FedEx Corp. Reports Higher Revenue and Earnings

Company: fedex, Profile: FedEx, Date: September 22, 2011

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FedEx Freight SegmentFor the first quarter, the FedEx Freight segment reported:• Revenue of $1.33 billion, up 6% from last year’s $1.26 billion.
“Revenue and earnings increased significantly in the quarter due to strong FedEx Ground performance, improved FedEx Freight results and the continued success of the company’s yield management actions,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer.
“While FedEx Ground and FedEx Freight achieved improved operating results despite lower than expected growth, the more rapid decline in demand for FedEx Express services, particularly from Asia, outpaced our ability to reduce operating costs.
FedEx Freight implemented a 6.75% general rate increase on September 6, 2011.
Operating income in the quarter was driven by strong yield growth and efficiencies resulting from the January 30, 2011 combination of the FedEx Freight and FedEx National LTL operations.

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MEMPHIS, Tenn., September 22, 2011 … FedEx Corp. (NYSE: FDX) today reported earnings of $1.46 per diluted share for the first quarter ended August 31, compared to $1.20 per diluted share a year ago, a year-over-year increase of 22%.

“Revenue and earnings increased significantly in the quarter due to strong FedEx Ground performance, improved FedEx Freight results and the continued success of the company’s yield management actions,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “While the economic environment is challenging, we remain confident FedEx will improve earnings, margins and cash flows this fiscal year.”

First Quarter Results

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

• Revenue of $10.52 billion, up 11% from $9.46 billion the previous year

• Operating income of $737 million, up 17% from $628 million last year

• Operating margin of 7.0%, up from 6.6% the previous year

• Net income of $464 million, up 22% from last year’s $380 million

During the quarter, improved FedEx Ground and FedEx Freight results offset the effect of slowing global economic growth, which especially impacted volume levels and drove lower productivity at FedEx Express. Results also reflect wage increases, higher funding of incentive compensation programs and the reinstatement of full 401(k) company-matching contributions.

Outlook

FedEx projects earnings to be $1.40 to $1.60 per diluted share in the second quarter and $6.25 to $6.75 per diluted share for fiscal 2012, compared to the company’s previous full year forecast of $6.35 to $6.85 per diluted share. This guidance assumes the current market outlook for fuel prices and moderate growth in the global economy. The company reported earnings of $0.89 per diluted share in last year’s second quarter, which included charges of $0.27 per diluted share. The capital spending forecast for fiscal 2012 remains $4.2 billion.

“The U.S. and global economy grew at a slower rate than we anticipated during the quarter,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “While FedEx Ground and FedEx Freight achieved improved operating results despite lower than expected growth, the more rapid decline in demand for FedEx Express services, particularly from Asia, outpaced our ability to reduce operating costs. We have slightly reduced our earnings forecast to reflect current business conditions and are aggressively working to adjust our cost structure to match demand levels.”

The company plans to begin acquiring FedEx common shares. A total of 5.7 million shares may be repurchased under existing share repurchase authorizations. The repurchases will be subject to market conditions and will be made from time to time either in the open market or through private transactions in accordance with the requirements of the Securities and Exchange Commission. The company’s repurchase program may be suspended, discontinued or resumed at any time.

2012 Rate Increases

FedEx Express will increase shipping rates by a net average of 3.9% for U.S. domestic, U.S. export and U.S. import services effective January 2, 2012. The full average rate increase of 5.9% will be partially offset by adjusting the fuel price threshold at which the fuel surcharge begins, reducing the fuel surcharge by two percentage points. The FedEx Ground and FedEx SmartPost pricing changes for 2012 will be announced later this year. FedEx Freight implemented a 6.75% general rate increase on September 6, 2011.

