2019 Annual ReportFEDEX CORPORATION 2019 ANNUAL REPORT Challenge. Change. Innovation.
To our shareowners,
Fiscal 2019 was a year of both challenge and change for FedEx. We are proud of our team
members who responded to both with positive actions and innovative solutions that will make
FedEx stronger, more competitive, and more profitable in the future.
CONFRONTING CHALLENGES AND EMBRACING OPPORTUNITIES
A very big challenge has been the slowdown in global trade that began in the fall of 2018. The
negative effects of trade disputes adversely affected the Chinese economy and contributed to
a sluggish performance in the Eurozone. Uncertainty over Brexit also weighed heavily on the
European market. The spillover effects from trade tensions have affected manufacturing and
reduced shipping throughout Asia, Europe, and North America. We are, however, mitigating
these headwinds by actively managing costs while investing for long-term success. It is essential
our customers worldwide know they can continue to rely on our superior global networks
and portfolio of solutions to help them quickly and efficiently manage their transportation and
logistics needs.
The weak global economic conditions experienced during Fiscal 2019 weighed on International
Priority volumes at FedEx Express. Additionally, a less profitable mix of international package and
freight at FedEx Express negatively impacted our results. We are taking steps to reduce costs,
and our customers are now benefiting from faster transit times due to FedEx and TNT integration
in Europe.
Additionally, while the rapid growth of global e-commerce is good for package volumes and
revenue growth, it requires disciplined cost management to maintain attractive margins. This
is especially true for deliveries to certain residential and rural areas that lack the density of
commercial stops where we deliver and pick up multiple packages. During the past year we
have continued to position FedEx to capitalize on e-commerce growth and improve profitability
through the realignment of our systems, the optimization of deliveries, and the use of innovative
solutions such as FedEx Extra Hours.
MAKING POSITIVE CHANGES FOR THE FUTURE
FedEx enters Fiscal 2020 with a sharp focus on extending our lead as the premier global
transport and logistics company and on making the necessary investments today to capture the
big opportunities we see for the future. While these investments are long-term in nature and
their success cannot always be measured immediately, we’re confident they will drive significant
earnings growth and improve margins, cash flows, and returns for our shareholders over the long
term. Here are some steps we’re taking:
Increasing Ground Capacity. For years, FedEx has anticipated the growth of e-commerce
would significantly increase demand throughout our networks and raise consumers’
expectations. We continue to manage this challenge by strategically opening new facilities and
investing in innovation and highly advanced technologies that have positioned FedEx Ground as
the industry’s most automated network. As a result, FedEx Ground continues to grow profitable
market share and is faster to more locations than UPS.
1
FEDEX.COM Challenge. Change. Innovation.
In Fiscal 2019, we further improved the FedEx Ground network to meet the speed and reliability
customers demand by:
> Transitioning to a year-round, six-day FedEx Ground operation to meet the growing demand for
e-commerce packages to be picked up on the weekend and delivered on Monday.
> Building two major hubs in Pennsylvania and Connecticut to serve some of the busiest
transportation corridors in the U.S.
We announced on May 30th further transformation of FedEx Ground capabilities to include:
> Extending Ground residential deliveries to seven days per week year-round for the majority of
the U.S. population beginning January 2020;
> Rapidly integrating FedEx SmartPost package volume into standard FedEx Ground operations;
> Adapting and expanding specialized facilities to better process the rapidly growing, oversized
package e-commerce market.
Improving FedEx Express hubs. Over the next six years, FedEx Express will modernize and
expand our Memphis and Indianapolis hubs to accommodate future growth. At the massive
Memphis World Hub, FedEx is investing in new sort systems and automation. We’re also
enhancing and expanding our Indianapolis hub with state-of-the-art technology. We’re pleased
these plans will create new opportunities for team members while significantly improving the
efficiency of the core of our global FedEx Express network.
Integrating TNT. Combining FedEx Express and TNT networks is beginning to deliver exceptional
value for customers worldwide. Our peerless European footprint and parcel and freight solutions
encompass more than 500 stations and 55,000 weekly road trips across 45 countries. Before we
acquired TNT, European revenue accounted for about 20 percent of our international revenues. It
now accounts for approximately 40 percent of international revenues, and we expect it to grow.
The vision for the FedEx global system is clear, and we are excited to be building a European
business with unmatched capabilities.
We continue to integrate European stations and reduce costs through more efficient delivery
routes. We expect to have most FedEx and TNT services rationalized and technology upgrades and
enhancements implemented in the summer of 2020, which will allow final customer migration
activities. We made other progress on the integration during Fiscal 2019 as well:
> We’ve substantially integrated the FedEx and TNT sales forces to deliver an outstanding FedEx
experience and grow our business.
> FedEx and TNT shipments are now sharing the unmatched legacy of the TNT European
surface linehaul network, significantly lowering our cost to serve customers and bringing
them greater value. These synergies have improved FedEx intra-European economy parcel
shipments’ transit time by at least one business day on about 40 percent of European lanes in
28 countries.
> Transit times for FedEx/TNT European Economy Express service have also improved from two
days to one day on 1,200 lanes.
> The TNT brand will be largely retired by the end of FY20.
> We’ve significantly improved or replaced the legacy TNT technology infrastructure to address
future cybersecurity threats.
Modernizing our aircraft fleet. Replacing older aircraft with new 777s and 767s is essential
to creating more efficient operations and meeting our customers’, investors’, and the public’s
sustainability expectations. Our long-term environmental strategy saves fuel, reduces emissions,
makes our operations more flexible and improves operating margins. Investing in new aircraft
also reduces maintenance costs and increases reliability which translates into a better customer
experience.
2
ANNUAL REPORT 2019 Nearing the end of Project RENEWAL. In 2010, we began a major information technology
transition from traditional mainframe computing to cloud-based systems. Consistent with
FedEx’s outstanding technology heritage and remarkable and often-lauded information
technology team, this multi-year project is one of the largest in industrial history. RENEWAL is
delivering benefits in terms of flexibility, security, speed to market, and resiliency.
Reducing costs. With the global economic challenges of Fiscal 2019, we took actions to improve
our financial performance with a heightened focus on organizational efficiency and productivity. The
near-term actions include lowering variable-incentive compensation, a voluntary buyout program for
eligible U.S. employees, limited hiring in staff functions, and reducing discretionary spending. We
are carefully reviewing capital expenditures to insure they will increase our returns in the future.
STAYING AHEAD THROUGH INNOVATION
The FedEx team continues to push the boundaries of what’s possible by tackling challenges big
and small, from global macro-economic trends to the evolving needs of customers.
Consumers value convenience. Customers in 59 countries outside the U.S. can now schedule
package deliveries where and when it’s convenient for them through FedEx Delivery Manager®.
More than 14 million people are enrolled, a 66 percent increase over the last year. We continue
to expand our retail networks and technologies to give consumers more options to pick up, ship,
or have packages held. With the recently announced addition of more than 8,000 Dollar General
stores to our convenience network, more than 90 percent of Americans will live within five miles
of a FedEx hold retail location by the end of 2020. Thanks to the new FedEx Extra Hours service
for retailers, consumers can now shop in the evening and enjoy next-day or two-day delivery.
FedEx SameDay bot delivers. Our bot prototype, developed with DEKA Development &
Research using its well-tested iBOT technology, represents the next chapter in our long legacy
of innovation and offering new solutions for customers. Upon entering service, our SameDay
bot will allow FedEx to enter a substantial new market segment, enabling retailers to accept
orders from nearby customers and make same-day and last-mile deliveries to their homes or
businesses with speed and unprecedented low costs.
FedEx is collaborating with companies such as AutoZone, Lowe’s, Pizza Hut, Target, Walgreens,
and Walmart to help assess retailers’ autonomous delivery needs. On average, more than
60 percent of merchants’ customers live within three miles of a store location, creating an
opportunity to participate in the market for on-demand, hyper-local delivery.
Safety above all. In every operating environment, we are applying the most up-to-date
safety technology for our transportation equipment, facilities, and yards to better protect our
employees, our customers and our communities. We strive for the highest standards of safety
throughout FedEx. For example:
> We’re testing the platooning of our highway trucks. The practice allows tractors with drivers to
follow each other in a safe, controlled manner through vehicle-to-vehicle communication and
safety features such as collision mitigation.
> At FedEx Ground, we’re piloting virtual reality training modules to make dock activities and
large-package lifting safer.
> Nearly all FedEx Freight linehaul tractors are equipped with advanced safety features, including
telematics, collision mitigation, lane-departure warning, and roll-over stability.
Blockchain will transform shipping. We believe that blockchain will become an inevitable
and essential tool to track goods and reduce friction and fraud in the supply chain especially for
cross-border shipments. The technology makes it possible to create and share an encrypted and
unchangeable digital ledger of transactions where there’s a need for a trusted custodial chain.
As a member of the Blockchain in Transport Alliance (BiTA), FedEx is helping develop common
standards to support the technology. We strongly support industry collaboration to ensure
widespread benefits from next-generation shipping transparency.
Challenge. Change. Innovation.
3
FEDEX.COM Challenge. Change. Innovation.
USING OUR NETWORKS FOR GOOD
It’s important to our customers, team members, investors, and communities that we use our
size, scale, and global network to create positive outcomes for the environment. Connecting
people and facilitating global commerce enhance living standards, enable the growth of
entrepreneurs and big companies alike, keep people connected, and support essential societal
needs from healthcare delivery to global security.
We achieve our goals through our corporate social-responsibility strategy that focuses on a safe
and inclusive workplace, career development, sustainable operations and services, and FedEx
Cares giving and volunteering. In fact, we recently announced a new citizenship goal of positively
affecting 50 million people by our 50th anniversary in 2023. Please read our Global Citizenship
Report at csr.fedex.com for a summary of our accomplishments and a preview of what’s to
come for FedEx and the billions of people we serve.
None of our achievements would be possible without our 450,000-plus team members around
the world who are dedicated to the Purple Promise which states, “I will make every FedEx
experience outstanding.” Through their efforts, FedEx has once again been recognized by
FORTUNE as one of the top 10 World’s Most Admired Companies for the 15th time as well as
one of the 100 Best Companies to Work For.
FedEx is uniquely positioned for long-term success, and we are confident we will deliver a great
future for our customers, shareowners, team members, and the communities we serve.
FREDERICK W. SMITH
Chairman and CEO
See “Risk Factors” and “Forward-Looking Statements” on pages 85-96 of the fiscal 2019 FedEx Corporation Annual
Report on Form 10-K, included herein, for a discussion of potential risks and uncertainties that could materially affect our
future performance.
4
ANNUAL REPORT 2019 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2019.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to .
OR
Commission file number 1-15829
FEDEX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
942 South Shady Grove Road, Memphis, Tennessee
(Address of Principal Executive Offices)
62-1721435
(I.R.S. Employer
Identification No.)
38120
(ZIP Code)
Title of each class
Common Stock, par value $0.10 per share
0.500% Notes due 2020
0.700% Notes due 2022
1.000% Notes due 2023
1.625% Notes due 2027
Registrant’s telephone number, including area code: (901) 818-7500
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol
FDX
FDX 20A
FDX 22B
FDX 23A
FDX 27
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No
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
Emerging growth company
Smaller reporting company
Accelerated filer
Non-accelerated filer
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
The aggregate market value of the common stock held by non-affiliates of the Registrant, computed by reference to the closing price as of the last business day of the
Registrant’s most recently completed second fiscal quarter, November 30, 2018, was approximately $55.2 billion. The Registrant has no non-voting stock.
As of July 12, 2019, 260,808,410 shares of the Registrant’s common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement to be delivered to stockholders in connection with the 2019 annual meeting of stockholders to be held on
September 23, 2019 are incorporated by reference in response to Part III of this Report.
TABLE OF CONTENTS
PART I
ITEM 1. Business
ITEM 1A. Risk Factors
ITEM 1B. Unresolved Staff Comments
ITEM 2. Properties
ITEM 3. Legal Proceedings
ITEM 4. Mine Safety Disclosures
Information about our Executive Officers
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
ITEM 6. Selected Financial Data
ITEM 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 8. Financial Statements and Supplementary Data
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
ITEM 9A. Controls and Procedures
ITEM 9B. Other Information
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
ITEM 14. Principal Accountant Fees and Services
ITEM 15. Exhibits, Financial Statement Schedules
ITEM 16. Form 10-K Summary
PART IV
FINANCIAL SECTION
Table of Contents
Management’s Discussion and Analysis of Results of Operations and Financial Condition
Consolidated Financial Statements
Other Financial Information
Page
3
21
21
21
25
25
26
28
29
29
29
29
29
29
29
30
30
30
30
30
31
46
49
50
100
148
- 1 -
EXHIBITS
Exhibit 4.1
Exhibit 10.12
Exhibit 10.53
Exhibit 10.54
Exhibit 10.55
Exhibit 10.202
Exhibit 10.203
Exhibit 10.204
Exhibit 10.205
Exhibit 10.206
Exhibit 10.207
Exhibit 21
Exhibit 23
Exhibit 24
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINK BASE DOCUMENT
EX-101 DEFINITIONS LINK BASE DOCUMENT
EX-101 LABELS LINK BASE DOCUMENT
EX-101 PRESENTATION LINK BASE DOCUMENT
- 2 -
ITEM 1. BUSINESS
Overview
PART I
FedEx Corporation (“FedEx”) was incorporated in Delaware on October 2, 1997 to serve as the parent holding company and provide
strategic direction to the FedEx portfolio of companies. FedEx provides a broad portfolio of transportation, e-commerce and business
services through companies competing collectively, operating independently and managed collaboratively, under the respected FedEx
brand. These companies are included in the following reportable business segments:
• FedEx Express: Federal Express Corporation (“FedEx Express”), including TNT Express B.V. (“TNT Express”), is the
world’s largest express transportation company, offering time-definite delivery to more than 220 countries and territories,
connecting markets that comprise more than 99% of the world’s gross domestic product.
• FedEx Ground: FedEx Ground Package System, Inc. (“FedEx Ground”) is a leading North American provider of small-
package ground delivery services. FedEx Ground provides low-cost, day-certain service to any business address in the U.S.
and Canada, as well as residential delivery to 100% of U.S. residences through its FedEx Home Delivery service. FedEx
SmartPost is a FedEx Ground service that specializes in the consolidation and delivery of high volumes of low-weight, less
time-sensitive business-to-consumer packages primarily using the U.S. Postal Service (“USPS”) for last-mile delivery to
residences.
• FedEx Freight: FedEx Freight Corporation (“FedEx Freight”) is a leading North American provider of less-than-truckload
(“LTL”) freight services across all lengths of haul, offering: FedEx Freight Priority, when speed is critical to meet a customer’s
supply chain needs; and FedEx Freight Economy, when a customer can trade time for cost savings. FedEx Freight also offers
freight delivery service to most points in Puerto Rico and the U.S. Virgin Islands.
• FedEx Services: FedEx Corporate Services, Inc. (“FedEx Services”) provides sales, marketing, information technology,
communications, customer service, technical support, billing and collection services, and certain back-office functions that
support our transportation segments. The FedEx Services segment includes FedEx Office and Print Services, Inc. (“FedEx
Office”), which provides document and business services and retail access to our package transportation businesses.
Additionally, the FedEx Logistics, Inc. (“FedEx Logistics” (formerly FedEx Trade Networks, Inc.)) operating segment provides
customs brokerage and global ocean and air freight forwarding through FedEx Trade Networks Transport & Brokerage, Inc. (“FedEx
Trade Networks Transport & Brokerage”); cross-border enablement and technology solutions and e-commerce transportation
solutions through FedEx Cross Border Technologies, Inc. and its subsidiary P2P Mailing Limited (“FedEx Cross Border”); integrated
supply chain management solutions through FedEx Supply Chain Distribution System, Inc. (“FedEx Supply Chain”); time-critical
shipment services through FedEx Custom Critical, Inc. (“FedEx Custom Critical”); and critical inventory and service parts logistics, 3-
D printing and technology repair through FedEx Forward Depots, Inc. (“FedEx Forward Depots”). FedEx Logistics is included in
“Corporate, other and eliminations” in our segment reporting. For more information about FedEx Logistics, please see “FedEx
Logistics Operating Segment.”
For more information about our reportable segments, please see “Business Segments.” For financial information concerning our
reportable segments, refer to the accompanying financial section, which includes management’s discussion and analysis of results of
operations and financial condition and our consolidated financial statements.
Our website is located at fedex.com. Detailed information about our services, e-commerce tools and solutions, and citizenship efforts
can be found on our website. In addition, we make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and all amendments to such reports available, free of charge, through our website, as soon as reasonably
practicable after they are filed with or furnished to the Securities and Exchange Commission (“SEC”). The Investor Relations section
of our website, http://investors.fedex.com, contains a significant amount of information about FedEx, including our SEC filings and
financial and other information for investors. The information that we post on our Investor Relations website could be deemed to be
material information. We encourage investors, the media and others interested in FedEx to visit this website from time to time, as
information is updated and new information is posted. The information on our website, however, is not incorporated by reference in,
and does not form part of, this Annual Report on Form 10-K.
Except as otherwise specified, any reference to a year indicates our fiscal year ended May 31 of the year referenced. References to our
transportation segments include, collectively, the FedEx Express segment, the FedEx Ground segment, and the FedEx Freight
segment.
- 3 -
Strategy
FedEx has developed a unique business strategy whereby our companies compete collectively, operate independently and manage
collaboratively, which allows us to provide a broad portfolio of transportation, e-commerce and business services to our customers.
Our companies compete collectively by standing as one brand worldwide and speaking with one voice; they operate independently by
focusing on our independent networks to meet distinct customer needs; and they manage collaboratively by working together to
sustain loyal relationships with our workforce, customers and investors.
Our “compete collectively, operate independently, manage collaboratively” strategy allows us to manage our business as a portfolio,
in the long-term best interest of the enterprise, not a particular operating company. As a result, we base decisions on capital
investment, expansion of delivery, information technology and retail networks, and service additions or enhancements upon achieving
the highest overall long-term return on capital for our business as a whole. For each FedEx company, we focus on making appropriate
investments in the technology and assets necessary to optimize our long-term earnings performance and cash flow. Our business
strategy also provides flexibility in sizing our operating companies to align with varying macroeconomic conditions and customer
demand for the market segments in which they operate, allowing us to leverage and manage change. Volatility, uncertainty and
evolution have become the norms in the global transportation market, and we are able to use our flexibility to accommodate changing
conditions in the global economy, including the continued growth of e-commerce. To that end, we continue to modernize our aircraft
fleet with more fuel efficient and lower-emission aircraft, expand our operations at FedEx Ground where we continue to see growing
package volumes, realign our systems and develop new innovative service offerings.
While our business strategy guides our operating companies to compete collectively and manage collaboratively, we continue to
believe that operating independent networks, each focused on its own respective markets, enhances service quality and reliability from
each business unit. Each FedEx company focuses exclusively on the market sectors in which it has the most expertise and can be
independently enhanced and managed to provide outstanding service to our customers. Each company’s operations, cost structure and
culture are designed to serve the unique customer demands of a particular market segment and as a result, we are able to adapt our
networks in response to changing needs.
Our business strategy allows us to respond to our current and potential customers’ evolving needs that are shaped by the following
four key trends that are driving global commerce:
• Growth of e-commerce: E-commerce continues to be a catalyst for the other trends below and is a vital growth engine for
businesses, as the internet is increasingly being used to purchase goods and services. While our residential e-commerce
revenues are much smaller than our business-to-business revenues, it is the fastest growing market and requires constant
innovation to make delivery to consumers more flexible, convenient, efficient and cost-effective. Through our global
transportation and technology networks, we contribute to and benefit from the growth of e-commerce.
• Globalization of trade: As the world’s economy has become more fully integrated, companies are sourcing and selling
globally. With customers in more than 220 countries and territories, we facilitate this supply chain through our global reach,
delivery services and information capabilities. Despite the recent trade tensions, we continue to believe that globalization will
drive international volume growth over the long term.
• Faster, more efficient supply chains: Companies of all sizes continue to depend on the delivery of just-in-time inventory to
help them compete. We have taken advantage of the move toward more efficient supply chains by helping customers obtain
more visibility into their supply chains and near real-time information to manage inventory in motion, thereby reducing
overhead and obsolescence and speeding time-to-market.
• Influx of high-tech businesses and high-value-added goods: High-tech and high-value-added goods have increased as a
percentage of real economic output, and our various operating companies offer a unique menu of services to fit virtually all
shipping needs of high-tech and high-value-added industries.
These trends have produced an unprecedented expansion of customer access — to goods, services and information. Through our
global transportation, information technology and retail networks, we help to make this access possible. We believe it would be
extremely difficult, costly and time-consuming to replicate our global network, which includes the world’s largest all-cargo air fleet
and connects more than 99% of the world’s gross domestic product. We continue to position our companies to facilitate and capitalize
on this access and to achieve stronger long-term growth, productivity and profitability.
- 4 -
During 2019, we introduced a number of innovative solutions, advanced important long-term business initiatives and made other
important investments that benefit our customers, employees and communities, including:
• Increasing capacity at FedEx Ground by expanding operations throughout the FedEx Ground U.S. network to six days per
week year-round, and announcing that in January 2020 FedEx Ground will expand residential delivery operations to seven
days per week year-round for the majority of the U.S. population.
• Making additional strategic investments to grow our FedEx Ground network to effectively handle e-commerce growth,
manage costs, and increase productivity. For example, in 2019 we opened two new major FedEx Ground hubs in Pennsylvania
and Connecticut to serve some of the busiest transportation corridors in the U.S. and began a transformation in FedEx Ground
operations that will allow us to increasingly integrate FedEx SmartPost packages given to the USPS into FedEx Ground
standard operations and improve our capabilities for handling large and heavy items.
• Substantially integrating the sales forces of FedEx Express and TNT Express and completing key projects that enable the
injection of FedEx Express shipments into the TNT Express European road network.
• Developing the FedEx SameDay Bot, an autonomous delivery device which represents the next chapter in our long legacy of
innovation and offering new solutions for our customers. We plan to begin testing the SameDay Bot in select markets in the
summer of 2020.
• Continuing our multi-year investments to modernize the FedEx Express World Hub in Memphis through investments in new
sort systems and automation and expand the FedEx Express hub in Indianapolis as part of our continued investment in
technology and operations to meet growing customer demand.
• Expanding e-commerce delivery options for retailers with FedEx Extra Hours, a service that enables participating retailers to
fulfill e-commerce orders into the evening and receive late pickups by FedEx Express, with next-day local delivery and two-
day shipping to any address in the continental United States. FedEx Extra Hours is currently available to select customers.
• Continuing our successful aircraft fleet modernization strategy, which has helped us greatly improve fuel efficiency and fleet
reliability in recent years, by entering into agreements to purchase 12 incremental Boeing 777 Freighter (“B777F”) aircraft and
12 incremental Boeing 767-300 Freighter (“B767F”) aircraft.
• Progressing the nationwide expansion of the FedEx retail channel with companies such as Walgreens and Walmart.
Additionally, during June 2019 we formed a strategic alliance with Dollar General that will provide access to FedEx drop-off
and pickup services at more than 8,000 Dollar General stores by the end of calendar 2020, which will give customers in rural
locations easy access to FedEx drop-off and pickup services.
• Significantly advancing a major information technology transition from traditional mainframe computing to cloud-based
systems, which is delivering significant benefits in terms of flexibility, security, speed to market and resiliency.
• Applying the most up-to-date safety technology for our transportation equipment, facilities and yards to protect our employees,
customers and communities. For example, during 2019 we tested the platooning of our highway trucks, which allows drivers to
follow each other in a safe, controlled manner, and piloted virtual reality training modules to make dock activities and large-
package lifting at FedEx Ground safer.
• Completing our investment of over $200 million in more than 200 global communities through our global giving platform,
FedEx Cares.
• Rebranding FedEx Trade Networks, Inc. as FedEx Logistics and announcing the consolidation of its corporate team members
into a new global headquarters in downtown Memphis over the next several years.
Reputation and Responsibility
By competing collectively under the FedEx brand, our operating companies benefit from one of the world’s most recognized brands.
FedEx is one of the most trusted and respected companies in the world, and the FedEx brand name is a powerful sales and marketing
tool. Among the many reputation awards we received during 2019, FedEx ranked 10th in FORTUNE magazine’s “World’s Most
Admired Companies” list — the 19th consecutive year FedEx has ranked among the top 20 in the FORTUNE Most Admired
Companies list, with 15 of those years ranking among the top 10. FedEx was also included on the Forbes/Reputation Institute 2019
“World’s Most Reputable Companies” list, which measures the reputations of thousands of the world’s most prestigious companies,
and was named to Forbes 2019 list of the “World’s Most Valuable Brands.” Additionally, FedEx was named one of America’s 2018
“Most JUST Companies” by JUST Capital and Forbes based on an evaluation of a variety of environmental, social and governance
factors.
- 5 -
FedEx is well recognized as a leader, not only in the transportation industry and for technological innovation, but also in global
citizenship. We understand that a sustainable global business is tied to our global citizenship, and we are committed to connecting the
world responsibly and resourcefully. Our latest published update to our global citizenship report is available at http://csr.fedex.com.
This report describes how we think about our responsibilities in the area of global citizenship and includes important goals and metrics
that demonstrate our commitment to fulfilling these responsibilities.
Our People
Along with a strong reputation among customers and the general public, FedEx is widely acknowledged as a great place to work. For
example, FedEx was named to FORTUNE magazine’s list of the “100 Best Companies to Work For” in the U.S. and listed as one of
the “World’s Best Employers” by Forbes in their latest surveys. FedEx was also included on FORTUNE magazine’s “100 Best
Workplaces for Millennials” list for 2018. During 2019 we made voluntary contributions totaling $1.0 billion to our tax-qualified U.S.
domestic pension plans to ensure our retirement program remains one of the best funded programs in the country.
FedEx also supports an inclusive workplace culture and is committed to the education, recruitment, development and advancement of
diverse team members worldwide, and we are recognized for our commitment to those efforts. For instance, in 2019 FedEx was
named one of Black Enterprise magazine’s “50 Best Companies for Diversity,” one of the “Best Workplaces for Diversity” by global
research and consulting firm Great Place to Work and FORTUNE magazine, and one of the “Best Employers for Diversity” in the U.S.
by Forbes. Additionally, FedEx was named a 2019 “Best-of-the-Best Corporation for Inclusion” by the National Gay and Lesbian
Chamber of Commerce and the National Business Inclusion Consortium. A key driver of our commitment to diversity and inclusion is
the FedEx Corporate Diversity Council, in which members collaborate across the enterprise to motivate and inspire each other, share
best practices and support multicultural programs within the company and communities we serve.
At FedEx, it is our people — our greatest asset — that give us our strong reputation. In addition to superior physical and information
networks, FedEx has an exemplary human network, with more than 450,000 team members who are focused on safety, the highest
ethical and professional standards, and the needs of their customers and communities. Consistent with this philosophy, FedEx Express
has created Purple Runway—A FedEx Pathways Program, an industry-leading pilot-development program, as well as a related
aviation scholarship program. FedEx Express has also partnered with the University of Memphis to provide FedEx Express team
members in Memphis, Indianapolis, Oakland, Los Angeles and Newark the chance to earn a tuition-free online degree. Additionally,
through our internal Purple Promise and Humanitarian Award programs, we recognize and reward employees who enhance customer
service and promote human welfare. For additional information on our people-first philosophy and workplace initiatives, see
http://csr.fedex.com.
Our Community
FedEx is committed to actively supporting the communities we serve worldwide through the strategic investment of our people,
resources and network. One way FedEx works to connect people and possibilities is through FedEx Cares, our global community
engagement program. We provide financial contributions, in-kind charitable shipping services and volunteer efforts by our team
members to help a variety of non-profit organizations achieve their goals and make a measurable impact on the world. We focus our
effort in the following areas:
• Global Entrepreneurship: Empowering women and minority entrepreneurs everywhere by providing the tools they need to
succeed.
• Delivering for Good: Lending our global network and our unparalleled logistics expertise to organizations with mission-
critical needs, especially in times of disaster, and to help communities heal, learn and thrive.
• Sustainable Transportation: Scaling solutions and investing in new ideas to improve mobility, reduce congestion, and
decrease pollution in communities around the world.
• Employment Pathways: Connecting young adults in underserved communities to skills and career training that lead to greater
access to jobs and opportunity, especially in the fields of technology and logistics.
• Road Safety: Leveraging our safety expertise to reduce road crash fatalities by improving road conditions and educating
drivers and pedestrians – especially child pedestrians – around the world.
• Diversity & Inclusion: Promoting inclusion, celebrating culture and history, and empowering young people from diverse
backgrounds.
• Volunteerism: Dedicating their time around the world, FedEx team members play a visible and meaningful role in addressing
social issues by creating connections with community leaders and supporting the non-profit organizations that make our
communities great places to live and work.
- 6 -
Between 2016 and 2019, FedEx invested over $200 million in over 200 global communities through FedEx Cares. FedEx also
supports communities throughout the U.S. with its annual FedEx Cares United Way giving campaign. Additionally, FedEx team
members provided over 81,000 volunteer hours during 2018. For additional information on our community involvement and our
FedEx Cares strategy, visit http://fedexcares.com.
The Environment
Our “Reduce, Replace, Revolutionize” approach to FedEx aircraft, vehicles, facilities and materials guides our environmental efforts
to drive efficient use of resources and cost savings. In furtherance of our commitment to protecting the environment, in 2017 we
announced a new goal to increase FedEx Express vehicle fuel efficiency 50% from a 2005 baseline by calendar 2025, after achieving
our previous goal of a 30% improvement five years early. Through 2018, our efforts collectively resulted in a 40% improvement in
FedEx Express vehicle fuel efficiency from our 2005 baseline. We also continue to work towards our goal to reduce aircraft emissions
intensity by 30% from a 2005 baseline by calendar 2020, a goal that we increased from 20% in 2012. In 2018, we achieved a 23%
reduction in aircraft emissions intensity since 2005 through a combination of our aircraft fleet modernization and operational
programs. We have also established a goal of obtaining 30% of our jet fuel from alternative fuels by calendar 2030.
To reduce the cost of fuel use and associated greenhouse gas (“GHG”) emissions, we have implemented efficiencies in flight
operations through our global FedEx Fuel Sense program, and we are replacing many of our older airplanes with more fuel-efficient
models. These two initiatives saved more than 204 million gallons of jet fuel and avoided nearly 2.0 million metric tons of CO2e
emissions in 2018, over 15% more emissions avoided than 2017. We have an impressive global alternative fuel fleet with more than
3,800 alternative fuel vehicles, including hybrid, electric, compressed or liquefied natural gas, liquefied petroleum gas and hydrogen
fuel cell vehicles. In 2018 we placed a reservation for 20 fully electric semi trucks which will be operated by FedEx Freight, and
FedEx Express expects to add 1,000 Chanje V8100 electric delivery vehicles to its fleet by the end of 2020. Additionally, we expect
the zero-emission, battery-powered FedEx SameDay Bot, which is discussed in more detail below under “FedEx Services Segment —
FedEx Services — Customer-Driven Technology,” to be an environmentally friendly alternative to delivering small payloads in large
vehicles.
Across the enterprise, we work to utilize the emission technology available in each market for our vehicles, which enables us to reduce
emissions and minimize the impact of the remaining legacy vehicles in the fleet. Innovative approaches such as vehicle platooning
offer the potential to increase truck fuel efficiency while enhancing safety.
Twenty-three of our facilities around the world now generate renewable energy, which collectively avoided more than 12,000 metric
tons of CO2 e emissions in 2018. In addition, 19 FedEx Express facilities in the U.S. have received certification in Leadership in
Energy and Environmental Design (LEED®), the U.S. Green Building Council’s system for rating the environmental performance of
buildings. FedEx Express has made LEED certification the standard for newly built U.S. facilities. In addition, FedEx Express also has
three LEED-certified facilities outside the U.S., while FedEx Ground has six LEED-certified facilities and FedEx Office has one, all
of which are in the U.S. Over 560 FedEx Express facilities and three FedEx Logistics facilities are certified to the ISO 14001
environmental management system standard. In Europe, FedEx Express uses the Building Research Establishment Environmental
Assessment Method (BREEAM) as the standard for all new buildings. For offices, its minimum building standard is BREEAM
Excellent, and for warehouses, its minimum standard is BREEAM Good.
We also continue to evaluate the environmental impacts of our packaging and copy and print services, and minimize waste generation
through efforts that include recycling and the use of copy paper with recycled content, among other environmentally responsible
available choices. In 2018, over 99% of paper purchased for use by FedEx Office was Forest Stewardship Council or other third-party-
certified as sustainably sourced. We also use FedEx-branded cardboard packaging at FedEx Express and FedEx Ground, which is
100% recyclable and made from over 50% recycled content. The longstanding paper shredding and recycling service at FedEx Office
allows customers to bring any documents, including sensitive items such as tax returns, to a FedEx Office location and have them
securely and confidentially shredded, then recycled. During 2018, almost 9.9 million pounds of paper were shredded and recycled
through the service.
As our business grows to meet the accelerating demands of e-commerce and other shipping needs, our waste management strategies
help ensure we recycle more of our own waste and encourage customers to recycle our packaging. In 2018, 78% of the solid waste
generated in our operations was sent to recyclers. One example of our environmentally-responsible activities is the Sustainable
Purchasing Leadership Council, a U.S. nonprofit organization that supports and recognizes sustainable procurement of which we are a
founding member. We continue to support the Council by participating in technical advisory groups and applying best practice
guidance to our own supply chain sustainability initiatives. For additional information on the ways we are minimizing our impact on
the environment, see http://csr.fedex.com.
- 7 -
Governance
FedEx has an independent Board of Directors committed to the highest quality corporate governance and accountability to
stockholders. Our Board of Directors periodically reviews all aspects of our governance policies and practices, including our
Corporate Governance Guidelines and our Code of Business Conduct and Ethics, in light of best practices and makes whatever
changes it deems appropriate to further our longstanding commitment to the highest standards of corporate governance. The
Guidelines and the Code, which apply to all of our directors, officers and employees, including our principal executive officer and
senior financial officers, are available on the Governance & Citizenship page of the Investor Relations section of our website at
http://investors.fedex.com. We will post on the Governance & Citizenship page of the Investor Relations section of our website
information regarding any amendment to, or waiver from, the provisions of the Code to the extent such disclosure is required.
Business Segments
The following describes in more detail the operations of each of our principal operating segments:
FedEx Express Segment
Overview
FedEx Express invented express distribution over 45 years ago in 1973 and remains the industry leader, providing rapid, reliable,
time-definite delivery of packages and freight to more than 220 countries and territories through an integrated global network. In May
2016, we acquired TNT Express, a leading international express transportation, small-package ground delivery and freight
transportation company.
FedEx Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight,
connecting markets that generate more than 99% of the world’s gross domestic product through door-to-door, customs-cleared service,
with a money-back guarantee. FedEx Express’s unmatched air route authorities and extensive transportation infrastructure, combined
with leading-edge information technologies, make it the world’s largest express transportation company. As of May 31, 2019, FedEx
Express employed approximately 239,000 employees (including approximately 47,000 employees at TNT Express) and had
approximately 103,000 drop-off locations (including FedEx Office stores and FedEx OnSite locations, such as nearly 9,000 Walgreens
stores, and approximately 27,000 TNT Express drop-off locations), 681 aircraft and approximately 91,000 vehicles (including
approximately 27,000 owner-operated vehicles that support TNT Express) in its global network.
Services
FedEx Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight. All
FedEx Express services are backed by a money-back guarantee. FedEx Express offers three U.S. domestic overnight package delivery
services: FedEx First Overnight, FedEx Priority Overnight and FedEx Standard Overnight. FedEx SameDay service is available 365
days a year throughout all 50 states for urgent shipments up to 150 pounds. FedEx Express also offers U.S. express overnight and
deferred freight services backed by a money-back guarantee to handle the needs of the time-definite freight market.
International express and deferred package delivery with a money-back guarantee is available to more than 220 countries and
territories, with a variety of time-definite services to meet distinct customer needs. FedEx International Priority provides time-definite
delivery typically within one, two or three business days. FedEx International Economy provides time-definite delivery typically in
two to five business days. FedEx International First provides time-definite delivery to select postal codes in 20 key global markets,
with delivery to select U.S. ZIP Codes as early as 8:00 a.m. from more than 90 countries in one or two business days, delivery by
10:00 a.m. in one business day to Canada and by 11:00 a.m. in one business day to Mexico. FedEx Express also offers domestic
pickup-and-delivery services within certain non-U.S. countries, including France, the United Kingdom, Australia, Brazil, Italy,
Canada, Mexico, Poland, India, China and South Africa. In addition, FedEx Express offers comprehensive international express and
deferred freight services, backed by a money-back guarantee, real-time tracking and advanced customs clearance.
We also provide FedEx Delivery Manager, which allows our U.S. residential customers to customize home deliveries to fit their
schedule by providing a range of options to schedule dates, locations and times of delivery. By signing up at fedex.com, customers can
receive notification of FedEx Express packages en route to their homes, and can choose various delivery options.
For information regarding FedEx Express e-shipping tools and solutions, see “FedEx Services Segment — FedEx Services —
Customer-Driven Technology.”
- 8 -
TNT Express provides two types of express services — Express and Economy Express. The Express services are day-definite and
delivered next-day or fastest-by-air for distances for which next-day is not possible. The Economy Express services are also day-
definite and are delivered fastest-by-road, except for intercontinental deliveries which depend on air. For both Express and Economy
Express services, TNT Express has time-definite options for customers requiring delivery before a certain time. TNT Express also
provides specialized or extremely urgent deliveries which include products such as same-day, value-added and non-standard freight
services.
International Expansion
In 2016 we acquired TNT Express, which is the largest acquisition in FedEx history. This acquisition rapidly accelerates our European
and global growth, substantially enhances our global footprint through TNT Express’s lower-cost road networks in Europe, the Middle
East and Asia, and expands our capabilities and solutions for our customers. The integration of FedEx Express and TNT Express is
complex as it spans over 200 countries and territories and involves combining our pickup-and-delivery operations at a local level, our
global and regional air and ground networks, and our extensive operations, customs clearance, sales and back-office information
technology systems.
Significant progress on the integration was made during 2019. We have completed the operational integration in the U.S., Canada and
Middle East, and the sales forces are substantially integrated. The sales force integration allows both the FedEx Express and TNT
Express sales teams to sell our full suite of services to customers. A significant milestone in the integration includes key projects that
enable the injection of FedEx Express shipments into the TNT Express European road network. This integration milestone will allow
FedEx Express customers to benefit from transit time improvements for their intra-European shipments. We began rolling out this
service in Europe in February 2019 and completed the service improvement in June 2019. In addition, by the end of 2020, we expect
to complete projects across our European hub and station locations that will allow interoperability between networks for both FedEx
Express and TNT Express packages, which will further lower costs as the related FedEx Express linehaul operations are optimized. In
2019, we began the operational network integration process for the key countries in Europe, which represent a significant percentage
of international revenue, workforces and facilities. Integration activities in Europe are complex and require consultations with works
councils and employee representatives in a number of countries. While we expect to make significant progress on integration activities
in 2020, particularly in Europe, integration work will continue thereafter. For more information about the integration, see Item 1A of
this Annual Report on Form 10-K (“Risk Factors”).
On May 1, 2019, we acquired the international express business of FC (Flying Cargo) Express Ltd., which was formerly a FedEx
Express Global Service Participant, in Israel. These acquisitions give us more robust global transportation networks and added
capabilities in important international markets. In recent years, we also have expanded our capabilities in the Asia-Pacific markets,
including through the establishment of: our Asia-Pacific hub at the Guangzhou Baiyun International Airport in southern China, which
began operations in 2009; our North Pacific regional hub at the Kansai International Airport in Osaka, Japan, which opened in 2014
and serves as a consolidation point for shipments from northern Asia to the U.S.; and our new International Express and Cargo Hub in
Shanghai, which opened in 2018 at Shanghai’s Pudong International Airport. Additionally, during 2019 we introduced a new flight
connecting the Vietnamese capital of Hanoi to our Asia-Pacific hub and increased the frequency of our flight from Memphis to Dubai.
These developments allow us to continue to better serve our global customers doing business in the Asia-Pacific markets.
To facilitate the use of our growing international network, we offer a full range of international trade consulting services and a variety
of online tools that enable customers to more easily determine and comply with international shipping requirements.
U.S. Postal Service Agreement
In 2013, FedEx Express entered into a new seven-year agreement with the USPS under which FedEx Express provides airport-to-
airport transportation of USPS First Class Mail, Priority Mail Express and Priority Mail within the United States. In February 2017,
the parties entered into an amendment to the agreement whereby the initial renewal period provided in the agreement was exercised in
part and the agreement’s period of performance was extended through September 29, 2024. FedEx Express also provides
transportation and delivery for the USPS’s international delivery service called Global Express Guaranteed under a separate
agreement. For more information about our relationship with the USPS, see Item 1A of this Annual Report on Form 10-K (“Risk
Factors”).
Pricing
FedEx Express periodically publishes updates to the list prices for the majority of its services in its Service Guides. In general,
shipping rates are based on the service selected, destination zone, weight, size, any ancillary service charge and whether the customer
charged the shipment to a FedEx account. As previously announced, on January 7, 2019, FedEx Express implemented a 4.9% average
list price increase for U.S. domestic, U.S. export and U.S. import services. FedEx Express also applied peak holiday season surcharges
from November 19, 2018 through December 24, 2018 for shipments that were oversized or required additional handling and, effective
September 3, 2018, made general changes to surcharges for certain packages requiring additional handling.
- 9 -
FedEx Express has an indexed fuel surcharge for U.S. domestic and U.S. outbound shipments and for shipments originating
internationally, where legally and contractually possible. FedEx Express fuel surcharges are adjusted on a weekly basis. The fuel
surcharge is based on a weekly fuel price from two weeks prior to the week in which it is assessed. Some FedEx Express international
fuel surcharges incorporate a timing lag of approximately six to eight weeks. On March 18, 2019, we updated the tables used to
determine our fuel surcharges for FedEx Express U.S. domestic services. On September 10, 2018, we updated the tables used to
determine our fuel surcharges at FedEx Express. The weighted-average U.S. domestic and outbound fuel surcharges for the past three
years were: 2019 — 7.5%; 2018 — 4.8%; and 2017 — 2.5%. See the “Results of Operations and Outlook — Consolidated Results —
Fuel” section of Item 7 of this Annual Report on Form 10-K (“Management’s Discussion and Analysis of Results of Operations and
Financial Condition”) for a description and discussion of the net impact of fuel on our operating results.
TNT Express periodically updates list prices for the majority of its services. In general, shipping rates are based on the selected
service, destination zone, (volumetric) weight, and any ancillary service charge. TNT Express offers its customers discounted prices
generally based on actual or potential volumes and/or revenue. TNT Express has an indexed fuel surcharge that varies by region or
country and by product. The fuel surcharge percentage is subject to monthly adjustment based upon the price of a designated fuel type.
If a customer has requirements that fall outside of TNT Express’s standard service levels, but are acceptable under its standard
operating procedures, TNT Express will provide the service with an additional charge to cover the additional costs incurred. For
instance, collections and deliveries in certain remote and less accessible locations will incur an out-of-area charge.
Operations
FedEx Express’s primary sorting facility, located in Memphis, serves as the center of the company’s multiple hub-and-spoke system.
A second national hub facility is located in Indianapolis. We are making investments over multiple years in our facilities of
approximately $1.5 billion to significantly expand the Indianapolis hub and approximately $1.5 billion to modernize the Memphis
World Hub. In addition to these national hubs, FedEx Express operates regional hubs in Fort Worth, Newark, Oakland and
Greensboro and major metropolitan sorting facilities in Chicago and Los Angeles.
Facilities in Anchorage, Paris, Cologne, Guangzhou and Osaka serve as sorting facilities for express package and freight traffic
moving to and from Asia, Europe and North America. Additional major sorting and freight handling facilities are located at Narita
Airport in Tokyo, Stansted Airport outside London and Pearson Airport in Toronto. The facilities in Paris, Cologne, Guangzhou and
Osaka are also designed to serve as regional hubs for their respective market areas. A facility in Miami — the Miami Gateway Hub —
serves our South Florida, Latin American and Caribbean markets.
Throughout its worldwide network, FedEx Express operates city stations and employs a staff of customer service agents, cargo
handlers and couriers who pick up and deliver shipments in the station’s service area. In some international areas, independent agents
(“Global Service Participants”) have been selected to complete deliveries and to pick up packages. TNT Express also relies upon
subcontractors and agents to conduct certain of its pickup-and-delivery and linehaul operations. For more information about our
sorting and handling facilities, see Part I, Item 2 of this Annual Report on Form 10-K (“Properties”) under the caption “FedEx Express
Segment.”
FedEx Office offers retail access to FedEx Express shipping services at all of its retail locations. FedEx Express also has alliances with
certain other retailers to provide in-store drop-off sites, including at nearly 9,000 Walgreens stores. Our unmanned FedEx Drop Boxes
provide customers the opportunity to drop off packages in office buildings, shopping centers and corporate or industrial parks.
Services are delivered by TNT Express through a combination of physical infrastructures such as hubs, depots and vehicles, and
electronic infrastructures such as track-and-trace systems. TNT Express operates road networks in Europe, the Middle East, Asia,
Australia and South America. TNT Express’s unique European road network connects more than 40 countries through 19 road hubs
and over 540 depots.
Fuel Supplies and Costs
During 2019, FedEx Express purchased jet fuel from various suppliers under contracts that vary in length and which provide for
estimated amounts of fuel to be delivered. The fuel represented by these contracts is purchased at market prices. Because of our
indexed fuel surcharge, we do not have any jet fuel hedging contracts. See “Pricing” above.
- 10 -
The following table sets forth FedEx Express’s costs for jet fuel and its percentage of FedEx Corporation consolidated revenues for
the last five fiscal years (amounts for 2017 to 2019 include TNT Express):
Fiscal Year
2019
2018
2017
2016
2015
$
Total Jet
Fuel Cost
(in millions)
Percentage of
Consolidated
Revenues
2,847
2,460
1,999
1,726
2,816
4.1 %
3.8
3.3
3.4
5.9
Most of FedEx Express’s vehicle fuel needs are satisfied by retail purchases with various discounts.
Competition
As described in Item 1A of this Annual Report on Form 10-K (“Risk Factors”), the express package and freight markets are both
highly competitive and sensitive to price and service, especially in periods of little or no macroeconomic growth. The ability to
compete effectively depends upon price, frequency, capacity and speed of scheduled service, ability to track packages, extent of
geographic coverage, reliability, innovative service offerings and the fit within the customer’s overall supply chain.
Competitors within the U.S. include other package delivery concerns, principally United Parcel Service, Inc. (“UPS”), passenger
airlines offering express package services, regional delivery companies, air freight forwarders and the USPS. FedEx Express’s and
TNT Express’s principal international competitors are DHL, UPS, DPD (a subsidiary of France’s La Poste’s GeoPost), General
Logistics Systems (a Royal Mail-owned parcel delivery group), foreign postal authorities, passenger airlines, air freight forwarders,
regional carriers, and all-cargo airlines. We also compete with startup companies that combine technology with crowdsourcing to
focus on local market needs. In addition, some high volume package shippers, such as Amazon.com, are developing and implementing
in-house delivery capabilities and utilizing independent contractors for deliveries, and may be considered competitors. For example,
Amazon.com is investing significant capital to establish a network of hubs, aircraft and vehicles. Many of FedEx Express’s
international competitors are government-owned, -controlled or -subsidized carriers, which may have greater resources, lower costs,
less profit sensitivity and more favorable operating conditions than FedEx Express.
Employees
Donald F. Colleran is the President and Chief Executive Officer of FedEx Express, which is headquartered in Memphis, Tennessee.
As of May 31, 2019, FedEx Express employed approximately 177,000 permanent full-time and approximately 62,000 permanent part-
time employees (including approximately 38,000 permanent full-time employees and approximately 8,000 permanent part-time
employees at TNT Express). Including the employees of TNT Express, FedEx Express’s international employees represent
approximately 53% of all employees.
The pilots of FedEx 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
collective bargaining agreement is scheduled to become amendable in November 2021. In addition to our pilots at FedEx Express,
certain of FedEx Express’s non-U.S. employees are unionized.
Attempts by other labor organizations to organize certain other groups of FedEx Express employees occur from time to time.
Although these organizing attempts have not resulted in any certification of a U.S. domestic collective bargaining representative of
FedEx Express employees (other than ALPA), we cannot predict the outcome of these labor activities or their effect, if any, on FedEx
Express or its employees. For more information, see “Risk Factors” below. FedEx Express believes its employee relations are
excellent.
FedEx Ground Segment
Overview
By leveraging the FedEx brand, maintaining a low cost structure and efficiently using information technology and advanced
automation systems, FedEx Ground continues to enhance its competitive position as a leading provider of business and residential
money-back guaranteed ground package delivery services. FedEx Ground serves customers in the North American small-package
market, focusing on business and residential delivery of packages weighing up to 150 pounds. Ground service is provided to 100% of
the continental U.S. population and overnight service of up to 400 miles to nearly 100% of the continental U.S. population. Service is
also provided to nearly 100% of the Canadian population. In addition, FedEx Ground offers service to Alaska and Hawaii through a
ground and air network operation coordinated with other transportation providers.
- 11 -
In January 2019, we expanded operations throughout the FedEx Ground U.S. network to six days per week year-round, and in January
2020, FedEx Ground will expand residential delivery operations to seven days per week year-round for the majority of the U.S.
population.
FedEx Ground continues to improve the speed, reach and service capabilities of its network, by reducing transit time for many of its
lanes and introducing and expanding overnight ground service in many metropolitan areas. FedEx Ground’s network expansion has
substantially increased the company’s daily pickup capacity through the addition of new hubs featuring the latest automated sorting
technology and the expansion or relocation of existing hubs and other facilities. FedEx Ground is also making significant operational
enhancements to ensure safe and reliable handling of large and heavy items. These changes include designing new facilities, adding
equipment to certain facilities and making other operational adjustments.
The company offers our FedEx Home Delivery service, which reaches 100% of U.S. residences. FedEx Home Delivery is dedicated to
meeting the delivery needs of residential customers and provides routine Saturday and evening delivery and premium options such as
day-specific, appointment and signature delivery. FedEx Home Delivery brings unmatched services to residential shippers and their
customers and is the first residential ground package delivery service to have offered a money-back guarantee. The FedEx SmartPost
service specializes in the consolidation and delivery of high volumes of low-weight, less time-sensitive business-to-consumer
packages primarily using the USPS for final delivery to any residential address or PO Box in the U.S. In May 2019, we announced
that FedEx SmartPost packages given to the USPS will be increasingly integrated into FedEx Ground standard operations.
Additionally, FedEx Delivery Manager allows our U.S. residential customers to customize home deliveries to fit their schedule by
providing a range of options to schedule dates, locations and times of delivery. By signing up at fedex.com, customers can receive
notification of FedEx Ground packages en route to their homes and can choose various delivery options.
Pricing
FedEx Ground periodically publishes updates to the list prices for the majority of its services in its Service Guide. In general, U.S.
shipping rates are based on the service selected, destination zone, weight, size, any ancillary service charge and whether the customer
charged the shipment to a FedEx account. As previously announced, on January 7, 2019, FedEx Ground and FedEx Home Delivery
average list prices increased by an average of 4.9%. FedEx SmartPost average list prices also increased. Additionally, FedEx Ground
applied peak holiday season surcharges from November 19, 2018 through December 24, 2018 for shipments that were oversized,
unauthorized, or required additional handling and, effective September 3, 2018, made general changes to surcharges on unauthorized
shipments and for certain packages requiring additional handling.
FedEx Ground has an indexed fuel surcharge, which is adjusted on a weekly basis. The fuel surcharge is based on a weekly fuel price
from two weeks prior to the week in which it is assessed. On March 18, 2019 and September 10, 2018, respectively, we updated the
tables used to determine our fuel surcharges at FedEx Ground. See the “Results of Operations and Outlook — Consolidated Results —
Fuel” section of Item 7 of this Annual Report on Form 10-K (“Management’s Discussion and Analysis of Results of Operations and
Financial Condition”) for a description and discussion of the net impact of fuel on our operating results.
Operations
FedEx Ground operates a multiple hub-and-spoke sorting and distribution system which consisted of 619 facilities, including 39 hubs,
in the U.S. and Canada as of May 31, 2019. FedEx Ground conducts its operations primarily with approximately 69,000 vehicles
owned or leased by separate service providers. To provide FedEx Home Delivery service and FedEx SmartPost Service, FedEx
Ground leverages its pickup operation and hub and linehaul network.
Advanced automated unloading and sorting technology is used to streamline the handling of millions of packages daily. FedEx
Ground yard management systems, which interact with GPS tags on each trailer and create geofences around FedEx Ground facilities,
automatically notify the control center when a trailer arrives and departs. Using overhead laser and six-sided camera-based bar code
scan technology, hub conveyors electronically guide packages to their appropriate destination chute, where they are loaded for
transport to their respective destination stations for local delivery. Autonomous, driverless tugger technologies enable FedEx Ground
to handle large, non-conveyable packages. Software systems and internet-based applications are also deployed to offer customers new
ways to connect internal package data with external delivery information. FedEx Ground provides shipment tracing and proof-of-
delivery signature functionality through the FedEx website, fedex.com. For additional information regarding FedEx Ground e-shipping
tools and solutions, see “FedEx Services Segment — FedEx Services — Customer-Driven Technology.”
FedEx Office offers retail access to FedEx Ground shipping services at all of its retail locations. FedEx Ground is also available as a
service option at all FedEx Authorized ShipCenters and other FedEx OnSite locations, including at nearly 9,000 Walgreens stores,
located in the U.S.
- 12 -
As of May 31, 2019, FedEx Ground employed approximately 31,000 permanent full-time and approximately 79,000 permanent part-
time employees. In addition, FedEx Ground relies on independent small businesses to conduct its linehaul and pickup-and-delivery
operations, as the use of these service providers is well suited to the needs of the ground delivery business and its customers. Henry J.
Maier is the President and Chief Executive Officer of FedEx Ground. FedEx Ground is headquartered in the Pittsburgh, Pennsylvania
area, and its primary competitors are UPS, the USPS and regional delivery carriers. We also compete with startup companies that
combine technology with crowdsourcing to focus on local market needs. In addition, some high volume package shippers, such as
Amazon.com, are developing and implementing in-house delivery capabilities and utilizing independent contractors for deliveries, and
may be considered competitors. For example, Amazon.com is investing significant capital to establish a network of hubs and vehicles.
Independent Contractor and Independent Service Provider Models
FedEx Ground is involved in lawsuits and administrative proceedings claiming that owner-operators engaged under operating
agreements no longer in place should have been treated as employees of FedEx Ground, rather than independent contractors. In
addition, we are defending joint-employer cases where it is alleged that FedEx Ground should be treated as an employer of the drivers
employed by owner-operators engaged by FedEx Ground. These cases are in varying stages of litigation. We will continue to
vigorously defend ourselves in these proceedings and continue to believe that owner-operators engaged by FedEx Ground are properly
classified as independent contractors and that FedEx Ground is not an employer or joint employer of the drivers of these independent
contractors. For a description of these proceedings, see Item 1A of this Annual Report on Form 10-K (“Risk Factors”) and Note 18 of
the accompanying consolidated financial statements.
FedEx Ground previously announced plans to implement the Independent Service Provider (“ISP”) model throughout its entire U.S.
pickup-and-delivery network. The transition to the ISP model is being accomplished on a district-by-district basis and we are now
targeting the transition to be completed during the second quarter of 2020. As of May 31, 2019, over two-thirds of standard FedEx
Ground volume (excluding FedEx SmartPost volume) was being delivered by small businesses operating under the ISP model. The
costs associated with these transitions will be recognized in the periods incurred and are not expected to be material to any future
quarter.
FedEx Freight Segment
FedEx Freight is a leading North American provider of LTL freight services, offering choice, simplicity and reliability to meet the
needs of LTL shippers — FedEx Freight Priority, when speed is critical to meet supply chain needs, and FedEx Freight Economy,
when time can be traded for cost savings. Through one comprehensive network of service centers and advanced information systems,
FedEx Freight provides service to virtually every U.S. ZIP Code (including Alaska and Hawaii) with industry-leading transit times.
FedEx Freight Priority, which has the fastest published transit times of any nationwide LTL service, offers a no-fee money-back
guarantee on eligible shipments. Internationally, FedEx Freight Canada offers FedEx Freight Priority service, serving most points in
Canada, as well as FedEx Freight Priority and FedEx Freight Economy service between Canada and the U.S. In addition, FedEx
Freight serves Mexico, Puerto Rico and the U.S. Virgin Islands via alliances.
