In a move to save up to $190 million in fiscal 2005 and beyond, FedEx Corp. announced Monday that FedEx Express will offer voluntary early retirement and severance programs during fiscal 2004.
The first program will offer a voluntary early retirement option with an enhanced pension package to certain groups of employees age 50 or older. The second program will offer voluntary severance incentives to eligible employees. Both programs are limited to salaried staff employees at FedEx Express.
Depending on employee acceptance rates, the pretax charge for these programs is estimated to be in a range of $230 million to $290 million in fiscal 2004, with most of the charge to be incurred in the first half of the fiscal year. Approximately a third of the pretax charge will be cash. The remainder of the charge relates primarily to pension and post-retirement health care liabilities.
The estimated savings from these programs are expected to be $100 million to $130 million in fiscal 2004, primarily in the second half of the fiscal year. Thus, the net cost of these programs in fiscal 2004 is expected to be $130 million to $160 million. In fiscal 2005 and beyond, the estimated annual savings from these programs is expected to be $150 million to $190 million.
"In recent years, FedEx has pursued a strategy to expand and diversify its portfolio of services to include time-definite global express, small package ground and heavy freight services" said Frederick W. Smith, chairman, president and CEO. "This strategy has enabled the company to perform well during these challenging economic times by growing our revenue 10% and earnings per share by 17% for the first nine months of fiscal year 2003. By operating our networks independently, we have the flexibility to expand or contract each network as customer demand or business conditions dictate. While FedEx Express international, FedEx Ground and FedEx Freight services are growing at impressive rates, the FedEx Express U.S. domestic growth rates have declined in recent periods."
During fiscal 2004, the company expects the U. S. economy to remain sluggish in its first fiscal quarter. Year-over-year economic improvement is expected to be evident in the second half of fiscal 2004, although sequential improvement may come earlier. The company believes that the fundamentals are in place for economic acceleration in the U.S. in the second half of fiscal 2004, including supportive conditions in the overall financial market, the recently approved tax stimulus package, continued accommodative monetary stance and improved consumer confidence.
The company expects significant increases in pension and health care costs in fiscal 2004, the impacts of which will be realized throughout all four quarters. Earnings are expected to be $0.52 to $0.60 per diluted share in the first quarter, compared to $0.52 per diluted share the previous year. Earnings for fiscal 2004 are expected to be $3.00 to $3.15 per share. Both earnings ranges exclude the net impact from the FedEx Express voluntary early retirement and severance programs, which is expected to be $0.25 to $0.30 per share for fiscal 2004.
The first program will offer a voluntary early retirement option with an enhanced pension package to certain groups of employees age 50 or older. The second program will offer voluntary severance incentives to eligible employees. Both programs are limited to salaried staff employees at FedEx Express.
Depending on employee acceptance rates, the pretax charge for these programs is estimated to be in a range of $230 million to $290 million in fiscal 2004, with most of the charge to be incurred in the first half of the fiscal year. Approximately a third of the pretax charge will be cash. The remainder of the charge relates primarily to pension and post-retirement health care liabilities.
The estimated savings from these programs are expected to be $100 million to $130 million in fiscal 2004, primarily in the second half of the fiscal year. Thus, the net cost of these programs in fiscal 2004 is expected to be $130 million to $160 million. In fiscal 2005 and beyond, the estimated annual savings from these programs is expected to be $150 million to $190 million.
"In recent years, FedEx has pursued a strategy to expand and diversify its portfolio of services to include time-definite global express, small package ground and heavy freight services" said Frederick W. Smith, chairman, president and CEO. "This strategy has enabled the company to perform well during these challenging economic times by growing our revenue 10% and earnings per share by 17% for the first nine months of fiscal year 2003. By operating our networks independently, we have the flexibility to expand or contract each network as customer demand or business conditions dictate. While FedEx Express international, FedEx Ground and FedEx Freight services are growing at impressive rates, the FedEx Express U.S. domestic growth rates have declined in recent periods."
During fiscal 2004, the company expects the U. S. economy to remain sluggish in its first fiscal quarter. Year-over-year economic improvement is expected to be evident in the second half of fiscal 2004, although sequential improvement may come earlier. The company believes that the fundamentals are in place for economic acceleration in the U.S. in the second half of fiscal 2004, including supportive conditions in the overall financial market, the recently approved tax stimulus package, continued accommodative monetary stance and improved consumer confidence.
The company expects significant increases in pension and health care costs in fiscal 2004, the impacts of which will be realized throughout all four quarters. Earnings are expected to be $0.52 to $0.60 per diluted share in the first quarter, compared to $0.52 per diluted share the previous year. Earnings for fiscal 2004 are expected to be $3.00 to $3.15 per share. Both earnings ranges exclude the net impact from the FedEx Express voluntary early retirement and severance programs, which is expected to be $0.25 to $0.30 per share for fiscal 2004.
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