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FedEx Annual Report, Year Ended May 31, 1999

Filing Date
Filed August 16, 1999
Period End
May 31, 1999
Security
FDX
In the record · 2016–202610-K1210-Q328-K159

FDX filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 159 current reports (8-K) between 2016 and 2026.

  1. Impairment8-K · May ’18May ’18
  2. Material agreement8-K · Mar ’20Mar ’20
  3. Leadership change8-K · Mar ’22Mar ’22
  4. Leadership change8-K · Jan ’26Jan ’26

01—Abstract

Summary

Summary of the 10-K filed August 16, 1999. Cited figures are marked; the original filing is the authoritative source.

FDX Corporation's fiscal 1999 10-K (fiscal year ended May 31, 1999) reports a record year: revenues rose 6% to $16.77 billiona, operating income rose 15% to $1.16 billion, and net income climbed 26% to $631 million, or $2.10 per diluted share (up 24%).

Excluding non-recurring items, including a roughly $91 millionb charge for strike contingency planning tied to the FedEx pilots' dispute, diluted EPS was $2.28, up 17%. The results were driven by package volume growth, yield-management actions, and lower jet fuel prices (average jet fuel cost per gallon fell about 23%). FedEx, the largest subsidiary, accounts for about 83% of revenue and remains the global express leader, while RPS, the ground small-package carrier, grew revenue 10% with a 12.3% operating margin.

Balance sheet and cash flow improved meaningfully. Debt to total capitalization fell to 22.8% from 29.3%, long-term debt dropped 16%, and operating cash flow reached $1.77 billionc against capital expenditures of $1.77 billion, so free cash flow was roughly breakeven. Management is targeting five-year goals of 12% to 15% annual earnings growth and return on equity of at least 20%, and it reports ROE of 14.6% for FY99.

The company pays no dividends and has said it does not intend to pay them. Its strategy rests on a 'portfolio' model in which independent operating companies focus on separate market segments while sharing sales and IT synergies. Key risks include pending DOT and foreign aviation-rights issues, weakness in Asian markets, rising maintenance costs from an aging fleet, and a $500 milliond RPS expansion plus a planned business-to-residential delivery test.

The FedEx pilots' five-year contract, ratified in February 1999, adds about 17% in pay over its term. Ongoing litigation over the air-cargo excise tax is not reserved for, and management views the other legal matters as immaterial.

02—Key points

Key Highlights

  1. Record FY99 revenue of $16.77 billion (+6%) and net income of $631 million (+26%), with diluted EPS of $2.10 (+24%); excluding non-recurring items, EPS was $2.28.
  2. FedEx generated $13.98 billion in revenue (about 83% of total) with operating income of $871 million, while RPS grew revenue 10% to $1.88 billion with a 12.3% operating margin.
  3. Debt to total capitalization improved to 22.8% from 29.3%, and long-term debt fell 16% to $1.37 billion.
  4. Operating cash flow reached $1.77 billion, but capital expenditures of $1.77 billion left little free cash flow; management aims to become cash flow positive.
  5. No dividends have been paid or are planned; the company reinvests all earnings, with a stated five-year target of 12%-15% annual earnings growth and ROE of at least 20%.
  6. Labor costs rose after the five-year FedEx pilot contract (17% pay increase), and a $91 million strike-contingency charge hit Q3 FY99 earnings.
  7. Major growth initiatives include a $500 million RPS capacity expansion, a Netscape internet portal partnership, and a business-to-residential pilot in Pittsburgh.

03—Questions

Frequently Asked Questions

  1. How did FDX perform financially in fiscal 1999?

    Revenue rose 6% to a record $16.77 billion, operating income increased 15% to $1.16 billion, and net income grew 26% to $631 million. Diluted EPS was $2.10, or $2.28 excluding non-recurring items such as the strike-contingency charge.

  2. Does FDX pay dividends?

    No. The company has never declared a cash dividend on its common stock, and management does not intend to pay dividends. It reinvests earnings in its businesses.

  3. What were the main risks disclosed?

    Key risks include competitive pricing pressure, weak Asian markets, restrictive international aviation rights, rising maintenance costs from an aging fleet, jet fuel price volatility, Y2K compliance, and labor costs under the new pilot contract. Litigation over the air-cargo excise tax is pending, with no amount reserved.

  4. How is the company's debt position?

    The balance sheet strengthened. Long-term debt fell to $1.37 billion from $1.64 billion, and debt to total capitalization declined to 22.8% from 29.3%. The company has a $1.0 billion revolving credit facility with no borrowings outstanding at year end.

  5. What is the outlook for FY2000?

    Management expects U.S. package volume growth slightly below FY99 rates, with IP growth accelerating. Yield increases are expected from the March 1999 rate increase, and the company targets continued margin improvement and progress toward positive free cash flow. Lower engine-kit profits and higher maintenance costs are expected to be headwinds.

04—Continue

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