FedEx early retirement program lowers 2nd quarter earnings

FedEx early retirement program lowers 2nd quarter earnings    FedEx Corp.'s profit dropped 63 percent in the second quarter to $91 million as the company took one-time charges of $283 million to cover voluntary retirement and cash severance incentives, and other business restructuring costs.
   Operating income was down 57 percent to $183 million on revenue of $5.9 billion, up 4 percent from the 2002 period ending Nov. 30.
   FedEx said about 3,600 employees accepted offers for early retirement, substantially higher than the company expected. As a result, the company has had to hire replacement managers and workers and defer some departure dates until May 31. For the first half of the fiscal year, the cost of business realignment programs was $415 million.
   The company expects savings from these initiatives to be $135 million to $145 million in fiscal 2004, mostly in the second half of the year. After that FedEx expects savings to be $235 million to $240 million per year.
   FedEx Express operating income improved 13 percent before realignment costs based on 4 percent revenue growth to $4.3 billion, cost controls and the voluntary retirement programs. The express unit recorded a $19 million loss for the quarter, factoring restructuring costs. International Priority revenue grew 14 percent, primarily due to an increase in weight per package and exchange rate differences.
   FedEx Ground's revenue improved 8 percent to $978 million. Operating income was flat at $135 million. Average daily package volume grew 3 percent in the second quarter, up from 1 percent growth in the first quarter. Volume growth is affected by last year's boost in anticipation of a potential strike by UPS workers. Lower than normal customer inventory levels in the retail sector also affected volumes, FedEx said.
   FedEx Freight reported revenue of $664 million, up from $634 million from a year ago. The company attributed its 6 percent improvement in yield to higher fuel surcharge revenue.