Through its many service offerings, FedEx Freight can match customers’ time-critical needs with industry-leading transit times. With
the expansion of FedEx electronic solutions, LTL shippers have the convenience of a single shipping and tracking solution for FedEx
Freight, FedEx Express and FedEx Ground. These solutions make freight shipping easier and provide customers easy access to their
account information. The FedEx Freight Advance Notice feature available on FedEx Freight Priority shipments uses the company’s
innovative technology systems to proactively notify FedEx Freight customers via the internet, e-mail or fax when a shipment may be
delayed beyond its estimated delivery date, providing customers with greater visibility and control of their LTL freight shipments.
Customers can also process cross-border LTL shipments to and from Canada and Mexico, as well as intra-Canada and -Mexico
shipments, through FedEx Ship Manager at fedex.com, FedEx Ship Manager Software, FedEx Ship Manager Server and FedEx Web
Services. Additionally, FedEx Freight A.M. Delivery offers freight delivery by 10:30 a.m. within and between the U.S. and Canada,
backed by a money-back guarantee.
FedEx Freight further simplifies LTL shipping with the FedEx Freight box, which offers improved flexibility, increased security,
better shipment integrity and no freight classification. The FedEx Freight box comes in two sizes: a standard freight box that requires a
pallet to ship and a smaller freight box with an integrated pallet. The ability to choose between freight boxes makes freight shipping
accessible to any business. With a distance-based pricing structure, the FedEx Freight box allows customers to ship LTL with flat
rates.
FedEx Freight also offers LTL Select, a free cloud-based, multi-carrier transportation management system that provides customers
with visibility into all available carriers and their pricing in one location, as well as the ability to book service and make payments.
- 13 -
As of May 31, 2019, the FedEx Freight segment was operating approximately 28,000 vehicles from a network of 373 service centers
and had approximately 49,000 employees. John A. Smith is the President and Chief Executive Officer of FedEx Freight, which is
based in Memphis, Tennessee. FedEx Freight’s primary competitors are YRC Worldwide Inc. (which includes YRC Regional
Transportation and YRC Freight), XPO Logistics, Inc., UPS Freight, Old Dominion Freight Line, Inc., ABF Freight (an ArcBest
company) and SAIA, Inc.
In 2014 and 2015, the International Brotherhood of Teamsters (“Teamsters”) petitioned for National Labor Relations Board (“NLRB”)
elections at sixteen FedEx Freight facilities. The Teamsters lost the vote or withdrew the petition prior to the election at twelve
facilities and won the vote at four facilities. To date, at three of the four FedEx Freight facilities that originally voted for Teamster
representation, the Teamsters have either been decertified by employee vote or voluntarily withdrawn as bargaining representative.
We are currently bargaining with the union at the other facility. Additionally, a union has been certified to represent owner-drivers at a
FedEx Freight Canada, Corp. facility.
FedEx Services Segment
FedEx Services
FedEx Services provides our other companies with sales, marketing, information technology, communications, customer service,
technical support, billing and collection services, and certain other back-office support. Through FedEx Services, we provide a
convenient single point of access for many customer support functions, enabling us to more effectively sell the entire portfolio of
transportation services and to help ensure a consistent and outstanding experience for our customers.
Rajesh Subramaniam and Robert B. Carter each serve as the Co-President and Co-Chief Executive Officer of FedEx Services, which
is based in Memphis, Tennessee. As of May 31, 2019, the FedEx Services segment had approximately 30,000 employees (including
approximately 15,000 at FedEx Office).
Customer-Driven Technology
FedEx is a world leader in technology, and FedEx founder Frederick W. Smith’s vision that “the information about a package is as
important as the delivery of the package itself” remains at the core of our comprehensive technology strategy. Innovation at FedEx is
the foundation of our relations with customers. We strive to build technology solutions that will solve our customers’ business
problems with simplicity, convenience, speed and reliability. Robert B. Carter, Executive Vice President — FedEx Information
Services and Chief Information Officer of FedEx, won the 2019 Forbes CIO Innovation Award for the development of FedEx OnSite,
our retail convenience network that utilizes third-party retailers such as Walgreens to receive and hold packages for FedEx customers.
Additionally, during 2019 we significantly advanced a major information technology transition from traditional mainframe computing
to cloud-based systems, which is delivering significant benefits in terms of flexibility, security, speed to market and resiliency.
The focal point of our strategy is our award-winning website, together with our customer integrated solutions. The fedex.com website
was launched nearly 25 years ago, and during that time, customers have shipped and tracked billions of packages at fedex.com. The
fedex.com website is widely recognized for its speed, ease of use and customer-focused features. The advanced tracking capability
within FedEx Tracking provides customers with a consolidated view of inbound and outbound shipments. FedEx Virtual Assistant on
fedex.com is an artificial-intelligence-enabled service that provides answers to customer shipping questions, allowing our customer
service representatives and sales professionals to focus on higher-value customer interactions. International Shipping Assist on
fedex.com uses artificial intelligence to continually improve the process of completing the complicated paperwork required for
international shipping. Additionally, our state-of-the-art Packaging Lab designs innovative custom packaging solutions to keep
shipments protected through transit, and SenseAware®, a FedEx innovation currently available in 26 markets worldwide, allows
customers to stay connected to their critical shipments by providing real-time updates regarding current location, precise temperature,
relative humidity, barometric pressure readings, light exposure and shock events.
We stand at the nexus of virtual and physical networks, a crucial intersection for the success of e-commerce deliveries. We design our
e-commerce tools and solutions to be easily integrated into our customers’ applications, as well as into third-party software developed
by leading e-procurement, systems integration and enterprise resource planning companies. Our FedEx Ship Manager suite of
solutions offers a wide range of options to help our customers manage their parcel and LTL shipping and associated processes. FedEx
Returns Technology, a comprehensive solution for returns management, provides high-volume merchants and e-tailers complete
visibility into returns, giving them an easy way to track shipments, manage inventory, analyze returns trends and make more informed
decisions based on shoppers’ returns behaviors.
- 14 -
In December 2018, we expanded e-commerce delivery options for retailers with FedEx Extra Hours, a service that enables
participating retailers to fulfill e-commerce orders into the evening and receive late pickups by FedEx Express, with next-day local
delivery and two-day shipping to any address in the continental United States. FedEx Extra Hours, which is currently available to
select customers, allows retailers to extend evening order cutoff times by five to eight hours, with some as late as midnight, depending
on their current order fulfillment process.
In February 2019, we announced the development through a partnership of the FedEx SameDay Bot, an autonomous delivery device
designed to help retailers make same-day and last-mile deliveries to their customers. With the SameDay Bot, retailers will be able to
accept orders from nearby customers and deliver them directly to homes or businesses the same day. We plan to begin testing the
SameDay Bot in select markets in the summer of 2020 and are collaborating with companies such as AutoZone, Lowe’s, Pizza Hut,
Target, Walgreens and Walmart to help assess retailers’ autonomous delivery needs.
FedEx Mobile is a suite of solutions including the FedEx mobile application, FedEx mobile website and SMS text messaging. The
FedEx Mobile app provides convenience for recipients to track packages, get quick rates and estimated delivery times, quickly find
the nearest FedEx location and easily access FedEx Delivery Manager to customize home deliveries. It is available on Android™ and
Apple devices. The FedEx mobile website has expanded to more than 195 countries and territories and 35 languages. FedEx Mobile
allows customers to track packages, create shipping labels, view account-specific rate quotes and access drop-off location information.
SMS Notifications allows customers to track or follow a package via text messaging, and it is currently available in five countries.
With FedEx Office Print Online and proprietary iPhone and Android mobile apps, customers can use their laptops or mobile devices,
accessing their personal cloud accounts, and print directly to any FedEx Office location in the U.S., or have their order delivered right
to their door. Customers also have the flexibility of using FedEx Office’s Print & Go solutions to print at self-serve locations from
USBs, the cloud or through email. Accessing files using popular cloud providers Google Drive™, Dropbox, Box, Microsoft
OneDrive® and from FedEx Office’s own My Online Documents is easy. If customers have their files on a mobile device or laptop,
they can email them to printandgo@fedex.com and with the retrieval code they receive they can conveniently print the files at the self-
serve kiosks in any FedEx Office location. FedEx Office provides options for customers to choose the best access method they need
for quick service or more robust printing projects. FedEx also uses wireless data collection devices to scan bar codes on shipments,
thereby enhancing and accelerating the package information available to our customers.
During 2018, we joined the Blockchain in Transportation Alliance to explore this chain-of-custody technology within the logistics
sector, which we believe can significantly improve worldwide supply chains and add value to our products, services and processes. By
giving more visibility to everyone involved in the logistics process, we believe blockchain technology can reduce customer claims,
increase customer satisfaction and reduce our costs.
Marketing
The FedEx brand name is symbolic of outstanding service, reliability and speed. Emphasis is placed on promoting and protecting the
FedEx brand, one of our most important assets. As a result, FedEx is one of the most widely recognized brands in the world. In
addition to television, print and digital advertising, we promote the FedEx brand through sponsorships and special events. For
example, FedEx sponsors:
• The FedExCup on the PGA TOUR.
• The FedEx St. Jude Invitational, a PGA TOUR event that has raised millions of dollars for St. Jude Children’s Research
Hospital and will become one of four World Golf Championships events on the PGA TOUR schedule beginning in July 2019.
• The National Football League (NFL), as its “Official Delivery Service Sponsor” and “Official Office Services Provider of the
NFL,” as well as sponsor of the “FedEx Air & Ground®” NFL Players of the Week and Players of the Year Awards.
• FedExField in Washington, DC.
• The #11 Joe Gibbs Racing Toyota Camry driven by Denny Hamlin in the NASCAR Sprint Cup Series.
• The UEFA Europa League, a major European soccer cup competition that spans 192 teams across 54 European nations.
• ATP World Tour men’s professional tennis circuit and French Open tennis tournament.
• FedExForum in Memphis, TN.
- 15 -
Information Security
FedEx Services has a team of highly qualified professionals dedicated to securing information about our customers’ shipments and
protecting our customers’, vendors’ and employees’ privacy, and we strive to provide a safe, secure online environment for our
customers. We are committed to compliance with applicable information security laws, regulations and industry standards —
including, for example, the Payment Card Industry Data Security Standard, a set of comprehensive requirements for enhancing
payment account data security developed by the Payment Card Industry Security Standards Council, as well as compliance with the
Health Insurance Portability and Accountability Act of 1996, which enforces the security and confidentiality of employee health
information. For a description of risks related to information security, see Item 1A of this Annual Report on Form 10-K (“Risk
Factors”).
Global ISO 9001 Certification
FedEx Services provides our customers with a high level of service quality, as evidenced by our ISO 9001 certification for our global
express and ground operations. ISO 9001 registration is required by thousands of customers around the world. FedEx’s global
certification, encompassing the processes of FedEx Express, FedEx Ground and FedEx Services, enhances our single-point-of-access
strategy and solidifies our reputation as the quality leader in the transportation industry. ISO 9001 is the international standard for
Quality Management Systems. ISO standards were developed by the International Organization for Standardization in Geneva,
Switzerland to promote and facilitate international trade. Approximately 170 countries, including European Union (“EU”) members,
the U.S. and Japan, recognize ISO standards.
FedEx Office
As of May 31, 2019, FedEx Office operated approximately 2,100 customer-facing stores, providing convenient access to printing and
shipping expertise with reliable service. The FedEx Office network features retail stores, centralized production centers, corporate on-
site print centers, and on-site business centers at colleges and universities, hotels, convention centers, corporate campuses and health
care campuses. Many of these locations are open later in the evenings to accommodate urgent printing projects and delivery drop-offs.
FedEx Office has designed a suite of printing and shipping management solutions that are flexible and scalable, allowing customers to
meet their unique printing and shipping needs. The network provides an adaptable cost model helping to save time, labor and overhead
by freeing up resources and avoiding fixed costs associated with large-scale printing and e-commerce parcel volumes. Services
include digital printing, professional finishing, document creation, direct mail, signs and graphics, copying, computer rental, free Wi-
Fi and corporate print solutions. To meet the evolving needs of print customers, FedEx Office has made significant investments in new
machines and technology, enhancing capabilities in narrow format color, large format, color management and other technologies.
Additional investments in grand format, large format, enhanced finishing and other print capabilities are planned.
FedEx Office also provides customers convenient access to the full range of FedEx Express and FedEx Ground shipping services.
Customers may have their FedEx Express and FedEx Ground packages delivered to any FedEx Office customer-facing location
nationwide through the Hold at FedEx Location service, free of charge, and may redirect packages to these locations through
AutoRedirect to Hold. Additionally, FedEx SameDay City is available in over 1,900 cities in 34 markets across the U.S., offering
door-to-door residential and business delivery of time-sensitive parcels within hours by FedEx Office uniformed team members in
branded FedEx Office delivery vehicles. Increasingly, industries such as health care, life sciences, manufacturing, finance, perishables,
travel and automotive are relying on same-day services for critical delivery needs.
FedEx Office also offers packing services, and packing supplies and boxes are included in its retail offerings. By allowing customers
to have items professionally packed by specially trained FedEx Office team members and then shipped using FedEx Ground day-
definite shipping and time-definite global FedEx Express shipping services, FedEx Office offers a complete “pack-and-ship” solution.
FedEx Office also offers FedEx Pack Plus, which includes custom box building capabilities and techniques, a robust assortment of
specialty boxes and additional packing supplies, equipment and tools to serve our customers’ needs.
Almost all FedEx Office locations provide local pickup-and-delivery service for print jobs completed by FedEx Office. A FedEx
courier picks up a customer’s print job at the customer’s location and then returns the finished product to the customer. Options and
services vary by location.
During 2018, we entered into an agreement to place up to 500 new FedEx Office locations within select U.S. Walmart stores
nationwide. The agreement is part of the nationwide expansion of the FedEx retail channel, and as of May 31, 2019 we have opened
over 200 FedEx Office locations inside Walmart stores.
- 16 -
FedEx Logistics Operating Segment
The FedEx Logistics operating segment leverages the power of the extensive international FedEx transportation network to provide
specialty solutions that complete a simple, seamless and powerful global trade experience for FedEx customers around the world,
including customs brokerage and global ocean and air freight forwarding through FedEx Trade Networks Transport & Brokerage;
cross-border enablement and technology solutions and e-commerce transportation solutions through FedEx Cross Border, including its
subsidiary P2P Mailing Limited; integrated supply chain management solutions through FedEx Supply Chain; time-critical shipment
services through FedEx Custom Critical; and critical inventory and service parts logistics, 3-D printing and technology repair through
FedEx Forward Depots.
Additionally, FedEx Logistics provides international trade advisory services, including assistance with the Customs-Trade Partnership
Against Terrorism program and, through WorldTariff, publishes customs duty and tax information for approximately 200 customs
areas worldwide.
Richard W. Smith is the President and Chief Executive Officer of FedEx Logistics, which is based in Memphis, Tennessee. As of
May 31, 2019, the FedEx Logistics organization had approximately 20,000 employees. FedEx Supply Chain has a small number of
employees who are members of unions.
FedEx Logistics is an operating segment that is included in “Corporate, other and eliminations” in our segment reporting.
FedEx Trade Networks Transport & Brokerage
FedEx Trade Networks Transport & Brokerage provides international trade services, specializing in customs brokerage and global
ocean and air freight forwarding. Additionally, FedEx Trade Networks Transport & Brokerage provides customs clearance services
for FedEx Express at its major U.S. hub facilities.
As trade throughout the world grows, so does the FedEx Trade Networks Transport & Brokerage solutions portfolio. As of May 31,
2019, value-added services of FedEx Trade Networks Transport & Brokerage included approximately 130 freight forwarding offices
in 30 countries and Global Trade Data, an information tool that allows customers to track and manage imports. In total, as of May 31,
2019, FedEx Trade Networks Transport & Brokerage had approximately 150 offices in 130 service locations throughout North
America and in Africa, Asia-Pacific, Europe, India, Latin America, the Middle East and Australia. FedEx Trade Networks Transport
& Brokerage maintains a network of air and ocean freight-forwarding service providers and has entered into strategic alliances to
provide services in certain countries in which it does not have owned offices.
On October 31, 2018, we acquired Manton Air-Sea Pty Ltd, a leading provider of logistics services, including freight forwarding and
customs brokerage solutions, with operations across Australia.
FedEx Cross Border
FedEx Cross Border is an e-commerce enabler that provides international cross-border enablement and technology solutions such as
duty calculations, package tracking, international shipping costs and currency conversion calculations. The offerings of FedEx Cross
Border strategically fit into our global portfolio by allowing us to help retailers and e-tailers reach international e-commerce
customers.
FedEx Supply Chain
FedEx Supply Chain is a supply chain solutions provider specializing in Product Lifecycle Logistics® for technology, retail, consumer
and industrial goods, and healthcare industries. With more than 12,000 employees at approximately 110 facilities as of May 31, 2019,
FedEx Supply Chain provides a comprehensive range of integrated logistics services to enable growth, minimize cost, mitigate supply
chain risk and improve customer services. Service offerings include inbound logistics, warehousing and distribution, fulfillment,
contract packaging and product configuration, systems integration, returns process and disposition, test, repair, refurbishment and
product liquidation.
In 2017, FedEx Supply Chain launched FedEx Fulfillment, an e-commerce solution that helps small and medium-sized businesses
fulfill orders from multiple channels, including websites and online marketplaces, and manage inventory for their retail stores. The
FedEx Fulfillment platform is designed to be an easy-to-use and all-in-one logistics solution through which customers have complete
visibility into their products, giving them an easy way to track items, manage inventory, analyze trends, and make more informed
decisions by better understanding shoppers’ spending behaviors.
- 17 -
FedEx Custom Critical
FedEx Custom Critical provides a range of expedited, time-specific freight-shipping services throughout the U.S., Canada and
Mexico. Among its services are Surface Expedite, providing exclusive-use shipping and time-definite services; Air Expedite, offering
an array of expedited air solutions to meet customers’ critical delivery times; White Glove Services, for shipments that require extra
care in handling, temperature control or specialized security; and managed transportation. Service from FedEx Custom Critical is
available 24 hours a day, 365 days a year. FedEx Custom Critical continuously monitors shipments through an integrated proprietary
shipment-control system, including two-way satellite communications on exclusive-use shipments.
FedEx Forward Depots
FedEx Forward Depots has responsibility for critical inventory and service parts logistics, 3-D printing and technology repair. FedEx
Forward Depots leverages innovative packing solutions, on-demand additive manufacturing and customer-driven design within the
structure of FedEx Logistics.
Trademarks
The “FedEx” trademark, service mark and trade name are essential to our worldwide business. FedEx, FedEx Express, FedEx Ground,
FedEx Freight, FedEx Office, FedEx Services, FedEx Logistics, FedEx Trade Networks Transport & Brokerage, FedEx Cross Border,
FedEx Supply Chain, FedEx Custom Critical, FedEx Forward Depots and TNT Express, among others, are trademarks, service marks
and trade names of Federal Express Corporation or the respective companies for which registrations, or applications for registration,
are on file, as applicable. We have authorized, through licensing arrangements, the use of certain of our trademarks, service marks and
trade names by our contractors and Global Service Participants to support our business. In addition, we license the use of certain of
our trademarks, service marks and trade names on promotional items for the primary purpose of enhancing brand awareness.
Regulation
Air. Under the Federal Aviation Act of 1958, as amended (the “Federal Aviation Act”), both the U.S. Department of Transportation
(“DOT”) and the Federal Aviation Administration (“FAA”) exercise regulatory authority over FedEx Express.
The FAA’s regulatory authority relates primarily to operational aspects of air transportation, including aircraft standards and
maintenance, as well as personnel and ground facilities, which may from time to time affect the ability of FedEx Express to operate its
aircraft in the most efficient manner. FedEx Express holds an air carrier certificate granted by the FAA pursuant to Part 119 of the
federal aviation regulations. This certificate is of unlimited duration and remains in effect so long as FedEx Express maintains its
standards of safety and meets the operational requirements of the regulations.
In September 2010, the FAA proposed rules that would significantly reduce the maximum number of hours on duty and increase the
minimum amount of rest time for our pilots, and thus require us to hire additional pilots and modify certain of our aircraft. When the
FAA issued final regulations in December 2011, all-cargo carriers, including FedEx Express, were exempt from these new pilot
fatigue requirements, and instead required to continue complying with previously enacted flight and duty time rules. In December
2012, the FAA reaffirmed the exclusion of us from the new rule. It is reasonably possible, however, that future security or flight safety
requirements could impose material costs on us. See Item 1A of this Annual Report on Form 10-K (“Risk Factors”) for additional
discussion of regulations related to pilots, including the FAA’s mandatory retirement age of 65, that could affect our business.
The DOT’s authority relates primarily to economic aspects of air transportation. The DOT’s jurisdiction extends to aviation route
authority and to other regulatory matters, including the transfer of route authority between carriers. FedEx Express holds various
certificates issued by the DOT, authorizing FedEx Express to engage in U.S. and international air transportation of property and mail
on a worldwide basis.
Under the Aviation and Transportation Security Act of 2001, as amended, the Transportation Security Administration (“TSA”), an
agency within the Department of Homeland Security, has responsibility for aviation security. The TSA requires FedEx Express to
comply with a Full All-Cargo Aircraft Operator Standard Security Plan, which contains evolving and strict security requirements.
These requirements are not static, but change periodically as the result of regulatory and legislative requirements, imposing additional
security costs and creating a level of uncertainty for our operations. It is reasonably possible that these rules or other future security
requirements could impose material costs on us.
FedEx Express participates in the Civil Reserve Air Fleet (“CRAF”) program. Under this program, the U.S. Department of Defense
may requisition for military use certain of FedEx Express’s wide-bodied aircraft in the event of a declared need, including a national
emergency. FedEx Express is compensated for the operation of any aircraft requisitioned under the CRAF program at standard
contract rates established each year in the normal course of awarding contracts. Through its participation in the CRAF program,
FedEx Express is entitled to bid on peacetime military cargo charter business. FedEx Express, together with a consortium of other
carriers, currently contracts with the U.S. government for such charter flights.
- 18 -
Ground. The ground transportation performed by FedEx Express is integral to its air transportation services. The enactment of the
Federal Aviation Administration Authorization Act of 1994 abrogated the authority of states to regulate the rates, routes or services of
intermodal all-cargo air carriers and most motor carriers. States may now only exercise jurisdiction over safety and insurance. FedEx
Express is registered in those states that require registration.
The operations of FedEx Ground, FedEx Freight and FedEx Custom Critical in interstate commerce are currently regulated by the
DOT and the Federal Motor Carrier Safety Administration, which retain limited oversight authority over motor carriers. Federal
legislation preempts regulation by the states of rates, routes and services in intrastate freight transportation.
Like other interstate motor carriers, our operations, including those at FedEx Express, are subject to certain DOT safety requirements
governing interstate operations. In addition, vehicle weight and dimensions remain subject to both federal and state regulations.
International. FedEx Express’s international authority permits it to carry cargo and mail from points in its U.S. route system to
numerous points throughout the world. The DOT regulates international routes and practices and is authorized to investigate and take
action against discriminatory treatment of U.S. air carriers abroad. The right of a U.S. carrier to serve foreign points is subject to the
DOT’s approval and generally requires a bilateral agreement between the U.S. and the foreign government. In addition, the carrier
must then be granted the permission of such foreign government to provide specific flights and services. The regulatory environment
for global aviation rights may from time to time impair the ability of FedEx Express to operate its air network in the most efficient
manner, and efficient operations often utilize open skies provisions of aviation agreements. Additionally, global air cargo carriers,
such as FedEx Express, are subject to current and potential additional aviation security regulation by U.S. and foreign governments.
Our operations outside of the U.S., such as FedEx Express’s growing international domestic operations, are also subject to current and
potential regulations, including certain postal regulations and licensing requirements, that restrict, make difficult and sometimes
prohibit, the ability of foreign-owned companies such as FedEx Express to compete effectively in parts of the international domestic
transportation and logistics market.
Communication. Because of the extensive use of radio and other communication facilities in its aircraft and ground transportation
operations, FedEx Express is subject to the Federal Communications Commission Act of 1934, as amended. Additionally, the Federal
Communications Commission regulates and licenses FedEx Express’s activities pertaining to satellite communications.
Environmental. Pursuant to the Federal Aviation Act, the FAA, with the assistance of the U.S. Environmental Protection Agency
(“EPA”), is authorized to establish standards governing aircraft noise. FedEx Express’s aircraft fleet is in compliance with current
noise standards of the federal aviation regulations. In addition to federal regulation of aircraft noise, certain airport operators have
local noise regulations, which limit aircraft operations by type of aircraft and time of day. These regulations have had a restrictive
effect on FedEx Express’s aircraft operations in some of the localities where they apply but do not have a material effect on any of
FedEx Express’s significant markets. Congress’s passage of the Airport Noise and Capacity Act of 1990 established a National Noise
Policy, which enabled FedEx Express to plan for noise reduction and better respond to local noise constraints. FedEx Express’s
international operations are also subject to noise regulations in certain of the countries in which it operates.
Concern over climate change, including the impact of global warming, has led to significant U.S. and international legislative and
regulatory efforts to limit GHG emissions, including our aircraft and vehicle engine emissions. Increasingly, state and local
governments are also considering GHG regulatory requirements.
Compliance with such regulation and the associated potential cost is complicated by the fact that various countries and regions are
following different approaches to the regulation of climate change. For example, the EU has established the Emissions Trading
System (“ETS”) to regulate GHG emissions in the EU and adopted a directive in 2008 requiring each EU member state to extend the
ETS to aviation operations. Efforts by the EU in 2009 to regulate flights arriving from or departing for airports outside of the EU were
postponed. The EU extended its stay on the extra-territorial application of the EU ETS as applied to international flights to and from
the European Economic Area (“EEA”) through the end of calendar 2023, contingent on successful implementation of the Carbon
Offsetting and Reduction Scheme for International Aviation (“CORSIA”).
- 19 -
In 2016, the International Civil Aviation Organization (“ICAO”) passed a resolution adopting CORSIA, which is a global, market-
based measure for purchasing credits to offset carbon dioxide emissions and intended to aid in meeting the ICAO’s goal of carbon-
neutral growth starting in calendar 2020 by complementing industry efforts in technology, operations, infrastructure and sustainable
aviation fuels. In June 2018, the ICAO adopted standards pertaining to country-by-country implementation including the collection
and reporting of information on international aviation emissions beginning in calendar 2019. In furtherance of these efforts, in March
2019 the FAA issued notice of a CORSIA program permitting U.S. carriers to submit emissions data on a voluntary basis. Data
reported during calendar 2019 and 2020 will be used to set the calendar 2020 emissions baseline, and beginning in calendar 2021
carriers subject to the requirements of CORSIA will be responsible for purchasing and retiring carbon credits to offset emissions in
excess of the calendar 2020 baseline. In response to the creation of the CORSIA program, in December 2017, the EU adopted a
proposal which indefinitely excludes from the ETS flights operating fully or partly outside the EU and gradually reduces the number
of aviation allowances from calendar 2021. The EU has indicated that it will assess CORSIA implementation and determine the future
status of the ETS as applied to international aviation to and from the EEA. We expect compliance with CORSIA to increase FedEx
operating expenses beginning in calendar 2021. The amount of such increase will ultimately depend on a number of factors, including
the number of our flights subject to CORSIA, the fuel efficiency of our fleet, the average growth of the aviation sector, our ability to
utilize sustainable aviation fuels in the future and the price of ICAO-eligible emission units or offsets required to be purchased by
FedEx.
Additionally, in calendar 2016, the EPA issued a finding that aircraft engine GHG emissions cause or contribute to air pollution that
may reasonably be anticipated to endanger public health or welfare. In March 2017, ICAO adopted new carbon dioxide emissions
standards that would apply not only to new aircraft types as of calendar 2020, but also to new deliveries of current in-production
aircraft types from calendar 2023. Additionally, a cutoff date of calendar 2028 for production of aircraft that do not comply with
proposed standards was adopted. These standards are considered to be especially stringent for larger aircraft weighing over 60 tons.
The calendar 2016 EPA finding is a regulatory prerequisite to the adoption of the new certification standard for new aircraft
emissions, expected in calendar 2019 or 2020. In the past, the U.S. Congress has also considered bills that would regulate GHG
emissions, and some form of federal climate change legislation is possible in the future. However, in calendar 2017 the U.S. withdrew
from the Paris climate accord, an agreement among 196 countries to reduce GHG emissions, and that withdrawal’s effect on future
U.S. policy regarding GHG emissions and on other GHG regulation is uncertain. Nevertheless, the extent to which other countries
implement that agreement could have an adverse direct or indirect effect on our business.
We are also subject to federal, state and local environmental laws and regulations relating to, among other things, the shipment of
dangerous goods and contingency planning for spills of petroleum products. Additionally, we are subject to numerous regulations
dealing with underground fuel storage tanks, hazardous waste handling, vehicle and equipment emissions and noise and the discharge
of effluents from our properties and equipment. We have environmental management programs designed to ensure compliance with
these regulations.
Export Controls. In recent years, the U.S. government has increased the number of companies and persons subject to U.S. export
control regulations. Such regulations can restrict the types of items that FedEx is permitted to transport for or deliver to certain
entities, and in some instances may prohibit FedEx from serving certain entities altogether. Violations of these regulations can result
in significant monetary and other penalties. For example, the Export Control Reform Act of 2018 (the “ECRA”) and its implementing
regulations, the Export Administration Regulations (the “EARs”), hold carriers such as FedEx strictly liable for shipments that may
violate the EARs without requiring evidence that the carriers had knowledge of any violations. Violations of the ECRA can result in
criminal penalties of up to $1 million and civil penalties of $300,000 (or twice the value of the transaction) per individual violation.
FedEx is investing in improvements and updates to its export control compliance programs. However, the heightened focus on export
controls by the U.S. government increases FedEx’s exposure to potential regulatory penalties and could result in higher compliance
costs. See “Recent Developments” below for information regarding a lawsuit recently filed by FedEx against the U.S. Department of
Commerce relating to the enforcement of prohibitions contained in the EARs.
Customs. Our activities, including customs brokerage and freight forwarding, are subject to regulation by U.S. Customs and Border
Protection and the TSA within the Department of Homeland Security (customs brokerage and security issues), the U.S. Federal
Maritime Commission (ocean freight forwarding) and the DOT (air freight forwarding). Our offshore operations are subject to similar
regulation by the regulatory authorities of foreign jurisdictions.
Labor. All U.S. employees at FedEx Express are covered by the Railway Labor Act of 1926, as amended (the “RLA”), while labor
relations within the U.S. at our other companies are governed by the National Labor Relations Act of 1935, as amended (the
“NLRA”). Under the RLA, groups that wish to unionize must do so across nationwide classes of employees. The RLA also requires
mandatory government-led mediation of contract disputes supervised by the National Mediation Board before a union can strike or an
employer can replace employees or impose contract terms. This part of the RLA helps minimize the risk of strikes that would shut
down large portions of the economy. Under the NLRA, employees can unionize in small localized groups, and government-led
mediation is not a required step in the negotiation process.
- 20 -
The RLA was originally passed to govern railroad and express carrier labor negotiations. As transportation systems evolved, the law
expanded to cover airlines, which are the dominant national transportation systems of today. As an air express carrier with an
integrated air/ground network, FedEx Express and its employees have been covered by the RLA since the founding of the company in
1971. The purpose of the RLA is to offer employees a process by which to unionize (if they choose) and engage in collective
bargaining while also protecting global commerce from damaging work stoppages and delays. Specifically, the RLA ensures that an
entire transportation system, such as at FedEx Express, cannot be shut down by the actions of a local segment of the network.
The U.S. Congress has, in the past, considered adopting changes in labor laws that would make it easier for unions to organize units of
our employees. For example, there is always a possibility that Congress could remove most FedEx Express employees from the
jurisdiction of the RLA, thereby exposing the FedEx Express network to sporadic labor disputes and the risk that small groups of
employees could disrupt the entire air/ground network. In addition, federal and state governmental agencies, such as the National
Mediation Board and the NLRB, have and may continue to take actions that could make it easier for our employees to organize under
the RLA or NLRA. For a description of these potential labor law changes, see Item 1A of this Annual Report on Form 10-K (“Risk
Factors”).
Data Protection. Recently, there has been heightened regulatory and enforcement focus on data protection in the U.S. (at both the state
and federal level) and abroad. For example, the EU’s General Data Protection Regulation (“GDPR”), which became effective in May
2018, greatly increases the jurisdictional reach of EU law and adds a broad array of requirements related to personal data, including
individual notice and opt-out preferences and the public disclosure of significant data breaches. Additionally, violations of the GDPR
can result in fines of as much as 4% of a company’s annual revenue. Other governments have enacted or are enacting similar data
protection laws, and are considering data localization laws that require data to stay within their borders. For more information
regarding data protection regulation, see Item 1A of this Annual Report on Form 10-K (“Risk Factors”).
Recent Developments
On June 24, 2019, FedEx filed suit in U.S. District Court in the District of Columbia seeking to enjoin the U.S. Department of
Commerce from enforcing prohibitions contained in the EARs against FedEx. FedEx believes that the EARs violate common carriers’
rights to due process under the Fifth Amendment of the U.S. Constitution as they unreasonably hold common carriers strictly liable for
shipments that may violate the EARs without requiring evidence that the carriers had knowledge of any violations.
ITEM 1A. RISK FACTORS
We present information about our risk factors on pages 85 through 95 of this Annual Report on Form 10-K.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
FedEx Express Segment
FedEx Express’s principal owned and leased properties include its aircraft, vehicles, major sorting and handling facilities,
administration buildings, FedEx Drop Boxes and data processing and telecommunications equipment.
- 21 -
Aircraft and Vehicles
As of May 31, 2019, FedEx Express’s aircraft fleet consisted of the following:
Description
Boeing B777F
Boeing MD11
Boeing MD10-30
Boeing MD10-10
Boeing 767F
Airbus A300-600
Airbus A310-300
Boeing B757-200
ATR-72
ATR-42
Cessna 208B
Total
Owned
Leased
Total
Maximum Gross
Structural Payload
(Pounds per Aircraft)
35
47
13
20
73
39
10
119
21
25
237
639
3
10
—
—
—
29
—
—
—
—
—
42
38 (1)
57
13
20
73 (1)
68
10
119
21
25
237
681
233,300
192,600
175,900
137,500
127,100
106,600
83,170
63,000
17,970
12,070
2,830
(1)
Includes one aircraft not currently in operation and undergoing pre-service modification.
At May 31, 2019, FedEx Express operated approximately 91,000 vehicles (including approximately 27,000 owner-operated vehicles
that support TNT Express) in its global network.
Aircraft Purchase Commitments
The following table is a summary of the number and type of aircraft we were committed to purchase as of May 31, 2019, with the year
of expected delivery:
2020
2021
2022
2023
2024
Thereafter
Total
Cessna
SkyCourier 408 ATR 72-600F
—
12
12
12
14
—
50
—
5
6
6
6
7
30
B767F(1)
B777F(2)
Total
17
18
12
6
—
—
53
5
2
3
4
4
2
20
22
37
33
28
24
9
153
(1) As of May 31, 2019, our obligation to purchase five B767F aircraft was conditioned upon there being no event that causes FedEx
Express or its employees not to be covered by the RLA.
(2) As of May 31, 2019, our obligation to purchase six B777F aircraft was conditioned upon there being no event that causes FedEx
Express or its employees not to be covered by the RLA.
As of May 31, 2019, we had $1.1 billion in deposits and progress payments on aircraft purchases and other planned aircraft-related
transactions. See Note 17 of the accompanying consolidated financial statements for more information about our purchase
commitments and options.
On June 24, 2019, FedEx Express exercised options to purchase an additional six B767F aircraft for delivery in 2022.
- 22 -
Lease
Expiration
Year
2036
2028
2028
2021
2030
2036
2031
Sorting and Handling Facilities
At May 31, 2019, FedEx Express operated the following major sorting and handling facilities:
Location
Primary
Memphis, Tennessee
National
Indianapolis, Indiana
Miami, Florida(2)
Regional
Fort Worth, Texas
Acres
Square
Feet
Sorting
Capacity
(per hour)(1)
800
3,607,973
484,000
452
2,509,000
184,000
Lessor
Memphis-Shelby County
Airport Authority
Indianapolis Airport
Authority
29
143,322
7,000 Aero Miami FX, LLC
168
948,000
Newark, New Jersey
70
595,000
Oakland, California
Greensboro, N. Carolina
75
165
448,935
593,000
156,000
76,000
Fort Worth Alliance Airport
Authority
Port Authority of New York
and New Jersey
63,000 City of Oakland
23,000
Piedmont Triad Airport
Authority
Metropolitan
Chicago, Illinois
Los Angeles, California
International
Anchorage, Alaska(4)
Paris, France(5)
Cologne, Germany(5)
Guangzhou, China(6)
Osaka, Japan(6)
Toronto, Canada(7)
(1) Documents and packages.
54
34
481,350
305,300
23,000 City of Chicago
57,000 City of Los Angeles
2028
2021/2025(3)
64
332,000
25,000
State of Alaska,
Department of
Transportation and
Public Facilities
111
11
155
1,238,000
325,000
873,006
17
29
425,206
341,881
63,000 Aeroports de Paris
20,000 Cologne Bonn Airport
56,000
Guangdong Airport
Management Corp.
9,000 Kansai Airports
13,000
Greater Toronto Airports
Authority
2023
2048
2040
2029
2024
2022
(2) Handles international express package and freight shipments to and from Latin America and the Caribbean.
(3) Property is held under two separate leases — the lease for the sorting and handling facility expires in 2021, and the lease for the
ramp expansion expires in 2025.
(4) Handles international express package and freight shipments to and from Asia, Europe and North America.
(5) Handles intra-Europe express package and freight shipments, as well as international express package and freight shipments to
and from Europe.
(6) Handles intra-Asia express package and freight shipments, as well as international express package and freight shipments to and
from Asia.
(7) Handles intra-Canada express package and freight shipments, as well as international express package and freight shipments to
and from Canada.
FedEx Express’s primary sorting facility, which serves as the center of its multiple hub-and-spoke system, is located at the Memphis
International Airport. FedEx Express’s facilities at the Memphis International Airport also include aircraft hangars, aircraft ramp
areas, vehicle parking areas, flight training and fuel facilities, the FedEx Cold Chain Center, administrative offices and warehouse
space.
- 23 -
FedEx Express leases these facilities from the Memphis-Shelby County Airport Authority (the “Authority”). The lease obligates
FedEx Express to maintain and insure the leased property and to pay all related taxes, assessments and other charges. The lease is
subordinate to, and FedEx Express’s rights thereunder could be affected by, any future lease or agreement between the Authority and
the U.S. government.
FedEx Express has additional major international sorting-and-handling facilities located at Narita Airport in Tokyo and Stansted
Airport outside London. FedEx Express also has a substantial presence at airports in Hong Kong, Taiwan and Dubai.
TNT Express operates a central air hub near Liege, Belgium and a central European road hub in Duiven, The Netherlands.
Administrative and Other Properties and Facilities
The World Headquarters of FedEx Express is located in southeastern Shelby County, Tennessee. FedEx Express international
headquarters are located in Hoofddorp, The Netherlands. As of May 31, 2019, FedEx Express owned or leased 656 facilities for city
station operations in the U.S. In addition, 521 city stations are owned or leased throughout FedEx Express’s international network.
The majority of these leases are for terms of five to ten years. City stations serve as a sorting and distribution center for a particular
city or region. We believe that suitable alternative facilities are available in each locale on satisfactory terms, if necessary.
As of May 31, 2019, TNT Express had over 780 facilities worldwide, including road hubs, air hubs, depots and office facilities. These
facilities are strategically located to cover the geographic areas served by TNT Express.
As of May 31, 2019, FedEx Express had approximately 36,000 Drop Boxes. FedEx Express customers can also ship from
approximately 31,000 staffed drop-off locations, including FedEx Office stores and FedEx Authorized ShipCenters. Internationally,
FedEx Express had approximately 48,000 drop-off locations, including approximately 27,000 TNT Express drop-off locations.
FedEx Ground Segment
FedEx Ground’s corporate offices are located in the Pittsburgh, Pennsylvania area. As of May 31, 2019, FedEx Ground owned or
leased 619 facilities, including 39 hubs. In addition, approximately 69,000 vehicles owned or leased by service providers support
FedEx Ground’s business. Of the 421 facilities that supported FedEx Home Delivery as of May 31, 2019, 388 were co-located with
existing FedEx Ground facilities. Leased facilities generally have terms of five years or less. The 39 hub facilities are strategically
located to cover the geographic area served by FedEx Ground. The hub facilities average approximately 483,000 square feet and range
in size from approximately 107,000 to 1,054,000 square feet.
FedEx Freight Segment
FedEx Freight’s corporate headquarters are located in Memphis, Tennessee, with some administrative offices in Harrison, Arkansas.
As of May 31, 2019, FedEx Freight operated approximately 28,000 vehicles and 373 service centers, which are strategically located to
provide service throughout North America. These facilities range in size from approximately 1,000 to 273,000 square feet of office
and dock space.
FedEx Services Segment
FedEx Services’ corporate headquarters are located in Memphis, Tennessee. FedEx Services leases state-of-the-art technology centers
in Collierville, Tennessee and Colorado Springs, Colorado. These facilities house personnel responsible for strategic software
development and other functions that support FedEx’s technology and e-commerce solutions.
FedEx Office’s corporate headquarters are located in Plano, Texas in leased facilities. As of May 31, 2019, FedEx Office operated
approximately 2,100 customer-facing stores and also operated 31 centralized production centers. Substantially all FedEx Office stores
are leased, generally for terms of five to ten years with varying renewal options. FedEx Office stores are generally located in strip
malls, office buildings or stand-alone structures and customer-facing stores average approximately 3,300 square feet in size.
The FedEx Authorized ShipCenter program offers U.S. domestic and international FedEx Express and FedEx Ground shipping and
drop-off services through a network of over 5,000 franchised and independent “pack and ship” retail locations. Additionally, FedEx
Services has an agreement with Office Depot, Inc. to offer U.S. domestic and international FedEx Express and FedEx Ground
shipping and drop-off services at Office Depot and OfficeMax retail locations (approximately 1,300 locations).
During 2018, we entered into an agreement to place up to 500 new FedEx Office locations within select U.S. Walmart stores
nationwide. As of May 31, 2019, we have opened over 200 FedEx Office locations inside Walmart stores.
- 24 -
FedEx Logistics
FedEx Logistics’ corporate headquarters are located in Memphis, Tennessee. As of May 31, 2019, FedEx Trade Networks Transport
& Brokerage had approximately 150 offices in 130 service locations throughout North America and in Africa, Asia-Pacific, Europe,
India, Latin America and the Middle East. In addition, as of May 31, 2019, FedEx Supply Chain had approximately 110 facilities
through which it operates its supply chain logistics services.
ITEM 3. LEGAL PROCEEDINGS
FedEx and its subsidiaries are subject to legal proceedings and claims that arise in the ordinary course of their business. For a
description of certain pending legal proceedings, see Note 18 of the accompanying consolidated financial statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
- 25 -
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Information regarding executive officers of FedEx is as follows:
Name and Office
Age
Positions and Offices Held and Business Experience
Frederick W. Smith
Chairman and Chief Executive
Officer
74 Chairman and Chief Executive Officer of FedEx since January 1998; Chairman of FedEx
Express since 1975; President of FedEx from January 1998 to January 2017; Chairman,
President and Chief Executive Officer of FedEx Express from April 1983 to January
1998; Chief Executive Officer of FedEx Express from 1977 to January 1998; and
President of FedEx Express from June 1971 to February 1975.
Mark R. Allen
Executive Vice President, General
Counsel and Secretary
63
Jill C. Brannon
Executive Vice President — Chief
Sales Officer
55
Executive Vice President, General Counsel and Secretary of FedEx since October 2017;
Executive Vice President, General Counsel — Select of FedEx from September 2017 to
October 2017; Senior Vice President, Legal International of FedEx Express from July
2010 to September 2017; Vice President, Legal — Europe, Middle East, Africa and
Indian Subcontinent Region of FedEx Express from October 2000 to July 2010; Vice
President, Legal — Asia Pacific of FedEx Express from 1996 to October 2000; and
various legal positions with FedEx Express from 1982 to 1996.
Executive Vice President — Chief Sales Officer of FedEx since March 2019; Senior Vice
President, Sales — Europe, Middle East, Africa and Indian Subcontinent Region of
FedEx Express from May 2016 to March 2019; Senior Vice President — Sales of FedEx
Services from July 2006 to May 2016; Vice President — Sales of FedEx Services from
July 2003 to June 2006; Vice President — Solutions of FedEx Services from July 2002 to
June 2003; Vice President — Marketing of FedEx Services from June 2001 to June 2002;
and various positions in sales, operations, marketing and strategic planning from 1985 to
May 2002.
Brie A. Carere
Executive Vice President — Chief
Marketing and Communications
Officer
Robert B. Carter
Executive Vice President —
FedEx Information Services and
Chief Information Officer
Donald F. Colleran
President and Chief Executive
Officer, FedEx Express
41
60
63
Executive Vice President — Chief Marketing and Communications Officer of FedEx
since January 2019; Senior Vice President, Global Portfolio Marketing of FedEx Services
from October 2016 to December 2018; Vice President, Marketing, Customer Experience
and Corporate Communications for FedEx Express Canada from October 2010 to
October 2016; and various positions in marketing, customer experience and strategy with
FedEx Express Canada from 2001 to October 2010.
Executive Vice President — FedEx Information Services and Chief Information Officer
of FedEx since January 2007; Executive Vice President and Chief Information Officer of
FedEx from June 2000 to January 2007; Corporate Vice President and Chief Technology
Officer of FedEx from February 1998 to June 2000; Vice President — Corporate Systems
Development of FedEx Express from September 1993 to February 1998; and Managing
Director — Systems Development of FedEx Express from April 1993 to September 1993.
Mr. Carter serves as a director of New York Life Insurance Company, a mutual life
insurance company.
President and Chief Executive Officer of FedEx Express since March 2019; Executive
Vice President — Chief Sales Officer of FedEx from January 2017 to March 2019;
Executive Vice President — Global Sales of FedEx Services from 2006 to January 2017;
Senior Vice President — International Sales from 2003 to 2006; Senior Vice President —
Canada of FedEx Express from 2000 to 2003; Vice President — Sales/APAC from 1997
to 2000; and various management positions in sales with FedEx Express from 1989 to
1997. Mr. Colleran serves as a director of ABM Industries Incorporated, a provider of
facility solutions, and as a director of EastGroup Properties, Inc., an equity real estate
investment trust.
- 26 -
Name and Office
Alan B. Graf, Jr.
Executive Vice President and
Chief Financial Officer
Age
65
Henry J. Maier
President and Chief Executive
Officer, FedEx Ground
65
Positions and Offices Held and Business Experience
Executive Vice President and Chief Financial Officer of FedEx since January 1998;
Executive Vice President and Chief Financial Officer of FedEx Express from February
1996 to January 1998; Senior Vice President and Chief Financial Officer of FedEx Express
from December 1991 to February 1996; Vice President and Treasurer of FedEx Express
from August 1987 to December 1991; and various management positions in finance and a
senior financial analyst at FedEx Express from 1980 to 1987. Mr. Graf serves as a director
of Mid-America Apartment Communities, Inc., a real estate investment trust that focuses on
acquiring, constructing, developing, owning and operating apartment communities, and as a
director of NIKE, Inc., a designer and marketer of athletic footwear, apparel, equipment and
accessories for sports and fitness activities.
President and Chief Executive Officer of FedEx Ground since June 2013; Executive Vice
President — Strategic Planning and Communications of FedEx Ground from September
2009 to June 2013; Senior Vice President — Strategic Planning and Communications of
FedEx Ground from December 2006 to September 2009; Vice President — Marketing of
FedEx Services from March 2000 to December 2006; Vice President — Marketing and
Communications of FedEx Ground from June 1999 to March 2000; and various
management positions in logistics, sales, marketing and communications with RPS, Inc.
and Caliber Logistics, Inc. from 1986 to 1999. Mr. Maier serves as a director of Kansas
City Southern, a transportation holding company that has railroad investments in the U.S.,
Mexico and Panama.
John A. Smith
President and Chief Executive
Officer, FedEx Freight
Corporation
Rajesh Subramaniam
President and Chief Operating
Officer
57
53
President and Chief Executive Officer of FedEx Freight since August 2018; President and
Chief Executive Officer — Select of FedEx Freight from May 2018 to August 2018;
Senior Vice President — Operations of FedEx Freight from May 2015 to May 2018; Vice
President — Safety, Fleet Maintenance and Facilities Services of FedEx Freight from
June 2011 to May 2015; Vice President — Operations of FedEx National LTL, Inc. from
April 2010 to June 2011; Vice President — Transportation/Fleet Maintenance of FedEx
National LTL, Inc. from March 2008 to April 2010; and various management positions at
FedEx Freight from 2000 to 2008.
President and Chief Operating Officer since March 2019; President and Chief Executive
Officer of FedEx Express from January 2019 to March 2019; Executive Vice President —
Chief Marketing and Communications Officer of FedEx from January 2017 to December
2018; Executive Vice President — Marketing & Communications of FedEx Services
from 2013 to January 2017; Senior Vice President — Marketing from 2006 to 2013;
Senior Vice President — Canada of FedEx Express from 2003 to 2006; Vice President —
Marketing/APAC of FedEx Express from 2000 to 2003; Vice President — APAC, EC &
CS of FedEx Express from 1999 to 2000; and various management and marketing analyst
positions at FedEx Express from 1991 to 1999. Mr. Subramaniam serves as a director of
First Horizon National Corporation, a financial services holding company.
Executive officers are elected by, and serve at the discretion of, the Board of Directors. There is no arrangement or understanding
between any executive officer and any person, other than a director or executive officer of FedEx or of any of its subsidiaries acting in
his or her official capacity, pursuant to which any executive officer was selected. There are no family relationships between any
executive officer and any other executive officer or director of FedEx, or any person nominated or chosen to become a director or
executive officer.
- 27 -
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
FedEx’s common stock is listed on the New York Stock Exchange under the symbol “FDX.” As of July 12, 2019, there were 11,882
holders of record of our common stock.
We expect to continue to pay regular quarterly cash dividends, though each quarterly dividend payment is subject to review and
approval by our Board of Directors. We evaluate our dividend payment amount on an annual basis. There are no material restrictions
on our ability to declare dividends, nor are there any material restrictions on the ability of our subsidiaries to transfer funds to us in the
form of cash dividends, loans or advances.
The following table provides information on FedEx’s repurchases of our common stock during the fourth quarter of 2019.
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Mar. 1-31, 2019
Apr. 1-30, 2019
May 1-31, 2019
Total
Total Number of
Shares Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of
Publicly
Announced
Programs
Maximum
Number of
Shares That May
Yet Be Purchased
Under the
Programs
210,000 $
210,000
220,000
640,000 $
177.75
190.59
174.54
180.86
210,000
210,000
220,000
640,000
5,527,200
5,317,200
5,097,200
The repurchases were made under the stock repurchase program approved by our Board of Directors and announced on January 26,
2016 and through which we are authorized to purchase, in the open market or in privately negotiated transactions, up to an aggregate
of 25 million shares of our common stock. As of July 12, 2019, 5.1 million shares remained authorized for purchase under the January
2016 stock repurchase program, which is the only such program that currently exists. The program does not have an expiration date.
- 28 -
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data as of and for the five years ended May 31, 2019 is presented on pages 149-150 of this Annual Report on
Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Management’s discussion and analysis of results of operations and financial condition is presented on pages 50 through 96 of this
Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative information about market risk is presented on page 148 of this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FedEx’s consolidated financial statements, together with the notes thereto and the report of Ernst & Young LLP dated July 16, 2019
thereon, are presented on pages 100 through 147 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Management’s Evaluation of Disclosure Controls and Procedures
The management of FedEx, with the participation of our principal executive and financial officers, has evaluated the effectiveness of
our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms, including ensuring that such information is accumulated and communicated to FedEx management as appropriate to
allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have
concluded that such disclosure controls and procedures were effective as of May 31, 2019 (the end of the period covered by this
Annual Report on Form 10-K).
Assessment of Internal Control Over Financial Reporting
Management’s report on our internal control over financial reporting is presented on page 97 of this Annual Report on Form 10-K.
The report of Ernst & Young LLP with respect to our internal control over financial reporting is presented on page 98 of this Annual
Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
During our fiscal quarter ended May 31, 2019, no change occurred in our internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
- 29 -
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding members of the Board of Directors and certain other aspects of FedEx’s corporate governance (such as the
procedures by which FedEx’s stockholders may recommend nominees to the Board of Directors and information about the Audit
Committee, including its members and our “audit committee financial expert”) will be presented in FedEx’s definitive proxy statement
for its 2019 annual meeting of stockholders, which will be held on September 23, 2019, and is incorporated herein by reference.
Information regarding executive officers of FedEx is included above in Part I of this Annual Report on Form 10-K under the caption
“Information About Our Executive Officers” pursuant to the Instruction to Item 401 of Regulation S-K and General Instruction G(3)
of Form 10-K. Information regarding FedEx’s Code of Business Conduct and Ethics is included above in Part I, Item 1 of this Annual
Report on Form 10-K under the caption “Reputation and Responsibility — Governance.”
ITEM 11. EXECUTIVE COMPENSATION
Information regarding director and executive compensation will be presented in FedEx’s definitive proxy statement for its 2019
annual meeting of stockholders, which will be held on September 23, 2019, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information regarding security ownership of certain beneficial owners and management and related stockholder matters, as well as
equity compensation plan information, will be presented in FedEx’s definitive proxy statement for its 2019 annual meeting of
stockholders, which will be held on September 23, 2019, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information regarding certain relationships and transactions with related persons (including FedEx’s policies and procedures for the
review and preapproval of related person transactions) and director independence will be presented in FedEx’s definitive proxy
statement for its 2019 annual meeting of stockholders, which will be held on September 23, 2019, and is incorporated herein by
reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information regarding the fees for services provided by Ernst & Young LLP during 2019 and 2018 and the Audit Committee’s
administration of the engagement of Ernst & Young LLP, including the Committee’s preapproval policies and procedures (such as
FedEx’s Policy on Engagement of Independent Auditor), will be presented in FedEx’s definitive proxy statement for its 2019 annual
meeting of stockholders, which will be held on September 23, 2019, and is incorporated herein by reference.
- 30 -
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) and (2) Financial Statements; Financial Statement Schedules
PART IV
FedEx’s consolidated financial statements, together with the notes thereto and the report of Ernst & Young LLP dated July 16, 2019
thereon, are listed on page 49 and presented on pages 100 through 147 of this Annual Report on Form 10-K. FedEx’s “Schedule II —
Valuation and Qualifying Accounts,” together with the report of Ernst & Young LLP dated July 16, 2019 thereon, is presented on
pages 151 through 152 of this Annual Report on Form 10-K. All other financial statement schedules have been omitted because they
are not applicable or the required information is included in FedEx’s consolidated financial statements or the notes thereto.
(a)(3) Exhibits
Exhibit
Number
*2.1
3.1
3.2
** 4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Description of Exhibit
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
Commitment Agreement dated as of May 3, 2018, by and among FedEx, Metropolitan Life Insurance Company and
State Street Global Advisors Trust Company, in its capacity as the independent fiduciary of the FedEx Corporation
Employees’ Pension Plan and the FedEx Freight Pension Plan. Schedules and other attachments to this exhibit have
been omitted pursuant to Item 601(a)(5) of Regulation S-K because the information contained therein is not material
and is not otherwise publicly disclosed. FedEx will furnish supplementally copies of such attachments to the SEC or
its staff upon request. (Filed as Exhibit 2.1 to FedEx’s FY18 Annual Report on Form 10-K, and incorporated herein
by reference.)
Certificate of Incorporation and Bylaws
Third Amended and Restated Certificate of Incorporation of FedEx. (Filed as Exhibit 3.1 to FedEx’s Current Report
on Form 8-K dated September 26, 2011 and filed September 28, 2011, and incorporated herein by reference.)
Amended and Restated Bylaws of FedEx. (Filed as Exhibit 3.1 to FedEx’s Current Report on Form 8-K dated and
filed March 11, 2019, and incorporated herein by reference.)
Long-Term Debt Instruments
Description of Capital Stock and Debt Securities.
Indenture, dated as of August 8, 2006, between FedEx, the Guarantors named therein and The Bank of New York
Mellon Trust Company, N.A. (formerly, The Bank of New York Trust Company, N.A.), as trustee. (Filed as
Exhibit 4.3 to FedEx’s Registration Statement on Form S-3 filed on September 19, 2012, and incorporated herein by
reference.)
Supplemental Indenture No. 3, dated as of July 27, 2012, between FedEx, the Guarantors named therein and The
Bank of New York Mellon Trust Company, N.A., as trustee. (Filed as Exhibit 4.5 to FedEx’s Registration Statement
on Form S-3 filed on September 19, 2012, and incorporated herein by reference.)
Form of 2.625% Note due 2022. (Included in Exhibit 4.5 to FedEx’s Registration Statement on Form S-3 filed on
September 19, 2012, and incorporated herein by reference.)
Form of 3.875% Note due 2042. (Included in Exhibit 4.5 to FedEx’s Registration Statement on Form S-3 filed on
September 19, 2012, and incorporated herein by reference.)
Supplemental Indenture No. 4, dated as of April 11, 2013, between FedEx, the Guarantors named therein and The
Bank of New York Mellon Trust Company, N.A., as trustee. (Filed as Exhibit 4.1 to FedEx’s Current Report on
Form 8-K dated and filed April 11, 2013, and incorporated herein by reference.)
Form of 2.70% Note due 2023. (Included in Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
April 11, 2013, and incorporated herein by reference.)
Form of 4.10% Note due 2043. (Included in Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
April 11, 2013, and incorporated herein by reference.)
Supplemental Indenture No. 5, dated as of January 9, 2014, between FedEx, the Guarantors named therein and The
Bank of New York Mellon Trust Company, N.A., as trustee. (Filed as Exhibit 4.1 to FedEx’s Current Report on
Form 8-K dated and filed January 9, 2014, and incorporated herein by reference.)
- 31 -
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
Form of 4.000% Note due 2024. (Included in Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
January 9, 2014, and incorporated herein by reference.)
Form of 4.900% Note due 2034. (Included in Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
January 9, 2014, and incorporated herein by reference.)
Form of 5.100% Note due 2044. (Included in Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
January 9, 2014, and incorporated herein by reference.)
Supplemental Indenture No. 6, dated as of January 9, 2015, between FedEx, the Guarantors named therein and The
Bank of New York Mellon Trust Company, N.A., as trustee. (Filed as Exhibit 4.1 to FedEx’s Current Report on
Form 8-K dated and filed January 9, 2015, and incorporated herein by reference.)
Form of 2.300% Note due 2020. (Included in Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
January 9, 2015, and incorporated herein by reference.)
Form of 3.200% Note due 2025. (Included in Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
January 9, 2015, and incorporated herein by reference.)
Form of 3.900% Note due 2035. (Included in Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
January 9, 2015, and incorporated herein by reference.)
Form of 4.100% Note due 2045. (Included in Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
January 9, 2015, and incorporated herein by reference.)
Form of 4.500% Note due 2065. (Included in Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
January 9, 2015, and incorporated herein by reference.)
Indenture, dated as of October 23, 2015, between FedEx, the Guarantors named therein and Wells Fargo Bank,
National Association, as trustee. (Filed as Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed
October 23, 2015, and incorporated herein by reference.)
Supplemental Indenture No. 1, dated as of October 23, 2015, between FedEx, the Guarantors named therein and
Wells Fargo Bank, National Association, as trustee. (Filed as Exhibit 4.2 to FedEx’s Current Report on Form 8-K
dated and filed October 23, 2015, and incorporated herein by reference.)
Form of 4.750% Note due 2045. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
October 23, 2015, and incorporated herein by reference.)
Supplemental Indenture No. 2, dated as of March 24, 2016, between FedEx, the Guarantors named therein and
Wells Fargo Bank, National Association, as trustee. (Filed as Exhibit 4.2 to FedEx’s Current Report on Form 8-K
dated and filed March 24, 2016, and incorporated herein by reference.)
Form of 3.250% Note due 2026. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
March 24, 2016, and incorporated herein by reference.)
Form of 4.550% Note due 2046. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
March 24, 2016, and incorporated herein by reference.)
Supplemental Indenture No. 3, dated as of April 11, 2016, between FedEx, the Guarantors named therein, Wells
Fargo Bank, National Association, as trustee, and Elavon Financial Services Limited, UK Branch, as paying agent.
(Filed as Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed April 11, 2016, and incorporated
herein by reference.)
Form of 0.500% Note due 2020. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
April 11, 2016, and incorporated herein by reference.)
Form of 1.000% Note due 2023. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
April 11, 2016, and incorporated herein by reference.)
Form of 1.625% Note due 2027. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
April 11, 2016, and incorporated herein by reference.)
Supplemental Indenture No. 4, dated as of January 6, 2017, between FedEx, the Guarantors named therein and
Wells Fargo Bank, National Association, as trustee. (Filed as Exhibit 4.2 to FedEx’s Current Report on Form 8-K
dated and filed January 6, 2017, and incorporated herein by reference.)
4.30
Form of 3.300% Note due 2027. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
January 6, 2017, and incorporated herein by reference.)
- 32 -
4.31
4.32
4.33
4.34
4.35
4.36
4.37
4.38
4.39
4.40
Form of 4.400% Note due 2047. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
January 6, 2017, and incorporated herein by reference.)
Supplemental Indenture No. 5, dated as of January 31, 2018, between FedEx, the Guarantors named therein and
Wells Fargo Bank, National Association, as trustee. (Filed as Exhibit 4.2 to FedEx’s Current Report on Form 8-K
dated and filed January 31, 2018, and incorporated herein by reference.)
Form of 3.400% Note due 2028. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
January 31, 2018, and incorporated herein by reference.)
Form of 4.050% Note due 2048. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
January 31, 2018, and incorporated herein by reference.)
Supplemental Indenture No. 6, dated as of October 17, 2018, between FedEx, the Guarantors named therein and
Wells Fargo Bank, National Association, as trustee. (Filed as Exhibit 4.2 to FedEx’s Current Report on Form 8-K
dated and filed October 17, 2018, and incorporated herein by reference.)
Form of 4.200% Note due 2028. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
October 17, 2018, and incorporated herein by reference.)
Form of 4.950% Note due 2048. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
October 17, 2018, and incorporated herein by reference.)
Supplemental Indenture No. 7, dated as of January 16, 2019, between FedEx, the Guarantors named therein and
Wells Fargo Bank, National Association, as trustee. (Filed as Exhibit 4.2 to FedEx’s Current Report on Form 8-K
dated and filed January 16, 2019, and incorporated herein by reference.)
Form of 3.400% Note due 2022. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
January 16, 2019, and incorporated herein by reference.)
Supplemental Indenture No. 8, dated as of January 18, 2019, between FedEx, the Guarantors named therein, Wells
Fargo Bank, National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent.
(Filed as Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed January 18, 2019, and incorporated
herein by reference.)
4.41
Form of 0.700% Note due 2022. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed
January 18, 2019, and incorporated herein by reference.)
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
Facility Lease Agreements
Composite Lease Agreement dated May 21, 2007 (but effective as of January 1, 2007) between the Memphis-
Shelby County Airport Authority and FedEx Express (the “Composite Lease Agreement”). (Filed as Exhibit 10.1 to
FedEx’s FY07 Annual Report on Form 10-K, and incorporated herein by reference.)
First Amendment dated December 29, 2009 (but effective as of September 1, 2008) to the Composite Lease
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY10 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Second Amendment dated March 30, 2010 (but effective as of June 1, 2009) and Third Amendment dated April 27,
2010 (but effective as of July 1, 2009), each to the Composite Lease Agreement. (Filed as Exhibit 10.3 to FedEx’s
FY10 Annual Report on Form 10-K, and incorporated herein by reference.)
Fourth Amendment dated December 22, 2011 (but effective as of December 15, 2011) to the Composite Lease
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY12 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Fifth Amendment dated December 19, 2012 (but effective as of January 1, 2013) to the Composite Lease
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY13 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Sixth Amendment dated September 19, 2013 (but effective as of July 1, 2014) to the Composite Lease Agreement.
(Filed as Exhibit 10.5 to FedEx’s FY14 Second Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Seventh Amendment dated June 1, 2016 (but effective as of April 1, 2016) to the Composite Lease Agreement.
(Filed as Exhibit 10.7 to FedEx’s FY16 Annual Report on Form 10-K, and incorporated herein by reference.)
Eighth Amendment dated July 29, 2016 (but effective as of April 1, 2017) to the Composite Lease Agreement.
(Filed as Exhibit 10.14 to FedEx’s FY17 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
- 33 -
10.9
10.10
10.11
**10.12
Ninth Amendment dated August 14, 2017 (but effective as of September 1, 2017) to the Composite Lease
Agreement. (Filed as Exhibit 10.9 to FedEx’s FY18 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Tenth Amendment dated May 22, 2018 (but effective as of May 1, 2018) to the Composite Lease Agreement. (Filed
as Exhibit 10.10 to FedEx’s FY18 Annual Report on Form 10-K, and incorporated herein by reference.)
Eleventh Amendment dated January 22, 2019 (but effective as of January 1, 2019) to the Composite Lease
Agreement. (Filed as Exhibit 10.9 to FedEx’s FY19 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Twelfth Amendment dated April 9, 2019 (but effective as of April 1, 2019) to the Composite Lease Agreement.
Attachments to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K because the
information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish
supplementally copies of such attachments to the SEC or its staff upon request.
*10.13
10.14
10.15
*10.16
*10.17
*10.18
*10.19
*10.20
*10.21
*10.22
*10.23
*10.24
Aircraft-Related Agreements
Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between The Boeing Company and FedEx
Express (the “Boeing 777 Freighter Purchase Agreement”). (Filed as Exhibit 10.1 to FedEx’s FY07 Second Quarter
Report on Form 10-Q, and incorporated herein by reference.)
Supplemental Agreement No. 1 dated as of June 16, 2008, amending the Boeing 777 Freighter Purchase Agreement.
(Filed as Exhibit 10.13 to FedEx’s FY08 Annual Report on Form 10-K, and incorporated herein by reference.)
Supplemental Agreement No. 2 dated as of July 14, 2008 to the Boeing 777 Freighter Purchase Agreement. (Filed
as Exhibit 10.3 to FedEx’s FY09 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
Supplemental Agreement No. 3 dated as of December 15, 2008 (and related side letters) to the Boeing 777 Freighter
Purchase Agreement. (Filed as Exhibit 10.4 to FedEx’s FY09 Second Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Supplemental Agreement No. 4 dated as of January 9, 2009 (and related side letters) to the Boeing 777 Freighter
Purchase Agreement. (Filed as Exhibit 10.1 to FedEx’s FY09 Third Quarter Report on Form 10-Q, and incorporated
herein by reference.)
Side letters dated May 29, 2009 and May 19, 2009, each amending the Boeing 777 Freighter Purchase Agreement.
(Filed as Exhibit 10.17 to FedEx’s FY09 Annual Report on Form 10-K, and incorporated herein by reference.)
Supplemental Agreement No. 5 dated as of January 11, 2010 to the Boeing 777 Freighter Purchase Agreement.
(Filed as Exhibit 10.3 to FedEx’s FY10 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
Supplemental Agreement No. 6 dated as of March 17, 2010, Supplemental Agreement No. 7 dated as of March 17,
2010, and Supplemental Agreement No. 8 (and related side letters) dated as of April 30, 2010, each amending the
Boeing 777 Freighter Purchase Agreement. (Filed as Exhibit 10.22 to FedEx’s FY10 Annual Report on Form 10-K,
and incorporated herein by reference.)
Supplemental Agreement No. 9 dated as of June 18, 2010, Supplemental Agreement No. 10 dated as of June 18,
2010, Supplemental Agreement No. 11 (and related side letter) dated as of August 19, 2010, and Supplemental
Agreement No. 13 (and related side letter) dated as of August 27, 2010, each amending the Boeing 777 Freighter
Purchase Agreement. (Filed as Exhibit 10.1 to FedEx’s FY11 First Quarter Report on Form 10-Q, and incorporated
herein by reference.)
Supplemental Agreement No. 12 (and related side letter) dated as of September 3, 2010, Supplemental Agreement
No. 14 (and related side letter) dated as of October 25, 2010, and Supplemental Agreement No. 15 (and related side
letter) dated as of October 29, 2010, each amending the Boeing 777 Freighter Purchase Agreement. (Filed as
Exhibit 10.2 to FedEx’s FY11 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
Supplemental Agreement No. 16 (and related side letters) dated as of January 31, 2011, and Supplemental
Agreement No. 17 dated as of February 14, 2011, each amending the Boeing 777 Freighter Purchase Agreement.
(Filed as Exhibit 10.1 to FedEx’s FY11 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
Supplemental Agreement No. 18 (and related side letter) dated as of March 30, 2011, amending the Boeing 777
Freighter Purchase Agreement. (Filed as Exhibit 10.26 to FedEx’s FY11 Annual Report on Form 10-K, and
incorporated herein by reference.)
- 34 -
*10.25
*10.26
*10.27
*10.28
*10.29
*10.30
*10.31
*10.32
*10.33
*10.34
*10.35
*10.36
*10.37
*10.38
*10.39
*10.40
*10.41
Supplemental Agreement No. 19 (and related side letter) dated as of October 27, 2011, amending the Boeing 777
Freighter Purchase Agreement. (Filed as Exhibit 10.2 to FedEx’s FY12 Second Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Supplemental Agreement No. 20 (and related side letters) dated as of December 14, 2011, amending the Boeing 777
Freighter Purchase Agreement. (Filed as Exhibit 10.2 to FedEx’s FY12 Third Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Supplemental Agreement No. 21 dated as of June 29, 2012, amending the Boeing 777 Freighter Purchase
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY13 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Supplemental Agreement No. 22 (and related side letters) dated as of December 11, 2012, amending the Boeing 777
Freighter Purchase Agreement. (Filed as Exhibit 10.2 to FedEx’s FY13 Third Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Supplemental Agreement No. 23 (and related side letters) dated as of December 10, 2013, amending the Boeing 777
Freighter Purchase Agreement. (Filed as Exhibit 10.4 to FedEx’s FY14 Third Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Supplemental Agreement No. 24 (and related side letters) dated as of May 4, 2016, amending the Boeing 777
Freighter Purchase Agreement. (Filed as Exhibit 10.25 to FedEx’s FY16 Annual Report on Form 10-K, and
incorporated herein by reference.)
Supplemental Agreement No. 25 (and related side letters) dated as of June 10, 2016, amending the Boeing 777
Freighter Purchase Agreement. (Filed as Exhibit 10.13 to FedEx’s FY17 First Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Supplemental Agreement No. 26 (and related side letter) dated as of February 10, 2017, amending the Boeing
777 Freighter Purchase Agreement. (Filed as Exhibit 10.13 to FedEx’s FY17 Second Quarter Report on Form 10-Q,
and incorporated herein by reference.)
Supplemental Agreement No. 27 (and related side letter) dated as of October 12, 2017, amending the Boeing
777 Freighter Purchase Agreement. (Filed as Exhibit 10.11 to FedEx’s FY18 Second Quarter Report on Form 10-Q,
and incorporated herein by reference.)
Supplemental Agreement No. 28 (and related side letter) dated as of January 26, 2018, amending the Boeing
777 Freighter Purchase Agreement. (Filed as Exhibit 10.8 to FedEx’s FY18 Third Quarter Report on Form 10-Q,
and incorporated herein by reference.)
Supplemental Agreement No. 29 (and related side letters) dated as of February 2, 2018, amending the Boeing
777 Freighter Purchase Agreement. (Filed as Exhibit 10.9 to FedEx’s FY18 Third Quarter Report on Form 10-Q,
and incorporated herein by reference.)
Letter Agreement dated as of March 16, 2018, amending the Boeing 777 Freighter Purchase Agreement. (Filed as
Exhibit 10.34 to FedEx’s FY18 Annual Report on Form 10-K, and incorporated herein by reference.)
Supplemental Agreement No. 30 (and related side letters) dated as of June 18, 2018, amending the Boeing
777 Freighter Purchase Agreement. (Filed as Exhibit 10.8 to FedEx’s FY19 First Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Supplemental Agreement No. 31 dated as of September 14, 2018, amending the Boeing 777 Freighter Purchase
Agreement. (Filed as Exhibit 10.12 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated
herein by reference.)
Letter Agreement dated as of September 14, 2018, amending the Boeing 777 Freighter Purchase Agreement. (Filed
as Exhibit 10.13 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
Boeing 767-3S2 Freighter Purchase Agreement dated as of December 14, 2011 between The Boeing Company and
FedEx Express (the “Boeing 767-3S2 Freighter Purchase Agreement”). (Filed as Exhibit 10.1 to FedEx’s FY12
Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
Supplemental Agreement No. 1 (and related side letters) dated as of June 29, 2012, amending the Boeing 767-3S2
Freighter Purchase Agreement. (Filed as Exhibit 10.1 to FedEx’s FY13 First Quarter Report on Form 10-Q, and
incorporated herein by reference.)
- 35 -
*10.42
*10.43
*10.44
*10.45
*10.46
*10.47
*10.48
*10.49
*10.50
*10.51
*10.52
**^10.53
**^10.54
**^10.55
*10.56
*10.57
*10.58
*10.59
10.60
Supplemental Agreement No. 2 dated as of October 8, 2012, amending the Boeing 767-3S2 Freighter Purchase
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY13 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Supplemental Agreement No. 3 (and related side letters) dated as of December 11, 2012, amending the Boeing 767-
3S2 Freighter Purchase Agreement. (Filed as Exhibit 10.1 to FedEx’s FY13 Third Quarter Report on Form 10-Q,
and incorporated herein by reference.)
Supplemental Agreement No. 4 (and related side letter) dated as of December 10, 2013, amending the Boeing 767-
3S2 Freighter Purchase Agreement. (Filed as Exhibit 10.3 to FedEx’s FY14 Third Quarter Report on Form 10-Q,
and incorporated herein by reference.)
Supplemental Agreement No. 5 (and related side letters) dated as of September 29, 2014, amending the Boeing 767-
3S2 Freighter Purchase Agreement. (Filed as Exhibit 10.2 to FedEx’s FY15 Second Quarter Report on Form 10-Q,
and incorporated herein by reference.)
Letter Agreement dated as of January 22, 2015, amending the Boeing 767-3S2 Freighter Purchase Agreement.
(Filed as Exhibit 10.5 to FedEx’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
Supplemental Agreement No. 6 (and related side letters) dated as of July 21, 2015, amending the Boeing 767-3S2
Freighter Purchase Agreement. (Filed as Exhibit 10.5 to FedEx’s FY16 First Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Supplemental Agreement No. 7 dated as of April 18, 2016, amending the Boeing 767-3S2 Freighter Purchase
Agreement. (Filed as Exhibit 10.34 to FedEx’s FY16 Annual Report on Form 10-K, and incorporated herein by
reference.)
Supplemental Agreement No. 8 (and related side letters) dated as of June 10, 2016, amending the Boeing 767-3S2
Freighter Purchase Agreement. (Filed as Exhibit 10.12 to FedEx’s FY17 First Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Supplemental Agreement No. 9 dated as of February 16, 2017, amending the Boeing 767-3S2 Freighter Purchase
Agreement. (Filed as Exhibit 10.12 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated
herein by reference.)
Supplemental Agreement No. 10 dated as of May 10, 2017, amending the Boeing 767-3S2 Freighter Purchase
Agreement. (Filed as Exhibit 10.40 to FedEx’s FY17 Annual Report on Form 10-K, and incorporated herein by
reference.)
Supplemental Agreement No. 11 (and related side letters) dated as of June 18, 2018, amending the Boeing 767-3S2
Freighter Purchase Agreement. (Filed as Exhibit 10.7 to FedEx’s FY19 First Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Letter Agreement dated as of May 10, 2019, amending the Boeing 767-3S2 Freighter Purchase Agreement.
Letter Agreement dated as of May 29, 2019, amending the Boeing 767-3S2 Freighter Purchase Agreement.
Letter Agreement dated as of May 29, 2019, amending the Boeing 767-3S2 Freighter Purchase Agreement and the
Boeing 777 Freighter Purchase Agreement.
U.S. Postal Service Agreements
Transportation Agreement dated April 23, 2013 between the USPS and FedEx Express (the “USPS Transportation
Agreement”). (Filed as Exhibit 10.52 to FedEx’s FY13 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated May 28, 2013, amending the USPS Transportation Agreement. (Filed as Exhibit 10.53 to
FedEx’s FY13 Annual Report on Form 10-K, and incorporated herein by reference.)
Amendment dated June 24, 2013, amending the USPS Transportation Agreement. (Filed as Exhibit 10.1 to FedEx’s
FY14 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated October 10, 2013 (but effective as of September 30, 2013), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY14 Second Quarter Report on Form 10-Q/A (Amendment No. 1),
and incorporated herein by reference.)
Amendment dated October 15, 2013 (but effective as of October 10, 2013), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY14 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
- 36 -
*10.61
*10.62
*10.63
*10.64
*10.65
*10.66
*10.67
*10.68
*10.69
10.70
*10.71
*10.72
*10.73
*10.74
*10.75
*10.76
*10.77
Amendment dated November 7, 2013 (but effective as of October 1, 2013), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY14 Second Quarter Report on Form 10-Q/A (Amendment No. 1),
and incorporated herein by reference.)
Amendment dated November 7, 2013 (but effective as of December 15, 2013), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY14 Second Quarter Report on Form 10-Q/A (Amendment No. 1),
and incorporated herein by reference.)
Amendment dated December 16, 2013 (but effective as of November 4, 2013), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY14 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 16, 2013 (but effective as of December 2, 2013), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY14 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated March 27, 2014 (but effective as of January 6, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.38 to FedEx’s FY14 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated March 27, 2014 (but effective as of February 3, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.39 to FedEx’s FY14 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated March 27, 2014 (but effective as of March 3, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.40 to FedEx’s FY14 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated April 16, 2014 (but effective as of March 31, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.41 to FedEx’s FY14 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated May 27, 2014 (but effective as of April 28, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.42 to FedEx’s FY14 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated May 27, 2014 (but effective as of May 14, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.43 to FedEx’s FY14 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated June 25, 2014 (but effective as of June 2, 2014), amending the USPS Transportation Agreement.
(Filed as Exhibit 10.1 to FedEx’s FY15 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated June 25, 2014 (but effective as of June 2, 2014), amending the USPS Transportation Agreement.
(Filed as Exhibit 10.2 to FedEx’s FY15 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated September 9, 2014 (but effective as of June 27, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 9, 2014 (but effective as of September 30, 2013), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 9, 2014 (but effective as of June 27, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 24, 2014 (but effective as of June 30, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 30, 2014 (but effective as of July 28, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.7 to FedEx’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
- 37 -
*10.78
*10.79
*10.80
*10.81
*10.82
*10.83
*10.84
*10.85
*10.86
*10.87
*10.88
*10.89
*10.90
10.91
*10.92
*10.93
*10.94
Amendment dated October 1, 2014 (but effective as of September 1, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.8 to FedEx’s FY15 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 30, 2014 (but effective as of September 29, 2014), amending the USPS
Transportation Agreement. (Filed as Exhibit 10.9 to FedEx’s FY15 Second Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Amendment dated November 4, 2014 (but effective as of September 29, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.10 to FedEx’s FY15 Second Quarter Report on Form 10-Q, and incorporated
herein by reference.)
Amendment dated November 4, 2014 (but effective as of December 1, 2013), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.11 to FedEx’s FY15 Second Quarter Report on Form 10-Q, and incorporated
herein by reference.)
Amendment dated December 23, 2014 (but effective as of October 27, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 10, 2014 (but effective as of November 24, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 23, 2014 (but effective as of January 5, 2015), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated February 19, 2015 (but effective as of December 1, 2014), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY15 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated June 12, 2015 (but effective as of January 5, 2015), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated June 16, 2015 (but effective as of February 2, 2015), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated June 23, 2015 (but effective as of March 2, 2015), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated August 31, 2015 (but effective as of January 4, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated September 15, 2015 (but effective as of June 29, 2015), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY16 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 1, 2015, amending the USPS Transportation Agreement. (Filed as Exhibit 10.2 to
FedEx’s FY16 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated October 15, 2015 (but effective as of March 30, 2015), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY16 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated November 9, 2015 (but effective as of January 4, 2015), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY16 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated November 9, 2015 (but effective as of January 4, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY16 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
- 38 -
*10.95
*10.96
*10.97
*10.98
*10.99
*10.100
10.101
*10.102
*10.103
*10.104
*10.105
*10.106
*10.107
*10.108
*10.109
*10.110
*10.111
*10.112
*10.113
Amendment dated January 12, 2016, amending the USPS Transportation Agreement. (Filed as Exhibit 10.1 to
FedEx’s FY16 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated January 28, 2016, amending the USPS Transportation Agreement. (Filed as Exhibit 10.2 to
FedEx’s FY16 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated January 28, 2016, amending the USPS Transportation Agreement. (Filed as Exhibit 10.3 to
FedEx’s FY16 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated January 29, 2016 (but effective as of January 31, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY16 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated February 11, 2016, amending the USPS Transportation Agreement. (Filed as Exhibit 10.5 to
FedEx’s FY16 Third Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated February 16, 2016 (but effective as of August 31, 2015), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY16 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated February 11, 2016 (but effective as of February 10, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.7 to FedEx’s FY16 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated February 29, 2016 (but effective as of September 28, 2015), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.8 to FedEx’s FY16 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated March 7, 2016, amending the USPS Transportation Agreement. (Filed as Exhibit 10.83 to
FedEx’s FY16 Annual Report on Form 10-K, and incorporated herein by reference.)
Amendment dated March 7, 2016, amending the USPS Transportation Agreement. (Filed as Exhibit 10.84 to
FedEx’s FY16 Annual Report on Form 10-K, and incorporated herein by reference.)
Amendment dated March 7, 2016 (but effective as of November 28, 2015), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.85 to FedEx’s FY16 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated April 5, 2016 (but effective as of January 4, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.86 to FedEx’s FY16 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated April 5, 2016 (but effective as of January 4, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.87 to FedEx’s FY16 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated April 11, 2016 (but effective as of February 1, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.88 to FedEx’s FY16 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated April 11, 2016 (but effective as of February 29, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.89 to FedEx’s FY16 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated April 12, 2016 (but effective as of April 4, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.90 to FedEx’s FY16 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated June 2, 2016 (but effective as of May 2, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY17 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated June 2, 2016 (but effective as of May 2, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY17 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated June 20, 2016 (but effective as of May 30, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY17 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
- 39 -
*10.114
*10.115
*10.116
*10.117
10.118
*10.119
*10.120
*10.121
*10.122
*10.123
*10.124
*10.125
*10.126
*10.127
*10.128
*10.129
*10.130
*10.131
Amendment dated June 20, 2016, amending the USPS Transportation Agreement. (Filed as Exhibit 10.4 to FedEx’s
FY17 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated June 20, 2016, amending the USPS Transportation Agreement. (Filed as Exhibit 10.5 to FedEx’s
FY17 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated June 20, 2016 (but effective as of May 2, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY17 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated July 18, 2016 (but effective as of June 27, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.7 to FedEx’s FY17 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated July 7, 2016 (but effective as of July 6, 2016), amending the USPS Transportation Agreement.
(Filed as Exhibit 10.8 to FedEx’s FY17 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated July 26, 2016 (but effective as of May 30, 2016), amending the USPS Transportation Agreement.
(Filed as Exhibit 10.9 to FedEx’s FY17 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated August 4, 2016 (but effective as of August 1, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.10 to FedEx’s FY17 First Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated August 9, 2016 (but effective as of June 27, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.11 to FedEx’s FY17 First Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 8, 2016 (but effective as of August 23, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 8, 2016 (but effective as of August 19, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 8, 2016 (but effective as of August 29, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 15, 2016 (but effective as of August 18, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 15, 2016 (but effective as of September 6, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 6, 2016 (but effective as of October 3, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 24, 2016 (but effective as of September 21, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.7 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 24, 2016 (but effective as of October 17, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.8 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 24, 2016 (but effective as of October 4, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.9 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated November 8, 2016 (but effective as of October 31, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.10 to FedEx’s FY17 Second Quarter Report on Form 10-Q, and incorporated
herein by reference.)
- 40 -
*10.132
*10.133
*10.134
*10.135
*10.136
*10.137
*10.138
*10.139
*10.140
*10.141
*10.142
*10.143
*10.144
*10.145
*10.146
*10.147
*10.148
*10.149
Amendment dated December 1, 2016 (but effective as of October 31, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 1, 2016 (but effective as of November 28, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 1, 2016 (but effective as of November 21, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 1, 2016 (but effective as of November 21, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 1, 2016 (but effective as of November 21, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 1, 2016 (but effective as of November 28, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 1, 2016 (but effective as of November 28, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.7 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated January 12, 2017 (but effective as of January 2, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.8 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated January 12, 2017 (but effective as of October 31, 2016), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.9 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated February 24, 2017 (but effective as of January 30, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.10 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated February 22, 2017 (but effective as of February 27, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.11 to FedEx’s FY17 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated March 30, 2017 (but effective as of January 2, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.129 to FedEx’s FY17 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated April 17, 2017 (but effective as of April 3, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.130 to FedEx’s FY17 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated May 18, 2017 (but effective as of January 30, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.131 to FedEx’s FY17 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated June 20, 2017 (but effective as of May 1, 2017), amending the USPS Transportation Agreement.
(Filed as Exhibit 10.1 to FedEx’s FY18 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated June 20, 2017 (but effective as of June 5, 2017), amending the USPS Transportation Agreement.
(Filed as Exhibit 10.2 to FedEx’s FY18 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
Amendment dated August 25, 2017 (but effective as of July 3, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY18 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated August 25, 2017 (but effective as of February 27, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY18 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
- 41 -
*10.150
*10.151
10.152
*10.153
*10.154
*10.155
*10.156
*10.157
*10.158
*10.159
*10.160
*10.161
10.162
*10.163
*10.164
*10.165
*10.166
*10.167
Amendment dated August 17, 2017 (but effective as of July 31, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY18 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated August 25, 2017 (but effective as of April 3, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY18 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated August 25, 2017 (but effective as of November 27, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.7 to FedEx’s FY18 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated August 28, 2017 (but effective as of November 27, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.8 to FedEx’s FY18 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated October 16, 2017 (but effective as of May 1, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 16, 2017 (but effective as of June 5, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 16, 2017 (but effective as of July 3, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 16, 2017 (but effective as of August 28, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 16, 2017 (but effective as of July 31, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 16, 2017 (but effective as of August 28, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 16, 2017 (but effective as of January 2, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.7 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated November 7, 2017 (but effective as of October 2, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.8 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated November 7, 2017 (but effective as of October 2, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.9 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated November 7, 2017 (but effective as of October 30, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.10 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated
herein by reference.)
Amendment dated December 8, 2017 (but effective as of August 28, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY18 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 8, 2017 (but effective as of November 27, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY18 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 8, 2017 (but effective as of October 2, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY18 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated January 8, 2018 (but effective as of January 1, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY18 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
- 42 -
*10.168
*10.169
*10.170
*10.171
*10.172
*10.173
*10.174
*10.175
*10.176
*10.177
*10.178
*10.179
*10.180
*10.181
*10.182
*10.183
*10.184
*10.185
Amendment dated January 11, 2018 (but effective as of October 30, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY18 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated January 26, 2018 (but effective as of November 27, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY18 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated February 16, 2018 (but effective as of January 29, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.7 to FedEx’s FY18 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated March 18, 2018 (but effective as of December 28, 2017), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.162 to FedEx’s FY18 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated March 20, 2018 (but effective as of February 26, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.163 to FedEx’s FY18 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated March 21, 2018 (but effective as of January 29, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.164 to FedEx’s FY18 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated April 10, 2018 (but effective as of January 29, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.165 to FedEx’s FY18 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated May 17, 2018 (but effective as of April 2, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.166 to FedEx’s FY18 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated May 17, 2018 (but effective as of April 30, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.167 to FedEx’s FY18 Annual Report on Form 10-K, and incorporated herein by
reference.)
Amendment dated July 17, 2018 (but effective as of February 26, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY19 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated July 17, 2018 (but effective as of February 26, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY19 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated July 17, 2018 (but effective as of April 2, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY19 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated June 29, 2018 (but effective as of June 4, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY19 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated July 17, 2018 (but effective as of April 2, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY19 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated August 1, 2018 (but effective as of June 29, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY19 First Quarter Report on Form 10-Q, and incorporated herein by
reference.)
Amendment dated September 11, 2018 (but effective as of May 30, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 11, 2018 (but effective as of April 30, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 11, 2018 (but effective as of July 2, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
- 43 -
*10.186
*10.187
*10.188
*10.189
*10.190
*10.191
*10.192
*10.193
*10.194
*10.195
*10.196
*10.197
*10.198
*10.199
*10.200
*10.201
**^10.202
Amendment dated September 11, 2018 (but effective as of June 4, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 11, 2018 (but effective as of July 2, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 11, 2018 (but effective as of July 30, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated September 27, 2018 (but effective as of August 27, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.7 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 18, 2018 (but effective as of September 3, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.8 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 16, 2018 (but effective as of November 24, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.9 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated October 26, 2018 (but effective as of July 30, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.10 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated
herein by reference.)
Amendment dated November 20, 2018 (but effective as of October 1, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.11 to FedEx’s FY19 Second Quarter Report on Form 10-Q, and incorporated
herein by reference.)
Amendment dated December 11, 2018 (but effective as of October 29, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.1 to FedEx’s FY19 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 20, 2018 (but effective as of September 3, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.2 to FedEx’s FY19 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated December 20, 2018 (but effective as of November 26, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.3 to FedEx’s FY19 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated January 3, 2019 (but effective as of October 1, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.4 to FedEx’s FY19 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated January 15, 2019 (but effective as of October 29, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.5 to FedEx’s FY19 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated January 15, 2019 (but effective as of October 29, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.6 to FedEx’s FY19 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated January 29, 2019 (but effective as of December 31, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.7 to FedEx’s FY19 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated February 7, 2019 (but effective as of November 26, 2018), amending the USPS Transportation
Agreement. (Filed as Exhibit 10.8 to FedEx’s FY19 Third Quarter Report on Form 10-Q, and incorporated herein
by reference.)
Amendment dated April 16, 2019 (but effective as of January 28, 2019), amending the USPS Transportation
Agreement. An attachment to this exhibit has been omitted pursuant to Item 601(a)(5) of Regulation S-K because
the information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish
supplementally a copy of the attachment to the SEC or its staff upon request.
- 44 -
**^10.203
**^10.204
**^10.205
**10.206
**10.207
10.208
10.209
10.210
10.211
10.212
10.213
10.214
10.215
10.216
10.217
10.218
Amendment dated April 16, 2019 (but effective as of December 31, 2018), amending the USPS Transportation
Agreement. An attachment to this exhibit has been omitted pursuant to Item 601(a)(5) of Regulation S-K because
the information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish
supplementally a copy of the attachment to the SEC or its staff upon request.
Amendment dated May 14, 2019 (but effective as of March 4, 2019), amending the USPS Transportation
Agreement. An attachment to this exhibit has been omitted pursuant to Item 601(a)(5) of Regulation S-K because
the information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish
supplementally a copy of the attachment to the SEC or its staff upon request.
Amendment dated May 14, 2019 (but effective as of January 28, 2019), amending the USPS Transportation
Agreement. An attachment to this exhibit has been omitted pursuant to Item 601(a)(5) of Regulation S-K because
the information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish
supplementally a copy of the attachment to the SEC or its staff upon request.
Financing Agreement
Five-Year Credit Agreement dated as of March 22, 2019, among FedEx, JPMorgan Chase Bank, N.A., individually
and as administrative agent, and other financial institutions. Certain attachments to this exhibit have been omitted
pursuant to Item 601(a)(5) of Regulation S-K because the information contained therein is not material and is not
otherwise publicly disclosed. FedEx will furnish supplementally copies of such attachments to the SEC or its staff
upon request.
364-Day Credit Agreement dated as of March 22, 2019, among FedEx, JPMorgan Chase Bank, N.A., individually
and as administrative agent, and other financial institutions. Certain attachments to this exhibit have been omitted
pursuant to Item 601(a)(5) of Regulation S-K because the information contained therein is not material and is not
otherwise publicly disclosed. FedEx will furnish supplementally copies of such attachments to the SEC or its staff
upon request.
Management Contracts/Compensatory Plans or Arrangements
FedEx 2002 Stock Incentive Plan. (Filed as Exhibit 4.3 to FedEx’s Registration Statement No. 333-100572 on Form
S-8, and incorporated herein by reference.)
Form of Stock Option Agreement pursuant to the FedEx 2002 Stock Incentive Plan. (Filed as Exhibit 4.4 to FedEx’s
Registration Statement No. 333-100572 on Form S-8, and incorporated herein by reference.)
Amendment to the 1995, 1997, 1999 and 2002 Stock Incentive Plans and the 2001 Restricted Stock Plan. (Filed as
Exhibit 10.3 to FedEx’s FY04 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
FedEx Incentive Stock Plan, as amended. (Filed as Exhibit 4.1 to FedEx’s Registration Statement No. 333-156333
on Form S-8, and incorporated herein by reference.)
Amendment to the FedEx Incentive Stock Plan, as amended, and the 1997, 1999 and 2002 Stock Incentive Plans.
(Filed as Exhibit 4.2 to FedEx’s Registration Statement No. 333-156333 on Form S-8, and incorporated herein by
reference.)
Form of Terms and Conditions of stock option grant pursuant to the FedEx Incentive Stock Plan, as amended. (Filed
as Exhibit 4.3 to FedEx’s Registration Statement No. 333-156333 on Form S-8, and incorporated herein by
reference.)
Form of Restricted Stock Agreement pursuant to the FedEx Incentive Stock Plan, as amended. (Filed as Exhibit 4.4
to FedEx’s Registration Statement No. 333-156333 on Form S-8, and incorporated herein by reference.)
FedEx Incentive Stock Plan 2005 Inland Revenue Approved Sub-Plan for the United Kingdom. (Filed as Exhibit
4.2 to FedEx’s Registration Statement No. 333-130619 on Form S-8, and incorporated herein by reference.)
Form of Share Option Agreement pursuant to the FedEx Incentive Stock Plan 2005 Inland Revenue Approved Sub-
Plan for the United Kingdom. (Filed as Exhibit 4.3 to FedEx’s Registration Statement No. 333-130619 on Form S-
8, and incorporated herein by reference.)
Amendments to the 1993, 1995, 1997, 1999 and 2002 Stock Incentive Plans, as amended, the 2001 Restricted Stock
Plan, as amended, and the Incentive Stock Plan, as amended. (Filed as Exhibit 10.48 to FedEx’s FY10 Annual
Report on Form 10-K, and incorporated herein by reference.)
Amendments to the 1993, 1995, 1997, 1999 and 2002 Stock Incentive Plans, the 2001 Restricted Stock Plan and the
Incentive Stock Plan. (Filed as Exhibit 10.2 to FedEx’s FY11 Third Quarter Report on Form 10-Q, and incorporated
herein by reference.)
10.219
FedEx 2010 Omnibus Stock Incentive Plan, as amended (the “2010 Omnibus Stock Incentive Plan”). (Filed as
Exhibit 10.12 to FedEx’s FY18 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
- 45 -
10.220
10.221
10.222
10.223
10.224
10.225
10.226
10.227
10.228
**21
**23
**24
**31.1
**31.2
**32.1
**32.2
Form of Terms and Conditions of stock option grant pursuant to the 2010 Omnibus Stock Incentive Plan. (Filed as
Exhibit 4.4 to FedEx’s Registration Statement No. 333-171232 on Form S-8, and incorporated herein by reference.)
Form of Terms and Conditions of restricted stock grant pursuant to the 2010 Omnibus Stock Incentive Plan. (Filed
as Exhibit 4.5 to FedEx’s Registration Statement No. 333-171232 on Form S-8, and incorporated herein by
reference.)
Form of Restricted Stock Agreement pursuant to the 2010 Omnibus Stock Incentive Plan. (Filed as Exhibit 4.5 to
FedEx’s Registration Statement No. 333-192957 on Form S-8, and incorporated herein by reference.)
Amended and Restated FedEx Retirement Parity Pension Plan. (Filed as Exhibit 10.35 to FedEx’s FY08 Annual
Report on Form 10-K, and incorporated herein by reference.)
FedEx Express Supplemental Long Term Disability Plan and Amendment to the Plan. (Filed as Exhibit 10.56 to
FedEx’s FY11 Annual Report on Form 10-K, and incorporated herein by reference.)
FedEx’s Amended and Restated Retirement Plan for Outside Directors. (Filed as Exhibit 10.2 to FedEx’s FY09
Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
Form of Management Retention Agreement between FedEx and each of Frederick W. Smith, Mark R. Allen, Jill C.
Brannon, Brie A. Carere, Robert B. Carter, Donald F. Colleran, Alan B. Graf, Jr., Henry J. Maier, John A. Smith
and Rajesh Subramaniam. (Filed as Exhibit 10.5 to FedEx’s FY10 Third Quarter Report on Form 10-Q, and
incorporated herein by reference.)
Separation and Release Agreement, dated December 3, 2018, between FedEx Express and David L. Cunningham,
Jr. (Filed as Exhibit 99.1 to FedEx’s Current Report on Form 8-K dated December 3, 2018 and filed December 7,
2018, and incorporated herein by reference.)
Separation and Release Agreement, dated February 13, 2019, between FedEx and David J. Bronczek. (Filed as
Exhibit 99.1 to FedEx’s Current Report on Form 8-K dated February 13, 2019 and filed February 14, 2019, and
incorporated herein by reference.)
Other Exhibits
Subsidiaries of Registrant.
Consent of Independent Registered Public Accounting Firm.
Powers of Attorney (presented on the signature pages of this Annual Report on Form 10-K).
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
**101.1
Interactive Data Files.
* Confidential treatment has been granted for confidential commercial and financial information in this exhibit identified by
brackets, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
** Filed herewith.
^
Information in this exhibit identified by brackets is confidential and has been excluded pursuant to Item 601(b)(10)(iv) of
Regulation S-K because it (i) is not material and (ii) would likely cause competitive harm to FedEx if publicly disclosed.
ITEM 16. FORM 10-K SUMMARY
None.
- 46 -
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: July 16, 2019
FEDEX CORPORATION
By: /s/ Frederick W. Smith
Frederick W. Smith
Chairman and Chief Executive Officer
Power of Attorney. KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby
constitutes and appoints Frederick W. Smith, Alan B. Graf, Jr. and John L. Merino, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with any and all
exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite
and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
/s/ Frederick W. Smith
Frederick W. Smith
/s/ Alan B. Graf, Jr.
Alan B. Graf, Jr.
/s/ John L. Merino
John L. Merino
/s/ John A. Edwardson
John A. Edwardson
/s/ Marvin R. Ellison
Marvin R. Ellison
/s/ Susan Patricia Griffith
Susan Patricia Griffith
/s/ John C. (“Chris”) Inglis
John C. (“Chris”) Inglis
/s/ Kimberly A. Jabal
Kimberly A. Jabal
/s/ Shirley Ann Jackson
Shirley Ann Jackson
Capacity
Date
Chairman and Chief Executive
Officer and Director
(Principal Executive Officer)
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Corporate Vice President and Principal
Accounting Officer
(Principal Accounting Officer)
July 16, 2019
July 16, 2019
July 16, 2019
Director
July 16, 2019
Director
July 16, 2019
Director
July 16, 2019
Director
July 16, 2019
Director
July 16, 2019
Director
July 16, 2019
- 47 -
Signature
/s/ R. Brad Martin
R. Brad Martin
/s/ Joshua Cooper Ramo
Joshua Cooper Ramo
/s/ Susan C. Schwab
Susan C. Schwab
/s/ David P. Steiner
David P. Steiner
/s/ Paul S. Walsh
Paul S. Walsh
Capacity
Director
Date
July 16, 2019
Director
July 16, 2019
Director
July 16, 2019
Director
July 16, 2019
Director
July 16, 2019
- 48 -
FINANCIAL SECTION TABLE OF CONTENTS
Management’s Discussion and Analysis of Results of Operations and Financial Condition
PAGE
Overview of Financial Section
Results of Operations and Outlook
Recent Accounting Guidance
Reportable Segments
FedEx Services Segment
FedEx Express Segment
FedEx Ground Segment
FedEx Freight Segment
Financial Condition
Liquidity
Capital Resources
Liquidity Outlook
Contractual Cash Obligations and Off-Balance Sheet Arrangements
Other Business Matters
Critical Accounting Estimates
Retirement Plans
Income Taxes
Self-Insurance Accruals
Long-Lived Assets
Legal and Other Contingencies
Risk Factors
Forward-Looking Statements
Effective Tax Rate Prior to MTM Retirement Plans Accounting Adjustment
Consolidated Financial Statements
Management’s Report on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets May 31, 2019 and 2018
Consolidated Statements of Income Years Ended May 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income Years Ended May 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows Years Ended May 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Common Stockholders’ Investment Years Ended May 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Other Financial Information
Quantitative and Qualitative Disclosures About Market Risk
Selected Financial Data
Report of Independent Registered Public Accounting Firm
Schedule II – Valuation and Qualifying Accounts
50
52
63
64
64
65
69
71
73
73
74
74
77
78
78
78
81
82
82
84
85
96
96
97
98
100
102
103
104
105
106
148
149
151
152
- 49 -
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW OF FINANCIAL SECTION
The financial section of the FedEx Corporation (“FedEx” or the “Company”) Annual Report on Form 10-K (“Annual Report”)
consists of the following: Management’s Discussion and Analysis of Results of Operations and Financial Condition (“MD&A”), the
Consolidated Financial Statements and the notes to the Consolidated Financial Statements, and Other Financial Information, all of
which include information about our significant accounting policies and practices and the transactions that underlie our financial
results. The following MD&A describes the principal factors affecting the results of operations, liquidity, capital resources,
contractual cash obligations and critical accounting estimates of FedEx. The discussion in the financial section should be read in
conjunction with the other sections of this Annual Report, particularly “Item 1. Business” and our detailed discussion of risk factors
included in this MD&A.
ORGANIZATION OF INFORMATION
Our MD&A is composed of three major sections: Results of Operations and Outlook, Financial Condition and Critical Accounting
Estimates. These sections include the following information:
• Results of operations includes an overview of our consolidated 2019 results compared to 2018 results, and 2018 results compared to
2017 results. This section also includes a discussion of key actions and events that impacted our results, as well as our outlook for
2020.
• The overview is followed by a financial summary and analysis (including a discussion of both historical operating results and
our outlook for 2020) for each of our transportation segments.
• Our financial condition is reviewed through an analysis of key elements of our liquidity, capital resources and contractual cash
obligations, including a discussion of our cash flows and our financial commitments.
• Critical accounting estimates discusses those financial statement elements that we believe are most important to understanding
the material judgments and assumptions incorporated in our financial results.
• We conclude with a discussion of risks and uncertainties that may impact our financial condition and operating results.
DESCRIPTION OF BUSINESS
We provide a broad portfolio of transportation, e-commerce and business services through companies competing collectively,
operating independently and managed collaboratively, under the respected FedEx brand. Our primary operating companies are Federal
Express Corporation (“FedEx Express”), including TNT Express B.V. (“TNT Express”), the world’s largest express transportation
company; FedEx Ground Package System, Inc. (“FedEx Ground”), a leading North American provider of small-package ground
delivery services; and FedEx Freight Corporation (“FedEx Freight”), a leading North American provider of less-than-truckload
(“LTL”) freight transportation services. These companies represent our major service lines and, along with FedEx Corporate Services,
Inc. (“FedEx Services”), constitute our reportable segments.
Our FedEx Services segment provides sales, marketing, information technology, communications, customer service, technical support,
billing and collection services, and certain back-office functions that support our transportation segments. The FedEx Services
segment also provides customers with retail access to FedEx Express and FedEx Ground shipping services through FedEx Office and
Print Services, Inc. (“FedEx Office”). See “Reportable Segments” for further discussion and refer to “Item 1. Business” for a more
detailed description of each of our operating companies.
- 50 -
The key indicators necessary to understand our operating results include:
•
•
•
•
the overall customer demand for our various services based on macroeconomic factors and the global economy;
the volumes of transportation services provided through our networks, primarily measured by our average daily volume and
shipment weight and size;
the mix of services purchased by our customers;
the prices we obtain for our services, primarily measured by yield (revenue per package or pound or revenue per shipment or
hundredweight for LTL freight shipments);
• our ability to manage our cost structure (capital expenditures and operating expenses) to match shifting volume levels; and
•
the timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel
surcharges.
Many of our operating expenses are directly impacted by revenue and volume levels, and we expect these operating expenses to
fluctuate on a year-over-year basis consistent with changes in revenues and volumes. Therefore, the discussion of operating expense
captions focuses on the key drivers and trends impacting expenses other than changes in revenues and volumes. The line item “Other
operating expenses” includes costs associated with outside service contracts (such as security, facility services and cargo handling),
professional fees, insurance, uniforms and taxes and licenses.
Except as otherwise specified, references to years indicate our fiscal year ended May 31, 2019 or ended May 31 of the year referenced
and comparisons are to the corresponding period of the prior year. References to our transportation segments include, collectively, the
FedEx Express segment, the FedEx Ground segment and the FedEx Freight segment.
- 51 -
RESULTS OF OPERATIONS AND OUTLOOK
CONSOLIDATED RESULTS
The following table compares summary operating results (dollars in millions, except per share amounts) for the years ended May 31:
Percent Change
Consolidated revenues
Operating income:
FedEx Express segment
FedEx Ground segment
FedEx Freight segment
Corporate, other and eliminations
Consolidated operating income
Operating margin:
FedEx Express segment
FedEx Ground segment
FedEx Freight segment
Consolidated operating margin
Consolidated net income(4)
Diluted earnings per share
2019(1)
2018(2)
2017(3)
$
69,693 $
65,450 $
60,319
2019/2018
6
2018/2017
9
2,123
2,640
615
(912 )
4,466
5.7 %
12.9 %
8.1 %
6.4 %
540 $
2,105
2,529
490
(852 )
4,272
5.8 %
13.7 %
7.2 %
6.5 %
4,572 $
2,380
2,243
371
(428 )
4,566
7.0 %
13.6 %
6.1 %
7.6 %
2,997
1
4
26
(7 )
5
(10 ) bp
(80 ) bp
90 bp
(10 ) bp
(88 )
2.03 $
16.79 $
11.07
(88 )
(12 )
13
32
(99 )
(6 )
(120 ) bp
10 bp
110 bp
(110 ) bp
53
52
$
$
The following table shows changes in revenues and operating income by reportable segment for 2019 compared to 2018 and 2018
compared to 2017 (in millions):
Year-over-Year Changes
FedEx Express segment
FedEx Ground segment
FedEx Freight segment
FedEx Services segment
Corporate, other and eliminations
$
$
1,159 $
2,127
770
41
146
4,243 $
Revenues
2019/2018
2018/2017
Operating Income
2019/2018(1)(2) 2018/2017(2)(3)
(275 )
18 $
286
111
119
125
—
—
(424 )
(60 )
(294 )
194 $
2,348 $
1,892
742
29
120
5,131 $
(1) Operating income in 2019 includes TNT Express integration expenses, business realignment costs and costs incurred in
connection with the settlement of a legal matter involving FedEx Ground.
(2) Operating income in 2018 includes TNT Express integration expenses, goodwill and other asset impairment charges associated
with FedEx Supply Chain Distribution System, Inc. (“FedEx Supply Chain”) and charges for legal reserves related to certain U.S.
Customs Border and Protection (“CBP”) matters involving FedEx Logistics, Inc. (“FedEx Logistics” (formerly FedEx Trade
Networks, Inc.)).
(3) Operating income in 2017 includes TNT Express integration expenses, as well as charges for legal reserves related to certain CBP
matters involving FedEx Logistics and charges in connection with the settlement of and certain expected losses relating to
independent contractor litigation matters at FedEx Ground.
(4) Consolidated net income includes a net loss in 2019, and net gains in 2018 and in 2017, associated with our mark-to-market
(“MTM”) retirement plans accounting adjustment. Consolidated net income in 2019 includes a tax benefit primarily related to a
lower statutory tax rate attributable to the enactment of the Tax Cuts and Jobs Act (“TCJA”) and a benefit from the reduction of a
valuation allowance on certain tax loss carryforwards, partially offset by a tax expense related to a lower tax rate applied to our
deferred taxes in the Netherlands. Consolidated net income in 2018 includes the following attributable to the enactment of the
TCJA: benefits related to the remeasurement of our net U.S. deferred tax liability; a lower statutory income tax rate on 2018
earnings; and a one-time benefit from a $1.5 billion contribution to our tax-qualified U.S. domestic pension plans (“U.S. Pension
Plans”). In addition, we recognized a net benefit from corporate structuring transactions as part of the ongoing integration of
FedEx Express and TNT Express and a benefit from foreign tax credits associated with distributions to the U.S. from our foreign
operations.
- 52 -
A summary of the effects of the (costs) benefits described above on our financial results (in millions) for the years ended May 31
follows:
Items affecting Operating Income:
TNT Express integration expenses
Business realignment costs
Litigation and legal matters
Goodwill and other asset impairment charges
2019
2018
2017
$
$
(388 )
(320 )
(46 )
—
(754 )
$
$
(477 )
—
(8 )
(380 )
(865 )
$
$
(327 )
—
(61 )
—
(388 )
Items affecting Net Income:
MTM retirement plans accounting adjustment, net of tax
$
(2,981 )
$
9
$
6
Items affecting income taxes:
Benefits attributable to enactment of the TCJA:
Remeasurement of net U.S. deferred tax liability
Lower statutory tax rate
Pension contribution
Reduction in valuation allowance
Deferred tax impact from Netherlands rate reduction
Corporate structuring transactions
Foreign tax credits generated by distributions from foreign operations
(4 )
40
—
90
(50 )
—
8
(2,897 )
$
1,150
265
204
—
—
255
225
2,108
$
$
—
—
—
—
—
—
—
6
Pension Accounting Change
As of June 1, 2018, we adopted new accounting guidance that changes how employers that sponsor defined benefit pension or other
postretirement benefit plans present net periodic benefit cost in their income statement. This new guidance requires us to report only
the service cost component in the “Salaries and employee benefits” line item. The other components of net benefit cost are required to
be presented in the income statement in other income, outside of income from operations. This new guidance impacts operating
income and margin but has no impact on net income or earnings per share. We have applied these changes retrospectively.
Overview
Our operating income improved in 2019 primarily due to volume growth, the favorable net impact of fuel at all of our transportation
segments, increased yields at FedEx Freight and FedEx Ground and lower variable incentive compensation expenses. Lower variable
incentive compensation expenses benefited our results by approximately $485 million in 2019. However, softening global economic
conditions negatively impacted International Priority package and freight volumes at FedEx Express, and we experienced a product
mix shift to lower yielding services due in part to an increase in e-commerce traffic at FedEx Express and FedEx Ground. Higher
purchased transportation costs at FedEx Ground, resulting from increased contractor settlement rates and expanding operations to six
days per week year-round starting in January 2019, also negatively affected our results.
Comparables for 2019 are affected by the direct and indirect effects at FedEx Express of the NotPetya cyberattack on June 27, 2017,
which negatively impacted earnings in 2018 by approximately $400 million ($1.19 per diluted share), primarily from loss of revenue
associated with decreased shipments in the TNT Express network, as well as incremental costs to restore information-technology
systems. All of TNT Express’s critical operational systems were fully restored, critical business data was recovered and shipping
services and solutions were back in place as of the second quarter of 2018. During 2019, we purchased insurance coverage designed to
address certain aspects of cyber risks.
Our 2019 results include business realignment costs of $320 million ($243 million, net of tax, or $0.91 per diluted share), primarily
related to our U.S.-based voluntary employee buyout program (see “Business Realignment Costs” below for additional information).
In addition, our 2019 results include $46 million ($43 million, net of tax, or $0.16 per diluted share) of costs incurred in connection
with the settlement of a legal matter involving FedEx Ground. These items are included in “Corporate, other and eliminations.”
