Federal Express 2005 Annual Report Download - page 38

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TO OUR SHAREOWNERS:
Several years ago, we committed to managing FedEx
Corporation for improving financial performance — setting
very specific long-term goals around improved margins, earn-
ings growth, better cash flow and higher return on capital.
Since then, we’ve consistently delivered against those goals.
And in FY05, we recorded our best performance yet.
As our independent operating companies and unique global
networks continue to find new and better ways to compete
collectively, demand for the entire portfolio of FedEx services
has steadily grown. Over the past five years, FedEx
Corporation revenue has increased to $29.4 billion in FY05
from $18.3 billion in FY00, thanks to solid volume growth,
strategic acquisitions, new services and steady pricing disci-
pline. Our continued focus on productivity across the corpora-
tion has helped us also drive sustainable improvement in
operating margin in recent years, growing to 8.4 percent in
FY05 from 6.7 percent in FY00. And during that same time period
net income has more than doubled — increasing to $1.4
billion in FY05 from $688 million in FY00. We view this as a very
strong indication that our operating strategy is working.
In response to the growing demand for our services, we’ve
taken a very disciplined approach to investing in the business
to increase capacity for future growth. We’ve been able to
hold our capital expenditures to within 5 to 8 percent of revenue
in recent years, and the $2.5 billion in capital spending fore-
casted for FY06 remains within that range. Additionally, solid
improvement in operating cash flow allowed us to repay nearly
$800 million in debt in FY05, and for the second straight year
we have more than $1 billion in cash on the balance sheet.
This consistent performance and ongoing focus on our finan-
cial goals have also paid off for our shareowners. For the third
straight year we increased our dividend payment, boosting
our quarterly dividend by 14 percent to 8 cents per share on
May 27, 2005. Even more significantly, for the five-year period
ending May 31, 2005, our total cumulative return to shareowners
is up more than 150 percent — outpacing the S&P 500 and the
Dow Jones Transportation Index.
But not all of our financial goals deal with dollars. Another
critical focus for FedEx is our long-standing commitment to
integrity, transparency and excellent internal controls. In
FY05, that commitment was demonstrated by more than 1,200
FedEx employees who spent nearly 100,000 hours ensuring we
fully comply with the requirements of Section 404 of the
Sarbanes-Oxley Act. Thanks to their hard work, internal controls
were strengthened with the documentation of approximately
225 key financial processes, which are supported by more
than 200 financial IT systems. Our intention was not only to
comply with the law but also to build upon a process that will
further enhance a strong controls mindset across all of FedEx
— today and into the future.
Our outstanding results in FY05 followed several years of con-
sistently strong performance. Now, thanks to carefully
planned expansion we are financially well positioned to take
advantage of the host of future growth opportunities in the
global marketplace.
Alan B. Graf, Jr.
Executive Vice President and Chief Financial Officer
*
*
Comparison of Five-Year Cumulative Total Return
*
Shows the value, at the end of each of the last five fiscal years, of $100
invested in FedEx stock or the relevant index on May 31, 2000, and assumes
reinvestment of dividends. Fiscal year ended May 31.
FedEx Corporation Common Stock S&P 500
Dow Jones Transportation Average
2000
$ 50
$ 100
$ 150
$ 200
$ 250
$ 300
2001 2002 2003 2004 2005
MESSAGE FROM THE CFO