fdx-10q_20200229.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED February 29, 2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 1-15829

FEDEX CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	62-1721435
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

942 South Shady Grove Road, Memphis, Tennessee	38120
(Address of principal executive offices)	(ZIP Code)

Registrant’s telephone number, including area code: (901) 818-7500

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.10 per share	FDX	New York Stock Exchange
0.700% Notes due 2022	FDX 22B	New York Stock Exchange
1.000% Notes due 2023	FDX 23A	New York Stock Exchange
0.450% Notes due 2025	FDX 25A	New York Stock Exchange
1.625% Notes due 2027	FDX 27	New York Stock Exchange
1.300% Notes due 2031	FDX 31	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock		Outstanding Shares at March 13, 2020
Common Stock, par value $0.10 per share		261,249,779

FEDEX CORPORATION

INDEX

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets February 29, 2020 and May 31, 2019		3
Condensed Consolidated Statements of Income Three and Nine Months Ended February 29, 2020 and February 28, 2019		5
Condensed Consolidated Statements of Comprehensive Income Three and Nine Months Ended February 29, 2020 and February 28, 2019		6
Condensed Consolidated Statements of Cash Flows Nine Months Ended February 29, 2020 and February 28, 2019		7
Condensed Consolidated Statements of Changes In Common Stockholders’ Investment Three and Nine Months Ended February 29, 2020 and February 28, 2019		8
Notes to Condensed Consolidated Financial Statements		9
Report of Independent Registered Public Accounting Firm		32
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		33
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		57
ITEM 4. Controls and Procedures		57

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		58
ITEM 1A. Risk Factors		58
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		60
ITEM 6. Exhibits		61
Signature		63

Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 10.6
Exhibit 10.7
Exhibit 10.8
Exhibit 10.9
Exhibit 10.10
Exhibit 10.11
Exhibit 10.12
Exhibit 10.13
Exhibit 10.14
Exhibit 15.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101.1 Interactive Data Files Exhibit 104.1 Cover Page Interactive Data File

- 2 -

FEDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

	February 29, 2020 (Unaudited)		May 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,766	$	2,319
Receivables, less allowances of $307 and $300		9,323		9,116
Spare parts, supplies and fuel, less allowances of $332 and $335		568		553
Prepaid expenses and other		884		1,098
Total current assets		12,541		13,086
PROPERTY AND EQUIPMENT, AT COST		64,305		59,511
Less accumulated depreciation and amortization		30,999		29,082
Net property and equipment		33,306		30,429
OTHER LONG-TERM ASSETS
Operating lease right-of-use assets, net		13,981		—
Goodwill		6,814		6,884
Other assets		3,372		4,004
Total other long-term assets		24,167		10,888
	$	70,014	$	54,403

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 3 -

FEDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE DATA)

	February 29, 2020 (Unaudited)			May 31, 2019
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Short-term borrowings	$	300		$	—
Current portion of long-term debt		35			964
Accrued salaries and employee benefits		1,472			1,741
Accounts payable		3,193			3,030
Operating lease liabilities		1,902			—
Accrued expenses		3,423			3,278
Total current liabilities		10,325			9,013
LONG-TERM DEBT, LESS CURRENT PORTION		18,973			16,617
OTHER LONG-TERM LIABILITIES
Deferred income taxes		3,101			2,821
Pension, postretirement healthcare and other benefit obligations		4,165			5,095
Self-insurance accruals		1,933			1,899
Operating lease liabilities		12,232			—
Deferred lease obligations		—			531
Other liabilities		454			670
Total other long-term liabilities		21,885			11,016
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of February 29, 2020 and May 31, 2019		32			32
Additional paid-in capital		3,324			3,231
Retained earnings		25,569			24,648
Accumulated other comprehensive loss		(887	)		(865	)
Treasury stock, at cost		(9,207	)		(9,289	)
Total common stockholders’ investment		18,831			17,757
	$	70,014		$	54,403

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 4 -

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

	Three Months Ended						Nine Months Ended
	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019
REVENUE	$	17,487		$	17,010		$	51,859		$	51,886
OPERATING EXPENSES:
Salaries and employee benefits		6,382			6,069			18,704			18,589
Purchased transportation		4,558			4,253			12,914			12,566
Rentals and landing fees		964			874			2,808			2,533
Depreciation and amortization		908			851			2,688			2,487
Fuel		879			907			2,639			2,945
Maintenance and repairs		684			658			2,226			2,144
Asset impairment charges		—			—			66			—
Business realignment costs		—			4			—			4
Other		2,701			2,483			7,872			7,468
		17,076			16,099			49,917			48,736
OPERATING INCOME		411			911			1,942			3,150
OTHER INCOME (EXPENSE):
Interest, net		(155	)		(135	)		(443	)		(393	)
Other retirement plans income		168			158			504			474
Other, net		(4	)		(3	)		(15	)		(22	)
		9			20			46			59
INCOME BEFORE INCOME TAXES		420			931			1,988			3,209
PROVISION FOR INCOME TAXES		105			192			368			700
NET INCOME	$	315		$	739		$	1,620		$	2,509
EARNINGS PER COMMON SHARE:
Basic	$	1.21		$	2.83		$	6.21		$	9.55
Diluted	$	1.20		$	2.80		$	6.17		$	9.41
DIVIDENDS DECLARED PER COMMON SHARE	$	0.65		$	0.65		$	2.60		$	2.60

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 5 -

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(IN MILLIONS)

	Three Months Ended						Nine Months Ended
	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019
NET INCOME	$	315		$	739		$	1,620		$	2,509
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of tax benefit of $6 and $3 in 2020 and tax expense of $9 and tax benefit of $22 in 2019		(1	)		103			(12	)		(90	)
Amortization of prior service credit, net of tax benefit of $7 and $19 in 2020 and tax benefit of $7 and $21 in 2019		(20	)		(23	)		(61	)		(69	)
		(21	)		80			(73	)		(159	)
COMPREHENSIVE INCOME	$	294		$	819		$	1,547		$	2,350

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 6 -

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN MILLIONS)

	Nine Months Ended
	February 29, 2020			February 28, 2019
Operating Activities:
Net income	$	1,620		$	2,509
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		2,688			2,487
Asset impairment charges		66			—
Provision for uncollectible accounts		295			221
Stock-based compensation		137			141
Other noncash items and deferred income taxes		1,758			250
Changes in assets and liabilities:
Receivables		(504	)		(780	)
Other assets		(149	)		(96	)
Accounts payable and other liabilities		(2,612	)		(1,307	)
Other, net		(21	)		(102	)
Cash provided by operating activities		3,278			3,323
Investing Activities:
Capital expenditures		(4,705	)		(3,757	)
Proceeds from asset dispositions and other		15			62
Cash used in investing activities		(4,690	)		(3,695	)
Financing Activities:
Proceeds from short-term borrowings, net		298			220
Principal payments on debt		(1,045	)		(874	)
Proceeds from debt issuances		2,093			2,463
Proceeds from stock issuances		38			58
Dividends paid		(509	)		(514	)
Purchase of treasury stock		(3	)		(1,365	)
Other, net		(5	)		5
Cash provided by (used in) financing activities		867			(7	)
Effect of exchange rate changes on cash		(8	)		(14	)
Net decrease in cash and cash equivalents		(553	)		(393	)
Cash and cash equivalents at beginning of period		2,319			3,265
Cash and cash equivalents at end of period	$	1,766		$	2,872

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 7 -

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ INVESTMENT

(UNAUDITED)

(IN MILLIONS, EXCEPT SHARE DATA)

	Three Months Ended						Nine Months Ended
	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019
Common Stock
Beginning Balance	$	32		$	32		$	32		$	32
Ending Balance		32			32			32			32
Additional Paid-in-Capital
Beginning Balance		3,287			3,185			3,231			3,117
Employee incentive plans and other		37			24			93			92
Ending Balance		3,324			3,209			3,324			3,209
Retained Earnings
Beginning Balance		25,431			26,080			24,648			24,823
Net Income		315			739			1,620			2,509
Cash dividends declared ($0.65, $0.65, $2.60, and $2.60 per share)		(170	)		(169	)		(679	)		(683	)
Employee incentive plans and other		(7	)		—			(16	)		1
Adoption of new accounting standards on June 1, 2019⁽¹⁾		—			—			(4	)		—
Ending Balance		25,569			26,650			25,569			26,650
Accumulated Other Comprehensive Income
Beginning Balance		(866	)		(817	)		(865	)		(578	)
Other comprehensive income, net of tax (expense)/benefit of $13, ($2), $22, and $43		(21	)		80			(73	)		(159	)
Reclassification to retained earnings due to the adoption of a new accounting standard on June 1, 2019⁽²⁾		—			—			51			—
Ending Balance		(887	)		(737	)		(887	)		(737	)
Treasury Stock
Beginning Balance		(9,225	)		(9,186	)		(9,289	)		(7,978	)
Purchase of treasury stock (0.0, 0.6, 0.02, and 6.0 million shares)		—			(93	)		(3	)		(1,365	)
Employee incentive plans and other (0.1, 0.1, 0.6, and 0.6 million shares)		18			19			85			83
Ending Balance		(9,207	)		(9,260	)		(9,207	)		(9,260	)
Total Common Stockholders' Investment Balance	$	18,831		$	19,894		$	18,831		$	19,894

⁽¹⁾

Relates to the adoption of Accounting Standards Update (“ASU”) 2016-02 and ASU 2018-02.

⁽²⁾

Relates to the adoption of ASU 2018-02.

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 8 -

FEDEX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) General

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of FedEx Corporation (“FedEx”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission (“SEC”) instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, 2019 (“Annual Report”). Significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the ac