EX-99.1 2 c25922exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
Exhibit 99.1
FOR IMMEDIATE RELEASE
FedEx Corp. Reports Strong Second Quarter
Revenue and Earnings Growth
Fiscal 2012 Earnings Outlook of $6.25 to $6.75 Per Share Reconfirmed
MEMPHIS, Tenn., December 15, 2011 ... FedEx Corp. (NYSE: FDX) today reported earnings of $1.57 per diluted share for the second quarter ended November 30. Last year’s second quarter earnings were $0.89 per diluted share, which included $0.27 per diluted share in costs related to the combination of the company’s FedEx Freight and FedEx National LTL operations and a reserve associated with a legal matter at FedEx Express. Excluding those one-time charges, earnings were $1.16 per diluted share a year ago.
“Our improved performance was largely a result of effective yield management programs and strong demand for FedEx Home Delivery and FedEx SmartPost services,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “With the healthy growth in online shopping this holiday season, demand is increasing for these residential delivery services.”
In order to continue the modernization of the company’s aircraft fleet, FedEx Express has signed an agreement with The Boeing Company to purchase 27 new 767-300F aircraft, with three arriving in fiscal 2014 and six per year in fiscal 2015-2018. The 767s were selected as the best choice to begin replacing FedEx Express’s MD10 aircraft, some of which are more than 40 years old. The 767s will provide similar capacity as the MD10s, with improved reliability, an approximate 30% increase in fuel efficiency and a minimum of a 20% reduction in unit operating costs.
FedEx Express is also delaying the delivery of 11 777F aircraft, two of which will be deferred from fiscal 2013, five from fiscal 2014 and one per year in fiscal 2015-2018, to better balance air network capacity to demand. As a result of these deferrals, FedEx Express will place into service four 777s in fiscal 2013 and two in fiscal 2014. The company is also exercising two 777 options for aircraft to be delivered at the end of the delivery schedule.
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“FedEx Express took action during the quarter to adjust its network, particularly in Asia, as recent inventory destocking trends have impacted demand for our FedEx Express services,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “The deferral of our 777 aircraft deliveries is a continuation of those efforts, enabling us to make appropriately-timed international 777 capacity additions over the next decade. With these actions, we expect fiscal 2013 capital expenditures to moderate to approximately $3.8 billion.”
Second Quarter Results
FedEx Corp. reported the following consolidated results for the second quarter:
    Revenue of $10.59 billion, up 10% from $9.63 billion the previous year
 
    Operating income of $780 million, up 66% from $469 million last year
 
    Operating margin of 7.4%, up from 4.9% the previous year
 
    Net income of $497 million, up 76% from $283 million a year ago
Operating results improved due to the continued strong performance of FedEx Ground driven by higher yields and volumes, as well as a significant improvement in profitability at FedEx Freight. The results for the quarter also reflect the positive year-over-year impact, predominately at FedEx Express, of a benefit from the timing lag that exists between when fuel prices change and when indexed fuel surcharges automatically adjust. Last year’s operating income and margin were impacted by one-time charges at FedEx Express and FedEx Freight.
Outlook
FedEx projects earnings to be $1.25 to $1.45 per diluted share in the third quarter and reconfirms its forecast of $6.25 to $6.75 per diluted share for fiscal 2012. This guidance assumes the current market outlook for fuel prices, normal winter weather and moderate growth in the global economy. The company reported earnings of $0.73 per diluted share in last year’s third quarter, which included one-time FedEx Freight combination costs of $0.08 per diluted share. The capital spending forecast for fiscal 2012 remains $4.2 billion.
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FedEx Express Segment
For the second quarter, the FedEx Express segment reported:
    Revenue of $6.58 billion, up 10% from last year’s $5.99 billion
 
