Federal Express 2001 Annual Report Download - page 15

FedEx Corporation
13
The following table shows revenues and operating income (in mil-
lions) and selected statistics for the year ended May 31:
2001
Revenues $835
Operating expenses:
Salaries and employee benefits 489
Purchased transportation 23
Rentals and landing fees 27
Depreciation and amortization 44
Fuel 41
Maintenance and repairs 39
Intercompany charges 1
Other 116
Total operating expenses 780
Operating income $55
Shipments per day(1) 56,012
Weight per shipment (lbs)(1) 1,132
Revenue per hundredweight(1) $11.83
(1) Based on portion of the year including both American Freightways and Viking
(January through May).
Operating Results
FedEx Freight has experienced lower than expected volumes
since formation of the segment in third quarter 2001, due to the
economic slowdown. The lower than expected volumes were
partially offset by strong yields. The complementary geographic
regions served by American Freightways and Viking are expected
to have a positive impact on results of operations for this segment.
Both companies will continue to focus on day-definite regional
LTL service, but will also collaborate as partners to serve cus-
tomers who have multiregional LTL needs. On July 10, 2001, FedEx
Freight announced a general rate increase of 5.9% to be effective
August 6, 2001.
Fuel surcharges for this segment included the following at
May 31, 2001:
Shipments Shipments
Operating Under Equal to or Over
Subsidiary 20,000 pounds 20,000 pounds
American Freightways 3% 7%
Viking 3% 6%
The American Freightways fuel surcharge, which was in effect at
the time of the acquisition, is tied to the “Retail on Highway Diesel
Fuel Price” as published by the U.S. Department of Energy and
changes weekly based on changes in the index. A fuel surcharge
has been in effect at Viking since August 16, 1999. The Viking fuel
surcharge on shipments equal to or over 20,000 pounds was
increased to 7% effective June 4, 2001.
Outlook
In 2002, FedEx Freight will seek to improve yield, volume and margins
by capitalizing on its excellent geographic coverage and by provid-
ing superior on-time performance. FedEx Freight will continue to
pursue synergies, such as leveraging information technology capa-
bilities between American Freightways and Viking in order to
improve cost structure, service and customer satisfaction levels.
OTHER OPERATIONS
Other operations include FedEx Custom Critical, a critical-shipment
carrier; FedEx Trade Networks, a global trade services company;
FedEx Supply Chain Services, a contract logistics provider; and
certain unallocated corporate items. The operating results of Viking
prior to December 1, 2000, are also included in this category.
Revenues
Revenues from other operations were $1 billion, $1.2 billion and
$.9 billion in 2001, 2000 and 1999, respectively. Excluding the
effects of businesses acquired during the comparable periods
and the revenues of Viking, revenues from other operations
decreased 11% in 2001, principally due to lower year-over-year
revenues at FedEx Custom Critical. The demand for services pro-
vided by this operating subsidiary (critical shipments) is highly
elastic and tied to key economic indicators, principally in the
automotive industry, where volumes have continued to decline
since the beginning of 2001.
The increase in other revenues from 1999 to 2000 was 15%,
excluding the effects of businesses acquired in 2000, due to sub-
stantially higher revenues at FedEx Custom Critical combined
with double-digit revenue growth at Viking.
Operating Income
Operating income (loss) from other operations was ($6.7) million,
$95.7 million and $60.6 million in 2001, 2000 and 1999, respectively.
Operating income in 2001 decreased 150%, excluding the effects
of businesses acquired during the comparable periods and the
operations of Viking. The decrease reflects the effect of the eco-
nomic slowdown on FedEx Custom Critical and FedEx Supply
Chain Services and costs associated with the reorganization of
FedEx Supply Chain Services.
Increased operating income for 2000 was due to strong earn-
ings at Viking and continued earnings growth at FedEx Custom
Critical. Results for 2000 also included a $10 million favorable
adjustment related to estimated future lease costs from the 1997
Viking restructuring.