- 53 -
The comparison of net income between 2019 and 2018 is also significantly affected by a provisional benefit of $1.15 billion ($4.22
per diluted share) specifically related to the remeasurement of our net U.S. deferred tax liability recognized during 2018 as a result of
the enactment of the TCJA. Net income for 2019 includes a tax benefit of $40 million ($0.15 per diluted share) primarily related to a
lower statutory income tax rate under the TCJA and $90 million ($0.34 per diluted share) from the reduction of a valuation allowance
on certain tax loss carryforwards. These items were partially offset by a tax expense of $50 million ($0.19 per diluted share) related to
a lower tax rate in the Netherlands applied to our deferred tax balances. See the “Income Taxes” section of this MD&A and Note 12 of
the accompanying consolidated financial statements.
Consolidated net income in 2019 includes a pre-tax noncash loss of $3.9 billion ($3.0 billion, net of tax, or $11.22 per diluted share)
associated with our fourth quarter MTM retirement plans accounting adjustment. See the “Retirement Plans MTM Adjustment”
section of this MD&A and Note 13 of the accompanying consolidated financial statements.
We incurred TNT Express integration expenses totaling $388 million ($314 million, net of tax, or $1.18 per diluted share) in 2019, an
$89 million decrease from 2018. The integration expenses are predominantly incremental costs directly associated with the integration
of TNT Express, including professional and legal fees, salaries and wages, travel and advertising expenses, and include any
restructuring charges at TNT Express. Internal salaries and wages are included only to the extent the individuals are assigned full-time
to integration activities. These costs were recognized at FedEx Express and FedEx Corporation. The identification of these costs as
integration-related expenditures is subject to our disclosure controls and procedures.
Our operating results declined in 2018 as a result of the NotPetya cyberattack at TNT Express, a fourth quarter goodwill impairment
charge at FedEx Supply Chain and increased TNT Express integration expenses. These negative factors were partially offset by
increased yields, volume growth at FedEx Ground and FedEx Freight and a favorable net impact of fuel at all of our transportation
segments.
Our results for 2018 included a tax benefit of $204 million ($0.75 per diluted share) from a $1.5 billion contribution to our U.S.
Pension Plans in 2018 and a benefit of approximately $265 million ($0.97 per diluted share) related to a lower statutory income tax
rate under the TCJA on 2018 earnings. In addition, we recognized a net benefit of $255 million ($0.94 per diluted share) from
corporate structuring transactions as part of the ongoing integration of FedEx Express and TNT Express. We also recognized a $225
million benefit ($0.83 per diluted share) from foreign tax credits generated by distributions to the U.S. from our foreign operations.
See the “Income Taxes” section of this MD&A and Note 12 of the accompanying consolidated financial statements.
We incurred TNT Express integration expenses totaling $477 million ($372 million, net of tax, or $1.36 per diluted share) in 2018, a
$150 million increase from 2017. In addition, consolidated net income in 2018 includes a net $10 million gain ($9 million, net of tax,
or $0.03 per diluted share) associated with our fourth quarter MTM retirement plans accounting adjustment, which includes a $210
million charge related to an agreement with Metropolitan Life Insurance Company to purchase a group annuity contract representing
the transfer of $6 billion of pension obligations. Our 2018 results also include $380 million ($379 million, net of tax, or $1.39 per
diluted share) of goodwill and other asset impairment charges related to FedEx Supply Chain and $8 million ($6 million, net of tax, or
$0.02 per diluted share) of charges for legal reserves related to certain CBP matters involving FedEx Logistics.
In addition to TNT Express integration expenses totaling $327 million ($245 million, net of tax, or $0.91 per diluted share),
consolidated net income in 2017 includes a net $24 million gain ($6 million, net of tax, or $0.02 per diluted share) associated with our
fourth quarter MTM retirement plans accounting adjustment. Our 2017 results also include $39 million ($24 million, net of tax, or
$0.09 per diluted share) of charges for legal reserves related to certain CBP matters involving FedEx Logistics and $22 million ($13
million, net of tax, or $0.05 per diluted share) of charges related to the settlement of and certain expected losses relating to
independent contractor litigation matters involving FedEx Ground. These items are included in “Corporate, other and eliminations.”
- 54 -
The following graphs for FedEx Express, FedEx Ground and FedEx Freight show selected volume trends (in thousands) for the years
ended May 31:
FedEx Express
FedEx Express
U.S. Domestic
U.S. Domestic
Average Daily Package Volume
Average Daily Package Volume
FedEx Express
FedEx Express
International(1)
International(1)
Average Daily Package Volume
Average Daily Package Volume
3,200
3,200
3,000
3,000
2,800
2,800
2,600
2,600
2,400
2,400
9,500
9,500
9,000
9,000
8,500
8,500
8,000
8,000
7,500
7,500
7,000
7,000
6,500
6,500
6,000
6,000
2,713
2,713
2,726
2,726
2,729
2,729
2,901
2,901
2016
2016
2017
2017
2018
2018
2019
2019
FedEx Ground
FedEx Ground
Average Daily Package Volume
Average Daily Package Volume
8,952
8,952
8,336
8,336
7,896
7,896
7,526
7,526
2016
2016
2017
2017
2018
2018
2019
2019
3,600
3,600
3,100
3,100
2,600
2,600
2,100
2,100
1,600
1,600
1,100
1,100
600
600
100
100
90.0
90.0
80.0
80.0
70.0
70.0
60.0
60.0
50.0
50.0
40.0
40.0
30.0
30.0
20.0
20.0
2,424
2,424
2,454
2,454
2,471
2,471
888
888
575
575
2016
2016
791
791
2017
2017
803
803
2018
2018
831
831
2019
2019
International domestic
International domestic
International export
International export
FedEx Freight
FedEx Freight
Average Daily Shipments
Average Daily Shipments
67.7
67.7
70.6
70.6
74.5
74.5
31.1
31.1
31.0
31.0
31.9
31.9
78.4
78.4
34.3
34.3
2016
2016
2017
2017
2018
2018
2019
2019
Priority
Priority
Economy
Economy
FedEx Express and FedEx Ground
FedEx Express and FedEx Ground
Total Average Daily Package Volume
Total Average Daily Package Volume
15,155
15,155
13,837
13,837
14,322
14,322
17,000
16,000
16,000
15,000
15,000
14,000
14,000
13,000
13,000
12,000
12,000
11,000
11,000
10,000
11,702
11,702
2016
2016
2017
2017
2018
2018
2019
2019
(1)
International domestic average daily package volume relates to our international intra-country operations. International
export average daily package volume relates to our international priority and economy services.
- 55 -
The following graphs for FedEx Express, FedEx Ground and FedEx Freight show selected yield trends for the years ended May 31:
$20.00
$20.00
$20.00
$20.00
$19.00
$19.00
$19.00
$19.00
$18.00
$18.00
$18.00
$18.00
$17.00
$17.00
$17.00
$17.00
$16.00
$16.00
$16.00
$16.00
$10.00
$10.00
$10.00
$10.00
$9.00
$9.00
$9.00
$9.00
$8.00
$8.00
$8.00
$8.00
$7.00
$7.00
$7.00
$7.00
$6.00
$6.00
$6.00
$6.00
FedEx Express
FedEx Express
FedEx Express
FedEx Express
U.S. Domestic
U.S. Domestic
U.S. Domestic
U.S. Domestic
Revenue per Package - Yield
Revenue per Package - Yield
Revenue per Package - Yield
Revenue per Package - Yield
$18.40
$18.40
$18.40
$18.40
$18.54
$18.54
$18.54
$18.54
$17.60
$17.60
$17.60
$17.60
$17.00
$17.00
$17.00
$17.00
FedEx Express
FedEx Express
FedEx Express
FedEx Express
International(1)
International(1)
International(1)
International(1)
Revenue per Package - Yield
Revenue per Package - Yield
Revenue per Package - Yield
Revenue per Package - Yield
$54.16
$54.16
$54.16
$54.16
$49.18
$49.18
$49.18
$49.18
$52.35
$52.35
$52.35
$52.35
$51.21
$51.21
$51.21
$51.21
$5.65
$5.65
$5.65
$5.65
$6.92
$6.92
$6.92
$6.92
$7.41
$7.41
$7.41
$7.41
$7.20
$7.20
$7.20
$7.20
$70.00
$70.00
$70.00
$70.00
$60.00
$60.00
$60.00
$60.00
$50.00
$50.00
$50.00
$50.00
$40.00
$40.00
$40.00
$40.00
$30.00
$30.00
$30.00
$30.00
$20.00
$20.00
$20.00
$20.00
$10.00
$10.00
$10.00
$10.00
$-
$-
$-
$-
2016
2016
2016
2016
2017
2017
2017
2017
2018
2018
2018
2018
2019
2019
2019
2019
2016
2016
2016
2016
2017
2017
2017
2017
2018
2018
2018
2018
2019
2019
2019
2019
International export composite
International export composite
International export composite
International export composite
International domestic
International domestic
International domestic
International domestic
FedEx Ground
FedEx Ground
FedEx Ground
FedEx Ground
Revenue per Package - Yield
Revenue per Package - Yield
Revenue per Package - Yield
Revenue per Package - Yield
FedEx Freight
FedEx Freight
FedEx Freight
FedEx Freight
Revenue per Shipment
Revenue per Shipment
Revenue per Shipment
Revenue per Shipment
$8.97
$8.97
$8.97
$8.97
$8.63
$8.63
$8.63
$8.63
$8.18
$8.18
$8.18
$8.18
$7.80
$7.80
$7.80
$7.80
2016
2016
2016
2016
2017
2017
2017
2017
2018
2018
2018
2018
2019
2019
2019
2019
$320.00
$320.00
$320.00
$320.00
$300.00
$300.00
$300.00
$300.00
$280.00
$280.00
$280.00
$280.00
$260.00
$260.00
$260.00
$260.00
$240.00
$240.00
$240.00
$240.00
$220.00
$220.00
$220.00
$220.00
$200.00
$200.00
$200.00
$200.00
$300.02
$300.02
$300.02
$300.02
$250.95
$250.95
$250.95
$250.95
$286.85
$286.85
$286.85
$286.85
$236.78
$236.78
$236.78
$236.78
$261.27
$261.27
$261.27
$261.27
$265.77
$265.77
$265.77
$265.77
$218.50
$218.50
$218.50
$218.50
$221.67
$221.67
$221.67
$221.67
2016
2016
2016
2016
2017
2017
2017
2017
2018
2018
2018
2018
2019
2019
2019
2019
Economy
Economy
Economy
Economy
Priority
Priority
Priority
Priority
(1)
International export revenue per package relates to our international priority and economy services. International domestic
revenue per package relates to our international intra-country operations.
Revenue
Revenues increased 6% in 2019 due to higher volumes at all of our transportation segments and increased yields at FedEx Ground and
FedEx Freight. At FedEx Ground, revenues increased 12% in 2019 due to volume growth and increased yields. Revenues at FedEx
Express increased 3% in 2019 primarily due to U.S. domestic package volume growth and international package and freight volume
recovery from the NotPetya cyberattack, partially offset by unfavorable exchange rates. FedEx Express revenue was negatively
impacted by an overall product mix shift from international package volume to international freight volume as well as softness in
International Priority package and freight volumes resulting from weakening global economic conditions. FedEx Freight revenues
increased 11% in 2019 due to higher revenue per shipment and average daily shipments. Higher fuel surcharges had a positive impact
on revenues at all of our transportation segments in 2019.
Revenues increased 9% in 2018 due to improved performance at all of our transportation segments. Revenues at FedEx Express
increased 7% in 2018 due to improved base yields and favorable exchange rates, despite impacts from the NotPetya cyberattack. At
FedEx Ground, revenues increased 11% in 2018 due to volume growth and increased yields. FedEx Freight revenues increased 12% in
2018 due to higher revenue per shipment and average daily shipments. Higher fuel surcharges had a positive impact on revenues at all
of our transportation segments in 2018.
- 56 -
Business Realignment Costs
In December 2018, we announced cost-reduction programs primarily through initiatives at FedEx Services and FedEx Express in
response to current business and economic conditions that included the following:
A U.S.-based voluntary employee buyout program for eligible employees;
Limited hiring in staff functions; and
Reductions in discretionary spending.
During 2019, we conducted a program to offer voluntary cash buyouts to eligible U.S.-based employees in certain staff functions. The
U.S.-based voluntary employee buyout program includes voluntary severance payments and funding to healthcare reimbursement
accounts, with the voluntary severance payment calculated based on four weeks of gross base salary for every year of continuous
service up to a maximum payment of two years of pay. This program was completed in the fourth quarter of 2019, and approximately
1,500 employees have left or will be leaving during 2020. Approximately 85% of the employees who were granted these severance
agreements departed on May 31, 2019. Costs of the benefits provided under the U.S.-based voluntary employee buyout program were
recognized as special termination benefits in the period that eligible employees accepted their offers.
We incurred costs of $320 million ($243 million, net of tax, or $0.91 per diluted share) during 2019 associated with our business
realignment activities. These costs related primarily to severance for employees who accepted voluntary buyouts in the third and
fourth quarters of 2019. Payments are made at the time of departure. Approximately $220 million was paid under this program during
2019. The cost of the U.S.-based voluntary employee buyout program is included in the caption “Business realignment costs” in our
consolidated statements of income. Also included in that caption are other incremental, external costs directly attributable to our
business realignment activities, such as professional fees.
Goodwill and Other Asset Impairment Charges
In 2018, we incurred goodwill and other asset impairment charges of $380 million related to FedEx Supply Chain, eliminating
substantially all of the goodwill attributable to this reporting unit. The key factors contributing to the goodwill impairment were
underperformance of the FedEx Supply Chain business during 2018, including base business erosion, and the failure to attain the level
of operating synergies and revenue and profit growth anticipated at the time of acquisition. For additional information regarding these
impairment charges, see the “Critical Accounting Estimates” section of this MD&A and Note 4 of the accompanying consolidated
financial statements.
- 57 -
Operating Expenses
The following tables compare operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the years
ended May 31:
Operating expenses:
Salaries and employee benefits
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Business realignment costs(2)
Goodwill and other asset impairment charges(3)
Other(4)
Total operating expenses
Total operating income
2019(1)
2018(1)
2017(1)
2019/2018
2018/2017
Percent Change
$
$
24,776 $
16,654
3,360
3,353
3,889
2,834
320
—
10,041
65,227
4,466 $
23,795 $
15,101
3,361
3,095
3,374
2,622
—
380
9,450
61,178
4,272 $
21,989
13,630
3,240
2,995
2,773
2,374
—
—
8,752
55,753
4,566
4
10
—
8
15
8
NM
NM
6
7
5
8
11
4
3
22
10
—
NM
8
10
(6 )
Operating expenses:
Salaries and employee benefits
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Business realignment costs(2)
Goodwill and other asset impairment charges(3)
Other(4)
Total operating expenses
Operating margin
2019(1)
Percent of Revenue
2018(1)
2017(1)
35.6 %
23.9
4.8
4.8
5.6
4.0
0.5
—
14.4
93.6
6.4 %
36.4 %
23.1
5.1
4.7
5.2
4.0
—
0.6
14.4
93.5
6.5 %
36.5 %
22.6
5.3
5.0
4.6
3.9
—
—
14.5
92.4
7.6 %
(1)
Includes TNT Express integration expenses of $388 million in 2019, $477 million in 2018 and $327 million in 2017.
(2)
Includes costs predominantly associated with our U.S.-based voluntary employee buyout program in 2019.
(3)
Includes goodwill and other asset impairment charges in 2018 associated with our FedEx Supply Chain business.
(4) Other expenses in 2019 include $46 million of costs incurred in connection with the settlement of a legal matter involving FedEx
Ground. Other expenses also include $8 million in 2018 and $39 million in 2017 of charges related to certain CBP matters
involving FedEx Logistics. Also included in 2017 is $22 million of charges in connection with the settlement of and certain
expected losses relating to independent contractor litigation matters involving FedEx Ground.
Our 2019 operating income improved primarily due to increased revenue, including recovery from the NotPetya cyberattack discussed
above, and lower variable incentive compensation expenses. These benefits were partially offset by higher purchased transportation
costs at FedEx Ground, driven primarily by increased contractor settlement rates and expansion of network operations to six days per
week year-round in January 2019, and higher salaries and employee benefits. In addition, decreased yields at FedEx Express and the
impact of business realignment costs negatively affected operating margin in 2019. An overall product mix shift at FedEx Express
from international package volume to international freight volume, growth in U.S. deferred services driven by e-commerce, as well as
softness in International Priority package and freight volumes at FedEx Express resulting from weakening global economic
conditions, also negatively impacted operating margins during 2019.
- 58 -
Purchased transportation costs increased 10% in 2019 primarily due to higher volumes at all of our transportation segments and
increased rates, including fuel costs, at FedEx Ground and FedEx Freight, reflecting the inflationary impact of the tight labor market
on our rates. Salaries and employee benefits expense increased 4% in 2019 primarily due to higher staffing to support volume growth
and annual merit increases, partially offset by lower variable incentive compensation expenses at all of our transportation segments.
Other operating expenses increased 6% in 2019 primarily due to a gain on the sale of a non-core business of TNT Express benefiting
results in 2018 and increased outside service contracts at FedEx Express. Currency exchange rates had a negative impact on revenues
and a positive impact on expenses at FedEx Express but did not have an impact on consolidated operating income in 2019.
In 2018, our operating income and margin declined primarily due to the NotPetya cyberattack at TNT Express, fourth quarter goodwill
and other asset impairment charges and increased TNT Express integration expenses.
In 2018, salaries and employee benefits expense increased 8% due to merit increases at all of our transportation segments, unfavorable
exchange rates at FedEx Express and higher staffing at FedEx Ground and FedEx Freight. Purchased transportation costs increased
11% in 2018 due to higher volumes at all of our transportation segments, increased transportation rates and higher fuel expenses at
FedEx Ground and unfavorable exchange rates at FedEx Express. Other operating expenses increased 8% in 2018 primarily due to
increased outside service contracts and unfavorable exchange rates at FedEx Express and higher TNT Express integration expenses.
Fuel
The following graph for our transportation segments shows our average cost of jet and vehicle fuel per gallon for the years ended
May 31:
Average Fuel Cost per Gallon
$4.00
$3.00
$2.00
$2.24
$2.41
$1.00
$1.52
$1.61
$2.79
$3.05
$1.93
$2.21
$-
2016
2017
2018
2019
Vehicle
Jet
Fuel expense increased 15% during 2019 due to higher fuel prices. However, fuel prices represent only one component of the factors
we consider meaningful in understanding the impact of fuel on our business. Consideration must also be given to the fuel surcharge
revenue we collect. Accordingly, we believe discussion of the net impact of fuel on our results, which is a comparison of the year-
over-year change in these two factors, is important to understand the impact of fuel on our business. In order to provide information
about the impact of fuel surcharges on the trend in revenue and yield growth, we have included the comparative weighted-average fuel
surcharge percentages in effect for 2019, 2018 and 2017 in the accompanying discussions of each of our transportation segments.
Most of our fuel surcharges are adjusted on a weekly basis. The fuel surcharge is based on a weekly fuel price from two weeks prior to
the week in which it is assessed. Some FedEx Express international fuel surcharges incorporate a timing lag of approximately six to
eight weeks.
The manner in which we purchase fuel also influences the net impact of fuel on our results. For example, our contracts for jet fuel
purchases at FedEx Express are tied to various indices, including the U.S. Gulf Coast index. While many of these indices are aligned,
each index may fluctuate at a different pace, driving variability in the prices paid for jet fuel. Furthermore, under these contractual
arrangements, approximately 70% of our jet fuel is purchased based on the index price for the preceding week, with the remainder of
our purchases tied to the index price for the preceding month, rather than based on daily spot rates. These contractual provisions
mitigate the impact of rapidly changing daily spot rates on our jet fuel purchases.
Because of the factors described above, our operating results may be affected should the market price of fuel suddenly change by a
significant amount or change by amounts that do not result in an adjustment in our fuel surcharges, which can significantly affect our
earnings either positively or negatively in the short-term. For more information, see “Risk Factors” below.
- 59 -
We routinely review our fuel surcharges. On March 18, 2019, we updated the tables used to determine our fuel surcharges for FedEx
Express U.S. domestic services and at FedEx Ground. On September 10, 2018, we updated the tables used to determine our fuel
surcharges at FedEx Express and FedEx Ground.
The net impact of fuel had a significant benefit to operating income in 2019 as higher fuel surcharges more than offset increased fuel
prices.
The net impact of fuel on our operating results does not consider the effects that fuel surcharge levels may have on our business,
including changes in demand and shifts in the mix of services purchased by our customers. In addition, our purchased transportation
expense may be impacted by fuel costs. While fluctuations in fuel surcharge percentages can be significant from period to period, fuel
surcharges represent one of the many individual components of our pricing structure that impact our overall revenue and yield.
Additional components include the mix of services sold, the base price and extra service charges we obtain for these services and the
level of pricing discounts offered.
Fuel expense increased 22% during 2018 due to higher fuel prices. The net impact of fuel had a significant benefit to operating income
in 2018 as higher fuel surcharges more than offset increased fuel prices.
Other Income and Expense
Interest expense increased $30 million in 2019 primarily due to U.S. debt issuances during the year. Interest expense increased $46
million in 2018 primarily due to U.S. debt and commercial paper issuances during the year.
Retirement Plans MTM Adjustment
We incurred a pre-tax noncash MTM net loss of $3.9 billion in 2019 ($3.0 billion, net of tax, or $11.22 per diluted share), a net gain of
$10 million in 2018 ($9 million, net of tax, or $0.03 per diluted share) and a net gain of $24 million in 2017 ($6 million, net of tax, or
$0.02 per diluted share) from actuarial adjustments to pension and postretirement healthcare plans related to the measurement of plan
assets and liabilities. The net loss in 2019 is attributable to a significantly lower discount rate, changes in actuarial estimates regarding
rates of retirement, disability and salary increases and lower than expected asset returns. The net gain in 2018 is attributable to an
increased discount rate, which more than offset losses from demographic experience. The net gain for 2018 includes a $210 million
loss from the purchase of a group annuity contract from Metropolitan Life Insurance Company that transferred approximately 20% of
our U.S. Pension Plan liabilities. The net gain in 2017 reflects higher-than-expected pension asset returns, particularly in the equity
markets. For more information, see the “Critical Accounting Estimates” section of this MD&A and Note 1 and Note 13 of the
accompanying consolidated financial statements.
Income Taxes
The following table sets forth our income tax expense (benefit) and the effective tax rates for the years ended May 31:
2019
2018
2017
$
138
$
1,271
$
Taxes computed at federal statutory rate(1)
Increases (decreases) in income tax from:
Non-deductible expenses
Valuation allowance
TCJA
Foreign tax rate enactments
State and local income taxes, net of federal benefit
Benefits from share-based payments
Uncertain tax positions
Foreign tax credits from distributions
Foreign operations
Corporate structuring transactions
Goodwill impairment charge
Other, net
Provision for income taxes (benefit)
Effective Tax Rate
$
79
(79 )
(71 )
50
44
(18 )
8
(8 )
(1 )
—
—
(27 )
$
115
17.6%
81
31
(1,354 )
6
119
(60 )
86
(225 )
25
(255 )
109
(53 )
(219 )
(5.0 )%
$
1,603
76
44
—
—
99
(55 )
—
—
(5 )
(68 )
—
(112 )
1,582
34.6 %
(1)
2019 includes the fully phased-in TCJA rate of 21%, 2018 includes a blended TCJA/pre-TCJA rate of 29.2% and 2017
includes the pre-TCJA rate of 35%.
- 60 -
The 2019 tax rate includes a benefit of $90 million from the reduction of a valuation allowance on tax loss carryforwards due to
certain business operational changes from the integration of FedEx Express and TNT Express in a local jurisdiction, which impacted
our determination of the realizability of the deferred tax asset in that jurisdiction and an expense of $50 million from the impact on our
deferred taxes attributable to a lower tax rate in the Netherlands. The 2019 tax rate was favorably impacted by the TCJA, which
resulted in benefits of $75 million from accelerated deductions claimed on our 2018 U.S. income tax return filed in 2019 and
approximately $40 million from the lower statutory tax rate on fiscal 2019 earnings.
The 2018 tax rate was favorably impacted by the TCJA, which resulted in a provisional benefit of $1.15 billion from the
remeasurement of our net U.S. deferred tax liability, a benefit of approximately $265 million related to the lower statutory income tax
rate and a one-time benefit of $204 million from a $1.5 billion contribution to our U.S. Pension Plans in 2018. Our 2018 tax rate also
included a net benefit of $255 million from corporate structuring transactions as part of the ongoing integration of FedEx Express and
TNT Express and a benefit of $225 million from foreign tax credits generated by distributions to the U.S. from our foreign operations.
The 2018 tax rate was negatively impacted by an increase in uncertain tax positions for income tax audits. Our 2017 tax rate was
favorably impacted by $62 million as a result of new U.S. foreign currency tax regulations.
The TCJA, enacted on December 22, 2017, significantly changed the U.S. corporate income tax system in multiple ways such as (1)
reducing our U.S. statutory federal income tax rate from 35% to 21% (due to our May 31 fiscal year-end, the lower rate was phased in,
resulting in a U.S. statutory federal rate of 29.2% for 2018 and a statutory federal rate of 21% for 2019 and subsequent years); (2)
requiring us to calculate a one-time U.S. tax on earnings which have not previously been repatriated to the U.S. (transition tax); and
(3) introducing new provisions that took effect in 2019, including but not limited to, a tax on global intangible low-taxed income
(GILTI), a tax deduction for foreign-derived intangible income, additional limitations on tax deductions for executive compensation
and a minimum base erosion and anti-abuse tax based on certain payments from a U.S. company to foreign related parties. We
included the impact of the above provisions in the computation of our effective tax rates, as applicable.
During 2019, the U.S. Treasury Department issued final regulations covering the one-time transition tax on unrepatriated foreign
earnings, which was enacted as part of the TCJA. Certain guidance included in these final regulations is inconsistent with our
interpretation that led to the recognition of a $225 million benefit in 2018 and an additional $8 million benefit in 2019.
Notwithstanding this inconsistency, we remain confident in our interpretation of the TCJA and intend to defend this position through
litigation, if necessary. However, if we are ultimately unsuccessful in defending our position, we may be required to reverse the $233
million benefit previously recorded.
During 2019, we completed our accounting for the tax effects of the TCJA within the one-year measurement period allowed under
Staff Accounting Bulletin 118. As a result, we recorded an adjustment to tax expense of $4 million recognized in 2019 as a revision of
the provisional benefit associated with the remeasurement of our net U.S. deferred tax liability.
For more information on income taxes, see the Critical Accounting Estimates section of this MD&A and Note 12 of the accompanying
consolidated financial statements.
Business Acquisitions
On May 1, 2019, we acquired the international express division of FC (Flying Cargo) Express Ltd. for $67 million in cash from
operations. The majority of the purchase price was allocated to goodwill. The financial results of this acquired business are included in
the FedEx Express segment from the date of acquisition and were not material to our results of operations. Therefore, pro forma
financial information has not been provided.
On October 1, 2018, we acquired the controlling interest in an existing joint venture with Swiss Post, which operates a Swiss-wide
transport system with connections to TNT Express’s global network. The controlling interest was acquired through the noncash
contribution of a complementary Swiss business into the venture, resulting in the recognition of an immaterial gain. The majority of
the purchase price was allocated to goodwill and other intangibles. The financial results of this acquired business are included in the
FedEx Express segment from the date of acquisition and were not material to our results of operations. Therefore, pro forma financial
information has not been provided.
On March 23, 2018, we acquired P2P Mailing Limited (“P2P”), a leading provider of worldwide, low-cost e-commerce transportation
solutions, for £92 million ($135 million) in cash from operations. The majority of the purchase price was allocated to goodwill. The
financial results of this acquired business are included in the FedEx Logistics operating segment from the date of acquisition and were
not material to our results of operations.
On October 13, 2017, we acquired Northwest Research Inc., a leader in inventory research and management, for $50 million in cash
from operations. The majority of the purchase price was allocated to property and equipment. The financial results of this acquired
business are included in the FedEx Services segment from the date of acquisition and were not material to our results of operations.
- 61 -
Outlook
During 2020, we expect volume growth at FedEx Ground and FedEx Express to drive higher revenues and expect improved operating
income at FedEx Ground and FedEx Freight. We expect operating income to decline at FedEx Express in 2020 due to macroeconomic
weakness and trade uncertainty, continued mix shift to lower-yielding services and a strategic decision not to renew a customer
contract. During 2020, we will continue to implement actions to reduce costs, improve efficiencies and adjust our network cost
structure to align with forecasted volume. However, we will continue to execute on the strategic initiatives we have in process to
position us to capitalize on e-commerce growth and other market opportunities we see for the future.
While FedEx Ground revenue is expected to grow in 2020, higher operating costs are expected to continue to negatively impact
operating margin, as we continue to focus on investments that increase our ability to meet the demands of e-commerce. During 2019,
FedEx Ground expanded operations throughout the U.S. network to six days per week year-round, and in January 2020, FedEx
Ground will expand residential delivery operations to seven days per week year-round for the majority of the U.S. population. To
support these operational changes, FedEx Ground is making strategic investments to modernize and optimize its network to improve
scheduling and productivity at its hubs and stations. The integration of FedEx SmartPost packages into standard FedEx Ground
operations continues, and the vast majority of this volume is expected to be integrated by the end of calendar 2020, which will
improve last-mile efficiency through increased delivery density. In addition, FedEx Ground is investing in technology, and taking
other strategic actions, to improve safety throughout its network. Costs associated with these FedEx Ground initiatives are expected to
be a headwind in 2020; however, we believe they will allow for the more efficient use of our existing assets, which will drive
improved performance and enhance our competitive position over the long term.
At FedEx Freight, we expect to increase operational efficiency in 2020 by continuing our focus on optimizing our network. FedEx
Freight is investing in upgraded dock equipment and vehicle technology that will modernize our operations and position us to realize
increasing benefits in 2021. In addition, safety initiatives will continue to be a top priority at FedEx Freight in 2020.
Our outlook for 2020 assumes we will not incur year-over-year expense increases in variable incentive compensation. Additionally,
our expectations for 2020 are dependent on key external factors, including stable fuel prices, moderate U.S. economic growth, no
further weakening in international economic conditions from our current forecast and no additional adverse developments in
international trade policies and relations.
During 2020, we will continue to execute our TNT Express integration plans and are focused on completing projects across our
European hub and station locations that will allow interoperability between networks for both FedEx Express and TNT Express
packages, which will further lower costs as the related FedEx Express linehaul operations are optimized. In addition, we will continue
to focus on the operational network integration process for the key countries in Europe, which represent a significant percentage of
international revenue, workforces and facilities. Integration activities in Europe are complex and require consultations with works
councils and employee representatives in a number of countries. While we expect to make significant progress on integration activities
in 2020, particularly in Europe, integration work will continue thereafter. We expect to incur approximately $350 million of
integration expenses in 2020 in the form of professional fees, outside service contracts, salaries and wages and other operating
expenses. We expect the aggregate integration program expenses, including restructuring charges at TNT Express, to be
approximately $1.7 billion through 2021, and we may incur additional costs, including investments that will further transform and
optimize the combined businesses. The timing and amount of integration expenses and capital investments in any future period may
change as we revise and implement our plans.
Our capital expenditures for 2020 are expected to be approximately $5.9 billion and include FedEx Express investments in aircraft
fleet modernization and the Memphis and Indianapolis hub modernization and expansion programs, as well as the investments at
FedEx Ground and FedEx Freight discussed above.
Our aircraft fleet modernization and hub modernization and expansion programs at FedEx Express are multi-year programs that will
entail significant investments over the next several years. See the “Contractual Cash Obligations and Off-Balance Sheet
Arrangements” section of this MD&A for details of our capital commitments for 2020 and beyond. We will continue to evaluate our
investments in critical long-term strategic projects to ensure our capital expenditures are expected to generate high returns on
investment and are balanced with our outlook for global economic conditions. For additional details on key 2020 capital projects, refer
to the “Financial Condition – Capital Resources” and “Financial Condition – Liquidity Outlook” sections of this MD&A.
We expect our effective tax rate for 2020 to be between 23% and 25%, prior to any MTM retirement plans accounting adjustment.
However, substantial activities and corporate structuring transactions are ongoing with respect to the integration of FedEx Express and
TNT Express. As we continue to integrate these businesses, there could be material favorable and unfavorable impacts to our effective
tax rate during this period.
Our outlook is dependent upon a stable pricing environment for fuel, as volatility in fuel prices impacts our fuel surcharge levels, fuel
expense and demand for our services.
- 62 -
See “Risk Factors” and “Forward-Looking Statements” for a discussion of these and other potential risks and uncertainties that could
materially affect our future performance.
Seasonality of Business
Our businesses are cyclical in nature, as seasonal fluctuations affect volumes, revenues and earnings. Historically, the U.S. express
package business experiences an increase in volumes in late November and December. International business, particularly in the Asia-
to-U.S. market, peaks in October and November in advance of the U.S. holiday sales season. Our first and third fiscal quarters,
because they are summer vacation and post winter-holiday seasons, have historically experienced lower volumes relative to other
periods. Normally, the fall is the busiest shipping period for FedEx Ground, while late December, June and July are the slowest
periods. For FedEx Freight, the spring and fall are the busiest periods and the latter part of December through February is the slowest
period. Shipment levels, operating costs and earnings for each of our companies can also be adversely affected by inclement weather,
particularly the impact of severe winter weather in our third fiscal quarter. See “Risk Factors” below for more information.
RECENT ACCOUNTING GUIDANCE
See Note 2 of the accompanying consolidated financial statements for a discussion of recent accounting guidance.
- 63 -
REPORTABLE SEGMENTS
FedEx Express, FedEx Ground and FedEx Freight represent our major service lines and, along with FedEx Services, constitute our
reportable segments. Our reportable segments include the following businesses:
FedEx Express Segment
FedEx Express (express transportation)
TNT Express (international express transportation, small-package ground delivery and freight
FedEx Ground Segment
FedEx Ground (small-package ground delivery)
transportation)
FedEx Freight Segment
FedEx Services Segment
FedEx Freight (LTL freight transportation)
FedEx Services (sales, marketing, information technology, communications, customer
service, technical support, billing and collection services and back-office functions)
FedEx Office (document and business services and package acceptance)
FEDEX SERVICES SEGMENT
The operating expenses line item “Intercompany charges” on the accompanying consolidated financial statements of our
transportation segments reflects the allocations from the FedEx Services segment to the respective transportation segments. The
allocations of net operating costs are based on metrics such as relative revenues or estimated services provided.
The FedEx Services segment provides direct and indirect support to our transportation businesses, and we allocate all of the net
operating costs of the FedEx Services segment (including the net operating results of FedEx Office) to reflect the full cost of operating
our transportation businesses in the results of those segments. Within the FedEx Services segment allocation, the net operating results
of FedEx Office, which are an immaterial component of our allocations, are allocated to FedEx Express and FedEx Ground. We
review and evaluate the performance of our transportation segments based on operating income (inclusive of FedEx Services segment
allocations). For the FedEx Services segment, performance is evaluated based on the impact of its total allocated net operating costs
on our transportation segments. We believe these allocations approximate the net cost of providing these functions. Our allocation
methodologies are refined periodically, as necessary, to reflect changes in our businesses.
Effective in 2020, the results of FedEx Office will be included in “Corporate, other and eliminations” instead of the FedEx Services
segment. This change was made to reflect our internal management reporting structure. Beginning in the first quarter of 2020, prior
year amounts will be revised to reflect this presentation.
CORPORATE, OTHER AND ELIMINATIONS
Corporate and other includes corporate headquarters costs for executive officers and certain legal and finance functions, as well as
certain other costs and credits not attributed to our core business. These costs are not allocated to the other business segments.
Also included in corporate and other is the FedEx Logistics operating segment, which provides customs brokerage and global ocean
and air freight forwarding through FedEx Trade Networks Transport & Brokerage, Inc.; cross-border enablement and technology
solutions and e-commerce transportation solutions through FedEx Cross Border Technologies, Inc., including its subsidiary P2P;
integrated supply chain management solutions through FedEx Supply Chain; time-critical shipment services through FedEx Custom
Critical, Inc.; and, effective September 1, 2018, critical inventory and service parts logistics, 3-D printing and technology repair
through FedEx Forward Depots, Inc.
The comparison of operating loss between 2019 and 2018 at “Corporate, other and eliminations” is significantly affected by the costs
associated with our business realignment activities of $320 million during 2019 and by goodwill and other asset impairment charges at
FedEx Supply Chain of $380 million recognized during 2018. In addition, the operating loss increase reflects higher operating losses
at FedEx Logistics due in part to lower transportation volumes from weakness in the global economy and costs incurred in connection
with the settlement of a legal matter involving FedEx Ground, including certain professional fees. The decrease in TNT Express
integration expenses discussed above positively impacted this category during 2019.
Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable
segment. Billings for such services are based on negotiated rates, which we believe approximate fair value, and are reflected as
revenues of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenues
and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because
the amounts are not material.
- 64 -
FEDEX EXPRESS SEGMENT
FedEx Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight including
priority, deferred or economy services, which provide delivery on a time-definite or day-definite basis. Prior year amounts have been
revised to conform to the current year presentation, including revised statistical information. The following tables compare revenues,
operating expenses, operating income (dollars in millions), operating margin and operating expenses as a percent of revenue for the years
ended May 31:
2019
2018
2017
2019/2018
2018/2017
Percent Change
Revenues:
Package:
U.S. overnight box
U.S. overnight envelope
U.S. deferred
Total U.S. domestic package revenue
International priority
International economy
Total international export package revenue
$
International domestic(1)
Total package revenue
Freight:
U.S.
International priority
International economy
International airfreight
Total freight revenue
Other
Total revenues
Operating expenses:
Salaries and employee benefits
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Intercompany charges
Other
Total operating expenses
Operating income
Operating margin
$
7,663
1,829
4,225
13,717
7,405
3,446
10,851
4,540
29,108
3,025
2,070
2,123
314
7,532
691
37,331
13,748
5,186
1,908
1,801
3,310
1,888
2,092
5,275
35,208
2,123
$
$
7,273 $
1,788
3,738
12,799
7,461
3,255
10,716
4,637
28,152
2,797
2,105
1,916
368
7,186
834
36,172
13,522
5,109
1,987
1,679
2,889
1,753
2,092
5,036
34,067
2,105 $
6,955
1,750
3,526
12,231
7,045
2,876
9,921
4,277
26,429
2,527
1,836
1,738
356
6,457
938
33,824
12,636
4,721
1,947
1,662
2,378
1,553
1,917
4,630
31,444
2,380
5
2
13
7
(1 )
6
1
(2 )
3
8
(2 )
11
(15 )
5
(17 )
3
2
2
(4 )
7
15
8
—
5
3
1
5
2
6
5
6
13
8
8
7
11
15
10
3
11
(11 )
7
7
8
2
1
21
13
9
9
8
(12 )
5.7 %
5.8 %
7.0 %
(10 ) bp
(120 ) bp
(1)
International domestic revenues relate to our international intra-country operations.
Operating expenses:
Salaries and employee benefits
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Intercompany charges
Other
Total operating expenses
Operating margin
2019
Percent of Revenue
2018
2017
36.8 %
13.9
5.1
4.8
8.9
5.1
5.6
14.1
94.3
5.7 %
37.4 %
14.1
5.5
4.6
8.0
4.9
5.8
13.9
94.2
5.8 %
37.3 %
14.0
5.8
4.9
7.0
4.6
5.7
13.7
93.0
7.0 %
- 65 -
The following table compares selected statistics (in thousands, except yield amounts) for the years ended May 31:
2019
2018
2017
2019/2018
2018/2017
Percent Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box
U.S. overnight envelope
U.S. deferred
Total U.S. domestic ADV
International priority
International economy
Total international export ADV
International domestic(1)
Total ADV
Revenue per package (yield):
U.S. overnight box
U.S. overnight envelope
U.S. deferred
U.S. domestic composite
International priority
International economy
International export composite
International domestic(1)
Composite package yield
Freight Statistics
Average daily freight pounds:
U.S.
International priority
International economy
International airfreight
Total average daily freight pounds
Revenue per pound (yield):
U.S.
International priority
International economy
International airfreight
Composite freight yield
1,285
539
1,077
2,901
538
293
831
2,471
6,203
23.38 $
13.31
15.39
18.54
53.96
46.16
51.21
7.20
18.40
1,252
549
928
2,729
535
268
803
2,454
5,986
22.80 $
12.77
15.79
18.40
54.71
47.63
52.35
7.41
18.44
1,265
561
900
2,726
537
254
791
2,424
5,941
21.57
12.24
15.36
17.60
51.44
44.41
49.18
6.92
17.45
8,577
5,250
14,347
1,644
29,818
8,362
5,345
12,603
1,938
28,248
8,185
5,168
12,274
1,901
27,528
1.38 $
1.55
0.58
0.75
0.99
1.31 $
1.55
0.60
0.75
1.00
1.21
1.39
0.56
0.73
0.92
$
$
3
(2 )
16
6
1
9
3
1
4
3
4
(3 )
1
(1 )
(3 )
(2 )
(3 )
—
3
(2 )
14
(15 )
6
5
—
(3 )
—
(1 )
(1 )
(2 )
3
—
—
6
2
1
1
6
4
3
5
6
7
6
7
6
2
3
3
2
3
8
12
7
3
9
(1)
International domestic statistics relate to our international intra-country operations.
FedEx Express Segment Revenues
FedEx Express segment revenues increased 3% in 2019 primarily due to higher fuel surcharge revenue resulting from increased fuel
prices, U.S domestic package volume growth and international package and freight volume recovery from the NotPetya cyberattack,
partially offset by unfavorable exchange rates. An overall product mix shift from international package volume to international freight
volume and softness in International Priority package and freight volumes resulting from weakening global economic conditions
negatively impacted revenues in 2019.
U.S. domestic package average daily volumes increased 6% in 2019 led by deferred services, as e-commerce continued to drive
growth. U.S. domestic package yields increased 1% in 2019 primarily due to higher fuel surcharges, partially offset by base yield
declines due to increased deferred volume and lower package weights. Average daily freight pounds increased 6% in 2019 primarily
due to higher volume in international freight services, reflecting recovery from the NotPetya cyberattack and an overall product mix
shift from package to freight. Freight yields decreased 1% in 2019 primarily due to unfavorable exchange rates, partially offset by
higher fuel surcharges. International export average daily volumes increased 3% primarily due to the recovery from the NotPetya
cyberattack. However, international package volume growth has slowed across most regions, as noted above. International export
package yields decreased 2% in 2019 driven by unfavorable exchange rates and base yield declines, partially offset by higher fuel
surcharges.
- 66 -
FedEx Express segment revenues increased 7% in 2018 primarily due to improved base rates, higher fuel surcharges and favorable
exchange rates, despite impacts from the NotPetya cyberattack.
FedEx Express’s U.S. domestic and outbound fuel surcharge and international fuel surcharges ranged as follows for the years ended
May 31:
U.S. Domestic and Outbound Fuel Surcharge:
Low
High
Weighted-average
International Fuel Surcharges:
Low
High
Weighted-average
2019
2018
2017
5.5 %
10.8
7.5
6.6
18.8
16.0
2.2 %
7.1
4.8
3.4
16.7
11.1
1.0 %
3.4
2.5
1.2
11.3
8.0
On March 18, 2019, we updated the tables used to determine our fuel surcharges for FedEx Express U.S. domestic services. On
January 7, 2019, FedEx Express implemented a 4.9% average list price increase for U.S. domestic, U.S. export and U.S. import
services. On September 10, 2018, we updated the tables used to determine our fuel surcharges at FedEx Express. On January 1, 2018,
FedEx Express implemented a 4.9% average list price increase for U.S. domestic, U.S. export and U.S. import services. Effective
February 6, 2017, FedEx Express fuel surcharges began adjusting on a weekly basis compared to the previous monthly adjustment. On
January 2, 2017, FedEx Express implemented a 3.9% average list price increase for U.S. domestic, U.S. export and U.S. import
services and a change to the U.S. domestic dimensional weight divisor.
FedEx Express Segment Operating Income
Comparables for 2019 are affected by the impact of the NotPetya cyberattack, which reduced earnings in 2018 by approximately $400
million, the sale of a non-core business of TNT Express, which benefited FedEx Express results in 2018 by $85 million, and lower
TNT Express integration costs in 2019. FedEx Express segment operating income increased 1% in 2019 due to increased volume, the
favorable net impact of fuel and lower variable incentive compensation expenses, partially offset by higher operating costs in salaries
and employee benefits, maintenance and repairs and depreciation and amortization, as well as lower yields. Lower variable incentive
compensation expenses benefited operating income by approximately $285 million in 2019. An overall product mix shift from
international package volume to international freight volume, growth in U.S. deferred services driven by e-commerce and softness in
International Priority package and freight volumes negatively impacted operating income and operating margin in 2019.
FedEx Express segment results include approximately $325 million of TNT Express integration expenses in 2019, a $55 million
decrease from 2018.
Other operating expenses increased 5% in 2019 primarily due to the gain on sale recorded in 2018 discussed above and higher outside
service contract expenses in 2019. Salaries and employee benefits expense increased 2% in 2019 primarily due to higher staffing to
support volume growth and merit increases, partially offset by lower variable incentive compensation expenses. Maintenance and
repairs expense increased 8% in 2019 primarily due to higher aircraft engine maintenance expense. Depreciation and amortization
expense increased 7% in 2019 primarily due to continued investment in aircraft and related equipment. Currency exchange rates had a
negative impact on revenues and a positive impact on expenses but did not have an impact on operating income in 2019.
Fuel expense increased 15% in 2019 due to increased fuel prices. However, the net impact of fuel had a significant benefit to operating
income in 2019, as higher fuel surcharges more than offset increased fuel prices. See the “Results of Operations and Outlook –
Consolidated Results – Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our
operating results.
FedEx Express segment operating income and margin decreased in 2018 primarily due to the impacts from the NotPetya cyberattack
and higher TNT Express integration expenses, partially offset by yield growth and the positive net impact of fuel. FedEx Express
results in 2018 include $380 million of TNT Express integration expenses.
Salaries and employee benefits expense increased 7% in 2018 primarily due to merit increases and unfavorable exchange rates. Other
operating expenses increased 9% in 2018 primarily due to increased outside service contracts, unfavorable exchange rates and TNT
Express integration expenses. Purchased transportation expense increased 8% in 2018 due to unfavorable exchange rates and
increased international volume. Maintenance and repairs expense increased 13% in 2018 due to the timing of aircraft engine
maintenance events, coupled with higher non-aircraft maintenance and repairs associated with vehicles and trailers, equipment and
facilities.
- 67 -
Fuel expense increased 21% in 2018 due to increased fuel prices. The net impact of fuel had a significant benefit to operating income
in 2018 as higher fuel surcharges more than offset increased fuel prices. See the “Results of Operations and Outlook – Consolidated
Results – Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.
FedEx Express Segment Outlook
Revenues are expected to increase at FedEx Express in 2020 primarily due to higher international volumes. Operating income is
expected to decline in 2020 due to macroeconomic weakness and trade uncertainty, continued mix shift to lower-yielding services and
a strategic decision not to renew a customer contract. During 2020, FedEx Express will continue to implement actions to reduce costs
to serve, improve efficiencies and adjust its air and ground network cost structure to align with forecasted volume.
During 2020, we will continue to execute our TNT Express integration plans, and we will be focused on completing projects across
our European hub and station locations that will allow interoperability between networks for both FedEx Express and TNT Express
packages, which will further lower costs as the related FedEx Express linehaul operations are optimized. In addition, we will continue
to focus on the operational network integration process for the key countries in Europe, which represent a significant percentage of
international revenue, workforces and facilities. Integration activities in Europe are complex and require consultations with works
councils and employee representatives in a number of countries. While we expect to make significant progress on integration activities
in 2020, particularly in Europe, integration work will continue thereafter. In connection with this, we expect the FedEx Express
segment to incur approximately $275 million of integration expenses in 2020.
Capital expenditures at FedEx Express are expected to increase in 2020, primarily related to long-term facility investments. We are
making investments over multiple years in our facilities of approximately $1.5 billion to significantly expand the Indianapolis hub and
approximately $1.5 billion to modernize the Memphis World Hub.
- 68 -
FEDEX GROUND SEGMENT
FedEx Ground service offerings include day-certain delivery to businesses in the U.S. and Canada and to 100% of U.S. residences.
The following tables compare revenues, operating expenses, operating income (dollars in millions), operating margin, selected
package statistics (in thousands, except yield amounts) and operating expenses as a percent of revenue for the years ended May 31:
2019
2018
2017
2019/2018
2018/2017
Percent Change
Revenues
Operating expenses:
Salaries and employee benefits
Purchased transportation
Rentals
Depreciation and amortization
Fuel
Maintenance and repairs
Intercompany charges
Other
Total operating expenses
Operating income
Operating margin
Average daily package volume
Revenue per package (yield)
Operating expenses:
Salaries and employee benefits
Purchased transportation
Rentals
Depreciation and amortization
Fuel
Maintenance and repairs
Intercompany charges
Other
Total operating expenses
Operating margin
FedEx Ground Segment Revenues
$
20,522
$
18,395 $
16,503
12
3,413
9,174
791
728
14
336
1,544
1,882
17,882
2,640
$
12.9 %
8,952
8.97
$
3,003
7,936
754
681
12
309
1,471
1,700
15,866
2,529 $
13.7 %
8,336
8.63 $
2,627
7,177
696
627
10
293
1,335
1,495
14,260
2,243
13.6 %
7,896
8.18
$
$
14
16
5
7
17
9
5
11
13
4
(80 ) bp
7
4
2019
Percent of Revenue
2018
2017
16.6 %
44.7
3.9
3.5
0.1
1.6
7.5
9.2
87.1
12.9 %
16.4 %
43.1
4.1
3.7
0.1
1.7
8.0
9.2
86.3
13.7 %
11
14
11
8
9
20
5
10
14
11
13
10 bp
6
6
15.9 %
43.5
4.2
3.8
0.1
1.8
8.1
9.0
86.4
13.6 %
FedEx Ground segment revenues increased 12% in 2019 due to volume growth and increased yields. Average daily volume increased
7% in 2019 primarily due to continued growth in residential services driven by e-commerce. FedEx Ground yields increased 4% in
2019 primarily due to higher fuel surcharges, product mix, extra services and base yields.
FedEx Ground segment revenues increased 11% in 2018 due to volume growth and increased yields. Average daily volume increased
6% in 2018 primarily due to continued growth in our residential services. Yield increased 6% in 2018 driven by higher base rates and
higher fuel surcharges.
The FedEx Ground fuel surcharge is based on a rounded average of the national U.S. on-highway average price for a gallon of diesel
fuel, as published by the Department of Energy. The fuel surcharge ranged as follows for the years ended May 31:
Low
High
Weighted-average
2019
2018
2017
6.3 %
7.8
6.9
4.0 %
6.3
5.2
3.3 %
4.5
4.0
- 69 -
On March 18, 2019, we updated the tables used to determine our fuel surcharges at FedEx Ground. On January 7, 2019, FedEx
Ground implemented a 4.9% average list price increase. On September 10, 2018, we updated the tables used to determine our fuel
surcharges at FedEx Ground. Effective January 22, 2018, dimensional weight pricing was applied to the majority of FedEx SmartPost
shipments. On January 1, 2018, FedEx Ground implemented a 4.9% average list price increase. Effective February 6, 2017, FedEx
Ground fuel surcharges began adjusting on a weekly basis compared to the previously monthly adjustment. On January 2, 2017,
FedEx Ground implemented a 4.9% average list price increase and a change to the U.S. domestic dimensional weight divisor.
FedEx Ground Segment Operating Income
FedEx Ground segment operating income increased 4% in 2019 due to volume growth, increased yields and the favorable net impact
of fuel. In addition, lower variable incentive compensation expenses benefited operating income by approximately $100 million in
2019. Higher purchased transportation costs, resulting from increased contractor settlement rates and expanding operations to six days
per week year-round starting in January 2019, and increased staffing and network expansion costs contributed to the operating margin
decline in 2019.
Purchased transportation expense increased 16% in 2019 due to higher volumes, increased contractor settlement rates, including
expanding to six-day operations year-round, and higher fuel costs. Salaries and employee benefits expense increased 14% in 2019 due
to additional staffing to support volume growth, merit increases and network expansion, partially offset by lower variable incentive
compensation expenses.
The net impact of fuel had a significant benefit to operating income in 2019, as higher fuel surcharges more than offset increased fuel
prices. See the “Results of Operations and Outlook – Consolidated Results – Fuel” section of this MD&A for a description and
additional discussion of the net impact of fuel on our operating results.
FedEx Ground segment operating income increased 13% in 2018 due to volume growth and increased yields. Higher purchased
transportation, staffing and network expansion costs partially offset these benefits.
Purchased transportation increased 11% in 2018 due to higher volumes, increased rates and higher fuel expenses. Salaries and
employee benefits expense increased 14% in 2018 due to additional staffing to support volume growth and network expansion and
merit increases. Other expenses increased 14% in 2018 primarily due to higher property taxes, retail sales commissions and security
and facility services. Intercompany charges increased 10% in 2018 due to higher allocated information-technology and marketing
costs. Rentals and depreciation and amortization expense increased 8% in 2018 due to network expansion.
FedEx Ground Segment Outlook
We expect FedEx Ground segment revenues and operating income to increase in 2020, reflecting continued volume growth in our
residential services and commercial business. We anticipate results in 2020 will continue to be negatively impacted by higher
operating costs required to service increased residential volumes driven by expected growth in e-commerce. During 2019, FedEx
Ground expanded operations throughout the U.S. network to six days per week year-round, and in January 2020, FedEx Ground will
expand residential delivery operations to seven days per week year-round for the majority of the U.S. population. To support these
operational changes, FedEx Ground is making strategic investments to modernize and optimize its network to improve scheduling and
productivity at its hubs and stations. The integration of FedEx SmartPost packages into the standard FedEx Ground operations
continues and the vast majority of this volume is expected to be integrated by the end of calendar 2020, which will improve last mile
efficiency through increased delivery density. In addition, FedEx Ground is investing in technology, and taking other strategic actions,
to improve safety throughout its network. Costs associated with these FedEx Ground initiatives are expected to be a headwind in
2020; however, we believe they will allow for the more efficient use of our existing assets, which will drive improved performance
and enhance our competitive position over the long term.
Capital expenditures at FedEx Ground are expected to increase in 2020 primarily due to additional trailer purchases and land
acquisitions.
FedEx Ground previously announced plans to implement the Independent Service Provider (“ISP”) model throughout its entire U.S.
pickup-and-delivery network. The transition to the ISP model is being accomplished on a district-by-district basis and we are now
targeting the transition to be completed during the second quarter of 2020. As of May 31, 2019, over two-thirds of standard FedEx
Ground volume (excluding FedEx SmartPost volume) was being delivered by small businesses operating under the ISP model. The
costs associated with these transitions will be recognized in the periods incurred and are not expected to be material to any future
quarter.
See “Risk Factors” and “Forward-Looking Statements” for a discussion of these and other potential risks and uncertainties that could
materially affect our future performance.
- 70 -
FEDEX FREIGHT SEGMENT
FedEx Freight LTL service offerings include priority services when speed is critical and economy services when time can be traded
for savings. The following table compares revenues, operating expenses, operating income (dollars in millions), operating margin,
selected statistics and operating expenses as a percent of revenue for the years ended May 31:
Percent Change
Revenues
Operating expenses:
Salaries and employee benefits
Purchased transportation
Rentals
Depreciation and amortization
Fuel
Maintenance and repairs
Intercompany charges
Other
Total operating expenses
Operating income
Operating margin
Average daily shipments (in thousands):
Priority
Economy
Total average daily shipments
Weight per shipment:
Priority
Economy
Composite weight per shipment
Revenue per shipment:
Priority
Economy
Composite revenue per shipment
Revenue per hundredweight:
Priority
Economy
Composite revenue per hundredweight
Operating expenses:
Salaries and employee benefits
Purchased transportation
Rentals
Depreciation and amortization
Fuel
Maintenance and repairs
Intercompany charges
Other
Total operating expenses
Operating margin
FedEx Freight Segment Revenues
2019
2018
2017
$
7,582
$
6,812 $
6,070
2019/2018
11
2018/2017
12
$
3,639
932
172
332
563
245
535
549
6,967
$
615
8.1 %
78.4
34.3
112.7
1,207
1,064
1,164
$
$
$
$
250.95
300.02
265.98
20.78
28.19
22.85
$
$
$
$
3,307
847
153
296
471
227
514
507
6,322
490 $
7.2 %
74.5
31.9
106.4
3,018
717
134
265
384
214
488
479
5,699
371
6.1 %
70.6
31.0
101.6
1,213
1,134
1,190
1,176
1,129
1,161
236.78 $
286.85
251.93 $
221.67
265.77
235.20
19.52 $
25.29
21.18 $
18.85
23.55
20.25
10
10
12
12
20
8
4
8
10
26
90 bp
5
8
6
—
(6 )
(2 )
6
5
6
6
11
8
10
18
14
12
23
6
5
6
11
32
110 bp
6
3
5
3
—
2
7
8
7
4
7
5
2019
Percent of Revenue
2018
2017
48.0 %
12.3
2.3
4.4
7.4
3.2
7.1
7.2
91.9
8.1 %
48.6 %
12.4
2.2
4.4
6.9
3.3
7.6
7.4
92.8
7.2 %
49.7 %
11.8
2.2
4.4
6.3
3.6
8.0
7.9
93.9
6.1 %
FedEx Freight segment revenues increased 11% in 2019 primarily due to higher revenue per shipment and average daily shipments.