    Operating income of $342 million, up 30% from $264 million a year ago
 
    Operating margin of 5.2%, up from 4.4% the previous year
U.S. domestic revenue per package grew 12% due to higher fuel surcharges and rate per pound, while average daily package volume declined 4%. FedEx International Priority® (IP) revenue per package grew 11% due to higher fuel surcharges, rate per pound and weight per package. IP average daily package volume decreased 3% driven by declines from Asia. IP freight pounds increased 4% with revenue per pound up 4% due to higher fuel surcharges. In total, IP package and freight pounds increased 2% and revenue increased 8% year-over-year.
Operating income and margin improved in the quarter, reflecting the year-over-year benefit of the fuel surcharge timing lag. Prior year results were negatively impacted by a $66 million reserve associated with a legal matter.
FedEx Ground Segment
For the second quarter, the FedEx Ground segment reported:
    Revenue of $2.34 billion, up 13% from last year’s $2.08 billion
 
    Operating income of $398 million, up 34% from $296 million a year ago
 
    Operating margin of 17.0%, up from 14.3% the previous year
FedEx Ground average daily package volume grew 4% in the second quarter driven by increases in FedEx Home Delivery services, as well as the business-to-business market. Revenue per package increased 8% primarily due to increased rates and higher fuel surcharges. FedEx SmartPost average daily volume increased 17% primarily due to growth in e-commerce. FedEx SmartPost revenue per package increased 4% primarily due to increased fuel surcharges.
Operating income and margin increased primarily due to increased revenue per package and volume growth.
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Earlier this month, FedEx Ground and FedEx Home Delivery announced that shipping rates will be increased by a net average of 4.9% effective January 2, 2012. The full average rate increase of 5.9% will be partially offset by adjusting the fuel price threshold at which the fuel surcharge begins, reducing the fuel surcharge by one percentage point. FedEx SmartPost rates will also increase.
FedEx Freight Segment
For the second quarter, the FedEx Freight segment reported:
    Revenue of $1.33 billion, up 9% from last year’s $1.22 billion
 
    Operating income of $40 million, compared with an operating loss of $91 million a year ago
 
    Operating margin of 3.0%, up from (7.5%) the previous year
Less-than-truckload (LTL) yield increased 8% primarily due to higher LTL fuel surcharges and ongoing yield management actions, which reduced LTL average daily shipments by 3%. FedEx Freight implemented a 6.75% general rate increase on September 6, 2011.
Operating income in the quarter was driven by strong yield growth and ongoing efficiency improvement resulting from the January 30, 2011 combination of the FedEx Freight and FedEx National LTL operations. The operating loss in the prior year largely resulted from $86 million of one-time costs associated with the LTL network combination.
Corporate Overview
FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $41 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world’s most admired and trusted employers, FedEx inspires its more than 290,000 team members to remain “absolutely, positively” focused on safety, the highest ethical and professional standards and the needs of their customers and communities. For more information, visit news.fedex.com.
Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and second quarter fiscal 2012 Statistical Book. These materials, as well as a Webcast of the earnings
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release conference call to be held at 8:30 a.m. EST on December 15 are available on the company’s Web site at investors.fedex.com. A replay of the conference call Webcast will be posted on our Web site following the call.
Certain statements in this press release 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, legal challenges or changes related to FedEx Ground’s owner-operators, new U.S. domestic or international government regulation, the impact from any terrorist activities or international conflicts, our ability to effectively operate, integrate and leverage acquired businesses, changes in fuel prices and currency exchange rates, our ability to match capacity to shifting volume levels and other factors which can be found in FedEx Corp.’s and its subsidiaries’ press releases and filings with the SEC.
Media Contact: Jess Bunn 901-818-7463
Investor Contact: Mickey Foster 901-818-7468
Home Page: fedex.com
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES
The company believes that meaningful analysis of our financial performance requires an understanding of the factors underlying that performance and our judgments about the likelihood that particular factors will repeat. Excluding a reserve associated with a legal matter at FedEx Express and the costs of the combination of FedEx Freight and FedEx National LTL operations from our prior period second quarter earnings, net of applicable incentive compensation impacts, will allow for more accurate comparisons of our second quarter operating performance. As required by SEC rules, the table below presents a reconciliation of our presented non-GAAP measures to the most directly comparable GAAP measures.
Fiscal 2011 Second Quarter Earnings
         
