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AnonymousInactiveFedEx Kinko’s Revenue Up, Prof
it DownFedEx 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 yearThe 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 yearThe 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 yearOperating 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 yearFedEx 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 yearLess-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. -
AuthorSeptember 29, 2005 at 11:03 AM
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