Revenue per shipment increased 6% in 2019 primarily due to higher base rates, reflecting our ongoing yield management initiatives,
and higher fuel surcharges. Average daily shipments increased 6% in 2019 due to higher demand for our service offerings.
- 71 -
FedEx Freight segment revenues increased 12% in 2018 primarily due to higher revenue per shipment and average daily shipments.
Revenue per shipment increased 7% in 2018 primarily due to higher base rates, driven by our ongoing yield management initiatives,
higher fuel surcharges and higher weight per shipment. Average daily shipments increased 5% in 2018 due to higher demand for our
service offerings.
The weekly indexed fuel surcharge is based on the average of the U.S. on-highway prices for a gallon of diesel fuel, as published by
the Department of Energy. The indexed FedEx Freight fuel surcharge ranged as follows for the years ended May 31:
Low
High
Weighted-average
2019
2018
2017
23.4 %
25.6
24.5
20.9 %
25.0
22.9
20.2 %
21.6
21.0
On January 7, 2019, FedEx Freight implemented a 5.9% average list price increase in certain U.S. and other shipping rates. On
January 1, 2018, FedEx Freight implemented a 4.9% average increase in certain U.S. and other shipping rates. On January 2, 2017,
FedEx Freight implemented a 4.9% average increase in certain U.S. and other shipping rates.
FedEx Freight Segment Operating Income
FedEx Freight segment operating income increased 26% and operating margin improved 90 basis points in 2019 primarily due to
higher revenue per shipment. In addition, lower variable incentive compensation expenses benefited operating income by
approximately $60 million in 2019. Salaries and employee benefits increased 10% in 2019 reflecting higher staffing levels to support
volume growth and merit increases, partially offset by lower variable incentive compensation expenses. Purchased transportation
increased 10% in 2019 due to increased rates, including higher fuel surcharges, and higher volumes.
Fuel expense increased 20% in 2019 due to higher fuel prices and higher mileage. The net impact of fuel had a moderate benefit to
operating income in 2019 as higher fuel surcharges more than offset increased fuel prices. See the “Results of Operations and Outlook
– Consolidated Results – Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our
operating results.
FedEx Freight segment operating income increased 32% and operating margin improved 110 basis points in 2018 primarily due to
higher revenue per shipment. Salaries and employee benefits increased 10% in 2018, driven by higher staffing levels to support
volume growth, merit increases and higher incentive compensation accruals. Purchased transportation increased 18% in 2018 due to
higher volumes and increased rates, including higher fuel surcharges.
Fuel expense increased 23% in 2018 due to higher fuel prices. The net impact of fuel had a moderate benefit to operating income in
2018 as higher fuel surcharges more than offset increased fuel prices. See the “Results of Operations and Outlook – Consolidated
Results – Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.
FedEx Freight Segment Outlook
We expect FedEx Freight segment average daily shipment volumes and weight per shipment growth rates to moderate in 2020. We
anticipate operating income and operating margin improvement at FedEx Freight in 2020 as we continue our focus on yield
management, profitable growth primarily from small and mid-sized customers, and improving our operational productivity and
efficiency. FedEx Freight will continue to leverage new technology to modernize our operations during 2020 and we expect to realize
increasing benefits from these investments in 2021.
Capital expenditures at FedEx Freight are expected to increase in 2020 due to continued investments in vehicles and trailers,
equipment and technology, which are expected to contribute to efficiency improvements.
- 72 -
FINANCIAL CONDITION
LIQUIDITY
Cash and cash equivalents totaled $2.3 billion at May 31, 2019, compared to $3.3 billion at May 31, 2018. The following table
provides a summary of our cash flows for the years ended May 31 (in millions):
2019
2018
2017
Operating activities:
Net income
Retirement plans mark-to-market adjustment
Gain from sale of business
Gain from sale of investment
Business realignment costs
Goodwill and other asset impairment charges
Other noncash charges and credits
Changes in assets and liabilities
Cash provided by operating activities
Investing activities:
Capital expenditures
Business acquisitions, net of cash acquired
Proceeds from sale of business
Proceeds from asset dispositions and other
Cash used in investing activities
Financing activities:
Purchase of treasury stock
Principal payments on debt
Proceeds from debt issuances
Dividends paid
Other
Cash (used in) provided by financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at end of period
$
$
$
540 $
3,882
(8 )
—
101
—
3,589
(2,491 )
5,613
(5,490 )
(66 )
—
83
(5,473 )
(1,480 )
(1,436 )
2,463
(683 )
97
(1,039 )
(47 )
(946 ) $
2,319 $
4,572 $
(10 )
(85 )
—
—
380
3,277
(3,460 )
4,674
(5,663 )
(179 )
123
42
(5,677 )
(1,017 )
(38 )
1,480
(535 )
337
227
72
(704 ) $
3,265 $
2,997
(24 )
—
(35 )
—
—
4,194
(2,202 )
4,930
(5,116 )
—
—
135
(4,981 )
(509 )
(82 )
1,190
(426 )
355
528
(42 )
435
3,969
Cash Provided by Operating Activities. Cash flows from operating activities increased $939 million in 2019 primarily due to lower
pension contributions, partially offset by higher tax payments, higher variable incentive compensation payments and lower net income
(net of noncash items).
Cash flows from operating activities decreased $256 million in 2018 primarily due to $500 million of additional voluntary pension
contributions and $500 million of payments related to previously accrued legal settlements, partially offset by lower net tax payments.
Cash Used in Investing Activities. Capital expenditures were 3% lower in 2019 primarily due to lower spending on aircraft and related
equipment at FedEx Express, as well as lower spending related to facilities, equipment and vehicles and trailers at FedEx Ground,
partially offset by increased spending related to facilities, equipment and vehicles and trailers at FedEx Express. Capital expenditures
were 11% higher in 2018 largely due to increased spending at FedEx Express for aircraft and related equipment as part of our fleet
modernization program. See “Capital Resources” below for a more detailed discussion of capital expenditures during 2019 and 2018.
Financing Activities. We issued various senior unsecured debt in 2019 and 2018. See Note 6 of the accompanying consolidated
financial statements for more information on these issuances. We used the net proceeds of our 2019 debt issuances to redeem the $750
million aggregate principal amount of 8.00% notes due January 15, 2019, pay the €500 million aggregate principal amount of floating-
rate notes that matured on April 11, 2019 and for general corporate purposes. We utilized the net proceeds of our 2018 debt issuance
for a voluntary incremental contribution to our U.S. Pension Plans in 2018.
- 73 -
The following table provides a summary of repurchases of our common stock for the periods ended May 31 (dollars in millions,
except per share amounts):
2019
2018
Total
Number of
Shares
Purchased
Average
Price Paid
per Share
Total
Purchase
Price
Total
Number of
Shares
Purchased
Average
Price Paid
per Share
Total
Purchase
Price
Common stock repurchases
6,640,000 $ 222.94 $
1,480 4,282,800 $ 237.45 $
1,017
On January 26, 2016, our Board of Directors approved a stock repurchase program of up to 25 million shares. Shares under this
repurchase program may be repurchased from time to time in the open market or in privately negotiated transactions. The timing and
volume of repurchases are at the discretion of management, based on the capital needs of the business, the market price of FedEx
common stock and general market conditions. No time limit was set for the completion of the program, and the program may be
suspended or discontinued at any time. See additional information on the stock repurchase program in Note 1 of the accompanying
consolidated financial statements. As of May 31, 2019, 5.1 million shares remained under the current stock repurchase authorization.
CAPITAL RESOURCES
Our operations are capital intensive, characterized by significant investments in aircraft, vehicles and trailers, technology, facilities,
and package handling and sort equipment. The amount and timing of capital additions depend on various factors, including pre-
existing contractual commitments, anticipated volume growth, domestic and international economic conditions, new or enhanced
services, geographical expansion of services, availability of satisfactory financing and actions of regulatory authorities.
The following table compares capital expenditures by asset category and reportable segment for the years ended May 31 (in millions):
Aircraft and related equipment
Package handling and ground support equipment
Vehicles and trailers
Information technology
Facilities and other
Total capital expenditures
FedEx Express segment
FedEx Ground segment
FedEx Freight segment
FedEx Services segment
Other
Total capital expenditures
2019
2018
2017
2019/2018
2018/2017
Percent Change
$
$
$
$
2,202 $
777
982
751
778
5,490 $
3,550 $
808
544
528
60
5,490 $
2,483 $
814
954
600
812
5,663 $
3,461 $
1,178
490
477
57
5,663 $
1,808
1,093
895
594
726
5,116
2,725
1,490
431
416
54
5,116
(11 )
(5 )
3
25
(4 )
(3 )
3
(31 )
11
11
5
(3 )
37
(26 )
7
1
12
11
27
(21 )
14
15
6
11
Capital expenditures decreased slightly during 2019 primarily due to lower spending on aircraft and related equipment at FedEx
Express, as well as lower spending related to facilities, equipment and vehicles and trailers at FedEx Ground, partially offset by
increased spending related to facilities, equipment and vehicles and trailers at FedEx Express. Capital expenditures during 2018 were
higher than the prior year primarily due to increased spending at FedEx Express for aircraft and related equipment, partially offset by
lower spending related to package handling and ground support equipment at FedEx Ground.
LIQUIDITY OUTLOOK
We believe that our cash and cash equivalents, which totaled $2.3 billion at May 31, 2019, cash flow from operations and available
financing sources will be adequate to meet our liquidity needs, including working capital, capital expenditure requirements, debt
payment obligations, pension contributions, TNT Express integration expenses and the remaining payments for the U.S.-based
voluntary employee buyout program. Our cash and cash equivalents balance at May 31, 2019 includes $1.1 billion of cash in foreign
jurisdictions associated with our permanent reinvestment strategy. We are able to access the majority of this cash without a material
tax cost, as the enactment of the TCJA significantly reduced the cost of repatriating foreign earnings from a U.S. tax perspective. We
do not believe that the indefinite reinvestment of these funds impairs our ability to meet our U.S. domestic debt or working capital
obligations.
- 74 -
Our capital expenditures are expected to be approximately $5.9 billion in 2020. We anticipate that our cash flow from operations will
be sufficient to fund our capital expenditures in 2020, which will include spending for aircraft and hub modernization at FedEx
Express, investments that increase our efficiency in handling large packages at FedEx Ground and investments in technology across
all transportation segments that will further optimize our networks and improve our competitiveness. We are making investments over
multiple years in our facilities of approximately $1.5 billion to significantly expand the FedEx Express Indianapolis hub and
approximately $1.5 billion to modernize the FedEx Express Memphis World Hub. We expect approximately 40% of capital
expenditures in 2020 to be designated for growth initiatives. Our expected capital expenditures for 2020 include $1.6 billion for
delivery of aircraft and related equipment and progress payments toward future aircraft deliveries at FedEx Express.
We have several aircraft modernization programs underway that are supported by the purchase of Boeing 777 Freighter (“B777F”)
and Boeing 767-300 Freighter (“B767F”) aircraft. These aircraft are significantly more fuel-efficient per unit than the aircraft types
previously utilized, and these expenditures are necessary to achieve significant long-term operating savings and to replace older
aircraft. Our ability to delay the timing of these aircraft-related expenditures is limited without incurring significant costs to modify
existing purchase agreements.
During 2019, FedEx Express entered into agreements to purchase 12 incremental B777F aircraft and 12 incremental B767F aircraft.
Six of the B777F and one of the B767F aircraft purchases are conditioned upon there being no event that causes FedEx Express or its
employees not to be covered by the Railway Labor Act of 1926, as amended (“RLA”). The B777F aircraft are expected to be
delivered between 2021 and 2025. The B767F aircraft are expected to be delivered between 2020 and 2022. As part of these
agreements, one B777F and one B767F aircraft delivery were accelerated from 2020 to 2019.
On June 24, 2019, FedEx Express exercised options to purchase an additional six B767F aircraft for delivery in 2022.
FedEx Express now has a total of 20 firm orders for B777F aircraft scheduled for delivery during 2020 through 2025 (one of which
was delivered in June 2019) and a total of 59 firm orders for B767F aircraft for delivery during 2020 through 2023 (one of which was
delivered in June 2019 and one in July 2019). Six of the B777F orders and five of the B767F orders are conditioned upon there being
no event that causes FedEx Express or its employees not to be covered by the RLA.
During 2019, FedEx Express also acquired options to purchase an additional 14 B777F aircraft and an additional six B767F aircraft,
and the delivery dates of 11 existing B777F option aircraft were rescheduled.
FedEx Express now has options to purchase a total of 25 B777F aircraft for delivery through 2028 and a total of 50 B767F aircraft for
delivery through 2026.
During 2018, FedEx Express entered into an agreement to purchase 50 Cessna SkyCourier 408 aircraft with options to purchase up to
50 additional Cessna SkyCourier 408 aircraft. The 50 firm-order Cessna SkyCourier 408 aircraft are expected to be delivered from
2021 through 2024. FedEx Express also entered into an agreement to purchase 30 ATR 72-600F aircraft with options to purchase up
to 20 additional ATR 72-600F aircraft. The 30 firm-order ATR 72-600F aircraft are expected to be delivered from 2021 through 2026.
Additionally, FedEx Express entered into an agreement to accelerate the delivery of two B777F aircraft from 2021 to 2020, one
B777F aircraft from 2021 to 2019, and one B777F aircraft from 2022 to 2020.
We have a shelf registration statement filed with the Securities and Exchange Commission (“SEC”) that allows us to sell, in one or
more future offerings, any combination of our unsecured debt securities and common stock.
During the fourth quarter of 2019, we replaced our $2.0 billion five-year revolving credit facility with a $2.0 billion five-year credit
agreement (the “Five-Year Credit Agreement”) and a $1.5 billion 364-day credit agreement (the “364-Day Credit Agreement” and,
together with the Five-Year Credit Agreement, the “New Credit Agreements”). The Five-Year Credit Agreement expires in March
2024 and includes a $250 million letter of credit sublimit. The 364-Day Credit Agreement expires in March 2020. The New Credit
Agreements are available to finance our operations and other cash flow needs. The New Credit Agreements contain a financial
covenant requiring us to maintain a ratio of debt to consolidated earnings (excluding noncash retirement plans MTM adjustments and
noncash asset impairment charges) before interest, taxes, depreciation and amortization (“adjusted EBITDA”) of not more than 3.5 to
1.0, calculated as of the end of the applicable quarter on a rolling four-quarters basis. The ratio of our debt to adjusted EBITDA was
2.25 to 1.0 at May 31, 2019. We believe this covenant is the only significant restrictive covenant in our New Credit Agreements. Our
New Credit Agreements contain other customary covenants that do not, individually or in the aggregate, materially restrict the conduct
of our business. We are in compliance with the financial covenant and all other covenants in our New Credit Agreements and do not
expect the covenants to affect our operations, including our liquidity or expected funding needs. If we failed to comply with the
financial covenant or any other covenants in our New Credit Agreements, our access to financing could become limited. We do not
expect to be at risk of noncompliance with the financial covenant or any other covenants in our New Credit Agreements. We had a
total of $53 million in letters of credit outstanding at May 31, 2019, with $197 million of the letter of credit sublimit unused under our
revolving credit facility.
- 75 -
As of May 31, 2019, no commercial paper was outstanding.
For 2020, we anticipate making voluntary contributions of $1.0 billion to our U.S. Pension Plans through available debt financing
sources. As noted in our discussion of critical accounting estimates, we do not anticipate contributions to our U.S. Pension Plans will
be required for the foreseeable future based on our funded status and the fact we have a credit balance related to our cumulative excess
voluntary pension contributions over those required that exceeds $3 billion. The credit balance is subtracted from plan assets to
determine the minimum funding requirements. Therefore, we could eliminate all required contributions to our principal U.S. Pension
Plans for several years if we were to choose to waive part of that credit balance in any given year. Our U.S. Pension Plans have ample
funds to meet expected benefit payments.
On June 10, 2019, our Board of Directors declared a quarterly dividend of $0.65 per share of common stock. The dividend was paid
on July 8, 2019 to stockholders of record as of the close of business on June 24, 2019. Each quarterly dividend payment is subject to
review and approval by our Board of Directors, and we evaluate our dividend payment amount on an annual basis at the end of each
fiscal year.
Standard & Poor’s has assigned us a senior unsecured debt credit rating of BBB, a commercial paper rating of A-2 and a ratings
outlook of “stable.” Moody’s Investors Service has assigned us an unsecured debt credit rating of Baa2, a commercial paper rating of
P-2 and a ratings outlook of “stable.” If our credit ratings drop, our interest expense may increase. If our commercial paper ratings
drop below current levels, we may have difficulty utilizing the commercial paper market. If our senior unsecured debt credit ratings
drop below investment grade, our access to financing may become limited.
- 76 -
CONTRACTUAL CASH OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
The following table sets forth a summary of our contractual cash obligations as of May 31, 2019. Certain of these contractual
obligations are reflected in our balance sheet, while others are disclosed as future obligations under accounting principles generally
accepted in the United States. Except for the current portion of interest on long-term debt, this table does not include amounts already
recorded in our balance sheet as current liabilities at May 31, 2019. We have certain contingent liabilities that are not accrued in our
balance sheet in accordance with accounting principles generally accepted in the United States. These contingent liabilities are not
included in the table below. We have other long-term liabilities reflected in our balance sheet, including deferred income taxes,
qualified and nonqualified pension and postretirement healthcare plan liabilities and other self-insurance accruals. Unless statutorily
required, the payment obligations associated with these liabilities are not reflected in the table below due to the absence of scheduled
maturities. Accordingly, this table is not meant to represent a forecast of our total cash expenditures for any of the periods presented.
2020
2021
Payments Due by Fiscal Year (Undiscounted)
(in millions)
2023
2022
2024
Thereafter
Total
Operating activities:
Operating leases
Non-capital purchase obligations and other
Interest on long-term debt
Investing activities:
Aircraft and aircraft-related capital
commitments
Other capital purchase obligations
Financing activities:
Debt
Total
$ 2,497 $ 2,263 $ 2,028 $ 1,779 $ 1,486 $ 8,062 $ 18,115
2,647
4,931
9,951 12,927
781
620
413
609
630
609
281
580
179
558
1,461
48
2,387
25
1,808
24
1,528
23
452
1
204
5
7,840
126
961
750 13,190 17,708
$ 6,368 $ 5,914 $ 6,099 $ 5,781 $ 3,426 $ 34,059 $ 61,647
1,217
1,590
—
Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and
are not included in the table above. Such purchase orders often represent authorizations to purchase rather than binding
agreements. See Note 17 of the accompanying consolidated financial statements for more information on such purchase orders.
Operating Activities
In accordance with accounting principles generally accepted in the United States, future contractual payments under our operating
leases (totaling $18.1 billion on an undiscounted basis) are not recorded in our balance sheet. Credit rating agencies routinely use
information concerning minimum lease payments required for our operating leases to calculate our debt capacity. The amounts
reflected in the table above for operating leases represent undiscounted future minimum lease payments under noncancelable
operating leases (principally facilities and aircraft) with an initial or remaining term in excess of one year at May 31, 2019. Under the
new lease accounting rules, the majority of these leases will be required to be recognized at the net present value on the balance sheet
as a liability with an offsetting right-to-use asset effective in 2020.
The amounts reflected for purchase obligations represent noncancelable agreements to purchase goods or services that are not capital-
related. Such contracts include those for printing and advertising and promotions contracts.
Included in the table above within the caption entitled “Non-capital purchase obligations and other” is our estimate of the current
portion of the liability ($126 million) for uncertain tax positions. We cannot reasonably estimate the timing of the long-term payments
or the amount by which the liability will increase or decrease over time; therefore, the long-term portion of the liability ($38 million)
is excluded from the table. See Note 12 of the accompanying consolidated financial statements for further information.
The amounts reflected in the table above for interest on long-term debt represent future interest payments due on our long-term debt.
Investing Activities
The amounts reflected in the table above for capital purchase obligations represent noncancelable agreements to purchase capital-
related equipment. Such contracts include those for certain purchases of aircraft, aircraft modifications, vehicles and trailers, facilities,
computers and other equipment.
As of May 31, 2019, we had $1.1 billion in deposits and progress payments on aircraft purchases and other planned aircraft-related
transactions.
- 77 -
Financing Activities
We have certain financial instruments representing potential commitments, not reflected in the table above, that were incurred in the
normal course of business to support our operations, including standby letters of credit and surety bonds. These instruments are
required under certain U.S. self-insurance programs and are also used in the normal course of operations. The underlying liabilities
insured by these instruments are reflected in our balance sheets, where applicable. Therefore, no additional liability is reflected for the
letters of credit and surety bonds themselves.
The amounts reflected in the table above for long-term debt represent future scheduled payments on our long-term debt.
OTHER BUSINESS MATTERS
On June 24, 2019, FedEx filed suit in U.S. District Court in the District of Columbia seeking to enjoin the U.S. Department of
Commerce from enforcing prohibitions contained in the Export Administration Regulations (the “EARs”) against FedEx. FedEx
believes that the EARs violate common carriers’ rights to due process under the Fifth Amendment of the U.S. Constitution as they
unreasonably hold common carriers strictly liable for shipments that may violate the EARs without requiring evidence that the carriers
had knowledge of any violations.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires
management to make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In
many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the
application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the
financial statements of a complex, global corporation. However, even under optimal circumstances, estimates routinely require
adjustment based on changing circumstances and new or better information.
The estimates discussed below include the financial statement elements that are either the most judgmental or involve the selection or
application of alternative accounting policies and are material to our financial statements. Management has discussed the development
and selection of these critical accounting estimates with the Audit Committee of our Board of Directors and with our independent
registered public accounting firm.
RETIREMENT PLANS
OVERVIEW. We sponsor programs that provide retirement benefits to most of our employees. These programs include defined benefit
pension plans, defined contribution plans and postretirement healthcare plans and are described in Note 13 of the accompanying
consolidated financial statements. The rules for pension accounting are complex and can produce volatility in our earnings, financial
condition and liquidity.
We are required to record annual year-end adjustments to our financial statements for the net funded status of our pension and
postretirement healthcare plans. The funded status of our plans also impacts our liquidity; however, the cash funding rules operate
under a completely different set of assumptions and standards than those used for financial reporting purposes. As a result, our actual
cash funding requirements can differ materially from our reported funded status.
Over the past several years, we have taken numerous actions to reduce pension-related risk and expense, including the introduction of
our portable pension account benefit, freezing our traditional pension benefit, employing a liability-driven investment strategy and
permitting former employees with a traditional pension benefit to make a one-time, irrevocable election to receive their benefits in a
lump-sum distribution. In May 2018, we entered into an agreement with Metropolitan Life Insurance Company to purchase a group
annuity contract representing the transfer of approximately $6 billion of our U.S. Pension Plan obligations. The transaction transferred
responsibility for pension benefits to Metropolitan Life Insurance Company for approximately 41,000 of our retirees and beneficiaries
who satisfied certain conditions and were receiving a monthly benefit from participating U.S. Pension Plans. There was no change to
the pension benefits for any plan participants as a result of this transaction. The purchase of the group annuity contract was funded
directly by assets of the U.S. Pension Plans. The group annuity contract reduced the size of our U.S. Pension Plans, reduced our
exposure to market risk and associated balance sheet volatility and eliminated the investment, administrative and Pension Benefit
Guaranty Corporation (“PBGC”) premium expenses for approximately 41,000 retirees. We recognized a $210 million one-time
settlement loss in connection with this transaction, which was included in our 2018 year-end MTM retirement plans accounting
adjustment.
- 78 -
The “Salaries and employee benefits” caption of our consolidated income statements includes expense associated with service costs.
The “Other retirement plans (expense) income” caption of our consolidated income statements includes our fourth quarter MTM
adjustment, expense associated with prior service and interest costs, the expected return on assets (“EROA”) and settlements. A
summary of our retirement plans costs over the past three years is as follows (in millions):
Defined benefit pension plans
Defined contribution plans
Postretirement healthcare plans
Retirement plans mark-to-market loss (gain)
The components of the MTM adjustments are as follows (in millions):
Discount rate change
Demographic experience:
Current year actuarial loss
Change in future assumptions
Actual versus expected return on assets
Annuity contract purchase
Total mark-to-market loss (gain)
2019
2019
2018
2017
$
$
111 $
561
75
3,882
4,629 $
150 $
527
74
(10 )
741 $
2019
2018
2017
$
1,780 $
(613 ) $
739
887
476
—
3,882 $
419
(37 )
11
210
(10 ) $
$
234
480
76
(24 )
766
266
268
182
(740 )
—
(24 )
The weighted-average discount rate for all our pension and postretirement healthcare plans decreased from 4.11% at May 31, 2018 to
3.69% at May 31, 2019. The demographic experience in 2019 reflects updates to several forward-looking assumptions, including
retirement rates, disability incidence rates and salary increase assumptions and a current-year actuarial loss due to unfavorable
experience compared to various demographic assumptions. The actual rate of return, which is net of all fees and expenses, on our U.S.
Pension Plan assets of 4.05% was lower than our expected return of 6.75%, as lower than expected equity returns negatively impacted
return-seeking assets while fixed-income assets performed as expected due to declining interest rates.
2018
The weighted-average discount rate for all of our pension and postretirement healthcare plans increased from 3.98% at May 31, 2017
to 4.11% at May 31, 2018. The demographic experience in 2018 reflects a liability loss due to unfavorable results related to various
demographic assumptions. The annuity contract purchase loss relates to the contract with Metropolitan Life Insurance Company as
discussed above. The actual rate of return, which is net of all fees and expenses, on our U.S. Pension Plan assets of 6.30% was slightly
lower than our expected return of 6.50% primarily due to generally flat returns in the long-duration fixed-income portfolio partially
offset by strong returns from global equities.
2017
The actual rate of return on our U.S. Pension Plan assets, which is net of all fees and expenses, of 9.2% was higher than our expected
return of 6.50% primarily due to a rise in the value of global equity markets in addition to favorable credit market conditions. The
weighted-average discount rate for all of our pension and postretirement healthcare plans decreased from 4.04% at May 31, 2016 to
3.98% at May 31, 2017. The demographic experience in 2017 reflects an update in mortality tables for U.S. pension and other
postemployment benefit plans.
DISCOUNT RATE. The discount rate is the interest rate used to discount the estimated future benefit payments that have been accrued
to date (the projected benefit obligation or “PBO”) to their net present value and to determine the succeeding year’s ongoing pension
expense (prior to any year-end MTM adjustment). The discount rate is determined each year at the plan measurement date. The
discount rate for our U.S. Pension Plans at each measurement date was as follows:
Measurement
Date
5/31/2019
5/31/2018
5/31/2017
5/31/2016
- 79 -
Discount Rate
3.85 %
4.27
4.08
4.13
We determine the discount rate with the assistance of actuaries, who calculate the yield on a theoretical portfolio of high-grade
corporate bonds (rated Aa or better). In developing this theoretical portfolio, we select bonds that match cash flows to benefit
payments, limit our concentration by industry and issuer, and apply screening criteria to ensure bonds with a call feature have a low
probability of being called. To the extent scheduled bond proceeds exceed the estimated benefit payments in a given period, the
calculation assumes those excess proceeds are reinvested at one-year forward rates.
The measurement of our PBO and the related impact on our annual MTM adjustment is highly sensitive to the discount rate
assumption. For our largest pension plan, a 50-basis-point increase in the discount rate would have decreased our 2019 PBO by
approximately $1.7 billion and a 50-basis-point decrease in the discount rate would have increased our 2019 PBO by approximately
$1.9 billion. However, our annual segment-level pension expense is less sensitive to changes in the discount rate. For example, a one-
basis-point increase in the discount rate for our largest pension plan would have a $34 million effect on the fourth quarter MTM
adjustment but only a net $140,000 impact on segment-level pension expense.
PLAN ASSETS. The expected average rate of return on plan assets is a long-term, forward-looking assumption that affects our
segment-level pension expense. It is required to be the expected future long-term rate of earnings on plan assets. Our pension plan
assets are invested primarily in publicly tradable securities, and our pension plans hold only a minimal investment in FedEx common
stock that is entirely at the discretion of third-party pension fund investment managers. As part of our strategy to manage pension costs
and funded status volatility, we follow a liability-driven investment strategy to better align plan assets with liabilities.
Establishing the expected future rate of investment return on our pension assets is a judgmental matter, which we review on an annual
basis and revise as appropriate. Management considers the following factors in determining this assumption:
•
•
•
the duration of our pension plan liabilities, which drives the investment strategy we can employ with our pension plan assets;
the types of investment classes in which we invest our pension plan assets and the expected compound geometric return we
can reasonably expect those investment classes to earn over time, net of all fees and expenses; and
the investment returns we can reasonably expect our investment management program to achieve in excess of the returns we
could expect if investments were made strictly in indexed funds.
For consolidated pension expense, we assumed a 6.75% expected long-term rate of return on our U.S. Pension Plan assets in 2019 and
6.50% in 2018 and 2017. We increased our EROA assumption in 2019 to 6.75% as the decrease in the number of retirees in payment
status due to the purchase of a group annuity contract in May 2018 (discussed above) is expected to reduce our short-term future cash
outlays and allow the remaining assets to be placed in longer-duration investments, which will increase the rate of return on assets.
Also, the reduction of PBGC fixed- and variable-rate premiums should increase the net return on assets. The actuarial historical annual
return on our U.S. Pension Plan assets, calculated on a compound geometric basis, was 7.5%, net of all fees and expenses, for the 15-
year period ended May 31, 2019. For our U.S. Pension Plans, a one basis-point change in our EROA would impact our 2020 pension
expense by $2.3 million.
FUNDED STATUS. The following is information concerning the funded status of our pension plans as of May 31 on a financial
reporting basis (in millions):
Funded Status of Plans:
Projected benefit obligation (PBO)
Fair value of plan assets
Funded status of the plans
Cash Amounts:
Cash contributions during the year
Benefit payments during the year
2019
2018
$
$
$
$
28,855 $
24,898
(3,957 ) $
1,125 $
806 $
24,820
23,566
(1,254 )
2,631
1,103
FUNDING. The funding requirements for our U.S. Pension Plans are governed by the Pension Protection Act of 2006, which has
aggressive funding requirements in order to avoid benefit payment restrictions that become effective if the funded status determined
under Internal Revenue Service rules falls below 80% at the beginning of a plan year. All of our U.S. Pension Plans have funded status
levels in excess of 80% and our plans are fully funded under the Employee Retirement Income Security Act. Additionally, current
benefit payments do not materially impact our total plan assets (benefit payments for our U.S. Pension Plans for 2019 were
approximately $720 million, or 3.1% of plan assets). Benefit payments were lower in 2019 due to the annuity purchase in 2018
(discussed above).
- 80 -
Over the past several years, we have made voluntary contributions to our U.S. Pension Plans in excess of the minimum required
contributions. For 2020, no pension contributions are required for our U.S. Pension Plans as they are fully funded under the Employee
Retirement Income Security Act. However, we expect to make voluntary contributions of $1.0 billion to these plans in 2020.
See Note 13 of the accompanying consolidated financial statements for further information about our retirement plans.
INCOME TAXES
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our income taxes are a function of our income,
statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Further, the
acquisition of TNT Express in 2016 expanded our foreign operations significantly and increased the complexity of our global
operations from an income tax perspective. The tax laws in the various jurisdictions are complex and subject to different
interpretations by us and the respective governmental taxing authorities. As a result, significant judgment is required in determining
our tax expense and in evaluating our tax positions, including evaluating uncertainties. Also, our effective tax rate is significantly
affected by the earnings generated in each jurisdiction, so unexpected fluctuations in the geographic mix of earnings could
significantly impact our tax rate. Our intercompany transactions are based on globally accepted transfer pricing principles, which align
profits with the business operations and functions of the various legal entities in our international business.
We evaluate our tax positions quarterly and adjust the balances as new information becomes available. These evaluations are based on
factors including, but not limited to, changes in facts or circumstances, changes in tax laws or their interpretations, audit activity and
changes in our business. In addition, management considers the advice of third parties in making conclusions regarding tax
consequences.
Tax contingencies arise from uncertainty in the application of tax rules throughout the many jurisdictions in which we operate. Despite
our belief that our tax return positions are consistent with applicable tax laws, taxing authorities could challenge certain positions. We
record tax benefits for uncertain tax positions based upon management’s evaluation of the information available at the reporting date.
To be recognized in the financial statements, a tax benefit must be at least more likely than not of being sustained based on technical
merits. The benefit for positions meeting the recognition threshold is measured as the largest benefit more likely than not of being
realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Significant judgment is
required in making these determinations and adjustments to unrecognized tax benefits may be necessary to reflect actual taxes payable
upon settlement.
Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets
arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net
operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the
adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating
earnings and available tax planning strategies. These sources of income rely heavily on estimates to make this determination so there
is a risk that these estimates will have to be revised as new information is received. To the extent we do not consider it more likely
than not that a deferred tax asset will be recovered, a valuation allowance is established. We believe we will generate sufficient future
taxable income to realize the tax benefits related to the remaining net deferred tax assets in our consolidated balance sheets that are not
subject to valuation allowances.
Our income tax positions are based on currently enacted tax laws. On December 22, 2017, the United States government enacted
comprehensive tax legislation through the TCJA, which significantly changes the U.S. corporate income tax system and includes,
among other things, a permanent reduction in the corporate income tax rate from 35% to 21%, a one-time transition tax on
unrepatriated foreign earnings, and new taxes on certain foreign source earnings and certain related party payments, which are referred
to as the global intangible low-taxed income tax and the base erosion and anti-abuse tax. The TCJA requires complex computations to
be performed that were not previously required in U.S. tax law, significant judgments, estimates and calculations to be made in
interpreting its provisions, and the preparation and analysis of information not previously relevant or regularly produced. The U.S.
Treasury Department, the Internal Revenue Service, and other standard-setting bodies could interpret or issue guidance on how
provisions of the TCJA will be applied or otherwise administered that is different from our interpretation. In addition, further
legislative action could be taken to address questions or issues caused by the TCJA. As we continue our ongoing analysis of the
TCJA’s related interpretations, collect and prepare necessary data, and interpret any additional guidance, we may be required to make
adjustments to amounts that we have recorded that may materially impact our results of operations and financial condition.
Additionally, state and foreign governments may issue guidance and enact tax laws in response to the TCJA or other global initiatives
that could result in further changes to our taxation and adversely impact our results of operations and financial condition.
For more information, including impacts from the TCJA, see the “Income Taxes” section of this MD&A and Note 12 of the
accompanying consolidated financial statements.
- 81 -
SELF-INSURANCE ACCRUALS
We are self-insured up to certain limits for costs associated with workers’ compensation claims, vehicle accidents and general
business liabilities, and benefits paid under employee healthcare and disability programs. Our reserves are established for estimates of
loss on reported claims, including incurred-but-not-reported claims. Self-insurance accruals reflected in our balance sheet were $3.0
billion at May 31, 2019 and $2.7 billion at May 31, 2018. Approximately 35% of these accruals were classified as current liabilities.
Our self-insurance accruals are primarily based on the actuarially estimated cost of claims incurred as of the balance sheet date. These
estimates include consideration of factors such as severity of claims, frequency and volume of claims, healthcare inflation, seasonality
and plan designs. Cost trends on material accruals are updated each quarter. We self-insure up to certain limits that vary by type of
risk. Periodically, we evaluate the level of insurance coverage and adjust insurance levels based on risk tolerance and premium
expense. Where estimable, losses covered by insurance are recognized on a gross basis with a corresponding insurance receivable.
We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly
judgmental accruals. However, the use of any estimation technique in this area is inherently sensitive given the magnitude of claims
involved and the length of time until the ultimate cost is known. We believe our recorded obligations for these expenses are
consistently measured on a conservative basis. Nevertheless, changes in healthcare costs, accident frequency and severity, insurance
retention levels and other factors can materially affect the estimates for these liabilities.
LONG-LIVED ASSETS
USEFUL LIVES AND SALVAGE VALUES. Our business is capital intensive, with approximately 56% of our total assets invested in
our transportation and information systems infrastructures.
The depreciation or amortization of our capital assets over their estimated useful lives, and the determination of any salvage values,
requires management to make judgments about future events. Because we utilize many of our capital assets over relatively long
periods (the majority of aircraft costs are depreciated over 15 to 30 years), we periodically evaluate whether adjustments to our
estimated service lives or salvage values are necessary to ensure these estimates properly match the economic use of the asset. This
evaluation may result in changes in the estimated lives and residual values used to depreciate our aircraft and other equipment. For our
aircraft, we typically assign no residual value due to the utilization of these assets in cargo configuration, which results in little to no
value at the end of their useful life. These estimates affect the amount of depreciation expense recognized in a period and, ultimately,
the gain or loss on the disposal of the asset. Changes in the estimated lives of assets will result in an increase or decrease in the amount
of depreciation recognized in future periods and could have a material impact on our results of operations (as described
below). Historically, gains and losses on disposals of operating equipment have not been material. However, such amounts may differ
materially in the future due to changes in business levels, technological obsolescence, accident frequency, regulatory changes and
other factors beyond our control.
IMPAIRMENT. As of May 31, 2019, the FedEx Express global air and ground network included a fleet of 681 aircraft (including
approximately 300 supplemental aircraft) that provide delivery of packages and freight to more than 220 countries and territories
through a wide range of U.S. and international shipping services. While certain aircraft are utilized in primary geographic areas (U.S.
versus international), we operate an integrated global network, and utilize our aircraft and other modes of transportation to achieve the
lowest cost of delivery while maintaining our service commitments to our customers. Because of the integrated nature of our global
network, our aircraft are interchangeable across routes and geographies, giving us flexibility with our fleet planning to meet changing
global economic conditions and maintain and modify aircraft as needed.
Because of the lengthy lead times for aircraft manufacture and modifications, we must anticipate volume levels and plan our fleet
requirements years in advance, and make commitments for aircraft based on those projections. Furthermore, the timing and
availability of certain used aircraft types (particularly those with better fuel efficiency) may create limited opportunities to acquire
these aircraft at favorable prices in advance of our capacity needs. These activities create risks that asset capacity may exceed demand.
At May 31, 2019, we had two purchased aircraft that were not yet placed into service.
The accounting test for whether an asset held for use is impaired involves first comparing the carrying value of the asset with its
estimated future undiscounted cash flows. If the cash flows do not exceed the carrying value, the asset must be adjusted to its current
fair value. We operate integrated transportation networks, and accordingly, cash flows for most of our operating assets are assessed at
a network level, not at an individual asset level for our analysis of impairment. Further, decisions about capital investments are
evaluated based on the impact to the overall network rather than the return on an individual asset. We make decisions to remove
certain long-lived assets from service based on projections of reduced capacity needs or lower operating costs of newer aircraft types,
and those decisions may result in an impairment charge. Assets held for disposal must be adjusted to their estimated fair values less
costs to sell when the decision is made to dispose of the asset and certain other criteria are met. The fair value determinations for such
aircraft may require management estimates, as there may not be active markets for some of these aircraft. Such estimates are subject to
revision from period to period.
- 82 -
In the normal management of our aircraft fleet, we routinely idle aircraft and engines temporarily due to maintenance cycles and
adjustments of our network capacity to match seasonality and overall customer demand levels. Temporarily idled assets are classified
as available-for-use, and we continue to record depreciation expense associated with these assets. These temporarily idled assets are
assessed for impairment on a quarterly basis. The criteria for determining whether an asset has been permanently removed from
service (and, as a result, is potentially impaired) include, but are not limited to, our global economic outlook and the impact of our
outlook on our current and projected volume levels, including capacity needs during our peak shipping seasons; the introduction of
new fleet types or decisions to permanently retire an aircraft fleet from operations; and changes to planned service expansion
activities. At May 31, 2019, we had seven aircraft temporarily idled. These aircraft have been idled for an average of 23 months and
are expected to return to revenue service in order to meet expected demand.
SALE. On April 30, 2018, we sold a non-core business of TNT Express and recorded a gain of $85 million in the FedEx Express
segment.
LEASES. We utilize operating leases to finance certain of our aircraft, facilities and equipment. Such arrangements typically shift the
risk of loss on the residual value of the assets at the end of the lease period to the lessor. As disclosed in “Financial Condition –
Contractual Cash Obligations and Off-Balance Sheet Arrangements” and Note 7 of the accompanying consolidated financial
statements, at May 31, 2019, we had approximately $18.1 billion (on an undiscounted basis) of future commitments for payments
under operating leases. The weighted-average remaining lease term of all operating leases outstanding at May 31, 2019 was
approximately six years. The future commitments for operating leases are not yet reflected as a liability in our balance sheet until the
new rules on lease accounting issued in 2016 become effective in 2020 as described below.
The determination of whether a lease is accounted for as a capital lease or an operating lease requires management to make estimates
primarily about the fair value of the asset and its estimated economic useful life. In addition, our evaluation includes ensuring we
properly account for build-to-suit lease arrangements and making judgments about whether various forms of lessee involvement
during the construction period make the lessee an agent for the owner-lessor or, in substance, the owner of the asset during the
construction period. We believe we have well-defined and controlled processes for making these evaluations, including obtaining
third-party appraisals for material transactions to assist us in making these evaluations.
On February 25, 2016, the Financial Accounting Standards Board issued a new lease accounting standard. Based on the new lease
accounting standard and our lease portfolio, we anticipate recognizing a lease liability and related right-of-use asset on the balance
sheet of approximately $14 billion, with an immaterial impact on our income statement compared to the current lease accounting
model. These changes are effective June 1, 2019 (fiscal 2020). See Note 2 of the accompanying consolidated financial statements for
more information on this recent accounting guidance.
GOODWILL. As of May 31, 2019, we had $6.9 billion of recorded goodwill from our business acquisitions, representing the excess of
the purchase price over the fair value of the net assets acquired. As of May 31, 2018, we had $7.0 billion of recorded goodwill from
our business acquisitions, representing the excess of the aggregate purchase price over the fair value of the net assets acquired. During
2017, we recorded $407 million in additional goodwill associated with the completion of the purchase price allocation related to the
TNT Express acquisition. Several factors give rise to goodwill in our acquisitions, such as the expected benefit from synergies of the
combination and the existing workforce of the acquired business.
Goodwill is reviewed at least annually for impairment. In our evaluation of goodwill impairment, we perform a qualitative assessment
that requires management judgment and the use of estimates to determine if it is more likely than not that the fair value of a reporting
unit is less than its carrying amount. An entity has an unconditional option to bypass the qualitative assessment for any reporting unit
and proceed directly to performing the quantitative goodwill impairment test. An entity may resume performing the qualitative
assessment in any subsequent period. We performed both qualitative and quantitative assessments of goodwill as of May 31, 2019.
This included comparing the fair value of the reporting unit to its carrying value (including attributable goodwill). Fair value is
estimated using standard valuation methodologies (principally the income or market approach) incorporating market participant
considerations and management’s assumptions on revenue growth rates, operating margins, discount rates and expected capital
expenditures. Estimates used by management can significantly affect the outcome of the impairment test. Changes in forecasted
operating results and other assumptions could materially affect these estimates. We perform our annual impairment tests in the fourth
quarter unless circumstances indicate the need to accelerate the timing of the tests.
- 83 -
Since the beginning of 2018, the financial reporting of TNT Express has been fully integrated into the FedEx Express segment and a
separate reporting unit does not exist for this entity. While there are several factors negatively impacting near-term results at FedEx
Express, including softening global economic conditions, a product mix shift to lower yielding services due in part to an increase in e-
commerce traffic, and the timing and amount of TNT Express integration program expenses, FedEx Express continues to be an
established profitable business with a fair value that significantly exceeds its carrying value based on our valuation performed during
the fourth quarter of 2019. In addition, our other reporting units with significant recorded goodwill include FedEx Ground, FedEx
Freight and FedEx Office (reported in the FedEx Services segment). We evaluated these reporting units during the fourth quarters of
2019 and 2018. The estimated fair value of each of these reporting units exceeded their carrying values as of the end of 2019 and
2018; therefore, we do not believe that any of these reporting units were impaired as of the balance sheet dates.
In connection with our annual impairment testing of goodwill conducted in the fourth quarter of 2018, we recorded an impairment
charge of $374 million for substantially all of the goodwill attributable to our FedEx Supply Chain reporting unit. The key factors
contributing to the goodwill impairment were underperformance of the FedEx Supply Chain business during 2018, including base
business erosion, and the failure to attain the level of operating synergies and revenue and profit growth anticipated at the time of
acquisition. Based on these factors, our outlook for the business and industry changed in the fourth quarter of 2018.
LEGAL AND OTHER CONTINGENCIES
We are subject to various loss contingencies in connection with our operations. Contingent liabilities are difficult to measure, as their
measurement is subject to multiple factors that are not easily predicted or projected. Further, additional complexity in measuring these
liabilities arises due to the various jurisdictions in which these matters occur, which makes our ability to predict their outcome highly
uncertain. Moreover, different accounting rules must be employed to account for these items based on the nature of the
contingency. Accordingly, significant management judgment is required to assess these matters and to make determinations about the
measurement of a liability, if any. Certain pending loss contingencies are described in Note 18 of the accompanying consolidated
financial statements. In the opinion of management, the aggregate liability, if any, of individual matters or groups of related matters
not specifically described in Note 18 is not expected to be material to our financial position, results of operations or cash flows. The
following describes our methods and associated processes for evaluating these matters.
Because of the complex environment in which we operate, we are subject to other legal proceedings and claims, including those
relating to general commercial matters, governmental enforcement actions, employment-related claims and FedEx Ground’s owner-
operators. Accounting guidance for contingencies requires an accrual of estimated loss from a contingency, such as a non-income tax
or other legal proceeding or claim, when it is probable (i.e., the future event or events are likely to occur) that a loss has been incurred
and the amount of the loss can be reasonably estimated. This guidance also requires disclosure of a loss contingency matter when, in
management’s judgment, a material loss is reasonably possible or probable.
During the preparation of our financial statements, we evaluate our contingencies to determine whether it is probable, reasonably
possible or remote that a liability has been incurred. A loss is recognized for all contingencies deemed probable and estimable,
regardless of amount. For unresolved contingencies with potentially material exposure that are deemed reasonably possible, we
evaluate whether a potential loss or range of loss can be reasonably estimated.
Our evaluation of these matters is the result of a comprehensive process designed to ensure that accounting recognition of a loss or
disclosure of these contingencies is made in a timely manner and involves our legal and accounting personnel, as well as external
counsel where applicable. The process includes regular communications during each quarter and scheduled meetings shortly before
the completion of our financial statements to evaluate any new legal proceedings and the status of existing matters.
In determining whether a loss should be accrued or a loss contingency disclosed, we evaluate, among other factors:
•
the current status of each matter within the scope and context of the entire lawsuit or proceeding (e.g., the lengthy and complex
nature of class-action matters);
•
the procedural status of each matter;
• any opportunities to dispose of a lawsuit on its merits before trial (i.e., motion to dismiss or for summary judgment);
•
•
•
the amount of time remaining before a trial date;
the status of discovery;
the status of settlement, arbitration or mediation proceedings; and
• our judgment regarding the likelihood of success prior to or at trial.
- 84 -
In reaching our conclusions with respect to accrual of a loss or loss contingency disclosure, we take a holistic view of each matter
based on these factors and the information available prior to the issuance of our financial statements. Uncertainty with respect to an
individual factor or combination of these factors may impact our decisions related to accrual or disclosure of a loss contingency,
including a conclusion that we are unable to establish an estimate of possible loss or a meaningful range of possible loss. We update
our disclosures to reflect our most current understanding of the contingencies at the time we issue our financial statements. However,
events may arise that were not anticipated and the outcome of a contingency may result in a loss to us that differs materially from our
previously estimated liability or range of possible loss.
Despite the inherent complexity in the accounting and disclosure of contingencies, we believe that our processes are robust and
thorough and provide a consistent framework for management in evaluating the potential outcome of contingencies for proper
accounting recognition and disclosure.
RISK FACTORS
A wide range of factors could materially adversely affect our business, results of operations, financial condition and the price of our
common stock. The most significant of these factors include the following:
We are directly affected by the state of the economy and anti-trade measures. While macroeconomic risks apply to most companies,
we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in economic activity.
Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods — key
macroeconomic measurements. When individuals and companies purchase and produce fewer goods, we transport fewer goods, and as
companies expand the number of distribution centers and move manufacturing closer to consumer markets, we transport goods shorter
distances. In addition, we have a relatively high fixed-cost structure, which is difficult to quickly adjust to match shifting volume
levels. Moreover, as we continue to grow our international business, we are increasingly affected by the health of the global economy,
the rate of growth of global trade, world trade policies, international taxes, government-to-government relations and the typically more
volatile economies of emerging markets. For instance, anti-trade and protectionist measures adopted by the U.S. or other countries in
which we do business, such as trade controls, tariffs, quotas, embargoes, sanctions, or retaliation by another country against such
measures, could result in economic uncertainty and instability, resulting in fewer goods being transported globally. In 2019, we saw a
customer preference for slower, less costly shipping services. Additionally, during 2019 weakness in the global economy adversely
affected our results of operations, and we expect such weakness to continue to be present during 2020.
A significant data breach or other disruption to our technology infrastructure could disrupt our operations and result in the loss of
critical confidential information, adversely impacting our reputation, business or results of operations. Our ability to attract and
retain customers, to efficiently operate our businesses, and to compete effectively depends in part upon the sophistication and
reliability of our technology network, including our ability to provide features of service that are important to our customers, to protect
our confidential business information and the information provided by our customers, and to maintain customer confidence in our
ability to protect our systems and to provide services consistent with their expectations. For example, we rely on information
technology to receive package level information in advance of physical receipt of packages, to track items that move through our
delivery systems, to efficiently plan deliveries, to execute billing processes, and to track and report financial and operational data. We
are subject to risks imposed by data breaches and operational disruptions, including through cyberattack or cyber-intrusion, including
by computer hackers, foreign governments, cyber terrorists, cyber criminals and malicious employees or other insiders. Data breaches
of companies and governments have increased in recent years as the number, intensity and sophistication of attempted attacks and
intrusions from around the world have increased and we, our customers and third parties increasingly store and transmit data by means
of connected information technology systems. Additionally, risks such as code anomalies, “Acts of God,” transitional challenges in
migrating operating company functionality to our FedEx enterprise automation platform, data leakage and human error pose a direct
threat to our products, services and data and could result in unauthorized or block legitimate access to sensitive or confidential data
regarding our operations, customers, employees, and suppliers, including personal information. The technology infrastructure of
acquired businesses, as well as their practices related to the use and maintenance of data, could also present issues that we were not
able to identify prior to the acquisition.
- 85 -
We also depend on and interact with the technology and systems of third parties, including our customers and third-party service
providers such as cloud service providers and delivery services. Such third parties may have access to information we maintain about
our company, customers, employees and vendors or operate systems that are critical to our business operations and services. Like us,
these third parties are subject to risks imposed by data breaches, cyberattacks and other events or actions that could damage, disrupt or
close down their networks or systems. We have security processes, protocols and standards in place, including contractual provisions
requiring such security measures, that are applicable to such third parties and are designed to protect information that is held by them,
or to which they have access, as a result of their engagements with us. Nevertheless, a cyberattack could defeat one or more of such
third parties’ security measures, allowing an attacker to obtain information about our company, customers, employees and vendors or
disrupt our operations. These third parties may also experience operational disruptions or human error that could result in
unauthorized access to sensitive or confidential data regarding our operations, customers, employees and suppliers, including personal
information.
A disruption to our complex, global technology infrastructure, including those impacting our computer systems and websites, could
result in the loss of confidential business or customer information, require substantial repairs or replacements, resulting in significant
costs, and lead to the temporary or permanent transfer by customers of some or all of their business to our competitors. The foregoing
could harm our reputation and adversely impact our operations, customer service and results of operations. Additionally, a security
breach could require us to devote significant management resources to address the problems created. These types of adverse impacts
could also occur in the event the confidentiality, integrity or availability of company and customer information was compromised due
to a data loss by FedEx or a trusted third party. We or the third parties with which we share information may not discover any security
breach and loss of information for a significant period of time after the security breach occurs.
Recently, there has also been heightened regulatory and enforcement focus on data protection in the U.S. (at both the state and federal
level) and abroad, and an actual or alleged failure to comply with applicable U.S. or foreign data protection regulations or other data
protection standards may expose us to litigation (including, in some instances, class action litigation), fines, sanctions or other
penalties, which could harm our reputation and adversely impact our business, results of operations and financial condition. This
regulatory environment is increasingly challenging and may present material obligations and risks to our business, including
significantly expanded compliance burdens, costs and enforcement risks. For example, the European Union’s (“EU”) General Data
Protection Regulation (“GDPR”), which became effective in May 2018, greatly increases the jurisdictional reach of EU law and adds
a broad array of requirements related to personal data, including individual notice and opt-out preferences and the public disclosure of
significant data breaches. Additionally, violations of the GDPR can result in fines of as much as 4% of a company’s annual revenue.
Other governments have enacted or are enacting similar data protection laws, including data localization laws that require data to stay
within their borders. All of these evolving compliance and operational requirements, as well as the uncertain interpretation and
enforcement of laws, impose significant costs and regulatory risks that are likely to increase over time.
We have invested and continue to invest in technology security initiatives, information-technology risk management and disaster
recovery plans, including investments to retire and replace end-of-life systems. The development and maintenance of these measures
is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become
increasingly more intense and sophisticated. Despite our efforts, we are not fully insulated from data breaches, technology disruptions
or data loss, which could adversely impact our competitiveness and results of operations. For instance, in June 2017 TNT Express
worldwide operations were significantly affected due to the infiltration of an information-technology virus known as NotPetya. In
May 2017 FedEx was one of many companies attacked by the rapidly spreading ransomware described as WannaCry that exploited
vulnerability in a third-party software program and infected computers using that program, encrypting files and holding them for
ransom. Additionally, during the third quarter of 2018 we discovered an unsecured server hosted by one of our third-party cloud
service providers, which exposed some archived account information related to a service discontinued after our 2015 acquisition of
Bongo International, LLC. The server has been secured, and we have found no indication that any information has been
misappropriated in connection with the incident. Neither the WannaCry ransomware attack or unsecured server caused a material
disruption to our systems or resulted in any material costs to FedEx.
While we have significant security processes and initiatives in place, we may be unable to detect or prevent a breach or disruption in
the future. Additionally, while we have insurance coverage designed to address certain aspects of cyber risks in place, such insurance
coverage may be insufficient to cover all losses or all types of claims that may arise.
- 86 -
Additional changes in international trade policies and relations could significantly reduce the volume of goods transported
globally and adversely affect our business and results of operations. The U.S. government has made significant changes in U.S. trade
policy and has taken certain actions that have negatively impacted U.S. trade, including imposing tariffs on certain goods imported
into the United States. To date, several governments, including the EU, China and India, have imposed tariffs on certain goods
imported from the United States. These actions contributed to weakness in the global economy that adversely affected our results of
operations during 2019, and we expect such weakness to continue to be present during 2020. Any further changes in U.S. or
international trade policy could trigger additional retaliatory actions by affected countries, resulting in “trade wars” and further
increased costs for goods transported globally, which may reduce customer demand for these products if the parties having to pay
those tariffs increase their prices, or in trading partners limiting their trade with countries that impose anti-trade measures. Political
uncertainty surrounding international trade and other disputes could also have a negative effect on consumer confidence and spending.
Such conditions could have an adverse effect on our business, results of operations and financial condition, as well as on the price of
our common stock.