    Q2 Diluted  
    Earnings Per Share  
         
Non-GAAP Measure
  $ 1.16  
         
FedEx Freight Combination Costs
    (0.17 )
         
ATA Legal Reserve
    (0.10 )
 
     
         
GAAP Measure
  $ 0.89  
 
     
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FEDEX CORP. FINANCIAL HIGHLIGHTS
Second Quarter Fiscal 2012
(In millions, except earnings per share)
(Unaudited)
                                                 
    Three Months Ended     Six Months Ended  
    November 30     November 30  
    2011     2010     %     2011     2010     %  
Revenue:
                                               
FedEx Express segment
  $ 6,583     $ 5,992       10 %   $ 13,175     $ 11,904       11 %
FedEx Ground segment
    2,339       2,077       13 %     4,617       4,038       14 %
FedEx Freight segment
    1,325       1,221       9 %     2,653       2,479       7 %
FedEx Services segment
    427       434       (2 %)     838       849       (1 %)
Other & eliminations
    (87 )     (92 )   NM       (175 )     (181 )   NM  
 
                                       
Total Revenue
    10,587       9,632       10 %     21,108       19,089       11 %
 
                                               
Operating Expenses:
                                               
Salaries and employee benefits
    3,982       3,779       5 %     7,986       7,582       5 %
Purchased transportation
    1,576       1,390       13 %     3,094       2,717       14 %
Rentals and landing fees
    623       628       (1 %)     1,243       1,229       1 %
Depreciation and amortization
    518       502       3 %     1,027       981       5 %
Fuel
    1,200       938       28 %     2,444       1,825       34 %
Maintenance and repairs
    511       473       8 %     1,062       990       7 %
Impairment and other charges
          67     NM             67     NM  
Other
    1,397       1,386       1 %     2,735       2,601       5 %
 
                                       
Total Operating Expenses
    9,807       9,163       7 %     19,591       17,992       9 %
 
                                               
Operating Income (Loss):
                                               
FedEx Express segment
    342       264       30 %     630       621       1 %
FedEx Ground segment
    398       296       34 %     805       583       38 %
FedEx Freight segment
    40       (91 )   NM       82       (107 )   NM  
 
                                       
Total Operating Income
    780       469       66 %     1,517       1,097       38 %
 
                                               
Other Expense:
                                               
Interest, net
    (7 )     (23 )     (70 %)     (18 )     (41 )     (56 %)
Other, net
    4       (9 )   NM       2       (16 )   NM  
 
                                       
Total Other Expense
    (3 )     (32 )     (91 %)     (16 )     (57 )     (72 %)
 
                                               
Pretax Income
    777       437       78 %     1,501       1,040       44 %
 
                                               
Provision for Income Taxes
    280       154       82 %     540       377       43 %
 
                                       
 
                                               
Net Income
  $ 497     $ 283       76 %   $ 961     $ 663       45 %
 
                                       
 
                                               
Diluted Earnings Per Share
  $ 1.57     $ 0.89       76 %   $ 3.02     $ 2.09       44 %
 
                                       
 
                                               
Weighted Average Common and Common Equivalent Shares
    316       316             317       316       0 %
 
                                               
Capital Expenditures
  $ 1,107     $ 1,047       6 %   $ 2,217     $ 2,059       8 %

 

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FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS
Second Quarter Fiscal 2012
(In millions)
                 
    Nov. 30, 2011        
    (Unaudited)     May 31, 2011  
ASSETS
               
Current Assets
               
Cash and cash equivalents
  $ 1,896     $ 2,328  
Receivables, less allowances
    4,837       4,581  
Spare parts, supplies and fuel, less allowances
    440       437  
Deferred income taxes
    628       610  
Prepaid expenses and other
    367       329  
 
