Form 8-K FEDEX CORP For: Dec 20

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 20, 2016

 

 

FEDEX CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Commission File Number 1-15829

 

Delaware		62-1721435
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

 

942 South Shady Grove Road, Memphis, Tennessee		38120
(Address of principal executive offices)		(ZIP Code)

Registrant’s telephone number, including area code: (901) 818-7500

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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EXPLANATORY NOTE

The information in this Report, including the exhibit, is being furnished pursuant to Item 2.02 of Form 8-K and General Instruction B.2 thereunder. Such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

SECTION 2. FINANCIAL INFORMATION.

 

Item 2.02.

Results of Operations and Financial Condition.

Attached as Exhibit 99.1 and incorporated herein by reference is a copy of FedEx Corporation’s press release, dated December 20, 2016, announcing its financial results for the fiscal quarter ended November 30, 2016.

SECTION 9. FINANCIAL STATEMENTS AND EXHIBITS.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d)

Exhibits. The following exhibit is being furnished as part of this Report.

 

Exhibit Number		Description
99.1		Press Release of FedEx Corporation dated December 20, 2016.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				FedEx Corporation
Date: December 20, 2016				By:		/s/ JOHN L. MERINO
						John L. Merino
						Corporate Vice President and Principal Accounting Officer

 

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Press Release of FedEx Corporation dated December 20, 2016.

 

E-1

Exhibit 99.1

FedEx Corp. Reports Increased Revenue, Operating Income

MEMPHIS, Tenn., December 20, 2016 ... FedEx Corp. (NYSE: FDX) today reported earnings of $2.59 per diluted share ($2.80 per diluted share on an adjusted basis) for the second quarter ended November 30, compared to earnings of $2.44 per diluted share a year ago ($2.58 per diluted share last year on an adjusted basis).

This year’s and last year’s quarterly consolidated earnings have been adjusted for:

 

		Second Quarter
Impact per diluted share		Fiscal 2017				Fiscal 2016
TNT Express integration and Outlook restructuring program costs		$	0.18			$	—
TNT Express intangible asset amortization			0.03				—
FedEx Ground legal matters			—				0.09
TNT Express acquisition expenses			—				0.04

“FedEx increased revenues and operating income despite continued low growth rates in the global economy. We are in the home stretch of our peak shipping season, and our service levels are high, thanks to the outstanding efforts of our hundreds of thousands of team members around the world,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “The integration of TNT Express into our broad portfolio of global business solutions is proceeding smoothly and according to plan.”

 

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Second Quarter Results

FedEx Corp. reported the following consolidated results for the second quarter (adjusted measures exclude TNT Express integration and Outlook restructuring program costs and intangible asset amortization expense from this year’s results and expenses related to FedEx Ground legal matters and the TNT Express acquisition from last year’s results):

 

		Fiscal 2017				Fiscal 2016
		As Reported (GAAP)		Adjusted (non-GAAP)		As Reported (GAAP)		Adjusted (non-GAAP)
Revenue		$14.9 billion		$14.9 billion		$12.5 billion		$12.5 billion
Operating income		$1.17 billion		$1.23 billion		$1.14 billion		$1.20 billion
Operating margin		7.8%		8.3%		9.1%		9.6%
Net income		$700 million		$757 million		$691 million		$729 million
Diluted EPS		$2.59		$2.80		$2.44		$2.58

Operating income rose compared to last year primarily due to the inclusion of TNT Express and increased base rates and ongoing cost efficiencies at FedEx Express. These factors were partially offset by TNT Express integration and restructuring program costs and intangible asset amortization, and lower operating income at FedEx Ground and FedEx Freight.

A gain from the sale of an investment benefited the quarter’s results by $0.08 per diluted share. In addition, the adoption of a new accounting standard related to share-based payment transactions benefited the quarter’s results by $0.07 per diluted share.

Earnings Guidance

FedEx is unable to forecast the fiscal 2017 year-end mark-to-market (“MTM”) pension accounting adjustments. As a result, the company is unable to provide fiscal 2017 earnings guidance on a GAAP basis.