Additionally, the U.S. government has recently taken action to limit the ability of domestic companies to engage in commerce with
certain foreign entities under certain circumstances. Given the nature of our business and our global recognizability, foreign
governments may target FedEx by limiting the ability of foreign entities to do business with us in certain instances, imposing
monetary or other penalties or taking other retaliatory action, which could have an adverse effect on our business, results of operations
and financial condition, as well as on the price of our common stock.
The failure to successfully integrate the businesses and operations of FedEx Express and TNT Express in the expected time frame
and at the expected cost may adversely affect our future results. Prior to FedEx’s acquisition of TNT Express in 2016, FedEx
Express and TNT Express operated as independent companies. There can be no assurances that these businesses can be integrated
successfully. Expected integration costs have increased significantly since the acquisition was completed, and parts of the integration
have taken longer than initially expected. It is possible that the integration process could result in higher than currently expected
integration costs, the loss of customers, the disruption of ongoing businesses, unexpected integration issues, or the loss of key
historical FedEx Express or TNT Express employees. It is also possible that the overall integration process will take longer than
currently anticipated.
- 87 -
Specifically, the following issues, among others, must be addressed as we integrate the operations of FedEx Express and TNT Express
in order to realize the anticipated benefits of the transaction:
• combining the companies’ operations and corporate functions;
• combining the businesses of FedEx Express and TNT Express and meeting the capital requirements of the combination in a manner
that permits us to achieve the operating and financial results we anticipated from the acquisition, the failure of which could result in
the anticipated benefits of the transaction not being realized in the time frame currently anticipated, or at all;
•
•
•
•
integrating and consolidating the companies’ administrative and information-technology infrastructure and computer systems, and
modernizing certain TNT Express systems which suffered from underinvestment prior to the acquisition;
integrating and restructuring the corporate entities;
integrating workforces and consulting with works councils and employee representatives while continuing to provide consistent,
high-quality service to customers;
integrating and unifying the offerings and services available to historical FedEx Express and TNT Express customers;
• harmonizing the companies’ operating practices, employee development and compensation programs, integrity and compliance
programs, terms and conditions of contracts of carriage, internal controls and other policies, procedures and processes;
•
integrating the companies’ financial reporting and internal control systems;
• maintaining existing agreements with customers and service providers and avoiding delays in entering into new agreements with
prospective customers and service providers;
• addressing possible differences in business backgrounds, corporate cultures and management philosophies;
• addressing employee social issues so as to maintain efficient and effective labor and employee relations;
• coordinating rebranding and marketing efforts;
• managing the movement of certain positions to different locations;
• managing potential unknown and unidentified liabilities, including liabilities that are significantly larger than currently anticipated,
and unforeseen increased expenses or delays associated with the integration process; and
• managing the expanded operations of a significantly larger, more complex company.
All of these factors could dilute FedEx’s earnings per share, delay or decrease the expected accretive effect of the acquisition and
negatively impact the price of our common stock. The expected financial benefits of the acquisition may also be delayed or decreased
by reductions in our base business levels due to economic weakness in Europe or other factors. In addition, at times the attention of
certain members of our management may be focused on the integration of the businesses of FedEx Express and TNT Express and
diverted from day-to-day business operations, which may disrupt our business. Further, we may not achieve the expected financial
benefits from any costs incurred in addition to our integration program expenses related to investments to further transform and
optimize the combined business.
Failure to successfully implement our business strategy and effectively respond to changes in market dynamics will cause our
future financial results to suffer. We are making significant investments and other decisions in connection with our long-term
business strategy which includes our ability to meet the demands of e-commerce, such as aircraft fleet modernization and hub
modernization and expansion at FedEx Express and expansion of FedEx Ground residential delivery operations to seven days per
week year-round for the majority of the U.S. population. We are also implementing various cost-containment actions, including
limited hiring and discretionary spending and a U.S.-based voluntary employee buyout program. Such initiatives and enhancements
may require us to make significant capital expenditures. Additionally, in developing our business strategy, we make certain
assumptions including, but not limited to, those related to customer demand and the mix of services to be purchased by our customers,
competition and the global economy; and actual market, economic and other conditions may be different from our assumptions. As
technology, customer behavior and market conditions continue to evolve, it is important that we maintain the relevance of our brand
and service offerings to our customers. If we are not able to successfully implement our business strategy and effectively respond to
changes in market dynamics, our future financial results will suffer.
- 88 -
The United Kingdom’s vote to leave the EU could adversely impact our business, results of operations and financial condition.
There is substantial uncertainty surrounding the United Kingdom’s 2016 vote to leave the EU (“Brexit”), which is scheduled for
October 31, 2019. The suspension or further delay of Brexit beyond October 31, 2019 requires the unanimous agreement of all
remaining EU member states. Any impact of Brexit depends on the terms of the United Kingdom’s withdrawal from the EU, if it
ultimately occurs. The ongoing uncertainty within the United Kingdom’s government and Parliament on the status of a withdrawal
agreement could lead to economic stagnation until an ultimate resolution with respect to Brexit occurs. Such uncertainty also sustains
the possibility of a “hard Brexit,” in which the United Kingdom leaves the EU without a withdrawal agreement and associated
transition period in place. The outcome of recent European Parliament elections, and potentially the outcome of the July 2019 election
to determine the next Prime Minister of the United Kingdom, could increase the likelihood of a hard Brexit. A hard Brexit would
likely cause significant market and economic disruption and negatively impact customer experience and service quality, and could
depress the demand for our services.
Even if an agreement setting forth the terms of the United Kingdom’s withdrawal from the EU is approved, the withdrawal could
result in a global economic downturn. The United Kingdom also could lose access to the single EU market and to the global trade
deals negotiated by the EU on behalf of its members, depressing trade between the United Kingdom and other countries, which would
negatively impact our international operations. Additionally, we may face new regulations regarding trade, aviation, security and
employees, among others, in the United Kingdom. Compliance with such regulations could be costly, negatively impacting our
business, results of operations and financial condition. Brexit could also adversely affect European and worldwide economic and
market conditions and could contribute to instability in global financial and foreign exchange markets, including volatility in the value
of the euro and the British pound.
Our businesses depend on our strong reputation and the value of the FedEx brand. The FedEx brand name symbolizes high-quality
service, reliability and speed. FedEx is one of the most widely recognized, trusted and respected brands in the world, and the FedEx
brand is one of our most important and valuable assets. In addition, we have a strong reputation among customers and the general
public for high standards of social and environmental responsibility and corporate governance and ethics. The FedEx brand name and
our corporate reputation are powerful sales and marketing tools, and we devote significant resources to promoting and protecting
them. Adverse publicity (whether or not justified) relating to activities by our employees, contractors, agents or others with whom we
do business, such as customer service mishaps, accidents, catastrophes or incidents involving aircraft or vehicles operated by us, data
breaches or technology infrastructure disruptions, noncompliance with laws or the shipment of certain items pursuant to our obligation
as a common carrier operating under federal law, could tarnish our reputation and reduce the value of our brand. With the increase in
the use of social media outlets such as Facebook, YouTube, Instagram and Twitter, adverse publicity can be disseminated quickly and
broadly, making it increasingly difficult for us to effectively respond. Damage to our reputation and loss of brand equity could reduce
demand for our services and thus have an adverse effect on our financial condition, liquidity and results of operations, as well as
require additional resources to rebuild our reputation and restore the value of our brand.
Our transportation businesses are impacted by the price and availability of jet and vehicle fuel. We must purchase large quantities
of fuel to operate our aircraft and vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. In
addition, our purchased transportation expense may be impacted by fuel costs. To date, we have been mostly successful in mitigating
over time the expense impact of higher fuel costs through our indexed fuel surcharges, as the amount of the surcharges is closely
linked to the market prices for fuel. If we are unable to maintain or increase our fuel surcharges because of competitive pricing
pressures or some other reason, fuel costs could adversely impact our operating results. As of May 31, 2019, we had no derivative
financial instruments to reduce our exposure to fuel price fluctuations, and we currently have no plans to use derivative financial
instruments for this purpose in the future. Even if we are able to offset the cost of fuel with our surcharges, high fuel surcharges could
move our customers away from our higher-yielding express services to our lower-yielding deferred or ground services or even reduce
customer demand for our services altogether. In addition, disruptions in the supply of fuel could have a negative impact on our ability
to operate our transportation networks. Weather-related events, natural disasters, political disruptions or wars involving oil-producing
countries, economic sanctions imposed against oil-producing countries or specific industry participants, changes in governmental
policy concerning fuel production, transportation, taxes or marketing, changes in refining capacity, environmental concerns and other
unpredictable events may impact fuel supply and could result in shortages in the future.
Our businesses are capital intensive, and we must make capital decisions based upon projected volume levels. We make significant
investments in aircraft, package handling facilities, vehicles, technology, sort equipment, copy equipment and other assets to support
our transportation and business networks. We also make significant investments to rebrand, integrate and grow the companies that we
acquire. The amount and timing of capital investments depend on various factors, including our anticipated volume growth. We must
make commitments to purchase or modify aircraft years before the aircraft are actually needed. We must predict volume levels and
fleet requirements and make commitments for aircraft based on those projections. Missing our projections could result in too much or
too little capacity relative to our shipping volumes. Overcapacity could lead to below-market asset dispositions or write-downs, as
well as negatively impact operating margins, and undercapacity could negatively impact service levels.
- 89 -
We face intense competition. The transportation and business services markets are both highly competitive and sensitive to price and
service, especially in periods of little or no macroeconomic growth. Some of our competitors have more financial resources and
competitive advantages than we do, or they are owned, controlled or subsidized by foreign governments, which enables them to raise
capital more easily. We also compete with regional transportation providers that operate smaller and less capital-intensive
transportation networks and startup companies that combine technology with crowdsourcing to focus on local market needs. In
addition, some high volume package shippers are developing and implementing in-house delivery capabilities and utilizing
independent contractors for deliveries, which could in turn reduce our revenues and market share. For example, Amazon.com is
investing significant capital to establish a network of hubs, aircraft and vehicles.
We believe we compete effectively with these companies — for example, by providing more reliable service at compensatory prices.
However, the existence of an irrational pricing environment could limit our ability not only to maintain or increase our prices
(including our fuel surcharges in response to rising fuel costs), but also to maintain or grow our revenues and market share. While we
believe we compete effectively through our current and planned service offerings, if our current competitors or potential future
competitors offer a broader range of services, more effectively bundle their services, or offer services at lower prices, it could impede
our ability to maintain or grow our market share. Moreover, if customers, such as Amazon.com, further develop or expand internal
capabilities for the services we provide, it will reduce our revenue and could negatively impact our financial condition and results of
operations. News regarding such developments or expansions could also negatively impact the price of our common stock.
Additionally, advancements in technology, such as advanced safety systems, automated package sorting, handling and delivery,
vehicle platooning, alternative fuel vehicles and digitization of freight services, may necessitate that we increase investments in order
to remain competitive, and our customers may not be willing to accept higher rates to cover the cost of these investments.
Government regulation and enforcement are evolving and unfavorable changes could harm our business. We are subject to
regulation under a wide variety of U.S. federal and state and non-U.S. regulations, laws, and policies. There can be no assurance that
such regulations, laws and policies will not be changed in ways that will decrease the demand for our services, subject us to escalating
costs or require us to modify our business models and objectives, harming our financial results. In particular, legislative, regulatory or
other actions that U.S. and non-U.S. governments have undertaken or are considering in areas such as data privacy and sovereignty,
taxes, foreign exchange intervention in response to currency volatility, currency controls that could restrict the movement of liquidity
from particular jurisdictions, trade controls, tariffs, quotas, embargoes or sanctions in the U.S. or other countries, complex economic
sanctions, export controls, additional security requirements, additional requirements on employees and benefits, environmental
standards, tax reform and accounting may have an adverse effect on our operations, liquidity, capital requirements, effective tax rate
and performance. For additional discussion, see Part I, Item 1 of this Annual Report on Form 10-K under the caption “Regulation.”
We could be subject to adverse changes in regulations and interpretations or challenges to our tax positions relating to the TCJA.
We are subject to taxation in the U.S. and numerous foreign jurisdictions. From time to time, changes in tax laws or regulations may
be enacted that could significantly affect our overall tax liability. In December 2017, the United States government enacted
comprehensive tax legislation through the TCJA, which significantly changed the U.S. corporate income tax system. The TCJA
requires complex computations to be performed that were not previously required in U.S. tax law, significant judgments, estimates and
calculations to be made in interpreting its provisions, and the preparation and analysis of information not previously relevant or
regularly produced.
The U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies could interpret or issue guidance on
how provisions of the TCJA will be applied or otherwise administered that is different from our interpretation. As we continue our
ongoing analysis of the TCJA’s related interpretations, collect and prepare necessary data, and interpret any additional guidance, we
may be required to make adjustments to amounts that we have recorded that may adversely impact our results of operations and
financial condition. For example, on January 15, 2019, the U.S. Treasury Department issued final regulations covering the one-time
transition tax on unrepatriated foreign earnings, which was enacted as part of the TCJA. Certain guidance included in these final
regulations is inconsistent with our interpretation that led to the recognition of benefits of $233 million. If we are ultimately
unsuccessful in defending our position with respect to our interpretation of the TCJA, we may be required to reverse these benefits. In
addition, further legislative action could be taken to address questions or issues caused by the TCJA. State and foreign governments
may also issue guidance and enact tax laws in response to the TCJA or other global initiatives that could result in further changes to
our taxation and adversely impact our results of operations and financial condition.
- 90 -
If we do not successfully execute or effectively operate, integrate, leverage and grow acquired businesses, our financial results and
reputation may suffer. Our strategy for long-term growth, productivity and profitability depends in part on our ability to make prudent
strategic acquisitions and to realize the benefits we expect when we make those acquisitions. In furtherance of this strategy, in addition
to TNT Express, we have acquired businesses in Europe, Latin America, Africa, the U.S., Asia and Australia over the past several
years. Acquisitions involve special accounting, regulatory, compliance, information technology, human resources and other risks.
While we expect our past and future acquisitions to enhance our value proposition to customers and improve our long-term
profitability, there can be no assurance that we will realize our expectations within the time frame we have established, if at all, or that
we can continue to support the value we allocate to these acquired businesses, including their goodwill or other intangible assets. For
example, in 2018 we incurred a goodwill impairment charge of $374 million related to FedEx Supply Chain, eliminating substantially
all of the goodwill attributable to this reporting unit. The key factors contributing to the goodwill impairment were underperformance
of the FedEx Supply Chain business during 2018, including base business erosion, and the failure to attain the level of operating
synergies and revenue and profit growth anticipated at the time of the acquisition.
Labor organizations attempt to organize groups of our employees from time to time, and potential changes in labor laws could
make it easier for them to do so. If we are unable to continue to maintain good relationships with our employees and avoid having
labor organizations organize groups of our employees, our operating costs could significantly increase and our operational flexibility
could be significantly reduced. Despite continual organizing attempts by labor unions, other than the pilots at FedEx Express and
drivers at one FedEx Freight, Inc. facility, our U.S. employees have thus far chosen not to unionize (we acquired FedEx Supply Chain
in 2015, which already had a small number of employees who are members of unions). Additionally, certain of FedEx Express’s non-
U.S. employees are unionized, and a union has been certified to represent owner-drivers at a FedEx Freight Canada, Corp. facility.
The U.S. Congress has, in the past, considered adopting changes in labor laws, however, that would make it easier for unions to
organize units of our employees. For example, there is always a possibility that Congress could remove most FedEx Express
employees from the jurisdiction of the RLA. For additional discussion of the RLA, see Part I, Item 1 of this Annual Report on Form
10-K under the caption “Regulation.” Such legislation could expose our customers to the type of service disruptions that the RLA was
designed to prevent — local work stoppages in key areas that interrupt the timely flow of shipments of time-sensitive, high-value
goods throughout our global network. Such disruptions could threaten our ability to provide competitively priced shipping options and
ready access to global markets.
There is also the possibility that Congress could pass other labor legislation that could adversely affect our companies, such as FedEx
Ground and FedEx Freight, whose employees are governed by the National Labor Relations Act of 1935, as amended (“NLRA”). In
addition, federal and state governmental agencies, such as the National Mediation Board and the National Labor Relations Board,
have and may continue to take actions that could make it easier for our employees to organize under the RLA or NLRA. Finally,
changes to federal or state laws governing employee classification could impact the status of FedEx Ground’s owner-operators as
independent employers of drivers. If FedEx Ground is deemed to be an employer or joint employer of the drivers of these independent
contractors, labor organizations could more easily organize these individuals, our operating costs could increase materially and we
could incur significant capital outlays.
FedEx Ground relies on owner-operators to conduct its linehaul and pickup-and-delivery operations, and the status of these
owner-operators as independent contractors and direct employers of drivers providing these services is being challenged. FedEx
Ground’s use of independent contractors is well suited to the needs of the ground delivery business and its customers, as evidenced by
the strong growth of this business segment. We are involved in lawsuits and administrative proceedings that claim the company’s
owner-operators engaged under operating agreements no longer in place should have been treated as our employees, rather than
independent contractors. In addition, we are defending joint-employer cases where it is alleged that FedEx Ground should be treated
as an employer of the drivers employed by owner-operators engaged by FedEx Ground. We incur certain costs, including legal fees, in
defending the status of FedEx Ground’s owner-operators as independent contractors and as direct employers of their drivers.
We continue to believe that owner-operators engaged by FedEx Ground are properly classified as independent contractors and that
FedEx Ground is not an employer or joint employer of the drivers of these independent contractors. However, adverse determinations
in these matters could, among other things, entitle certain of our owner-operators to the reimbursement of certain expenses and their
drivers to certain wage payments from the owner-operators and FedEx Ground, and result in employment and withholding tax and
benefit liability for FedEx Ground. Changes to state laws governing the definition of independent contractors, or employees of
independent contractors, could also impact the status of FedEx Ground’s owner-operators.
- 91 -
Disruptions or modifications in service by the USPS or changes in its business or financial soundness could have an adverse effect
on our operations and financial results. The U.S. Postal Service (“USPS”) is a significant customer and vendor of FedEx. In
particular, the USPS is the largest customer of FedEx Express, which provides domestic air transportation services for the USPS’s
First Class Mail, Priority Mail Express and Priority Mail and transportation and delivery for the USPS’s international delivery service.
Disruptions or modifications in service by the USPS as a result of financial difficulties or changes in its business, including any
structural changes to its operations, network, service offerings or pricing, could adversely affect our operations, negatively impacting
our revenue, results of operations and financial condition.
The transportation infrastructure continues to be a target of terrorist activities. Because transportation assets continue to be a target
of terrorist activities, governments around the world are adopting or are considering adopting stricter security requirements that will
increase operating costs and potentially slow service for businesses, including those in the transportation industry. For example, the
U.S. Transportation Security Administration (“TSA”) requires FedEx Express to comply with a Full All-Cargo Aircraft Operator
Standard Security Plan, which contains evolving and strict security requirements. Additionally, the International Civil Aviation
Organization currently allows a member state to permit carriers and other entities to determine, without government oversight, which
shippers and shipments are secure for purposes of putting those shipments on all-cargo aircraft. This allowance will be removed by
calendar 2021 and may require us to undergo additional screening and oversight by the TSA and similar government agencies
internationally. Security requirements such as these are not static, but change periodically as the result of regulatory and legislative
requirements, imposing additional security costs and creating a level of uncertainty for our operations. Thus, it is reasonably possible
that these rules or other future security requirements could impose material costs on us or slow our service to our customers. The
impact on our operations of avoiding areas of the world, including airspace, in which there are geopolitical conflicts and the targeting
of aircraft by parties to those conflicts can also be significant. Moreover, a terrorist attack directed at FedEx or other aspects of the
transportation infrastructure could disrupt our operations and adversely impact demand for our services.
The regulatory environment for global aviation or other transportation rights may impact our operations and increase our
operating costs. Our extensive air network is critical to our success. Our right to serve foreign points is subject to the approval of the
Department of Transportation and generally requires a bilateral agreement between the U.S. and foreign governments. In addition, we
must obtain the permission of foreign governments to provide specific flights and services. Our operations outside of the U.S., such as
FedEx Express’s growing international domestic operations, are also subject to current and potential regulations, including certain
postal regulations and licensing requirements, that restrict, make difficult and sometimes prohibit, the ability of foreign-owned
companies such as FedEx Express to compete effectively in parts of the international domestic transportation and logistics market.
Regulatory or executive actions affecting global aviation or transportation rights or a failure to obtain or maintain aviation or other
transportation rights in important international markets could impair our ability to operate our networks.
We are subject to other extensive regulatory and legal compliance requirements that may result in significant costs. For instance, the
Federal Aviation Administration (“FAA”) from time to time issues directives and other regulations relating to the maintenance and
operation of aircraft that require significant expenditures in order to comply. High-profile accidents, catastrophes or incidents
involving aircraft may trigger increased regulatory and legal compliance requirements. These requirements can be issued with little or
no notice, or can otherwise impact our ability to efficiently or fully utilize our aircraft, and in some instances have resulted in the
temporary grounding of aircraft types altogether. Further, our business may be adversely impacted when government agencies cease to
operate as expected, including due to partial shutdowns, sequestrations or similar events, which may result in, among other things,
disruption in the ability of government agencies to grant required regulatory approvals. For additional discussion, see Part I, Item 1 of
this Annual Report on Form 10-K under the caption “Regulation.”
We may be affected by global climate change or by legal, regulatory or market responses to such change. Concern over climate
change, including the impact of global warming, has led to significant U.S. and international legislative and regulatory efforts to limit
greenhouse gas (“GHG”) emissions, including our aircraft and vehicle engine emissions. Increasingly, state and local governments are
also considering GHG regulatory requirements. Compliance with such regulation and the associated potential cost is complicated by
the fact that various countries and regions are following different approaches to the regulation of climate change. Increased regulation
regarding GHG emissions, especially aircraft or vehicle engine emissions, could impose substantial costs on us, especially at FedEx
Express. These costs include an increase in the cost of the fuel and other energy we purchase and capital costs associated with
updating or replacing our aircraft or vehicles prematurely. Until the timing, scope and extent of such possible regulation becomes
known, we cannot predict its effect on our cost structure or our operating results. It is reasonably possible, however, that it could
materially increase our operating expenses and have an adverse direct or indirect effect on our business, if instituted. For additional
discussion of regulatory responses to climate change, including the Carbon Offsetting and Reduction Scheme for International
Aviation and the Paris climate accord, see Part I, Item 1 of this Annual Report on Form 10-K under the caption “Regulation.”
- 92 -
Moreover, even without such regulation, increased awareness and any adverse publicity in the global marketplace about the GHGs
emitted by companies in the airline and transportation industries could harm our reputation and reduce customer demand for our
services, especially our air express services. Finally, given the broad and global scope of our operations and our susceptibility to
global macroeconomic trends, we are particularly vulnerable to the physical risks of climate change that could affect all of humankind,
such as shifts in weather patterns and world ecosystems.
Our failure to attract or retain employee talent or maintain our company culture could adversely impact our business. Our success
depends upon the efforts and abilities of our high-quality employees, many of whom are longstanding FedEx team members.
Difficulties in recruiting, motivating, rewarding and retaining employee talent, including successors to members of senior
management, or the unexpected loss of such individuals resulting in the depletion of our institutional knowledge base, could have an
adverse impact on our business, results of operations, reputation and the price of our common stock. Additionally, our company
culture is important to providing high quality customer service and having a productive workforce and could be adversely affected by
our growing operations and other factors. If we fail to maintain the strength of our company culture, our competitive ability and our
business may be harmed.
Increasing costs, the volatility of costs and funding requirements and other legal mandates for employee benefits, especially
pension and healthcare benefits, could adversely impact our results of operations, financial condition and liquidity. We sponsor
programs that provide retirement benefits to most of our employees. These programs include defined benefit pension plans, defined
contribution plans and postretirement healthcare plans. The costs of providing pension and other retirement benefit plans are
dependent on numerous assumptions, such as discount rates, expected long-term investment returns on plan assets, future salary
increases, employee turnover, mortality, retirement ages, government regulations, and the frequency and amount of our required or
voluntary contributions made to the plans. Changes in actuarial assumptions and differences between the assumptions and actual
values, as well as significant declines in the value of investments that fund our pension and other postretirement plans, if not offset or
mitigated by a decline in plan liabilities, could increase pension and other postretirement expense, and we could be required from time
to time to fund the pension plans with significant amounts of cash. Such cash funding obligations could adversely affect our results of
operations and liquidity. Additionally, the rules for pension and retirement benefit plan accounting are complex, involve numerous
assumptions and can produce volatility in our results of operations, financial condition and liquidity. For example, our fourth quarter
2019 MTM retirement plans accounting adjustment resulted in a pre-tax noncash $3.9 billion loss ($3.0 billion, net of tax, or $11.22
per diluted share) and reduced the funded status of our tax qualified U.S. domestic pension plans. For additional information on our
MTM retirement plans accounting adjustment, see “Management’s Discussion and Analysis of Results of Operations and Financial
Condition—Results of Operations and Outlook—Retirement Plans MTM Adjustments” and Note 13 of the accompanying
consolidated financial statements.
A higher than normal number of pilot retirements across the industry, increased flight hour requirements to achieve a commercial
pilot’s license, reductions in the number of military pilots entering the commercial workforce and other factors have caused a
shortage of pilots that could have an adverse effect on our business and results of operations. Large numbers of pilots in the
industry are approaching the FAA’s mandatory retirement age of 65. Commencing in 2013, the minimum flight hour requirement to
achieve a commercial pilot’s license in the United States increased from 250 to 1,500 hours, thereby significantly increasing the time
and cost commitment required to become licensed to fly commercial aircraft. Additionally, the number of military pilots being trained
by the U.S. armed forces and available as commercial pilots upon their retirement from military service has been decreasing. These
and other factors have contributed to a shortage of qualified, entry-level pilots, and the companies with which we contract to fly
smaller regional “feeder” aircraft are having difficulty attracting and retaining pilots. If the companies with which we contract become
unable to hire adequate numbers of pilots to meet their needs, we could experience a reduction of service offered to certain locations,
service disruptions, increased costs of operations and other difficulties that could have an adverse effect on our business and results of
operations. Additionally, although we are not currently having difficulty staffing FedEx pilots to operate our primary FedEx Express
fleet, such a difficulty may arise in the future, which could have an adverse effect on our business and results of operations.
Our inability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key
geography could adversely impact our business and results of operations. While we operate several integrated networks with assets
distributed throughout the world, there are concentrations of key assets within our networks that are exposed to adverse weather
conditions or localized risks from natural or manmade disasters such as earthquakes, volcanoes, wildfires, hurricanes, conflicts or
unrest, terrorist attacks or other disturbances, actual or threatened. Additionally, shifts in weather patterns caused by climate change
could increase the frequency, severity or duration of certain adverse weather conditions. Prolonged interruptions or disruptions at a
key location such as our Memphis World Hub or one of our information-technology centers could adversely impact our business and
results of operations. We also may incur significant costs to reestablish or relocate these functions. Moreover, resulting economic
dislocations, including supply chain and fuel disruptions, could adversely impact demand for our services resulting in an adverse
effect on our business and results of operations.
- 93 -
Our autonomous delivery strategy is dependent upon our ability to successfully mitigate unique technological, operational and
regulatory risks. In 2019 we announced the development through a partnership of an autonomous delivery device designed to help
retailers make same-day and last-mile deliveries to their customers. Autonomous delivery is a new and evolving market, which makes
it difficult to predict its acceptance, growth, the magnitude and timing of necessary investments and other trends. This aspect of our
business strategy is subject to a variety of risks inherent with the development of new technologies, including: the ability to continue
to develop autonomous delivery software and hardware; access to sufficient capital; our ability to develop and maintain necessary
partnerships; risks related to the manufacture of autonomous devices; and significant competition from other companies, some of
which may have more resources and capital to devote to autonomous technologies than we do.
In addition, we face risks related to the commercial deployment of autonomous delivery devices on our targeted timeline or at all,
including consumer acceptance, achievement of adequate safety and other performance standards and compliance with uncertain,
evolving and potentially conflicting federal and state regulations. To the extent accidents, cybersecurity breaches or other adverse
events associated with our autonomous delivery devices occur, we could be subject to liability, government scrutiny, further regulation
and reputational damage. Any of the foregoing could adversely impact our results of operations, financial condition and growth
prospects.
Volatility or disruption in the debt capital markets or our failure to maintain our current credit ratings and commercial paper
ratings could adversely affect our liquidity, increase our interest expense and limit our financing options. Historically, we have
relied on the public debt capital markets to fund portions of our capital investments and other expenditures and access to the
commercial paper market as part of our working capital management strategy. Our continued access to these markets, and the terms of
such access, depend on multiple factors including the condition of the debt capital markets, our operating performance and our credit
ratings. Standard & Poor’s has assigned us a senior unsecured debt credit rating of BBB, a commercial paper rating of A-2 and a
ratings outlook of “stable.” Moody’s Investors Service has assigned us an unsecured debt credit rating of Baa2, a commercial paper
rating of P-2 and a ratings outlook of “stable.” These ratings are based on a number of factors, including assessments of our financial
strength and financial policies. If our credit ratings drop, our interest expense may increase and our access to financing may become
limited. If our commercial paper ratings drop below current levels, we may have difficulty utilizing the commercial paper market. In
addition, increased volatility or disruption in the debt capital markets could adversely affect our ability to refinance existing debt.
- 94 -
We are also subject to other risks and uncertainties, including:
• changes in our ability to attract and retain drivers and package and freight handlers;
•
the increasing costs of compliance with federal, state and foreign governmental agency mandates (including the Foreign Corrupt
Practices Act and the U.K. Bribery Act) and defending against inappropriate or unjustified enforcement or other actions by such
agencies;
• changes in foreign currency exchange rates, especially in the euro, Chinese yuan, British pound, Canadian dollar, Australian dollar
and Mexican peso, which can affect our sales levels and foreign currency sales prices;
• market acceptance of our new service and growth initiatives;
• any liability resulting from and the costs of defending against class-action and other litigation, such as wage-and-hour, joint
employment, securities and discrimination and retaliation claims, and any other legal or governmental proceedings, including the
matters discussed in Note 18 of the accompanying consolidated financial statements;
•
the outcome of future negotiations to reach new collective bargaining agreements — including with the union that represents the
pilots of FedEx Express (the current pilot agreement is scheduled to become amendable in November 2021), with the union elected
in 2015 to represent drivers at a FedEx Freight, Inc. facility in the U.S., and with the union certified in 2019 to represent owner-
drivers at a FedEx Freight Canada, Corp. facility;
•
the impact of technology developments on our operations and on demand for our services, and our ability to continue to identify
and eliminate unnecessary information-technology redundancy and complexity throughout the organization;
• governmental underinvestment in transportation infrastructure, which could increase our costs and adversely impact our service
levels due to traffic congestion or sub-optimal routing of our vehicles and aircraft;
• widespread outbreak of an illness or any other communicable disease, or any other public health crisis;
• stockholder activism, which could divert the attention of management and our board of directors from our business, hinder
execution of our business strategy, give rise to perceived uncertainties as to our future and cause the price of our common stock to
fluctuate significantly; and
•
the alternative interest rates we are able to negotiate with counterparties pursuant to the relevant provisions of our credit agreements
in the event the London Interbank Offered Rate or the euro interbank offered rate cease to exist and we make borrowings under the
agreements.
- 95 -
FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report, including (but not limited to) those contained in the “Business” section of Part I, the
“Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” section of Part II,
the “Income Taxes,” “Outlook” (including segment outlooks), “Recent Accounting Guidance,” “Liquidity Outlook,” “Contractual
Cash Obligations and Off-Balance Sheet Arrangements,” “Critical Accounting Estimates” and “Risk Factors” sections of
“Management’s Discussion and Analysis of Results of Operations and Financial Condition,” and the “Recent Accounting Guidance,”
“Income Taxes,” “Retirement Plans,” “Commitments” and “Contingencies” notes to the consolidated financial statements, are
“forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial
condition, results of operations, cash flows, plans, objectives, future performance and business. Forward-looking statements include
those preceded by, followed by or that include the words “will,” “may,” “could,” “would,” “should,” “believes,” “expects,”
“anticipates,” “plans,” “estimates,” “targets,” “projects,” “intends” or similar expressions. These forward-looking statements involve
risks and uncertainties. Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking
statements, because of, among other things, the risk factors identified above and the other risks and uncertainties you can find in our
press releases and other SEC filings.
As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-
looking statement is neither a prediction nor a guarantee of future events or circumstances and those future events or circumstances
may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report.
We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a
result of new information, future events or otherwise.
EFFECTIVE TAX RATE PRIOR TO MTM RETIREMENT PLANS ACCOUNTING ADJUSTMENT
We are unable to predict the amount of the 2020 year-end MTM retirement plans accounting adjustment, as it is significantly impacted
by changes in interest rates and the financial markets. For this reason, a full reconciliation of our 2020 effective tax rate forecast to the
most directly comparable accounting principle generally accepted in the United States (“GAAP”) measure is impracticable.
We have provided a 2020 effective tax rate forecast prior to year-end MTM retirement plans accounting adjustments to facilitate
analysis and comparisons of our ongoing business operations by excluding an item that is unrelated to our core operating performance,
and to assist investors with comparisons to prior periods and assessing trends in our underlying businesses. This adjustment is
consistent with how management views our businesses. Management uses this non-GAAP financial measure in making financial,
operating and planning decisions and evaluating the company’s ongoing performance.
This non-GAAP measure is intended to supplement and should be read together with, and is not an alternative or substitute for, and
should not be considered superior to, our reported financial measures. Accordingly, users of our financial statements should not place
undue reliance on this non-GAAP financial measure. Because non-GAAP financial measures are not standardized, it may not be
possible to compare this non-GAAP measure with other companies’ non-GAAP financial measures having the same or similar names.
While we are unable to predict the amount of the 2020 year-end MTM retirement plans accounting adjustment, it is reasonably
possible that such adjustment could have a material impact on our 2020 effective tax rate.
- 96 -
MANAGEMENT’S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting
includes, among other things, defined policies and procedures for conducting and governing our business, sophisticated information
systems for processing transactions and a properly staffed, professional internal audit department. Mechanisms are in place to monitor
the effectiveness of our internal control over financial reporting and actions are taken to correct all identified deficiencies. Our
procedures for financial reporting include the active involvement of senior management, our Audit Committee and our staff of highly
qualified financial and legal professionals.
Management, with the participation of our principal executive and financial officers, assessed our internal control over financial
reporting as of May 31, 2019, the end of our fiscal year. Management based its assessment on criteria established in Internal Control–
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the
COSO criteria).
Based on this assessment, management has concluded that our internal control over financial reporting was effective as of May 31,
2019.
The effectiveness of our internal control over financial reporting as of May 31, 2019, has been audited by Ernst & Young LLP, the
independent registered public accounting firm who also audited the Company’s consolidated financial statements included in this
Annual Report on Form 10-K. Ernst & Young LLP’s report on the Company’s internal control over financial reporting is included in
this Annual Report on Form 10-K.
- 97 -
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
FedEx Corporation
Opinion on Internal Control Over Financial Reporting
We have audited FedEx Corporation’s internal control over financial reporting as of May 31, 2019, based on criteria established in
Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (the COSO criteria). In our opinion, FedEx Corporation (the Company) maintained, in all material respects, effective
internal control over financial reporting as of May 31, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of May 31, 2019 and 2018, the related consolidated statements of
income, comprehensive income, changes in common stockholders’ investment and cash flows for each of the three years in the period
ended May 31, 2019, and the related notes and our report dated July 16, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Memphis, Tennessee
July 16, 2019
- 98 -
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
FedEx Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of FedEx Corporation (the Company) as of May 31, 2019 and 2018,
the related consolidated statements of income, comprehensive income, changes in common stockholders’ investment and cash flows
for each of the three years in the period ended May 31, 2019, and the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company at May 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in
the period ended May 31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of May 31, 2019, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) and our report dated July 16, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2002.
Memphis, Tennessee
July 16, 2019
- 99 -
FEDEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Receivables, less allowances of $300 and $401
Spare parts, supplies and fuel, less allowances of $335 and $268
Prepaid expenses and other
Total current assets
PROPERTY AND EQUIPMENT, AT COST
Aircraft and related equipment
Package handling and ground support equipment
Information technology
Vehicles and trailers
Facilities and other
Less accumulated depreciation and amortization
Net property and equipment
OTHER LONG-TERM ASSETS
Goodwill
Other assets
Total other long-term assets
May 31,
2019
2018
$
$
2,319 $
9,116
553
1,098
13,086
22,793
10,409
6,268
8,339
11,702
59,511
29,082
30,429
6,884
4,004
10,888
54,403 $
3,265
8,481
525
1,070
13,341
20,749
9,727
5,794
7,708
11,143
55,121
26,967
28,154
6,973
3,862
10,835
52,330
The accompanying notes are an integral part of these consolidated financial statements.
- 100 -
FEDEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt
Accrued salaries and employee benefits
Accounts payable
Accrued expenses
Total current liabilities
LONG-TERM DEBT, LESS CURRENT PORTION
OTHER LONG-TERM LIABILITIES
Deferred income taxes
Pension, postretirement healthcare and other benefit obligations
Self-insurance accruals
Deferred lease obligations
Deferred gains, principally related to aircraft transactions
Other liabilities
Total other long-term liabilities
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares
issued as of May 31, 2019 and 2018
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost
Total common stockholders’ investment
May 31,
2019
2018
$
$
964 $
1,741
3,030
3,278
9,013
16,617
2,821
5,095
1,899
531
99
571
11,016
32
3,231
24,648
(865 )
(9,289 )
17,757
54,403 $
1,342
2,177
2,977
3,131
9,627
15,243
2,867
2,187
1,784
551
121
534
8,044
32
3,117
24,823
(578 )
(7,978 )
19,416
52,330
The accompanying notes are an integral part of these consolidated financial statements.
- 101 -
FEDEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
REVENUES
OPERATING EXPENSES:
Salaries and employee benefits
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Business realignment costs
Goodwill and other asset impairment charges
Other
OPERATING INCOME
OTHER (EXPENSE) INCOME:
Interest expense
Interest income
Other retirement plans (expense) income
Other, net
INCOME BEFORE INCOME TAXES
PROVISION FOR INCOME TAXES (BENEFIT)
NET INCOME
BASIC EARNINGS PER COMMON SHARE
DILUTED EARNINGS PER COMMON SHARE
2019
Years ended May 31,
2018
2017
$
69,693 $
65,450 $
60,319
24,776
16,654
3,360
3,353
3,889
2,834
320
—
10,041
65,227
4,466
(588 )
59
(3,251 )
(31 )
(3,811 )
655
115
540 $
2.06 $
2.03 $
23,795
15,101
3,361
3,095
3,374
2,622
—
380
9,450
61,178
4,272
(558 )
48
598
(7 )
81
4,353
(219 )
4,572 $
17.08 $
16.79 $
21,989
13,630
3,240
2,995
2,773
2,374
—
—
8,752
55,753
4,566
(512 )
33
471
21
13
4,579
1,582
2,997
11.24
11.07
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
- 102 -
FEDEX CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN MILLIONS)
NET INCOME
OTHER COMPREHENSIVE LOSS:
Foreign currency translation adjustments, net of tax benefit of $29 in
2019, tax expense of $16 in 2018 and tax expense of $52 in 2017
Amortization of prior service credit and other, net of tax benefits of $28 in
2019, $37 in 2018 and $43 in 2017
COMPREHENSIVE INCOME
2019
Years Ended May 31,
2018
2017
$
540 $
4,572 $
2,997
(195 )
(74 )
(171 )
(92 )
(287 )
253 $
(89 )
(163 )
4,409 $
(75 )
(246 )
2,751
$
The accompanying notes are an integral part of these consolidated financial statements.
- 103 -
FEDEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization
Provision for uncollectible accounts
Deferred income taxes and other noncash items
Stock-based compensation
Retirement plans mark-to-market adjustment
Gain from sale of business
Gain from sale of investment
Business realignment costs
Goodwill and other asset impairment charges
Changes in assets and liabilities:
Receivables
Other current assets
Pension and postretirement healthcare assets and liabilities, net
Accounts payable and other liabilities
Other, net
Cash provided by operating activities
INVESTING ACTIVITIES
Capital expenditures
Business acquisitions, net of cash acquired
Proceeds from sale of business
Proceeds from asset dispositions and other
Cash used in investing activities
FINANCING ACTIVITIES
Principal payments on debt
Proceeds from debt issuances
Proceeds from stock issuances
Dividends paid
Purchase of treasury stock
Other, net
Cash (used in) provided by financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2019
Years ended May 31,
2018
2017
$
540 $
4,572 $
2,997
3,353
295
(233 )
174
3,882
(8 )
—
101
—
(873 )
(25 )
(909 )
(571 )
(113 )
5,613
(5,490 )
(66 )
—
83
(5,473 )
(1,436 )
2,463
101
(683 )
(1,480 )
(4 )
(1,039 )
(47 )
(946 )
3,265
2,319 $
3,095
246
(231 )
167
(10 )
(85 )
—
—
380
(1,049 )
(135 )
(2,345 )
141
(72 )
4,674
(5,663 )
(179 )
123
42
(5,677 )
(38 )
1,480
327
(535 )
(1,017 )
10
227
72
(704 )
3,969
3,265 $
2,995
136
909
154
(24 )
—
(35 )
—
—
(556 )
78
(1,688 )
103
(139 )
4,930
(5,116 )
—
—
135
(4,981 )
(82 )
1,190
337
(426 )
(509 )
18
528
(42 )
435
3,534
3,969
$
The accompanying notes are an integral part of these consolidated financial statements.
- 104 -
FEDEX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ INVESTMENT
(IN MILLIONS, EXCEPT SHARE DATA)
Balance at May 31, 2016
Net income
Other comprehensive loss, net of tax of $9
Purchase of treasury stock (3.0 million shares)
Cash dividends declared ($1.60 per share)
Employee incentive plans and other
(3.5 million shares issued)
Balance at May 31, 2017
Net income
Other comprehensive loss, net of tax of $21
Purchase of treasury stock (4.3 million shares)
Cash dividends declared ($2.00 per share)
Employee incentive plans and other
(3.1 million shares issued)
Balance at May 31, 2018
Net income
Other comprehensive loss, net of tax of $57
Purchase of treasury stock (6.6 million shares)
Cash dividends declared ($2.60 per share)
Employee incentive plans and other
(1.3 million shares issued)
Balance at May 31, 2019
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
$
32 $
—
—
—
—
2,892 $ 18,371 $
2,997
—
—
(426 )
—
—
—
—
Total
Treasury
Stock
(7,342 ) $ 13,784
2,997
(246 )
(509 )
(426 )
—
—
(509 )
—
(169 ) $
—
(246 )
—
—
—
32
—
—
—
—
—
32
—
—
—
—
113
(109 )
3,005 20,833
4,572
—
—
(535 )
—
—
—
—
112
(47 )
3,117 24,823
540
—
—
(683 )
—
—
—
—
—
(415 )
—
(163 )
—
—
—
(578 )
—
(287 )
—
—
469
473
(7,382 ) 16,073
4,572
(163 )
(1,017 )
(535 )
—
—
(1,017 )
—
421
486
(7,978 ) 19,416
540
(287 )
(1,480 )
(683 )
—
—
(1,480 )
—
—
32 $
114
(32 )
3,231 $ 24,648 $
—
(865 ) $
169
251
(9,289 ) $ 17,757
$
The accompanying notes are an integral part of these consolidated financial statements.
- 105 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS. FedEx Corporation (“FedEx”) provides a broad portfolio of transportation, e-commerce and business
services through companies competing collectively, operating independently and managed collaboratively, under the respected FedEx
brand. Our primary operating companies are Federal Express Corporation (“FedEx Express”), the world’s largest express
transportation company; FedEx Ground Package System, Inc. (“FedEx Ground”), a leading North American provider of small-
package ground delivery services; and FedEx Freight Corporation (“FedEx Freight”), a leading North American provider of less-than-
truckload (“LTL”) freight transportation. These companies represent our major service lines and, along with FedEx Corporate
Services, Inc. (“FedEx Services”), constitute our reportable segments. Our FedEx Services segment provides sales, marketing,
information technology, communications, customer service, technical support, billing and collection services, and certain back-office
functions that support our transportation segments (FedEx Express, FedEx Ground and FedEx Freight) and other business units. In
addition, the FedEx Services segment provides customers with retail access to FedEx Express and FedEx Ground shipping services
through FedEx Office and Print Services, Inc. (“FedEx Office”).
FISCAL YEARS. Except as otherwise specified, references to years indicate our fiscal year ended May 31, 2019 or ended May 31 of
the year referenced.
RECLASSIFICATIONS. Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to
the current year’s presentation.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of FedEx and its subsidiaries,
substantially all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated in
consolidation. We are not the primary beneficiary of, nor do we have a controlling financial interest in, any variable interest entity.
Accordingly, we have not consolidated any variable interest entity.
REVENUE RECOGNITION.
Satisfaction of Performance Obligation
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the basis of revenue
recognition in accordance with U.S. generally accepted accounting principles (“GAAP”). To determine the proper revenue recognition
method for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single contract and
whether the combined or single contract should be accounted for as more than one performance obligation. For most of our contracts,
the customer contracts with us to provide distinct services within a single contract, such as transportation services. The majority of our
contracts with customers for transportation services include only one performance obligation, the transportation services themselves.
However, if a contract is separated into more than one performance obligation, we allocate the total transaction price to each
performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services
underlying each performance obligation. We frequently sell standard transportation services with observable standalone sales prices.
In these instances, the observable standalone sales are used to determine the standalone selling price.
For transportation services, revenue is recognized over time as we perform the services in the contract because of the continuous
transfer of control to the customer. Our customers receive the benefit of our services as the goods are transported from one location to
another. If we were unable to complete delivery to the final location, another entity would not need to reperform the transportation
service already performed. As control transfers over time, revenue is recognized based on the extent of progress towards completion
of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on
the nature of the products or services to be provided. We use the cost-to-cost measure of progress for our package delivery contracts
because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost
measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total
estimated costs at completion of the performance obligation. Revenues, including ancillary or accessorial fees and reductions for
estimated customer incentives, are recorded proportionally as costs are incurred. Costs to fulfill include labor and other direct costs
and an allocation of indirect costs. For our freight and freight forwarding contracts, an output method of progress based on time-in-
transit is utilized as the timing of costs incurred does not best depict the transfer of control to the customer.
- 106 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We also provide customized customer-specific solutions, such as supply chain management solutions and inventory and service parts
logistics, through which we provide the service of integrating a complex set of tasks and components into a single capability. For these
arrangements, the majority of which are conducted by our FedEx Logistics, Inc. (“FedEx Logistics” (formerly FedEx Trade Networks,
Inc.)) operating segment, the entire contract is accounted for as one performance obligation. For these performance obligations, we
typically have a right to consideration from customers in an amount that corresponds directly with the value to the customers of our
performance completed to date, and as such we recognize revenue in the amount to which we have a right to invoice the customer.
Contract Modification
Contracts are often modified to account for changes in the rates we charge our customers or to add additional distinct services. We
consider contract modifications to exist when the modification either creates new enforceable rights and obligations or alters the
existing arrangement. Contract modifications that add distinct goods or services are treated as separate performance obligations.
Contract modifications that do not add distinct goods or services typically change the price of existing services. These contract
modifications are accounted for prospectively as the remaining performance obligations are executed.
Variable Consideration
Certain contracts contain customer incentives, guaranteed service refunds and other provisions that can either increase or decrease the
transaction price. These incentives are generally awarded based upon achieving certain performance metrics. We estimate variable
consideration as the most likely amount to which we expect to be entitled. We include estimated amounts of revenue, which may be
reduced by incentives or other contract provisions, in the transaction price to the extent it is probable that a significant reversal of
cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our
estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on an
assessment of anticipated customer spending and all information (historical, current and forecasted) that is reasonably available to us.
Principal vs. Agent Considerations
Transportation services are provided with the use of employees and independent businesses that contract with FedEx. GAAP requires
us to evaluate whether our businesses themselves promise to transfer services to the customer (as the principal) or to arrange for
services to be provided by another party (as the agent) using a control model. Based on our evaluation of the control model, we
determined that FedEx is the principal to the transaction for most of these services and revenue is recognized on a gross basis based on
the transfer of control to the customer. Costs associated with independent businesses providing transportation services are recognized
as incurred and included in the caption “Purchased transportation” in the consolidated statements of income.
Our contract logistics, global trade services and certain transportation businesses engage in certain transactions wherein they act as
agents. Revenue from these transactions is recorded on a net basis. Net revenue includes billings to customers less third-party charges,
including transportation or handling costs, fees, commissions and taxes and duties.
Contract Assets and Liabilities
Contract assets include billed and unbilled amounts resulting from in-transit packages, 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 packages totaled $533 million and $542 million at May 31, 2019 and May 31, 2018,
respectively. Contract assets net of deferred unearned revenue were $364 million and $363 million at May 31, 2019 and May 31,
2018, respectively. Contract assets are included within current assets in the accompanying consolidated balance sheets. Contract
liabilities related to advance payments from customers were $11 million and $13 million at May 31, 2019 and May 31, 2018,
respectively. Contract liabilities are included within current liabilities in the accompanying consolidated balance sheets.
Payment terms
Certain of our revenue-producing transactions are subject to taxes, such as sales tax, assessed by governmental authorities. We present
these revenues net of tax. Under the typical payment terms of our customer contracts, the customer pays at periodic intervals (e.g.,
every 15 days, 30 days, 45 days, etc.) for shipments included on invoices received. It is not customary business practice to extend
payment terms past 90 days, and as such, we do not have a practice of including a significant financing component within our revenue
contracts with customers.
- 107 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Disaggregation of Revenue
See Note 14 for disclosure of disaggregated revenues for the periods ended May 31. This presentation is consistent with how we
organize our segments internally for making operating decisions and measuring performance.
CREDIT RISK. We routinely grant credit to many of our customers for transportation and business services without collateral. The
risk of credit loss in our trade receivables is substantially mitigated by our credit evaluation process, short collection terms and sales to
a large number of customers, as well as the low revenue per transaction for most of our services. Allowances for potential credit losses
are determined based on historical experience and the impact of current economic conditions. Historically, credit losses have been
within management’s expectations.
ADVERTISING. Advertising and promotion costs are expensed as incurred and are classified in other operating expenses. Advertising
and promotion expenses were $468 million in 2019, $442 million in 2018 and $458 million in 2017.
CASH EQUIVALENTS. Cash in excess of current operating requirements is invested in short-term, interest-bearing instruments with
maturities of three months or less at the date of purchase and is stated at cost, which approximates market value.
SPARE PARTS, SUPPLIES AND FUEL. Spare parts (principally aircraft-related) are reported at weighted-average cost. Allowances
for obsolescence are provided for spare parts currently identified as excess or obsolete as well as expected to be on hand at the date the
aircraft are retired from service. These allowances are provided over the estimated useful life of the related aircraft and engines. The
majority of our supplies and fuel are reported at weighted-average cost.
PROPERTY AND EQUIPMENT. Expenditures for major additions, improvements and flight equipment modifications are capitalized
when such costs are determined to extend the useful life of the asset or are part of the cost of acquiring the asset. Expenditures for
equipment overhaul costs of engines or airframes prior to their operational use are capitalized as part of the cost of such assets as they
are costs required to ready the asset for its intended use. Maintenance and repairs costs are charged to expense as incurred, except for
certain aircraft engine maintenance costs incurred under third-party service agreements. These agreements result in costs being
expensed based on cycles or hours flown and are subject to annual escalation. These service contracts transfer risk to third-party
service providers and generally fix the amount we pay for maintenance to the service provider as a rate per cycle or flight hour, in
exchange for maintenance and repairs under a predefined maintenance program. We capitalize certain direct internal and external
costs associated with the development of internal-use software. Gains and losses on sales of property used in operations are classified
within operating expenses and historically have been nominal.
For financial reporting purposes, we record depreciation and amortization of property and equipment on a straight-line basis over the
asset’s service life or related lease term, if shorter. For income tax purposes, depreciation is computed using accelerated methods when
applicable.
The depreciable lives and net book value of our property and equipment are as follows (dollars in millions):
Wide-body aircraft and related equipment
Narrow-body and feeder aircraft and related equipment
Package handling and ground support equipment
Information technology
Vehicles and trailers
Facilities and other
Range
15 to 30 years $
5 to 18 years
3 to 30 years
2 to 10 years
3 to 15 years
2 to 40 years
Net Book Value at May 31,
2018
2019
11,975 $
2,696
4,157
1,553
4,042
6,006
10,463
2,908
4,028
1,277
3,747
5,731
Substantially all property and equipment have no material residual values. The majority of aircraft costs are depreciated on a straight-
line basis over 15 to 30 years. We periodically evaluate the estimated service lives and residual values used to depreciate our property
and equipment.
Depreciation and amortization expense, excluding gains and losses on sales of property and equipment used in operations, was $3.4
billion in 2019, $3.1 billion in 2018 and $2.9 billion in 2017. Depreciation and amortization expense includes amortization of assets
under capital lease.
- 108 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CAPITALIZED INTEREST. Interest on funds used to finance the acquisition and modification of aircraft, including purchase deposits,
construction of certain facilities, and development of certain software up to the date the asset is ready for its intended use, is
capitalized and included in the cost of the asset if the asset is actively under construction. Capitalized interest was $64 million in 2019,
$61 million in 2018 and $41 million in 2017.
IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets are reviewed for impairment when circumstances indicate the carrying
value of an asset may not be recoverable. For assets that are to be held and used, an impairment is recognized when the estimated
undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an
adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair
value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as
applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.
We operate integrated transportation networks, and accordingly, cash flows for most of our operating assets to be held and used are
assessed at a network level, not at an individual asset level, for our analysis of impairment.
In the normal management of our aircraft fleet, we routinely idle aircraft and engines temporarily due to maintenance cycles and
adjustments of our network capacity to match seasonality and overall customer demand levels. Temporarily idled assets are classified
as available-for-use, and we continue to record depreciation expense associated with these assets. These temporarily idled assets are
assessed for impairment on a quarterly basis. The criteria for determining whether an asset has been permanently removed from
service (and, as a result, is potentially impaired) include, but are not limited to, our global economic outlook and the impact of our
outlook on our current and projected volume levels, including capacity needs during our peak shipping seasons; the introduction of
new fleet types or decisions to permanently retire an aircraft fleet from operations; and changes to planned service expansion
activities. At May 31, 2019, we had seven aircraft temporarily idled. These aircraft have been idled for an average of 23 months and
are expected to return to revenue service.
SALE OF BUSINESS. On April 30, 2018, we sold a non-core business of TNT Express B.V. (“TNT Express”) and recorded a gain of
$85 million in the FedEx Express segment.
GOODWILL. Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net
assets of businesses acquired. Several factors give rise to goodwill in our acquisitions, such as the expected benefits from synergies of
the combination and the existing workforce of the acquired business. Goodwill is reviewed at least annually for impairment. In our
evaluation of goodwill impairment, we perform a qualitative assessment to determine if it is more likely than not that the fair value of
a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, we proceed to test goodwill for
impairment, including comparing the fair value of the reporting unit to its carrying value (including attributable goodwill). Fair value
for our reporting units is determined using an income or market approach incorporating market participant considerations and
management’s assumptions on revenue growth rates, operating margins, discount rates and expected capital expenditures. Fair value
determinations may include both internal and third-party valuations. Unless circumstances otherwise dictate, we perform our annual
impairment testing in the fourth quarter.
INTANGIBLE ASSETS. Intangible assets primarily include customer relationships, technology assets and trademarks acquired in
business combinations. Intangible assets are amortized over periods ranging from 3 to 15 years, either on a straight-line basis or on a
basis consistent with the pattern in which the economic benefits are realized.
PENSION AND POSTRETIREMENT HEALTHCARE PLANS. Our defined benefit pension and other postretirement benefit plans are
measured using actuarial techniques that reflect management’s assumptions for discount rate, investment returns on plan assets, salary
increases, expected retirement, mortality, employee turnover and future increases in healthcare costs. We determine the discount rate
(which is required to be the rate at which the projected benefit obligation (“PBO”) could be effectively settled as of the measurement
date) with the assistance of actuaries, who calculate the yield on a theoretical portfolio of high-grade corporate bonds (rated Aa or
better) with cash flows that are designed to match our expected benefit payments in future years. We use the fair value of plan assets
to calculate the expected return on assets (“EROA”) for interim and segment reporting purposes. Our EROA is a judgmental matter
which is reviewed on an annual basis and revised as appropriate.