           
Total current assets
    8,168       8,285  
 
               
Property and Equipment, at Cost
    35,399       33,686  
Less accumulated depreciation and amortization
    18,690       18,143  
 
           
Net property and equipment
    16,709       15,543  
 
               
Other Long-Term Assets
               
Goodwill
    2,399       2,326  
Other assets
    1,176       1,231  
 
           
Total other long-term assets
    3,575       3,557  
 
           
 
               
 
  $ 28,452     $ 27,385  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
               
Current Liabilities
               
Current portion of long-term debt
  $ 428     $ 18  
Accrued salaries and employee benefits
    1,390       1,268  
Accounts payable
    1,646       1,702  
Accrued expenses
    1,916       1,894  
 
           
Total current liabilities
    5,380       4,882  
 
               
Long-Term Debt, Less Current Portion
    1,251       1,667  
 
               
Other Long-Term Liabilities
               
Deferred income taxes
    1,555       1,336  
Pension, postretirement healthcare and other benefit obligations
    2,065       2,124  
Self-insurance accruals
    977       977  
Deferred lease obligations
    897       779  
Deferred gains, principally related to aircraft transactions
    234       246  
Other liabilities
    176       154  
 
           
Total other long-term liabilities
    5,904       5,616  
 
               
Commitments and Contingencies
               
 
               
Common Stockholders’ Investment
               
Common stock, $0.10 par value, 800 million shares authorized
    32       32  
Additional paid-in capital
    2,557       2,484  
Retained earnings
    16,103       15,266  
Accumulated other comprehensive loss
    (2,581 )     (2,550 )
Treasury stock, at cost
    (194 )     (12 )
 
           
Total common stockholders’ investment
    15,917       15,220  
 
           
 
               
 
  $ 28,452     $ 27,385  
 
           

 

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FEDEX CORP. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Second Quarter Fiscal 2012
(In millions)
(Unaudited)
                 
    Six Months Ended  
    November 30  
    2011     2010  
 
               
Operating Activities:
               
Net income
  $ 961     $ 663  
Noncash charges:
               
Depreciation and amortization
    1,027       981  
Other, net
    422       262  
Changes in operating assets and liabilities, net
    (242 )     105  
 
           
 
               
Net cash provided by operating activities
    2,168       2,011  
 
               
Investing Activities:
               
Capital expenditures
    (2,217 )     (2,059 )
Business acquisition, net of cash acquired
    (114 )      
Proceeds from asset dispositions and other
    15       7  
 
           
 
               
Net cash used in investing activities
    (2,316 )     (2,052 )
 
               
Financing Activities:
               
Principal payments on debt
    (18 )     (12 )
Dividends paid
    (82 )     (76 )
Purchase of treasury stock
    (197 )      
Other, net
    37       29  
 
           
 
               
Net cash used in financing activities
    (260 )     (59 )
 
           
 
               
Effect of exchange rate changes on cash
    (24 )     25  
 
           
 
               
Net decrease in cash and cash equivalents
    (432 )     (75 )
 
               
Cash and cash equivalents at beginning of period
    2,328       1,952  
 
           
Cash and cash equivalents at end of period
  $ 1,896     $ 1,877  
 
           

 

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FEDEX EXPRESS SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS
Second Quarter Fiscal 2012
(Dollars in millions)
(Unaudited)
                                                 
    Three Months Ended     Six Months Ended  
    November 30     November 30  
    2011     2010     %     2011     2010     %  
FINANCIAL HIGHLIGHTS
                                               
 
                                               
Revenue
  $ 6,583     $ 5,992       10 %   $ 13,175     $ 11,904       11 %
 
                                               
Operating Expenses:
                                               
