FedEx Corp. (NYSE:FDX) today reported the following consolidated results for the first quarter ended August 31 (adjusted measures exclude the items listed below for the applicable fiscal year):

	Fiscal 2022		Fiscal 2021
	As Reported (GAAP)	Adjusted (non-GAAP)	As Reported (GAAP)	Adjusted (non-GAAP)
Revenue	$22.0 billion	$22.0 billion	$19.3 billion	$19.3 billion
Operating income	$1.40 billion	$1.49 billion	$1.59 billion	$1.64 billion
Operating margin	6.4%	6.8%	8.2%	8.5%
Net income	$1.11 billion	$1.19 billion	$1.25 billion	$1.28 billion
Diluted EPS	$4.09	$4.37	$4.72	$4.87

This year's and last year's quarterly consolidated results have been adjusted for:

Impact per diluted share	Fiscal 2022	Fiscal 2021
Business realignment costs	$0.19	$ —
TNT Express integration expenses	0.08	0.14

"The execution of our strategies continues to drive higher demand for our services, despite the disruptive impact of the pandemic to labor availability and global supply chains," said Frederick W. Smith, FedEx Corp. chairman and chief executive officer. "I am very proud of our team members around the world who continue to transport lifesaving vaccines and deliver urgently needed supplies to those affected by natural disasters like Hurricane Ida and the recent earthquakes."

First quarter operating results were negatively affected by an estimated $450 million year over year increase in costs due to a constrained labor market which impacted labor availability, resulting in network inefficiencies, higher wage rates, and increased purchased transportation expenses. This was partially offset by higher package and freight yields, increased international export express shipments and a favorable net fuel impact. In addition, while commercial ground and U.S. domestic express package volume increased year over year, continued supply chain disruptions have slowed U.S. domestic parcel demand compared to the company's earlier forecast.

FedEx Express operating results declined due to higher operating expenses, largely driven by staffing challenges and COVID-19-related air network impacts. Results were also negatively impacted by a decline in U.S. average daily freight pounds due to a surge in charter flights a year ago. These factors were partially offset by higher revenue per package and growth in FedEx International Priority and U.S. domestic express packages. The prior year's results included a pre-tax benefit of approximately $65 million from a reduction in aviation excise taxes provided by the Coronavirus Aid, Relief, and Economic Security Act, which expired on December 31, 2020.

FedEx Ground first quarter operating results declined primarily due to higher labor costs and network inefficiencies due to inadequate staffing, which negatively affected year-over-year results by an estimated $320 million. Operating results were also negatively impacted by higher expansion-related costs. These costs were partially offset by higher revenue per package and growth in commercial packages.

FedEx Freight first quarter operating results improved primarily due to the continued focus on revenue quality and cost management. FedEx Freight reported a record operating margin of 17.3% for the quarter, with average daily shipments growing 12% and revenue per shipment increasing 11%.

"The FedEx teams continue to diligently deliver for our customers under unique and challenging circumstances," said Raj Subramaniam, FedEx Corp. president and chief operating officer. "The current labor environment is driving inefficiencies in the operation of our networks and significantly impacting our financial results. For the peak season ahead, service remains our focus and we are making investments in resources and capacity to meet our customer's needs."

2022 Rate Increases

As previously announced, effective January 3, 2022, FedEx Express, FedEx Ground and FedEx Home Delivery shipping rates will increase by an average of 5.9%, while FedEx Freight rates will increase by an average of 5.9% to 7.9%. Effective November 1, 2021, a fuel surcharge increase will be applied to FedEx Express (U.S. domestic package and freight services), FedEx Ground and FedEx Freight shipments. Details related to these and additional changes to rates and surcharges are available at fedex.com/en-us/shipping/current-rates.html.

Outlook

FedEx is unable to forecast the fiscal 2022 mark-to-market (MTM) retirement plan accounting adjustments. As a result, FedEx is unable to provide a fiscal 2022 earnings per share or effective tax rate (ETR) outlook on a GAAP basis.

FedEx is reducing its earnings outlook to reflect first quarter results, which were lower than the company's June forecast. As conditions during the first quarter were more challenging than anticipated and are now expected to extend longer, the revised FedEx outlook also reflects management's updated expectations for the remainder of the fiscal year:

Earnings per diluted share of $18.25 to $19.50 before the MTM retirement plan accounting adjustments, compared to the prior forecast of $18.90 to $19.90 per diluted share;
Earnings per diluted share of $19.75 to $21.00 before the MTM retirement plan accounting adjustments and excluding estimated TNT Express integration expenses and costs associated with business realignment activities, compared to the prior forecast of $20.50 to $21.50 per diluted share;
ETR of approximately 24% prior to the MTM retirement plan accounting adjustments; and
Capital spending of $7.2 billion.

