10-Q 1 fdx-20220228.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 February 28, 2022

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 March 15, 2022

Common Stock, par value $0.10 per share

 

259,178,229

 

 

 


 

FEDEX CORPORATION

INDEX

 

 

 

PAGE

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

ITEM 1. Financial Statements

 

 

Condensed Consolidated Balance Sheets
February 28, 2022 and May 31, 2021

 

3

Condensed Consolidated Statements of Income
Three and Nine Months Ended February 28, 2022 and 2021

 

5

Condensed Consolidated Statements of Comprehensive Income
Three and Nine Months Ended February 28, 2022 and 2021

 

6

Condensed Consolidated Statements of Cash Flows
Nine Months Ended February 28, 2022 and 2021

 

7

Condensed Consolidated Statements of Changes In Common Stockholders’ Investment
Three and Nine Months Ended February 28, 2022 and 2021

 

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

 

44

ITEM 4. Controls and Procedures

 

45

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

ITEM 1. Legal Proceedings

 

45

ITEM 1A. Risk Factors

 

45

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

 

46

ITEM 5. Other Information

 

46

ITEM 6. Exhibits

 

49

Signature

 

50

 

 

 

Exhibit 10.1

 

 

Exhibit 15.1

 

 

Exhibit 22

 

 

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 28,
2022
(Unaudited)

 

 

May 31,
2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,065

 

 

$

7,087

 

Receivables, less allowances of $793 and $742

 

 

11,668

 

 

 

12,069

 

Spare parts, supplies, and fuel, less allowances of $356 and $349

 

 

611

 

 

 

587

 

Prepaid expenses and other

 

 

1,122

 

 

 

837

 

Total current assets

 

 

19,466

 

 

 

20,580

 

PROPERTY AND EQUIPMENT, AT COST

 

 

74,146

 

 

 

70,077

 

Less accumulated depreciation and amortization

 

 

36,770

 

 

 

34,325

 

Net property and equipment

 

 

37,376

 

 

 

35,752

 

OTHER LONG-TERM ASSETS

 

 

 

 

 

 

Operating lease right-of-use assets, net

 

 

16,605

 

 

 

15,383

 

Goodwill

 

 

6,755

 

 

 

6,992

 

Other assets

 

 

3,906

 

 

 

4,070

 

Total other long-term assets

 

 

27,266

 

 

 

26,445

 

 

 

$

84,108

 

 

$

82,777

 

 

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 28,
2022
(Unaudited)

 

 

May 31,
2021

 

LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Current portion of long-term debt

 

$

116

 

 

$

146

 

Accrued salaries and employee benefits

 

 

2,489

 

 

 

2,903

 

Accounts payable

 

 

4,187

 

 

 

3,841

 

Operating lease liabilities

 

 

2,395

 

 

 

2,208

 

Accrued expenses

 

 

4,803

 

 

 

4,562

 

Total current liabilities

 

 

13,990

 

 

 

13,660

 

LONG-TERM DEBT, LESS CURRENT PORTION

 

 

20,393

 

 

 

20,733

 

OTHER LONG-TERM LIABILITIES

 

 

 

 

 

 

Deferred income taxes

 

 

4,331

 

 

 

3,927

 

Pension, postretirement healthcare, and other benefit obligations

 

 

3,100

 

 

 

3,501

 

Self-insurance accruals

 

 

2,597

 

 

 

2,430

 

Operating lease liabilities

 

 

14,450

 

 

 

13,375

 

Other liabilities

 

 

721

 

 

 

983

 

Total other long-term liabilities

 

 

25,199

 

 

 

24,216

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

COMMON STOCKHOLDERS’ INVESTMENT

 

 

 

 

 

 

Common stock, $0.10 par value; 800 million shares authorized; 318 million shares
   issued as of February 28, 2022 and May 31, 2021

 

 

32

 

 

 

32

 

Additional paid-in capital

 

 

3,686

 

 

 

3,481

 

Retained earnings

 

 

32,225

 

 

 

29,817

 

Accumulated other comprehensive loss

 

 

(887

)

 

 

(732

)

Treasury stock, at cost

 

 

(10,530

)

 

 

(8,430

)

Total common stockholders’ investment

 

 

24,526

 

 

 

24,168

 

 

 

$

84,108

 

 

$

82,777

 

 

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
 February 28,

 

 

Nine Months Ended
 February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

REVENUE

 

$

23,641

 

 

$

21,510

 

 

$

69,118

 

 

$

61,394

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

8,244

 

 

 

8,010

 

 

 

24,155

 

 

 

22,305

 

Purchased transportation

 

 

6,272

 

 

 

5,660

 

 

 

18,172

 

 

 

16,044

 

Rentals and landing fees

 

 

1,225

 

 

 

1,131

 

 

 

3,535

 

 

 

3,073

 

Depreciation and amortization

 

 

986

 

 

 

956

 

 

 

2,952

 

 

 

2,818

 

Fuel

 

 

1,201

 

 

 

756

 

 

 

3,355

 

 

 

1,946

 

Maintenance and repairs

 

 

822

 

 

 

822

 

 

 

2,530

 

 

 

2,443

 

Business realignment costs

 

 

107

 

 

 

10

 

 

 

218

 

 

 

10

 

Other

 

 

3,458

 

 

 

3,160

 

 

 

9,880

 

 

 

8,695

 

 

 

 

22,315

 

 

 

20,505

 

 

 

64,797

 

 

 

57,334

 

OPERATING INCOME

 

 

1,326

 

 

 

1,005

 

 

 

4,321

 

 

 

4,060

 

OTHER (EXPENSE) INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

Interest, net

 

 

(163

)

 

 

(187

)

 

 

(478

)

 

 

(555

)

Other retirement plans income

 

 

211

 

 

 

202

 

 

 

380

 

 

 

553

 

Other, net

 

 

1

 

 

 

29

 

 

 

(11

)

 

 

3

 

 

 

 

49

 

 

 

44

 

 

 

(109

)

 

 

1

 

INCOME BEFORE INCOME TAXES

 

 

1,375

 

 

 

1,049

 

 

 

4,212

 

 

 

4,061

 

PROVISION FOR INCOME TAXES

 

 

263

 

 

 

157

 

 

 

944

 

 

 

698

 

NET INCOME

 

$

1,112

 

 

$

892

 

 

$

3,268

 

 

$

3,363

 

EARNINGS PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

4.26

 

 

$

3.36

 

 

$

12.36

 

 

$

12.75

 

Diluted

 

$

4.20

 

 

$

3.30

 

 

$

12.17

 

 

$

12.55

 

DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.75

 

 

$

0.65

 

 

$

3.00

 

 

$

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 28,

 

 

February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

NET INCOME

 

$

1,112

 

 

$

892

 

 

$

3,268

 

 

$

3,363

 

OTHER COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax expense of $3 and tax benefit of $1 in 2022 and tax expense of $1 and $5 in 2021

 

 

91

 

 

 

136

 

 

 

(150

)

 

 

389

 

Amortization of prior service credit, net of tax benefit of $1 and $2 in 2022 and $0 and $1 in 2021

 

 

(1

)

 

 

(2

)

 

 

(5

)

 

 

(6

)

 

 

 

90

 

 

 

134

 

 

 

(155

)

 

 

383

 

COMPREHENSIVE INCOME

 

$

1,202

 

 

$

1,026

 

 

$

3,113

 

 

$

3,746

 

 

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 28,

 

 

 

2022

 

 

2021

 

Operating Activities:

 

 

 

 

 

 

Net income

 

$

3,268

 

 

$

3,363

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

2,952

 

 

 

2,818

 

Provision for uncollectible accounts

 

 

327

 

 

 

428

 

Stock-based compensation

 

 

151

 

 

 

161

 

Retirement plans mark-to-market adjustments

 

 

260

 

 

 

52

 

Other noncash items including leases and deferred income taxes

 

 

2,498

 

 

 

2,020

 

Business realignment costs

 

 

128

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

(66

)

 

 

(1,187

)

Other assets

 

 

(235

)

 

 

(165

)

Accounts payable and other liabilities

 

 

(2,892

)

 

 

63

 

Other, net

 

 

(61

)

 

 

(161

)

Cash provided by operating activities

 

 

6,330

 

 

 

7,392

 

Investing Activities:

 

 

 

 

 

 

Capital expenditures

 

 

(4,379

)

 

 

(4,202

)

Business acquisitions, net of cash acquired

 

 

 

 

 

(225

)

Purchase of investments

 

 

(145

)

 

 

 

Proceeds from asset dispositions and other

 

 

71

 

 

 

88

 

Cash used in investing activities

 

 

(4,453

)

 

 

(4,339

)

Financing Activities:

 

 

 

 

 

 

Principal payments on debt

 

 

(113

)

 

 

(105

)

Proceeds from debt issuances

 

 

 

 

 

970

 

Proceeds from stock issuances

 

 

151

 

 

 

482

 

Dividends paid

 

 

(598

)

 

 

(513

)

Purchase of treasury stock

 

 

(2,248

)

 

 

 

Other, net

 

 

 

 

 

(13

)

Cash (used in) provided by financing activities

 

 

(2,808

)

 

 

821

 

Effect of exchange rate changes on cash

 

 

(91

)

 

 

101

 

Net (decrease) increase in cash and cash equivalents

 

 

(1,022

)

 

 

3,975

 

Cash and cash equivalents at beginning of period

 

 

7,087

 

 

 

4,881

 

Cash and cash equivalents at end of period

 

$

6,065

 

 

$

8,856

 

 

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 28,

 

 

February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

32

 

 

$

32

 

 

$

32

 

 

$

32

 

Ending Balance

 

 

32

 

 

 

32

 

 

 

32

 

 

 

32

 

Additional Paid-in Capital

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

 

3,653

 

 

 

3,400

 

 

 

3,481

 

 

 

3,356

 

Employee incentive plans and other

 

 

42

 

 

 

45

 

 

 

214

 

 

 

89

 

Purchase of treasury stock

 

 

(9

)

 

 

 

 

 

(9

)

 

 

 

Ending Balance

 

 

3,686

 

 

 

3,445

 

 

 

3,686

 

 

 

3,445

 

Retained Earnings

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

 

31,307

 

 

 

27,208

 

 

 

29,817

 

 

 

25,216

 

Net Income

 

 

1,112

 

 

 

892

 

 

 

3,268

 

 

 

3,363

 

Cash dividends declared ($0.75, $0.65, $3.00, and $2.60 per share)

 

 

(194

)

 

 

(173

)

 

 

(792

)

 

 

(686

)

Employee incentive plans and other

 

 

 

 

 

(3

)

 

 

(68

)

 

 

31

 

Ending Balance

 

 

32,225

 

 

 

27,924

 

 

 

32,225

 

 

 

27,924

 

Accumulated Other Comprehensive Loss

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

 

(977

)

 

 

(898

)

 

 

(732

)

 

 

(1,147

)

Other comprehensive income, net of tax (expense)/benefit of ($2), ($1), $3, and ($4)

 

 

90

 

 

 

134

 

 

 

(155

)

 

 

383

 

Ending Balance

 

 

(887

)

 

 

(764

)

 

 

(887

)

 

 

(764

)

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

 

(9,075

)

 

 

(8,703

)

 

 

(8,430

)

 

 

(9,162

)

Purchase of treasury stock (6.1, 0.0, 8.9, and 0.0 million shares)

 

 

(1,491

)

 

 

 

 

 

(2,239

)

 

 

 

Employee incentive plans and other (0.3, 0.3, 1.1, and 3.7 million shares)

 

 

36

 

 

 

47

 

 

 

139

 

 

 

506

 

Ending Balance

 

 

(10,530

)

 

 

(8,656

)

 

 

(10,530

)

 

 

(8,656

)

Total Common Stockholders’ Investment Balance

 

$

24,526

 

 

$

21,981

 

 

$

24,526

 

 

$

21,981

 

 

 

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, 2021 (“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 February 28, 2022, and the results of our operations for the three- and nine-month periods ended February 28, 2022 and 2021, cash flows for the nine-month periods ended February 28, 2022 and 2021, and changes in common stockholders’ investment for the three- and nine-month periods ended February 28, 2022 and 2021. Operating results for the three- and nine-month periods ended February 28, 2022 are not necessarily indicative of the results that may be expected for the year ending May 31, 2022.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2022 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

REVENUE RECOGNITION.

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 $819 million and $715 million at February 28, 2022 and May 31, 2021, respectively. Contract assets net of deferred unearned revenue were $591 million and $572 million at February 28, 2022 and May 31, 2021, 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 $8 million and $9 million at February 28, 2022 and May 31, 2021, 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 periods ended February 28. This presentation is consistent with how we organize our segments internally for making operating decisions and measuring performance.

 

 

Three Months Ended

 

 

Nine Months Ended