10-KPeriod: FY2012

FEDEX CORP Annual Report, Year Ended May 31, 2012

Filed July 16, 2012For Securities:FDX

Summary

FedEx Corporation's fiscal year ended May 31, 2012, showed a strong rebound in financial performance, with revenues increasing by 9% to $42.7 billion and operating income surging by 34% to $3.2 billion. This growth was primarily driven by improved profitability in the FedEx Ground segment, higher yields across all transportation segments, and favorable fuel surcharge adjustments that more than offset incremental fuel costs. Despite moderating global economic conditions, the company demonstrated resilience, with net income rising 40% to $2.0 billion, translating to diluted earnings per share of $6.41. Key operational highlights include significant revenue and operating income increases at FedEx Ground, which benefited from market share gains and strong demand. FedEx Freight also returned to profitability, bolstered by yield improvements and cost efficiencies from its recent LTL operations combination. FedEx Express saw revenue growth, though volumes were impacted by a softer global economy, leading to a decision to retire certain aircraft to better align capacity with demand. The company continued strategic international expansion through acquisitions, further strengthening its global network.

Financial Highlights

45 data points
Beta

Revenue

$42.68B

Net Income

$2.03B

4.8% Net Margin

EPS (Diluted)

$6.41

Total Assets

$29.90B

Cash & Equivalents

$2.84B

Free Cash Flow

$4.83B

Financial Statements
Beta
Revenue$42.68B
Operating Expenses$39.49B
Operating Income$3.19B
Interest Expense$52.00M
Net Income$2.03B
EPS (Basic)$6.44
EPS (Diluted)$6.41
Shares Outstanding (Basic)315.00M
Shares Outstanding (Diluted)317.00M

Key Highlights

  • 1Revenues increased 9% to $42.7 billion, driven by yield growth across all segments.
  • 2Operating income grew 34% to $3.2 billion, with operating margin expanding to 7.5% from 6.1%.
  • 3Net income increased 40% to $2.0 billion, and diluted EPS rose 40% to $6.41.
  • 4FedEx Ground segment was a standout performer, with revenues up 13% and operating income up 33%.
  • 5FedEx Freight returned to profitability, with operating income increasing significantly due to higher yields and cost efficiencies.
  • 6FedEx Express experienced revenue growth but saw a decline in U.S. domestic and International Priority package volumes.
  • 7The company incurred a $134 million impairment charge related to retiring aircraft to optimize capacity at FedEx Express.
  • 8FedEx continued its international expansion with several strategic acquisitions in Mexico, India, Poland, France, and Brazil.

Frequently Asked Questions

Revenue growth was primarily driven by increased yields across all transportation segments, including higher fuel surcharges and base rate increases implemented as part of yield management programs. FedEx Ground also benefited from strong demand and market share gains, contributing significantly to the overall revenue increase.

FedEx managed fuel costs through its indexed fuel surcharge system, which aims to pass on changes in fuel prices to customers. In fiscal year 2012, the company benefited from a timing lag between fuel price changes and the adjustment of fuel surcharges, resulting in surcharges significantly exceeding incremental fuel costs. However, the company noted that this favorable effect was expected to reverse in 2013 if fuel prices remained stable.

Operating income in 2012 was impacted by a $134 million non-cash impairment charge related to the decision to retire 24 aircraft and engines at FedEx Express to better align network capacity with demand. This was partially offset by a favorable $66 million reversal of a legal reserve related to the ATA Airlines lawsuit.

FedEx anticipates continued revenue and earnings growth in 2013, despite a cautious outlook for global economic conditions. Growth is expected to be driven by improvements in FedEx Freight's profitability and the sustained strong performance of FedEx Ground. FedEx Express is expected to contribute through international revenue growth and network efficiencies. However, higher pension expenses due to low discount rates are expected to be a headwind.