Giving You a Smarter Way to Connect FedEx Annual Report 2009
6 8 16 22 30
Letter to Shareholders FedEx Ground FedEx Office FedEx Express The Environment
Allow us to introduce ourselves... Headquartered in Memphis, Tennessee, FedEx is a publicly owned and traded corporation (NYSE: FDX) that provides a global portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively under the respected FedEx brand. These operating companies are primarily represented by FedEx Express, FedEx Ground, FedEx Freight and FedEx Services. These companies form the core of our reportable segments.
OPERATING MARGIN
2.1% 2009
9.3%
9.6%
2007
2005
$38.0
ANNUAL REVENUE (IN BILLIONS)
2008
2008
$35.5 2009
$31.7
$35.2
2005
2007
$32.3 2006
4
5.5%
9.3% 2006
$2
OFFICE
$7
OTHER
Today’s FedEx is led by FedEx Corporation, which provides strategic direction and consolidated financial reporting for the operating companies that compete collectively under the FedEx name worldwide: FedEx Express, FedEx Ground, FedEx Freight, FedEx Office, FedEx Custom Critical, FedEx Trade Networks and FedEx Services. FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.
STOCK PRICE (MAY 31 CLOSE)
$109.27 2006
REVENUE BY DIVISION (IN BILLIONS) $4.4
GROUND
$111.62 2007
$104.3
$22.4
2005
$91.71 2008
$55.1
EXPRESS
2009
5
6
To Our Valued Shareholders, Some FedEx people literally see the world from 30,000 feet. Others see it from people’s front porches. As a whole, our team looks out at the world from more than 220 countries and territories and through 35 years of history. These perspectives give us insight into the impact FedEx makes on the world. We see how the access we provide contributes positively to people’s lives, businesses’ success and nations’ growth. We see that creating a long-term value is about more than financial returns. It’s also about continuously earning the trust of our team members, customers, shareowners and the communities we serve. We take trust very seriously. People around the world have welcomed FedEx into their communities and their daily lives. They trust us to deliver services to them in a highly reliable yet cost-effective manner. We know they expect us to do it responsibly with respect for our team members, our communities, and our environment.
This past year proved our ability to frame how we think about our responsibilities. It shows our deep commitment to great service for customers and communities. It describes our initiatives toward sustainable operations and strong governance. We believe we can do the most good by focusing on areas where we can apply our specific expertise. Our physical and digital networks give people worldwide access to new economic opportunities, changing what’s possible in their lives and fueling business innovation. We apply our innovative spirit to deliver our services in ways that are more efficient and better for the environment. We realize the world faces big challenges. We believe that with sustained, sincere effort from all sectors -- companies, governments, non-governmental organizations, and individuals -- we can overcome any challenge and create greater possibilities for people, businesses and nations worldwide. Sincerely,
Frederick W. Smith Chairman, President, and CEO FedEx Corporation 7
FedEx Ground
we’re bringing you closer to home
We’re in the people business. That’s why we work extra hard to make sure your packages get where they need to go. We understand that your time is important, which is why we make sure your deliveries are made on time. We take pride in knowing that we are helping bring you closer to your loved ones. FedEx Ground is a leading provider of small-package ground delivery service. FedEx Ground provides day-definite, economical service. FedEx Ground provides day-definite, economical service to every business address in the United States, Canada and Puerto Rico, as well as delivery to nearly 100 percent of residential addresses in the U.S. through FedEx Home Delivery.
While on a business trip in Seattle, Mr. Schwartz missed his daughter’s 6th birthday. To make up for it, he sent her a surprise from one of our 500 ground terminals.
10
During 2009, we opened 42 new delivery and pick up terminals in the United States.
FedEx Ground processed over 3.3 million packages each day in 2009.
In the past year, Ground established 381 new shipcenters.
$6.8 2008
$6.5
$7.0 2009
2007
$6.1 $5.8 2005
2006
ANNUAL REVENUE (IN BILLIONS)
Even though Chloe’s daddy couldn’t be with her on the exact day of her birthday, she was so excited that he sent her a surprise present all the way from Washington.