Before year-end MTM pension accounting adjustments, earnings for fiscal 2017 are now projected to be $10.95 to $11.45 per diluted share. This forecast includes TNT Express results and assumes moderate economic growth. The fiscal 2017 earnings forecast before year-end MTM pension accounting adjustments and excluding TNT Express integration and Outlook restructuring program costs and intangible asset amortization remains $11.85 to $12.35 per diluted share. The capital spending forecast for the fiscal year, which includes TNT Express, remains $5.6 billion.

“We are on track to achieve our fiscal 2017 earnings forecast, as we continue long-term investments in our networks,” said Alan B. Graf, FedEx Corp. executive vice president and chief financial officer. “While these network projects are impacting FedEx Ground’s near-term profitability, the investments will expand capacity, improve service and enhance long-term returns and cash flows.”

 

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Executive Appointments

The Board of Directors of FedEx Corporation has approved the elections of Donald F. Colleran as Executive Vice President, Chief Sales Officer, and Rajesh Subramaniam as Executive Vice President, Chief Marketing and Communications Officer, effective January 1, 2017. Messrs. Colleran and Subramaniam also will become members of the FedEx Strategic Management Committee on that date.

FedEx Express Segment

For the second quarter, the FedEx Express segment reported (adjusted measures exclude TNT Express integration costs):

 

		Fiscal 2017				Fiscal 2016
		As Reported (GAAP)		Adjusted (non-GAAP)		As Reported (GAAP)
Revenue		$6.74 billion		$6.74 billion		$6.59 billion
Operating income		$636 million		$654 million		$622 million
Operating income YOY change %		2%		5%
Operating margin		9.4%		9.7%		9.4%

Revenue increased 2% due to increased base rates and higher package volume. U.S. domestic revenue per package increased 3% and U.S. freight revenue per pound increased 6%, both due to higher base rates. International export revenue per package increased 1% as higher base rates were partially offset by unfavorable currency exchange rates and lower fuel surcharges. International export average daily volume grew 2%, driven by growth in both FedEx International Priority^® and FedEx International Economy^®.

Operating results improved due to increased base rates and ongoing cost efficiencies. As-reported results include $18 million of TNT Express integration expenses. Fuel and currency exchange rates had a minimal impact on the quarter’s results.

 

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TNT Express Segment

For the second quarter, the TNT Express segment reported (adjusted measures exclude TNT Express integration and Outlook restructuring program costs and intangible asset amortization expense):

 

		Fiscal 2017
		As Reported (GAAP)		Adjusted (non-GAAP)
Revenue		$1.90 billion		$1.90 billion
Operating income		$70 million		$90 million
Operating margin		3.7%		4.7%

As-reported results include $10 million of intangible asset amortization expense and $10 million of integration and Outlook restructuring program costs.

FedEx Ground Segment

For the second quarter, the FedEx Ground segment reported:

 

		Fiscal 2017		Fiscal 2016		Change
Revenue		$4.42 billion		$4.05 billion		9%
Operating income		$465 million		$526 million		(12%)
Operating margin		10.5%		13.0%		(2.5 pts)

Revenue increased due to higher volume and yields. FedEx Ground average daily volume grew 5% in the second quarter, driven by e–commerce and commercial package growth. FedEx Ground yield increased 4% due to higher base rates.

Operating results decreased due to higher rent, depreciation and staffing as a result of network expansion, and increased purchased transportation rates.

FedEx Freight Segment

For the second quarter, the FedEx Freight segment reported:

 

		Fiscal 2017		Fiscal 2016		Change
Revenue		$1.60 billion		$1.55 billion		3%
Operating income		$88 million		$101 million		(13%)
Operating margin		5.5%		6.5%		(1.0 pts)

 

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Revenue increased 3% due to growth in less-than-truckload average daily shipments, partially offset by lower weight per shipment.

Operating results decreased due to the impact from lower average weight per shipment and higher information technology expenses.

Corporate Overview

FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $58 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world’s most admired and trusted employers, FedEx inspires its more than 400,000 team members to remain “absolutely, positively” focused on safety, the highest ethical and professional standards and the needs of their customers and communities. To learn more about how FedEx connects people and possibilities around the world, please visit about.fedex.com.

Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs, Form 8-Ks, Statistical Books and second quarter fiscal 2017 Earnings Presentation. These materials, as well as a webcast of the earnings release conference call to be held at 5:00 p.m. EST on December 20, are available on the company’s website at investors.fedex.com. A replay of the conference call webcast will be posted on our website following the call.

The Investor Relations page of our website, investors.fedex.com, contains a significant amount of information about FedEx, including our Securities and Exchange Commission (“SEC”) filings and financial and other information for investors. The information that we post on our Investor Relations website could be deemed to be material information. We encourage investors, the media and others interested in the company to visit this website from time to time, as information is updated and new information is posted.

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

 

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uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, our ability to successfully integrate the businesses and operations of FedEx Express and TNT Express in the expected time frame, our ability to match capacity to shifting volume levels, a significant data breach or other disruption to our technology infrastructure, changes in fuel prices or currency exchange rates, legal challenges or changes related to FedEx Ground’s owner-operators and the drivers providing services on their behalf, new U.S. domestic or international government regulation, our ability to effectively operate, integrate and leverage acquired businesses, disruptions or modifications in service by, or changes in the business of, the U.S. Postal Service, the impact from any terrorist activities or international conflicts and other factors which can be found in FedEx Corp.’s and its subsidiaries’ press releases and FedEx Corp.’s filings with the SEC. Any forward-looking statement speaks only as of the date on which it is made. We do not undertake or assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Media Contact: Jess Bunn 901-818-7463

Investor Contact: Mickey Foster 901-818-7468

Home Page: fedex.com

 

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RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

TO GAAP FINANCIAL MEASURES

Second Quarter Fiscal 2017 and Fiscal 2016 Results

The company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP” or “reported”). We have supplemented the reporting of our financial information determined in accordance with GAAP with certain non-GAAP (or “adjusted”) financial measures, including our adjusted second quarter fiscal 2017 and 2016 consolidated operating income and margin, net income and earnings per share, and adjusted second quarter fiscal 2017 FedEx Express segment and TNT Express segment operating income and margin. These financial measures have been adjusted to exclude the impact of the following items (as applicable):

 

•

TNT Express integration and Outlook restructuring program costs;

 

•

TNT Express intangible asset amortization;

 

•

Expenses in connection with the settlement of independent contractor litigation matters involving FedEx Ground; and

 

•

TNT Express acquisition expenses.

We expect to incur significant expenses over the next few years in connection with our integration of TNT Express and the Outlook restructuring program. We have adjusted the applicable fiscal 2017 second quarter financial measures to exclude these items 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 Outlook restructuring program is a TNT Express legacy program that includes various initiatives focused on yield management, improved operational efficiency and productivity and improved customer service.

We will also have recurring intangible asset amortization expenses. The company and TNT Express incurred, and will continue incurring, these expenses solely as a result of the company’s acquisition of TNT Express and the related purchase accounting treatment. We excluded intangible asset amortization from the company’s and the TNT Express segment’s fiscal 2017 second quarter financial results to help investors understand the impact of these expenses on TNT Express’s base business and to facilitate the overall

 

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comparability of the company’s consolidated financial results. We will not adjust our financial results for intangible asset amortization beginning in fiscal 2018 because the company’s and the TNT Express segment’s financial results will be comparable year-over-year at that time. Given the timing and complexity of the TNT Express acquisition, the presentation of the TNT Express segment in the company’s financial statements, including the allocation of the purchase price, is preliminary and will likely change in future periods, perhaps significantly, as fair value estimates of the assets acquired and liabilities assumed are refined during the measurement period. We will complete our purchase price allocation no later than the fourth quarter of 2017.

The FedEx Ground legal matters are excluded from our fiscal 2016 second quarter financial measures because they are unrelated to our core operating performance and to assist investors with assessing trends in our underlying businesses.

The TNT Express acquisition expenses are excluded from our fiscal 2016 second quarter financial measures because these items impacted the year-over-year comparability of our financial statements and are not related to our core operating performance.

