FedEx Freight | Fedex Corp. Reports Fourth Quarter And Full-year Earnings

SwampRatt

TB Legend
Credits
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Feel free to read the SEC filing:

http://d18rn0p25nwr6d.cloudfront.net/CIK-0001048911/07bd70ac-5257-481e-86e1-f647b6443aa8.pdf

Breifly, FedEx Freight is doing VERY good. Great even.

4th Quarter - at a glance:

Revenue $ 1,955
Operating Income $ 194
Operating Margin 9.9%

Also, worth checking out, The Earnings call TRANSCRIPT:

https://seekingalpha.com/article/42...-results-earnings-call-transcript?part=single


Freight was mentioned 7 times. All good. We can get into both of the above later, if anyone wants to.

But then, on the Express side, significant challenges persist:

FedEx points to weak global trade as drag

https://seekingalpha.com/news/3473721-fedex-points-weak-global-trade-drag?dr=1#email_link

Lots to check out when time allows...
 
Pension - from the earnings call:

"As I mentioned earlier, a substantial decline in this account rates, changes in actuarial assumptions and lower-than-expected asset returns negatively impacted our FY 2019 mark-to-market adjustment. With that our U.S. qualified pension plan funded status declined to approximately 90%. While we are not required to make a pension contribution in FY 2020, we are expecting to contribute $1 billion."

The above speaks to funding status. Nothing to do with amount of pension benefit. The positive gain comes in the form of lower PBGC insurance premiums. Investor class likes this, and with historically low interest rates there is a cost benefit.
 
Freight mentions in the earnings call:

"Let me emphasize, however, that based on our current forecast of U.S. GDP growth for FY 2020 we anticipate FedEx freight will increase earnings and margin over the period."

"FedEx Freight, for example is in the midst of modernizing an industry that has been historically paper based. Technology advancements like advanced forklift computers, electronic shipping labels, and advanced driver assist systems allows for team members to work smarter, safer and more efficiently. This evolution of automation sets us up continued long-term success."

"FedEx Freight closed the year with another strong quarter despite weakening industrial production, revenue per shipment increased 4%, operating income increased 15% and operating margin improved to 9.9%."

"At FedEx Freight, we expect continued to improve performance, as we remain focused on improving revenue quality, while implementing technology solutions that will drive efficiency and further differentiate us in the LTL market."

"We’ll have the benefits from the full TNT interoperability, we’ll have lower U.S. FedEx Express rural and residential cost, we’ll have unbelievable improvement in Ground productivity and growth and we’ll have continued freight growth and improved productivity."

"...making an exception saying we expected Freight and Ground to have earnings increases and margin increases in Freight and hopefully any compression in Ground due to the expansion will be very small."
 
Fun facts, from the FORM 10-K, filed with the UNITED STATES SECURITIES AND EXCHANGE COMMISSION. Lots of info and little known Facts. A matter of public record.

"In 2018 we placed a reservation for 20 fully electric semi trucks which will be operated by FedEx Freight, and FedEx Express expects to add 1,000 Chanje V8100 electric delivery vehicles to its fleet by the end of 2020. Additionally, we expect the zero-emission, battery-powered FedEx SameDay Bot, which is discussed in more detail below under “FedEx Services Segment —FedEx Services — Customer-Driven Technology,” to be an environmentally friendly alternative to delivering small payloads in large vehicles."

"FedEx Freight also offers LTL Select, a free cloud-based, multi-carrier transportation management system that provides customers with visibility into all available carriers and their pricing in one location, as well as the ability to book service and make payments."

"As of May 31, 2019, the FedEx Freight segment was operating approximately 28,000 vehicles from a network of 373 service centers and had approximately 49,000 employees"
 
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More from the SEC filing:

"In 2014 and 2015, the International Brotherhood of Teamsters (“Teamsters”) petitioned for National Labor Relations Board (“NLRB”) elections at sixteen FedEx Freight facilities. The Teamsters lost the vote or withdrew the petition prior to the election at twelve facilities and won the vote at four facilities. To date, at three of the four FedEx Freight facilities that originally voted for Teamster representation, the Teamsters have either been decertified by employee vote or voluntarily withdrawn as bargaining representative. We are currently bargaining with the union at the other facility. Additionally, a union has been certified to represent owner-drivers at a FedEx Freight Canada, Corp. facility."

"INFORMATION ABOUT OUR EXECUTIVE OFFICERS" - Pages 26 & 27 - https://seekingalpha.com/filing/4565992

"Our operating income improved in 2019 primarily due to volume growth, the favorable net impact of fuel at all of our transportation segments, increased yields at FedEx Freight and FedEx Ground and lower variable incentive compensation expenses. Lower variable incentive compensation expenses benefited our results by approximately $485 million in 2019"
 
Continued:

"Purchased transportation costs increased 10% in 2019 primarily due to higher volumes at all of our transportation segments and increased rates, including fuel costs, at FedEx Ground and FedEx Freight, reflecting the inflationary impact of the tight labor market on our rates. Salaries and employee benefits expense increased 4% in 2019 primarily due to higher staffing to support volume growth and annual merit increases, partially offset by lower variable incentive compensation expenses at all of our transportation segments"

"During 2020, we expect volume growth at FedEx Ground and FedEx Express to drive higher revenues and expect improved operating income at FedEx Ground and FedEx Freight. We expect operating income to decline at FedEx Express in 2020 due to macroeconomic weakness and trade uncertainty, continued mix shift to lower-yielding services and a strategic decision not to renew a customer contract."

