FedEx Corporation Investor Relations February 12, 2018

Transcription

1 FedEx Corporation Investor Relations February 12, 2018 Forward-Looking Statements Certain statements in this presentation may be considered forward-looking statements, such as statements relating to management s views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, a significant data breach or other disruption to our technology infrastructure, the ongoing impact of the June 27, 2017 cyberattack affecting TNT Express, our ability to successfully integrate the businesses and operations of FedEx Express and TNT Express in the expected time frame or at the expected cost, changes in fuel prices or currency exchange rates, our ability to match capacity to shifting volume levels, new U.S. domestic or international government regulation, our ability to effectively operate, integrate and leverage acquired businesses, our ability to achieve our FedEx Express segment profit improvement goal, legal challenges or changes related to owner-operators engaged by FedEx Ground and the drivers providing services on their behalf, disruptions or modifications in service by, or changes in the business or financial soundness of, the U.S. Postal Service, the impact from any terrorist activities or international conflicts and other factors which can be found in FedEx Corp. s and its subsidiaries press releases and FedEx Corp. s filings with the SEC. Any forward-looking statement speaks only as of the date on which it is made. We do not undertake or assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 1

2 Unmatched Global Network Links More Than 99% of World s GDP Over 220 countries and territories, every address in the U.S. Over 660 aircraft and over 170,000 motorized vehicles Approximately 5,000 operating facilities; 375 airports Sorts and processes over 14M shipments per day Over 400,000 team members worldwide See fedex.com/dream for more information Broad Portfolio of Services FY17 Revenues: $60.3 billion Team Members: More than 400,000 Countries and Territories Served: More than 220 $34.8 billion 57% $18.1 billion 30% $6.4 billion 10% $1.6 billion 3% FedEx Express Group, FedEx Ground, FedEx Freight and FedEx Services show group/segment revenue. TNT Express segment revenue is included in the FedEx Express Group results. Not included in the chart is ($0.6) billion other & eliminations revenue. 2

3 Bundle of Solutions % of Revenue FXE+FXG 18.5% FedEx Ground (FXG) 0.5% FedEx Express (FXE) 1.7% All cos 77.2% FXG+FXF 0.2% FXE+FXF 0.3% FedEx Freight (FXF) 1.6% Our portfolio of solutions creates a strong value proposition 96% of U.S. revenue comes from customers of two or more operating companies We manage service offerings as a portfolio for the benefit of our customers and FedEx Our independent operations enable optimal service quality, reliability and focus Revenue from U.S. payors for the period May 2016 April Customer defined at the Country HQ level. FXG includes FedEx SmartPost service revenue. FXE does not include TNT Express revenue. FedEx Long-Term Financial Goals Increase EPS 10% 15% per year Grow profitable revenue Achieve 10%+ operating margin Improve cash flows Increase ROIC Increase returns to shareowners 3

4 Well Positioned for Profitable Growth E-commerce, including B2B e-commerce, and global trade growth are increasing demand for our services Integration of TNT into FedEx Express is expected to be substantially complete by the end of May 2020 The FedEx Express segment (FedEx Express and TNT combined) is targeting operating income improvement of $1.2 to $1.5 billion in FY20 versus FY17, assuming moderate economic growth, current accounting rules and tax laws in effect prior to U.S. tax reform and continued recovery from the TNT Express cyberattack FedEx Ground continues to gain revenue share with double-digit margins FedEx Freight margins are rebounding as the industrial environment improves FedEx service levels and culture remain strong Macroeconomic Trends The economy showed solid momentum entering the year, and business and consumer sentiment remain favorable. Higher growth reflects the impact of the Tax Cuts and Jobs Act of The synchronous global upturn across regions and sectors is supporting global trade flows. Risks to the outlook include geopolitical tensions and the potential for economic policy missteps. CY17 CY18 CY19 GDP Forecast U.S. 2.3% 3.0% 2.6% Global 3.0% 3.1% 3.0% U.S. Growth Industrial Production 2.0% 3.6% 2.6% Consumer Spending 2.7% 2.9% 2.5% FedEx analysis as of January 31,

5 FedEx Business Trends Meeting E-Commerce Demands Another record peak holiday shipping season with outstanding service levels Significant enhancements to the FedEx portfolio Long-term alliance agreement with Walgreens for FedEx OnSite FedEx Fulfillment 80% of people in the U.S. are 9 minutes or less from a FedEx hold location Customers want to drop off or pick up at places convenient to their everyday lives the FedEx retail convenience network offers more than 55,000 U.S. locations. FedEx OnSite: More than 8,000 and growing Pickup & pre-labeled drop off at Walgreens Kroger Albertsons FedEx services also available at FedEx Authorized ShipCenter and Office Depot OfficeMax locations. FedEx Staffed locations: 2,700 FedEx Office Stations & Express Counters FedEx Express drop off also available for packages up to 20 x 12 x 6 at nearly 40,000 drop boxes. 5

6 Pricing Strategy: Grow Yields Increases Effective January 2018* FedEx Express, FedEx Ground and FedEx Freight increased shipping rates an average of 4.9% Dimensional weight pricing applies to FedEx SmartPost packages FedEx Freight is implementing an Over Length Surcharge *Details related to these and additional changes to rates and surcharges are available at fedex.com/rates2018 FedEx Express: Higher Revenues, Profits Modernizing air fleet for greater reliability and fuel efficiency Continuing yield management International volume growth Improving network efficiencies Identifying new revenue and cost management opportunities 6

7 TNT Express Cyberattack Recovery erations are back to normal Service levels within Europe restored Estimated $100 million operating income impact in Q2, diminishing in Q3 Impact predominantly from lost revenue Executing a detailed plan to win more customer volume Aligning Synergies with FY18 integration focuses on more complex, higher value markets timized Pickup and Delivery erations Integrated Global Express Network Improved Efficiency of Staff Functions and Processes (SG&A) Grow Revenue With Best-In-Class Service Portfolio 7

8 Express: On Track for Strong Profit Growth FY20 Incremental erating Target $1.2 - $1.5 billion of additional operating income at FedEx Express segment in FY20 versus FY17, assuming moderate economic growth, current accounting rules and tax laws in effect prior to U.S. tax reform and continued recovery from the TNT Express cyberattack. Integration and restructuring expenses estimated to be $450 million for FY18; approximately $1.4 billion over the fouryear integration period FedEx Ground: Building A Better Business Superior service, innovation and speed advantage Three distinct services: FedEx Ground, FedEx Home Delivery, FedEx SmartPost Flexible business model Benefiting from yield growth including higher pricing on larger shipments 8

9 FedEx Ground Is Faster Than UPS Ground Lanes faster than UPS 29.1% Lanes equal to UPS 67.8% UPS lanes faster 3.1% Net FedEx advantage 25.9% FedEx analysis September 2017 Strong Portfolio of Residential Services FedEx Express FedEx Ground FedEx Ground 1 2 days transit time Time-definite MBG Declared value up to $50K Home Delivery: 1 5 days transit time Day-definite MBG Declared value up to $50K Heavier-weight SmartPost: 2 8 days transit time Final delivery by the USPS or FXG No MBG No declared value Lighter-weight 9

10 Ground s Revenue Market Share Has Increased for 18 Consecutive Years Revenue ($ Billions) % 25% Market Share 10 0 CY98 CY99 CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17- H1 FedEx Ground/FedEx SmartPost Revenue FedEx Ground/FedEx SmartPost Revenue Total Ground Market Revenue Market Share 0% Source: FedEx analysis Notes: Figures Exclude USPS Priority Mail; Ground Market includes USPS Workshare and Parcel Select Products FedEx Ground: Increasing erating Continued focus on balancing capacity and volume growth with cost reduction, yield management, customer mix and pricing strategies erating income, margins and cash flow are expected to increase over the long-term 10

11 FedEx Freight: Competitive Advantages The only nationwide LTL that offers Priority and Economy from one network 95% of total shipments are from customers that use both Priority and Economy + Priority: Fastest published times of any nationwide LTL* Canada: Fastest published times of any LTL service connecting the U.S. and major Canadian markets* + National account payor based view, FedEx analysis as of December 2016 * As of September 2017 FedEx Freight: Continuing Improvements Cross selling with package business; focusing on small and medium enterprises, including a FedEx Freight box Margins are improving with a better balance of volume, pricing and capacity Investing in safety and efficiency improvements timizing rail usage, over 19% of total linehaul miles* U.S. industrial environment is improving * FedEx analysis as of September

12 Corporate erating Margin 10.0% 8.0% 10.0% 8.4% 7.8% 7.9% 9.0% 10.0% 8.4% 9.0% 6.0% 6.1% 4.0% 3.9% 2.0% 0.0% FY13 FY14 FY15 FY16 FY17 GAAP Adjusted Non-GAAP reconciliations are included herein. FY17 includes the addition of TNT Express. Earnings Per Share $14.00 $12.00 $10.80 $12.09 $11.07 $10.00 $8.00 $6.00 $8.55 $7.48 $6.75 $7.05 $8.95 $6.51 $4.00 $3.65 $2.00 $0.00 FY13 FY14 FY15 FY16 FY17 GAAP Adjusted Non-GAAP reconciliations are included herein. FY17 includes the addition of TNT Express. 12

13 Capital Expenditures (% of Revenues) 12.0% 10.0% 8.0% 7.6% 7.8% 9.2% 9.6% 8.5% 6.0% 4.0% 2.0% 0.0% FY13 FY14 FY15 FY16 FY17 Explanatory Note on Non-GAAP Financial Measures The company reports its financial results in accordance with accounting principles generally accepted in the United States ( GAAP ). We have supplemented the reporting of our financial information determined in accordance with GAAP with certain non-gaap (or adjusted ) financial measures. Reconciliations of non-gaap measures used in this presentation to the most directly comparable GAAP measures are included herein. Additional information about FedEx s historical financial results is available on our website (investors.fedex.com). 13

14 FY17 Reconciliation for FedEx Corp. Dollars in millions, except EPS Margin Taxes 1 Net 2 Diluted EPS 3 GAAP Measure $5, % $1,582 $2,997 $11.07 Mark-to-Market Pension Accounting Adjustments 4 (24) --- (18) (6) (0.02) TNT Express Integration Expenses % FedEx Trade Networks Legal Matters % FedEx Ground Legal Matters Non-GAAP Measure $5, % $1,670 $3,273 $ ,2,3,4,5 See Footnotes for Non-GAAP Reconciliation Slides below for details. FY16 Reconciliation for FedEx Corp. Dollars in millions, except EPS 3 Margin 3 Taxes 1,3 Net 2 Diluted EPS GAAP Measure $3, % $920 $1,820 $6.51 Tax Impact Corporate Restructuring for TNT Integration (76) (0.27) Mark-to-Market Pension Accounting Adjustments 4 1, % FedEx Ground Legal Matters % TNT Expenses and erating Results % FedEx Trade Networks Legal Matter % Non-GAAP Measure $5, % $1,678 $3,016 $ ,2,3,4,6,7 See Footnotes for Non-GAAP Reconciliation Slides below for details. 14

15 FY15 Reconciliation for FedEx Corp. Dollars in millions, except EPS Margin 3 Taxes 1,3 Net 2 Diluted EPS GAAP Measure $1, % $577 $1,050 $3.65 Segment Reporting Change 8 (266) (0.6%) (98) (168) (0.58) Mark-to-Market Pension Accounting Adjustments 4 2, % 808 1, Aircraft Impairment & Related Charges % FedEx Ground Legal Matter % Non-GAAP Measure $4, % $1,451 $2,572 $8.95 1,2,3,4,8 See Footnotes for Non-GAAP Reconciliation Slides below for details. FY14 Reconciliation for FedEx Corp. Dollars in millions, except EPS Margin Taxes 1 Net 2 Diluted EPS GAAP Measure $3, % $1,334 $2,324 $7.48 Segment Reporting Change 8 (237) (0.5%) (94) (143) (0.46) Mark-to-Market Pension Accounting Adjustments Non-GAAP Measure $3, % $1,246 $2,190 $7.05 1,2,4,8 See Footnotes for Non-GAAP Reconciliation Slides below for details. 15

16 FY13 Reconciliation for FedEx Corp. Dollars in millions, except EPS Margin Taxes 1 Net 2 Diluted EPS 3 GAAP Measure $4, % $1,622 $2,716 $8.55 Segment Reporting Change 8 (254) (0.6%) (99) (155) (0.49) Mark-to-Market Pension Accounting Adjustments 4 (1,368) (3.1%) (533) (835) (2.63) Business Realignment Program % Aircraft Impairment % Non-GAAP Measure $3, % $1,234 $2,142 $6.75 1,2,3,4,8 See Footnotes for Non-GAAP Reconciliation Slides below for details. Footnotes for Non-GAAP Reconciliation Slides 1. taxes are based on the company s approximate statutory tax rates applicable to each transaction. 2. Effect of Total other (expense) income on net income amount not shown. 3. Does not sum to total due to rounding. 4. Mark-to-Market (MTM) pension accounting adjustments reflect the year-end noncash adjustment to the valuation of the company s defined benefit pension and other postretirement plans. 5. These expenses, including restructuring charges at TNT Express, were recognized at FedEx Corporate, FedEx Express and TNT Express. 6. Net of recognized insurance recovery. 7. TNT Express s financial results for FY16 are immaterial from the time of acquisition (May 25, 2016). 8. Represents the adjustment in Corporate, eliminations and other resulting from the change in recognizing expected return on plan assets for our defined benefit pension and other postretirement plans at the segment level associated with the adoption of MTM accounting. 16