FEDEX CORP [FDX] Filings

10-Q 1 fdx-10q_20211130.htm 10-Q fdx-10q_20211130.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 November 30, 2021

☐

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 14, 2021
Common Stock, par value $0.10 per share		264,969,342

FEDEX CORPORATION

INDEX

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets November 30, 2021 and May 31, 2021		3
Condensed Consolidated Statements of Income Three and Six Months Ended November 30, 2021 and 2020		5
Condensed Consolidated Statements of Comprehensive Income Three and Six Months Ended November 30, 2021 and 2020		6
Condensed Consolidated Statements of Cash Flows Six Months Ended November 30, 2021 and 2020		7
Condensed Consolidated Statements of Changes In Common Stockholders’ Investment Three and Six Months Ended November 30, 2021 and 2020		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		45
ITEM 4. Controls and Procedures		45

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		46
ITEM 1A. Risk Factors		46
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		47
ITEM 5. Other Information		47
ITEM 6. Exhibits		48
Signature		49

Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
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

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FEDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

	November 30, 2021 (Unaudited)		May 31, 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	6,833	$	7,087
Receivables, less allowances of $792 and $742		12,197		12,069
Spare parts, supplies, and fuel, less allowances of $351 and $349		594		587
Prepaid expenses and other		1,123		837
Total current assets		20,747		20,580
PROPERTY AND EQUIPMENT, AT COST		72,974		70,077
Less accumulated depreciation and amortization		35,821		34,325
Net property and equipment		37,153		35,752
OTHER LONG-TERM ASSETS
Operating lease right-of-use assets, net		16,018		15,383
Goodwill		6,702		6,992
Other assets		3,627		4,070
Total other long-term assets		26,347		26,445
	$	84,247	$	82,777

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

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FEDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE DATA)

	November 30, 2021 (Unaudited)			May 31, 2021
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt	$	117		$	146
Accrued salaries and employee benefits		2,537			2,903
Accounts payable		4,190			3,841
Operating lease liabilities		2,371			2,208
Accrued expenses		4,669			4,562
Total current liabilities		13,884			13,660
LONG-TERM DEBT, LESS CURRENT PORTION		20,386			20,733
OTHER LONG-TERM LIABILITIES
Deferred income taxes		4,162			3,927
Pension, postretirement healthcare, and other benefit obligations		3,353			3,501
Self-insurance accruals		2,594			2,430
Operating lease liabilities		13,955			13,375
Other liabilities		973			983
Total other long-term liabilities		25,037			24,216
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of November 30, 2021 and May 31, 2021		32			32
Additional paid-in capital		3,653			3,481
Retained earnings		31,307			29,817
Accumulated other comprehensive loss		(977	)		(732	)
Treasury stock, at cost		(9,075	)		(8,430	)
Total common stockholders’ investment		24,940			24,168
	$	84,247		$	82,777

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

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FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

	Three Months Ended November 30,						Six Months Ended November 30,
	2021			2020			2021			2020
REVENUE	$	23,474		$	20,563		$	45,477		$	39,884
OPERATING EXPENSES:
Salaries and employee benefits		8,135			7,443			15,911			14,295
Purchased transportation		6,241			5,407			11,900			10,384
Rentals and landing fees		1,177			1,006			2,310			1,942
Depreciation and amortization		995			936			1,966			1,862
Fuel		1,145			625			2,154			1,190
Maintenance and repairs		839			815			1,708			1,621
Business realignment costs		44			—			111			—
Other		3,301			2,866			6,422			5,535
		21,877			19,098			42,482			36,829
OPERATING INCOME		1,597			1,465			2,995			3,055
OTHER (EXPENSE) INCOME:
Interest, net		(155	)		(184	)		(315	)		(368	)
Other retirement plans (expense) income		(47	)		150			169			351
Other, net		(15	)		(25	)		(12	)		(26	)
		(217	)		(59	)		(158	)		(43	)
INCOME BEFORE INCOME TAXES		1,380			1,406			2,837			3,012
PROVISION FOR INCOME TAXES		336			180			681			541
NET INCOME	$	1,044		$	1,226		$	2,156		$	2,471
EARNINGS PER COMMON SHARE:
Basic	$	3.94		$	4.64		$	8.11		$	9.40
Diluted	$	3.88		$	4.55		$	7.97		$	9.26
DIVIDENDS DECLARED PER COMMON SHARE	$	0.75		$	0.65		$	2.25		$	1.95

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

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FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(IN MILLIONS)