Salaries and employee benefits
    2,377       2,253       6 %     4,790       4,511       6 %
Purchased transportation
    448       388       15 %     897       757       18 %
Rentals and landing fees
    421       427       (1 %)     844       830       2 %
Depreciation and amortization
    288       265       9 %     570       520       10 %
Fuel
    1,039       802       30 %     2,116       1,556       36 %
Maintenance and repairs
    354       320       11 %     734       672       9 %
Intercompany charges
    548       512       7 %     1,096       1,025       7 %
Other1
    766       761       1 %     1,498       1,412       6 %
 
                                       
Total Operating Expenses
    6,241       5,728       9 %     12,545       11,283       11 %
 
                                       
 
                                               
Operating Income
  $ 342     $ 264       30 %   $ 630     $ 621       1 %
 
                                       
 
                                               
Operating Margin
    5.2 %     4.4 %   0.8 pts     4.8 %     5.2 %   (0.4 pts)
 
                                               
OPERATING STATISTICS2
                                               
 
                                               
Operating Weekdays
    63       63             128       128        
 
                                               
AVG DAILY VOLUME / POUNDS
                                               
Average Daily Package Volume (000s):
                                               
U.S. Overnight Box
    1,168       1,196       (2 %)     1,151       1,182       (3 %)
U.S. Overnight Envelope
    582       626       (7 %)     589       625       (6 %)
U.S. Deferred
    838       865       (3 %)     834       855       (2 %)
 
                                       
Total U.S. Domestic Package
    2,588       2,687       (4 %)     2,574       2,662       (3 %)
International Priority
    569       585       (3 %)     556       575       (3 %)
International Domestic3
    529       354       49 %     486       339       43 %
 
                                       
Total Average Daily Packages
    3,686       3,626       2 %     3,616       3,576       1 %
 
                                       
 
                                               
Average Daily Freight Pounds (000s):
                                               
U.S.
    7,630       7,459       2 %     7,295       7,179       2 %
International Priority
    3,451       3,320       4 %     3,289       3,171       4 %
International Airfreight
    1,213       1,243       (2 %)     1,188       1,242       (4 %)
 
                                       
Total Avg Daily Freight Pounds
    12,294       12,022       2 %     11,772       11,592       2 %
 
                                       
 
                                               
YIELD
                                               
Revenue Per Package:
                                               
U.S. Overnight Box
  $ 22.05     $ 19.75       12 %   $ 22.15     $ 19.70       12 %
U.S. Overnight Envelope
    11.48       10.54       9 %     11.56       10.59       9 %
U.S. Deferred
    13.84       12.24       13 %     13.70       12.12       13 %
 
                                       
Total U.S. Domestic Package
    17.01       15.19       12 %     16.99       15.13       12 %
International Priority
    60.56       54.54       11 %     61.42       54.12       13 %
International Domestic3
    6.51       7.39       (12 %)     6.81       7.22       (6 %)
 
                                       
Composite Package Yield
  $ 22.23     $ 20.77       7 %   $ 22.45     $ 20.65       9 %
 
                                       
 
                                               
Revenue Per Freight Pound:
                                               
U.S.
  $ 1.31     $ 1.13       16 %   $ 1.31     $ 1.15       14 %
International Priority
    2.16       2.08       4 %     2.18       2.07       5 %
International Airfreight
    0.97       0.88       10 %     0.99       0.87       14 %
 
                                       
Composite Freight Yield
  $ 1.51     $ 1.36       11 %   $ 1.52     $ 1.37       11 %
 
                                       
     
1 —   Previous year includes a $66 million reserve for a legal matter.
 
2 —   Operating statistics include only the operations of FedEx Express.
 
3 —   International Domestic includes the operations of a February 2011 business acquisition in India and a July 2011 business acquisition in Mexico.

