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FedEx to miss target, offer buyouts
Shares fall after announcing up to $290M in charges, payroll reductions, guidance below forecasts.
June 3, 2003: 7:16 AM EDT

NEW YORK (Reuters) - FedEx Corp., the largest overnight package deliverer, said Monday it plans to offer voluntary buyouts to 14,000 management and salaried employees at its main U.S. express delivery unit in an effort to save as much as $190 million a year.

FedEx also said it expects to miss analysts' profit forecasts for its current quarter and fiscal 2004, excluding the charge, because of "significant increases" in pension and health-care costs in an economy that it called "sluggish."

The Memphis, Tenn.-based company said it expects to take a $230 million to $290 million pretax charge to pay for the retirement and severance packages at its largest operating unit, FedEx Express.

Sandra Munoz, a FedEx spokeswoman, said the company is offering the packages to about 12 percent of FedEx Express's 116,000 U.S. employees. The retirement and severance packages are not being offered to couriers, pilots or customer service representatives, she said.

The company said it hopes starting in fiscal 2005 to save between $150 million and $190 million a year from the retirement and severance programs, after savings of between $100 million and $130 million from the programs in the current fiscal year, which started Sunday.

FedEx shares, which closed up 63 cents at $64.61 on the New York Stock Exchange, fell to $63.50 in after-hours trading on Instinet.

FedEx said it expects to take about one-third of the charge in cash. The rest, it said, relates mainly to pension and post-retirement health-care costs. It said most of the charge will be in the fiscal year's first half.

The programs "are yet another step in (our) ongoing process of reducing our cost structure" to boost competitiveness, serve employees and increase the company's share price, David Bronczek, FedEx Express's chief executive, said in a statement.

FedEx said it expects to post per-share profit, excluding the programs, of between 52 cents and 60 cents in its fiscal 2004 first quarter, which ends Aug. 31, and between $3.00 and $3.15 for fiscal 2004. It said the programs should reduce full-year profit by between 25 cents and 30 cents.

Analysts polled by research firm First Call on average forecast per share profit of 61 cents for the first quarter and $3.19 for the year.  Top of page

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