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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

FOR THE QUARTERLY PERIOD ENDED August 31, 2020

OR

 

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

FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number: 1-15829

 

FEDEX CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

62-1721435

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

942 South Shady Grove Road, Memphis, Tennessee

38120

(Address of principal executive offices)

(ZIP Code)

 

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

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

 

 

 

 

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, par value $0.10 per share

 

FDX

 

New York Stock Exchange

0.700% Notes due 2022

 

FDX 22B

 

New York Stock Exchange

1.000% Notes due 2023

 

FDX 23A

 

New York Stock Exchange

0.450% Notes due 2025

 

FDX 25A

 

New York Stock Exchange

1.625% Notes due 2027

 

FDX 27

 

New York Stock Exchange

1.300% Notes due 2031

 

FDX 31

 

New York Stock Exchange

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

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

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

 

Large accelerated filer

Accelerated filer             

Non-accelerated filer

Smaller reporting company 

Emerging growth company 

 

 

 

 

 

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

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

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

 

Common Stock

 

Outstanding Shares at September 11, 2020

Common Stock, par value $0.10 per share

 

262,591,998

 

 

 

 

 


 

FEDEX CORPORATION

INDEX

 

 

 

PAGE

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

ITEM 1. Financial Statements

 

 

Condensed Consolidated Balance Sheets

August 31, 2020 and May 31, 2020

 

3

Condensed Consolidated Statements of Income
Three Months Ended August 31, 2020 and 2019

 

5

Condensed Consolidated Statements of Comprehensive Income
Three Months Ended August 31, 2020 and 2019

 

6

Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 2020 and 2019

 

7

Condensed Consolidated Statements of Changes In Common Stockholders’ Investment

Three Months Ended August 31, 2020 and 2019

 

8

Notes to Condensed Consolidated Financial Statements

 

9

Report of Independent Registered Public Accounting Firm

 

19

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

 

20

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

 

42

ITEM 4. Controls and Procedures

 

42

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

ITEM 1. Legal Proceedings

 

43

ITEM 1A. Risk Factors

 

43

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

 

45

ITEM 5. Other Information

 

45

ITEM 6. Exhibits

 

46

Signature

 

48

 

 

 

Exhibit 10.1

 

 

Exhibit 10.2

 

 

Exhibit 10.3

 

 

Exhibit 10.4

 

 

Exhibit 10.5

 

 

Exhibit 15.1

 

 

Exhibit 31.1

 

 

Exhibit 31.2

 

 

Exhibit 32.1

 

 

Exhibit 32.2

 

 

Exhibit 101.1 Interactive Data Files

Exhibit 104.1 Cover Page Interactive Data File

 

 

- 2 -


 

FEDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

 

 

 

August 31,

2020

(Unaudited)

 

 

May 31,

2020

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,954

 

 

$

4,881

 

Receivables, less allowances of $485 and $390

 

 

10,508

 

 

 

10,102

 

Spare parts, supplies and fuel, less allowances of $337 and $335

 

 

593

 

 

 

572

 

Prepaid expenses and other

 

 

848

 

 

 

828

 

Total current assets

 

 

18,903

 

 

 

16,383

 

PROPERTY AND EQUIPMENT, AT COST

 

 

66,446

 

 

 

65,024

 

Less accumulated depreciation and amortization

 

 

32,184

 

 

 

31,416

 

Net property and equipment

 

 

34,262

 

 

 

33,608

 

OTHER LONG-TERM ASSETS

 

 

 

 

 

 

 

 

Operating lease right-of-use assets, net

 

 

14,496

 

 

 

13,917

 

Goodwill

 

 

6,633

 

 

 

6,372

 

Other assets

 

 

3,354

 

 

 

3,257

 

Total other long-term assets

 

 

24,483

 

 

 

23,546

 

 

 

$

77,648

 

 

$

73,537

 

 

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

- 3 -


 

FEDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE DATA)

 

 

 

August 31,

2020

(Unaudited)

 

 

May 31,

2020

 

LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

 

87

 

 

 

51

 

Accrued salaries and employee benefits

 

 

1,756

 

 

 

1,569

 

Accounts payable

 

 

3,339

 

 

 

3,269

 

Operating lease liabilities

 

 

2,024

 

 

 

1,923

 

Accrued expenses

 

 

3,989

 

 

 

3,532

 

Total current liabilities

 

 

11,195

 

 

 

10,344

 

LONG-TERM DEBT, LESS CURRENT PORTION

 

 

23,204

 

 

 

21,952

 

OTHER LONG-TERM LIABILITIES

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

3,171

 

 

 

3,162

 

Pension, postretirement healthcare and other benefit obligations

 

 

5,036

 

 

 

5,019

 

Self-insurance accruals

 

 

2,147

 

 

 

2,104

 

Operating lease liabilities

 

 

12,714

 

 

 

12,195

 

Other liabilities

 

 

719

 

 

 

466

 

Total other long-term liabilities

 

 

23,787

 

 

 

22,946

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

COMMON STOCKHOLDERS’ INVESTMENT

 

 

 

 

 

 

 

 

Common stock, $0.10 par value; 800 million shares authorized; 318 million shares

   issued as of August 31, 2020 and May 31, 2020

 

 

32

 

 

 

32

 

Additional paid-in capital

 

 

3,375

 

 

 

3,356

 

Retained earnings

 

 

26,108

 

 

 

25,216

 

Accumulated other comprehensive loss

 

 

(1,020

)

 

 

(1,147

)

Treasury stock, at cost

 

 

(9,033

)

 

 

(9,162

)

Total common stockholders’ investment

 

 

19,462

 

 

 

18,295

 

 

 

$

77,648

 

 

$

73,537

 

 

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

- 4 -


 

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

 

 

 

Three Months Ended

August 31,

 

 

 

2020

 

 

2019

 

REVENUE

 

$

19,321

 

 

$

17,048

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

6,852

 

 

 

6,087

 

Purchased transportation

 

 

4,977

 

 

 

4,028

 

Rentals and landing fees

 

 

936

 

 

 

920

 

Depreciation and amortization

 

 

926

 

 

 

879

 

Fuel

 

 

565

 

 

 

870

 

Maintenance and repairs

 

 

806

 

 

 

768

 

Other

 

 

2,669

 

 

 

2,519

 

 

 

 

17,731

 

 

 

16,071

 

OPERATING INCOME

 

 

1,590

 

 

 

977

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

Interest, net

 

 

(184

)

 

 

(137

)

Other retirement plans income

 

 

201

 

 

 

168

 

Other, net

 

 

(1

)

 

 

(12

)

 

 

 

16

 

 

 

19

 

INCOME BEFORE INCOME TAXES

 

 

1,606

 

 

 

996

 

PROVISION FOR INCOME TAXES

 

 

361

 

 

 

251

 

NET INCOME

 

$

1,245

 

 

$

745

 

EARNINGS PER COMMON SHARE:

 

 

 

 

 

 

 

 

Basic

 

$

4.75

 

 

$

2.86

 

Diluted

 

$

4.72

 

 

$

2.84

 

DIVIDENDS DECLARED PER COMMON SHARE

 

$

1.30

 

 

$

1.30

 

 

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

- 5 -


 

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(IN MILLIONS)

 

 

 

Three Months Ended

 

 

 

August 31,

 

 

 

2020

 

 

2019

 

NET INCOME

 

$

1,245

 

 

$

745

 

OTHER COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax benefit of $2 in 2020 and $3 in 2019

 

 

129

 

 

 

(83

)

Amortization of prior service credit, net of tax benefit of $1 in 2020 and $6 in 2019

 

 

(2

)

 

 

(21

)

 

 

 

127

 

 

 

(104

)

COMPREHENSIVE INCOME

 

$

1,372

 

 

$

641

 

 

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

- 6 -


 

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN MILLIONS)

 

 

 

Three Months Ended

August 31,

 

 

 

2020

 

 

2019

 

Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

1,245

 

 

$

745

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

926

 

 

 

879

 

Provision for uncollectible accounts

 

 

143

 

 

 

105

 

Stock-based compensation

 

 

75

 

 

 

67

 

Other noncash items and deferred income taxes

 

 

531

 

 

 

694

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

(387

)

 

 

(267

)

Other assets

 

 

(30

)

 

 

(118

)

Accounts payable and other liabilities

 

 

198

 

 

 

(1,537

)

Other, net

 

 

(50

)

 

 

(3

)

Cash provided by operating activities

 

 

2,651

 

 

 

565

 

Investing Activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,424

)

 

 

(1,418

)

Proceeds from asset dispositions and other

 

 

6

 

 

 

(1

)

Cash used in investing activities

 

 

(1,418

)

 

 

(1,419

)

Financing Activities:

 

 

 

 

 

 

 

 

Principal payments on debt

 

 

(45

)

 

 

(985

)

Proceeds from debt issuances

 

 

959

 

 

 

2,093

 

Proceeds from stock issuances

 

 

82

 

 

 

12

 

Dividends paid

 

 

(170

)

 

 

(170

)

Purchase of treasury stock

 

 

 

 

 

(3

)

Other, net

 

 

(1

)

 

 

(5

)

Cash provided by financing activities

 

 

825

 

 

 

942

 

Effect of exchange rate changes on cash

 

 

15

 

 

 

(18

)

Net increase in cash and cash equivalents

 

 

2,073

 

 

 

70

 

Cash and cash equivalents at beginning of period

 

 

4,881

 

 

 

2,319

 

Cash and cash equivalents at end of period

 

$

6,954

 

 

$

2,389

 

 

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

- 7 -


 

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ INVESTMENT

(UNAUDITED)

(IN MILLIONS, EXCEPT SHARE DATA)

 

 

 

Three Months Ended

 

 

 

August 31,

 

 

 

2020

 

 

2019

 

Common Stock

 

 

 

 

 

 

 

 

Beginning Balance

 

$

32

 

 

$

32

 

Ending Balance

 

 

32

 

 

 

32

 

Additional Paid-in Capital

 

 

 

 

 

 

 

 

Beginning Balance

 

 

3,356

 

 

 

3,231

 

Employee incentive plans and other

 

 

19

 

 

 

26

 

Ending Balance

 

 

3,375

 

 

 

3,257

 

Retained Earnings

 

 

 

 

 

 

 

 

Beginning Balance

 

 

25,216

 

 

 

24,648

 

Net Income

 

 

1,245

 

 

 

745

 

Cash dividends declared ($1.30 and $1.30 per share)

 

 

(341

)

 

 

(339

)

Employee incentive plans and other

 

 

(12

)

 

 

(2

)

Adoption of new accounting standards on June 1, 2019(1)

 

 

 

 

 

(4

)

Ending Balance

 

 

26,108

 

 

 

25,048

 

Accumulated Other Comprehensive Income

 

 

 

 

 

 

 

 

Beginning Balance

 

 

(1,147

)

 

 

(865

)

Other comprehensive income, net of tax benefit of $3 and $9

 

 

127

 

 

 

(104

)

Reclassification to retained earnings due to the adoption of a new accounting standard on June 1, 2019(2)

 

 

 

 

 

51

 

Ending Balance

 

 

(1,020

)

 

 

(918

)

Treasury Stock

 

 

 

 

 

 

 

 

Beginning Balance

 

 

(9,162

)

 

 

(9,289

)

Purchase of treasury stock (0.0 and 0.02 million shares)

 

 

 

 

 

(3

)

Employee incentive plans and other (1.0 and 0.3 million shares)

 

 

129

 

 

 

39

 

Ending Balance

 

 

(9,033

)

 

 

(9,253

)

Total Common Stockholders' Investment Balance

 

$

19,462

 

 

$

18,166

 

 

(1)

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

 

(2)

Relates to the adoption of ASU 2018-02.

 

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

 

 

- 8 -


FEDEX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) General

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of FedEx Corporation (“FedEx”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission (“SEC”) instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, 2020 (“Annual Report”). Significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of August 31, 2020, and the results of our operations for the three-month periods ended August 31, 2020 and 2019, cash flows for the three-month periods ended August 31, 2020 and 2019, and changes in common stockholders’ investment for the three-month periods ended August 31, 2020 and 2019. Operating results for the three-month period ended August 31, 2020 are not necessarily indicative of the results that may be expected for the year ending May 31, 2021.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2021 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

REVENUE RECOGNITION

Contract Assets and Liabilities

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

Gross contract assets related to in-transit shipments totaled $620 million and $563 million at August 31, 2020 and May 31, 2020, respectively. Contract assets net of deferred unearned revenue were $450 million and $456 million at August 31, 2020 and May 31, 2020, respectively. Contract assets are included within current assets in the accompanying unaudited condensed consolidated balance sheets. Contract liabilities related to advance payments from customers were $9 million and $10 million at August 31, 2020 and May 31, 2020, respectively. Contract liabilities are included within current liabilities in the accompanying unaudited condensed consolidated balance sheets.

- 9 -


 

Disaggregation of Revenue

The following table provides revenue by service type (in millions) for the periods ended August 31. This presentation is consistent with how we organize our segments internally for making operating decisions and measuring performance.

 

 

Three Months Ended

 

 

 

2020

 

 

2019

 

REVENUE BY SERVICE TYPE

 

 

 

 

 

 

 

 

FedEx Express segment:

 

 

 

 

 

 

 

 

Package:

 

 

 

 

 

 

 

 

U.S. overnight box

 

$

1,861

 

 

$

1,866

 

U.S. overnight envelope

 

 

426

 

 

 

479

 

U.S. deferred

 

 

1,096

 

 

 

956

 

Total U.S. domestic package revenue

 

 

3,383

 

 

 

3,301

 

International priority

 

 

2,317

 

 

 

1,817

 

International economy

 

 

616

 

 

 

855

 

Total international export package revenue

 

 

2,933

 

 

 

2,672

 

International domestic(1)

 

 

1,088

 

 

 

1,076

 

Total package revenue

 

 

7,404

 

 

 

7,049

 

Freight:

 

 

 

 

 

 

 

 

U.S.

 

 

833

 

 

 

695

 

International priority

 

 

653

 

 

 

464

 

International economy

 

 

371

 

 

 

516

 

International airfreight

 

 

75

 

 

 

66

 

Total freight revenue

 

 

1,932

 

 

 

1,741

 

Other

 

 

311

 

 

 

155

 

Total FedEx Express segment

 

 

9,647

 

 

 

8,945

 

FedEx Ground segment

 

 

7,040

 

 

 

5,179

 

FedEx Freight segment

 

 

1,826

 

 

 

1,905

 

FedEx Services segment

 

 

8

 

 

 

4

 

Other and eliminations(2)

 

 

800

 

 

 

1,015

 

 

 

$

19,321

 

 

$

17,048

 

 

(1)

International domestic revenue relates to our international intra-country operations.

 

(2)

Includes the FedEx Logistics, Inc. (“FedEx Logistics”) and FedEx Office and Print Services, Inc. (“FedEx Office”) operating segments.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots of Federal Express Corporation (“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, a small number of our employees are members of unions.

STOCK-BASED COMPENSATION. We have two types of equity-based compensation: stock options and restricted stock. The key terms of the stock option and restricted stock awards granted under our outstanding incentive stock plans and all financial disclosures about these programs are set forth in our Annual Report.

Our stock-based compensation expense was $75 million for the three-month period ended August 31, 2020 and $67 million for the three-month period ended August 31, 2019. Due to its immateriality, additional disclosures related to stock-based compensation have been excluded from this quarterly report.

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.

- 10 -


 

If a derivative is designated as a cash flow hedge, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in other comprehensive income. For net investment hedges, the entire change in the fair value is recorded in other comprehensive 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 hedge for any period presented. As of August 31, 2020, we had €640 million of debt designated as a net investment hedge to reduce the volatility of the U.S. dollar value of a portion of our net investment in a euro-denominated consolidated subsidiary. As of August 31, 2020, the hedge remains effective.

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 June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13 that amends the impairment model for most financial assets and certain other instruments that are not measured at fair value through net income, including trade receivables, to utilize an expected loss methodology in place of the incurred loss methodology. We adopted this standard effective June 1, 2020 (fiscal 2021). We updated our process for estimating the expected credit loss to include a review of forecasted information that may impact expected collectability over the lifetime of the asset. See Note 2 for additional information. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15 that reduces the complexity of 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. We adopted this standard effective June 1, 2020 (fiscal 2021) and applied these changes prospectively. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This standard is effective June 1, 2021 (fiscal 2022). We adopted this standard effective June 1, 2020 (fiscal 2021). The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

New Accounting Standards and Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06 that changes how entities account for convertible instruments and contracts in an entity’s own equity. These changes will be effective June 1, 2022 (fiscal 2023). We are assessing the impact of this new standard on our consolidated financial statements and related disclosures.

TREASURY SHARES. In January 2016, our Board of Directors approved a stock repurchase program of up to 25 million shares. We did not repurchase any shares of FedEx common stock during the first quarter of 2021. As of August 31, 2020, 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.

During 2020, we amended our amended and restated $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement”) and our $1.5 billion 364-day credit agreement (the “364-Day Credit Agreement” and together with the Five-Year Credit Agreement, the “Credit Agreements”). The amendments to the Credit Agreements, among other things, temporarily restrict us from repurchasing any shares of our common stock between May 27, 2020 and May 31, 2021.

See Note 4 for more information on the amendments to the Credit Agreements.

DIVIDENDS DECLARED PER COMMON SHARE. On August 14, 2020, our Board of Directors declared a quarterly dividend of $0.65 per share of common stock. The dividend will be paid on October 1, 2020 to stockholders of record as of the close of business on September 4, 2020. 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. The amendments to the Credit Agreements discussed above under “Treasury Shares” temporarily restrict us from increasing the amount of our quarterly dividend payable per share of common stock from $0.65 per share between May 27, 2020 and May 31, 2021. There are no other 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.

- 11 -


 

(2) Credit Losses

We are exposed to credit losses primarily through our trade receivables. We assess ability to pay for certain customers by conducting a credit review, which considers the customer’s established credit rating and our assessment of creditworthiness. We determine the allowance for credit losses on accounts receivable using a combination of specific reserves for accounts that are deemed to exhibit credit loss indicators and general reserves that are determined using loss rates based on historical write-offs by geography and recent forecasted information, including underlying economic expectations. We update our estimate of credit loss reserves quarterly, considering recent write-offs and collections information and underlying economic expectations.

Our allowance for credit losses was $175 million at May 31, 2020. Credit losses charged to expense for the quarters ended August 31, 2020 and 2019, were $143 million and $105 million, respectively. Our allowance for credit losses as of August 31, 2020 is $222 million.

(3) Accumulated Other Comprehensive Loss

The following table provides changes in accumulated other comprehensive income (“AOCI”), net of tax, reported in our unaudited condensed consolidated financial statements for the three-month periods ended August 31 (in millions; amounts in parentheses indicate debits to AOCI):

 

 

 

2020

 

 

2019

 

Foreign currency translation loss:

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(1,207

)

 

$

(954

)

Translation adjustments

 

 

129

 

 

 

(83

)

Reclassification to retained earnings due to the adoption of ASU 2018-02

 

 

 

 

 

1

 

Balance at end of period

 

 

(1,078

)

 

 

(1,036

)

Retirement plans adjustments:

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

60

 

 

 

89

 

Reclassifications from AOCI

 

 

(2

)

 

 

(21

)

Reclassification to retained earnings due to the adoption of ASU 2018-02

 

 

 

 

 

50

 

Balance at end of period

 

 

58

 

 

 

118

 

Accumulated other comprehensive (loss) at end of period

 

$

(1,020

)

 

$

(918

)

The following table presents details of the reclassifications from AOCI for the three-month periods ended August 31 (in millions; amounts in parentheses indicate debits to earnings):

 

 

 

Amount Reclassified from

AOCI

 

 

Affected Line Item in the

Income Statement

 

 

2020

 

 

2019

 

 

 

Amortization of retirement plans

   prior service credits, before tax

 

$

3

 

 

$

27

 

 

Other retirement plans (expense) income

Income tax benefit

 

 

(1

)

 

 

(6

)

 

Provision for income taxes

AOCI reclassifications, net of tax

 

$

2

 

 

$

21

 

 

Net income

 

(4) Financing Arrangements

We have a shelf registration statement filed with the SEC that allows us to sell, in one or more future offerings, any combination of our unsecured debt securities and common stock and allows pass through trusts formed by FedEx Express to sell, in one or more future offerings, pass through certificates.

During August 2020, FedEx Express issued $970 million of Pass Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of 1.875% due in February 2034 utilizing pass through trusts (the “Trusts”). The Certificates are secured by 19 Boeing aircraft with a net book value of $1.9 billion at August 31, 2020. The payment obligations of FedEx Express in respect of the Certificates are fully and unconditionally guaranteed by FedEx. FedEx Express is using the proceeds from the issuance for general corporate purposes.

Each Trust meets the definition of a variable interest entity, or VIE, as defined in the Consolidations topic of the Codification (ASC 810), and must be considered for consolidation in our financial statements. Our assessment of the Trusts considers both quantitative and qualitative factors, including the purpose for which the Trust was established and the nature of the risks related to the Trusts. Neither FedEx nor FedEx Express invests in or possesses a financial interest in the Trusts. Rather, FedEx Express has an obligation to

- 12 -


 

make interest and principal payments, which are fully and unconditionally guaranteed by FedEx, and is not the primary beneficiary of the Trusts. Based on this analysis, we determined that we are not required to consolidate the Trusts.

We have a $2.0 billion Five-Year Credit Agreement and a $1.5 billion 364-Day Credit Agreement. The Five-Year Credit Agreement expires in March 2025 and includes a $250 million letter of credit sublimit. The 364-Day Credit Agreement expires in March 2021. The Credit Agreements are available to finance our operations and other cash flow needs. The Credit Agreements contain a financial covenant requiring us to maintain a ratio of debt to consolidated earnings (excluding noncash retirement plans mark-to-market adjustments, noncash pension service costs and noncash asset impairment charges) before interest, taxes, depreciation and amortization (“adjusted EBITDA”) of not more than 4.75 to 1.0, calculated as of August 31, 2020 on a rolling four-quarters basis. The ratio of our debt to adjusted EBITDA was 2.9 to 1.0 at August 31, 2020. The Credit Agreements also contain the temporary covenants discussed in Note 1. We believe these covenants are the only significant restrictive covenants in the Credit Agreements. The 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 the 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 the Credit Agreements, our access to financing could become limited.

Information regarding changes to the ratio of debt to adjusted EBITDA required to be maintained under the Credit Agreements through the fourth quarter of 2021 is provided in our Annual Report.

As of August 31, 2020, no commercial paper was outstanding and $0.3 million in letters of credit were outstanding, leaving $3.5 billion available under the Credit Agreements for future borrowings. Outstanding commercial paper reduces the amount available to borrow under the Credit Agreements.

Long-term debt, including current maturities and exclusive of finance leases, had carrying values of $22.8 billion at August 31, 2020 and $21.5 billion at May 31, 2020, compared with estimated fair values of $26.0 billion at August 31, 2020 and $22.8 billion at May 31, 2020. The annualized weighted-average interest rate on long-term debt was 3.5% at August 31, 2020. 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.

(5) Computation of Earnings Per Share

The calculation of basic and diluted earnings per common share for the three-month periods ended August 31 was as follows (in millions, except per share amounts):

 

 

 

2020

 

 

2019

 

Basic earnings per common share:

 

 

 

 

 

 

 

 

Net earnings allocable to common shares(1)

 

$

1,243

 

 

$

744

 

Weighted-average common shares

 

 

262

 

 

 

260

 

Basic earnings per common share

 

$

4.75

 

 

$

2.86

 

Diluted earnings per common share:

 

 

 

 

 

 

 

 

Net earnings allocable to common shares(1)

 

$

1,243

 

 

$

744

 

Weighted-average common shares

 

 

262

 

 

 

260

 

Dilutive effect of share-based awards

 

 

1

 

 

 

2

 

Weighted-average diluted shares

 

 

263

 

 

 

262

 

Diluted earnings per common share

 

$

4.72

 

 

$

2.84

 

Anti-dilutive options excluded from diluted earnings per

   common share

 

 

9.0

 

 

 

10.9

 

 

 

(1)

Net earnings available to participating securities were immaterial in all periods presented.

(6) 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. Key terms of our retirement plans are provided in our Annual Report.

- 13 -


 

Our retirement plans costs for the three-month periods ended August 31 were as follows (in millions):

 

 

 

2020

 

 

2019

 

Defined benefit pension plans, net

 

$

25

 

 

$

37

 

Defined contribution plans

 

 

159

 

 

 

142

 

Postretirement healthcare plans

 

 

21

 

 

 

22

 

 

 

$

205

 

 

$

201

 

 

Net periodic benefit cost of the pension and postretirement healthcare plans for the three-month periods ended August 31 included the following components (in millions):

 

 

 

U.S. Pension Plans

 

 

International Pension Plans

 

 

Postretirement Healthcare Plans

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Service cost

 

$

213

 

 

$

192

 

 

$

23

 

 

$

24

 

 

$

11

 

 

$

11

 

Other retirement plans (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Interest cost

 

 

240

 

 

 

250

 

 

 

10

 

 

 

11

 

 

 

10

 

 

 

11

 

    Expected return on plan assets

 

 

(446

)

 

 

(400

)

 

 

(12

)

 

 

(13

)

 

 

 

 

 

 

   Amortization of prior service credit and other

 

 

(2

)

 

 

(27

)

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

(208

)

 

 

(177

)

 

 

(3

)

 

 

(2

)

 

 

10

 

 

 

11

 

 

 

$

5

 

 

$

15

 

 

$

20

 

 

$

22

 

 

$

21

 

 

$

22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For 2021, no pension contributions are required for our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) as they are fully funded under the Employee Retirement Income Security Act. We made voluntary contributions to our U.S. Pension Plans of $1.0 billion during the first quarter of 2020.

In 2020, we announced the closing of our U.S.-based defined benefit pension plans to new non-union employees hired on or after January 1, 2020. We will introduce an all-401-(k) plan retirement benefit structure for eligible employees with a higher company match of up to 8% across all U.S.-based operating companies in 2022. During calendar 2021, current eligible employees under the Portable Pension Account (“PPA”) pension formula will be given a one-time option to continue to be eligible for pension compensation credits under the existing PPA formula and remain in the existing 401(k) plan with its match of up to 3.5%, or to cease receiving compensation credits under the pension plan and move to the new 401(k) plan with the higher match of up to 8%. Changes to the new 401(k) plan structure become effective beginning January 1, 2022. While this new program will provide employees greater flexibility and reduce our long-term pension costs, it will not have a material impact on current or near-term financial results.

(7) Business Segment Information

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 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.

- 14 -


 

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

   transportation)

FedEx Custom Critical, Inc. (time-critical transportation)

FedEx Cross Border Holdings, Inc. (“FedEx Cross Border”) (cross-border e-commerce technology and e-commerce transportation solutions)

 

 

 

FedEx Ground Segment

FedEx Ground (small-package ground delivery)

 

 

FedEx Freight Segment

FedEx Freight (LTL freight transportation)

 

 

FedEx Services Segment

FedEx Services (sales, marketing, information technology, communications, customer

   service, technical support, billing and collection services and back-office functions)

 

 

References to our transportation segments include, collectively, the FedEx Express segment, the FedEx Ground segment and the FedEx Freight segment.

Effective June 1, 2020, the results of FedEx Cross Border are included in the FedEx Express segment prospectively as the impact to prior periods was not material. This change was made to reflect our internal management reporting structure.

