MEMPHIS, Tenn.--June 23, 2004-- FedEx Corporation reported earnings of $1.36 per diluted share for the fourth quarter ended May 31 including $0.01 of business realignment costs and a $0.04 benefit from a nonrecurring reduction in the effective income tax rate. This compares to $0.92 per diluted share a year ago, an increase of 48%. Earnings before business realignment costs and the tax benefit were $1.33 per diluted share. "We have strong momentum in our business," said Frederick W. Smith, chairman, president and chief executive officer. "Our entire portfolio of transportation services is experiencing strong demand, especially in ground, international express and regional less-than-truckload services. Another bright spot is the contribution of FedEx Kinko's to our earnings. The company's strategy of bundling its broad portfolio of services to customers is working very well." ************** FedEx Kinko's Segment For the fourth quarter, the FedEx Kinko's segment reported: Revenue of $521 million Operating income of $39 million Operating margin of 7.5% FedEx Kinko's revenue for the quarter was driven by demand from commercial customer sales and signs and banners. FedEx Kinko's recently unveiled the new brand identity for its retail locations--FedEx Kinko's Office and Print Center--and made available the full range of FedEx day-definite ground and time-definite global express shipping services at all U.S. FedEx Kinko's centers. The addition of 1,100 staffed locations to the FedEx retail network improves access for our customers. FedEx Kinko's is planning to offer FedEx Consolidated Returns(TM) service and complete "pack-and-ship" capabilities to customers in time for the 2004 peak holiday season. The store rebranding initiative will continue through fiscal 2006. ********** Fourth Quarter Results FedEx Corp. reported the following consolidated results for the fourth quarter: Revenue of $7.04 billion, up 21% from $5.83 billion the previous year Operating income of $685 million, up 39% from $492 million a year ago Operating margin of 9.7%, up from 8.4% the previous year Net income of $412 million, up 47% from last year's $280 million Total average daily package volume at FedEx Express and FedEx Ground grew a combined 7% year over year for the quarter, due to growth in U.S. domestic express shipments, continued strong growth in international express shipments and higher growth in ground shipments. Revenue per package increased at both FedEx Express and FedEx Ground. Full Year Results For the full fiscal year, FedEx Corp. reported earnings of $2.76 per diluted share, including $0.89 per diluted share of costs associated with the previously announced business realignment through voluntary early retirement and severance programs and $0.12 per diluted share from nonrecurring tax benefits recorded in the first and fourth quarters. Excluding these costs and tax benefits, earnings for the full year were $3.52 per diluted share. Last year's reported earnings were $2.74 per diluted share. "FedEx continues to realize the benefits of actions undertaken over the past several years to reduce capital expenditures and improve cash flows, returns on investment and margins," said Alan B. Graf, Jr., executive vice president and chief financial officer. "We expect our strong momentum to continue into the new fiscal year." Capital spending in fiscal 2004 was reduced to $1.3 billion and the quarterly dividend was increased $0.01 to $0.07 per share in the most recent dividend declaration. The fourth quarter pretax cost of the business realignment programs was $6 million. Approximately $65 million of savings were realized in the fourth quarter and $150 million for the year, reflected primarily in lower salaries and employee benefits costs. The company continues to expect related savings to be $230 million to $240 million in fiscal 2005. Outlook The company continues to see broad-based economic improvement across many sectors in the U.S. and world economies. FedEx expects earnings to be $0.90 to $1.00 per diluted share in its first fiscal quarter. Earnings for the year are expected to be $4.20 to $4.40 per diluted share, with the company benefiting from the full year effect of FedEx Kinko's, growth in FedEx International Priority , FedEx Ground and FedEx Freight shipments and full-year savings from the business realignment programs. Capital spending for fiscal 2005 is forecast to be approximately $1.6 billion. The expected year-over-year increase will fund additional aircraft capacity for FedEx Express, which is driven by growth in FedEx International Priority. Also, additional investments will be made in the FedEx Ground network and FedEx Kinko's. FedEx Express Segment For the fourth quarter, the FedEx Express segment reported: Revenue of $4.71 billion, up 10% from last year's $4.28 billion Operating income of $407 million, up 38% from $295 million a year ago Operating margin of 8.6%, up from 6.9% the previous year FedEx International Priority (IP) revenue grew 22% for the quarter, as IP revenue per package grew 7%, primarily due to an increase in average weight per package and favorable exchange rate differences. IP average daily package volume grew 12%, led by strong growth in Asia and improved U.S. export growth. U.S. domestic express package revenue increased 6%, as average daily package volume grew 2% and U.S. domestic package yield also increased 2%. Operating income improved 38% year over year and operating margin expanded 170 basis points, benefiting from ongoing cost control efforts including early retirement and severance savings, revenue growth and one additional operating day. FedEx Ground Segment For the fourth quarter, the FedEx Ground segment reported: Revenue of $1.06 billion, up 15% from last year's $921 million Operating income of $159 million, up 7% from $149 million a year ago Operating margin of 15.1%, down from 16.2% the previous year Average daily package volume grew 12% in the fourth quarter, the highest this year, driven by continued growth across all FedEx Ground services. As a result of this strength, FedEx Ground generated quarterly revenue exceeding $1 billion for the first time. Yield improved 2% primarily due to a January 2004 general rate increase and an increase in extra services revenue, partially offset by the elimination of the FedEx Ground fuel surcharge in January. The FedEx Ground operating margin was negatively affected by a small operating loss at FedEx Supply Chain Services and higher intercompany charges, partially offset by the benefit of one additional operating day. FedEx Freight Segment For the fourth quarter, the FedEx Freight segment reported: Revenue of $758 million, up 21% from last year's $626 million Operating income of $80 million, up 63% from $49 million a year ago Operating margin of 10.6%, up from 7.8% the previous year FedEx Freight is experiencing strong growth in its regional and interregional less-than-truckload (LTL) shipments. Average daily LTL shipments increased 11% compared to last year's fourth quarter, which continues the upward demand trend that began at the end of the second quarter. LTL yield improved 4% year over year due to the impact of growth in its interregional freight service, higher fuel surcharges, last year's general rate increase and favorable contract renewals. FedEx Freight implemented a 5.9% general rate increase effective June 14, 2004. Operating margin was up 280 basis points compared to the previous year due to higher revenue, productivity efficiencies and cost management efforts. Also contributing to the improved revenue and operating income was an additional operating day in this year's fourth quarter compared to last year. Tax Rate The company's effective tax rate was reduced to 36.0% for the fourth quarter and to 36.5% for the full year. The reduction provided a $0.04 per share benefit to the fourth quarter. The year-over-year 150 basis point reduction in the full year rate was primarily attributable to the company's first quarter 2004 favorable decision in its aircraft engine maintenance litigation, stronger than anticipated international results and the results of tax audits during 2004. For fiscal 2005, the effective income tax rate is expected to be approximately 38%.