"At FedEx Freight, we expect to increase operational efficiency in 2020 by continuing our focus on optimizing our network. FedEx Freight is investing in upgraded dock equipment and vehicle technology that will modernize our operations and position us to realize increasing benefits in 2021. In addition, safety initiatives will continue to be a top priority at FedEx Freight in 2020."
 
More:

"For FedEx Freight, the spring and fall are the busiest periods and the latter part of December through February is the slowest period. Shipment levels, operating costs and earnings for each of our companies can also be adversely affected by inclement weather, particularly the impact of severe winter weather in our third fiscal quarter."

"The weekly indexed fuel surcharge is based on the average of the U.S. on-highway prices for a gallon of diesel fuel, as published by the Department of Energy. The indexed FedEx Freight fuel surcharge ranged as follows...

2019 - Low - 23.4%, High - 25.6%, Weighted-average - 24.5%"

"FedEx Freight segment operating income increased 26% and operating margin improved 90 basis points in 2019 primarily due to higher revenue per shipment. In addition, lower variable incentive compensation expenses benefited operating income by approximately $60 million in 2019. Salaries and employee benefits increased 10% in 2019 reflecting higher staffing levels to support volume growth and merit increases, partially offset by lower variable incentive compensation expenses. Purchased transportation increased 10% in 2019 due to increased rates, including higher fuel surcharges, and higher volumes.

Fuel expense increased 20% in 2019 due to higher fuel prices and higher mileage. The net impact of fuel had a moderate benefit to operating income in 2019 as higher fuel surcharges more than offset increased fuel prices"

"Capital expenditures at FedEx Freight are expected to increase in 2020 due to continued investments in vehicles and trailers, equipment and technology, which are expected to contribute to efficiency improvements."
 
Cont:

"Despite continual organizing attempts by labor unions, other than the pilots at FedEx Express and drivers at one FedEx Freight, Inc. facility, our U.S. employees have thus far chosen not to unionize (we acquired FedEx Supply Chain in 2015, which already had a small number of employees who are members of unions). Additionally, certain of FedEx Express’s non-U.S. employees are unionized, and a union has been certified to represent owner-drivers at a FedEx Freight Canada, Corp. facility."
 
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And:

"We may be affected by global climate change or by legal, regulatory or market responses to such change. Concern over climate change, including the impact of global warming, has led to significant U.S. and international legislative and regulatory efforts to limit greenhouse gas (“GHG”) emissions, including our aircraft and vehicle engine emissions. Increasingly, state and local governments are also considering GHG regulatory requirements. Compliance with such regulation and the associated potential cost is complicated by the fact that various countries and regions are following different approaches to the regulation of climate change. Increased regulation regarding GHG emissions, especially aircraft or vehicle engine emissions, could impose substantial costs on us, especially at FedEx Express. These costs include an increase in the cost of the fuel and other energy we purchase and capital costs associated with updating or replacing our aircraft or vehicles prematurely...
Moreover, even without such regulation, increased awareness and any adverse publicity in the global marketplace about the GHGs emitted by companies in the airline and transportation industries could harm our reputation and reduce customer demand for our services, especially our air express services. Finally, given the broad and global scope of our operations and our susceptibility to global macroeconomic trends, we are particularly vulnerable to the physical risks of climate change that could affect all of humankind, such as shifts in weather patterns and world ecosystems"

"Our failure to attract or retain employee talent or maintain our company culture could adversely impact our business. Our success depends upon the efforts and abilities of our high-quality employees, many of whom are longstanding FedEx team members. Difficulties in recruiting, motivating, rewarding and retaining employee talent, including successors to members of senior management, or the unexpected loss of such individuals resulting in the depletion of our institutional knowledge base, could have an adverse impact on our business, results of operations, reputation and the price of our common stock. Additionally, our company culture is important to providing high quality customer service and having a productive workforce and could be adversely affected by our growing operations and other factors. If we fail to maintain the strength of our company culture, our competitive ability and our business may be harmed."
 
More:

SIGNIFICANT SUBSIDIARIES
AND THEIR JURISDICTIONS

[Subsidiary, % ownership, Jurisdiction]

FedEx Freight Corporation, 100%, DELAWARE
FedEx Freight, Inc. , 100%, ARKANSAS

*FedEx Freight, Inc. is a direct wholly-owned subsidiary of FedEx Freight Corporation.

->The above provides clarity as to why/how different benefits apply to "Freight Corporation" vs "Freight Inc."

****************

$1,500,000,000
364-DAY CREDIT AGREEMENT

Dated as of
March 22, 2019

Among
FEDEX CORPORATION,
as Borrower,

BANK OF AMERICA, N.A.,
as Syndication Agent,

CITIBANK, N.A.,

THE BANK OF NOVA SCOTIA

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Documentation Agents,

The Several Lenders Party Hereto,

And

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent



SUBSIDIARIES OF FEDEX CORPORATION:

124 separate subsidiaries listed

One reason (of many) that the FedEx Legal department(s) have become so massive.
 
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