FedEx Services Segment

The FedEx Services segment operates combined sales, marketing, administrative and information-technology functions in shared services operations for U.S. customers of our major business units and certain back-office support to our operating segments which allows 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 provides direct and indirect support to our operating segments, and we allocate all of the net operating costs of the FedEx Services segment to reflect the full cost of operating our businesses in the results of those segments. 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 operating 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 revenue 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.

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 Office operating segment, which provides an array of document and business services and retail access to our customers for our package transportation businesses, and the FedEx Logistics operating segment, which provides integrated supply chain management solutions, specialty transportation, customs brokerage and global ocean and air freight forwarding.

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 revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

- 15 -


 

The following table provides a reconciliation of reportable segment revenue and operating income (loss) to our unaudited condensed consolidated financial statement totals for the three-month periods ended August 31 (in millions):

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

FedEx Express segment

 

$

9,647

 

 

$

8,945

 

FedEx Ground segment

 

 

7,040

 

 

 

5,179

 

FedEx Freight segment

 

 

1,826

 

 

 

1,905

 

FedEx Services segment

 

 

8

 

 

 

4

 

Other and eliminations

 

 

800

 

 

 

1,015

 

 

 

$

19,321

 

 

$

17,048

 

Operating income (loss):

 

 

 

 

 

 

 

 

FedEx Express segment

 

$

710

 

 

$

285

 

FedEx Ground segment

 

 

834

 

 

 

644

 

FedEx Freight segment

 

 

274

 

 

 

194

 

Corporate, other and eliminations

 

 

(228

)

 

 

(146

)

 

 

$

1,590

 

 

$

977

 

 

(8) Commitments

As of August 31, 2020, our purchase commitments under various contracts for the remainder of 2021 and annually thereafter were as follows (in millions):

 

 

 

Aircraft and Related

 

 

Other(1)

 

 

Total

 

2021 (remainder)

 

$

1,180

 

 

$

782

 

 

$

1,962

 

2022

 

 

2,166

 

 

 

670

 

 

 

2,836

 

2023

 

 

2,423

 

 

 

460

 

 

 

2,883

 

2024

 

 

1,015

 

 

 

302

 

 

 

1,317

 

2025

 

 

621

 

 

 

226

 

 

 

847

 

Thereafter

 

 

2,716

 

 

 

397

 

 

 

3,113

 

Total

 

$

10,121

 

 

$

2,837

 

 

$

12,958

 

 

 

(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 August 31, 2020, our obligation to purchase 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. Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above.

During the first quarter of 2021, FedEx Express executed a contract amendment rescheduling Boeing 767-300 Freighter (“B767F”) aircraft deliveries as follows: 2021 – 18 aircraft; 2022 – 11 aircraft; 2023 – 13 aircraft; and 2024 – 4 aircraft.

- 16 -


 

As of August 31, 2020, we had $632 million 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 accompanying unaudited condensed consolidated balance sheets. Aircraft and related contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of August 31, 2020 with the year of expected delivery:

 

 

 

Cessna SkyCourier 408

 

 

ATR 72-600F

 

 

B767F

 

 

B777F

 

 

Total

 

2021 (remainder)

 

 

 

 

 

4

 

 

 

13

 

 

 

 

 

 

17

 

2022

 

 

9

 

 

 

7

 

 

 

11

 

 

 

5

 

 

 

32

 

2023

 

 

12

 

 

 

6

 

 

 

13

 

 

 

2

 

 

 

33

 

2024

 

 

12

 

 

 

6

 

 

 

4

 

 

 

4

 

 

 

26

 

2025

 

 

12

 

 

 

6

 

 

 

 

 

 

2

 

 

 

20

 

Thereafter

 

 

5

 

 

 

1

 

 

 

 

 

 

 

 

 

6

 

Total

 

 

50

 

 

 

30

 

 

 

41

 

 

 

13

 

 

 

134

 

 

A summary of future minimum lease payments under noncancelable operating and finance leases with an initial or remaining term in excess of one year at August 31, 2020 is as follows (in millions):

 

 

 

Aircraft

and Related

Equipment

 

 

Facilities

and Other

 

 

Total

Operating

Leases

 

 

Finance Leases

 

 

Total Leases

 

2021 (remainder)

 

$

200

 

 

$

1,661

 

 

$

1,861

 

 

$

48

 

 

$

1,909

 

2022

 

 

229

 

 

 

2,120

 

 

 

2,349

 

 

 

27

 

 

 

2,376

 

2023

 

 

198

 

 

 

1,905

 

 

 

2,103

 

 

 

25

 

 

 

2,128

 

2024

 

 

102

 

 

 

1,672

 

 

 

1,774

 

 

 

24

 

 

 

1,798

 

2025

 

 

69

 

 

 

1,466

 

 

 

1,535

 

 

 

24

 

 

 

1,559

 

Thereafter

 

 

258

 

 

 

7,335

 

 

 

7,593

 

 

 

706

 

 

 

8,299

 

Total lease payments

 

 

1,056

 

 

 

16,159

 

 

 

17,215

 

 

 

854

 

 

 

18,069

 

Less imputed interest

 

 

(85

)

 

 

(2,392

)

 

 

(2,477

)

 

 

(381

)

 

 

(2,858

)

Present value of lease liability

 

$

971

 

 

$

13,767

 

 

$

14,738

 

 

$

473

 

 

$

15,211

 

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.

As of August 31, 2020, FedEx has entered into additional leases which have not yet commenced and are therefore not part of the right-of-use asset and liability. These leases are generally for build-to-suit facilities and have undiscounted future payments of approximately $1.1 billion, and will commence when FedEx gains beneficial access to the leased asset. Commencement dates are expected to be from 2021 to 2022.

 

(9) Contingencies

 

Service Provider Lawsuits. FedEx Ground is defending lawsuits in which it is alleged that FedEx Ground should be treated as a joint employer of 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 these matters could, among other things, entitle 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 FedEx Ground is not an employer or joint employer of the drivers of these independent businesses.

Federal Securities Litigation and Derivative Lawsuits. 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, which have been consolidated, 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.

On September 17, 2019 and November 6, 2019, FedEx, its Board of Directors and certain present and former directors and officers were named as defendants in two stockholder derivative lawsuits filed in the U.S. District Court for the District of Delaware. The

- 17 -


 

complaints, which were subsequently consolidated, repeated the allegations in the federal securities litigation complaints, and asserted new claims against the FedEx Board of Directors and certain present and former directors and officers for breach of fiduciary duty, waste of corporate assets, unjust enrichment, insider selling and violations of the federal securities laws. On June 24, 2020, the consolidated lawsuit was dismissed with prejudice. The plaintiff did not appeal the dismissal by the July 24, 2020 deadline.

Derivative Lawsuit Related to New York Cigarette Litigation. On October 3, 2019, FedEx and certain present and former FedEx directors and officers were named as defendants in a stockholder derivative lawsuit filed in the Delaware Court of Chancery. The complaint alleges the defendants breached their fiduciary duties in connection with the activities alleged in lawsuits filed by the City of New York and the State of New York against FedEx Ground in December 2013 and November 2014 and against FedEx Ground and FedEx Freight in July 2017. The underlying lawsuits related to the alleged shipment of cigarettes to New York residents in contravention of several statutes, as well as common law nuisance claims, and were dismissed by the court in December 2018 following entry into a final settlement agreement for approximately $35 million. The settlement did not include any admission of liability by FedEx Ground or FedEx Freight. In addition to the settlement amount, we recognized approximately $10 million for certain attorney’s fees in connection with the underlying lawsuits. 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 lawsuit. On August 14, 2019, a separate stockholder derivative lawsuit alleging similar breaches of fiduciary duty was filed in the Delaware Court of Chancery. The plaintiff voluntarily dismissed this lawsuit on June 25, 2020.

Environmental Matters. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that management reasonably believes could exceed $100,000.

Prior to our acquisition of TNT Express, a lawsuit was filed in Simões Filho, Bahia, Brazil against a subsidiary of TNT Express alleging violations of Brazilian environmental laws. Specifically, the lawsuit alleges that in 2012, certain employees unlawfully discarded non-toxic trash on a highway. We could be subject to monetary sanctions and fines related to such activity that exceed $100,000. We believe that the aggregate amount of any such sanctions and fines will be immaterial.

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, as well as lawsuits containing allegations that FedEx and its subsidiaries are responsible for third-party losses related to vehicle accidents that could exceed our insurance coverage for such losses. 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.

(10) Supplemental Cash Flow Information

Cash paid for interest expense and income taxes for the three-month periods ended August 31 was as follows (in millions):

 

 

 

2020

 

 

2019

 

Cash payments for:

 

 

 

 

 

 

 

 

Interest (net of capitalized interest)

 

$

182

 

 

$

164

 

Income taxes

 

$

134

 

 

$

55

 

Income tax refunds received

 

 

(11

)

 

 

(12

)

Cash tax (refunds) payments, net

 

$

123

 

 

$

43

 

 

 

- 18 -


 

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

FedEx Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of FedEx Corporation (the Company) as of August 31, 2020, the related condensed consolidated statements of income, comprehensive income, cash flows and changes in common stockholders’ investment for the three-month periods ended August 31, 2020 and 2019, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of May 31, 2020, the related consolidated statements of income, comprehensive income, cash flows and changes in common stockholders’ investment for the year then ended, and the related notes (not presented herein); and in our report dated July 20, 2020, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

Basis for Review Results

These financial statements are the responsibility of the Company’s management. 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 SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

/s/ Ernst & Young LLP

 

Memphis, Tennessee

September 15, 2020

- 19 -


 

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

GENERAL

The following Management’s Discussion and Analysis of Results of Operations and Financial Condition (“MD&A”) describes the principal factors affecting the results of operations, liquidity, capital resources, contractual cash obligations and critical accounting estimates of FedEx Corporation (“FedEx”). This discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended May 31, 2020 (“Annual Report”). Our Annual Report includes additional information about our significant accounting policies, practices and the transactions that underlie our financial results, as well as a detailed discussion of the most significant risks and uncertainties associated with our financial condition and operating results.

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 operating segments. See “Reportable Segments” for further discussion. Additional information on our businesses can be found in our Annual Report.

As discussed in our Annual Report, as of June 1, 2020 FedEx Cross Border Holdings, Inc. (“FedEx Cross Border”) is included in the FedEx Express segment. This change was made to reflect our internal management reporting structure.

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 revenue and volumes. Therefore, the discussion of operating expense captions focuses on the key drivers and trends impacting expenses other than those factors strictly related to changes in revenue and volumes. The line item “Other operating expense” includes costs associated with outside service contracts (such as facility services and cargo handling, temporary labor and security), insurance, uniforms and professional fees.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2021 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.

- 20 -


 

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

The following tables compare summary operating results and changes in revenue and operating income (dollars in millions, except per share amounts) for the periods ended August 31:

 

 

Three Months Ended

 

 

Percent

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

Revenue

 

$

19,321

 

 

$

17,048

 

 

 

13

 

 

Operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

FedEx Express segment

 

 

710

 

 

 

285

 

 

 

149

 

 

FedEx Ground segment

 

 

834

 

 

 

644

 

 

 

30

 

 

FedEx Freight segment

 

 

274

 

 

 

194

 

 

 

41

 

 

Corporate, other and eliminations

 

 

(228

)

 

 

(146

)

 

 

(56

)

 

Consolidated operating income

 

 

1,590

 

 

 

977

 

 

 

63

 

 

Operating margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

FedEx Express segment

 

 

7.4

%

 

 

3.2

%

 

 

420

 

bp

FedEx Ground segment

 

 

11.8

%

 

 

12.4

%

 

 

(60

)

bp

FedEx Freight segment

 

 

15.0

%

 

 

10.2

%

 

 

480

 

bp

Consolidated operating margin

 

 

8.2

%

 

 

5.7

%

 

 

250

 

bp

Consolidated net income

 

$

1,245

 

 

$

745

 

 

 

67

 

 

Diluted earnings per share

 

$

4.72

 

 

$

2.84

 

 

 

66

 

 

 

 

 

Year-over-Year Changes

 

 

 

Revenue

 

 

Operating Income (Loss)

 

FedEx Express segment

 

$

702

 

 

$

425

 

FedEx Ground segment

 

 

1,861

 

 

 

190

 

FedEx Freight segment

 

 

(79

)

 

 

80

 

FedEx Services segment

 

 

4

 

 

 

 

Corporate, other and eliminations

 

 

(215

)

 

 

(82

)

 

 

$

2,273

 

 

$

613

 

Overview

The coronavirus (“COVID-19”) pandemic continued to impact our business during the first quarter of 2021, specifically resulting in unprecedented demand for our residential delivery services, rivaling our peak holiday season traffic. Additionally, demand for our commercial services improved sequentially throughout the first quarter of 2021 as businesses reopened around the world. During the first quarter of 2021, we incurred approximately $100 million of increased operating expenses related to personal protective equipment and medical/safety supplies, as well as additional security and cleaning services in order to protect our team members and customers during the COVID-19 pandemic.

Our consolidated operating income improved during the first quarter of 2021 due to international export and U.S. domestic package volume growth at FedEx Express, residential volume growth at FedEx Ground and yield improvement at FedEx Ground and FedEx Freight. In addition, our results were positively impacted by approximately $130 million due to an additional operating day at all of our transportation segments in the first quarter of 2021. We incurred higher purchased transportation costs and salaries and employee benefits expense to support increased volumes in the first quarter of 2021. Additionally, higher variable incentive compensation expense negatively impacted year-over-year first quarter comparisons by $195 million, approximately half of which was due to the reversal of long-term incentive compensation accruals in the prior year. The provisions recorded for variable compensation during the first quarter of 2021 were for non-executive officer team members based on the assumption that current performance trends will continue during the fiscal year.

We incurred TNT Express integration expenses totaling $49 million ($38 million, net of tax, or $0.14 per diluted share) in the first quarter of 2021, a $22 million decrease from the first quarter of 2020. The integration expenses are predominantly incremental costs directly associated with the integration of TNT Express, including professional and legal fees, salaries and employee benefits, advertising and travel expenses. Internal salaries and employee benefits are included only to the extent the individuals are assigned

- 21 -


 

full-time to integration activities. These costs were incurred at FedEx Express and FedEx Corporate. The identification of these costs as integration-related expenditures is subject to our disclosure controls and procedures.

The following graphs for FedEx Express, FedEx Ground and FedEx Freight show selected volume trends (in thousands) over the five most recent quarters:

 

(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.

 

 

(2)

International average daily freight pounds relate to our international priority, economy and airfreight services.

- 22 -


 

The following graphs for FedEx Express, FedEx Ground and FedEx Freight show selected yield trends over the five most recent quarters:

 

(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.

 

 

(2)

International revenue per pound relates to our international priority, economy and airfreight services.

- 23 -


 

Revenue

Revenue increased 13% in the first quarter of 2021 primarily due to volume growth in residential delivery services at FedEx Ground and U.S. domestic package volume at FedEx Express, both reflecting increased e-commerce demand due to the continuing impacts of the COVID-19 pandemic. International export package volume growth at FedEx Express and yield improvement at FedEx Ground and FedEx Freight also contributed to the increase in revenue during the first quarter of 2021. In addition, one additional operating day at all of our transportation segments positively impacted revenue in the first quarter of 2021. These positive factors were partially offset by lower fuel surcharges at all of our transportation segments.

At FedEx Ground, revenue increased 36% in the first quarter of 2021 primarily due to residential delivery volume growth, including the sharp increase in demand resulting from stay-at-home orders and other responsive measures to the COVID-19 pandemic. Revenue at FedEx Express increased 8% in the first quarter of 2021 due to international export and U.S. domestic package volume growth, partially offset by lower fuel surcharges. FedEx Freight revenue decreased 4% in the first quarter of 2021 due to decreased average daily shipments, partially offset by higher revenue per shipment.

Operating Expenses

The following tables compare operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended August 31:

 

 

Three Months Ended

 

 

Percent

 

 

Percent of Revenue

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

2020

 

 

 

2019

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

$

6,852

 

 

$

6,087

 

 

 

13

 

 

 

35.5

 

%

 

 

35.7

 

%

Purchased transportation

 

 

4,977

 

 

 

4,028

 

 

 

24

 

 

 

25.8

 

 

 

 

23.6

 

 

Rentals and landing fees

 

 

936

 

 

 

920

 

 

 

2

 

 

 

4.8

 

 

 

 

5.4

 

 

Depreciation and amortization

 

 

926

 

 

 

879

 

 

 

5

 

 

 

4.8

 

 

 

 

5.2

 

 

Fuel

 

 

565

 

 

 

870

 

 

 

(35

)

 

 

2.9

 

 

 

 

5.1

 

 

Maintenance and repairs

 

 

806

 

 

 

768

 

 

 

5

 

 

 

4.2

 

 

 

 

4.5

 

 

Other

 

 

2,669

 

 

 

2,519

 

 

 

6

 

 

 

13.8

 

 

 

 

14.8

 

 

Total operating expenses

 

 

17,731

 

 

 

16,071

 

 

 

10

 

 

 

91.8

 

 

 

 

94.3

 

 

Operating income

 

$

1,590

 

 

$

977

 

 

 

63

 

 

 

8.2

 

%

 

 

5.7

 

%

The increase in volumes noted above under “Revenue” resulted in a 24% increase in purchased transportation costs driven by FedEx Ground and a 13% increase in salaries and employee benefits expense driven by FedEx Ground and FedEx Express in the first quarter of 2021. Purchased transportation was also negatively impacted by contractor settlement rate increases at FedEx Ground, including in connection with the ongoing expansion of U.S. operations to seven days per week year-round. In addition, salaries and employee benefits expense increased due to merit increases and higher variable incentive compensation at all of our transportation segments in the first quarter of 2021.

 

- 24 -


 

Fuel

The following graph for our transportation segments shows our average cost of jet and vehicle fuel per gallon for the five most recent quarters:

Fuel expense decreased 35% in the first quarter of 2021 due to decreased fuel prices. 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 the first quarters of 2021 and 2020 in the accompanying discussion 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 and preceding day, 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.

We routinely review our fuel surcharges. Additional information on table changes affecting fuel surcharges can be found in our Annual Report. The net impact of fuel on operating income described below and for each segment below excludes the impact from these table changes.

The net impact of fuel had a slightly negative impact to operating income in the first quarter of 2021 due to lower fuel surcharges, partially offset by decreased 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.

 

- 25 -


 

Income Taxes

Our effective tax rate was 22.5% for the first quarter of 2021, compared to 25.2% for the first quarter of 2020. The 2021 tax rate was favorably impacted by changes in our corporate legal entity structure, including the tax status of certain foreign entities, and increased earnings in certain non-U.S. jurisdictions.

We are subject to taxation in the United States and various U.S. state, local and foreign jurisdictions. We are currently under examination by the Internal Revenue Service for the 2016 and 2017 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next twelve months and could result in a change in our balance of unrecognized tax benefits. The impact of any changes is not expected to be material to our consolidated financial statements.

- 26 -


 

Outlook

The uncertainty over the continuing and ultimate impact the COVID-19 pandemic will have on the global economy generally, and our business in particular, makes any expectations for 2021 inherently less clear. However, based on the current trends in our business, we anticipate increased demand to result in higher revenue and operating income at FedEx Ground and FedEx Express for the remainder of 2021. In addition, yield management and improved productivity is anticipated to contribute to revenue and operating income growth at FedEx Freight in 2021. If our current trends continue, we expect certain expenses, including higher variable incentive compensation accruals and increased supply and other costs related to the COVID-19 pandemic, to continue to be incurred during 2021.

Government travel warnings and restrictions related to the COVID-19 pandemic are expected to continue to impact the demand for commercial air travel, thereby reducing available air capacity. Therefore, we expect continued strong demand for international priority shipments for the remainder of 2021 to necessitate increased usage of our assets to support demand in key international supply chains. We will continue managing network capacity, flexing our network and making adjustments as needed to align with volumes and operating conditions.

We have expanded FedEx Ground seven-day residential delivery coverage to nearly 95 percent of the U.S. population and will continue to optimize our network capacity to meet evolving customer needs. During the second half of 2021, we will focus on last-mile residential delivery optimization by directing certain U.S. day-definite residential FedEx Express shipments into the FedEx Ground network to increase efficiency and lower our cost-to-serve. We also are focused on improving revenue quality and lowering costs through advanced technology aimed at improving productivity and safety.

We are continuing to execute our TNT Express integration plans and are scheduled to complete the integration of the FedEx Express and TNT Express linehaul and pickup-and-delivery operations and begin offering an enhanced portfolio of international services in 2021. We will leverage the capabilities that TNT Express adds to our portfolio, which are expected to improve our European revenue and profitability, which continue to underperform our expectations for that market. While we expect to make significant progress on integration activities in 2021, particularly in Europe, integration work will continue after 2021. We expect to complete the final phase of international air network interoperability in early calendar 2022.

We expect to incur approximately $125 million of integration expenses in the remainder of 2021 in the form of professional fees, outside service contracts, salaries and wages and other operating expenses. We expect the aggregate integration program expenses to be approximately $1.7 billion through the completion of the physical network integration of TNT Express into FedEx Express in 2022. We continue to pursue actions in addition to the integration to further transform and optimize the FedEx Express international business, particularly in Europe, including expansion of our e-commerce capabilities and lowering our overhead costs. We may incur additional costs, including capital investments related to these actions. The timing and amount of integration and other expenses, including capital investments, may change as we revise and implement our plans.

Our expectations for the remainder of 2021 are dependent on key external factors, including no further weakening of global economic conditions or additional shut-downs related to the COVID-19 pandemic, current fuel price expectations, and no additional adverse developments in international trade policies and relations.

Other Outlook Matters. For details on key 2021 capital projects, refer to the “Liquidity Outlook” section of this MD&A.

See “Forward-Looking Statements” and Part II, Item 1A “Risk Factors” for a discussion of these and other potential risks and uncertainties that could materially affect our future performance.

RECENT ACCOUNTING GUIDANCE

See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting guidance.

- 27 -


 

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 transportation)

FedEx Custom Critical, Inc. (“FedEx Custom Critical”) (time-critical transportation)

FedEx Cross Border (cross-border e-commerce technology and e-commerce transportation solutions)

 

 

FedEx Ground Segment

FedEx Ground (small-package ground delivery)

 

 

FedEx Freight Segment

FedEx Freight (LTL freight transportation)

 

 

FedEx Services Segment

FedEx Services (sales, marketing, information technology, communications, customer service, technical support, billing and collection services and back-office functions)

Effective June 1, 2020, the results of FedEx Cross Border are included in the FedEx Express segment prospectively as the impact to prior periods was not material. This change was made to reflect our internal management reporting structure.

FEDEX SERVICES SEGMENT

The operating expense line item “Intercompany charges” on the accompanying unaudited condensed consolidated financial statements of our transportation segments reflects the allocations from the FedEx Services segment to the respective operating segments. The allocations of net operating costs are based on metrics such as relative revenue or estimated services provided.

The FedEx Services segment provides direct and indirect support to our operating segments, and we allocate all of the net operating costs of the FedEx Services segment to reflect the full cost of operating our businesses in the results of those segments. 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 operating 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.

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, the results of the FedEx Logistics, Inc. (“FedEx Logistics”) and FedEx Office and Print Services, Inc. (”FedEx Office”) operating segments are included in corporate and other. FedEx Office provides an array of document and business services and retail access to our customers for our package transportation businesses. FedEx Logistics provides integrated supply chain management solutions, specialty transportation, customs brokerage and global ocean and air freight forwarding.

In the first quarter of 2021, the decrease in revenue in “Corporate, other and eliminations” was driven primarily by the inclusion of FedEx Custom Critical and FedEx Cross Border in the FedEx Express segment and a significant decline in non-shipping revenue at FedEx Office resulting from the COVID-19 pandemic.

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 revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

- 28 -


 

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 and economy services, which provide delivery on a time-definite or day-definite basis. The following tables compare revenue, operating expenses, operating income (dollars in millions), operating margin and operating expenses as a percent of revenue for the periods ended August 31:

 

 

Three Months Ended

 

 

Percent

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Package:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. overnight box

 

$

1,861

 

 

$

1,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. overnight envelope

 

 

426

 

 

 

479

 

 

 

(11

)

 

 

 

 

 

 

 

 

 

 

U.S. deferred

 

 

1,096

 

 

 

956

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

Total U.S. domestic package revenue

 

 

3,383

 

 

 

3,301

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

International priority

 

 

2,317

 

 

 

1,817

 

 

 

28

 

 

 

 

 

 

 

 

 

 

 

International economy

 

 

616

 

 

 

855

 

 

 

(28

)

 

 

 

 

 

 

 

 

 

 

Total international export package revenue

 

 

2,933

 

 

 

2,672

 

 

 

10

 

 

 

 

 

 

 

 

 

 

 

International domestic(1)

 

 

1,088

 

 

 

1,076

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

Total package revenue

 

 

7,404

 

 

 

7,049

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

Freight:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

833

 

 

 

695

 

 

 

20

 

 

 

 

 

 

 

 

 

 

 

International priority

 

 

653

 

 

 

464

 

 

 

41

 

 

 

 

 

 

 

 

 

 

 

International economy

 

 

371

 

 

 

516

 

 

 

(28

)

 

 

 

 

 

 

 

 

 

 

International airfreight

 

 

75

 

 

 

66

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

Total freight revenue

 

 

1,932

 

 

 

1,741

 

 

 

11

 

 

Percent of Revenue

 

 

Other(2)

 

 

311

 

 

 

155

 

 

 

101

 

 

2020

 

 

 

2019

 

 

Total revenues

 

 

9,647

 

 

 

8,945

 

 

 

8

 

 

 

100.0

 

%

 

 

100.0

 

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

3,742

 

 

 

3,372

 

 

 

11

 

 

 

38.8

 

 

 

 

37.7

 

 

Purchased transportation

 

 

1,304

 

 

 

1,232

 

 

 

6

 

 

 

13.5

 

 

 

 

13.8

 

 

Rentals and landing fees

 

 

504

 

 

 

513

 

 

 

(2

)

 

 

5.2

 

 

 

 

5.7

 

 

Depreciation and amortization

 

 

477

 

 

 

462

 

 

 

3

 

 

 

5.0

 

 

 

 

5.2

 

 

Fuel

 

 

496

 

 

 

743

 

 

 

(33

)

 

 

5.1

 

 

 

 

8.3

 

 

Maintenance and repairs

 

 

551

 

 

 

517

 

 

 

7

 

 

 

5.7

 

 

 

 

5.8

 

 

Intercompany charges

 

 

461

 

 

 

469

 

 

 

(2

)

 

 

4.8

 

 

 

 

5.2

 

 

Other

 

 

1,402

 

 

 

1,352

 

 

 

4

 

 

 

14.5

 

 

 

 

15.1

 

 

Total operating expenses

 

 

8,937

 

 

 

8,660

 

 

 

3

 

 

 

92.6

 

%

 

 

96.8

 

%

Operating income

 

$

710

 

 

$

285

 

 

 

149

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

 

7.4

%

 

 

3.2

%

 

 

420

 

bp

 

 

 

 

 

 

 

 

 

 

(1)

International domestic revenue relates to our international intra-country operations.

 

 

(2)

Includes the operations of FedEx Custom Critical and FedEx Cross Border for the period ended August 31, 2020.

