Thursday, March 19, 2009

FedEx Profit Plummets, Announces Cost Cuts

MEMPHIS, Tenn., March 19, 2009 -- FedEx Corp. today reported earnings of $0.31 per diluted share for the third quarter ended February 28, compared to $1.26 per diluted share a year ago.

"Our financial performance was sharply lower during the quarter due to the global recession," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "While we are gaining market share in all of our transportation segments, the downturn in our industry and the severity and expected duration of the recession require that we take additional actions."

Cost-Reduction Actions

In light of the continuing deterioration in the global economy, FedEx will implement additional cost-reduction initiatives, both in the U.S. and internationally. These measures include the following:

* Network capacity reductions at FedEx Express and FedEx Freight
* Further reduction of personnel and work hours
* Expansion of previously announced pay actions to include non-U.S. employees, where permitted
* Streamlining of information technology systems and other internal processes
* Additional reductions in other spending categories
* Increased economies in the acquisition of goods and services

These cost-reduction actions are expected to result in fourth quarter charges of approximately $100 million, excluding any potential asset impairment charges. For fiscal 2010, these actions are targeted to reduce expenses by approximately $1.0 billion.

"Our goal when we implemented compensation reductions in January for U.S. salaried personnel was to both protect our business and minimize the loss of jobs,” said Smith. "With industrial production and global trade trends worsening since last quarter, we are applying these additional measures to continue to secure as many of our jobs as possible during this downturn. We remain focused on providing outstanding service, and will ensure that our actions do not impede our industry-leading customer experience."


FedEx expects earnings to be $0.45 to $0.70 per diluted share in the fourth quarter, excluding any one-time charges. Earnings in last year’s fourth quarter were $1.45 per diluted share, excluding a charge of $891 million ($696 million, net of tax, or $2.22 per diluted share) related predominately to non-cash asset impairment charges 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. This outlook assumes continued weak global macroeconomic conditions and stable fuel prices.

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