11
On the Road FedEx Ground provides 100-percent coverage to every business address in Canada and Puerto Rico, with smallpackage delivery in three to seven business days. Among its many competitive service options, FedEx Ground offers C.O.D. service for all destinations served. We currently operate the largest fleet of commercial hybrid trucks in the U.S. We are also involved in projects around the globe to develop and/or operate alternative energy vehicles.
172
HYBRID TRUCKS around the world
14
14.2 PERCENT
increased fuel efficiency in 2009
25 PERCENT
reduced greenhouse gas emissions by using hybrid vehicles
FedEx Ground segment revenues increased 4% in 2009 due to yield improvement at FedEx Ground and volume growth at both FedEx SmartPost and FedEx Ground. FedEx Ground volume growth during 2009 resulted from market share gains, including volumes gained from DHL’s exit from the U.S. market, and continued growth in the FedEx Home Delivery service. FedEx Ground volumes also benefited from existing FedEx Express customers’ opting for lower-cost FedEx Ground offerings. Yield improvement at FedEx Ground during 2009 was primarily due to higher base rates (partially offset by higher customer discounts), increased extra service revenue and higher fuel surcharges.
42 PERCENT
improved fuel economy from using hybrid vehicles
15
FedEx Office
providing you with access to opportunity
$1.2 2008
$1.0 $0.7 2005
$0.9 2006
ANNUAL REVENUE (IN BILLIONS)
In 2009, FedEx Office added 45 new centers to its pre-existing 1,808 locations.
An employee at FedEx Office in Toronto, Rebecca works on binding a presentation for Edwin. FedEx Office takes pride in helping its customers make good first impressions. This past year, Office’s revenue grew by 8%.
18
$2.3 2009
2007
Helping you make good first impressions. The newest member of the FedEx family, Office always helps it’s customers put their best foot forward. Whether it’s for an important business meeting or a final school presentation, FedEx Office is committed to delivering your message. FedEx Office (formerly FedEx Kinko’s) provides access points to printing and shipping expertise with reliable service when and where you need it. The Dallas-based company has a network of more than 1,900 digitally-connected locations. FedEx Office services include copying and digital printing, professional finishing, document creation, direct mail, signs and graphics, Internet access, computer rental, FedEx Express and FedEx Ground shipping, and more. In addition, the company offers FedEx OfficeSM Print Online, an online printing solution for business and personal printing, at home, at the office or on the go. Products, services and hours vary by location.
With the addition of Office, the FedEx stock price rose 2.3%. in 2009
Edwin works for a strategic branding firm and with the help of FedEx Office, was able to pitch and sell an idea to a new client.
19
In Our Packaging FedEx Office is among the top 10 U.S. corporate retail users of renewable energy, purchasing 32 percent of their total energy consumption from renewable sources such as wind and solar. Over 785 locations in 38 states purchase renewable energy. The paper and packaging used in FedEx Office contains approximately 24.5 percent postconsumer recycled fiber. FedEx Office also offers more than 35 types of post-consumer paper for purchase, 14 of which are Forest Stewardship Council (FSC) certified.
+1,000 MEGA WATT HOURS of solar energy produced in 2009
20
100 PERCENT
of envelopes are made from recycled material
20.6 MILLION POUNDS of recycled materials collected since 2007
We plan to expand our on-site renewable energy generation in addition to procurement of renewable energy credits (RECs) purchased. Goal: 25,000 MWh. FY09 exceeded 25,000 MWh of RECs procured, and generated more than 1,000 MWh of on-site solar energy.
785 LOCATIONS
We have pioneered a digital network that enables documents to be professionally printed and finished closer to where they’re needed, reducing the resources used to physically transport shipments. And we became leaders in the print/ copy industry by adopting forest-based products guidance, establishing requirements that our vendors follow sustainable forest-managment practices and recycled content standards.
using renewable energy
21
FedEx Express
making a global difference
During the past year, FedEx Express processed over 3.5 million packages each day.
We’re all a part of something bigger. We believe it is part of our responsibilty as a corporate citizen to use our capabilities and extensive transportation network to assist people and communities who need access to basic health and services. That is why we have partnered with ORBIS International in helping cure some of the 28 million blind who do not have access to proper medical care. FedEx Express makes sure that the ORBIS Flying Eye Hospital, a plane outfitted with an operating room and a large classroom, reaches remote areas where quality eye care is hard to come by. FedEx has enabled ORBIS doctors to perform corrective eye surgery and teach local doctors the procedure within communities in China, Ethiopia, India, Malaysia, Tanzania, Vietnam, and other countries.
FedEx Express has partnered with ORBIS International to provide cataract and other eye surgeries to children and adults in developing countries across the world.
24
Federal Express Corporation (FedEx Express) is the world’s largest express transportation company, offering time-definite delivery to 90 percent of the world’s gross product within on to three business days. The FedEx Express segment also includes FedEx Trade Networks, which provides international trade services, specializing in customs brokerage and global cargo distribution.
FedEx Express services over 375 airports worldwide.
In 2009, Express acquired 35 fuelefficient planes to add to our fleet.
$21.8 2008
$22.4 2009
$20.2
$20.9
2005
2007
$20.6 2006
ANNUAL REVENUE (IN BILLIONS)
Toume Keosangva, 51, was able to receive surgery on her glaucoma on board the Flying Eye Hospital in Vientiane. 25
In the Air Federal Express Corporation (FedEx Express) is the world’s largest express transportation company, offering time-definite delivery to 90 percent of the world’s gross product within on to three business days. The FedEx Express segment also includes FedEx Trade Networks, which provides international trade services, specializing in customs brokerage and global cargo distribution.
STAGE 3 FAA NOISE LAW all FedEx Express aircrafts meet Federal noise standards
28
4.6 PERCENT
less aircraft CO² emissions on a pounds per available ton basis
452,573 METRIC TONS of CO² emissions saved since 2005
We are upgrading our fleet by replacing narrow-body aircraft with planes that lessen the environmental impact -- reducing fuel consumption up to 36 percent while providing 20 percent more capacity. And we will acquire aircraft that provide greater payload capacity using 18 percent less fuel than planes in our current international fleet. These replacements will also significantly eliminate carbon emissions that would have otherwise occurred. We collaborated with a major aircraft engine manufacturer to reduce aircraft noise pollution, resulting in a state-of-theart solution that has been adopted by other companies to significantly reduce noise performance of many older aircraft.
36 PERCENT
reduced fuel consumption from using narrow-body planes 29
Our Environmental Efforts FedEx is committed to providing global connections while minimizing our environmental impact. We have integrated responsible environmental practices into our daily operations, and we continuously set goals that challenge us to increase efficiencies and reduce waste. At FedEx, we have taken a leadership role in the adoption and advancement of responsible environmental practices. We support the growth of sustainable energy use through commitments to renewable power sources in our operations and use of innovative technologies in our transportation fleet. FedEx seeks to diversify its energy supply whenever possible, relying on energy sources such as wind and solar power. In August 2005, FedEx Express activated California’s thenlargest corporate solar power installation at its Oakland, Calif., West Coast Hub. The system reduces demand on the utility grid and serves as an additional source of power capacity to benefit businesses and residents of California.
FedEx has the largest corporate solar power installation at its Oaklnd, CA Hub. 30
FedEx Ground operates over 170 hybrid delivery trucks.
FedEx has continued its role as a leader in the industry by encouraging more companies to purchase and develop clean-technology trucks. Our vehicle experts have participated in numerous industry conferences and gatherings to educate companies about the benefits of cleaner truck technology. We have also championed the need for a smaller engine for application in hybrid vehicles following the 2007 EPA federal engine standard to replace the existing larger, less efficient engine. FedEx Freight has developed a custom-facility lighting solution that reduces energy consumption by up to 93 percent. These progressive lighting solutions have been installed at 27 service centers throughout the United States. As an Environmental Protection Agency (EPA) Energy Star partner, FedEx Freight has also changed over 3,500 traditional bulbs for energy-efficient compact fluorescent (CFL) bulbs to date. 31
942 South Shady Grove Road Memphis, TN 38120