 

 

 

 

 

 

- 29 -


 

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended August 31:

 

 

 

Three Months Ended

 

 

Percent

 

 

 

2020

 

 

2019

 

 

Change

 

Package Statistics

 

 

 

 

 

 

 

 

 

 

 

 

Average daily package volume (ADV):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. overnight box

 

 

1,287

 

 

 

1,218

 

 

 

6

 

U.S. overnight envelope

 

 

483

 

 

 

562

 

 

 

(14

)

U.S. deferred

 

 

1,207

 

 

 

976

 

 

 

24

 

Total U.S. domestic ADV

 

 

2,977

 

 

 

2,756

 

 

 

8

 

International priority

 

 

696

 

 

 

530

 

 

 

31

 

International economy

 

 

260

 

 

 

294

 

 

 

(12

)

Total international export ADV

 

 

956

 

 

 

824

 

 

 

16

 

International domestic(1)

 

 

2,298

 

 

 

2,352

 

 

 

(2

)

Total ADV

 

 

6,231

 

 

 

5,932

 

 

 

5

 

Revenue per package (yield):

 

 

 

 

 

 

 

 

 

 

 

 

U.S. overnight box

 

$

22.25

 

 

$

23.94

 

 

 

(7

)

U.S. overnight envelope

 

 

13.56

 

 

 

13.32

 

 

 

2

 

U.S. deferred

 

 

13.97

 

 

 

15.29

 

 

 

(9

)

U.S. domestic composite

 

 

17.48

 

 

 

18.71

 

 

 

(7

)

International priority

 

 

51.18

 

 

 

53.52

 

 

 

(4

)

International economy

 

 

36.46

 

 

 

45.52

 

 

 

(20

)

International export composite

 

 

47.18

 

 

 

50.67

 

 

 

(7

)

International domestic(1)

 

 

7.28

 

 

 

7.15

 

 

 

2

 

Composite package yield

 

$

18.28

 

 

$

18.57

 

 

 

(2

)

Freight Statistics

 

 

 

 

 

 

 

 

 

 

 

 

Average daily freight pounds:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

8,849

 

 

 

8,015

 

 

 

10

 

International priority

 

 

5,501

 

 

 

4,792

 

 

 

15

 

International economy

 

 

11,633

 

 

 

13,717

 

 

 

(15

)

International airfreight

 

 

1,575

 

 

 

1,555

 

 

 

1

 

Total average daily freight pounds

 

 

27,558

 

 

 

28,079

 

 

 

(2

)

Revenue per pound (yield):

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

1.45

 

 

$

1.36

 

 

 

7

 

International priority

 

 

1.83

 

 

 

1.51

 

 

 

21

 

International economy

 

 

0.49

 

 

 

0.59

 

 

 

(17

)

International airfreight

 

 

0.74

 

 

 

0.66

 

 

 

12

 

Composite freight yield

 

$

1.08

 

 

$

0.97

 

 

 

11

 

 

 

(1)

International domestic statistics relate to our international intra-country operations.

FedEx Express Segment Revenue

FedEx Express segment revenue increased 8% in the first quarter of 2021 due to international export and U.S. domestic package volume growth, partially offset by lower fuel surcharges. The demand for our domestic residential service offerings continued to increase due to the COVID-19 pandemic, resulting in higher growth in deferred services. Revenue was also positively impacted by pricing initiatives resulting from global air freight capacity constraints and one additional operating day in the first quarter of 2021.

International export package average daily volumes increased 16% in the first quarter of 2021 led by volume growth in Asia-Pacific and Europe. International export package yields decreased 7% in the first quarter of 2021 primarily driven by base yield declines and lower fuel surcharges, partially offset by pricing initiatives resulting from global air freight capacity constraints. Total average daily freight pounds decreased 2% in the first quarter of 2021 primarily due to lower international volume as a result of macroeconomic weakness and the COVID-19 pandemic, partially offset by an increase in U.S. domestic volume. Composite freight yields increased 11% in the first quarter of 2021 primarily due to improved base yields, partially offset by lower fuel surcharges. U.S. domestic package average daily volumes increased 8% in the first quarter of 2021 driven by growth in deferred service offerings and overnight box volume, partially offset by a decrease in overnight envelope shipments. The growth in deferred services was accelerated due to the COVID-19 pandemic. U.S. domestic package yields decreased 7% in the first quarter of 2021 driven by lower fuel surcharges, lower

- 30 -


 

weight per package and unfavorable product mix. Other revenue increased 101% due to inclusion of FedEx Custom Critical and FedEx Cross Border in the FedEx Express segment in the first quarter of 2021.

FedEx Express’s U.S. domestic and outbound fuel surcharge and international fuel surcharge ranged as follows for the periods ended August 31:

 

 

Three Months Ended

 

 

 

2020

 

 

2019

 

U.S. Domestic and Outbound Fuel Surcharge:

 

 

 

 

 

 

 

 

Low

 

 

2.73

%

 

 

7.27

%

High

 

 

4.12

 

 

 

8.45

 

Weighted-average

 

 

3.43

 

 

 

7.55

 

International Export and Freight Fuel Surcharge:

 

 

 

 

 

 

 

 

Low

 

 

0.28

 

 

 

6.87

 

High

 

 

17.00

 

 

 

18.22

 

Weighted-average

 

 

10.29

 

 

 

15.55

 

International Domestic Fuel Surcharge:

 

 

 

 

 

 

 

 

Low

 

 

4.19

 

 

 

3.27

 

High

 

 

20.33

 

 

 

19.47

 

Weighted-average

 

 

5.93

 

 

 

7.50

 

FedEx Express Segment Operating Income

FedEx Express segment operating income increased 149% in the first quarter of 2021 primarily due to international export and U.S. domestic package volume growth and increased network operating efficiency. Operating income and operating margin were positively impacted by one additional operating day in the first quarter of 2021. FedEx Express segment operating results include approximately $65 million related to a benefit from a reduction in aviation excise taxes provided by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). These factors were partially offset by higher salaries and employee benefits expense to support increased volume and higher variable incentive compensation expense of $110 million in the first quarter of 2021, approximately half of which was due to the reversal of long-term incentive compensation accruals in the prior year.

FedEx Express segment results included $37 million of TNT Express integration expenses in the first quarter of 2021, a $20 million decrease from the first quarter of 2020.

Salaries and employee benefits increased 11% in the first quarter of 2021 primarily due to staffing to support volume growth, and higher variable incentive compensation expense. Purchased transportation expense increased 6% in the first quarter of 2021 primarily due to the inclusion of FedEx Custom Critical and FedEx Cross Border in the FedEx Express segment, partially offset by lower freight volumes, resulting in lower utilization of third-party transportation providers. Other operating expense increased 4% in the first quarter of 2021 primarily due to higher operating supplies offset by decreased travel, driven by the COVID-19 pandemic. In addition, higher outside service contract expense and bad debt expense negatively impacted other operating expense.

Fuel expense decreased 33% in the first quarter of 2021 due to decreased fuel prices. The net impact of fuel had a slightly negative impact to operating income in the first quarter of 2021 as lower fuel surcharges outpaced decreased fuel prices. See the “Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.

- 31 -


 

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 revenue, 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 periods ended August 31:

 

 

Three Months Ended

 

 

Percent

 

 

 

Percent of Revenue

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

 

2020

 

 

 

2019

 

 

Revenues

 

$

7,040

 

 

$

5,179

 

 

 

36

 

 

 

 

100.0

 

%

 

 

100.0

 

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

1,274

 

 

 

871

 

 

 

46

 

 

 

 

18.2

 

 

 

 

16.8

 

 

Purchased transportation

 

 

3,291

 

 

 

2,303

 

 

 

43

 

 

 

 

46.7

 

 

 

 

44.5

 

 

Rentals

 

 

264

 

 

 

239

 

 

 

10

 

 

 

 

3.8

 

 

 

 

4.6

 

 

Depreciation and amortization

 

 

204

 

 

 

193

 

 

 

6

 

 

 

 

2.9

 

 

 

 

3.7

 

 

Fuel

 

 

4

 

 

 

3

 

 

 

33

 

 

 

 

 

 

 

 

 

 

Maintenance and repairs

 

 

107

 

 

 

87

 

 

 

23

 

 

 

 

1.5

 

 

 

 

1.7

 

 

Intercompany charges

 

 

432

 

 

 

375

 

 

 

15

 

 

 

 

6.1

 

 

 

 

7.3

 

 

Other

 

 

630

 

 

 

464

 

 

 

36

 

 

 

 

9.0

 

 

 

 

9.0

 

 

Total operating expenses

 

 

6,206

 

 

 

4,535

 

 

 

37

 

 

 

 

88.2

 

%

 

 

87.6

 

%

Operating income

 

$

834

 

 

$

644

 

 

 

30

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

 

11.8

%

 

 

12.4

%

 

 

(60

)

bp

 

 

 

 

 

 

 

 

 

 

Average daily package volume

 

 

11,559

 

 

 

8,834

 

 

 

31

 

 

 

 

 

 

 

 

 

 

 

 

Revenue per package (yield)

 

$

9.33

 

 

$

9.13

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

FedEx Ground Segment Revenue

FedEx Ground segment revenue increased 36% in the first quarter of 2021 primarily due to residential delivery volume growth, including the sharp increase in demand resulting from stay-at-home orders and other responsive measures to the COVID-19 pandemic. In addition, revenue was positively impacted by yield improvement and one additional operating day in the first quarter of 2021. Average daily volume increased 31% in the first quarter of 2021 primarily due to continued growth in residential services driven by e-commerce. FedEx Ground yields increased 2% in the first quarter of 2021 primarily due to pricing initiatives, partially offset by lower 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 periods ended August 31:

 

 

Three Months Ended

 

 

 

2020

 

 

2019

 

Low

 

 

5.75

%

 

 

6.75

%

High

 

 

5.75

 

 

 

7.25

 

Weighted-average

 

 

5.75

 

 

 

7.04

 

FedEx Ground Segment Operating Income

FedEx Ground segment operating income increased 30% in the first quarter of 2021 primarily due to residential delivery volume growth and yield growth. In addition, in the first quarter of 2021, operating income benefited from one additional operating day. These factors were partially offset by higher purchased transportation costs and salaries and employee benefits expense to support increased volumes in the first quarter of 2021.

Purchased transportation expense increased 43% in the first quarter of 2021 due to higher volumes and increased contractor settlement rates, including as a result of the ongoing expansion of U.S. operations to seven days per week year-round. Salaries and employee benefits expense increased 46% in the first quarter of 2021 due to additional staffing to support volume growth, including the ongoing expansion of U.S. operations to seven days per week year-round, merit increases, and higher variable incentive compensation. Other operating expense increased 36% in the first quarter of 2021 primarily due to higher self-insurance accruals and higher operating supplies driven by the COVID-19 pandemic.

The net impact of fuel had a slightly positive impact to operating income in the first quarter of 2021 as decreased fuel prices outpaced lower fuel surcharges. See the “Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.

- 32 -


 

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 tables compare revenue, operating expenses, operating income (dollars in millions), operating margin, selected statistics and operating expenses as a percent of revenue for the periods ended August 31:

 

 

Three Months Ended

 

 

Percent

 

 

 

Percent of Revenue

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

 

2020

 

 

 

2019

 

 

Revenues

 

$

1,826

 

 

$

1,905

 

 

 

(4

)

 

 

 

100.0

 

%

 

 

100.0

 

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

858

 

 

 

919

 

 

 

(7

)

 

 

 

47.0

 

 

 

 

48.3

 

 

Purchased transportation

 

 

170

 

 

 

187

 

 

 

(9

)

 

 

 

9.3

 

 

 

 

9.8

 

 

Rentals

 

 

56

 

 

 

52

 

 

 

8

 

 

 

 

3.1

 

 

 

 

2.7

 

 

Depreciation and amortization

 

 

106

 

 

 

94

 

 

 

13

 

 

 

 

5.8

 

 

 

 

4.9

 

 

Fuel

 

 

65

 

 

 

123

 

 

 

(47

)

 

 

 

3.6

 

 

 

 

6.5

 

 

Maintenance and repairs

 

 

53

 

 

 

65

 

 

 

(18

)

 

 

 

2.9

 

 

 

 

3.4

 

 

Intercompany charges

 

 

119

 

 

 

126

 

 

 

(6

)

 

 

 

6.5

 

 

 

 

6.6

 

 

Other

 

 

125

 

 

 

145

 

 

 

(14

)

 

 

 

6.8

 

 

 

 

7.6

 

 

Total operating expenses

 

 

1,552

 

 

 

1,711

 

 

 

(9

)

 

 

 

85.0

 

%

 

 

89.8

 

%

Operating income

 

$

274

 

 

$

194

 

 

 

41

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

 

15.0

%

 

 

10.2

%

 

 

480

 

bp

 

 

 

 

 

 

 

 

 

 

Average daily shipments (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Priority

 

 

71.3

 

 

 

78.5

 

 

 

(9

)

 

 

 

 

 

 

 

 

 

 

 

Economy

 

 

30.1

 

 

 

32.8

 

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

Total average daily shipments

 

 

101.4

 

 

 

111.3

 

 

 

(9

)

 

 

 

 

 

 

 

 

 

 

 

Weight per shipment (lbs)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Priority

 

 

1,096

 

 

 

1,156

 

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

Economy

 

 

998

 

 

 

960

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

Composite weight per shipment

 

 

1,067

 

 

 

1,098

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

Revenue per shipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Priority

 

$

259.90

 

 

$

255.45

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

Economy

 

 

302.74

 

 

 

295.75

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

Composite revenue per shipment

 

$

272.62

 

 

$

267.34

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

Revenue per hundredweight

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Priority

 

$

23.71

 

 

$

22.10

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

Economy

 

 

30.34

 

 

 

30.81

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

Composite revenue per hundredweight

 

$

25.55

 

 

$

24.35

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

FedEx Freight Segment Revenue

FedEx Freight segment revenue decreased 4% in the first quarter of 2021 due to decreased average daily shipments, partially offset by higher revenue per shipment. Average daily shipments decreased 9% in the first quarter of 2021 due to lower demand for our service offerings as a result of the COVID-19 pandemic and related supply chain disruptions. Revenue per shipment increased 2% in the first quarter of 2021 primarily due to higher base rates reflecting our ongoing revenue quality initiatives, partially offset by lower weight per shipment.

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 periods ended August 31:

 

 

Three Months Ended

 

 

 

2020

 

 

2019

 

Low

 

 

21.00

%

 

 

23.50

%

High

 

 

21.30

 

 

 

24.40

 

Weighted-average

 

 

21.20

 

 

 

23.90

 

- 33 -


 

FedEx Freight Segment Operating Income

FedEx Freight segment operating income increased 41% in the first quarter of 2021 driven by continued focus on revenue quality initiatives and aligning our cost structure with current and anticipated business levels, enabling FedEx Freight to improve profit and more than offset the impact of lower volumes as a result of the COVID-19 pandemic and weaker economic conditions.

Salaries and employee benefits expense decreased 7% in the first quarter of 2021 primarily due to lower volumes, partially offset by higher variable incentive compensation and merit increases.

Fuel expense decreased 47% in the first quarter of 2021 primarily due to decreased fuel prices. The net impact of fuel had a slightly negative impact to operating income in the first quarter of 2021 as lower fuel surcharges outpaced decreased fuel prices. See the “Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.

- 34 -


 

FINANCIAL CONDITION

LIQUIDITY

Cash and cash equivalents totaled $7.0 billion at August 31, 2020, compared to $4.9 billion at May 31, 2020. The following table provides a summary of our cash flows for the three-month periods ended August 31 (in millions):

 

 

2020

 

 

2019

 

Operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

1,245

 

 

$

745

 

Noncash charges and credits

 

 

1,675

 

 

 

1,745

 

Changes in assets and liabilities

 

 

(269

)

 

 

(1,925

)

Cash provided by operating activities

 

 

2,651

 

 

 

565

 

Investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,424

)

 

 

(1,418

)

Proceeds from asset dispositions and other

 

 

6

 

 

 

(1

)

Cash used in investing activities

 

 

(1,418

)

 

 

(1,419

)

Financing activities:

 

 

 

 

 

 

 

 

Principal payments on debt

 

 

(45

)

 

 

(985

)

Proceeds from debt issuances

 

 

959

 

 

 

2,093

 

Proceeds from stock issuances

 

 

82

 

 

 

12

 

Dividends paid

 

 

(170

)

 

 

(170

)

Purchase of treasury stock

 

 

 

 

 

(3

)

Other, net

 

 

(1

)

 

 

(5

)

Cash provided by financing activities

 

 

825

 

 

 

942

 

Effect of exchange rate changes on cash

 

 

15

 

 

 

(18

)

Net increase in cash and cash equivalents

 

$

2,073

 

 

$

70

 

Cash and cash equivalents at the end of period

 

$

6,954

 

 

$

2,389

 

Cash flows from operating activities increased $2.1 billion in the first quarter of 2021 primarily due to lower pension contributions, relief from certain taxes in the United States pursuant to the CARES Act, lower variable incentive compensation payments and higher net income. Capital expenditures remained flat during the first quarter of 2021 primarily due to higher spending related to aircraft and related equipment at FedEx Express, which was offset by decreased spending on vehicles and trailers at FedEx Freight and FedEx Express. See “Capital Resources” for a discussion of capital expenditures during 2021 and 2020.

During August 2020, FedEx Express issued $970 million of Pass Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of 1.875% due in February 2034 utilizing pass through trusts. The Certificates are secured by 19 Boeing aircraft. The payment obligations of FedEx Express in respect of the Certificates are fully and unconditionally guaranteed by FedEx. FedEx Express is using the proceeds from the issuance for general corporate purposes. See Note 4 for additional information.

- 35 -


 

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 periods ended August 31 (in millions):

 

 

Three Months Ended

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Percent Change

 

Aircraft and related equipment

 

$

773

 

 

$

541

 

 

 

43

 

Package handling and ground support equipment

 

 

217

 

 

 

141

 

 

 

54

 

Vehicles and trailers

 

 

37

 

 

 

261

 

 

 

(86

)

Information technology

 

 

194

 

 

 

222

 

 

 

(13

)

Facilities and other

 

 

203

 

 

 

253

 

 

 

(20

)

Total capital expenditures

 

$

1,424

 

 

$

1,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FedEx Express segment

 

$

1,028

 

 

$

951

 

 

 

8

 

FedEx Ground segment

 

 

204

 

 

 

96

 

 

 

113

 

FedEx Freight segment

 

 

39

 

 

 

186

 

 

 

(79

)

FedEx Services segment

 

 

118

 

 

 

151

 

 

 

(22

)

Other

 

 

35

 

 

 

34

 

 

 

3

 

Total capital expenditures

 

$

1,424

 

 

$

1,418

 

 

 

 

Capital expenditures remained flat in the first quarter of 2021 primarily due to higher spending related to aircraft and related equipment at FedEx Express, which was offset by decreased spending on vehicles and trailers at FedEx Freight and FedEx Express.

- 36 -


 

GUARANTOR FINANCIAL INFORMATION

We are providing the following information in compliance with Rule 13-01 of Regulation S-X, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” with respect to our senior unsecured debt securities and the Certificates. As of August 31, 2020, we had outstanding $21.9 billion of senior unsecured debt securities and $970 million of Certificates.

Substantially all of the senior unsecured notes were issued by FedEx under a shelf registration statement and are guaranteed by certain direct and indirect subsidiaries of FedEx (“Guarantor Subsidiaries”). FedEx owns, directly or indirectly, 100% of each Guarantor Subsidiary. The guarantees are (1) unsecured obligations of the respective Guarantor Subsidiary, (2) rank equally with all of their other unsecured and unsubordinated indebtedness, and (3) are full and unconditional and joint and several. If we sell, transfer or otherwise dispose of all of the capital stock or all or substantially all of the assets of a Guarantor Subsidiary to any person that is not an affiliate of FedEx, the guarantee of that Guarantor Subsidiary will terminate and holders of debt securities will no longer have a direct claim against such subsidiary under the guarantee.

Additionally, FedEx fully and unconditionally guarantees the payment obligations of FedEx Express in respect of the Certificates. See Note 6 to the financial statements included in our Annual Report for additional information regarding the terms of the senior unsecured debt securities and Note 4 of the accompanying consolidated financial statements for additional information regarding the terms of the Certificates.

The following tables present summarized financial information for FedEx (as Parent) and the Guarantor Subsidiaries on a combined basis after transactions and balances within the combined entities have been eliminated.

Parent and Guarantor Subsidiaries

The following table presents the summarized balance sheet information as of August 31, 2020 and May 31, 2020 (in millions):

 

 

 

August 31,

2020

 

 

May 31,

2020

 

Current Assets

 

$

13,016

 

 

$

11,014

 

Intercompany Receivable

 

 

3,442

 

 

 

3,985

 

Total Assets

 

 

78,198

 

 

 

62,089

 

Current Liabilities

 

 

7,758

 

 

 

7,030

 

Intercompany Payable

 

 

 

 

 

519

 

Total Liabilities

 

 

52,037

 

 

 

49,844

 

The following table presents the summarized statement of income information as of August 31, 2020 (in millions):

 

Revenue

 

$

14,215

 

Intercompany Charges, net

 

 

(658

)

Operating Income

 

 

1,143

 

Intercompany Charges, net

 

 

35

 

Income Before Income Taxes

 

 

1,221

 

Net Income

 

$

949

 

The following tables present summarized financial information for FedEx (as Parent Guarantor) and FedEx Express (as Subsidiary Issuer) on a combined basis after transactions and balances within the combined entities have been eliminated.

Parent Guarantor and Subsidiary Issuer

The following table presents the summarized balance sheet information as of August 31, 2020 and May 31, 2020 (in millions):

 

 

 

August 31,

2020

 

 

May 31,

2020

 

Current Assets

 

$

6,231

 

 

$

4,444

 

Intercompany Receivable

 

 

2,124

 

 

 

3,918

 

Total Assets

 

 

60,673

 

 

 

57,375

 

Current Liabilities

 

 

4,078

 

 

 

3,546

 

Intercompany Payable

 

 

7,138

 

 

 

7,853

 

Total Liabilities

 

 

46,273

 

 

 

45,140

 

- 37 -


 

 

The following table presents the summarized statement of income information as of August 31, 2020 (in millions):

 

Revenue

 

$

5,334

 

Intercompany Charges, net

 

 

(241

)

Operating Income

 

 

213

 

Intercompany Charges, net

 

 

135

 

Income Before Income Taxes

 

 

620

 

Net Income

 

$

601

 

LIQUIDITY OUTLOOK

In response to current business and economic conditions as referenced above in the “Outlook” section of this MD&A, we are taking actions to manage our cash flow and improve our liquidity, including review and consideration of opportunities and strategies for capital expenditure reductions and deferrals, operating expense reductions and alternative financing sources in addition to our credit facilities and unsecured debt markets. In addition, we expect to benefit from certain of the relief provisions of recently enacted and any future government programs intended to provide economic relief to U.S. and global businesses in response to the COVID-19 pandemic, including relief from certain income, excise and payroll taxes in the United States pursuant to the CARES Act.

We believe that our cash and cash equivalents, cash flow from operations and available financing sources will be adequate to meet our internal and external liquidity needs. Our cash and cash equivalents balance at August 31, 2020 includes $1.2 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 Tax Cuts and Jobs Act 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.

Our capital expenditures are expected to be approximately $5.1 billion in 2021, a $0.8 billion decrease from 2020. The slight increase in our expected capital expenditures from the estimate in our Annual Report is due to capital investment for additional capacity initiatives in support of increased volumes. Total capital expenditures will include aircraft modernization at FedEx Express and strategic investments to improve productivity and safety. We invested $0.8 billion in aircraft and related equipment in the first quarter of 2021. In addition, we are making investments over multiple years 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 these investments in hubs will provide productivity gains. We anticipate that our cash flow from operations will be sufficient to fund our capital expenditures for the remainder of 2021. Historically, we have been successful in obtaining unsecured financing from both domestic and international sources, although the marketplace for such investment capital can become restricted depending on a variety of economic factors.

During the first quarter of 2021, FedEx Express executed a contract amendment rescheduling Boeing 767-300 Freighter aircraft deliveries as follows: 2021 – 18 aircraft; 2022 – 11 aircraft; 2023 – 13 aircraft; and 2024 – 4 aircraft.

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 and allows pass through trusts formed by FedEx Express to sell, in one or more future offerings, pass through certificates.

We have a $2.0 billion Five-Year Credit Agreement and a $1.5 billion 364-Day Credit Agreement. The Five-Year Credit Agreement expires in March 2025 and includes a $250 million letter of credit sublimit. The 364-Day Credit Agreement expires in March 2021. The Credit Agreements are available to finance our operations and other cash flow needs. See Note 1 and Note 4 of the accompanying unaudited condensed consolidated financial statements for a description of the terms and significant covenants of the Credit Agreements.

We do not expect to make any contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) during 2021. Our U.S. Pension Plans have ample funds to meet expected benefit payments.

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 “negative.” 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 “negative.” 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.

- 38 -


 

CONTRACTUAL CASH OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

There have been no material changes to the contractual commitments described in Part II, Item 7 in our Annual Report.

We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity.

See Note 8 to the accompanying unaudited condensed consolidated financial statements for additional information on our purchase commitments.

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 (the “DOC”) from enforcing prohibitions contained in the Export Administration Regulations against FedEx. On September 11, 2020, the court granted the DOC’s motion to dismiss the lawsuit. We intend to appeal this decision.

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.

GOODWILL. Goodwill is tested for impairment between annual tests whenever events or circumstances make it more likely than not that the fair value of a reporting unit has fallen below its carrying value. We do not believe there has been any other change of events or circumstances that would indicate that a reevaluation of the goodwill of our reporting units is required as of August 31, 2020, nor do we believe the goodwill of our reporting units is at risk of failing impairment testing. For additional details on goodwill impairment testing, refer to Note 1 to the financial statements included in our Annual Report.

Information regarding our critical accounting estimates can be found in our Annual Report, including Note 1 to the financial statements therein. 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.

FORWARD-LOOKING STATEMENTS

Certain statements in this report, including (but not limited to) those contained in “Income Taxes,” “Outlook,” “Liquidity Outlook” and “Critical Accounting Estimates,” and the “Financing Arrangements,” “Retirement Plans,” “Commitments” and “Contingencies” notes to our unaudited condensed 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 and the assumptions underlying such statements. 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, potential risks and uncertainties, such as:

the negative impacts of the COVID-19 pandemic;

 

economic conditions in the global markets in which we operate;

 

significant changes in the volumes of shipments transported through our networks, customer demand for our various services or the prices we obtain for our services;

 

anti-trade measures and additional changes in international trade policies and relations;

 

a significant data breach or other disruption to our technology infrastructure;

 

our ability to successfully integrate the businesses and operations of FedEx Express and TNT Express in the expected time frame and at the expected cost and to achieve the expected benefits from the combined businesses;

 

- 39 -


 

our ability to successfully implement our business strategy, effectively respond to changes in market dynamics and achieve the anticipated benefits and associated cost savings of such strategies and actions;

 

damage to our reputation or loss of brand equity;

 

our ability to retain and attract employee talent and maintain our company culture;

 

the impact of the United Kingdom’s withdrawal from the European Union;

 

the price and availability of jet and vehicle fuel;

 

our ability to manage our network capacity and cost structure for capital expenditures and operating expenses, and match it to shifting and future customer volume levels;

 

the impact of intense competition on our ability to maintain or increase our prices (including our fuel surcharges in response to rising fuel costs) or to maintain or grow our revenue and market share;

 

any impacts on our businesses resulting from evolving or new U.S. domestic or international government regulations, laws, policies and actions, which could be unfavorable to our business, including regulatory or other actions affecting data privacy and sovereignty, global aviation or other transportation rights, increased air cargo, pilot flight and duty time and other security or safety requirements, export controls, the use of new technology and accounting, trade (such as protectionist measures or restrictions on free trade), foreign exchange intervention in response to currency volatility, labor (such as joint employment standards or changes to the Railway Labor Act of 1926, as amended, affecting FedEx Express employees), environmental (such as global climate change legislation) or postal rules;

 

future changes in tax laws, regulations and interpretations, and challenges to our tax positions;

 

our ability to execute and effectively operate, integrate, leverage and grow acquired businesses, and to continue to support the value we allocate to these acquired businesses, including their goodwill and other intangible assets;

 

our ability to maintain good relationships with our employees and avoid attempts by labor organizations to organize groups of our employees, which could significantly increase our operating costs and reduce our operational flexibility;

 

the impact of costs related to lawsuits in which it is alleged that FedEx Ground should be treated as an employer of drivers employed by service providers engaged by FedEx Ground;

 

increased insurance and claims expenses related to vehicle accidents, workers’ compensation claims and general business liabilities;

 

any impact on our business from disruptions or modifications in service by, or changes in the business or financial soundness of, the U.S. Postal Service, which is a vendor and significant customer of FedEx;

 

the impact of any international conflicts or terrorist activities on the United States and global economies in general, the transportation industry or us in particular, and what effects these events will have on our costs or the demand for our services;

 

increasing costs, the volatility of costs and funding requirements and other legal mandates for employee benefits, especially pension and healthcare benefits;

 

our ability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography;

 

our ability to successfully mitigate unique technological, operational and regulatory risks related to our autonomous delivery strategy;

 

constraints, volatility or disruption in the capital markets and our ability to maintain our current credit ratings, commercial paper ratings, senior unsecured debt credit ratings and Credit Agreement financial covenants;

 

widespread outbreak of an illness or any other communicable disease, or any other public health crisis;

- 40 -


 

 

human capital management risks, including changes in our ability to attract and retain drivers, package and freight handlers, commercial pilots and other employees, as well as health and safety issues;

 

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;

 

any liability resulting from and the costs of defending against class-action, derivative 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 9 of the accompanying unaudited condensed 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) and with the union elected in 2015 to represent drivers at a FedEx Freight, Inc. facility in the U.S.;

 

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;

 

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; and

 

other risks and uncertainties you can find in our press releases and SEC filings, including the risk factors identified under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in our Annual Report, as updated by our quarterly reports on Form 10-Q.

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.

- 41 -


 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of August 31, 2020, there were no material changes in our market risk sensitive instruments and positions since our disclosures in our Annual Report.

The principal foreign currency exchange rate risks to which we are exposed relate to 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 revenue than our expenses, as a significant portion of our expenses are denominated in U.S. dollars, such as aircraft and fuel expenses. During the first quarter of 2021, the U.S. dollar weakened relative to the currencies of the foreign countries in which we operate, as compared to the first quarter of 2020, and this weakening had a slightly positive impact on our results.

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 “Fuel” section of “Management’s Discussion and Analysis of Results of Operations and Financial Condition.”

Item 4. 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 August 31, 2020 (the end of the period covered by this Quarterly Report on Form 10-Q).

During our fiscal quarter ended August 31, 2020, 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. Due to the COVID-19 pandemic, the majority of our accounting, finance and legal employees continued working remotely. We continue to monitor the COVID-19 pandemic and its effects on the design and operating effectiveness of our internal control over financial reporting.

- 42 -


 

PART II. OTHER INFORMATION

For a description of all material pending legal proceedings, see Note 9 of the accompanying unaudited condensed consolidated financial statements.

Item 1A. Risk Factors

Other than the risk factor set forth below, there have been no material changes from the risk factors disclosed in our Annual Report (under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition”) in response to Part I, Item 1A of Form 10-K.

 

The COVID-19 pandemic has had certain adverse effects on our business, results of operations and financial condition, and we expect such adverse effects will continue. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. Due to the crucial role we play in moving supply chains and delivering critical relief, we are considered an essential business and we continue to operate under and respond to evolving governmental and other restrictions issued in the U.S. and globally. The disruption of global supply chains and the global economy has materially affected our business, results of operations and financial condition. We expect the full impact of the COVID-19 pandemic, including the extent of its effect on our financial condition and results of operations, to be dictated by future developments which remain uncertain and cannot be predicted, such as its duration and spread, the success of efforts to contain it and treat its impact, the possibility of subsequent widespread outbreaks, and the impact of actions taken in response. The COVID-19 pandemic has had, and we expect will continue to have, certain negative impacts on our business, including, but not limited to, the following:

 

The COVID-19 pandemic has had a rapid and significant negative impact on the global economy. The disruption of global supply chains, interruption in economic activity, preventative measures taken to alleviate the pandemic (such as governmental and other restrictions and other responsive measures), and increased economic uncertainty caused by the pandemic have resulted in increased global economic weakness of an unknown duration. Although certain of the responsive measures have begun, and may continue, to ease in certain locations, the ongoing pandemic, including large outbreaks in various regions, has resulted, and may continue to result, in their reinstitution. Continued weak global economic conditions have reduced business-to-business demand for certain of our services. The various governmental and other restrictions and slow down of commercial activities in major markets around the world has also led to unprecedented demand for residential delivery services, rivaling our peak holiday season traffic. During 2020, we incurred increased costs associated with this demand and lower composite yields than our typical service mix, and we continued to incur increased costs associated with this demand in the first quarter of 2021. Prolonged economic weakness, including an extended period of elevated levels of unemployment in the U.S. and other regions, could further reduce discretionary consumer spending and consumer confidence, which could have a further adverse effect on our results of operations.

 

 

We have made significant operational adjustments to align our services with shipping volumes and operating conditions and to comply with evolving governmental orders, rules and regulations. As a result, we are incurring additional operating expenses as we adjust to dramatically changed and continuously evolving market dynamics and operating conditions, and we may continue to incur similar expenses in the future. Additionally, we have reduced planned 2021 capital expenditures by decreasing planned spending on vehicles and trailers, delaying facility expansions and postponing certain information technology initiatives. The COVID-19 pandemic has also delayed completion of capital improvements and certain other initiatives in Europe related to the integration of TNT Express. If we are unable to remain agile and continue to flex our networks to align with shipping volumes, customer needs, market demands and operating conditions, or are unable to continuously respond to evolving governmental policies for the duration of a prolonged period of economic recovery, our business operations could be negatively impacted, which could have a further adverse effect on our results of operations.

 

 

We rely on a global workforce and our business demands we take measures to protect the health and safety of our team members, customers and others with whom we do business, while continuing to effectively manage our employees and maintain business operations. We have taken additional measures and incurred additional expenses to protect the health and safety of our team members and the public, and continue to work with customers to accommodate special requests around modified store hours, closings, and delivery alternatives to comply with applicable government restrictions and safety guidance. Due to the size, scope and geographically dispersed nature of our operations, the expenses we incur to protect the health and safety of certain of our employees may be higher than similar expenses incurred by companies in other industries. Additionally, our business operations may be disrupted if a significant portion of our workforce is unable to work safely and effectively due to illness, quarantines, government actions, or other restrictions or measures responsive to the pandemic, or if members of senior management or our Board of Directors are unable to perform their duties for an extended period of time. Measures taken across our business operations to address health and safety may not be sufficient to prevent the spread of

- 43 -


 

 

COVID-19 among our team members, customers and others. Therefore, we could face operational disruptions and incur additional expenses, including devoting additional resources to assisting employees diagnosed with COVID-19 and further changing health and safety protocols and processes, that could adversely affect our business and results of operations.

 

 

A significant number of our employees as well as customers and others with whom we do business continue to work remotely in response to the COVID-19 pandemic. Our business operations may be disrupted, and we may experience increased risk of adverse effects to our business, if a significant portion of our workforce or certain business operations are negatively impacted as a result of remote work arrangements, including due to cyber risks or other disruption to our technology infrastructure. Further, if our FedEx Express Memphis World Hub or another key operating facility experiences closures or worker shortages as a result of COVID-19, whether temporary or sustained, our business operations would be significantly disrupted.

 

 

Cost management and various cost-containment actions implemented across our business in response to the COVID-19 pandemic could hinder execution of our business strategy, including deferral of planned capital projects. These actions could result in increased costs to successfully implement our business strategy and effectively respond to changes in market dynamics, and could adversely affect our business and results of operations. For additional discussion, see Part I, Item 1 of our Annual Report under the caption “Strategy.”

 

 

We cannot be certain that loss or delay in the collection of accounts receivable will not have a material adverse effect on our results of operations and financial condition. For additional discussion, see Part II, Item 7 of our Annual Report under the caption “Liquidity Outlook.”

 

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many other risks described under the heading “Risk Factors” in our Annual Report, any of which could materially and adversely affect our business, results of operations and financial condition. Such risks include, but are not limited to, additional changes in international trade policies and relations; our ability to successfully integrate the businesses and operations of FedEx Express and TNT Express in the expected time frame and at the expected cost; our strong reputation and the value of the FedEx brand; our ability to manage our capital intensive businesses; changes to the business and financial soundness of the U.S. Postal Service; workforce availability; employee healthcare benefit costs; constraints, volatility or disruption in the capital markets and our ability to access sources of financing and liquidity; and the impact of litigation or claims from customers, team members, suppliers, regulators or other third parties relating to the COVID-19 pandemic or our actions in response to the pandemic.

 

- 44 -


 

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

We did not repurchase any shares of FedEx common stock during the first quarter of 2021.

On January 26, 2016, we announced a stock repurchase program approved by our Board of Directors, 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 September 11, 2020, 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. See Note 1 of the accompanying unaudited condensed consolidated financial statements for further discussion.

Item 5. Other Information

Compensatory Arrangements of Certain Officers

Each named executive officer, other than Frederick W. Smith, has received a base salary increase of 2% effective October 1, 2020.

 

- 45 -


 

Item 6. Exhibits

 

Exhibit

Number

 

Description of Exhibit

 

 

 

        4.1

 

Pass Through Trust Agreement, dated as of August 13, 2020, between FedEx Express and Wilmington Trust Company. (Filed as Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed August 13, 2020 (the “August 13, 2020 Form 8-K”), and incorporated herein by reference.)

 

 

 

 

        4.2

 

Trust Supplement No. 2020-1AA, dated as of August 13, 2020, between FedEx Express and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement dated as of August 13, 2020. (Filed as Exhibit 4.2 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

        4.3

 

Guarantee of FedEx dated August 13, 2020. (Filed as Exhibit 4.3 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

 

 

        4.4

 

Form of Pass Through Trust Certificate, Series 2020-1AA. (Included in Exhibit A to Exhibit 4.2 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

 

 

        4.5

 

Intercreditor Agreement, dated as of August 13, 2020, among Wilmington Trust Company, as Trustee of the FedEx Pass Through Trust 2020-1AA, BNP Paribas, acting through its New York Branch, as Liquidity Provider, and Wilmington Trust Company, as Subordination Agent. (Filed as Exhibit 4.5 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

 

        4.6

 

Revolving Credit Agreement (2020-1AA), dated as of August 13, 2020, between Wilmington Trust Company, as Subordination Agent, agent and trustee for the trustee of the FedEx Pass Through Trust 2020-1AA and as Borrower, and BNP Paribas, acting through its New York Branch, as Liquidity Provider. (Filed as Exhibit 4.6 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

 

    *†4.7

 

Participation Agreement (N126FE), dated as of August 13, 2020, among FedEx Express, Wilmington Trust Company, as Pass Through Trustee under the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein. (Filed as Exhibit 4.7 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

 

  **†4.8

 

Participation Agreement (N869FD), dated as of August 13, 2020, among FedEx Express, Wilmington Trust Company, as Pass Through Trustee under the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein. (Filed as Exhibit 4.8 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

      *4.9

 

Indenture and Security Agreement (N126FE), dated as of August 13, 2020, between FedEx Express and Wilmington Trust Company, as Loan Trustee. (Filed as Exhibit 4.9 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

 

  **4.10

 

Indenture and Security Agreement (N869FD), dated as of August 13, 2020, between FedEx Express and Wilmington Trust Company, as Loan Trustee. (Filed as Exhibit 4.10 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

 

      4.11

 

Form of Series 2020-1AA Equipment Notes. (Included in Exhibit 4.9 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

 

 

˄ 10.1

 

Amendment dated July 7, 2020 (but effective as of March 30, 2020), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and FedEx Express (the “USPS Transportation Agreement”).

 

 

 

 

˄ 10.2

 

Amendment dated July 7, 2020 (but effective as of May 4, 2020), amending the USPS Transportation Agreement.

 

 

 

 

 

 

˄ 10.3

 

Amendment dated July 7, 2020 (but effective as of June 1, 2020), amending the USPS Transportation Agreement.

 

 

 

˄ 10.4

 

Supplemental Agreement No. 15 (and related side letters) dated as of June 25, 2020, amending the Boeing 767-3S2 Freighter Purchase Agreement.

 

 

 

***10.5

 

Amended and Restated FedEx Retirement Parity Pension Plan, effective June 15, 2020.

 

 

 

      15.1

 

Letter re: Unaudited Interim Financial Statements.

 

 

 

- 46 -


 

      31.1

 

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.

 

 

 

      31.2

 

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.

 

      32.1

 

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.

 

 

 

      32.2

 

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.

 

 

 

    *99.1

 

Schedule I related to the FedEx Express Pass Through Certificates, Series 2020-1AA (the “Certificates”) (Filed as Exhibit 99.1 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

  **99.2

 

Schedule II related to the Certificates (Filed as Exhibit 99.2 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

 

 

 

    101.1

 

Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”).

 

 

 

 

    104.1

 

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101.1).

 

 

*

Pursuant to Instruction 2 to Item 601 of Regulation S-K, Exhibit 99.1 to the August 13, 2020 Form 8-K contains a list of documents applicable to the Boeing 767-300F Aircraft (other than the Aircraft bearing Registration No. N126FE) that relate to the offering of the Certificates, which documents are substantially identical to those which are filed as Exhibits 4.7 and 4.9 to the August 13, 2020 Form 8-K, except for the information identifying such Aircraft in question and various information relating to the principal amounts of the Equipment Notes relating to such Aircraft. Exhibit 99.1 to the August 13, 2020 Form 8-K sets forth the details by which such documents differ from the corresponding representative sample of documents filed as Exhibits 4.7 and 4.9 to the August 13, 2020 Form 8-K with respect to the Aircraft bearing Registration No. N976JT.

