FedEx Corporation (FedEx Express) (Memphis) reported earnings of $2.13 per diluted share for the fourth quarter ended May 31. This excludes a $0.98 per diluted share business realignment program charge and a previously announced $0.20 per diluted share noncash aircraft impairment charge at FedEx Express. Including these charges, fourth quarter earnings were $0.95 per diluted share.

Last year’s fourth quarter earnings were $1.99 per diluted share, excluding a $0.26 per diluted share noncash aircraft impairment charge at FedEx Express. Including last year’s charge, earnings were $1.73 per diluted share.

“FedEx Ground posted another strong year and FedEx Freight margins continued to improve,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “These positive developments did not fully offset tepid economic growth and customer preference for less costly international shipping services. FedEx Express results improved in the fourth quarter, and while near-term challenges remain, we are confident we are positioning FedEx for profitable, long-term growth.”

Fourth Quarter Results

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

	Fiscal 2013		Fiscal 2012
	Adjusted (non-GAAP)	As Reported (GAAP)	Adjusted (non-GAAP)	As Reported (GAAP)
Revenue	$11.4 billion	$11.4 billion	$11.0 billion	$11.0 billion
Operating Income	$1.10 billion	$502 million	$990 million	$856 million
Operating Margin	9.6%	4.4%	9.0%	7.8%
Net Income	$679 million	$303 million	$634 million	$550 million
Diluted EPS	$2.13	$0.95	$1.99	$1.73

As announced on June 3, during the quarter FedEx Express permanently retired 10 aircraft and related engines. As a consequence, a noncash impairment charge of $100 million ($63 million, net of tax, or $0.20 per diluted share) was recorded in the fourth quarter.

Excluding business realignment program costs and aircraft impairment charges from this year and aircraft impairment charges from last year, “adjusted” operating results improved due to continued strong FedEx Ground performance and better FedEx Express performance.

Full Year Results

FedEx Corp. reported the following consolidated results for the full year:

	Fiscal 2013		Fiscal 2012
	Adjusted (non-GAAP)	As Reported (GAAP)	Adjusted (non-GAAP)	As Reported (GAAP)
Revenue	$44.3 billion	$44.3 billion	$42.7 billion	$42.7 billion
Operating Income	$3.21 billion	$2.55 billion	$3.28 billion	$3.19 billion
Operating Margin	7.3%	5.8%	7.7%	7.5%
Net Income	$1.98 billion	$1.56 billion	$2.09 billion	$2.03 billion
Diluted EPS	$6.23	$4.91	$6.59	$6.41

Capital spending for fiscal 2013 was $3.4 billion, down from $4.0 billion in fiscal 2012.

Business Realignment Program Update

In October, the company announced profit improvement programs, which include a voluntary employee separation program. The program was completed during the fourth quarter, and approximately 3,600 employees will be voluntarily leaving the company in phases to ensure a smooth transition. Approximately 40% of the employees vacated their positions on May 31, 2013 in the first phase. Approximately 25% of the employees will vacate their positions in the final phase at the end of fiscal 2014.

The company incurred costs of $496 million ($313 million, net of tax, or $0.98 per diluted share) during the fourth quarter and $560 million ($353 million, net of tax, or $1.11 per diluted share) during fiscal 2013, associated with the business realignment activities. The cost of the voluntary employee separation program is included in the “Business realignment, impairment and other charges” line of the company’s statements of income. Business realignment program costs at FedEx Services have been allocated to the operating segments through the “Intercompany charges” line of each segment’s statement of income.

Outlook

FedEx is revising its earnings guidance practices to focus on full fiscal year projections with quarterly updates. For fiscal 2014, the company projects earnings per share growth of 7% to 13% from fiscal 2013 adjusted results. This assumes the current market outlook for fuel prices, U.S. GDP growth of 2.3% and world GDP growth of 2.7%. Capital spending for fiscal 2014 is expected to be approximately $4 billion.

“We remain focused on improving margins and returns in all of our businesses. The pace of that improvement is expected to be moderate in fiscal 2014 and then accelerate in fiscal 2015,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “Our profit improvement program is progressing, but we continue to see the effects of customers selecting lower-rate international services. FedEx Express will further decrease capacity between Asia and the United States in July.”

FedEx Express Segment

For the fourth quarter, the FedEx Express segment reported:

• Revenue of $6.98 billion, up 3% from last year’s $6.80 billion
• Adjusted operating income of $460 million, up 11% from $415 million a year ago. Including charges, operating income of $0, down from $281 million last year.
• Adjusted operating margin of 6.6%, up from 6.1% the previous year. Including charges, operating margin of 0.0%, down from 4.1% last year.

Adjusted operating income and margin improved despite the demand shift toward lower yielding international services, as the net impact of the fuel surcharge timing lag, capacity reductions and other cost reduction activities benefited the quarter’s results. Direct and intercompany costs associated with the business realignment programs and the aircraft impairment charge impacted operating income and margin by $460 million and 6.6 percentage points, respectively. Last year’s results included a $134 million aircraft impairment charge.

Revenue increased due to this year’s business acquisitions and growth at FedEx Trade Networks. U.S. domestic average daily package volume increased 2% and U.S. domestic revenue per package increased 1%, as higher rate per pound and weight per package were offset by lower fuel surcharges. FedEx International Economy volume grew 11%, while FedEx International Priority volume decreased 2% during the quarter. International export revenue per package fell 2% due primarily to lower rates.

FedEx Express is pleased to have been selected as the sole awardee of the recent U.S. Postal Service air cargo solicitation, representing the majority of the USPS’s air line-haul traffic. This new seven year agreement, valued at approximately $10.5 billion, begins on October 1, 2013. The agreement provides reduced rates for the USPS versus the prior FedEx Express agreement and offers the opportunity for incremental revenue.

In other news, FedEx Corporation also announced that it has completed the first stage of a strategic acquisition by signing agreements to acquire the businesses operated by its current service provider Supaswift (Pty) Ltd. in five countries in Southern Africa, including South Africa, Malawi, Mozambique, Swaziland and Zambia, and is also in discussions to acquire Supaswift’s businesses in Botswana and Namibia. These acquisitions will operate under the FedEx Express business unit and the transaction is subject to necessary regulatory approvals and customary closing conditions.

Once the acquisition is completed, FedEx Express will have direct access across the seven markets to 39 facilities and will welcome approximately 1,000 of Supaswift’s team members, who will join the ranks of more than 300,000 FedEx team members globally. FedEx Express will then offer a complete suite of FedEx branded export, import and domestic solutions, connecting Southern Africa to more than 220 countries and territories worldwide, enhancing customers’ business flexibility and speed to market.

Copyright Photo: Ken Petersen/AirlinersGallery.com. FedEx has been building up a large Boeing 757 fleet to replace its older Boeing 727s. Formerly operated by Britannia Airways/Thomsonfly/Thomson Airways as G-BYAS, 757-204 (F) N925FD (msn 27238) departs from the Memphis sorting hub.

FedEx Express: