10-Q 1 fdx-20241130.htm 10-Q 10-Q
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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 November 30, 2024

OR

 

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

0.450% Notes due 2025

 

FDX 25A

 

New York Stock Exchange

1.625% Notes due 2027

 

FDX 27

 

New York Stock Exchange

0.450% Notes due 2029

 

FDX 29A

 

New York Stock Exchange

1.300% Notes due 2031

 

FDX 31

 

New York Stock Exchange

0.950% Notes due 2033

 

FDX 33

 

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 December 17, 2024

Common Stock, par value $0.10 per share

 

240,850,603

 

 

 


 

FEDEX CORPORATION

INDEX

 

 

PAGE

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

ITEM 1. Financial Statements

 

 

Condensed Consolidated Balance Sheets
November 30, 2024 and May 31, 2024

 

3

Condensed Consolidated Statements of Income
Three and Six Months Ended November 30, 2024 and 2023

 

5

Condensed Consolidated Statements of Comprehensive Income
Three and Six Months Ended November 30, 2024 and 2023

 

6

Condensed Consolidated Statements of Cash Flows
Six Months Ended November 30, 2024 and 2023

 

7

Condensed Consolidated Statements of Changes In Common Stockholders’ Investment
Three and Six Months Ended November 30, 2024 and 2023

 

8

Notes to Condensed Consolidated Financial Statements

 

9

Report of Independent Registered Public Accounting Firm

 

20

ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

 

21

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

 

40

ITEM 4. Controls and Procedures

 

41

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

ITEM 1. Legal Proceedings

 

41

ITEM 1A. Risk Factors

 

41

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

44

ITEM 5. Other Information

 

44

ITEM 6. Exhibits

 

46

Signature

 

47

 

 

 

 

- 2 -


 

FEDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

 

 

 

November 30, 2024
(Unaudited)

 

 

May 31,
2024

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,029

 

 

$

6,501

 

Receivables, less allowances of $702 and $775

 

 

10,737

 

 

 

10,087

 

Spare parts, supplies, and fuel, less allowances of $293 and $288

 

 

620

 

 

 

614

 

Prepaid expenses and other

 

 

1,335

 

 

 

1,005

 

Total current assets

 

 

17,721

 

 

 

18,207

 

PROPERTY AND EQUIPMENT, AT COST

 

 

85,658

 

 

 

84,391

 

Less accumulated depreciation and amortization

 

 

44,652

 

 

 

42,900

 

Net property and equipment

 

 

41,006

 

 

 

41,491

 

OTHER LONG-TERM ASSETS

 

 

 

 

 

 

Operating lease right-of-use assets, net

 

 

16,821

 

 

 

17,115

 

Goodwill

 

 

6,290

 

 

 

6,423

 

Other assets

 

 

3,643

 

 

 

3,771

 

Total other long-term assets

 

 

26,754

 

 

 

27,309

 

 

 

$

85,481

 

 

$

87,007

 

 

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)

 

 

 

November 30, 2024
(Unaudited)

 

 

May 31,
2024

 

LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Current portion of long-term debt

 

$

592

 

 

$

68

 

Accrued salaries and employee benefits

 

 

2,710

 

 

 

2,673

 

Accounts payable

 

 

3,896

 

 

 

3,189

 

Operating lease liabilities

 

 

2,536

 

 

 

2,463

 

Accrued expenses

 

 

4,658

 

 

 

4,962

 

Total current liabilities

 

 

14,392

 

 

 

13,355

 

LONG-TERM DEBT, LESS CURRENT PORTION

 

 

19,433

 

 

 

20,135

 

OTHER LONG-TERM LIABILITIES

 

 

 

 

 

 

Deferred income taxes

 

 

4,436

 

 

 

4,482

 

Pension, postretirement healthcare, and other benefit obligations

 

 

1,571

 

 

 

2,010

 

Self-insurance accruals

 

 

3,825

 

 

 

3,701

 

Operating lease liabilities

 

 

14,713

 

 

 

15,053

 

Other liabilities

 

 

651

 

 

 

689

 

Total other long-term liabilities

 

 

25,196

 

 

 

25,935

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

COMMON STOCKHOLDERS’ INVESTMENT

 

 

 

 

 

 

Common stock, $0.10 par value; 800 million shares authorized; 318 million shares
   issued as of November 30, 2024 and May 31, 2024

 

 

32

 

 

 

32

 

Additional paid-in capital

 

 

4,165

 

 

 

3,988

 

Retained earnings

 

 

39,175

 

 

 

38,649

 

Accumulated other comprehensive loss

 

 

(1,515

)

 

 

(1,359

)

Treasury stock, at cost

 

 

(15,397

)

 

 

(13,728

)

Total common stockholders’ investment

 

 

26,460

 

 

 

27,582

 

 

 

$

85,481

 

 

$

87,007

 

 

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

 

 

Six Months Ended

 

 

 

November 30, 2024

 

 

November 30, 2023

 

 

November 30, 2024

 

 

November 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

$

21,967

 

 

$

22,165

 

 

$

43,546

 

 

$

43,846

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

7,879

 

 

 

7,833

 

 

 

15,664

 

 

 

15,618

 

Purchased transportation

 

 

5,500

 

 

 

5,395

 

 

 

10,775

 

 

 

10,431

 

Rentals and landing fees

 

 

1,168

 

 

 

1,138

 

 

 

2,329

 

 

 

2,289

 

Depreciation and amortization

 

 

1,063

 

 

 

1,040

 

 

 

2,141

 

 

 

2,111

 

Fuel

 

 

947

 

 

 

1,328

 

 

 

2,022

 

 

 

2,429

 

Maintenance and repairs

 

 

831

 

 

 

854

 

 

 

1,660

 

 

 

1,678

 

Business optimization costs

 

 

326

 

 

 

145

 

 

 

454

 

 

 

250

 

Other

 

 

3,201

 

 

 

3,156

 

 

 

6,369

 

 

 

6,279

 

 

 

 

20,915

 

 

 

20,889

 

 

 

41,414

 

 

 

41,085

 

OPERATING INCOME

 

 

1,052

 

 

 

1,276

 

 

 

2,132

 

 

 

2,761

 

OTHER (EXPENSE) INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

Interest, net

 

 

(102

)

 

 

(97

)

 

 

(186

)

 

 

(188

)

Other retirement plans, net

 

 

50

 

 

 

41

 

 

 

99

 

 

 

80

 

Other, net

 

 

(19

)

 

 

(18

)

 

 

(8

)

 

 

(28

)

 

 

 

(71

)

 

 

(74

)

 

 

(95

)

 

 

(136

)

INCOME BEFORE INCOME TAXES

 

 

981

 

 

 

1,202

 

 

 

2,037

 

 

 

2,625

 

PROVISION FOR INCOME TAXES

 

 

240

 

 

 

302

 

 

 

502

 

 

 

647

 

NET INCOME

 

$

741

 

 

$

900

 

 

$

1,535

 

 

$

1,978

 

EARNINGS PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

3.06

 

 

$

3.59

 

 

$

6.30

 

 

$

7.88

 

Diluted

 

$

3.03

 

 

$

3.55

 

 

$

6.24

 

 

$

7.79

 

DIVIDENDS DECLARED PER COMMON SHARE

 

$

1.38

 

 

$

1.26

 

 

$

4.14

 

 

$

2.52

 

 

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

 

 

Six Months Ended

 

 

 

November 30, 2024

 

 

November 30, 2023

 

 

November 30, 2024

 

 

November 30, 2023

 

NET INCOME

 

$

741

 

 

$

900

 

 

$

1,535

 

 

$

1,978

 

OTHER COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax benefit/(expense) of $2 and ($2) in 2024 and ($3) and $1 in 2023

 

 

(181

)

 

 

28

 

 

 

(152

)

 

 

 

Prior service credit arising during period, net of tax (expense) of ($11) and ($11) in 2023

 

 

 

 

 

36

 

 

 

 

 

 

36

 

Amortization of prior service credit, net of tax benefit of $0 and $1 in 2024 and $0 and $0 in 2023

 

 

(2

)

 

 

(2

)

 

 

(4

)

 

 

(3

)

 

 

 

(183

)

 

 

62

 

 

 

(156

)

 

 

33

 

COMPREHENSIVE INCOME

 

$

558

 

 

$

962

 

 

$

1,379

 

 

$

2,011

 

 

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)

 

 

 

Six Months Ended

 

 

 

November 30, 2024

 

 

November 30, 2023

 

Operating Activities:

 

 

 

 

 

 

Net income

 

$

1,535

 

 

$

1,978

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

2,141

 

 

 

2,111

 

Provision for uncollectible accounts

 

 

250

 

 

 

216

 

Other noncash items including leases and deferred income taxes

 

 

1,589

 

 

 

1,427

 

Stock-based compensation

 

 

84

 

 

 

96

 

Business optimization costs, net of payments

 

 

125

 

 

 

(28

)

Changes in assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

(1,079

)

 

 

(687

)

Other assets

 

 

(111

)

 

 

(110

)

Accounts payable and other liabilities

 

 

(2,087

)

 

 

(975

)

Other, net

 

 

58

 

 

 

(24

)

Cash provided by operating activities

 

 

2,505

 

 

 

4,004

 

Investing Activities:

 

 

 

 

 

 

Capital expenditures

 

 

(1,585

)

 

 

(2,595

)

Purchase of investments

 

 

(107

)

 

 

(75

)

Proceeds from sale of investments

 

 

52

 

 

 

 

Proceeds from asset dispositions and other

 

 

34

 

 

 

62

 

Cash used in investing activities

 

 

(1,606

)

 

 

(2,608

)

Financing Activities:

 

 

 

 

 

 

Principal payments on debt

 

 

(47

)

 

 

(94

)

Proceeds from stock issuances

 

 

440

 

 

 

211

 

Dividends paid

 

 

(676

)

 

 

(635

)

Purchase of treasury stock

 

 

(2,020

)

 

 

(1,000

)

Other

 

 

(6

)

 

 

 

Cash used in financing activities

 

 

(2,309

)

 

 

(1,518

)

Effect of exchange rate changes on cash

 

 

(62

)

 

 

(5

)

Net decrease in cash and cash equivalents

 

 

(1,472

)

 

 

(127

)

Cash and cash equivalents at beginning of period

 

 

6,501

 

 

 

6,856

 

Cash and cash equivalents at end of period

 

$

5,029

 

 

$

6,729

 

 

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

 

 

Six Months Ended

 

 

 

November 30, 2024

 

 

November 30, 2023

 

 

November 30, 2024

 

 

November 30, 2023

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

32

 

 

$

32

 

 

$

32

 

 

$

32

 

Ending Balance

 

 

32

 

 

 

32

 

 

 

32

 

 

 

32

 

Additional Paid-in Capital

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

 

4,134

 

 

 

3,800

 

 

 

3,988

 

 

 

3,769

 

Purchase of treasury stock

 

 

(12

)

 

 

2

 

 

 

(21

)

 

 

(34

)

Employee incentive plans and other

 

 

43

 

 

 

47

 

 

 

198

 

 

 

114

 

Ending Balance

 

 

4,165

 

 

 

3,849

 

 

 

4,165

 

 

 

3,849

 

Retained Earnings

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

 

38,767

 

 

 

36,021

 

 

 

38,649

 

 

 

35,259

 

Net Income

 

 

741

 

 

 

900

 

 

 

1,535

 

 

 

1,978

 

Cash dividends declared ($1.38, $1.26, $4.14, and $2.52 per share)

 

 

(333

)

 

 

(316

)

 

 

(1,009

)

 

 

(632

)

Ending Balance

 

 

39,175

 

 

 

36,605

 

 

 

39,175

 

 

 

36,605

 

Accumulated Other Comprehensive Loss

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

 

(1,332

)

 

 

(1,356

)

 

 

(1,359

)

 

 

(1,327

)

Other comprehensive (loss)/income, net of tax benefit/(expense) of $2, ($14), ($1), and ($10)

 

 

(183

)

 

 

62

 

 

 

(156

)

 

 

33

 

Ending Balance

 

 

(1,515

)

 

 

(1,294

)

 

 

(1,515

)

 

 

(1,294

)

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

 

(14,425

)

 

 

(11,963

)

 

 

(13,728

)

 

 

(11,645

)

Purchase of treasury stock (3.7, 2.0, 7.1, and 3.9 million shares)

 

 

(1,001

)

 

 

(509

)

 

 

(1,995

)

 

 

(974

)

Employee incentive plans and other (0.2, 0.4, 2.4, and 1.5 million shares)

 

 

29

 

 

 

46

 

 

 

326

 

 

 

193

 

Ending Balance

 

 

(15,397

)

 

 

(12,426

)

 

 

(15,397

)

 

 

(12,426

)

Total Common Stockholders’ Investment Balance

 

$

26,460

 

 

$

26,766

 

 

$

26,460

 

 

$

26,766

 

 

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

- 8 -


 

FEDEX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1: Description of Business Segments and Summary of Significant Accounting Policies

DESCRIPTION OF BUSINESS SEGMENTS. FedEx Corporation (“FedEx”) provides a broad portfolio of transportation, e-commerce, and business services, offering integrated business solutions utilizing our flexible, efficient, and intelligent global network. Our primary operating companies are Federal Express Corporation (“Federal Express”), the world’s largest express transportation company and a leading North American provider of small-package ground delivery services, and FedEx Freight, Inc. (“FedEx Freight”), a leading North American provider of less-than-truckload (“LTL”) freight transportation services.

In connection with our one FedEx consolidation plan, on June 1, 2024, FedEx Ground Package System, Inc. (“FedEx Ground”) and FedEx Corporate Services, Inc. (“FedEx Services”) were merged into Federal Express, becoming a single company operating a unified, fully integrated air-ground express network under the respected FedEx brand. FedEx Freight continues to provide LTL freight transportation services as a separate subsidiary. Beginning in the first quarter of 2025, Federal Express and FedEx Freight represent our major service lines and constitute our reportable segments. Additionally, the results of FedEx Custom Critical, Inc. (“FedEx Custom Critical”) are included in the FedEx Freight segment instead of the Federal Express segment in 2025. Prior-year amounts were revised to reflect this presentation.

We evaluated our reporting units with significant recorded goodwill during the fourth quarter of 2024, and the estimated fair value of each reporting unit exceeded its carrying value as of the end of 2024 immediately before our one FedEx consolidation. We reevaluated the conclusion of our 2024 goodwill impairment tests as of June 1, 2024 immediately after our one FedEx consolidation and concluded that the estimated fair values of our reporting units with significant goodwill continued to exceed their respective carrying values.

In June 2024, we announced that FedEx’s management and Board of Directors were conducting an assessment of the role of FedEx Freight in the company’s portfolio structure. On December 19, 2024, we announced that the Board of Directors concluded that assessment and decided to pursue a full separation of FedEx Freight through the capital markets, creating a new publicly traded company. The transaction is intended to qualify as a tax-free separation for U.S. federal income tax purposes for FedEx stockholders and is expected to be executed within the next 18 months.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of 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 fiscal year ended May 31, 2024 (“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 accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of November 30, 2024, and the results of our operations for the three- and six-month periods ended November 30, 2024 and 2023, cash flows for the six-month periods ended November 30, 2024 and 2023, and changes in common stockholders’ investment for the three- and six-month periods ended November 30, 2024 and 2023. Operating results for the three- and six-month periods ended November 30, 2024 are not necessarily indicative of the results that may be expected for the year ending May 31, 2025.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2025 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

Contract Assets and Liabilities. Contract assets include billed and unbilled amounts resulting from in-transit shipments, as we have an unconditional right to payment only once all performance obligations have been completed (e.g., packages have been delivered). Contract assets are generally classified as current, and the full balance is converted each quarter based on the short-term nature of the transactions. Our contract liabilities consist of advance payments and billings in excess of revenue. The full balance of deferred revenue is converted each quarter based on the short-term nature of the transactions.

Gross contract assets related to in-transit shipments totaled $693 million and $672 million at November 30, 2024 and May 31, 2024, respectively. Contract assets net of deferred unearned revenue were $531 million and $463 million at November 30, 2024 and May 31, 2024, respectively. Contract assets are included within current assets in the accompanying unaudited condensed consolidated balance sheets. Contract liabilities related to advance payments from customers were $22 million and $23 million at November 30, 2024 and May 31, 2024, respectively. Contract liabilities are included within current liabilities in the accompanying unaudited condensed consolidated balance sheets.

- 9 -


 

Disaggregation of Revenue. The following table provides revenue by service type (in millions) for the three- and six-month periods ended November 30. This presentation is consistent with how we organize our segments internally for making operating decisions and measuring performance.

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

November 30,

 

 

November 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

REVENUE BY SERVICE TYPE

 

 

 

 

 

 

 

 

 

 

 

 

Federal Express segment:

 

 

 

 

 

 

 

 

 

 

 

 

Package:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. priority

 

$

2,563

 

 

$

2,605

 

 

$

5,154

 

 

$

5,278

 

U.S. deferred

 

 

1,199

 

 

 

1,207

 

 

 

2,350

 

 

 

2,394

 

U.S. ground

 

 

8,256

 

 

 

8,309

 

 

 

16,312

 

 

 

16,442

 

Total U.S. domestic package revenue

 

 

12,018

 

 

 

12,121

 

 

 

23,816

 

 

 

24,114

 

International priority

 

 

2,231

 

 

 

2,390

 

 

 

4,437

 

 

 

4,717

 

International economy

 

 

1,588

 

 

 

1,183

 

 

 

2,948

 

 

 

2,300

 

Total international export package revenue

 

 

3,819

 

 

 

3,573

 

 

 

7,385

 

 

 

7,017

 

International domestic(1)

 

 

1,190

 

 

 

1,213

 

 

 

2,302

 

 

 

2,353

 

Total package revenue

 

 

17,027

 

 

 

16,907

 

 

 

33,503

 

 

 

33,484

 

Freight:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

383

 

 

 

577

 

 

 

952

 

 

 

1,154

 

International priority

 

 

640

 

 

 

568

 

 

 

1,166

 

 

 

1,121

 

International economy

 

 

529

 

 

 

470

 

 

 

992

 

 

 

942

 

Total freight revenue

 

 

1,552

 

 

 

1,615

 

 

 

3,110

 

 

 

3,217

 

Other

 

 

262

 

 

 

251

 

 

 

533

 

 

 

498

 

Total Federal Express segment

 

 

18,841

 

 

 

18,773

 

 

 

37,146

 

 

 

37,199

 

FedEx Freight segment

 

 

2,177

 

 

 

2,452

 

 

 

4,506

 

 

 

4,837

 

Other and eliminations(2)

 

 

949

 

 

 

940

 

 

 

1,894

 

 

 

1,810

 

 

 

$

21,967

 

 

$

22,165

 

 

$

43,546

 

 

$

43,846

 

(1)
International domestic revenue relates to our international intra-country operations.
(2)
Includes the FedEx Dataworks, Inc. (“FedEx Dataworks”), FedEx Office and Print Services, Inc. (“FedEx Office”), and FedEx Logistics, Inc. (“FedEx Logistics”) operating segments.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots of Federal Express, who are a small number of its total employees, are represented by the Air Line Pilots Association, International (“ALPA”) and are employed under a collective bargaining agreement that took effect on November 2, 2015. The agreement became amendable in November 2021. Bargaining for a successor agreement began in May 2021, and in November 2022 the National Mediation Board (“NMB”), which is the U.S. governmental agency that oversees labor agreements for entities covered by the Railway Labor Act of 1926, as amended, began actively mediating the negotiations. In July 2023, Federal Express’s pilots failed to ratify the tentative successor agreement that was approved by ALPA’s FedEx Master Executive Council the prior month. Bargaining for a successor agreement continues. In April 2024, the NMB rejected ALPA’s request for a proffer of arbitration, and the parties remain in mediated negotiations. The conduct of mediated negotiations has no effect on our operations. A small number of our other employees are members of unions.

STOCK-BASED COMPENSATION. We have three types of equity-based compensation: stock options, restricted stock, and, for outside directors, restricted stock units. The key terms of our equity-based compensation plans and financial disclosures about these programs are set forth in our Annual Report. Our stock-based compensation expense was $36 million for the three-month period ended November 30, 2024 and $84 million for the six-month period ended November 30, 2024. Our stock-based compensation expense was $40 million for the three-month period ended November 30, 2023 and $96 million for the six-month period ended November 30, 2023. Due to its immateriality, additional disclosures related to stock-based compensation have been excluded from this quarterly report.

BUSINESS OPTIMIZATION COSTS. In the second quarter of 2023, we announced DRIVE, a comprehensive program to improve long-term profitability. This program includes a business optimization plan to drive efficiency within and among our transportation segments, lower our overhead and support costs, and transform our digital capabilities. We have commenced our plan to consolidate our sortation facilities and equipment, reduce pickup-and-delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimized network through Network 2.0, the multi-year effort to improve the efficiency with which we pick up, transport, and deliver packages in the U.S. and Canada.

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We have implemented Network 2.0 optimization in more than 200 locations in the U.S. and Canada. Contracted service providers will handle the pickup and delivery of packages in some locations while employee couriers will handle others.

In June 2024, Federal Express announced a workforce reduction plan in Europe as part of its ongoing measures to reduce structural costs. The plan will impact between 1,700 and 2,000 employees in Europe across back-office and commercial functions. The execution of the plan is subject to a consultation process that is expected to occur over an 18-month period in accordance with local country processes and regulations. In the six-month period ended November 30, 2024, we incurred $176 million of costs related to this plan. We expect the pre-tax cost of the severance benefits and legal and professional fees to be provided under and related to the plan to range from $250 million to $375 million in cash expenditures. These charges are expected to be incurred through fiscal 2026 and will be classified as business optimization expenses.

We incurred costs associated with our business optimization activities, including the workforce reduction plan in Europe, of $326 million ($249 million, net of tax, or $1.02 per diluted share) in the three-month period ended November 30, 2024 and $454 million ($347 million, net of tax, or $1.41 per diluted share) in the six-month period ended November 30, 2024. These costs were primarily related to severance and professional services and are included in Federal Express and Corporate, other, and eliminations. We recognized $145 million ($110 million, net of tax, or $0.44 per diluted share) in the three-month period ended November 30, 2023 and $250 million ($191 million, net of tax, or $0.75 per diluted share) in the six-month period ended November 30, 2023.These costs were primarily related to professional services and severance and are included in Federal Express and Corporate, other, and eliminations.

DERIVATIVE FINANCIAL INSTRUMENTS. We enter into derivative financial instruments to reduce the effects of volatility in foreign currency exchange exposure on operating results and cash flows. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of cash receipts and cash payments principally related to our investments. We use debt denominated in foreign currency and fixed-to-fixed cross-currency swaps to hedge our exposure to changes in foreign exchange rates on certain of our foreign investments.

As of November 30, 2024, we had €159 million of debt designated as a net investment hedge to reduce the volatility of the U.S. dollar value of a portion of our net investment in a euro-denominated consolidated subsidiary.

As of November 30, 2024, we had four cross-currency swaps outstanding, and the fair value of the swaps classified as assets and liabilities was $19 million and $17 million, respectively. As of May 31, 2024, the fair value of the swaps classified as assets and liabilities was $8 million and $14 million, respectively. We record all derivatives on the balance sheet at fair value within either “Prepaid expenses and other” or “Other liabilities” in the accompanying unaudited condensed consolidated balance sheets. For debt and foreign currency derivatives designated as net investment hedges, the gain or loss on the derivative is reported in AOCL as part of the cumulative translation adjustment. The estimated fair values were determined using pricing models that rely on market-based inputs such as foreign currency exchange rates and yield curves, and are classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the derivative financial instruments, either directly or indirectly.

As of November 30, 2024, our net investment hedges remain effective.

SUPPLIER FINANCE PROGRAM. We offer voluntary Supply Chain Finance (“SCF”) programs through financial institutions to certain of our suppliers. We agree to commercial terms with our suppliers, including prices, quantities, and payment terms, and they issue invoices to us based on the agreed-upon contractual terms. If our suppliers choose to participate in the SCF programs, they determine which invoices, if any, to sell to the financial institutions to receive an early discounted payment, while we settle the net payment amount with the financial institutions on the payment due dates. We guarantee these payments with the financial institutions.

Amounts due to our suppliers that participate in the SCF programs are included in “Accounts payable” in the accompanying unaudited condensed consolidated balance sheets. We have been informed by the participating financial institutions that as of November 30, 2024 and May 31, 2024, suppliers have been approved to sell to them $104 million and $94 million, respectively, of our outstanding payment obligations. A rollforward of obligations confirmed and paid during the six-month period ended November 30, 2024 is presented below (in millions):

 

 

2024

 

Confirmed obligations outstanding at beginning of period

 

$