Fedex Corporation 2000 Annual Report Time-Definite, Global Express Transportation
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FedEx Corporation 2000 Annual Report Time-definite, global express transportation Small-package ground delivery (formerly RPS) Integrated logistics and supply chain solutions (formerly FDX Logistics) Expedited, door-to-door, super-critical delivery (formerly Roberts Express) Customs brokerage and trade facilitation solutions After two years as FDX Corporation, we have adopted a new name that, we believe, more accurately reflects our corporate identity: FedEx Corporation, the parent company for the FedEx family of services worldwide. Changes have occurred quickly, including new names for our major operating companies, new logos and new colors. And we are already beginning to see the benefits of a more focused, more effi- cient FedEx family of companies. But what has not changed is our fundamental business philoso- phy – to operate independently yet compete collectively. And what will never change is our mission – to produce superior financial returns for our shareowners as we serve our customers with the highest quality transportation, logistics and e-commerce solutions. SELECTED FINANCIAL DATA Percent In thousands, except earnings per share 2000 1999 Change OPERATING RESULTS Revenues $18,256,945 $16,773,470 + 9 Operating income 1,221,074 1,163,086 + 5 Operating margin 6.7% 6.9% Net income 688,336 631,333 + 9 Earnings per share, assuming dilution $ 2.32 $ 2.10 +10 Cash earnings per share, assuming dilution(1) $ 6.22 $ 5.54 +12 Average common and common equivalent shares 296,326 300,643 – 1 EBITDA(2) $ 2,398,663 $ 2,194,373 + 9 Capital expenditures, including equivalent capital(3) $ 1,991,600 $ 2,330,613 –15 FINANCIAL POSITION Total assets $11,527,111 $10,648,211 + 8 Long-term debt 1,782,790 1,374,606 +30 Common stockholders’ investment 4,785,243 4,663,692 + 3 FedEx (1) Net income plus depreciation and amortization divided by average common and common equivalent shares. 1 (2) Earnings before interest, taxes, depreciation and amortization. (3) Represents actual cash expenditures plus the equivalent amount of cash that would have been expended for the acquisition of assets Corp. (principally aircraft), whose use was obtained through long-term operating leases entered into during the period. 14.6% 14.6% $18.3 $2.32 13.5% $16.8 $2.10 $15.9 $1.69 98 99 00 98 99 00 98 99 00 REVENUES EARNINGS RETURN ON (in billions) PER SHARE AVERAGE EQUITY $2.4 29.3% $2.3 $2.3 $2.2 27.1% $2.0 $2.0 22.8% 98 99 00 98 99 00 98 99 00 EBITDA(2) CAPITAL EXPENDITURES DEBT TO TOTAL (in billions) AND EQUIVALENTS CAPITALIZATION (in billions)(3) MESSAGE FROM THE CEO DEAR FELLOW SHAREOWNERS, This new strategic plan is based on three Just as we did in FY99 – when we overcame sound principles: significant challenges to post record rev- > To leverage a significant point of competi- enues, record earnings per share and record tive differentiation, we strengthened our service levels – FedEx Corporation has closed superior business philosophy – to operate FY00 with the strong financial results that independently yet compete collectively. our shareowners have come to expect. Independently, each company is free to focus For the 12 months ended May 31, 2000: on the distinct needs of its market segment, without compromising networks or service. > Revenue rose 9% to $18.3 billion Collectively, the entire FedEx family works > Net income increased 9% to together to cross-sell services and choreo- $688 million graph customer solutions. > Earnings per share rose to $2.32 versus $2.10 per diluted share a year ago, for > To extend the strength of the powerful a 10% gain. FedEx brand name, we rebranded our major 2 operating companies to include FedEx Express, Continued economic strength – particularly FedEx Ground, FedEx Custom Critical, FedEx in the high-tech and high-value-added sec- Logistics and FedEx Trade Networks. tors – led to improved growth rates in the largest segment of our business, express > To provide a single point of access for our transportation. Our international express customers, we reorganized and created the new business continued to grow at the fastest pace, FedEx Corporate Services company, which with revenues rising 18%, led by increases in integrates customer-related activities such as Asia-Pacific and Europe. Combine our sales, marketing and information technology. improved growth rates with our demonstrated Through FedEx Services, our customers now fiscal responsibility – for example, holding have one “touch point” to connect with the full capital spending to less than $2 billion – and range of FedEx services – one sales rep, one toll- it’s evident that, for FY00, FedEx Corporation free customer service line, one Web site, one turned challenge into opportunity. customer automation platform and, soon, one account number and one invoice. FEDEX STRATEGIC PLAN “Challenge” was also the operative word for It’s really very simple. Our strategic plan is an increasingly competitive environment. To good for customers, good for shareowners turn that challenge into our competitive and good for FedEx. Customers benefit from advantage, FedEx Corporation conducted convenient, one-stop shopping for the full extensive research to develop a new strategic range of FedEx transportation, logistics and plan, which we unveiled in January and e-commerce solutions. Shareowners benefit called “Project ARISE.” from tangible, strategic opportunities for continued profitable growth. And, in the process, more than 200,000 employees and in the largest e-commerce distribution event contractors of FedEx Corporation benefit to date: the delivery of 250,000 Harry Potter from increased opportunities at a company books, with guaranteed Saturday delivery. widely regarded as one of America’s great For our customers, our diversified portfolio places to work. strategy is the right approach, offering the right FedEx service at the right time and the STRATEGIC GROWTH OPPORTUNITIES right price. Although our strategic initiatives will require additional spending over the next three years, > Attract new business from small and we plan to mitigate those costs as we consoli- medium-sized customers. date support functions, rationalize services, and reduce administrative costs. More impor- Our sales integration plan also calls for more tantly, we expect our new strategic plan to dedicated attention to small and medium- generate substantial incremental revenues sized customers. We plan to add more than FedEx and profits beginning in FY01 as we focus on 250 account executives – most dedicated 3 the following growth opportunities: to our smaller customers – and increase Corp. prospecting for new accounts by up to 35%. > Generate incremental volume in our core transportation businesses by Why the special attention to small and cross-selling all FedEx services. medium-sized customers? First, these smaller accounts generate nearly half of total An estimated 1.7 million businesses ship FedEx revenue. Second, in today’s “start-up” both express and ground packages, account- business environment, smaller accounts ing for nearly 14 million shipments every day. have unique needs for transportation, logis- These “multi-mode” shippers need one con- tics, and information services. Whether it’s a venient, bundled solution, which is why our new Internet-based company or a traditional integrated sales force has been trained to brick-and-mortar firm, smaller companies cross-sell both FedEx Express and FedEx are sourcing and selling worldwide, and they Ground services. need a reliable business ally to help them navigate this global economy. Since we consolidated our sales teams on April 1, we’ve already begun to see results. > Create new revenue streams. Many companies that have looked to FedEx only for reliable express transportation are Since we announced our new strategic plan last now expanding to use our other services as January, we have already taken two decisive well. In fact, our bundling strategy brought steps to create entirely new revenue streams immediate – and high-profile – business as that complement our core businesses. Amazon.com tapped FedEx Express and our new FedEx Home Delivery service to participate In February, we created the new FedEx Trade electronic customs clearance to speed an inter- Networks subsidiary to offer customs national shipment on to its final destination. brokerage and trade facilitation solutions for Although ground transportation may be con- our global customers. This new operating strained by geographic boundaries, FedEx company includes customs broker Tower Ground is uniquely positioned to take advan- Group International and World Tariff, Limited, tage of the surge in U.S. imports and exports the premier source of customs duty and tax as a member of the global FedEx family. information around the globe. In addition, its trucks can be an important In March, we launched the innovative new source of cross-border transportation through- FedEx Home Delivery service to major metro- out the NAFTA region. politan areas – and just three months later, as We believe that international growth must we issued FY00 earnings, we took advantage remain a high priority as manufacturing of our financial strength to accelerate plans becomes even more focused on high-tech and for expansion. With options for delivery by high-value-added items that are sold globally. 4 appointment, at night, or on Saturdays, we believe that FedEx Home Delivery truly fits the > Capitalize on e-commerce. way we live, work and shop today. It’s a perfect solution for online merchants, many of whom As the global economy