 

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FEDEX GROUND SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS
Second Quarter Fiscal 2012
(Dollars in millions)
(Unaudited)
                                                 
    Three Months Ended     Six Months Ended  
    November 30     November 30  
    2011     2010     %     2011     2010     %  
FINANCIAL HIGHLIGHTS
                                               
 
                                               
Revenues:
                                               
FedEx Ground
  $ 2,143     $ 1,916       12 %   $ 4,259     $ 3,755       13 %
FedEx SmartPost
    196       161       22 %     358       283       27 %
 
                                       
Total Revenues
    2,339       2,077       13 %     4,617       4,038       14 %
 
                                               
Operating Expenses:
                                               
Salaries and employee benefits
    362       318       14 %     713       625       14 %
Purchased transportation
    933       845       10 %     1,819       1,627       12 %
Rentals
    72       67       7 %     138       129       7 %
Depreciation and amortization
    94       83       13 %     187       165       13 %
Fuel
    5       3       67 %     7       4       75 %
Maintenance and repairs
    43       42       2 %     87       86       1 %
Intercompany charges
    245       227       8 %     486       448       8 %
Other
    187       196       (5 %)     375       371       1 %
 
                                       
Total Operating Expenses
    1,941       1,781       9 %     3,812       3,455       10 %
 
                                       
 
                                               
Operating Income
  $ 398     $ 296       34 %   $ 805     $ 583       38 %
 
                                       
 
                                               
Operating Margin
    17.0 %     14.3 %   2.7 pts     17.4 %     14.4 %   3.0 pts
 
                                               
OPERATING STATISTICS
                                               
 
                                               
Operating Weekdays
    63       63             128       128        
 
                                               
Average Daily Package Volume (000s)
                                               
FedEx Ground
    3,979       3,843       4 %     3,849       3,686       4 %
FedEx SmartPost
    1,737       1,484       17 %     1,573       1,287       22 %
 
                                               
Yield (Revenue Per Package)
                                               
FedEx Ground
  $ 8.53     $ 7.89       8 %   $ 8.62     $ 7.94       9 %
FedEx SmartPost
  $ 1.79     $ 1.72       4 %   $ 1.78     $ 1.70       5 %

 

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FEDEX FREIGHT SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS
Second Quarter Fiscal 2012
(Dollars in millions)
(Unaudited)
                                                 
    Three Months Ended     Six Months Ended  
    November 30     November 30  
    2011     2010     %     2011     2010     %  
FINANCIAL HIGHLIGHTS
                                               
 
                                               
Revenue
  $ 1,325     $ 1,221       9 %   $ 2,653     $ 2,479       7 %
 
                                               
Operating Expenses:
                                               
Salaries and employee benefits
    577       584       (1 %)     1,155       1,184       (2 %)
Purchased transportation
    221       185       19 %     428       389       10 %
Rentals
    29       31       (6 %)     57       65       (12 %)
Depreciation and amortization
    44       62       (29 %)     88       110       (20 %)
Fuel
    156       133       17 %     321       264       22 %
Maintenance and repairs
    48       45       7 %     98       91       8 %
Intercompany charges
    108       108             217       217        
Impairment and other charges1
          67     NM             67     NM  
Other
    102       97       5 %     207       199       4 %
 
                                       
Total Operating Expenses
    1,285       1,312       (2 %)     2,571       2,586       (1 %)
 
                                       
 
                                               
Operating Income (Loss)
  $ 40     $ (91 )   NM     $ 82     $ (107 )   NM  
 
                                       
 
                                               
Operating Margin
    3.0 %     (7.5 %)   10.5 pts       3.1 %     (4.3 %)   7.4 pts  
 
                                               
OPERATING STATISTICS
                                               
 
                                               
LTL Operating Weekdays
    62       62             127       127        
 
                                               
LTL Shipments Per Day (000s)
    86.8       89.4       (3 %)     85.8       90.6       (5 %)
Weight Per LTL Shipment (lbs)
    1,147       1,115       3 %     1,152       1,125       2 %
LTL Revenue/CWT
  $ 19.79     $ 18.27       8 %   $ 19.54     $ 17.77       10 %
     
1 —   Previous year includes charges associated with the combination of FedEx Freight and FedEx National LTL operations.

 

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