	Three Months Ended						Six Months Ended
	November 30,						November 30,
	2021			2020			2021			2020
NET INCOME	$	1,044		$	1,226		$	2,156		$	2,471
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of tax benefit of $4 and $4 in 2021 and tax expense of $6 and $4 in 2020		(94	)		124			(241	)		253
Amortization of prior service credit, net of tax benefit of $1 and $1 in 2021 and $0 and $1 in 2020		(2	)		(2	)		(4	)		(4	)
		(96	)		122			(245	)		249
COMPREHENSIVE INCOME	$	948		$	1,348		$	1,911		$	2,720

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

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FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN MILLIONS)

	Six Months Ended November 30,
	2021			2020
Operating Activities:
Net income	$	2,156		$	2,471
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		1,966			1,862
Provision for uncollectible accounts		211			291
Stock-based compensation		112			121
Retirement plans mark-to-market adjustments		260			52
Other noncash items including leases and deferred income taxes		1,713			1,482
Business realignment costs		55			—
Changes in assets and liabilities:
Receivables		(519	)		(1,100	)
Other assets		(236	)		(56	)
Accounts payable and other liabilities		(1,582	)		241
Other, net		(54	)		(134	)
Cash provided by operating activities		4,082			5,230
Investing Activities:
Capital expenditures		(3,143	)		(2,826	)
Proceeds from asset dispositions and other		31			14
Cash used in investing activities		(3,112	)		(2,812	)
Financing Activities:
Principal payments on debt		(72	)		(75	)
Proceeds from debt issuances		—			970
Proceeds from stock issuances		111			431
Dividends paid		(400	)		(341	)
Purchase of treasury stock		(748	)		—
Other, net		—			(12	)
Cash (used in) provided by financing activities		(1,109	)		973
Effect of exchange rate changes on cash		(115	)		67
Net (decrease) increase in cash and cash equivalents		(254	)		3,458
Cash and cash equivalents at beginning of period		7,087			4,881
Cash and cash equivalents at end of period	$	6,833		$	8,339

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

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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,						November 30,
	2021			2020			2021			2020
Common Stock
Beginning Balance	$	32		$	32		$	32		$	32
Ending Balance		32			32			32			32
Additional Paid-in Capital
Beginning Balance		3,610			3,375			3,481			3,356
Employee incentive plans and other		43			25			172			44
Ending Balance		3,653			3,400			3,653			3,400
Retained Earnings
Beginning Balance		30,462			26,108			29,817			25,216
Net Income		1,044			1,226			2,156			2,471
Cash dividends declared ($0.75, $0.65, $2.25, and $1.95 per share)		(198	)		(172	)		(598	)		(513	)
Employee incentive plans and other		(1	)		46			(68	)		34
Ending Balance		31,307			27,208			31,307			27,208
Accumulated Other Comprehensive Income
Beginning Balance		(881	)		(1,020	)		(732	)		(1,147	)
Other comprehensive income, net of tax benefit/(expense) of $5, ($6), $5, and ($3)		(96	)		122			(245	)		249
Ending Balance		(977	)		(898	)		(977	)		(898	)
Treasury Stock
Beginning Balance		(8,902	)		(9,033	)		(8,430	)		(9,162	)
Purchase of treasury stock (0.9, 0.0, 2.8, and 0.0 million shares)		(199	)		—			(748	)		—
Employee incentive plans and other (0.2, 2.4, 0.8, and 3.4 million shares)		26			330			103			459
Ending Balance		(9,075	)		(8,703	)		(9,075	)		(8,703	)
Total Common Stockholders’ Investment Balance	$	24,940		$	21,039		$	24,940		$	21,039

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

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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 November 30, 2021, and the results of our operations for the three- and six-month periods ended November 30, 2021 and 2020, cash flows for the six-month periods ended November 30, 2021 and 2020, and changes in common stockholders’ investment for the three- and six-month periods ended November 30, 2021 and 2020. Operating results for the three- and six-month periods ended November 30, 2021 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 $926 million and $715 million at November 30, 2021 and May 31, 2021, respectively. Contract assets net of deferred unearned revenue were $683 million and $572 million at November 30, 2021 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 $9 million at both November 30, 2021 and May 31, 2021. Contract liabilities are included within current liabilities in the accompanying unaudited condensed consolidated balance sheets.

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Disaggregation of Revenue

The following table provides revenue by service type (in millions) for the 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
	2021		2020		2021		2020
REVENUE BY SERVICE TYPE
FedEx Express segment:
Package:
U.S. overnight box	$	2,249	$	2,012	$	4,419