FedEx Lower 4th Qtr 2008 Earnings

FedEx Corp. Reports Fourth Quarter and Full Year Earnings

MEMPHIS, Tenn., June 18, 2008 ... FedEx Corp. (NYSE: FDX) today reported a loss of $0.78 per diluted share for the fourth quarter ended May 31, compared to earnings of $1.96 per diluted share a year ago. The quarter's results include the previously announced charge of $891 million ($696 million, net of tax, or $2.22 per diluted share) related predominately to one-time, non-cash asset impairment charges. These charges were 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. Last year's fourth quarter included a $0.06 per diluted share net benefit from a settlement with Airbus related to the A380 aircraft order cancellation. Excluding these items, earnings were $1.45 per diluted share in the fourth quarter compared to $1.90 per diluted share a year ago.
"Record high fuel prices and the weak U.S. economy dampened volume growth and substantially affected our bottom line," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "Despite the challenging conditions, our team members continue their outstanding performance in support of our customers, as service levels and morale remain high. We will continue to reduce expenses to match volume and revenue expectations."

Outlook
Earnings are difficult to predict in light of very volatile and high fuel prices and an uncertain economic outlook. FedEx projects earnings to be $0.80 to $1.00 per diluted share in the first quarter. This is in contrast to $1.58 per diluted share a year ago when crude oil averaged about $70 per barrel and the U.S. economy was stronger. The company is currently targeting fiscal 2009 earnings of $4.75 to $5.25 per diluted share. This guidance incorporates the current high fuel prices and the related impact on fuel surcharges, which are reducing demand for FedEx services and impacting yield across the company's transportation segments. This outlook assumes no additional increases to current fuel prices and no further weakening in the economy.
"The operating environment for fiscal 2009 is expected to be very difficult due to the weak U.S. economy and extremely high fuel prices," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "However, we will focus on reducing expenses and remaining cash flow positive, and will continue to take positive steps to improve the customer experience across our portfolio of services."
The capital spending forecast for the year is less than $3 billion, which includes significant investments in more fuel-efficient aircraft.