These forecasts assume continued growth in U.S. industrial production and global trade, a gradual improvement in labor availability beginning in the second half of fiscal 2022, no additional COVID-19-related business restrictions, and current fuel price expectations. FedEx's ETR and earnings per share forecasts are based on current law and related regulations and guidance.

"Our results for the first quarter reflect higher operating costs we are incurring during this uncertain and challenging operating environment," said Michael C. Lenz, FedEx Corp. executive vice president and chief financial officer. "While we expect these conditions to continue near-term, we expect a gradual improvement in labor availability combined with our proactive revenue management actions to mitigate the ongoing impact of these headwinds on our results and position us for earnings growth in fiscal 2022."

Corporate Overview

FedEx Corp. (NYSE:FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenue of $87 billion, the company offers integrated business solutions through operating companies competing collectively, operating collaboratively and innovating digitally under the respected FedEx brand. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its 560,000 team members to remain focused on safety, the highest ethical and professional standards and the needs of their customers and communities. FedEx is committed to connecting people and possibilities around the world responsibly and resourcefully, with a goal to achieve carbon-neutral operations by 2040. To learn more, please visit fedex.com/about.

Additional information and operating data are contained in the company's annual report, Form 10-K, Form 10-Qs, Form 8-Ks and Statistical Books. These materials, as well as a webcast of the earnings release conference call to be held at 5:30 p.m. EDT on September 21, are available on the company's website at investors.fedex.com. A replay of the conference call webcast will be posted on our website following the call.

The Investor Relations page of our website, investors.fedex.com, contains a significant amount of information about FedEx, including our Securities and Exchange Commission (SEC) filings and financial and other information for investors. The information that we post on our Investor Relations website could be deemed to be material information. We encourage investors, the media and others interested in the company to visit this website from time to time, as information is updated and new information is posted.

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 and underlying assumptions. Forward-looking statements include those preceded by, followed by or that include the words "will," "may," "could," "would," "should," "believes," "expects," "anticipates," "plans," "estimates," "targets," "projects," "intends" or similar expressions. 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; our ability to meet our labor and purchased transportation needs while controlling related costs; a significant data breach or other disruption to our technology infrastructure; the continuing impact of the COVID-19 pandemic; anti-trade measures and additional changes in international trade policies and relations; our ability to successfully implement our business strategy, effectively respond to changes in market dynamics and achieve the anticipated benefits and associated cost savings of such strategies and actions, including our ability to successfully implement our FedEx Express workforce reduction plan in Europe and to continue to transform and optimize the FedEx Express international business, particularly in Europe; damage to our reputation or loss of brand equity; changes in the business or financial soundness of the U.S. Postal Service, including strategic changes to its operations to reduce its reliance on the air network of FedEx Express; changes in fuel prices or currency exchange rates; our ability to match capacity to shifting volume levels; the impact of intense competition; our ability to effectively operate, integrate, leverage and grow acquired businesses and realize the anticipated benefits of acquisitions and other strategic transactions; the future rate of e-commerce growth and our ability to successfully expand our e-commerce services portfolio; the timeline for recovery of passenger airline cargo capacity; evolving or new U.S. domestic or international laws and government regulations, policies and actions; future guidance, regulations, interpretations, challenges or judicial decisions related to our tax positions; legal challenges or changes related to service providers engaged by FedEx Ground and the drivers providing services on their behalf; an increase in self-insurance accruals and expenses; the impact of any international conflicts or terrorist activities; our ability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography; our ability to achieve our goal of carbon-neutral operations by 2040; and other factors which can be found in FedEx Corp.'s and its subsidiaries' press releases and FedEx Corp.'s filings with the SEC. Any forward-looking statement speaks only as of the date on which it is made. We do not undertake or assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

The financial section of this release is provided on the company's website at investors.fedex.com.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

TO GAAP FINANCIAL MEASURES

First Quarter Fiscal 2022 and Fiscal 2021 Results

The company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or "reported"). We have supplemented the reporting of our financial information determined in accordance with GAAP with certain non-GAAP (or "adjusted") financial measures, including our adjusted first quarter fiscal 2022 and 2021 consolidated operating income and margin, net income and diluted earnings per share, and adjusted first quarter fiscal 2022 and 2021 FedEx Express segment operating income and margin. These financial measures have been adjusted to exclude the impact of the following items (as applicable):

TNT Express integration expenses incurred in fiscal 2022 and 2021; and
Business realignment costs incurred in fiscal 2022.

We have incurred and expect to incur significant expenses through fiscal 2022 in connection with our integration of TNT Express. We have adjusted our first quarter fiscal 2022 and 2021 consolidated and FedEx Express segment financial measures to exclude TNT Express integration expenses because we generally would not incur such expenses as part of our continuing operations. The integration expenses are predominantly incremental costs directly associated with the integration of TNT Express, including professional and legal fees and other operating expenses. Internal salaries and employee benefits are included only to the extent the individuals are assigned full-time to integration activities. The integration expenses do not include costs associated with our business realignment activities.

