*NEWS*FED-EX/KINKO:REVENUE UP,PROFIT DOWN

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*NEWS*FED-EX/KINKO:REVENUE UP,PROFIT DOWN

 user 2005-09-29 at 11:01:00 am Views: 139
  • #13022

    FedEx Kinko’s Revenue Up, Profit Down
    FedEx Reports
    Strong Revenue Growth and Improved Earnings: Earnings Guidance Raised
    for the Year; Express and Ground Package Growth Solid.

    MEMPHIS, TN – FedEx
    Corporation reported earnings of $1.10 per diluted share for the first
    quarter ended August 31, compared to $1.08 per diluted share a year
    ago. This year’s first quarter includes a one-time, non-cash charge of
    $79 million to adjust the accounting for certain facility leases,
    primarily at FedEx Express. Excluding this charge, earnings for the
    quarter would have been $1.25 per diluted share.

    FedEx Corp. reported the following consolidated results
    for the first quarter:

    Revenue of $7.71 billion, up 10% from $6.98 billion the previous year
    Operating income of $584 million, up 1% from $579 million a year ago
    Operating margin of 7.6%, down from last year’s 8.3%
    Net income of $339 million, up 3% from $330 million the previous year

    The one-time charge reduced the company’s operating margin by 0.9 percentage points.

    “On behalf of FedEx, I want to express our concern and sympathy for the
    victims of Hurricane Katrina and our employees who are part of those
    communities. We are proud of the FedEx workers who helped ship and
    deliver more than 900 tons of relief supplies to assist in the area’s
    recovery,” said Frederick W. Smith, chairman, president and chief
    executive officer. “Despite uncertainty related to Katrina and other
    economic conditions, we remain optimistic about global trade and expect
    continued economic expansion in the U.S. and in the international
    markets. With our unparalleled global network and broad range of
    services, FedEx is well positioned to take advantage of market
    conditions as world trade continues to grow.”

    Total combined average daily package volume at FedEx Express and FedEx
    Ground grew 5% year over year for the quarter, due to continued growth
    in international express, U.S. domestic express and ground shipments.

    “FedEx delivered solid results in the quarter, but earnings were
    negatively impacted by the one-time, non-cash lease accounting charge,”
    said Alan B. Graf, Jr., executive vice president and chief financial
    officer. “Hurricane Katrina had no significant effect on first quarter
    results, although the storm inflicted some damage to our facilities in
    the U.S. Gulf Coast region. Meanwhile, our operations have resumed in
    most of the affected areas except for sections of New Orleans.”

    Outlook
    FedEx expects second quarter earnings to be $1.30 to $1.45 per diluted
    share and has increased its earnings guidance for the year to $5.25 to
    $5.50 per diluted share, despite the lease accounting charge in the
    first quarter. The capital spending forecast for fiscal 2006 remains
    $2.5 billion.

    The earnings guidance range reflects the economic uncertainty
    surrounding the hurricane effects and the continued volatility of fuel
    prices.

    FedEx Kinko’s Segment
    For the first quarter, the FedEx Kinko’s segment reported:

    Revenue of $517 million, up 6% from last year’s $490 million
    Operating income of $16 million, down 16% from $19 million a year ago
    Operating margin of 3.1%, down from 3.8% the previous year

    The FedEx Kinko’s revenue increase for the quarter was due to continued
    growth from FedEx Express and FedEx Ground package acceptance and the
    benefit of the conversion of certain FedEx World Service Centers to
    FedEx Kinko’s Ship Centers, partially offset by a decline in copy
    product line revenues.

    Operating margin continued to be negatively affected by costs
    associated with internal technology and product offering initiatives,
    as well as higher administrative costs.

    FedEx Express Segment
    For the first quarter, the FedEx Express segment reported:

    Revenue of $5.12 billion, up 11% from last year’s $4.62 billion
    Operating income of $285 million, down 8% from $310 million a year ago
    Operating margin of 5.6%, down from 6.7% the previous year

    Operating income during the first quarter was negatively affected by a
    one-time, non-cash charge of $75 million recorded primarily to adjust
    the accounting for rent escalation terms in certain facility leases.
    Operating margin was negatively affected by 1.4 percentage points due
    to this charge. Similar to many other public companies, FedEx
    determined that a portion of its facility leases had rent escalation
    clauses that had not been recognized appropriately in the past. The
    adjustment recorded resulted in a cumulative correction that increased
    operating expenses for the quarter. The amounts were not material for
    any prior period.

    FedEx International Priority (IP) revenue grew 13% for the quarter, as
    IP revenue per package grew 7%, primarily due to higher fuel surcharges
    and package weights, as well as favorable exchange rates. IP average
    daily package volume grew 6%. U.S. domestic express package revenue
    increased 8%, as U.S. domestic average daily package volume grew 4%.
    U.S. domestic revenue per package increased 3%, driven by higher fuel
    surcharges.

    On September 7, FedEx announced the first overnight express link
    between India and China as part of its new eastbound around-the-world
    flight, which connects Europe, India, China and Japan with the FedEx
    Express U.S. hub in Memphis. Start-up costs for this flight, together
    with costs associated with the westbound around-the-world flight that
    began in March, negatively affected operating income in the first
    quarter. The complementary eastbound and westbound around-the-world
    routes have been launched to meet supply and demand needs in both
    directions.

    FedEx Ground Segment
    For the first quarter, the FedEx Ground segment reported:

    Revenue of $1.22 billion, up 14% from last year’s $1.07 billion
    Operating income of $148 million, up 1% from $147 million a year ago
    Operating margin of 12.1%, down from 13.7% the previous year

    FedEx Ground average daily package volume grew 6% year over year in the
    first quarter. Yield improved 6% primarily due to higher extra service
    revenue, the January 2005 general rate increase and reimplementation of
    a fuel surcharge.

    Despite improved field productivity at FedEx Ground, the segment
    operating margin declined primarily because of losses at FedEx
    SmartPost and higher year-over-year expenses related to investment in
    new technology, as well as the opening of three new hubs in line with
    the company’s long-term growth strategy.

    FedEx Freight Segment
    For the first quarter, the FedEx Freight segment reported:

    Revenue of $892 million, up 11% from last year’s $807 million
    Operating income of $135 million, up 31% from $103 million a year ago
    Operating margin of 15.1%, up from 12.8% the previous year

    Less-than-truckload (LTL) yield improved 10% year over year, reflecting
    incremental fuel surcharges, higher rates and growth in interregional
    freight service. Average daily LTL shipments increased 2% year over
    year. Operating margin improved during the quarter due to LTL revenue
    growth and system productivity gains.

    On September 13, the company launched FedEx Freight Advance Notice,
    which provides customers with greater shipment visibility and control.
    This new feature is another example of how FedEx Freight provides
    service offerings designed to meet the diverse and changing needs of
    its customers.