FedEx Corp. reported the following consolidated results for the second quarter ended November 30 (adjusted measures exclude the items listed below for the applicable fiscal year):

	Fiscal 2020		Fiscal 2019
	As Reported (GAAP)	Adjusted (non-GAAP)	As Reported (GAAP)	Adjusted (non-GAAP)
Revenue	$17.3 billion	$17.3 billion	$17.8 billion	$17.8 billion
Operating income	$554 million	$684 million	$1.17 billion	$1.33 billion
Operating margin	3.2%	3.9%	6.6%	7.5%
Net income	$560 million	$660 million	$935 million	$1.08 billion
Diluted EPS	$2.13	$2.51	$3.51	$4.03

 

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

 

Impact per diluted share
	Fiscal 2020	Fiscal 2019
TNT Express integration expenses	$0.19	$0.34
Aircraft impairment charges	0.19	—
FedEx Ground legal matter	—	0.17
Net U.S. deferred tax liability remeasurement	—	0.02

 

Operating results declined due to weak global economic conditions, increased FedEx Ground costs from expanded service offerings, the loss of business from a large customer, a continuing mix shift to lower-yielding services and a more competitive pricing environment. In addition, the later timing of the Thanksgiving holiday resulted in the shifting of Cyber Week into December, which negatively impacted the quarter’s results. These factors were partially offset by lower variable incentive compensation expenses and increased yields at FedEx Freight. Net income includes a tax benefit of $133 million ($0.51 per diluted share) from the recognition of certain foreign tax loss carry forwards.

 

FedEx Express recorded asset impairment charges of $66 million ($50 million, net of tax, or $0.19 per diluted share) related to the permanent retirement of 10 Airbus A310-300 aircraft and 12 related engines. During the remainder of fiscal 2020, FedEx Express will make further network capacity changes by reducing flight hours. The company continues to evaluate if additional aircraft retirements are warranted.

 

Outlook

 

FedEx is unable to forecast the fiscal 2020 year-end mark-to-market (MTM) retirement plan accounting adjustment. As a result, the company is unable to provide a fiscal 2020 earnings per share or effective tax rate (ETR) outlook on a GAAP basis.

 

FedEx now forecasts fiscal 2020 earnings of $9.10 to $10.35 per diluted share before the year-end MTM retirement plan accounting adjustment, and earnings of $10.25 to $11.50 per diluted share before the year-end MTM retirement plan accounting adjustment and excluding TNT Express integration expenses and aircraft impairment charges. The company’s ETR is now expected to be 23% to 26% before the year-end MTM retirement plan accounting adjustment. The capital spending forecast remains $5.9 billion.

 

These forecasts assume moderate U.S. economic growth, the company’s current fuel price expectations, no further weakening in international economic conditions from the company’s current forecast and no additional adverse developments in international trade policies and relations. FedEx’s ETR and earnings per share outlooks are based on the company’s current interpretations of the Tax Cuts and Jobs Act (TCJA) and related regulations and guidance, and are subject to change based on future guidance, as well as FedEx’s ability to defend its interpretations.