MEMPHIS, Tenn -- FedEx Corp. today reported a loss of $2.82 per diluted share for the fourth quarter ended May 31, including $3.46 per diluted share of previously disclosed charges. Excluding these charges, fourth quarter earnings were $0.64 per diluted share. These charges approximate $1.2 billion ($1.1 billion noncash), resulting primarily from the impairment of goodwill related to the acquisitions of Kinko’s, Inc. (now known as FedEx Office) and Watkins Motor Lines (now known as FedEx National LTL). These impairment charges reflect a decline in the current fair value of these companies in light of economic conditions and their recent and forecasted performance. The quarter also included costs from actions to align the company’s networks to better match demand by removing equipment and facilities from service and reducing personnel.

Last year’s fourth quarter loss was $0.78 per diluted share and included a charge of $2.22 per diluted share associated with the decision to minimize the use of the Kinko’s trade name and a reduction in the value of the goodwill resulting from the Kinko’s acquisition. Excluding this charge, fourth quarter earnings were $1.45 per diluted share a year ago.

“FedEx operations performed well even with strong economic headwinds,thanks to decisive management actions to control costs and committed team members who delivered outstanding service to our customers,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer.

“There are signs that the worst of the recession is behind us and we remain optimistic that we will see quarter-over-quarter economic improvement later this calendar year.”

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

- Revenue of $7.85 billion, down 20% from $9.87 billion the previous year
- Operating loss of $849 million, compared to an operating loss of $163 million last year
- Net loss of $876 million, down from last year’s net loss of $241 million
- Loss per share of $2.82, down from a loss of $0.78 per share a year ago
- Excluding the impact of impairment and other charges from both years, earnings per share were $0.64, down from $1.45 a year ago (see table)

In addition to the impairment and other charges, operating performance continues to be restrained by the global recession, which is resulting in lower shipment volumes at FedEx Express and FedEx Freight and a very competitive pricing environment. Revenue was also negatively impacted by reduced fuel surcharges and lower shipment weight. Revenue declines were partially offset by stringent cost control efforts and share gains in the parcel market.

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

- Revenue of $35.5 billion, down 6% from $38.0 billion the previous year
- Operating income of $747 million, down 64% from $2.08 billion last year
- Net income of $98 million, down 91% from last year’s $1.13 billion
- Earnings per share of $0.31, down 91% from $3.60 per share a year ago
- Excluding the impact of fourth quarter impairment and other charges from both years, earnings per share were $3.76, compared to $5.83 a year ago
- Capital spending for fiscal 2009 was $2.5 billion.

Outlook
FedEx projects earnings to be $0.30 to $0.45 per diluted share in the first quarter, compared to $1.23 per diluted share a year ago. This outlook assumes current fuel prices and a stable economic environment.

“The operating environment for our first two quarters in fiscal 2010 is expected to be extremely difficult,” said Alan B. Graf, Jr., FedEx Corp.
executive vice president and chief financial officer. “Manufacturing activity is expected to be substantially negative year over year through the summer and last year’s first quarter results benefited from stronger economic activity,making earnings comparisons difficult. Also, the recent run-up in fuel prices will have a significant negative impact on our first quarter’s results. At this time we do not have enough visibility into the economic recovery and jet fuel prices to provide a meaningful annual earnings forecast. However, we believe that FedEx will be poised for growth in our fiscal second half, as our many cost-saving initiatives gain traction and the economy begins to improve.”

Total pension costs for fiscal 2010 are expected to increase approximately $125 million year over year. The capital spending forecast for fiscal 2010 is $2.6 billion, which includes significant investments in more fuel-efficient aircraft.

FedEx Express Segment
For the fourth quarter, the FedEx Express segment reported:

- Revenue of $4.80 billion, down 25% from last year’s $6.37 billion
- Operating loss of $136 million, down from operating income of $426 million a year ago
- Operating margin of (2.8%), down from 6.7% the previous year

Operating income and margin were negatively impacted by charges of $260 million associated with aircraft-related charges and severance programs. These costs are the result of permanently removing ten Airbus A310-200 and four Boeing MD10-10 owned aircraft and certain excess aircraft engines from service, terminating certain aircraft-related leases and contracts and reducing management and staff positions.

U.S. domestic package revenue declined 21%, driven by a 19% drop in revenue per package due to lower fuel surcharges, weight per package and rate per pound. U.S. domestic package volume was down 2%. FedEx International Priority® (IP) package revenue declined 27%. IP revenue per package declined 17% primarily due to lower fuel surcharges, unfavorable exchange rates and lower package weights, partially offset by a higher rate per pound. IP package volume fell 12%, with declines in all international regions.

The impact of declining revenue and rising fuel prices was partially offset by significant volume-related reductions in flight hours, labor hours, fuel consumption and purchased transportation, and a continued focus on aggressive expense reductions throughout the company.

FedEx Ground Segment
For the fourth quarter, the FedEx Ground segment reported:

- Revenue of $1.70 billion, down 1% from last year’s $1.72 billion
- Operating income of $203 million, unchanged from a year ago
- Operating margin of 11.9%, up from 11.8% the previous year

FedEx Ground average daily package volume was essentially flat year over year. Yield decreased 1% primarily due to lower fuel surcharges. FedEx SmartPost revenue increased 21%, as average daily volume grew 66% largely due to market share gains, including gains from DHL’s exit from the U.S. domestic package market.

FedEx Freight Segment
For the fourth quarter, the FedEx Freight segment reported:

- Revenue of $948 million, down 28% from last year’s $1.31 billion
- Operating loss of $106 million, down from operating income of $99 million a year ago
- Operating margin of (11.2%), down from 7.6% the previous year

The operating loss reflects a $90 million impairment charge related to the goodwill associated with the September 2006 acquisition of the U.S. and Canadian less-than-truckload freight operations of Watkins Motor Lines (now known as FedEx National LTL). The quarter also includes $10 million of charges primarily related to severance associated with personnel reductions. Less-than-truckload (LTL) average daily shipments decreased 17% year over year, as a result of the current economic recession, which resulted in the weakest LTL environment in decades. LTL yield declined 11% due to lower fuel surcharges and the continuing effects of a competitive pricing environment resulting from excess capacity in the LTL industry. The revenue decline was partially offset by lower variable incentive compensation and continued stringent cost-containment initiatives.

FedEx Services Segment
FedEx Services fourth quarter segment revenue, which includes the operations of FedEx Office and FedEx Global Supply Chain Services, was down 13% year over year primarily due to declines in copy product revenues. Fourth quarter results for FedEx Services include an $810 million goodwill impairment charge related to the acquisition of Kinko’s (now known as FedEx Office). This charge was not allocated to the transportation segments, as the charge was unrelated to the core performance of those businesses.