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 SEC rules, the tables below present a reconciliation of our presented non-GAAP financial measures to the most directly comparable GAAP measures.

 

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Fiscal 2017 Earnings Guidance

Our fiscal 2017 earnings guidance is a non-GAAP financial measure because it excludes the fiscal 2017 year-end MTM pension accounting adjustments, projected fiscal 2017 TNT Express integration and Outlook restructuring program costs, and projected fiscal 2017 TNT Express intangible asset amortization. We have provided this non-GAAP earnings guidance measure for the same reasons that were outlined above for historical non-GAAP measures.

We are unable to predict the amount of the year-end MTM pension accounting adjustments, as they are significantly impacted by changes in interest rates and the financial markets, so such adjustments are not included in our earnings guidance. For this reason, a full reconciliation of our fiscal 2017 earnings guidance to the most directly comparable GAAP measure is impracticable. It is reasonably possible, however, that our fourth quarter fiscal 2017 MTM pension accounting adjustments could have a material impact on our fiscal 2017 consolidated financial results. The last table included below outlines the impact of the items that are excluded from our earnings guidance, other than the year-end MTM pension accounting adjustments.

 

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Second Quarter Fiscal 2017

FedEx Corporation

 

																		Diluted
		Operating								Income				Net				Earnings
Dollars in millions, except EPS		Income1				Margin				Taxes2				Income3				Per Share
GAAP measure		$	1,167				7.8	%		$	378			$	700			$	2.59
TNT Express integration and Outlook restructuring program costs4			58				0.4	%			8				50				0.18
TNT Express intangible asset amortization			10				0.1	%			3				7				0.03
Non-GAAP measure		$	1,234				8.3	%		$	389			$	757			$	2.80

FedEx Express Segment

 

		Operating
Dollars in millions		Income				Margin
GAAP measure		$	636				9.4	%
TNT Express integration costs			18				0.3	%
Non-GAAP measure		$	654				9.7	%

TNT Express Segment

 

		Operating
Dollars in millions		Income				Margin
GAAP measure		$	70				3.7	%
TNT Express integration and Outlook restructuring program costs			10				0.5	%
TNT Express intangible asset amortization			10				0.5	%
Non-GAAP measure		$	90				4.7	%

 

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Second Quarter Fiscal 2016

FedEx Corporation

 

																		Diluted
		Operating								Income				Net				Earnings
Dollars in millions, except EPS		Income1				Margin1				Taxes2				Income1,3				Per Share1
GAAP measure		$	1,137				9.1	%		$	364			$	691			$	2.44
FedEx Ground legal matters			41				0.3	%			16				25				0.09
TNT Express acquisition expenses			17				0.1	%			7				12				0.04
Non-GAAP measure		$	1,196				9.6	%		$	387			$	729			$	2.58

Fiscal 2017 Earnings Guidance

 

						Diluted Earnings
Dollars in millions, except EPS		Adjustments				Per Share
Earnings per diluted share before MTM pension adjustments (non-GAAP)5						$	10.95 to $11.45
TNT Express integration and Outlook restructuring program costs		$	250
Income tax effect2			(63	)
Net of tax effect		$	187				0.69
TNT Express intangible asset amortization		$	75
Income tax effect2			(19	)
Net of tax effect		$	56				0.21
Earnings per diluted share with adjustments5						$	11.85 to $12.35

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.

3 –	Effect of “Total other (expense) income” on net income amount not shown.

4 –	These costs were recognized at FedEx Corporate ($30 million), FedEx Express ($18 million) and TNT Express ($10 million).

5 –	The year-end MTM pension accounting adjustments, which are impracticable to calculate at this time, are excluded.