 

**    

Pursuant to Instruction 2 to Item 601 of Regulation S-K, Exhibit 99.2 to the August 13, 2020 Form 8-K contains a list of documents applicable to the Boeing 777F Aircraft (other than the Aircraft bearing Registration No. N869FD) that relate to the offering of the Certificates, which documents are substantially identical to those which are filed as Exhibits 4.8 and 4.10 to the August 13, 2020 Form 8-K, except for the information identifying such Aircraft in question and various information relating to the principal amounts of the Equipment Notes relating to such Aircraft. Exhibit 99.2 to the August 13, 2020 Form 8-K sets forth the details by which such documents differ from the corresponding representative sample of documents filed as Exhibits 4.8 and 4.10 to the August 13, 2020 Form 8-K with respect to the Aircraft bearing Registration No. N869FD.

 

***

     Management contract or compensatory plan or arrangement.

 

†          Certain attachments 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 a copy of such attachments to the SEC or its staff upon request.

 

˄    

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.

 

- 47 -


 

SIGNATURE

Pursuant to the requirements 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.

 

 

 

 

FEDEX CORPORATION

 

 

 

 

Date: September 15, 2020

 

 

/s/ JOHN L. MERINO

 

 

 

JOHN L. MERINO

 

 

 

CORPORATE VICE PRESIDENT AND

 

 

 

PRINCIPAL ACCOUNTING OFFICER

 

 

 

- 48 -

Exhibit 10.1

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.

 

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT

  1. CONTRACT ID CODE     PAGE     OF
     

 

    1    

 

 

    2    

2. AMENDMENT/MODIFICATION NO.

177

 

3. EFFECTIVE DATE  

03/30/2020

  4. REQUISITION/PURCHASE REQ. NO.       5. PROJECT NO. (If applicable)
6. ISSUED BY                                                CODE     5ACAAQ   7. ADMINISTERED BY (IF OTHER THAN ITEM 6)   CODE     5ACAAQ

JESSICA J. STRINGER

Cargo Air Acquisitions

Air Transportation CMC

United States Postal Service

475 L’Enfant Plaza SW, Room 1P650

Washington DC 20260-0650

(202) 268-5527

 

 

Cargo Air Acquisitions

Air Transportation CMC

United States Postal Service

475 L’Enfant Plaza SW, Room 1P650

Washington DC 20260-0650

8. NAME AND ADDRESS OF CONTRACTOR (No., Street, County,  State, and Zip Code)           (x)         9A. AMENDMENT OF SOLICITATION NO.

 

FEDERAL EXPRESS CORPORATION

             

3610 HACKS CROSS ROAD

MEMPHIS TN 38125-8800

           

9B. DATED (SEE ITEM 11)

 

   

    

 

     x      

 

 

10A. MODIFICATION OF CONTRACT/ORDER NO.

ACN-13-FX

 

                  10B. DATED (SEE ITEM 13)
SUPPLIER CODE:         000389122   FACILITY CODE                           04/23/2013
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
☐  The above numbered Solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers          ☐  is extended,        ☐  is not  extended.

 

Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing items 8 and 15, and returning                      copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified.

 

12. ACCOUNTING AND APPROPRIATION DATA (If required.)

See Schedule

 

Net Decrease:            [*]

    

13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.

 

   
(x)    

A. THIS CHANGE BY CLAUSE IS ISSUED PURSUANT TO: (Specify clause) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A

     
☐                 

 

☐  

 

B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14.

 

       

 

☐  

 

C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO THE AUTHORITY OF: THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.

 

       
☒    

D. OTHER (such as no cost change/cancellation, termination, etc.) (Specify type of modification and authority): THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.

Mutual Agreement of the Contracting Parties

 

       

 

E. IMPORTANT: Contractor          is not,          is required to sign this document and return         1     copies to the issuing office.

 

   

14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)

 

In accordance with contract ACN-13-FX and the “Fuel Adjustment” section, the following Line Haul Rate (fuel) for the Day Network as set out in Attachment 10 is modified for performance during the period of March 30, 2020 to May 3, 2020 (Operating Period 79) as follows:

 

TIERS: Base – Tier 5

From:

[*] per cubic foot

To:

[*] per cubic foot

Continued...

   

Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect.

 

   

15A. NAME AND TITLE OF SIGNER (Type or print)

 

    Ron D. Stevens, Vice President                                                          

 

16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)

 

    Brian Mckain

15B. CONTRACTOR/OFFEROR

 

/s/ RON D. STEVENS

(Signature of person authorized to sign)

     

15C. DATE SIGNED  

 

7-7-20

 

16B. CONTRACT AUTHORITY

 

/s/ BRIAN MCKAIN

(Signature of Contracting Officer)

     

16C. DATE SIGNED

 

7-7-20

 

*

Blank spaces contained confidential information that 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.


CONTINUATION SHEET

  REQUISITION NO.  

Page

 

2

 

    Of

 

    2

 

              

 

CONTRACT/ORDER NO.

 

ACN-13-FX/177

 

AWARD/ EFFECTIVE DATE  

03/30/2020

  MASTER/AGENCY CONTRACT NO       SOLICITATION NO.  

SOLICITATION         ISSUE DATE

           
    ITEM NO    

 

 

SCHEDULE OF SUPPLIES/SERVICES

 

 

QUANTITY 

 

 

 UNIT 

 

 

    UNIT PRICE    

 

 

AMOUNT

 

 

 

1

 

 

This is a decrease of [*].

 

TIERS: 6 - 8

TIER 6:

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

 

TIER 7:

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

 

TIER 8:

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

 

[*]

 

Sub Rept Req’d: Y Carrier Code: FX Route Termini

S: Various Route Termini End: Various Payment

Terms: SEE CONTRACT

Discount Terms:

 

See Schedule

 

Accounting Info:

BFN: 670167

Period of Performance: 09/30/2013 to 09/29/2024

 

Change Item 1 to read as follows:

 

Day Network

Account Number: 53503

 

This is for estimation purposes only and is not a guarantee of contract value.

 

Omitted Attachment

 

An attachment to this exhibit regarding volume information 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 Securities and Exchange Commission or its staff upon request.

 

    

             

 

 

[*]

 

*

Blank spaces contained confidential information that 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.

Exhibit 10.2

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.

 

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT

  1. CONTRACT ID CODE     PAGE     OF
     

 

    1    

 

 

    2    

2. AMENDMENT/MODIFICATION NO.

178

 

3. EFFECTIVE DATE  

05/04/2020

  4. REQUISITION/PURCHASE REQ. NO.       5. PROJECT NO. (If applicable)
6. ISSUED BY                                                CODE     5ACAAQ   7. ADMINISTERED BY (IF OTHER THAN ITEM 6)   CODE     5ACAAQ

JESSICA J. STRINGER

Cargo Air Acquisitions

Air Transportation CMC

United States Postal Service

475 L’Enfant Plaza SW, Room 1P650

Washington DC 20260-0650

(202) 268-5527  

 

 

Cargo Air Acquisitions

Air Transportation CMC

United States Postal Service

475 L’Enfant Plaza SW, Room 1P650

Washington DC 20260-0650

8. NAME AND ADDRESS OF CONTRACTOR (No., Street, County,  State, and Zip Code)           (x)         9A. AMENDMENT OF SOLICITATION NO.

 

FEDERAL EXPRESS CORPORATION

             

3610 HACKS CROSS ROAD

MEMPHIS TN 38125-8800

           

9B. DATED (SEE ITEM 11)

 

   

    

 

     x      

 

 

10A. MODIFICATION OF CONTRACT/ORDER NO.

ACN-13-FX

 

                  10B. DATED (SEE ITEM 13)
SUPPLIER CODE:       000389122   FACILITY CODE                           04/23/2013
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS     
☐  The above numbered Solicitation is amended as set forth in Item 14. The hour and date  specified for receipt of Offers          ☐  is extended,        ☐  is not  extended.

 

Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing items 8 and 15, and returning                  copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified.

 

12. ACCOUNTING AND APPROPRIATION DATA (If required.)

See Schedule

 

Net Decrease:            [*]

    

13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.

 

   
(x)    

A. THIS CHANGE BY CLAUSE IS ISSUED PURSUANT TO: (Specify clause) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.

     
☐                 

 

☐  

 

B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14.

 

       

 

☐  

 

C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO THE AUTHORITY OF: THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.

 

       
☒    

D. OTHER (such as no cost change/cancellation, termination, etc.) (Specify type of modification and authority): THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.

Mutual Agreement of the Contracting Parties

 

       

 

E. IMPORTANT: Contractor          is not,          is required to sign this document and return         1     copies to the issuing office.

 

   

14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)

 

In accordance with contract ACN-13-FX and the “Fuel Adjustment” section, the following Line Haul Rate (fuel) for the Day Network as set out in Attachment 10 is modified for performance during the period of May 4, 2020 to May 31, 2020 (Operating Period 80) as follows:

 

TIERS: Base – Tier 5

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

Continued...

   

Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect.

 

   

15A. NAME AND TITLE OF SIGNER (Type or print)

 

    Ron D. Stevens, Vice President                                                          

 

16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)

 

    Brian Mckain

15B. CONTRACTOR/OFFEROR

 

/s/ RON D. STEVENS

(Signature of person authorized to sign)

     

15C. DATE SIGNED  

 

7-7-20

 

16B. CONTRACT AUTHORITY

 

/s/ BRIAN MCKAIN

(Signature of Contracting Officer)

     

16C. DATE SIGNED

 

7-7-20

 

*

Blank spaces contained confidential information that 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.


CONTINUATION SHEET

  REQUISITION NO.  

Page

 

2

 

    Of

 

    2

 

              

 

CONTRACT/ORDER NO.

 

ACN-13-FX/178

 

AWARD/ EFFECTIVE DATE  

05/04/2020

  MASTER/AGENCY CONTRACT NO       SOLICITATION NO.  

SOLICITATION         ISSUE DATE

           
    ITEM NO    

 

 

SCHEDULE OF SUPPLIES/SERVICES

 

 

QUANTITY 

 

 

 UNIT 

 

 

    UNIT PRICE    

 

 

AMOUNT

 

 

 

1

 

 

TIERS: 6 - 8

TIER 6:

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

 

TIER 7:

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

 

TIER 8:

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

 

[*]

 

Sub Rept Req’d: Y Carrier Code: FX Route Termini

S: Various Route Termini End: Various Payment

Terms: SEE CONTRACT

Discount Terms:

 

See Schedule

 

Accounting Info:

BFN: 670167

Period of Performance: 09/30/2013 to 09/29/2024

 

Change Item 1 to read as follows:

 

Day Network

Account Number: 53503

 

This is for estimation purposes only and is not a guarantee of contract value.

 

Omitted Attachment

 

An attachment to this exhibit regarding volume information 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 Securities and Exchange Commission or its staff upon request.

 

    

             

 

 

[*]

 

*

Blank spaces contained confidential information that 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.

Exhibit 10.3

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.

 

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT

  1. CONTRACT ID CODE     PAGE     OF
     

 

    1    

 

 

    2    

2. AMENDMENT/MODIFICATION NO.

179

 

3. EFFECTIVE DATE  

06/01/2020

  4. REQUISITION/PURCHASE REQ. NO.       5. PROJECT NO. (If applicable)
6. ISSUED BY                                               CODE     5ACAAQ   7. ADMINISTERED BY (IF OTHER THAN ITEM 6)   CODE     5ACAAQ

JESSICA J. STRINGER

Cargo Air Acquisitions

Air Transportation CMC

United States Postal Service

475 L’Enfant Plaza SW, Room 1P650

Washington DC 20260-0650

(202) 268-5527  

 

 

Cargo Air Acquisitions

Air Transportation CMC

United States Postal Service

475 L’Enfant Plaza SW, Room 1P650

Washington DC 20260-0650

8. NAME AND ADDRESS OF CONTRACTOR (No., Street, County,  State, and Zip Code)           (x)         9A. AMENDMENT OF SOLICITATION NO.

 

FEDERAL EXPRESS CORPORATION

             

3610 HACKS CROSS ROAD

MEMPHIS TN 38125-8800

           

9B. DATED (SEE ITEM 11)

 

   

    

 

     x      

 

 

10A. MODIFICATION OF CONTRACT/ORDER NO.

ACN-13-FX

 

                  10B. DATED (SEE ITEM 13)
SUPPLIER CODE:       000389122   FACILITY CODE                           04/23/2013
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS     
☐  The above numbered Solicitation is amended as set forth in Item 14. The hour and date  specified for receipt of Offers          ☐  is extended,        ☐  is not  extended.

 

Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing items 8 and 15, and returning                  copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment number. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified.

 

12. ACCOUNTING AND APPROPRIATION DATA (If required.)

See Schedule

 

Net Decrease:            [*]

    

13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.

 

   
(x)    

A. THIS CHANGE BY CLAUSE IS ISSUED PURSUANT TO: (Specify clause) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.

     
☐                 

 

☐  

 

B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14.

 

       

 

☐  

 

C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO THE AUTHORITY OF: THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.

 

       
☒    

D. OTHER (such as no cost change/cancellation, termination, etc.) (Specify type of modification and authority): THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.

Mutual Agreement of the Contracting Parties

 

       

 

E. IMPORTANT: Contractor          is not,          is required to sign this document and return         1     copies to the issuing office.

 

   

14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)

 

In accordance with contract ACN-13-FX and the “Fuel Adjustment” section, the following Line Haul Rate (fuel) for the Day Network as set out in Attachment 10 is modified for performance during the period of June 1, 2020 to June 28, 2020 (Operating Period 81) as follows:

 

TIERS: Base – