FedEx Corporation

Please stand by, we're about to begin. Good day, everyone, and welcome to the FedEx Corporation fourth quarter fiscal year 2019 earnings conference call. Today's call is being recorded. At this time, I will turn the call over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.

Good afternoon, and welcome to FedEx Corporation's fourth quarter earnings conference call. The fourth quarter earnings release and stat book are on our website at FedEx.com. This call is being streamed from our website, where the replay will be available for about one year. Joining us on the call today are members of the media. During our question and answer session, callers will be limited to one question in order to allow us to accommodate all those who would like to participate. I want to remind all listeners that FedEx Corporation desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act. Certain statements in this conference call, such as projections regarding future performance, may be considered forward-looking statements within the meaning of the act. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our press releases and filings with the SEC. Please refer to the investor relations portion of our website at FedEx.com for reconciliation of the non-GAAP financial measures discussed on this call, the most directly comparable GAAP measures. Joining us on the call today are Fred Smith, Chairman, Raj Subramaniam, President and Chief Operating Officer, Alan Graf, Executive Vice President and Chief Financial Officer, Mark Allen, Executive Vice President, General Counsel and Secretary, Rob Carter, Executive Vice President, FedEx Information Services and CIO. Marie Carreri, Executive Vice President, Chief Marketing and Communications Officer. And now Fred Smith will share his views on the quarter.

Thank you very much, Mickey. Welcome to all joining our quarterly call. Fiscal 2019 was a year of both challenge and change for FedEx. We faced weakening international revenue growth driven by the slowdown in global trade. a less favorable service mix of T&T Express business after the NotPetya cyber attack and continued rapid growth of e-commerce demand. We're very proud of our team members who are responding with positive actions and innovative solutions that will make FedEx even stronger and more successful in the future. FedEx enters fiscal 2020 with a sharp focus on extending our lead as the premier global transport and logistics company and on making the necessary investments today to capture the significant market opportunities we see for the future. These steps include enhancing FedEx ground capabilities, speed, and efficiency, improving FedEx Express hub automation, particularly in Memphis and Indianapolis, finishing the integration of TNT, modernizing our aircraft fleet, and reducing unit cost and increasing productivity, especially for e-commerce deliveries. While these investments are long-term in nature and their success cannot always be measured immediately, we're confident they will drive significant earnings growth and improve margins, cash flows, and returns for our shareholders over the long haul. Let me emphasize, however, that based on our current forecast, of U.S. GDP growth for FY20, we anticipate FedEx freight will increase earnings and margin over the period. We believe FedEx ground will increase earnings for the fiscal year with modest, if any, margin compression from current levels despite the investments we've announced, such as six- and seven-day-per-week delivery, large package capabilities, and insourcing of smart posts. Global trade disputes and low global growth rates create significant uncertainty for the Express business, leading us to be cautious in projecting FY20 earnings for this segment. The integration of TNT is now progressing at a good clip, and we will see significant benefits by this time in summer 2021. Major focus of our investment strategy, I should note, is also improved sustainability and efficiency. We intend to substantially grow our e-commerce business and are well aware improved profitability in this market requires great efficiency in delivering residential packages. And we have sound initiatives to steadily improve our cost to serve this market. To these ends, for example, we recently announced insourcing 2 million SmartPost packages and an agreement with Dollar General for over 8,000 pickup and delivery on-site locations in sparsely populated and rural areas. Over FY20, we will announce several additional initiatives in this regard. Let me also caution observers who follow FedEx in this industry to be very careful extrapolating past assumptions and trends into the future. For instance, we've noted repeatedly short-haul package delivery will become increasingly important as retailers ship e-commerce orders from store or local fulfillment. Hence, average yields have to be matched with operational changes not visible to most to assess, to assure potential future profitability. Also, future developments in speeding up e-commerce deliveries and postal reform, which, by the way, we have supported, will likely be discontinuities in the next several years. FedEx is uniquely positioned for long-term success and will continue to deliver a great future for our customers, shareholders, team members, and the communities we serve. Let me now turn to Raj, followed by Bree and Alan, and then a brief comment by Mark Allen, and then we'll take questions. Raj?