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FEDEX CORP. FINANCIAL HIGHLIGHTS

Second Quarter Fiscal 2017

(In millions, except earnings per share)

(Unaudited)

 

		Three Months Ended												Six Months Ended
		November 30												November 30
		2016				2015				%				2016				2015				%
Revenue:
FedEx Express segment		$	6,743			$	6,588				2	%		$	13,399			$	13,179				2	%
TNT Express segment			1,899				—				NM				3,703				—				NM
FedEx Ground segment			4,419				4,050				9	%			8,709				7,880				11	%
FedEx Freight segment			1,597				1,547				3	%			3,255				3,148				3	%
FedEx Services segment			414				403				3	%			809				793				2	%
Eliminations and other			(141	)			(135	)			4	%			(281	)			(268	)			5	%
Total Revenue			14,931				12,453				20	%			29,594				24,732				20	%
Operating Expenses:
Salaries and employee benefits			5,353				4,570				17	%			10,664				9,095				17	%
Purchased transportation			3,431				2,538				35	%			6,671				4,882				37	%
Rentals and landing fees			802				682				18	%			1,592				1,377				16	%
Depreciation and amortization			740				653				13	%			1,479				1,301				14	%
Fuel			658				615				7	%			1,308				1,327				(1	%)
Maintenance and repairs			579				529				9	%			1,177				1,077				9	%
Other			2,201				1,729				27	%			4,272				3,392				26	%
Total Operating Expenses			13,764				11,316				22	%			27,163				22,451				21	%
Operating Income:
FedEx Express segment			636				622				2	%			1,260				1,167				8	%
TNT Express segment			70				—				NM				56				—				NM
FedEx Ground segment			465				526				(12	%)			1,075				1,063				1	%
FedEx Freight segment			88				101				(13	%)			223				233				(4	%)
Eliminations, corporate and other			(92	)			(112	)			(18	%)			(183	)			(182	)			1	%
Total Operating Income			1,167				1,137				3	%			2,431				2,281				7	%
Other Income (Expense):
Interest, net			(119	)			(74	)			61	%			(232	)			(137	)			69	%
Other, net			30				(8	)			NM				21				(5	)			NM
Total Other Expense			(89	)			(82	)			9	%			(211	)			(142	)			49	%
Pretax Income			1,078				1,055				2	%			2,220				2,139				4	%
Provision for Income Taxes			378				364				4	%			805				756				6	%
Net Income		$	700			$	691				1	%		$	1,415			$	1,383				2	%
Diluted Earnings Per Share		$	2.59			$	2.44				6	%		$	5.24			$	4.86				8	%
Weighted Average Common and Common Equivalent Shares			270				283				(5	%)			270				284				(5	%)
Capital Expenditures		$	1,466			$	1,353				8	%		$	2,681			$	2,562				5	%

 

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FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS

Second Quarter Fiscal 2017

(In millions)

 

		Nov. 30, 2016
		(Unaudited)				May 31, 2016
ASSETS
Current Assets
Cash and cash equivalents		$	3,059			$	3,534
Receivables, less allowances			7,575				7,252
Spare parts, supplies and fuel, less allowances			517				496
Prepaid expenses and other			901				707
Total current assets			12,052				11,989
Property and Equipment, at Cost			48,918				47,018
Less accumulated depreciation and amortization			23,611				22,734
Net property and equipment			25,307				24,284
Other Long-Term Assets
Goodwill			6,921				6,747
Other assets			2,068				2,939
Total other long-term assets			8,989				9,686
		$	46,348			$	45,959
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current Liabilities
Current portion of long-term debt		$	43			$	29
Accrued salaries and employee benefits			1,765				1,972
Accounts payable			2,954				2,944
Accrued expenses			3,045				3,063
Total current liabilities			7,807				8,008
Long-Term Debt, Less Current Portion			13,553				13,733
Other Long-Term Liabilities
Deferred income taxes			2,148				1,567
Pension, postretirement healthcare and other benefit obligations			5,845				6,227
Self-insurance accruals			1,349				1,314
Deferred lease obligations			547				400
Deferred gains, principally related to aircraft transactions			145				155
Other liabilities			423				771
Total other long-term liabilities			10,457				10,434
Commitments and Contingencies
Common Stockholders’ Investment
Common stock, $0.10 par value, 800 million shares authorized			32				32
Additional paid-in capital			2,946				2,892
Retained earnings			19,410				18,371
Accumulated other comprehensive loss			(425	)			(169	)
Treasury stock, at cost			(7,432	)			(7,342	)
Total common stockholders’ investment			14,531				13,784
		$	46,348			$	45,959

 

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FEDEX CORP. CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

Second Quarter Fiscal 2017

(In millions)

(Unaudited)

 

		Six Months Ended
		November 30
		2016				2015
Operating Activities:
Net income		$	1,415			$	1,383
Noncash charges:
Depreciation and amortization			1,479				1,301
Other, net			489				95
Gain from sale of an investment			(35	)			—
Changes in operating assets and liabilities, net			(713	)			(325	)
Net cash provided by operating activities			2,635				2,454
Investing Activities:
Capital expenditures			(2,681	)			(2,562	)
Proceeds from asset dispositions and other			100				12
Net cash used in investing activities			(2,581	)			(2,550	)
Financing Activities:
Principal payments on debt			(43	)			(17	)
Proceeds from debt issuance			—				1,238
Proceeds from stock issuances			164				62
Dividends paid			(213	)			(141	)
Purchase of treasury stock			(334	)			(1,101	)
Other, net			(5	)			(8	)
Net cash (used in) provided by financing activities			(431	)			33
Effect of exchange rate changes on cash			(98	)			(53	)
Net decrease in cash and cash equivalents			(475	)			(116	)
Cash and cash equivalents at beginning of period			3,534				3,763
Cash and cash equivalents at end of period		$	3,059			$	3,647

 

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FEDEX EXPRESS SEGMENT FINANCIAL HIGHLIGHTS

Second Quarter Fiscal 2017

(Dollars in millions)

(Unaudited)

 

		Three Months Ended												Six Months Ended
		November 30												November 30
		2016				2015				%				2016				2015				%
Revenues:
Package Revenue:
U.S. Overnight Box		$	1,709			$	1,682				2	%		$	3,431			$	3,340				3	%
U.S. Overnight Envelope			422				397				6	%			865				819				6	%
Total U.S. Overnight			2,131				2,079				3	%			4,296				4,159				3	%
U.S. Deferred			834				826				1	%			1,644				1,642				—
Total U.S. Package Revenue			2,965				2,905				2	%			5,940				5,801				2	%
International Priority			1,443				1,433				1	%			2,877				2,897				(1	%)
International Economy			605				568				7	%			1,189				1,142				4	%
Total International Export Package			2,048				2,001				2	%			4,066				4,039				1	%
International Domestic1			332				336				(1	%)			652				663				(2	%)
Total Package Revenue			5,345				5,242				2	%			10,658				10,503				1	%
Freight Revenue:
U.S.			612				578				6	%			1,228				1,151				7	%
International Priority			378				354				7	%			738				704				5	%
International Airfreight			27				32				(16	%)			54				68				(21	%)
Total Freight Revenue			1,017				964				5	%			2,020				1,923				5	%
Other Revenue2			381				382				—				721				753				(4	%)
Total Express Revenue		$	6,743			$	6,588				2	%		$	13,399			$	13,179				2	%
Operating Expenses:
Salaries and employee benefits			2,604				2,513				4	%			5,192				5,036				3	%
Purchased transportation			603				616				(2	%)			1,160				1,217				(5	%)
Rentals and landing fees			398				399				—				799				809				(1	%)
Depreciation and amortization			360				349				3	%			708				696				2	%
Fuel			509				517				(2	%)			1,010				1,124				(10	%)
Maintenance and repairs			339				330				3	%			696				675				3	%
Intercompany charges			463				462				—				925				907				2	%
Other			831				780				7	%			1,649				1,548				7	%
Total Operating Expenses			6,107				5,966				2	%			12,139				12,012				1	%
Operating Income		$	636			$	622				2	%		$	1,260			$	1,167				8	%
Operating Margin			9.4	%			9.4	%			—				9.4	%			8.9	%			0.5 pts

1 - International Domestic revenues represent international intra-country operations.

2 - Includes FedEx Trade Networks and FedEx SupplyChain Systems.

 

15

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FEDEX EXPRESS SEGMENT OPERATING HIGHLIGHTS

Second Quarter Fiscal 2017

(Unaudited)

 

		Three Months Ended												Six Months Ended
		November 30												November 30
		2016				2015				%				2016				2015				%
PACKAGE STATISTICS1
Average Daily Package Volume (000s):
U.S. Overnight Box			1,283				1,290				(1	%)			1,269				1,250				2	%
U.S. Overnight Envelope			557				531				5	%			563				536				5	%
Total U.S. Overnight Package			1,840				1,821				1	%			1,832				1,786				3	%
U.S. Deferred			866				900				(4	%)			845				882				(4	%)
Total U.S. Domestic Package			2,706				2,721				(1	%)			2,677				2,668				—
International Priority			409				402				2	%			397				396				—
International Economy			189				186				2	%			183				181				1	%
Total International Export Package			598				588				2	%			580				577				1	%
International Domestic2			982				954				3	%			928				903				3	%
Total Average Daily Packages			4,286				4,263				1	%			4,185				4,148				1	%
Yield (Revenue Per Package):
U.S. Overnight Box		$	21.15			$	20.70				2	%		$	21.13			$	20.89				1	%
U.S. Overnight Envelope			12.00				11.87				1	%			11.98				11.93				—
U.S. Overnight Composite			18.38				18.13				1	%			18.31				18.20				1	%
U.S. Deferred			15.30				14.55				5	%			15.21				14.54				5	%
U.S. Domestic Composite			17.39				16.94				3	%			17.33				16.99				2	%
International Priority			56.04				56.52				(1	%)			56.66				57.19				(1	%)
International Economy			50.75				48.53				5	%			50.62				49.35				3	%
Total International Export Composite			54.37				54.00				1	%			54.75				54.73				—
International Domestic2			5.36				5.59				(4	%)			5.49				5.73				(4	%)
Composite Package Yield		$	19.80			$	19.52				1	%		$	19.90			$	19.78				1	%
FREIGHT STATISTICS1
Average Daily Freight Pounds (000s):
U.S.			8,177				8,213				—				8,121				7,738				5	%
International Priority			2,743				2,605				5	%			2,637				2,547				4	%
International Airfreight			600				678				(12	%)			592				643				(8	%)
Total Avg Daily Freight Pounds			11,520				11,496				—				11,350				10,928				4	%
Revenue Per Freight Pound:
U.S.		$	1.19			$	1.12				6	%		$	1.18			$	1.16				2	%
International Priority			2.18				2.16				1	%			2.19				2.16				1	%
International Airfreight			0.72				0.75				(4	%)			0.71				0.83				(14	%)
Composite Freight Yield		$	1.40			$	1.33				5	%		$	1.39			$	1.37				1	%
Operating Weekdays			63				63				—				128				128				—

 

1 -	Package and freight statistics include only the operations of FedEx Express.

2 -	International Domestic represents international intra-country operations.

 

16

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TNT EXPRESS SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Second Quarter Fiscal 2017

(Dollars in millions)

(Unaudited)

 

		Three Months Ended				Six Months Ended
		November 30, 2016				November 30, 2016
FINANCIAL HIGHLIGHTS
Revenue		$	1,899			$	3,703
Operating Expenses:
Salaries and employee benefits			510				1,031
Purchased transportation			749				1,517
Rentals and landing fees			87				173
Depreciation and amortization			52				124
Fuel			56				110
Maintenance and repairs			40				76
Intercompany charges			5				5
Other			330				611
Total Operating Expenses			1,829				3,647
Operating Income		$	70			$	56
Operating Margin			3.7	%			1.5	%
OPERATING STATISTICS
Operating Weekdays			62				126
Package:
Average Daily Package Volume (000s)			1,071				993
Yield (Revenue Per Package)		$	24.88			$	25.40
Freight:
Average Daily Freight Pounds (000s)			3,484				3,595
Revenue Per Freight Pound		$	0.59			$	0.61

 

17

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FEDEX GROUND SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Second Quarter Fiscal 2017

(Dollars in millions)

(Unaudited)

 

		Three Months Ended												Six Months Ended
		November 30												November 30
		2016				2015				%				2016				2015				%
FINANCIAL HIGHLIGHTS
Revenues:
FedEx Ground		$	4,015			$	3,677				9	%		$	7,906			$	7,137				11	%
GENCO			404				373				8	%			803				743				8	%
Total Revenues			4,419				4,050				9	%			8,709				7,880				11	%
Operating Expenses:
Salaries and employee benefits			820				696				18	%			1,586				1,349				18	%
Purchased transportation			1,861				1,712				9	%			3,553				3,239				10	%
Rentals			189				155				22	%			370				300				23	%
Depreciation and amortization			168				146				15	%			331				292				13	%
Fuel			3				2				50	%			5				5				—
Maintenance and repairs			78				69				13	%			154				138				12	%
Intercompany charges			328				301				9	%			653				598				9	%
Other			507				443				14	%			982				896				10	%
Total Operating Expenses			3,954				3,524				12	%			7,634				6,817				12	%
Operating Income		$	465			$	526				(12	%)		$	1,075			$	1,063				1	%
Operating Margin			10.5	%			13.0	%			(2.5 pts	)			12.3	%			13.5	%			(1.2 pts	)
OPERATING STATISTICS1
Operating Weekdays			63				63				—				128				128				—
Average Daily Package Volume (000s)			8,005				7,623				5	%			7,692				7,163				7	%
Yield (Revenue Per Package)		$	7.95			$	7.64				4	%		$	8.02			$	7.77				3	%

 

1 -	Operating statistics include only the operations of FedEx Ground (including FedEx SmartPost).

 

18

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FEDEX FREIGHT SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

Second Quarter Fiscal 2017

(Dollars in millions)

(Unaudited)

 

		Three Months Ended												Six Months Ended
		November 30												November 30
		2016				2015				%				2016				2015				%
FINANCIAL HIGHLIGHTS
Revenue		$	1,597			$	1,547				3	%		$	3,255			$	3,148				3	%
Operating Expenses:
Salaries and employee benefits			761				731				4	%			1,533				1,452				6	%
Purchased transportation			250				246				2	%			509				497				2	%
Rentals			35				33				6	%			65				76				(14	%)
Depreciation and amortization			66				61				8	%			130				120				8	%
Fuel			92				95				(3	%)			183				197				(7	%)
Maintenance and repairs			55				53				4	%			109				106				3	%
Intercompany charges			124				112				11	%			250				225				11	%
Other			126				115				10	%			253				242				5	%
Total Operating Expenses			1,509				1,446				4	%			3,032				2,915				4	%
Operating Income		$	88			$	101				(13	%)		$	223			$	233				(4	%)
Operating Margin			5.5	%			6.5	%			(1.0 pts	)			6.9	%			7.4	%			(0.5 pts	)
OPERATING STATISTICS
LTL Operating Weekdays			62				62				—				127				127				—
Average Daily LTL Shipments (000s)
Priority			72.7				68.9				6	%			72.6				67.7				7	%
Economy			31.4				31.4				—				31.9				31.0				3	%
Total Average Daily LTL Shipments			104.1				100.3				4	%			104.5				98.7				6	%
Weight Per LTL Shipment (lbs)
Priority			1,165				1,179				(1	%)			1,171				1,189				(2	%)
Economy			1,113				1,141				(2	%)			1,105				1,155				(4	%)
Composite Weight Per LTL Shipment			1,149				1,167				(2	%)			1,151				1,178				(2	%)
LTL Revenue/Shipment
Priority		$	220.34			$	218.52				1	%		$	218.89			$	220.90				(1	%)
Economy			261.28				263.47				(1	%)			258.26				266.43				(3	%)
Composite LTL Revenue/Shipment		$	232.70			$	232.60				—			$	230.90			$	235.23				(2	%)
LTL Revenue/CWT
Priority		$	18.92			$	18.53				2	%		$	18.70			$	18.58				1	%
Economy			23.48				23.09				2	%			23.37				23.07				1	%
Composite LTL Revenue/CWT		$	20.25			$	19.93				2	%		$	20.07			$	19.97				1	%

 

19