven by continued improvement in base pricing and benefits from our profit improvement program. The outlook assumes continued moderate economic growth and does not include any operating results or costs related to TNT Express.
Capital spending for fiscal 2016 is expected to be approximately $4.6 billion, which includes expansion of the FedEx Ground network and planned aircraft deliveries to support the FedEx Express fleet modernization program.
“Our operating performance significantly improved in fiscal 2015 as we focused on revenue quality and executed on our profit improvement program initiatives,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “We expect strong earnings growth in fiscal 2016 as we continue to focus on improving performance and successfully executing our profit improvement initiatives.”
During the fourth quarter, FedEx Express permanently retired 15 aircraft and 21 related engines, and adjusted the retirement schedule of an additional 23 aircraft and 57 engines. These actions resulted in $276 million of impairment and related charges, of which $246 million was noncash. These charges are excluded from this year’s adjusted operating income and margin.
Revenue decreased 4% as lower fuel surcharges and unfavorable currency exchange rates more than offset base yield and volume growth. U.S. domestic package volume grew 2%, driven by a 3% increase in overnight box. U.S. domestic revenue per package declined 4%, with lower fuel surcharges offsetting improved base rates. International export volume was down 1%, as FedEx International Economy grew 3% while FedEx International Priority declined 2%. International export revenue per package decreased 8%, as lower fuel surcharges and unfavorable currency exchange rates more than offset higher base rates.
Adjusted segment operating results improved due to higher base yield and U.S. domestic volume growth, the benefit from profit improvement program initiatives and lower international expenses due to currency exchange rates. These benefits were partially offset by an unfavorable net fuel impact, higher incentive compensation and a negative impact from weather.
Revenue increased due to the inclusion of GENCO results and higher ground volume and revenue per package. Ground yield increased 2% due to higher dimensional weight charges and increased rates, partially offset by lower fuel surcharges. Ground average daily volume grew 5% in the quarter, primarily driven by growth in residential deliveries. FedEx SmartPost average daily volume decreased 1% due to the reduction in volume from a major customer. FedEx SmartPost revenue per package increased 7% due to rate increases and improved customer mix, partially offset by higher postage costs.
Segment operating margin declined due predominantly to the inclusion of GENCO results and increased self-insurance reserves.
LTL revenue per shipment improved 2% due to higher rates from ongoing yield initiatives, significantly offset by lower fuel surcharges. Less-than-truckload (LTL) average daily shipments were flat.
Segment operating results improved primarily due to the positive impact of higher LTL revenue per shipment.
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