FedEx Express Segment

For the first quarter, the FedEx Express segment reported:

• Revenue of $6.59 billion, up 12% from last year’s $5.91 billion

• Operating income of $288 million, down 19% from $357 million a year ago

• Operating margin of 4.4%, down from 6.0% the previous year

U.S. domestic revenue per package grew 13% due to higher fuel surcharges, yield management actions and increased weight per package, while average daily package volume declined 3%. FedEx International Priority® (IP) revenue per package grew 16% due to higher fuel surcharges, the favorable impact of exchange rates, yield management actions and increased weight per package. IP average daily package volume decreased 4% driven by declines from Asia. IP freight pounds increased 3% with revenue per pound up 7% due to higher fuel surcharges and the favorable impact of exchange rates. In total, IP package and freight pounds increased 2% and revenue increased 11% year-over-year.

Operating income and margin decreased as package volume declines accelerated during the quarter due to slowing global economic growth. The package volume declines were more pronounced in certain premium services. Expense reductions related to volume also accelerated during the quarter but only partially offset increases in wages, incentive compensation programs, benefits and fixed costs.

FedEx Ground Segment

For the first quarter, the FedEx Ground segment reported:

• Revenue of $2.28 billion, up 16% from last year’s $1.96 billion

• Operating income of $407 million, up 42% from $287 million a year ago

• Operating margin of 17.9%, up from 14.6% the previous year

FedEx Ground average daily package volume grew 5% in the first quarter driven by increases in the business-to-business market as well as the FedEx Home Delivery service. Revenue per package increased 9% primarily due to higher fuel surcharges and yield management actions. FedEx SmartPost average daily volume increased 29% due to growth in e-commerce and gains in market share. FedEx SmartPost revenue per package increased 5% primarily due to increased fuel surcharges.

Operating income and margin increased primarily due to higher package yield and increased volume.

FedEx Freight Segment

For the first quarter, the FedEx Freight segment reported:

• Revenue of $1.33 billion, up 6% from last year’s $1.26 billion.

• Operating income of $42 million, compared with an operating loss of $16 million a year ago

• Operating margin of 3.2%, up from (1.3%) the previous year

Less-than-truckload (LTL) yield increased 11% primarily due to higher LTL fuel surcharges and ongoing yield management actions. LTL average daily shipments decreased 7% as a result of the yield management actions.

Operating income in the quarter was driven by strong yield growth and efficiencies resulting from the January 30, 2011 combination of the FedEx Freight and FedEx National LTL operations.

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 $40 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 290,000 team members to remain “absolutely, positively” focused on safety, the highest ethical and professional standards and the needs of their customers and communities. For more information, visit news.fedex.com.

Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and first quarter fiscal 2012 Statistical Book. These materials, as well as a Webcast of the earnings release conference call to be held at 8:30 a.m. EDT on September 22 are available on the company’s Web site at investors.fedex.com. A replay of the conference call Webcast will be posted on our Web site following the call.

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 uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, legal challenges or changes related to FedEx Ground’s owner-operators, new U.S. domestic or international government regulation, the impact from any terrorist activities or international conflicts, our ability to effectively operate, integrate and leverage acquired businesses, changes in fuel prices and currency exchange rates, our ability to match capacity to shifting volume levels and other factors which can be found in FedEx Corp.’s and its subsidiaries’ press releases and filings with the SEC.

FEDEX CORP. FINANCIAL HIGHLIGHTS First Quarter Fiscal 2012 (In millions, except earnings per share and FTEs) (Unaudited) Three Months Ended August 31 2011 2010 % Revenue: FedEx Express segment $ 6,592 $ 5,912 12 % FedEx Ground segment 2,278 1,961 16 % FedEx Freight segment 1,328 1,258 6 % FedEx Services segment 411 415 (1 %) Other & eliminations (88 ) (89 ) (1 %) Total Revenue 10,521 9,457 11 % Operating Expenses: Salaries and employee benefits 4,004 3,803 5 % Purchased transportation 1,518 1,327 14 % Rentals and landing fees 620 601 3 % Depreciation and amortization 509 479 6 % Fuel 1,244 887 40 % Maintenance and repairs 551 517 7 % Other 1,338 1,215 10 % Total Operating Expenses 9,784 8,829 11 % Operating Income (Loss): FedEx Express segment 288 357 (19 %) FedEx Ground segment 407 287 42 % FedEx Freight segment 42 (16 ) NM Total Operating Income 737 628 17 % Other Income (Expense): Interest, net (11 ) (18 ) (39 %) Other, net (2 ) (7 ) (71 %) Total Other Income (Expense) (13 ) (25 ) (48 %) Income Before Income Taxes 724 603 20 % Provision for Income Taxes 260 223 17 % Net Income $ 464 $ 380 22 % Diluted Earnings Per Share $ 1.46 $ 1.20 22 % Weighted Average Common and Common Equivalent Shares 318 315 1 % Capital Expenditures $ 1,110 $ 1,012 10 % Average Full-Time Equivalents (in thousands) 259 252 3 %

FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS First Quarter Fiscal 2012 (In millions) August 31, 2011 ASSETS (Unaudited) May 31, 2011 Current Assets Cash and cash equivalents $ 1,959 $ 2,328 Receivables, less allowances 4,624 4,581 Spare parts, supplies and fuel, less allowances 418 437 Deferred income taxes 610 610 Prepaid expenses and other 352 329 Total current assets 7,963 8,285 Property and Equipment, at Cost 34,224 33,686 Less accumulated depreciation and amortization 18,404 18,143 Net property and equipment 15,820 15,543 Other Long-Term Assets Goodwill 2,435 2,326 Other assets 1,620 1,231 Total other long-term assets 4,055 3,557 $ 27,838 $ 27,385 LIABILITIES AND STOCKHOLDERS’ INVESTMENT Current Liabilities Current portion of long-term debt $ 301 $ 18 Accrued salaries and employee benefits 1,245 1,268 Accounts payable 1,563 1,702 Accrued expenses 1,872 1,894 Total current liabilities 4,981 4,882 Long-Term Debt, Less Current Portion 1,367 1,667 Other Long-Term Liabilities Deferred income taxes 1,441 1,336 Pension, postretirement healthcare and other benefit obligations 2,123 2,124 Self-insurance accruals 964 977 Deferred lease obligations 824 779 Deferred gains, principally related to aircraft transactions 240 246 Other liabilities 184 154 Total other long-term liabilities 5,776 5,616 Commitments and Contingencies Common Stockholders’ Investment Common stock, $0.10 par value, 800 million shares authorized 32 32 Additional paid-in capital 2,547 2,484 Retained earnings 15,648 15,266 Accumulated other comprehensive loss (2,501 ) (2,550 ) Treasury stock, at cost (12 ) (12 ) Total common stockholders’ investment 15,714 15,220 $ 27,838 $ 27,385

FEDEX CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS First Quarter Fiscal 2012 (In millions) (Unaudited) Three Months Ended August 31 2011 2010 Operating Activities: Net income $ 464 $ 380 Noncash charges: Depreciation and amortization 509 479 Other, net 211 98 Changes in operating assets and liabilities, net (324 ) (161 ) Net cash provided by operating activities 860 796 Investing Activities: Capital expenditures (1,110 ) (1,012 ) Business acquisitions, net of cash acquired (111 ) ” Proceeds from asset dispositions and other 5 3 Net cash used in investing activities (1,216 ) (1,009 ) Financing Activities: Principal payments on debt (17 ) (12 ) Dividends paid (41 ) (38 ) Other, net 32 9 Net cash used in financing activities (26 ) (41 ) Effect of exchange rate changes on cash 13 11 Net decrease in cash and cash equivalents (369 ) (243 ) Cash and cash equivalents at beginning of period 2,328 1,952 Cash and cash equivalents at end of period $ 1,959 $ 1,709

FEDEX EXPRESS SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS First Quarter Fiscal 2012 (Dollars in millions) (Unaudited) Three Months Ended August 31 FINANCIAL HIGHLIGHTS 2011 2010 % Revenue $ 6,592 $ 5,912 12 % Operating Expenses: Salaries and employee benefits 2,413 2,258 7 % Purchased transportation 449 369 22 % Rentals and landing fees 423 403 5 % Depreciation and amortization 282 255 11 % Fuel 1,077 754 43 % Maintenance and repairs 380 352 8 % Intercompany charges 548 513 7 % Other 732 651 12 % Total Operating Expenses 6,304 5,555 13 % Operating Income $ 288 $ 357 (19 %) Operating Margin 4.4 % 6.0 % (1.6 pts) OPERATING STATISTICS Operating Weekdays 65 65 ” AVG DAILY VOLUME / POUNDS Average Daily Package Volume (000s): U.S. Overnight Box 1,134 1,168 (3 %) U.S. Overnight Envelope 596 624 (4 %) U.S. Deferred 829 846 (2 %) Total U.S. Domestic Package 2,559 2,638 (3 %) International Priority 543 566 (4 %) International Domestic1 445 323 38 % Total Average Daily Packages 3,547 3,527 1 % Average Daily Freight Pounds (000s): U.S. 6,969 6,908 1 % International Priority 3,132 3,027 3 % International Airfreight 1,165 1,240 (6 %) Total Avg Daily Freight Pounds 11,266 11,175 1 % YIELD Revenue Per Package: U.S. Overnight Box $ 22.24 $ 19.65 13 % U.S. Overnight Envelope 11.64 10.64 9 % U.S. Deferred 13.57 12.01 13 % Total U.S. Domestic Package 16.97 15.07 13 % International Priority 62.30 53.70 16 % International Domestic1 7.16 7.04 2 % Composite Package Yield $ 22.67 $ 20.52 10 % Revenue Per Freight Pound: U.S. $ 1.31 $ 1.16 13 % International Priority 2.21 2.06 7 % International Airfreight 1.02 0.87 17 % Composite Freight Yield $ 1.53 $ 1.38 11 % Average Full-Time Equivalents (000s) 136 132 3 % 1 – International Domestic includes the operations of a February 2011 business acquisition in India and a July 2011 business acquisition in Mexico.

FEDEX GROUND SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS First Quarter Fiscal 2012 (Dollars in millions) (Unaudited) Three Months Ended August 31 2011 2010 % FINANCIAL HIGHLIGHTS Revenues: FedEx Ground $ 2,116 $ 1,839 15 % FedEx SmartPost 162 122 33 % Total Revenues 2,278 1,961 16 % Operating Expenses: Salaries and employee benefits 351 307 14 % Purchased transportation 886 782 13 % Rentals 66 62 6 % Depreciation and amortization 93 82 13 % Fuel 2 1 NM Maintenance and repairs 44 44 ” Intercompany charges 241 221 9 % Other 188 175 7 % Total Operating Expenses 1,871 1,674 12 % Operating Income $ 407 $ 287 42 % Operating Margin 17.9 % 14.6 % 3.3 pts OPERATING STATISTICS Operating Weekdays 65 65 ” Average Daily Package Volume (000s) FedEx Ground 3,722 3,534 5 % FedEx SmartPost 1,415 1,100 29 % Yield (Revenue Per Package) FedEx Ground $ 8.73 $ 7.99 9 % FedEx SmartPost $ 1.76 $ 1.68 5 %

Company Information:

Company: fedex, Profile: FedEx, Date: September 22, 2011

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FedEx Freight SegmentFor the first quarter, the FedEx Freight segment reported:• Revenue of $1.33 billion, up 6% from last year’s $1.26 billion.
“Revenue and earnings increased significantly in the quarter due to strong FedEx Ground performance, improved FedEx Freight results and the continued success of the company’s yield management actions,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer.
“While FedEx Ground and FedEx Freight achieved improved operating results despite lower than expected growth, the more rapid decline in demand for FedEx Express services, particularly from Asia, outpaced our ability to reduce operating costs.
FedEx Freight implemented a 6.75% general rate increase on September 6, 2011.
Operating income in the quarter was driven by strong yield growth and efficiencies resulting from the January 30, 2011 combination of the FedEx Freight and FedEx National LTL operations.

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