The accounting guidance related to employers’ accounting for defined benefit pension and other postretirement plans requires
recognition in the balance sheet of the funded status of these plans. We use “mark-to-market” or MTM accounting and immediately
recognize changes in the fair value of plan assets and actuarial gains or losses in our results annually in the fourth quarter each year.
The annual MTM adjustment is recognized at the corporate level and does not impact segment results. The remaining components of
pension and postretirement healthcare expense, primarily service and interest costs and the EROA, are recorded on a quarterly basis.
- 109 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES. Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and
liabilities and their reported amounts in the financial statements. The liability method is used to account for income taxes, which
requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid.
Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets
arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net
operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the
adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating
earnings and available tax planning strategies. These sources of income rely heavily on estimates to make this determination and, thus,
there is a risk that these estimates will have to be revised as new information is received. To the extent we do not consider it more
likely than not that a deferred tax asset will be recovered, a valuation allowance is established. We believe we will generate sufficient
future taxable income to realize the tax benefits related to the remaining net deferred tax assets in our consolidated balance sheets that
are not subject to valuation allowances.
We recognize liabilities for uncertain income tax positions based on a two-step process. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be
sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and
measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently
difficult and subjective to estimate such amounts, as we must determine the probability of various possible outcomes. We reevaluate
these uncertain tax positions on a quarterly basis or when new information becomes available to management. These reevaluations are
based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, successfully settled issues under
audit and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or an
increase to the related provision.
We classify interest related to income tax liabilities as interest expense, and if applicable, penalties are recognized as a component of
income tax expense. The income tax liabilities and accrued interest and penalties that are due within one year of the balance sheet date
are presented as current liabilities. The noncurrent portion of our income tax liabilities and accrued interest and penalties are recorded
in the caption “Other liabilities” in the accompanying consolidated balance sheets.
SELF-INSURANCE ACCRUALS. We are self-insured for costs associated with workers’ compensation claims, vehicle accidents and
general business liabilities, and benefits paid under employee healthcare and disability programs. Accruals are primarily based on the
actuarially estimated cost of claims, which includes incurred-but-not-reported claims. Current workers’ compensation claims, vehicle
and general liability, employee healthcare claims and long-term disability are included in accrued expenses. We self-insure up to
certain limits that vary by operating company and type of risk. Periodically, we evaluate the level of insurance coverage and adjust
insurance levels based on risk tolerance and premium expense.
LEASES. We lease certain aircraft, facilities, equipment and vehicles and trailers under capital and operating leases. The
commencement date of all leases is the earlier of the date we become legally obligated to make rent payments or the date we may
exercise control over the use of the property. In addition to minimum rental payments, certain leases provide for contingent rentals
based on equipment usage, principally related to aircraft leases at FedEx Express. Rent expense associated with contingent rentals is
recorded as incurred. Certain of our leases contain fluctuating or escalating payments and rent holiday periods. The related rent
expense is recorded on a straight-line basis over the lease term. The cumulative excess of rent payments over rent expense is
accounted for as a deferred lease asset and recorded in “Other assets” in the accompanying consolidated balance sheets. The
cumulative excess of rent expense over rent payments is accounted for as a deferred lease obligation. Leasehold improvements
associated with assets utilized under capital or operating leases are amortized over the shorter of the asset’s useful life or the lease
term.
DEFERRED GAINS. Gains on the sale and leaseback of aircraft and other property and equipment are deferred and amortized ratably
over the life of the lease as a reduction of rent expense. Substantially all of these deferred gains are related to aircraft transactions.
DERIVATIVE FINANCIAL INSTRUMENTS. Our risk management strategy includes the select use of derivative instruments to reduce
the effects of volatility in foreign currency exchange exposure on operating results and cash flows. In accordance with our risk
management policies, we do not hold or issue derivative instruments for trading or speculative purposes. All derivative instruments are
recognized in the financial statements at fair value, regardless of the purpose or intent for holding them.
When we become a party to a derivative instrument and intend to apply hedge accounting, we formally document the hedge
relationship and the risk management objective for undertaking the hedge, which includes designating the instrument for financial
reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge.
- 110 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
If a derivative is designated as a cash flow or net investment hedge, changes in its fair value are considered to be effective and are
recorded in accumulated other comprehensive income (“AOCI”) until the hedged item is recorded in income. Any portion of a change
in the fair value of a derivative that is considered to be ineffective, along with the change in fair value of any derivatives not
designated in a hedging relationship, is immediately recognized in the income statement. We do not have any derivatives designated
as a cash flow or net investment hedge for any period presented. Accordingly, additional disclosures about these types of financial
instruments are excluded from this report.
For derivative instruments designated as hedges, we assess, both at hedge inception and on an ongoing basis, whether the derivatives
that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items. In
addition, when we determine that a derivative is not highly effective as a hedge, hedge accounting is discontinued. When a hedging
instrument expires or is sold, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gains or losses
existing in AOCI at that time remain there until the forecasted transaction is ultimately recognized in the income statement. When a
forecasted transaction is no longer expected to occur, the cumulative gains or losses that were reported in AOCI are immediately
recognized in the income statement. The financial statement impact of derivative transactions was immaterial for each period
presented. Accordingly, additional disclosures have been excluded from this report.
FOREIGN CURRENCY TRANSLATION. Translation gains and losses of foreign operations that use local currencies as the functional
currency are accumulated and reported, net of applicable deferred income taxes, as a component of AOCI within common
stockholders’ investment. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a
currency other than the local currency are included in the caption “Other, net” in the accompanying consolidated statements of income
and were immaterial for each period presented.
EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots of FedEx Express, who are a small number of its
total employees, are employed under a collective bargaining agreement that took effect on November 2, 2015. The collective
bargaining agreement is scheduled to become amendable in November 2021. Other than the pilots at FedEx Express and drivers at one
FedEx Freight facility, our U.S. employees have thus far chosen not to unionize (we acquired FedEx Supply Chain Distribution
System, Inc. (“FedEx Supply Chain”) in 2015, which already had a small number of employees that are members of unions).
Additionally, certain of FedEx Express’s non-U.S. employees are unionized, and a union has been certified to represent owner-drivers
at a FedEx Freight Canada, Corp. facility.
STOCK-BASED COMPENSATION. The accounting guidance related to share-based payments requires recognition of compensation
expense for stock-based awards using a fair value method. We use the Black-Scholes option pricing model to calculate the fair value
of stock options. The value of restricted stock awards is based on the stock price of the award on the grant date. We record stock-based
compensation expense in the “Salaries and employee benefits” caption in the accompanying consolidated statements of income. We
issue new shares or treasury shares from stock repurchases to cover employee stock option exercises and restricted stock grants.
TREASURY SHARES. In January 2016, our Board of Directors authorized a stock repurchase program of up to 25 million shares.
During 2019, we repurchased 6.6 million shares of FedEx common stock at an average price of $222.94 per share for a total of $1.5
billion. As of May 31, 2019, 5.1 million shares remained under the stock repurchase authorization. Shares under the current
repurchase program may be repurchased from time to time in the open market or in privately negotiated transactions. The timing and
volume of repurchases are at the discretion of management, based on the capital needs of the business, the market price of FedEx
common stock and general market conditions. No time limit was set for the completion of the program, and the program may be
suspended or discontinued at any time.
In 2018, we repurchased 4.3 million shares of FedEx common stock at an average price of $237.45 per share for a total of $1.0 billion.
In 2017, we repurchased 3.0 million shares of FedEx common stock at an average price of $172.13 per share for a total of $509
million.
DIVIDENDS DECLARED PER COMMON SHARE. On June 10, 2019, our Board of Directors declared a quarterly dividend of $0.65
per share of common stock. The dividend was paid on July 8, 2019 to stockholders of record as of the close of business on June 24,
2019. Each quarterly dividend payment is subject to review and approval by our Board of Directors, and we evaluate our dividend
payment amount on an annual basis at the end of each fiscal year. There are no material restrictions on our ability to declare dividends,
nor are there any material restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or
advances.
- 111 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS REALIGNMENT COSTS. In December 2018, we announced cost-reduction programs primarily through initiatives at
FedEx Services and FedEx Express in response to current business and economic conditions that included the following:
A U.S.-based voluntary employee buyout program for eligible employees;
Limited hiring in staff functions; and
Reductions in discretionary spending.
During 2019, we conducted a program to offer voluntary cash buyouts to eligible U.S.-based employees in certain staff functions. The
U.S.-based voluntary employee buyout program includes voluntary severance payments and funding to healthcare reimbursement
accounts, with the voluntary severance payment calculated based on four weeks of gross base salary for every year of continuous
service up to a maximum payment of two years of pay. This program was completed in the fourth quarter of 2019, and approximately
1,500 employees have left or will be leaving during 2020. Costs of the benefits provided under the U.S.-based voluntary employee
buyout program were recognized as special termination benefits in the period that eligible employees accepted their offers.
We incurred costs of $320 million ($243 million, net of tax, or $0.91 per diluted share) during 2019 associated with our business
realignment activities. These costs related primarily to severance for employees who accepted voluntary buyouts in the third and
fourth quarters of 2019. Payments are made at the time of departure. Approximately $220 million was paid under this program during
2019. The cost of the U.S.-based voluntary employee buyout program is included in the caption “Business realignment costs” in our
consolidated statements of income. Also included in that caption are other incremental, external costs directly attributable to our
business realignment activities, such as professional fees.
USE OF ESTIMATES. The preparation of our consolidated financial statements requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingent
liabilities. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other
information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the
accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas
where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated
include: self-insurance accruals; retirement plan obligations; long-term incentive accruals; tax liabilities; loss contingencies; litigation
claims; impairment assessments on long-lived assets (including goodwill); and purchase price allocations.
NOTE 2: RECENT ACCOUNTING GUIDANCE
New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial
statements. We believe the following new accounting guidance is relevant to the readers of our financial statements.
Recently Adopted Accounting Standards
In 2014, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board issued a new accounting
standard that supersedes virtually all existing revenue recognition guidance under GAAP. The fundamental principles of the new
guidance are that companies should recognize revenue in a manner that reflects the timing of the transfer of services to customers and
the amount of revenue recognized reflects the consideration that a company expects to receive for the goods and services provided.
The new guidance establishes a five-step approach for the recognition of revenue. We adopted this standard as of June 1, 2018 (fiscal
2019) using the modified retrospective method of adoption as permitted by the standard. The new guidance did not have an impact on
our revenue recognition policies, practices or systems; therefore, there was no cumulative-effect adjustment to retained earnings as of
June 1, 2018.
In March 2017, the FASB issued an Accounting Standards Update (ASU 2017-07) that changes how employers that sponsor defined
benefit pension or other postretirement benefit plans present the net periodic benefit cost in the income statement. This new guidance
requires entities to report the service cost component in the same line item or items as other compensation costs. The other
components of net benefit cost are required to be presented in the income statement separately from the service cost component
outside of income from operations. This standard impacts our operating income but has no impact on our net income or earnings per
share. We adopted this standard effective June 1, 2018 (fiscal 2019) and applied these changes retrospectively. As such, prior year
financial results are recast to conform to these new rules.
- 112 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents our results under our historical method of accounting and as adjusted to reflect our adoption of ASU
2017-07 (in millions):
Revenue
Operating income
Other income (expense), net
Net income
Reported
$
65,450 $
4,870
(517 )
4,572
As Adjusted
65,450
4,272
81
4,572
— $
(598 )
598
—
Reported
$ 60,319 $
5,037
(458 )
2,997
May 31, 2018
Effect of
Adoption of
ASU 2017-07
May 31, 2017
Effect of
Adoption of
ASU 2017-07
As
Adjusted
— $ 60,319
4,566
13
2,997
(471 )
471
—
In August 2018, the FASB issued an Accounting Standards Update (ASU 2018-14) that modifies the disclosure requirements for
employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no
longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as
relevant. This new guidance had a minimal impact on our financial reporting. We adopted these new rules in the fourth quarter of
2019 and applied them retrospectively.
New Accounting Standards and Accounting Standards Not Yet Adopted
In 2016, the FASB issued a new lease accounting standard which requires lessees to put most leases on their balance sheets but
recognize the expenses in their income statements in a manner similar to current practice. The new standard states that a lessee will
recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset
for the lease term. Expenses related to leases determined to be operating leases will be recognized on a straight-line basis, while those
determined to be financing leases will be recognized following a front-loaded expense profile in which interest and amortization are
presented separately in the income statement. The new standard will also require disclosures to help investors and other financial
statement users better understand the amount, timing and uncertainty of cash flows arising from leases. These disclosures include
qualitative and quantitative requirements as well as additional information about the amounts recorded in the financial statements.
We are adopting the new leasing standard using a modified retrospective transition method as of the beginning of the period of
adoption; therefore, we will not adjust the comparative periods presented but will record a cumulative effect adjustment to retained
earnings effective as of June 1, 2019. We will elect the package of practical expedients permitted under the transition guidance within
the new standard, which among other things, allows us to carry forward the historical accounting relating to lease identification and
classification for existing leases upon adoption and to not separate lease and non-lease components for certain classes of assets. We
will make an accounting policy election not to recognize leases with an initial term of 12 months or less on the consolidated balance
sheets.
Based on our lease portfolio, we anticipate recognizing a lease liability and related right-of-use asset on our balance sheet of
approximately $14 billion, with an immaterial impact on our income statement compared to the current lease accounting model. In
addition, we expect to de-recognize existing deferred gains on sale leasebacks of aircraft of approximately $56 million as a
cumulative-effect adjustment to retained earnings effective as of June 1, 2019. The majority of our existing lease arrangements are
classified as operating leases, which will continue to be classified as operating under the new standard. In connection with the
adoption of these new rules, we implemented changes to our policies, processes, information systems and internal controls to ensure
we meet the standard’s reporting and disclosure requirements.
In June 2016, the FASB issued an Accounting Standards Update (ASU 2016-13) that changes how entities will measure credit losses
for most financial assets and certain other instruments that are not measured at fair value through net income. These changes will be
effective June 1, 2020 (fiscal 2021). We are assessing the impact of this new standard on our consolidated financial statements and
related disclosures.
In February 2018, the FASB issued an Accounting Standards Update (ASU 2018-02) that will permit companies to reclassify the
income tax effect of the Tax Cuts and Jobs Act (“TCJA”) on items within AOCI to retained earnings. We are adopting this standard as
of June 1, 2019 (fiscal 2020) and are electing to reclassify these tax effects, which are immaterial to our financial statements.
In August 2018, the FASB issued an Accounting Standards Update (ASU 2018-15) that reduces the complexity for accounting for
costs of implementing a cloud computing service arrangement and aligns the accounting for capitalizing implementation costs of
hosting arrangements, regardless of whether they convey a license to the hosted software. These changes will be effective June 1,
2020 (fiscal 2021). We are assessing the impact of this new standard on our consolidated financial statements and related disclosures.
- 113 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: BUSINESS COMBINATIONS
On May 1, 2019, we acquired the international express division of FC (Flying Cargo) Express Ltd. (“Flying Cargo”) for $67 million in
cash from operations. The majority of the purchase price was allocated to goodwill. The financial results of this acquired business are
included in the FedEx Express segment from the date of acquisition and were not material to our results of operations. Therefore, pro
forma financial information has not been provided.
On October 1, 2018, we acquired the controlling interest in an existing joint venture with Swiss Post, which operates a Swiss-wide
transport system with connections to TNT Express’s global network. The controlling interest was acquired through the noncash
contribution of a complementary Swiss business into the venture, resulting in the recognition of an immaterial gain. The majority of
the purchase price was allocated to goodwill and other intangibles. The financial results of this acquired business are included in the
FedEx Express segment from the date of acquisition and were not material to our results of operations. Therefore, pro forma financial
information has not been provided.
On March 23, 2018, we acquired P2P Mailing Limited (“P2P”), a leading provider of worldwide, low-cost e-commerce transportation
solutions, for £92 million ($135 million) in cash from operations. The majority of the purchase price was allocated to goodwill. The
financial results of this acquired business are included in the FedEx Logistics operating segment from the date of acquisition and were
not material to our results of operations. Therefore, pro forma financial information has not been provided.
On October 13, 2017, we acquired Northwest Research, Inc. (“Northwest Research”), a leader in inventory research and management,
for $50 million in cash from operations. The majority of the purchase price was allocated to property and equipment. The financial
results of this acquired business are included in the FedEx Services segment from the date of acquisition and were not material to our
results of operations. Therefore, pro forma financial information has not been provided.
NOTE 4: GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL. The carrying amount of goodwill attributable to each reportable operating segment and changes therein are as follows
(in millions):
FedEx Express
Segment
FedEx Ground
Segment
FedEx Freight
Segment
FedEx Services
Segment
Corporate,
Other and
Eliminations Total
Goodwill at May 31, 2017
Accumulated impairment charges
Balance as of May 31, 2017
Goodwill acquired(1)
Purchase adjustments and other(2)
Impairment charges(3)
Balance as of May 31, 2018
Goodwill acquired(4)
Purchase adjustments and other(2)
Balance as of May 31, 2019
Accumulated goodwill impairment charges
as of May 31, 2019
$
$
$
4,953 $
—
4,953
76
71
—
5,100
126
(210 )
5,016 $
827 $
—
827
14
(1 )
—
840
—
—
840 $
764 $
(133 )
631
3
—
—
634
—
—
634 $
1,525 $
(1,177 )
348
—
—
—
348
—
—
348 $
395 $ 8,464
(1,310 )
—
7,154
395
125
32
68
(2 )
(374 )
(374 )
6,973
51
126
—
(5 )
(215 )
46 $ 6,884
— $
— $
(133 ) $
(1,177 ) $
(374 ) $ (1,684 )
(1) Goodwill acquired relates to the acquisitions of Northwest Research and P2P. See Note 3 for more information.
(2) Primarily purchase price allocation-related adjustments, currency translation adjustments and acquired goodwill related to
immaterial acquisitions.
Impairment charges related to the goodwill impairment of FedEx Supply Chain described below.
(3)
(4) Goodwill acquired relates to the acquisitions of Flying Cargo and the controlling interest in an existing joint venture with
Swiss Post. See Note 3 for more information.
Our reporting units with significant recorded goodwill include FedEx Express, FedEx Ground, FedEx Freight and FedEx Office
(reported in the FedEx Services segment). We evaluated these reporting units during the fourth quarter of 2019. The estimated fair
value of each of these reporting units exceeded their carrying values in 2019, and we do not believe that any of these reporting units
were impaired as of May 31, 2019.
- 114 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 2018, we incurred a goodwill impairment charge of $374 million related to FedEx Supply Chain, eliminating substantially all of the
goodwill attributable to this reporting unit. In our evaluation of the goodwill of this reporting unit, we compared the fair value of the
reporting unit to its carrying value (including attributable goodwill). Fair value was estimated using standard valuation methodologies
(principally the income and market approach) incorporating market participant considerations and management’s assumptions on
revenue growth rates, operating margins, discount rates and expected capital expenditures. The key factors contributing to the
goodwill impairment were underperformance of the FedEx Supply Chain business during 2018, including base business erosion, and
the failure to attain the level of operating synergies and revenue and profit growth anticipated at the time of the acquisition. Based on
these factors, our outlook for the business and industry changed in the fourth quarter of 2018. No other impairments of goodwill were
recognized during 2019, 2018 or 2017.
OTHER INTANGIBLE ASSETS. The summary of our intangible assets and related accumulated amortization at May 31, 2019 and
2018 is as follows (in millions):
Customer relationships
Technology
Trademarks and other
Total
2019
2018
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
$
$
685 $
66
137
888 $
(293 ) $
(51 )
(128 )
(472 ) $
392 $
15
9
416 $
676 $
68
141
885 $
(250 ) $
(39 )
(116 )
(405 ) $
426
29
25
480
Amortization expense for intangible assets was $82 million in 2019, $87 million in 2018 and $91 million in 2017.
Expected amortization expense for the next five years is as follows (in millions):
2020
2021
2022
2023
2024
$
64
52
45
43
42
NOTE 5: SELECTED CURRENT LIABILITIES
The components of selected current liability captions at May 31 were as follows (in millions):
Accrued Salaries and Employee Benefits
Salaries
Employee benefits, including variable compensation
Compensated absences
Accrued Expenses
Self-insurance accruals
Taxes other than income taxes
Other
2019
2018
425 $
552
764
1,741 $
1,104 $
304
1,870
3,278 $
498
933
746
2,177
957
334
1,840
3,131
$
$
$
$
- 115 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS
The components of long-term debt (net of discounts and debt issuance costs), along with maturity dates for the years subsequent to
May 31, 2019, are as follows (in millions):
Interest Rate%
Maturity
May 31,
2019
2018
Senior unsecured debt:
Euro senior unsecured debt:
Total senior unsecured debt
Other debt
Capital lease obligations
Less current portion
8.00
2.30
3.40
2.625-2.70
4.00
3.20
3.25
3.30
3.40
4.20
4.90
3.90
3.875-4.10
5.10
4.10
4.55-4.75
4.40
4.05
4.95
4.50
7.60
floating-rate
0.50
0.70
1.00
1.625
2019 $
2020
2022
2023
2024
2025
2026
2027
2028
2029
2034
2035
2043
2044
2045
2046
2047
2048
2049
2065
2098
2019
2020
2022
2023
2027
$
— $
400
497
747
746
696
745
446
495
396
495
494
984
742
641
2,460
735
986
835
246
237
—
559
713
836
1,387
17,518
1
62
17,581
964
16,617 $
750
399
—
746
746
695
744
445
495
—
495
493
983
742
640
2,459
735
986
—
246
237
582
581
—
869
1,442
16,510
4
71
16,585
1,342
15,243
Interest on our U.S. dollar fixed-rate notes is paid semi-annually. Interest on our euro fixed-rate notes is paid annually. The weighted
average interest rate on long-term debt was 3.5% as of May 31, 2019. Long-term debt, including current maturities and exclusive of
capital leases, had estimated fair values of $17.8 billion at May 31, 2019 and $16.6 billion at May 31, 2018. The estimated fair values
were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value
of our long-term debt is 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 liability, either directly or indirectly.
We have a shelf registration statement filed with the Securities and Exchange Commission (“SEC”) that allows us to sell, in one or
more future offerings, any combination of our unsecured debt securities and common stock.
During January 2019, we issued $1.2 billion of senior unsecured debt under our current shelf registration statement, comprised of
€640 million of 0.7% fixed-rate notes due in May 2022 and $500 million of 3.4% fixed-rate notes due in January 2022. We used the
net proceeds to pay the €500 million aggregate principal amount of floating-rate notes that matured on April 11, 2019, and for general
corporate purposes.
- 116 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During October 2018, we issued $1.25 billion of senior unsecured debt under our current shelf registration statement, comprised of
$400 million of 4.20% fixed-rate notes due in October 2028 and $850 million of 4.95% fixed-rate notes due in October 2048. We used
the net proceeds to redeem the $750 million aggregate principal amount of 8.00% notes due January 15, 2019, and for general
corporate purposes.
During the fourth quarter of 2019, we replaced our $2.0 billion five-year revolving credit facility with a $2.0 billion five-year credit
agreement (the “Five-Year Credit Agreement”) and a $1.5 billion 364-day credit agreement (the “364-Day Credit Agreement” and,
together with the Five-Year Credit Agreement, the “New Credit Agreements”). The Five-Year Credit Agreement expires in March
2024 and includes a $250 million letter of credit sublimit. The 364-Day Credit Agreement expires in March 2020. The New Credit
Agreements are available to finance our operations and other cash flow needs. The New Credit Agreements contain a financial
covenant requiring us to maintain a ratio of debt to consolidated earnings (excluding noncash retirement plans MTM adjustments and
noncash asset impairment charges) before interest, taxes, depreciation and amortization (“adjusted EBITDA”) of not more than 3.5 to
1.0, calculated as of the end of the applicable quarter on a rolling four-quarters basis. The ratio of our debt to adjusted EBITDA was
2.25 to 1.0 at May 31, 2019. We believe this covenant is the only significant restrictive covenant in our New Credit Agreements. Our
New Credit Agreements contain other customary covenants that do not, individually or in the aggregate, materially restrict the conduct
of our business. We are in compliance with the financial covenant and all other covenants in our New Credit Agreements and do not
expect the covenants to affect our operations, including our liquidity or expected funding needs. If we failed to comply with the
financial covenant or any other covenants in our New Credit Agreements, our access to financing could become limited. We had a
total of $53 million in letters of credit outstanding at May 31, 2019, with $197 million of the letter of credit sublimit unused under our
revolving credit facility.
As of May 31, 2019, no commercial paper was outstanding.
NOTE 7: LEASES
We utilize certain aircraft, land, facilities, retail locations and equipment under capital and operating leases that expire at various dates
through 2051. We leased 6% of our total aircraft fleet under operating leases as of May 31, 2019 and 7% as of May 31, 2018. A
portion of our supplemental aircraft are leased by us under agreements that provide for cancellation upon 30 days’ notice. Our leased
facilities include national, regional and metropolitan sorting facilities, retail facilities and administrative buildings.
Rent expense under operating leases for the years ended May 31 was as follows (in millions):
Minimum rentals
Contingent rentals(1)
(1) Contingent rentals are based on equipment usage.
2019
2018
2017
$
$
2,875 $
222
3,097 $
2,913 $
194
3,107 $
2,814
178
2,992
A summary of future minimum lease payments under noncancelable operating leases with an initial or remaining term in excess of one
year at May 31, 2019 is as follows (in millions):
2020
2021
2022
2023
2024
Thereafter
Total
Aircraft
and Related
Equipment
Operating Leases
Facilities
and Other
Total
Operating
Leases
$
$
288 $
230
212
154
58
85
1,027 $
2,209 $
2,033
1,816
1,625
1,428
7,977
17,088 $
2,497
2,263
2,028
1,779
1,486
8,062
18,115
Property and equipment recorded under capital leases and future minimum lease payments under capital leases are immaterial. The
weighted-average remaining lease term of all operating leases outstanding at May 31, 2019 was approximately six years. While certain
of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance,
none of our lease agreements include material financial covenants or limitations.
- 117 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FedEx Express makes payments under certain leveraged operating leases that are sufficient to pay principal and interest on certain
pass-through certificates. The pass-through certificates are not direct obligations of, or guaranteed by, FedEx or FedEx Express.
We are the lessee under certain operating leases covering a portion of our leased aircraft in which the lessors are trusts established
specifically to purchase, finance and lease these aircraft to us. These leasing entities are variable interest entities. We are not the
primary beneficiary of the leasing entities, as the lease terms are at market at the inception of the lease and do not include a residual
value guarantee, fixed-price purchase option or similar feature that obligates us to absorb decreases in value or entitles us to
participate in increases in the value of the aircraft. Therefore, we are not required to consolidate any of these entities as the primary
beneficiary. Our maximum exposure under these leases is included in the summary of future minimum lease payments.
NOTE 8: PREFERRED STOCK
Our Certificate of Incorporation authorizes the Board of Directors, at its discretion, to issue up to 4,000,000 shares of preferred
stock. The stock is issuable in series, which may vary as to certain rights and preferences, and has no par value. As of May 31, 2019,
none of these shares had been issued.
NOTE 9: ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table provides changes in AOCI, net of tax, reported in the consolidated financial statements for the years ended
May 31 (in millions; amounts in parentheses indicate debits to AOCI):
Foreign currency translation loss:
Balance at beginning of period
Translation adjustments
Balance at end of period
Retirement plans adjustments:
Balance at beginning of period
Prior service credit and other arising during period
Reclassifications from AOCI
Balance at end of period
$
Accumulated other comprehensive loss at end of period
$
2019
2018
2017
(759 ) $
(195 )
(954 )
181
—
(92 )
89
(865 ) $
(685 ) $
(74 )
(759 )
270
(4 )
(85 )
181
(578 ) $
(514 )
(171 )
(685 )
345
1
(76 )
270
(415 )
The following table presents details of the reclassifications from AOCI for the years ended May 31 (in millions; amounts in
parentheses indicate debits to earnings):
Amortization of retirement plans prior service
credits, before tax
Income tax benefit
AOCI reclassifications, net of tax
$
$
NOTE 10: STOCK-BASED COMPENSATION
Amount Reclassified from
AOCI
2018
2017
2019
Affected Line Item in the
Income Statement
120 $
(28 )
92 $
121 $
(36 )
85 $
120 Salaries and employee benefits
(44 ) Provision for income taxes
76 Net income
Our total stock-based compensation expense for the years ended May 31 was as follows (in millions):
Stock-based compensation expense
2019
2018
2017
$
174 $
167 $
154
We have two types of equity-based compensation: stock options and restricted stock.
STOCK OPTIONS. Under the provisions of our incentive stock plan, key employees and non-employee directors may be granted
options to purchase shares of our common stock at a price not less than its fair market value on the date of grant. Vesting requirements
are determined at the discretion of the Compensation Committee of our Board of Directors. Option-vesting periods range from one to
four years, with 82% of our options vesting ratably over four years. Compensation expense associated with these awards is recognized
on a straight-line basis over the requisite service period of the award.
- 118 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RESTRICTED STOCK. Under the terms of our incentive stock plan, restricted shares of our common stock are awarded to key
employees. All restrictions on the shares expire ratably over a four-year period. Shares are valued at the market price on the date of
award. The terms of our restricted stock provide for continued vesting subsequent to the employee’s retirement. Compensation
expense associated with these awards is recognized on a straight-line basis over the shorter of the requisite service period or the stated
vesting period.
ASSUMPTIONS. The key assumptions for the Black-Scholes valuation method include the expected life of the option, stock price
volatility, a risk-free interest rate and dividend yield. The following table includes the weighted-average Black-Scholes value of our
stock option grants, the intrinsic value of options exercised (in millions) and the key weighted-average assumptions used in the
valuation calculations for options granted during the years ended May 31, followed by a discussion of our methodology for developing
each of the assumptions used in the valuation model:
Weighted-average Black-Scholes value
Intrinsic value of options exercised
Black-Scholes Assumptions:
Expected lives
Expected volatility
Risk-free interest rate
Dividend yield
2019
2018
2017
$
$
61.42 $
122 $
55.72 $
359 $
43.99
274
6.4 years
6.5 years
6.5 years
21 %
2.94 %
0.935 %
23 %
2.07 %
0.796 %
25 %
1.64 %
0.719 %
The expected life represents an estimate of the period of time options are expected to remain outstanding, and we examine actual stock
option exercises to determine the expected life of the options. Options granted have a maximum term of 10 years. Expected volatilities
are based on the actual changes in the market value of our stock and are calculated using daily market value changes from the date of
grant over a past period equal to the expected life of the options. The risk-free interest rate is the U.S. Treasury Strip rate posted at the
date of grant having a term equal to the expected life of the option. The expected dividend yield is the annual rate of dividends per
share over the exercise price of the option.
The following table summarizes information regarding stock option activity for the year ended May 31, 2019:
Outstanding at June 1, 2018
Granted
Exercised
Forfeited
Outstanding at May 31, 2019
Exercisable
Expected to vest
Available for future grants
Stock Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
(in millions)(1)
147.98
244.16
91.01
212.85
166.89
134.70
217.78
6.1 $
4.8 $
8.3 $
260
260
—
Shares
12,984,917 $
2,383,158
(1,112,160 )
(633,400 )
13,622,515 $
8,344,344 $
4,950,924 $
13,894,509
(1) Only presented for options with market value at May 31, 2019 in excess of the exercise price of the option.
The options granted during 2019 are primarily related to our principal annual stock option grant in June 2018.
- 119 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information regarding vested and unvested restricted stock for the year ended May 31, 2019:
Unvested at June 1, 2018
Granted
Vested
Forfeited
Unvested at May 31, 2019
Restricted Stock
Weighted-
Average
Grant Date
Fair Value
185.16
253.28
180.65
218.08
217.76
Shares
337,590 $
149,579
(153,734 )
(8,957 )
324,478 $
During the year ended May 31, 2018, there were 155,624 shares of restricted stock granted with a weighted-average fair value of
$212.60 per share. During the year ended May 31, 2017, there were 153,984 shares of restricted stock granted with a weighted-
average fair value of $166.12 per share.
Stock option vesting during the years ended May 31 was as follows:
2019
2018
2017
Stock Options
Vested during
the year
Fair value
(in millions)
2,249,301 $
2,465,493
2,427,837
115
112
104
As of May 31, 2019, there was $221 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested
share-based compensation arrangements. This compensation expense is expected to be recognized on a straight-line basis over the
remaining weighted-average vesting period of approximately two years.
Total shares outstanding or available for grant related to equity compensation at May 31, 2019 represented 10% of the total
outstanding common and equity compensation shares and equity compensation shares available for grant.
NOTE 11: COMPUTATION OF EARNINGS PER SHARE
The calculation of basic and diluted earnings per common share for the years ended May 31 was as follows (in millions, except per
share amounts):
Basic earnings per common share:
Net earnings allocable to common shares(1)
Weighted-average common shares
Basic earnings per common share
Diluted earnings per common share:
Net earnings allocable to common shares(1)
Weighted-average common shares
Dilutive effect of share-based awards
Weighted-average diluted shares
Diluted earnings per common share
2019
2018
2017
$
$
$
$
539 $
262
2.06 $
539 $
262
3
265
2.03 $
4,566 $
267
17.08 $
4,566 $
267
5
272
16.79 $
2,993
266
11.24
2,993
266
4
270
11.07
Anti-dilutive options excluded from diluted earnings per common share
5.4
2.5
4.5
(1) Net earnings available to participating securities were immaterial in all periods presented.
- 120 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: INCOME TAXES
The components of the provision for income taxes for the years ended May 31 were as follows (in millions):
Current provision (benefit)
Domestic:
Federal
State and local
Foreign
Deferred provision (benefit)
Domestic:
Federal
State and local
Foreign
2019
2018
2017
$
$
(107 ) $
64
243
200
(61 )
(7 )
(17 )
(85 )
115 $
(540 ) $
43
461
(36 )
271
125
(579 )
(183 )
(219 ) $
269
88
285
642
989
59
(108 )
940
1,582
Pre-tax earnings of foreign operations for 2019, 2018 and 2017 were $929 million, $958 million and $919 million, respectively. These
amounts represent only a portion of total results associated with international shipments and do not represent our international results
of operations.
A reconciliation of total income tax expense and the amount computed by applying the statutory federal income tax rate (21% in 2019,
29.2% in 2018 and 35% in 2017) to income before taxes for the years ended May 31 is as follows (in millions):
Taxes computed at federal statutory rate
Increases (decreases) in income tax from:
Non-deductible expenses
Valuation allowance
TCJA(1)
Foreign tax rate enactments
State and local income taxes, net of federal benefit
Benefits from share-based payments
Uncertain tax positions
Foreign tax credits from distributions
Foreign operations
Corporate structuring transactions(2)
Goodwill impairment charge
Other, net
Provision for income taxes (benefit)
Effective Tax Rate
2019
2018
2017
$
138 $
1,271
$
1,603
79
(79 )
(71 )
50
44
(18 )
8
(8 )
(1 )
—
—
(27 )
115 $
17.6 %
81
31
(1,354 )
6
119
(60 )
86
(225 )
25
(255 )
109
(53 )
(219 )
$
(5.0 )%
76
44
—
—
99
(55 )
—
—
(5 )
(68 )
—
(112 )
1,582
34.6 %
$
(1) Primary components in 2018 were a $1.15 billion benefit from the remeasurement of our net U.S. deferred tax liability and a $204
million one-time benefit from a contribution to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) in 2018.
(2) The 2018 and 2017 net benefits consist of foreign deferred tax benefits of $434 million and $94 million, respectively, which were
partially offset by U.S. deferred tax expenses of $179 million and $26 million, respectively.
The 2019 tax rate includes a benefit of $90 million from the reduction of a valuation allowance on tax loss carryforwards due to
certain business operational changes from the integration of FedEx Express and TNT Express in a local jurisdiction, which impacted
our determination of the realizability of the deferred tax asset in that jurisdiction and an expense of $50 million from the impact on our
deferred taxes attributable to a lower tax rate in the Netherlands. The 2019 tax rate was also favorably impacted by the TCJA, which
resulted in benefits of approximately $75 million from accelerated deductions claimed on our 2018 U.S. income tax return filed in
2019 and approximately $40 million from the lower statutory tax rate on fiscal 2019 earnings.
- 121 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 2018 tax rate was favorably impacted by the TCJA, which resulted in a provisional benefit of $1.15 billion from the
remeasurement of our net U.S. deferred tax liability. In addition, we recognized a benefit of approximately $265 million related to the
lower statutory income tax rate and a one-time benefit of $204 million from a $1.5 billion contribution to our U.S. Pension Plans in
2018. Our 2018 tax rate also included a net benefit of $255 million from corporate structuring transactions as part of the ongoing
integration of FedEx Express and TNT Express and a benefit of $225 million from foreign tax credits generated by distributions to the
U.S. from our foreign operations. The 2018 tax rate was negatively impacted by an increase in uncertain tax positions for income tax
audits. Our 2017 tax rate was favorably impacted by $62 million as a result of new U.S. foreign currency tax regulations.
The TCJA, enacted on December 22, 2017, significantly changed the U.S. corporate income tax system in multiple ways such as (1)
reducing our U.S. statutory federal income tax rate from 35% to 21% (due to our May 31 fiscal year-end, the lower rate was phased in,
resulting in a U.S. statutory federal rate of 29.2% for 2018 and a statutory federal rate of 21% for 2019 and subsequent years); (2)
requiring us to calculate a one-time U.S. tax on earnings which have not previously been repatriated to the U.S. (transition tax); and
(3) introducing new provisions that took effect in 2019, including but not limited to, a tax on global intangible low-taxed income
(GILTI), a tax deduction for foreign-derived intangible income, additional limitations on tax deductions for executive compensation
and a minimum base erosion and anti-abuse tax based on certain payments from a U.S. company to foreign related parties. We
included the impact of the above provisions in the computation of our effective tax rates, as applicable.
As provided for in the TCJA, our historical earnings were subject to the one-time transition tax and can be repatriated to the U.S. with
a de minimis tax cost. We continue to assert that both our historical and current earnings in our foreign subsidiaries are permanently
reinvested and therefore no deferred taxes or withholding taxes have been provided, including deferred taxes on any additional outside
basis difference (e.g., stock basis differences attributable to acquisition or other permanent differences).
During 2019, the U.S. Treasury Department issued final regulations covering the one-time transition tax on unrepatriated foreign
earnings, which was enacted as part of the TCJA. Certain guidance included in these final regulations is inconsistent with our
interpretation that led to the recognition of a $225 million benefit in 2018 and an additional $8 million benefit in 2019.
Notwithstanding this inconsistency, we remain confident in our interpretation of the TCJA and intend to defend this position through
litigation, if necessary. However, if we are ultimately unsuccessful in defending our position, we may be required to reverse the $233
million benefit previously recorded.
In December 2017, the SEC staff issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance to registrants in accounting for
income taxes under the TCJA. In accordance with SAB 118, we made reasonable estimates and recorded provisional amounts for the
TCJA during 2018. Under the transitional provisions of SAB 118, we had a one-year measurement period to complete the accounting
for the initial tax effects of the TCJA. Our accounting is complete for the tax effects of the TCJA, including the following elements
initially recorded on a provisional basis:
In 2018, we recognized a provisional benefit related to the revaluation of U.S. deferred tax assets and liabilities. During 2019,
we revised the provisional benefit associated with the remeasurement of our net U.S. deferred tax liability. As a result, we
recognized a $4 million tax expense, which decreased the $1.15 billion provisional benefit recorded in 2018.
In 2018, we previously recognized an immaterial provisional benefit from foreign tax credits exceeding the one-time
transition tax on previously deferred foreign earnings. No adjustments were made to the provisional estimate during the
remeasurement period.
We have determined to record the taxes for GILTI as a period cost.
The significant components of deferred tax assets and liabilities as of May 31 were as follows (in millions):
Property, equipment, leases and intangibles
Employee benefits
Self-insurance accruals
Other
Net operating loss/credit carryforwards
Valuation allowances
2019
2018
Deferred Tax
Assets
Deferred Tax
Liabilities
Deferred Tax
Assets
Deferred Tax
Liabilities
$
$
592 $
1,256
585
510
1,139
(590 )
3,492 $
4,633 $
—
—
340
—
—
4,973 $
752 $
595
494
416
1,146
(711 )
2,692 $
3,663
31
—
602
—
—
4,296
- 122 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net deferred tax liabilities as of May 31 have been classified in the balance sheets as follows (in millions):
Noncurrent deferred tax assets(1)
Noncurrent deferred tax liabilities
$
$
2019
2018
1,340 $
(2,821 )
(1,481 ) $
1,263
(2,867 )
(1,604 )
(1) Noncurrent deferred tax assets are included in the line item “Other Assets” in our consolidated balance sheets.
We have approximately $3.4 billion of net operating loss carryovers in various foreign jurisdictions and $780 million of state
operating loss carryovers. The valuation allowances primarily represent amounts reserved for operating loss carryforwards, which
expire over varying periods starting in 2020. Therefore, we establish valuation allowances if it is more likely than not that deferred
income tax assets will not be realized. We believe that we will generate sufficient future taxable income to realize the tax benefits
related to the remaining net deferred tax assets in our consolidated balance sheets. See Note 1 above for more information on our
policy for assessing the recoverability of deferred tax assets and valuation allowances.
We are subject to taxation in the U.S. and various U.S. state, local and foreign jurisdictions. The Internal Revenue Service is currently
auditing our 2016 and 2017 tax returns. We will also be commencing an appeals proceeding in September 2019 with respect to our
2014 and 2015 U.S. federal income tax returns. It is reasonably possible that certain income tax return proceedings will be completed
during the next 12 months and could result in a change in our balance of unrecognized tax benefits. The expected impact of any
changes would not be material to our consolidated financial statements.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
Balance at beginning of year
Increases for tax positions taken in the current year
Increases for tax positions taken in prior years
Increase for business acquisition
Decreases for tax positions taken in prior years
Settlements
Decreases from lapse of statute of limitations
Changes due to currency translation
Balance at end of year
2019
2018
2017
$
$
161 $
—
31
—
(4 )
(21 )
—
(3 )
164 $
67 $
3
103
—
(10 )
(2 )
—
—
161 $
49
—
8
17
(1 )
(4 )
(2 )
—
67
Our liabilities recorded for uncertain tax positions include $141 million at May 31, 2019 and $142 million at May 31, 2018 associated
with positions that, if favorably resolved, would provide a benefit to our income tax expense. We classify interest related to income
tax liabilities as interest expense and, if applicable, penalties are recognized as a component of income tax expense. The balance of
accrued interest and penalties was $38 million on May 31, 2019 and $35 million on May 31, 2018. Total interest and penalties
included in our consolidated statements of income are immaterial.
It is difficult to predict the ultimate outcome or the timing of resolution for tax positions. Changes may result from the conclusion of
ongoing audits, appeals or litigation in state, local, federal and foreign tax jurisdictions, or from the resolution of various proceedings
between U.S. and foreign tax authorities. Our liability for uncertain tax positions includes no matters that are individually or
collectively material to us. It is reasonably possible that the amount of the benefit with respect to certain of our unrecognized tax
positions will increase or decrease within the next 12 months, but an estimate of the range of the reasonably possible changes cannot
be made. However, we do not expect that the resolution of any of our uncertain tax positions will have a material effect on us.
NOTE 13: RETIREMENT PLANS
We sponsor programs that provide retirement benefits to most of our employees. These programs include defined benefit pension
plans, defined contribution plans and postretirement healthcare plans.
The accounting guidance related to postretirement benefits requires recognition in the balance sheet of the funded status of defined
benefit pension and other postretirement benefit plans, and the recognition in either expense or AOCI of unrecognized gains or losses
and prior service costs or credits. We use MTM accounting for the recognition of our actuarial gains and losses related to our defined
benefit pension and postretirement healthcare plans as described in Note 1. The funded status is measured as the difference between
the fair value of the plan’s assets and the PBO of the plan.
- 123 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of our retirement plans costs over the past three years is as follows (in millions):
Defined benefit pension plans
Defined contribution plans
Postretirement healthcare plans
Retirement plans mark-to-market loss (gain)
The components of the MTM adjustments are as follows (in millions):
Discount rate change
Demographic experience:
Current year actuarial loss
Change in future assumptions
Actual versus expected return on assets
Annuity contract purchase
Total mark-to-market loss (gain)
2019
2019
2018
2017
$
$
111 $
561
75
3,882
4,629 $
150 $
527
74
(10 )
741 $
2019
2018
2017
$
1,780 $
(613 ) $
739
887
476
—
3,882 $
419
(37 )
11
210
(10 ) $
$
234
480
76
(24 )
766
266
268
182
(740 )
—
(24 )
The weighted-average discount rate for all our pension and postretirement healthcare plans decreased from 4.11% at May 31, 2018 to
3.69% at May 31, 2019. The demographic experience in 2019 reflects updates to several forward-looking assumptions, including
retirement rates, disability incidence rates and salary increase assumptions and a current-year actuarial loss due to unfavorable
experience compared to various demographic assumptions. The actual rate of return, which is net of all fees and expenses, on our U.S.
Pension Plan assets of 4.05% was lower than our expected return of 6.75%, as lower than expected equity returns negatively impacted
return-seeking assets while fixed-income assets performed as expected due to declining interest rates.
2018
The weighted-average discount rate for all of our pension and postretirement healthcare plans increased from 3.98% at May 31, 2017
to 4.11% at May 31, 2018. The demographic experience in 2018 reflects a liability loss due to unfavorable results related to various
demographic assumptions. The annuity contract purchase loss relates to the contract with Metropolitan Life Insurance Company as
discussed below. The actual rate of return, which is net of all fees and expenses, on our U.S. Pension Plan assets of 6.30% was slightly
lower than our expected return of 6.50% primarily due to generally flat returns in the long-duration fixed-income portfolio partially
offset by strong returns from global equities.
2017
The actual rate of return on our U.S. Pension Plan assets, which is net of all fees and expenses, of 9.2% was higher than our expected
return of 6.50% primarily due to a rise in the value of global equity markets in addition to favorable credit market conditions. The
weighted-average discount rate for all of our pension and postretirement healthcare plans decreased from 4.04% at May 31, 2016 to
3.98% at May 31, 2017. The demographic experience in 2017 reflects an update in mortality tables for U.S. pension and other
postemployment benefit plans.
PENSION PLANS. Our largest pension plan covers certain U.S. employees age 21 and over, with at least one year of service. Pension
benefits for most employees are accrued under a cash balance formula we call the Portable Pension Account (“PPA”). Under the PPA,
the retirement benefit is expressed as a dollar amount in a notional account that grows with annual credits based on pay, age and years
of credited service, and interest on the notional account balance. The PPA benefit is payable as a lump sum or an annuity at retirement
at the election of the employee. The plan interest credit rate varies from year to year based on a U.S. Treasury index. Prior to 2009,
certain employees earned benefits using a traditional pension formula (based on average earnings and years of service). Benefits under
this formula were capped on May 31, 2008 for most employees.
We also sponsor or participate in nonqualified benefit plans covering certain of our U.S. employee groups and other pension plans
covering certain of our international employees. The international defined benefit pension plans provide benefits primarily based on
earnings and years of service and are funded in compliance with local laws and practices. The majority of our international obligations
are for defined benefit pension plans in the Netherlands and the United Kingdom.
- 124 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 2017, our U.S. Pension Plans were amended to permit former employees with a vested traditional pension benefit to make a
one-time, irrevocable election to receive their benefits in a lump-sum distribution. Approximately 18,300 former employees elected to
receive this lump-sum distribution and a total of approximately $1.3 billion was paid by the plans in May 2017.
In May 2018, we entered into an agreement with Metropolitan Life Insurance Company to purchase a group annuity contract and
transfer approximately $6 billion of our U.S. Pension Plan obligations. The transaction transferred responsibility for pension benefits
to Metropolitan Life Insurance Company for approximately 41,000 of our retirees and beneficiaries who satisfied certain conditions
and were receiving a monthly benefit from participating U.S. Pension Plans. There was no change to the pension benefits for any plan
participants as a result of this transaction. The purchase of the group annuity contract was funded directly by assets of the U.S.
Pension Plans. We recognized a $210 million one-time settlement loss in connection with this transaction, which was included in our
2018 year-end MTM retirement plans accounting adjustment.
POSTRETIREMENT HEALTHCARE PLANS. Certain of our subsidiaries offer medical, dental and vision coverage to eligible U.S.
retirees and their eligible dependents and a small number of international employees. U.S. employees covered by the principal plan
become eligible for these benefits at age 55 and older, if they have permanent, continuous service of at least 10 years after attainment
of age 45 if hired prior to January 1, 1988, or at least 20 years after attainment of age 35 if hired on or after January 1, 1988.
Postretirement healthcare benefits are capped at 150% of the 1993 per capita projected employer cost, which has been reached under
most plans, so these benefits are not subject to future inflation.
Effective January 1, 2018, certain of our U.S. postretirement healthcare benefits were converted to a lump-sum benefit in a notional
retiree health reimbursement account (HRA) for eligible participants. The HRA is available to reimburse a participant for qualifying
healthcare premium costs and limits the company liability to the HRA account balance. The amount of the credit is based on age at
January 1, 2018 or upon age at retirement thereafter. In connection with this change, retiree health coverage was closed to most new
employees hired on or after January 1, 2018.
PENSION PLAN ASSUMPTIONS. The accounting for pension and postretirement healthcare plans includes numerous assumptions,
such as: discount rates; expected long-term investment returns on plan assets; future salary increases; employee turnover; mortality;
and retirement ages.
Weighted-average actuarial assumptions used to determine the benefit obligations and net periodic benefit cost of our plans are as
follows:
U.S. Pension Plans
2019
2018
2017
International Pension Plans
2017
2018
2019
Postretirement
Healthcare Plans
2018
2019
2017
Discount rate used to determine benefit
obligation
Discount rate used to determine net periodic
benefit cost
Rate of increase in future compensation
levels used to determine benefit obligation
Rate of increase in future compensation levels
used to determine net periodic benefit cost
Expected long-term rate of return on assets
Interest crediting rate used to determine net
periodic benefit cost
Interest crediting rate used to determine
benefit obligation
3.85 % 4.27 % 4.08 % 1.92 % 2.37 % 2.43 % 3.70 % 4.33 % 4.32 %
4.27 4.08
4.13
2.34
2.43 2.46 4.33 4.32 4.43
5.10 4.43
4.47
2.27
2.26 2.42 — — —
4.43 4.47
6.75 6.50
4.46
6.50
2.22
3.12
2.42 2.82 — — —
3.09 3.18 — — —
4.00 4.00
4.00
2.20
2.20 2.30 — — —
4.00 4.00
4.00
2.20
2.20 2.30 — — —
Our U.S. Pension Plan assets are invested primarily in publicly tradable securities, and our pension plans hold only a minimal
investment in FedEx common stock that is entirely at the discretion of third-party pension fund investment managers. As part of our
strategy to manage pension costs and funded status volatility, we follow a liability-driven investment strategy to better align plan
assets with liabilities.
- 125 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Establishing the expected future rate of investment return on our pension assets is a judgmental matter, which we review on an annual
basis and revise as appropriate. Management considers the following factors in determining this assumption:
•
•
•
the duration of our pension plan liabilities, which drives the investment strategy we can employ with our pension plan assets;
the types of investment classes in which we invest our pension plan assets and the expected compound geometric return we
can reasonably expect those investment classes to earn over time, net of all fees and expenses; and
the investment returns we can reasonably expect our investment management program to achieve in excess of the returns we
could expect if investments were made strictly in indexed funds.
For consolidated pension expense, we assumed a 6.75% expected long-term rate of return on our U.S. Pension Plan assets in 2019, and
6.50% in 2018 and 2017. We increased our EROA assumption in 2019 to 6.75% as the decrease in the number of retirees in payment
status due to the purchase of a group annuity contract in May 2018 (discussed above) is expected to reduce our short-term future cash
outlays and allow the remaining assets to be placed in longer-duration investments, which will increase the rate of return on assets.
Also, the reduction of Pension Benefit Guaranty Corporation fixed- and variable-rate premiums should increase the net return on
assets. For the 15-year period ended May 31, 2019, our actual return was 7.5%, net of all fees and expenses.
The investment strategy for our U.S. Pension Plan assets is to utilize a diversified mix of public equities and fixed-income and
alternative investments to earn a long-term investment return that meets our pension plan obligations. Our largest asset classes are
Corporate Fixed Income Securities and Government Fixed Income Securities (which are largely benchmarked against the Barclays
Long Government, Barclays Long Corporate or the Citigroup 20+ STRIPS indices), and U.S. and non-U.S. Equities (which are mainly
benchmarked to the S&P 500 Index and MSCI indices). Accordingly, we do not have any significant concentrations of risk. Active
management strategies are utilized within the plan in an effort to realize investment returns in excess of market indices. Our
investment strategy also includes the limited use of derivative financial instruments on a discretionary basis to improve investment
returns and manage exposure to market risk.
The following is a description of the valuation methodologies used for investments measured at fair value:
• Cash and cash equivalents. These Level 1 investments include cash, cash equivalents and foreign currency valued using
exchange rates. These Level 2 investments include short-term investment funds which are collective funds priced at a constant
value by the administrator of the funds.
• Domestic, international and global equities. These Level 1 investments are valued at the closing price or last trade reported on
the major market on which the individual securities are traded.
• Fixed income. We determine the fair value of these Level 2 corporate bonds, U.S. and non-U.S. government securities and
other fixed income securities by using bid evaluation pricing models or quoted prices of securities with similar characteristics.
• Alternative Investments. The valuation of these Level 3 investments requires significant judgment due to the absence of quoted
market prices, the inherent lack of liquidity and the long-term nature of such assets. Investments in private equity, debt, real
estate, hedge funds and other private investments are valued at estimated fair value based on quarterly financial information
received from the investment advisor and/or general partner. These estimates incorporate factors such as contributions and
distributions, market transactions, market comparables and performance multiples.
- 126 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair values of investments by level and asset category and the weighted-average asset allocations for our U.S. Pension Plans and
our most significant international pension plans at the measurement date are presented in the following table (in millions):
Plan Assets at Measurement Date
2019
Asset Class (U.S. Plans)
Cash and cash equivalents
Equities
U.S. large cap equity(2)
International equities(2)
Global equities(2)
U.S. SMID cap equity
Fixed income securities
Corporate
Government(2)
Mortgage-backed and other(2)
Alternative investments(2)
Other
Total U.S. plan assets
Asset Class (International Plans)
Cash and cash equivalents
Equities
International equities(2)
Global equities(2)
Fixed income securities
Corporate(2)
Government(2)
Mortgage-backed and other(2)
Other(2)
Total international plan assets
Fair Value Actual %
570
$
2 %
2,546
3,306
1,451
731
11
14
6
3
6,794
5,384
622
1,963
(47 )
$ 23,320
29
23
3
9
—
100 %
$
57
4
72
206
5
15
322
438
167
112
$ 1,374
24
32
12
8
100 %
Quoted Prices in
Active Markets
Level 1
Other Observable
Inputs
Level 2
Unobservable
Inputs
Level 3
Target
Range
%(1)
0 - 5% $
30 - 50
50 $
520
875
2,700
730
1
50 - 70
0 - 15
$
$
$
(45 )
4,310 $
57
290
10
357 $
6,794
3,742
175
$
(2 )
11,230 $
302
302
17
17
(1) Target ranges have not been provided for international plan assets as they are managed at an individual country level.
(2) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient
have not been classified in the fair value hierarchy but are included in the total.
- 127 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Plan Assets at Measurement Date
2018
Asset Class (U.S. Plans)
Cash and cash equivalents
Equities
U.S. large cap equity(2)
International equities(2)
Global equities(2)
U.S. SMID cap equity
Fixed income securities
Corporate
Government(2)
Mortgage-backed and other(2)
Alternative investments(2)
Other
Total U.S. plan assets
Asset Class (International Plans)
Cash and cash equivalents
Equities
International equities(2)
Global equities(2)
Fixed income securities
Corporate(2)
Government(2)
Mortgage-backed and other(2)
Alternative investments
Other
Total international plan assets
Fair Value Actual %
714
$
3 %
2,449
3,506
1,772
780
11
16
8
4
5,834
4,872
626
1,573
(69 )
$ 22,057
26
22
3
7
—
100 %
$
24
2 %
146
228
11
17
306
452
168
19
(23 )
$ 1,320
23
34
13
2
(2 )
100 %
Target
Range
%(1)
0 - 5% $
30 - 50
50 - 70
0 - 10
$
$
$
Quoted Prices in
Active Markets
Level 1
Other Observable
Inputs
Level 2
Unobservable
Inputs
Level 3
19 $
695
840
2,681
780
(62 )
4,258 $
2 $
108
(6 )
104 $
172
5,834
3,345
125
$
(7 )
10,164 $
22
70
68
256
19
(17 )
418
209
209
(1) Target ranges have not been provided for international plan assets as they are managed at an individual country level.