The costs related to business realignment activities in connection with the FedEx Express workforce reduction plan in Europe are excluded from our first quarter fiscal 2022 consolidated and FedEx Express segment non-GAAP financial measures because they are unrelated to our core operating performance and to assist investors with assessing trends in our underlying businesses.

We believe these adjusted financial measures facilitate analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of, or are unrelated to, the company's and our business segments' core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. These adjustments are consistent with how management views our businesses. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating the company's and each business segment's ongoing performance.

Our non-GAAP financial measures are intended to supplement and should be read together with, and are not an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of our financial statements should not place undue reliance on these non-GAAP financial measures. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. As required by SEC rules, the tables below present a reconciliation of our presented non-GAAP financial measures to the most directly comparable GAAP measures.

Fiscal 2022 Earnings Per Share and Effective Tax Rate Forecasts

Our fiscal 2022 earnings per share (EPS) forecast is a non-GAAP financial measure because it excludes (i) fiscal 2022 MTM retirement plan accounting adjustments, (ii) estimated fiscal 2022 TNT Express integration expenses, and (iii) estimated fiscal 2022 business realignment costs. Our fiscal 2022 effective tax rate (ETR) forecast is a non-GAAP financial measure because it excludes the impact of fiscal 2022 MTM retirement plan accounting adjustments.

We have provided these non-GAAP financial measures for the same reasons that were outlined above for historical non-GAAP measures. These items are excluded from our fiscal 2022 EPS and ETR forecasts, as applicable, for the same reasons described above for historical non-GAAP measures.

We are unable to predict the amount of the MTM retirement plan accounting adjustments, as they are significantly impacted by changes in interest rates and the financial markets, so such adjustments are not included in our fiscal 2022 EPS and ETR forecasts. For this reason, a full reconciliation of our fiscal 2022 EPS and ETR forecasts to the most directly comparable GAAP measures is impracticable. It is reasonably possible, however, that our fiscal 2022 MTM retirement plan accounting adjustments could have a material impact on our fiscal 2022 consolidated financial results and ETR.

The table included below titled "Fiscal 2022 Earnings Per Share Forecast" outlines the impacts of the items that are excluded from our fiscal 2022 EPS forecast, other than the MTM retirement plan accounting adjustments.

First Quarter Fiscal 2022

FedEx Corporation

	Operating		Income	Net	Diluted Earnings
Dollars in millions, except EPS	Income	Margin	Taxes¹	Income²	Per Share³
GAAP measure	$1,398	6.4%	$345	$1,112	$4.09
Business realignment costs⁴	67	0.3%	15	52	0.19
TNT Express integration expenses⁵	29	0.1%	6	23	0.08
Non-GAAP measure	$1,494	6.8%	$366	$1,187	$4.37

FedEx Express Segment

	Operating
Dollars in millions	Income	Margin
GAAP measure	$567	5.2%
Business realigment costs	67	0.6%
TNT Express integration expenses	26	0.2%
Non-GAAP measure	$660	6.0%

First Quarter Fiscal 2021

FedEx Corporation

	Operating		Income	Net	Diluted Earnings
Dollars in millions, except EPS	Income	Margin	Taxes¹	Income²	Per Share³
GAAP measure	$1,590	8.2%	$361	$1,245	$4.72
TNT Express integration expenses⁵	49	0.3%	11	38	0.14
Non-GAAP measure	$1,639	8.5%	$372	$1,283	$4.87

FedEx Express Segment

	Operating
Dollars in millions	Income	Margin³
GAAP measure	$710	7.4%
TNT Express integration expenses	37	0.4%
Non-GAAP measure	$747	7.7%

Fiscal 2022 Earnings Per Share Forecast

Dollars in millions, except EPS	Adjustments	Diluted Earnings Per Share
Earnings per diluted share before MTM retirement plan accounting adjustments (non-GAAP)⁶		$18.25 to $19.50

TNT Express integration expenses	$150
Income tax effect¹	(28)
Net of tax effect	$122	0.45

Business realignment costs	$370
Income tax effect¹	(85)
Net of tax effect	$285	1.05

Earnings per diluted share with adjustments⁶		$19.75 to $21.00

Notes:

1 – Income taxes are based on the company's approximate statutory tax rates applicable to each transaction.

2 – Effect of "total other (expense) income" on net income amount not shown.

3 – Does not sum to total due to rounding.

4 – Business realignment costs were recognized at FedEx Express.

5 – These expenses were recognized at FedEx Corporate and FedEx Express.

6 – The MTM retirement plan accounting adjustments, which are impracticable to calculate at this time, are excluded.

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