(2) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient
have not been classified in the fair value hierarchy but are included in the total.
The change in fair value of Level 3 assets that use significant unobservable inputs is shown in the table below (in millions):
Balance at beginning of year
Actual return on plan assets:
Assets held during current year
Assets sold during the year
Purchases, sales and settlements
Balance at end of year
U.S. Pension Plans
2019
2018
$
209 $
11
13
69
302 $
$
129
8
4
68
209
- 128 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables provide a reconciliation of the changes in the pension and postretirement healthcare plans’ benefit obligations
and fair value of assets over the two-year period ended May 31, 2019 and a statement of the funded status as of May 31, 2019 and
2018 (in millions):
Accumulated Benefit Obligation (“ABO”)
Changes in Projected Benefit Obligation (“PBO”)
and Accumulated Postretirement Benefit
Obligation (“APBO”)
PBO/APBO at the beginning of year
Service cost
Interest cost
Actuarial loss
Benefits paid
Settlements
Other
PBO/APBO at the end of year
Change in Plan Assets
Fair value of plan assets at the beginning of year
Actual return on plan assets
Company contributions
Benefits paid
Settlements
Other
Fair value of plan assets at the end of year
Funded Status of the Plans
Amount Recognized in the Balance Sheet at May 31:
Noncurrent asset
Current pension, postretirement healthcare and
other benefit obligations
Noncurrent pension, postretirement healthcare
and other benefit obligations
Net amount recognized
Amounts Recognized in AOCI and not yet reflected
in Net Periodic Benefit Cost:
U.S. Pension Plans
International
Pension Plans
Postretirement
Healthcare Plans
2019
2018
2019
2018
2019
2018
$ 25,915 $ 22,029 $ 2,084 $ 1,956
$ 22,653 $ 27,870 $ 2,167 $ 2,043 $
97
49
(34 )
(46 )
(5 )
63
955 $
35
40
266
(123 )
—
48
$ 26,554 $ 22,653 $ 2,301 $ 2,167 $ 1,221 $
679
1,115
21
(854 )
(6,178 )
—
689
951
3,016
(755 )
—
—
94
49
127
(38 )
(13 )
(85 )
984
1,034
(755 )
—
—
$ 22,057 $ 24,933 $ 1,509 $ 1,379 $
49
84
(46 )
(5 )
48
$ 23,320 $ 22,057 $ 1,578 $ 1,509 $
$ (3,234 ) $
— $
—
73
(123 )
—
50
— $
(658 ) $ (1,221 ) $
1,609
2,547
(854 )
(6,178 )
—
94
91
(38 )
(13 )
(65 )
(723 ) $
(596 ) $
927
36
39
(9 )
(80 )
—
42
955
—
—
42
(80 )
—
38
—
(955 )
$
— $
— $
82 $
73 $
— $
—
(70 )
(22 )
(16 )
(16 )
(87 )
(62 )
(3,164 )
$ (3,234 ) $
(574 )
(596 ) $
(789 )
(723 ) $
(715 )
(1,134 )
(658 ) $ (1,221 ) $
(893 )
(955 )
Prior service (credit) cost and other
$
(173 ) $
(292 ) $
(6 ) $
(10 ) $
1 $
2
Our pension plans included the following components at May 31 (in millions):
2019
Qualified
Nonqualified
International Plans
Total
2018
Qualified
Nonqualified
International Plans
Total
PBO
Fair Value of
Plan Assets
Funded Status
$
$
$
$
26,300 $
254
2,301
28,855 $
22,413 $
240
2,167
24,820 $
23,320 $
—
1,578
24,898 $
22,057 $
—
1,509
23,566 $
(2,980 )
(254 )
(723 )
(3,957 )
(356 )
(240 )
(658 )
(1,254 )
- 129 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table above provides the PBO, fair value of plan assets and funded status of our pension plans on an aggregated basis. The following
tables present our plans on a disaggregated basis to show those plans (as a group) whose assets did not exceed their liabilities. The fair
value of plan assets for pension plans with a PBO or ABO in excess of plan assets at May 31 were as follows (in millions):
U.S. Pension Benefits
Fair value of plan assets
PBO
Net funded status
International Pension Benefits
Fair value of plan assets
PBO
Net funded status
U.S. Pension Benefits
ABO(1)
Fair value of plan assets
PBO
Net funded status
International Pension Benefits
ABO(1)
Fair value of plan assets
PBO
Net funded status
PBO Exceeds the Fair Value
of Plan Assets
2019
2018
23,320 $
(26,554 )
(3,234 ) $
1,125 $
(1,929 )
(804 ) $
22,057
(22,653 )
(596 )
1,060
(1,791 )
(731 )
ABO Exceeds the Fair Value
of Plan Assets
2019
2018
(25,915 ) $
23,320
(26,554 )
(3,234 ) $
(1,709 ) $
1,120
(1,925 )
$
(805 )
(1,134 )
859
(1,214 )
(355 )
(1,581 )
1,060
(1,791 )
(731 )
$
$
$
$
$
$
$
$
(1) ABO not used in determination of funded status.
Contributions to our U.S. Pension Plans for the years ended May 31 were as follows (in millions):
Required
Voluntary
$
$
2019
2018
— $
1,000
1,000 $
22
2,478
2,500
For 2020, no pension contributions are required for our U.S. Pension Plans as they are fully funded under the Employee Retirement
Income Security Act. However, we expect to make voluntary contributions of $1.0 billion to these plans in 2020.
Net periodic benefit cost for the three years ended May 31 were as follows (in millions):
U.S. Pension Plans
2018
2017
2019
International Pension Plans
2018
2019
2017
Postretirement Healthcare Plans
2018
2017
2019
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service credit
Actuarial losses (gains) and other
Net periodic benefit cost
94 $
$ 689 $ 679 $ 638 $
49
951 1,115 1,128
(47 )
(1,505 ) (1,624 ) (1,501 )
(2 )
(118 )
80
(95 )
52 $ 174 $
(118 )
3,537
$ 3,554 $
(118 )
37
89 $
- 130 -
36 $
39
35 $
40
97 $
49
(46 )
(2 ) —
(2 )
265
87
(38 )
60 $ 173 $ 340 $
36
83 $
43
39
(38 ) — — —
(1 ) —
(14 )
(9 )
61
65 $
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts recognized in other comprehensive income were primarily related to amortization of prior service cost in our U.S. Pension
Plans of $118 million in 2019 and 2018 ($91 million, net of tax, in 2019 and $83 million, net of tax, in 2018).
Benefit payments, which reflect expected future service, are expected to be paid as follows for the years ending May 31 (in millions):
2020
2021
2022
2023
2024
2025-2029
U.S. Pension Plans
$
1,027 $
971
1,051
1,138
1,230
7,515
International
Pension Plans
Postretirement
Healthcare Plans
87
98
109
117
121
473
45 $
46
47
55
61
396
These estimates are based on assumptions about future events. Actual benefit payments may vary significantly from these estimates.
Future medical benefit claims costs are estimated to increase at an annual rate of 6.00% during 2020, decreasing to an annual growth
rate of 4.50% in 2037 and thereafter.
- 131 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14: BUSINESS SEGMENTS AND DISAGGREGATED REVENUE
FedEx Express, FedEx Ground and FedEx Freight represent our major service lines and, along with FedEx Services, constitute our
reportable segments. Our reportable segments include the following businesses:
FedEx Express Segment
FedEx Express (express transportation)
TNT Express (international express transportation, small-package ground delivery and freight
FedEx Ground Segment
FedEx Ground (small-package ground delivery)
transportation)
FedEx Freight Segment
FedEx Services Segment
FedEx Services Segment
FedEx Freight (LTL freight transportation)
FedEx Services (sales, marketing, information technology, communications, customer
service, technical support, billing and collection services and back-office functions)
FedEx Office (document and business services and package acceptance)
The FedEx Services segment operates combined sales, marketing, administrative and information-technology functions in shared
services operations that support our transportation businesses and allow us to obtain synergies from the combination of these
functions. For the international regions of FedEx Express, some of these functions are performed on a regional basis and reported by
FedEx Express in their natural expense line items. The FedEx Services segment includes: FedEx Services, which provides sales,
marketing, information technology, communications, customer service, technical support, billing and collection services for U.S.
customers of our major business units and certain back-office support to our other companies; and FedEx Office, which provides an
array of document and business services and retail access to our customers for our package transportation businesses.
The FedEx Services segment provides direct and indirect support to our transportation businesses, and we allocate all of the net
operating costs of the FedEx Services segment (including the net operating results of FedEx Office) to reflect the full cost of operating
our transportation businesses in the results of those segments. Within the FedEx Services segment allocation, the net operating results
of FedEx Office, which are an immaterial component of our allocations, are allocated to FedEx Express and FedEx Ground. We
review and evaluate the performance of our transportation segments based on operating income (inclusive of FedEx Services segment
allocations). For the FedEx Services segment, performance is evaluated based on the impact of its total allocated net operating costs
on our transportation segments.
Operating expenses for each of our transportation segments include the allocations from the FedEx Services segment to the respective
transportation segments. These allocations also include charges and credits for administrative services provided between operating
companies. The allocations of net operating costs are based on metrics such as relative revenues or estimated services provided. We
believe these allocations approximate the net cost of providing these functions. Our allocation methodologies are refined periodically,
as necessary, to reflect changes in our businesses.
Other Intersegment Transactions
Corporate and other includes corporate headquarters costs for executive officers and certain legal and finance functions, as well as
certain other costs and credits not attributed to our core business. These costs are not allocated to the other business segments.
Also included in corporate and other is the FedEx Logistics operating segment, which provides customs brokerage and global ocean
and air freight forwarding through FedEx Trade Networks Transport & Brokerage, Inc.; cross-border enablement and technology
solutions and e-commerce transportation solutions through FedEx Cross Border Technologies, Inc., including its subsidiary P2P;
integrated supply chain management solutions through FedEx Supply Chain; time-critical shipment services through FedEx Custom
Critical, Inc.; and, effective September 1, 2018, critical inventory and service parts logistics, 3-D printing and technology repair
through FedEx Forward Depots, Inc.
Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable
segment. Billings for such services are based on negotiated rates, which we believe approximate fair value, and are reflected as
revenues of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenues
and expenses are eliminated in our consolidated results and are not separately identified in the following segment information, because
the amounts are not material.
- 132 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides a reconciliation of reportable segment revenues, depreciation and amortization, operating income (loss)
and segment assets to consolidated financial statement totals (in millions) for the years ended or as of May 31:
Revenues
2019
2018
2017
Depreciation and
amortization
2019
2018
2017
Operating income (loss)
2019(1)
2018(2)
2017(3)
Segment assets(4)
2019
2018
2017
$
$
$
$
FedEx
Express
Segment
FedEx
Ground
Segment
FedEx
Freight
Segment
FedEx
Services
Segment
Corporate,
other and
eliminations
Consolidated
Total
37,331 $
36,172
33,824
20,522 $
18,395
16,503
7,582 $
6,812
6,070
1,691 $
1,650
1,621
2,567 $
2,421
2,301
1,801 $
1,679
1,662
2,123 $
2,105
2,380
33,247 $
31,753
31,307
728 $
681
627
2,640 $
2,529
2,243
17,561 $
15,458
12,969
332 $
296
265
615 $
490
371
424 $
382
371
68 $
57
70
— $
—
—
(912 ) $
(852 )
(428 )
4,736 $
4,251 (5)
3,740 (5)
6,972 $
6,377
5,682
(8,113 ) $
(5,509 ) (5)
(5,146 ) (5)
69,693
65,450
60,319
3,353
3,095
2,995
4,466
4,272
4,566
54,403
52,330
48,552
(1)
(2)
(3)
Includes TNT Express integration expenses and restructuring charges of $388 million. These expenses are included in “Corporate,
other and eliminations” and the FedEx Express segment. Also includes business realignment costs of $320 million and costs
incurred in connection with the settlement of a legal matter involving FedEx Ground of $46 million.
Includes TNT Express integration expenses and restructuring charges of $477 million. These expenses are included in “Corporate,
other and eliminations” and the FedEx Express segment. Also includes goodwill and other asset impairment charges of $380
million.
Includes TNT Express integration expenses and restructuring charges of $327 million. These expenses are included in “Corporate,
other and eliminations” and the FedEx Express segment. Also includes $39 million of charges for legal reserves related to certain
U.S. Customs and Border Protection (“CBP”) matters involving FedEx Logistics and $22 million of charges in connection with
the settlement of and certain expected losses relating to independent contractor litigation matters at FedEx Ground.
(4) Segment assets include intercompany receivables.
(5) Amounts revised for reclassification of eliminations.
The following table provides a reconciliation of reportable segment capital expenditures to consolidated totals for the years ended
May 31 (in millions):
2019
2018
2017
FedEx
Express
Segment
FedEx
Ground
Segment
FedEx
Freight
Segment
FedEx
Services
Segment
$
3,550 $
3,461
2,725
808 $
1,178
1,490
544 $
490
431
528 $
477
416
Other
Consolidated
Total
60 $
57
54
5,490
5,663
5,116
- 133 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents revenue by service type and geographic information for the years ended or as of May 31 (in millions):
2019
2018(1)
2017(1)
REVENUE BY SERVICE TYPE
FedEx Express segment:
Package:
U.S. overnight box
U.S. overnight envelope
U.S. deferred
Total U.S. domestic package revenue
International priority
International economy
Total international export package revenue
International domestic(2)
Total package revenue
Freight:
U.S.
International priority
International economy
International airfreight
Total freight revenue
Other
Total FedEx Express segment
FedEx Ground segment
FedEx Freight segment
FedEx Services segment
Other and eliminations(3)
GEOGRAPHICAL INFORMATION(4)
Revenues:
U.S.
International:
FedEx Express segment
FedEx Ground segment
FedEx Freight segment
FedEx Services segment
Other
Total international revenue
Noncurrent assets:
U.S.
International
$
$
7,663 $
1,829
4,225
13,717
7,405
3,446
10,851
4,540
29,108
3,025
2,070
2,123
314
7,532
691
37,331
20,522
7,582
1,691
2,567
$
69,693
7,273 $
1,788
3,738
12,799
7,461
3,255
10,716
4,637
28,152
2,797
2,105
1,916
368
7,186
834
36,172
18,395
6,812
1,650
2,421
$
65,450
6,955
1,750
3,526
12,231
7,045
2,876
9,921
4,277
26,429
2,527
1,836
1,738
356
6,457
938
33,824
16,503
6,070
1,621
2,301
60,319
$
47,584 $
43,581 $
40,269
20,424
467
207
1
1,010
22,109
69,693 $
33,189 $
8,128
41,317 $
20,417
407
181
3
861
21,869
65,450 $
30,362 $
8,627
38,989 $
18,817
331
149
10
743
20,050
60,319
28,141
7,783
35,924
$
$
$
(1) Prior year amounts have been revised to conform to the current year presentation.
(2)
(3)
(4)
International domestic revenues relate to our intra-country operations.
Includes the FedEx Logistics operating segment.
International revenue includes shipments that either originate in or are destined to locations outside the United States, which could
include U.S. payors. Noncurrent assets include property and equipment, goodwill and other long-term assets. Our flight
equipment is registered in the U.S. and is included as U.S. assets; however, many of our aircraft operate internationally.
- 134 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15: SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest expense and income taxes for the years ended May 31 was as follows (in millions):
Cash payments for:
Interest (net of capitalized interest)
Income taxes
Income tax refunds received
Cash tax payments, net
2019
2018
2017
$
$
$
617 $
407 $
(36 )
371 $
524 $
760 $
(571 )
189 $
484
397
(20 )
377
NOTE 16: GUARANTEES AND INDEMNIFICATIONS
In conjunction with certain transactions, primarily the lease, sale or purchase of real estate, operating assets or services in the ordinary
course of business and in connection with business acquisitions, we may provide routine guarantees or indemnifications (e.g.,
environmental, fuel, tax and intellectual property infringement), the terms of which range in duration, and often they are not limited
and have no specified maximum obligation. As a result of the TNT Express acquisition, we have assumed a guarantee related to the
demerger of TNT Express and PostNL Holding B.V., which occurred in 2011, for pension benefits earned prior to the date of the
demerger. The risk of making payments associated with this guarantee is remote. The overall maximum potential amount of the
obligation under such guarantees and indemnifications cannot be reasonably estimated. Historically, we have not been required to
make significant payments under our guarantee or indemnification obligations and no material amounts have been recognized in our
financial statements for the underlying fair value of these obligations.
NOTE 17: COMMITMENTS
Annual purchase commitments under various contracts as of May 31, 2019 were as follows (in millions):
2020
2021
2022
2023
2024
Thereafter
Total
Aircraft and
Aircraft Related
Other(1)
Total
$
$
1,518 $
2,455
1,862
1,569
492
2,456
10,352 $
898 $
587
383
263
140
400
2,671 $
2,416
3,042
2,245
1,832
632
2,856
13,023
(1) Primarily equipment and advertising contracts.
The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or
services. As of May 31, 2019, our obligation to purchase five Boeing 767-300 Freighter (“B767F”) aircraft and six Boeing 777
Freighter (“B777F”) aircraft is conditioned upon there being no event that causes FedEx Express or its employees not to be covered by
the Railway Labor Act of 1926, as amended (“RLA”). Open purchase orders that are cancelable are not considered unconditional
purchase obligations for financial reporting purposes and are not included in the table above.
We have several aircraft modernization programs underway that are supported by the purchase of B777F and B767F aircraft. These
aircraft are significantly more fuel-efficient per unit than the aircraft types previously utilized, and these expenditures are necessary to
achieve significant long-term operating savings and to replace older aircraft. Our ability to delay the timing of these aircraft-related
expenditures is limited without incurring significant costs to modify existing purchase agreements.
During 2019, FedEx Express entered into agreements to purchase 12 incremental B777F aircraft and 12 incremental B767F aircraft.
Six of the B777F and one of the B767F aircraft purchases are conditioned upon there being no event that causes FedEx Express or its
employees not to be covered by the RLA. The B777F aircraft are expected to be delivered between 2021 and 2025. The B767F aircraft
are expected to be delivered between 2020 and 2022. As part of these agreements, one B777F and one B767F aircraft delivery were
accelerated from 2020 to 2019.
- 135 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of May 31, 2019, we had $1.1 billion in deposits and progress payments on aircraft purchases and other planned aircraft-related
transactions. These deposits are classified in the “Other assets” caption of our consolidated balance sheets. Aircraft and aircraft-related
contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of
May 31, 2019, with the year of expected delivery:
2020
2021
2022
2023
2024
Thereafter
Total
Cessna
SkyCourier
408
ATR 72-600F
—
5
6
6
6
7
30
—
12
12
12
14
—
50
B767F
B777F
Total
17
18
12
6
—
—
53
5
2
3
4
4
2
20
22
37
33
28
24
9
153
On June 24, 2019, FedEx Express exercised options to purchase an additional six B767F aircraft for delivery in 2022.
FedEx Express now has a total of 20 firm orders for B777F aircraft scheduled for delivery during 2020 through 2025 (one of which
was delivered in June 2019) and a total of 59 firm orders for B767F aircraft for delivery during 2020 through 2023 (one of which was
delivered in June 2019 and one in July 2019). Six of the B777F orders and five of the B767F orders are conditioned upon there being
no event that causes FedEx Express or its employees to be covered by the RLA.
During 2019, FedEx Express also acquired options to purchase an additional 14 B777F aircraft and an additional six B767F aircraft,
and the delivery dates of 11 existing B777F option aircraft were rescheduled.
FedEx Express now has options to purchase a total of 25 B777F aircraft for delivery through 2028 and a total of 50 B767F aircraft for
delivery through 2026.
NOTE 18: CONTINGENCIES
Independent Contractor — Lawsuits and Administrative Proceedings. FedEx Ground is involved in lawsuits and administrative
proceedings claiming that owner-operators engaged under operating agreements no longer in place should have been treated as
employees of FedEx Ground, rather than independent contractors. In addition, we are defending joint-employer cases where it is
alleged that FedEx Ground should be treated as an employer of the drivers employed by service providers engaged by FedEx Ground.
These cases are in varying stages of litigation, and we are not currently able to estimate an amount or range of potential loss in all of
these matters. However, we do not expect to incur, individually or in the aggregate, a material loss in these matters. Nevertheless,
adverse determinations in matters related to owner-operators or service providers engaged by FedEx Ground could, among other
things, entitle former owner-operators to the reimbursement of certain expenses, and service providers’ drivers to certain wage
payments from the service providers and FedEx Ground, and result in employment and withholding tax and benefit liability for FedEx
Ground. We continue to believe that owner-operators engaged by FedEx Ground were properly classified as independent contractors
and that FedEx Ground is not an employer or joint employer of the service providers’ drivers.
Federal Securities Litigation. On June 26, 2019 and July 2, 2019, FedEx and certain present and former officers were named as
defendants in two putative class action securities lawsuits filed in the U.S. District Court for the Southern District of New York. The
complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5
promulgated thereunder relating to alleged misstatements or omissions in FedEx’s public filings with the SEC and other public
statements during the period from September 19, 2017 to December 18, 2018. We are not currently able to estimate the probability of
loss or the amount or range of potential loss, if any, at this stage of the litigation.
Other Matters. FedEx and its subsidiaries are subject to other legal proceedings that arise in the ordinary course of business, including
certain lawsuits containing various class-action allegations of wage-and-hour violations in which plaintiffs claim, among other things,
that they were forced to work “off the clock,” were not paid overtime or were not provided work breaks or other benefits. In the
opinion of management, the aggregate liability, if any, with respect to these other actions will not have a material adverse effect on our
financial position, results of operations or cash flows.
- 136 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19: RELATED PARTY TRANSACTIONS
Our Chairman and Chief Executive Officer, Frederick W. Smith, currently holds an approximate 10% ownership interest in the
National Football League Washington Redskins professional football team and is a member of its board of directors. FedEx has a
multi-year naming rights agreement with Washington Football, Inc. granting us certain marketing rights, including the right to name
the stadium where the team plays and other events are held “FedExField.”
- 137 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20: SUMMARY OF QUARTERLY OPERATING RESULTS (UNAUDITED)
(in millions, except per share amounts)
2019(1)
Revenues
Operating income
Net income (loss)(2)
Basic earnings (loss) per common share(3)
Diluted earnings (loss) per common share(3)
2018(4)
Revenues
Operating income
Net income (5)
Basic earnings per common share(3)
Diluted earnings per common share(3)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
$
17,052 $
1,071
835
3.15
3.10
15,297 $
971
596
2.22
2.19
17,824 $
1,168
935
3.56
3.51
16,313 $
1,115
775
2.89
2.84
17,010 $
911
739
2.83
2.80
16,526 $
858
2,074
7.74
7.59
17,807
1,316
(1,969 )
(7.56 )
(7.56 )
17,314
1,328
1,127
4.23
4.15
(1) The fourth quarter, third quarter, second quarter and first quarter of 2019 include $84 million, $69 million, $114 million and $121
million, respectively, of TNT Express integration expenses (including any restructuring charges). The fourth quarter and third
quarter of 2019 include business realignment costs of $316 million and $4 million, respectively. The fourth quarter includes a net
loss of $3.9 billion related to the annual MTM retirement plans accounting adjustment. The second quarter of 2019 includes costs
incurred in connection with the settlement of a legal matter involving FedEx Ground of $46 million.
(2) The income tax benefit for the fourth quarter of 2019 was unfavorably impacted by $200 million due to the lower statutory tax
rate under the TCJA on fiscal 2019 earnings and the annual retirement plans accounting MTM adjustment. The third quarter,
second quarter and first quarter of 2019 include $60 million, $150 million and $135 million, respectively, of tax benefits primarily
from the lower statutory tax rate under the TCJA on fiscal 2019 earnings. The third quarter of 2019 includes a tax benefit of $90
million from the reduction of a valuation allowance on certain tax loss carryforwards and a tax expense of $50 million related to a
lower tax rate in the Netherlands applied to our deferred tax balances. The second quarter of 2019 includes a tax benefit of
approximately $60 million from accelerated deductions claimed on our 2018 U.S. income tax return. In addition, we recognized a
tax expense of $4 million in the second quarter of 2019 as a revision of the provisional benefit associated with the remeasurement
of our net U.S. deferred tax liability upon completion of the accounting for the tax effects of the TCJA.
(3) The sum of the quarterly earnings per share may not equal annual amounts due to differences in the weighted-average number of
shares outstanding during the respective periods.
(4) The fourth quarter, third quarter, second quarter and first quarter of 2018 include $136 million, $106 million, $122 million and
$112 million, respectively, of TNT Express integration expenses (including any restructuring charges). The fourth quarter of 2018
includes goodwill and other asset impairment charges related to FedEx Supply Chain of $380 million and a net gain of $10
million related to the annual MTM retirement plans accounting adjustment. The fourth quarter and first quarter of 2018 include
charges for legal reserves related to certain CBP matters involving FedEx Logistics of $1 million and $7 million, respectively.
(5) The fourth quarter of 2018 includes a $255 million net tax benefit from corporate structuring transactions as part of the ongoing
integration of FedEx Express and TNT Express. The fourth quarter, third quarter, and second quarter of 2018 include $133
million, $12 million, and $80 million, respectively, of tax benefits from foreign tax credits associated with distributions to the
U.S. from foreign operations. The fourth quarter and third quarter of 2018 include $100 million and $165 million, respectively, of
tax benefits related to a lower statutory income tax rate on fiscal 2018 earnings. In addition, the third quarter of 2018 includes the
following TCJA-related items: a provisional benefit of $1.15 billion related to the remeasurement of our net U.S. deferred tax
liability and a one-time benefit of $204 million from a $1.5 billion contribution to our U.S. Pension Plans.
- 138 -
FEDEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 21: CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
We are required to present condensed consolidating financial information in order for the subsidiary guarantors of our public debt to
continue to be exempt from reporting under the Securities Exchange Act of 1934, as amended.
The guarantor subsidiaries, which are 100% owned by FedEx, guarantee $17.5 billion of our public debt. The guarantees are full and
unconditional and joint and several. Our guarantor subsidiaries were not determined using geographic, service line or other similar
criteria, and as a result, the “Guarantor Subsidiaries” and “Non-guarantor Subsidiaries” columns each include portions of our domestic
and international operations. Accordingly, this basis of presentation is not intended to present our financial condition, results of
operations or cash flows for any purpose other than to comply with the specific requirements for subsidiary guarantor reporting.
- 139 -
Condensed consolidating financial statements for our guarantor subsidiaries and non-guarantor subsidiaries are presented in the
following tables (in millions):
CONDENSED CONSOLIDATING BALANCE SHEETS
May 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Receivables, less allowances
Spare parts, supplies, fuel, prepaid expenses and other,
less allowances
Total current assets
PROPERTY AND EQUIPMENT, AT COST
Less accumulated depreciation and amortization
Net property and equipment
INTERCOMPANY RECEIVABLE
GOODWILL
INVESTMENT IN SUBSIDIARIES
OTHER ASSETS
LIABILITIES AND COMMON STOCKHOLDERS’
INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt
Accrued salaries and employee benefits
Accounts payable
Accrued expenses
Total current liabilities
LONG-TERM DEBT, LESS CURRENT PORTION
INTERCOMPANY PAYABLE
OTHER LONG-TERM LIABILITIES
Deferred income taxes
Other liabilities
Total other long-term liabilities
COMMON STOCKHOLDERS’ INVESTMENT
Guarantor
Subsidiaries
Non-
guarantor
Subsidiaries Eliminations Consolidated
Parent
$
826 $
56
158 $
5,603
1,381 $
3,684
(46 ) $
(227 )
2,319
9,116
366
1,248
25
17
8
2,877
—
33,725
995
38,853 $
953
6,714
55,341
27,066
28,275
(405 )
1,589
5,449
1,811
43,433 $
332
5,397
4,145
1,999
2,146
—
5,295
—
1,789
14,627 $
—
(273 )
—
—
—
(2,472 )
—
(39,174 )
(591 )
(42,510 ) $
959 $
143
16
521
1,639
16,322
—
—
3,135
3,135
17,757
38,853 $
2 $
1,100
1,469
1,853
4,424
287
—
3 $
498
1,808
914
3,223
8
2,472
— $
—
(263 )
(10 )
(273 )
—
(2,472 )
2,832
3,965
6,797
31,925
43,433 $
580
1,095
1,675
7,249
14,627 $
(591 )
—
(591 )
(39,174 )
(42,510 ) $
1,651
13,086
59,511
29,082
30,429
—
6,884
—
4,004
54,403
964
1,741
3,030
3,278
9,013
16,617
—
2,821
8,195
11,016
17,757
54,403
$
$
$
- 140 -
CONDENSED CONSOLIDATING BALANCE SHEETS
May 31, 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Receivables, less allowances
Spare parts, supplies, fuel, prepaid expenses and other,
less allowances
Total current assets
PROPERTY AND EQUIPMENT, AT COST
Less accumulated depreciation and amortization
Net property and equipment
INTERCOMPANY RECEIVABLE
GOODWILL
INVESTMENT IN SUBSIDIARIES
OTHER ASSETS
LIABILITIES AND COMMON STOCKHOLDERS’
INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt
Accrued salaries and employee benefits
Accounts payable
Accrued expenses
Total current liabilities
LONG-TERM DEBT, LESS CURRENT PORTION
INTERCOMPANY PAYABLE
OTHER LONG-TERM LIABILITIES
Deferred income taxes
Other liabilities
Total other long-term liabilities
COMMON STOCKHOLDERS’ INVESTMENT
Guarantor
Subsidiaries
Non-
guarantor
Subsidiaries Eliminations Consolidated
Parent
$
1,485 $
3
257 $
4,970
1,538 $
3,586
(15 ) $
(78 )
3,265
8,481
425
1,913
21
17
4
1,487
—
33,370
75
36,849 $
878
6,105
51,232
25,111
26,121
924
1,709
4,082
1,854
40,795 $
292
5,416
3,868
1,839
2,029
—
5,264
—
1,829
14,538 $
—
(93 )
—
—
—
(2,411 )
—
(37,452 )
104
(39,852 ) $
1,332 $
65
16
460
1,873
14,942
—
—
619
619
19,415
36,849 $
1 $
1,506
1,332
1,778
4,617
288
—
9 $
606
1,719
896
3,230
13
2,411
— $
—
(90 )
(3 )
(93 )
—
(2,411 )
2,626
3,432
6,058
29,832
40,795 $
137
1,126
1,263
7,621
14,538 $
104
—
104
(37,452 )
(39,852 ) $
1,595
13,341
55,121
26,967
28,154
—
6,973
—
3,862
52,330
1,342
2,177
2,977
3,131
9,627
15,243
—
2,867
5,177
8,044
19,416
52,330
$
$
$
- 141 -
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
Year Ended May 31, 2019
REVENUES
OPERATING EXPENSES:
Salaries and employee benefits
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Business realignment costs
Intercompany charges, net
Other
OPERATING INCOME
OTHER (EXPENSE) INCOME:
Equity in earnings of subsidiaries
Interest, net
Other retirement plans expense
Intercompany charges, net
Other, net
INCOME (LOSS) BEFORE INCOME TAXES
Provision for income taxes
NET INCOME (LOSS)
COMPREHENSIVE INCOME (LOSS)
$
$
Parent
Guarantor
Subsidiaries
$
— $
50,431 $
Non-
guarantor
Subsidiaries Eliminations Consolidated
69,693
19,643 $
(381 ) $
138
—
6
1
—
1
320
(765 )
299
—
—
540
(586 )
—
606
(20 )
540
—
540 $
453 $
19,055
10,344
2,582
2,877
3,587
2,475
—
(861 )
6,674
46,733
3,698
174
54
(2,675 )
(442 )
53
862
77
785 $
838 $
5,583
6,494
779
475
302
360
—
1,626
3,256
18,875
768
—
3
(576 )
(164 )
(64 )
(33 )
38
(71 ) $
(324 ) $
—
(184 )
(7 )
—
—
(2 )
—
—
(188 )
(381 )
—
(714 )
—
—
—
—
(714 )
—
(714 ) $
(714 ) $
24,776
16,654
3,360
3,353
3,889
2,834
320
—
10,041
65,227
4,466
—
(529 )
(3,251 )
—
(31 )
655
115
540
253
- 142 -
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
Year Ended May 31, 2018
REVENUES
OPERATING EXPENSES:
Salaries and employee benefits
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Goodwill and other asset impairment charges
Intercompany charges, net
Other
OPERATING INCOME (LOSS)
OTHER (EXPENSE) INCOME:
Equity in earnings of subsidiaries
Interest, net
Other retirements plans income
Intercompany charges, net
Other, net
INCOME (LOSS) BEFORE INCOME TAXES
Provision for income taxes (benefit)
NET INCOME (LOSS)
COMPREHENSIVE INCOME (LOSS)
$
$
Parent
Guarantor
Subsidiaries
$
— $
48,601 $
Non-
guarantor
Subsidiaries Eliminations Consolidated
65,450
17,256 $
(407 ) $
149
—
5
1
—
1
—
(437 )
281
—
—
4,572
(541 )
—
544
(3 )
4,572
—
4,572 $
4,489 $
18,380
9,134
2,587
2,644
3,077
2,294
—
(125 )
6,227
44,218
4,383
62
46
547
(296 )
(120 )
4,622
309
4,313 $
4,263 $
5,266
6,191
776
450
297
327
380
562
3,118
17,367
(111 )
—
(224 )
(7 )
—
—
—
—
—
(176 )
(407 )
—
—
(15 )
51
(248 )
116
(207 )
(528 )
321 $
291 $
(4,634 )
—
—
—
—
(4,634 )
—
(4,634 ) $
(4,634 ) $
23,795
15,101
3,361
3,095
3,374
2,622
380
—
9,450
61,178
4,272
—
)
(510
598
—
)
(7
4,353
)
(219
4,572
4,409
- 143 -
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
Year Ended May 31, 2017
REVENUES
OPERATING EXPENSES:
Salaries and employee benefits
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Intercompany charges, net
Other
OPERATING INCOME
OTHER (EXPENSE) INCOME:
Equity in earnings of subsidiaries
Interest, net
Other retirements plans (expense) income
Intercompany charges, net
Other, net
INCOME (LOSS) BEFORE INCOME TAXES
Provision for income taxes
NET INCOME (LOSS)
COMPREHENSIVE INCOME (LOSS)
Parent
Guarantor
Subsidiaries
$
— $
44,823 $
Non-
guarantor
Subsidiaries Eliminations Consolidated
60,319
15,798 $
(302 ) $
123
—
5
1
—
1
(434 )
304
—
—
2,997
(507 )
—
508
(1 )
2,997
—
2,997 $
2,922 $
17,137
8,260
2,517
2,538
2,476
2,086
179
5,734
40,927
3,896
68
27
516
(299 )
(134 )
4,074
1,439
2,635 $
2,580 $
4,729
5,495
724
456
297
287
255
2,885
15,128
670
—
(125 )
(6 )
—
—
—
—
(171 )
(302 )
—
—
1
(45 )
(209 )
156
573
143
430 $
314 $
(3,065 )
—
—
—
—
(3,065 )
—
(3,065 ) $
(3,065 ) $
21,989
13,630
3,240
2,995
2,773
2,374
—
8,752
55,753
4,566
—
(479 )
471
—
21
4,579
1,582
2,997
2,751
$
$
- 144 -
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended May 31, 2019
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
INVESTING ACTIVITIES
Capital expenditures
Business acquisitions, net of cash acquired
Proceeds from asset dispositions and other
CASH USED IN INVESTING ACTIVITIES
FINANCING ACTIVITIES
Net transfers from (to) Parent
Payment on loan between subsidiaries
Intercompany dividends
Principal payments on debt
Proceeds from debt issuances
Proceeds from stock issuances
Dividends paid
Purchase of treasury stock
Other, net
CASH USED IN FINANCING
ACTIVITIES
Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
Guarantor
Subsidiaries
Non-
guarantor
Subsidiaries Eliminations Consolidated
Parent
$
66 $
4,885 $
693 $
(31 ) $
5,613
(6 )
—
(45 )
(51 )
(4,920 )
(9 )
101
(4,828 )
193
51
—
(1,310 )
2,463
101
(683 )
(1,480 )
(9 )
(674 )
—
(659 )
1,485
826 $
(259 )
—
106
(117 )
—
—
—
—
127
(143 )
(13 )
(99 )
257
158 $
(564 )
(57 )
27
(594 )
66
(51 )
(106 )
(9 )
—
—
—
—
(122 )
(222 )
(34 )
(157 )
1,538
1,381 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(31 )
(15 )
(46 ) $
(5,490 )
(66 )
83
(5,473 )
—
—
—
(1,436 )
2,463
101
(683 )
(1,480 )
(4 )
(1,039 )
(47 )
(946 )
3,265
2,319
- 145 -
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
INVESTING ACTIVITIES
Capital expenditures
Business acquisitions, net of cash acquired
Proceeds from sale of business
Proceeds from asset dispositions and other
CASH USED IN INVESTING ACTIVITIES
FINANCING ACTIVITIES
Net transfers from (to) Parent
Payment on loan between subsidiaries
Intercompany dividends
Principal payments on debt
Proceeds from debt issuance
Proceeds from stock issuances
Dividends paid
Purchase of treasury stock
Other, net
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended May 31, 2018
Guarantor
Subsidiaries
Non-
guarantor
Subsidiaries Eliminations Consolidated
Parent
$
(2,837 ) $
6,767 $
712 $
32 $
4,674
(1 )
—
—
(6 )
(7 )
1,529
663
—
—
1,480
327
(535 )
(1,017 )
3
(5,299 )
(44 )
—
33
(5,310 )
(1,612 )
—
98
(22 )
—
—
—
—
7
(363 )
(135 )
123
15
(360 )
83
(663 )
(98 )
(16 )
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
32
(47 )
(15 ) $
(5,663 )
(179 )
123
42
(5,677 )
—
—
—
(38 )
1,480
327
(535 )
(1,017 )
10
227
72
(704 )
3,969
3,265
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2,450
(5 )
(399 )
1,884
1,485 $
(1,529 )
4
(68 )
325
257 $
(694 )
73
(269 )
1,807
1,538 $
$
- 146 -
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended May 31, 2017
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
INVESTING ACTIVITIES
Capital expenditures
Proceeds from asset dispositions and other
CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES
FINANCING ACTIVITIES
Net transfers from (to) Parent
Payment on loan between subsidiaries
Intercompany dividends
Principal payments on debt
Proceeds from debt issuances
Proceeds from stock issuances
Dividends paid
Purchase of treasury stock
Other, net
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
Guarantor
Subsidiaries
Non-
guarantor
Subsidiaries Eliminations Consolidated
Parent
$
(1,155 ) $
5,254 $
835 $
(4 ) $
4,930
—
34
(4,694 )
25
(422 )
76
—
—
(5,116 )
135
34
(4,669 )
(346 )
—
(4,981 )
421
41
—
—
1,190
337
(426 )
(509 )
(12 )
1,042
(11 )
(90 )
1,974
1,884 $
(518 )
(15 )
1
(55 )
—
—
—
—
(13 )
(600 )
14
(1 )
326
325 $
97
(26 )
(1 )
(27 )
—
—
—
—
43
86
(45 )
530
1,277
1,807 $
—
—
—
—
—
—
—
—
—
—
—
(4 )
(43 )
(47 ) $
—
—
—
(82 )
1,190
337
(426 )
(509 )
18
528
(42 )
435
3,534
3,969
- 147 -
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATES. While we currently have market risk sensitive instruments related to interest rates, we have no significant
exposure to changing interest rates on our long-term debt. As disclosed in Note 6 to the accompanying consolidated financial
statements, we had outstanding fixed-rate long-term debt (exclusive of capital leases) with an estimated fair value of $17.8 billion at
May 31, 2019 and outstanding fixed- and floating-rate long-term debt (exclusive of capital leases) with an estimated fair value of
$16.6 billion at May 31, 2018. Market risk for long-term debt is estimated as the potential decrease in fair value resulting from a
hypothetical 10% increase in interest rates and amounts to approximately $390 million as of May 31, 2019 and approximately $430
million as of May 31, 2018. The underlying fair values of our long-term debt were estimated based on quoted market prices or on the
current rates offered for debt with similar terms and maturities.
We have interest rate risk with respect to our pension and postretirement benefit obligations. Changes in interest rates impact our
liabilities associated with these retirement plans, as well as the amount of pension and postretirement benefit expense recognized.
Declines in the value of plan assets could diminish the funded status of our pension plans and potentially increase our requirement to
make contributions to the plans. Substantial investment losses on plan assets would also increase net pension expense.
FOREIGN CURRENCY. While we are a global provider of transportation, e-commerce and business services, the majority of our
transactions during the periods presented in this Annual Report are denominated in U.S. dollars. The principal foreign currency
exchange rate risks to which we are exposed are in the euro, Chinese yuan, British pound, Canadian dollar, Australian dollar and
Mexican peso. Historically, our exposure to foreign currency fluctuations is more significant with respect to our revenues than our
expenses, as a significant portion of our expenses are denominated in U.S. dollars, such as aircraft and fuel expenses. Foreign currency
fluctuations had a slightly positive impact on operating income in 2019 and a slightly negative impact on operating income in 2018.
However, favorable foreign currency fluctuations also may have had an offsetting impact on the price we obtained or the demand for
our services, which is not quantifiable. At May 31, 2019, the result of a uniform 10% strengthening in the value of the dollar relative
to the currencies in which our transactions are denominated would result in a decrease in operating income of $63 million for 2020.
This theoretical calculation required under SEC guidelines assumes that each exchange rate would change in the same direction
relative to the U.S. dollar, which is not consistent with our actual experience in foreign currency transactions. In addition to the direct
effects of changes in exchange rates, fluctuations in exchange rates also affect the volume of sales or the foreign currency sales price
as competitors’ services become more or less attractive. The sensitivity analysis of the effects of changes in foreign currency exchange
rates does not factor in a potential change in sales levels or local currency prices.
We maintain derivative financial instruments to manage foreign currency fluctuations related to probable future transactions and cash
flows denominated in currencies other than the currency of the transacting entity which impacts our exposure to foreign currency
exchange risk. These derivatives are not designated as hedges and are accounted for at fair value with any profit or loss recorded in
income, which was immaterial for 2019 and 2018.
COMMODITY. While we have market risk for changes in the price of jet and vehicle fuel, this risk is largely mitigated by our indexed
fuel surcharges. For additional discussion of our indexed fuel surcharges, see the “Results of Operations and Outlook — Consolidated
Results — Fuel” section of “Management’s Discussion and Analysis of Results of Operations and Financial Condition.”
- 148 -
The following table sets forth (in millions, except per share amounts and other operating data) certain selected consolidated financial
and operating data for FedEx as of and for the five years ended May 31, 2019. This information should be read in conjunction with the
Consolidated Financial Statements, MD&A and other financial data appearing elsewhere in this Annual Report.
SELECTED FINANCIAL DATA
Operating Results
Revenues
Operating income(8)
Income before income taxes
Net income
Per Share Data
Earnings per share:
Basic
Diluted
Average shares of common stock outstanding
Average common and common equivalent shares
outstanding
Cash dividends declared
Financial Position
Property and equipment, net
Total assets(9)
Long-term debt, less current portion(9)
Common stockholders’ investment
Other Operating Data
FedEx Express aircraft fleet
2019(1)(2)(3)
2018(2)(3)(4)
2017(2)(3)(5)
2016(3)(6)
2015(3)(7)
$
$
$
$
$
69,693 $
4,466
655
540
65,450 $
4,272
4,353
4,572
60,319 $
4,566
4,579
2,997
50,365 $
4,168
2,740
1,820
47,453
3,407
1,627
1,050
2.06 $
2.03 $
262
17.08 $
16.79 $
267
11.24 $
11.07 $
266
6.59 $
6.51 $
276
265
2.60 $
272
2.00 $
270
1.60 $
279
1.00 $
3.70
3.65
283
287
0.80
30,429 $
54,403
16,617
17,757
28,154 $
52,330
15,243
19,416
25,981 $
48,552
14,909
16,073
24,284 $
45,959
13,733
13,784
20,875
36,469
7,187
14,993
681
670
657
643
647
(1) Results for 2019 include business realignment charges of $320 million ($243 million, net of tax, or $0.91 per diluted share), costs
incurred in connection with the settlement of a legal matter involving FedEx Ground of $46 million ($43 million, net of tax, or
$0.16 per diluted share) and a net U.S. deferred tax liability remeasurement of $4 million ($0.02 per diluted share) for lower tax
rates.
(2) Results include TNT Express integration expenses and restructuring charges of $388 million ($314 million, net of tax, or $1.18
per diluted share) in 2019, $477 million ($372 million, net of tax, or $1.36 per diluted share) in 2018 and $327 million ($245
million, net of tax, or $0.91 per diluted share) in 2017. These expenses are included in “Corporate, other and eliminations” and
the FedEx Express segment.
(3) Results include the following: MTM retirement plans accounting adjustments: net loss of $3.9 billion ($3.0 billion, net of tax, or
$11.22 per diluted share) in 2019; net gains of $10 million ($9 million, net of tax, or $0.03 per diluted share) in 2018 and $24
million ($6 million, net of tax, or $0.02 per diluted share) in 2017; and net losses of $1.5 billion ($946 million, net of tax, or $3.39
per diluted share) in 2016 and $2.2 billion ($1.4 billion, net of tax, or $4.81 per diluted share) in 2015. See Note 1 and Note 13 to
the accompanying consolidated financial statements for additional information.
(4) Results for 2018 include tax benefits of $2.1 billion ($7.71 per diluted share), which includes benefits of $1.6 billion related to the
TCJA as follows: a provisional benefit of $1.15 billion ($4.22 per diluted share) for the remeasurement of our net U.S. deferred
tax liability for lower tax rates; a benefit of $204 million ($0.75 per diluted share) from an incremental pension contribution made
in the third quarter and deductible against prior year taxes at 35%; and a benefit of approximately $265 million ($0.97 per diluted
share) for the phase-in of the reduced tax rate applied to 2018 earnings. The remaining 2018 tax benefits include a net benefit of
$255 million ($0.94 per diluted share) from corporate structuring transactions as part of the ongoing integration of FedEx Express
and TNT Express and a benefit of $225 million ($0.83 per diluted share) from foreign tax credits associated with distributions to
the U.S. from foreign operations. In addition, 2018 results include $380 million ($379 million, net of tax, or $1.39 per diluted
share) of goodwill and other asset impairment charges related to FedEx Supply Chain and charges of $8 million ($6 million, net
of tax, or $0.02 per diluted share) for legal reserves related to certain CBP matters involving FedEx Logistics.
(5)
Results for 2017 include charges for legal reserves related to certain CBP matters involving FedEx Logistics for $39 million
($24 million, net of tax, or $0.09 per diluted share) and charges in connection with the settlement of and certain expected losses
relating to independent contractor litigation matters at FedEx Ground in the amount of $22 million ($13 million, net of tax, or
$0.05 per diluted share).
- 149 -
(6) Results for 2016 include provisions related to independent contractor litigation matters at FedEx Ground for $256 million, net of
recognized immaterial insurance recovery ($158 million, net of tax, or $0.57 per diluted share), and expenses related to the
settlement of a CBP notice of action involving FedEx Logistics in the amount of $69 million, net of recognized immaterial
insurance recovery ($43 million, net of tax, or $0.15 per diluted share). Total transaction, financing and integration-planning
expenses related to our TNT Express acquisition, as well as TNT Express’s immaterial financial results from the time of
acquisition, were $132 million ($125 million, net of tax, or $0.45 per diluted share) during 2016. In addition, 2016 results include
a $76 million ($0.27 per diluted share) favorable tax impact from an internal corporate legal entity restructuring to facilitate the
integration of FedEx Express and TNT Express.
(7) Results for 2015 include impairment and related charges of $276 million ($175 million, net of tax, or $0.61 per diluted share)
resulting from the decision to permanently retire and adjust the retirement schedule of certain aircraft and related engines.
Additionally, results for 2015 include a charge of $197 million ($133 million, net of tax, or $0.46 per diluted share) in the fourth
quarter to increase the legal reserve associated with the settlement of a legal matter at FedEx Ground to the amount of the
settlement.
(8)
(9)
Includes reclassifications to conform to the current year presentation of newly adopted pension guidance which requires us to
report only the service cost component in the “Salaries and employee benefits” line item. The other components of net benefit
cost are required to be presented in the income statement in other income, outside of income from operations.
Includes adjustments in 2015 and 2016 related to our adoption of an accounting standard that requires us to classify debt issuance
costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability, rather than as an
asset.
- 150 -
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
FedEx Corporation
We have audited the consolidated financial statements of FedEx Corporation (the Company) as of May 31, 2019 and 2018, and for
each of the three years in the period ended May 31, 2019, and have issued our report thereon dated July 16, 2019 included elsewhere
in this Form 10-K. Our audits of the consolidated financial statements included the financial statement schedule listed in Item 15(a) of
this Form 10-K (the “schedule”). This schedule is the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s schedule, based on our audits.
In our opinion, the schedule presents fairly, in all material respects, the information set forth therein when considered in conjunction
with the consolidated financial statements.
/s/ Ernst & Young LLP
Memphis, Tennessee
July 16, 2019
- 151 -
FEDEX CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MAY 31, 2019, 2018 AND 2017
(IN MILLIONS)
SCHEDULE II
DESCRIPTION
Accounts Receivable Reserves:
Allowance for Doubtful Accounts
2019
2018
2017
Allowance for Revenue Adjustments
2019
2018
2017
Inventory Valuation Allowance:
2019
2018
2017
ADDITIONS
BALANCE
AT
BEGINNING
OF YEAR
CHARGED
TO
EXPENSES
CHARGED
TO
OTHER
ACCOUNTS DEDUCTIONS
BALANCE
AT
END OF
YEAR
$
$
$
199 $
115
73
202 $
137
105
268 $
237
218
295 $
246
136
— $
—
—
28 $
27
26
— $
—
—
373 (a) $
162 (a)
94 (a)
1,192 (b) $
1,173 (b)
941 (b)
1,215 (c) $
1,108 (c)
909 (c)
75 $
6
—
36 $
2
7
121
199
115
179
202
137
335
268
237
(a) Uncollectible accounts written off, net of recoveries, and other adjustments.
(b) Principally charged against revenue.
(c)
Service failures, rebills and other.
- 152 -
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
5/14
5/15
5/16
5/17
5/18
5/19
*
$100 invested on 5/31/14 in stock or index, including reinvestment of dividends. Fiscal year ending May 31.
FedEx Corporation
S&P 500
Dow Jones US Transportation Average
FEDEX CORPORATION BOARD OF DIRECTORS
Frederick W. Smith
Chairman and Chief Executive Officer of
FedEx Corporation
Shirley Ann Jackson(1)(2)(4)
President of Rensselaer Polytechnic Institute
Technological research university
John A. Edwardson(1*)
Former Chairman and Chief Executive Officer of
CDW Corporation
Technology products and services company
Marvin R. Ellison(2)(3)(4)
President and Chief Executive Officer of
Lowe’s Companies, Inc.
Home improvement retailer
Susan Patricia Griffith(3)(4)
President and Chief Executive Officer of
The Progressive Corporation
Property and casualty insurance company
John C. (“Chris”) Inglis(2)(3*)(4)
Professor at the U.S. Naval Academy
R. Brad Martin(1)(4)
Chairman of RBM Venture Company
Private investment company
Joshua Cooper Ramo(1)(3)
Vice Chairman, Co-Chief Executive Officer of
Kissinger Associates, Inc.
Strategic advisory firm
Susan C. Schwab(2)(3)
Professor at the University of Maryland
School of Public Policy
David P. Steiner(4*)(5)
Former Chief Executive Officer of
Waste Management, Inc.
Integrated waste management services company
Kimberly A. Jabal(1)(3)
Chief Financial Officer of Unity Technologies
Real-time 3D development company
Paul S. Walsh(2*)
Chairman of Compass Group PLC
Food service and support services company
(1) Audit Committee
(2) Compensation Committee
(3)
Information Technology Oversight Committee
(4) Nominating & Governance Committee
(5) Lead Independent Director
*
Committee Chair
FEDEX CORPORATION EXECUTIVE OFFICERS
Frederick W. Smith
Chairman and Chief Executive Officer
Donald F. Colleran
President and Chief Executive Officer, FedEx Express
Mark R. Allen
Executive Vice President, General Counsel and Secretary
Alan B. Graf, Jr.
Executive Vice President and Chief Financial Officer
Jill C. Brannon
Executive Vice President — Chief Sales Officer
Henry J. Maier
President and Chief Executive Officer, FedEx Ground
Brie A. Carere
Executive Vice President — Chief Marketing and
Communications Officer
John A. Smith
President and Chief Executive Officer, FedEx
Freight Corporation
Robert B. Carter
Executive Vice President — FedEx Information Services
and Chief Information Officer
Rajesh Subramaniam
President and Chief Operating Officer
CORPORATE INFORMATION
FEDEX CORPORATION: 942 South Shady Grove Road,
Memphis, Tennessee 38120, (901) 818-7500, fedex.com
ANNUAL MEETING OF STOCKHOLDERS: Monday,
September 23, 2019, 8:00 a.m. local time, FedEx Express
World Headquarters, 3670 Hacks Cross Road, Building G,
Memphis, Tennessee 38125.
STOCK LISTING: FedEx Corporation’s common stock is
listed on the New York Stock Exchange under the ticker
symbol FDX.
FINANCIAL INFORMATION: Copies of FedEx Corporation’s
Annual Report on Form 10-K (Form 10-K), other documents
filed with or furnished to the Securities and Exchange
Commission (SEC) and other financial and statistical
information are available through the Investor Relations
section of our website at htttp://investors.fedex.com.
The information we post on our Investor Relations
website could be deemed to be material information. We
encourage investors, the media and others interested
in FedEx to visit this website from time to time, as
information is updated and new information is posted.
Company documents filed with or furnished to the SEC can
also be found on the SEC’s website at www.sec.gov.
You will be mailed a copy of the Form 10-K, without
charge, upon request to: FedEx Corporation Investor
Relations, 942 South Shady Grove Road, Memphis,
Tennessee 38120, (901) 818-7200, e-mail: ir@fedex.com.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM:
Ernst & Young LLP, Memphis, Tennessee
CUSTOMER SERVICE: Call 1-800-Go-FedEx or visit fedex.com.
MEDIA INQUIRIES: Jenny Robertson, Vice
President Corporate Communications, 3650 Hacks
Cross Road, Memphis, TN 38125, (901) 434-4829,
e-mail: mediarelations@fedex.com.
SHAREOWNER ACCOUNT SERVICES: Computershare,
PO BOX 505000, Louisville, Kentucky 40233-5000,
(800) 446-2617, www.computershare.com
DIRECT STOCK PURCHASE AND DIVIDEND
REINVESTMENT: For information on the direct stock
purchase and dividend reinvestment plan for FedEx
Corporation common stock, call Computershare at
(800) 446-2617 or visit their direct stock purchase plan
website at www.computershare.com. This plan provides
an alternative to traditional retail brokerage methods of
purchasing, holding and selling FedEx common stock. This
plan also permits shareowners to automatically reinvest
their dividends to purchase additional shares of FedEx
common stock.
INVESTOR RELATIONS: Mickey Foster, Vice President,
Investor Relations, FedEx Corporation, 942 South Shady
Grove Road, Memphis, Tennessee 38120, (901) 818-7200,
e-mail: ir@fedex.com or visit investors.fedex.com
EQUAL EMPLOYMENT OPPORTUNITY: Our greatest
asset is our people. We are committed to providing a
workplace where our employees and contractors feel
respected, satisfied and appreciated. Our policies are
designed to promote fairness and respect for everyone.
We hire, evaluate and promote employees, and engage
contractors, based on their skills and performance. With
this in mind, we will not tolerate certain behaviors. These
include harassment, retaliation, violence, intimidation and
discrimination of any kind involving race, color, religion,
national origin, gender, sexual orientation, gender identity,
gender expression, age, disability, veteran status or any
other characteristic protected by federal, state or local law.
Our latest Global Citizenship Report is available at
http://csr.fedex.com.
942 South Shady Grove Road Memphis, TN 38120fedex.comFEDEX CORPORATION 2019 ANNUAL REPORT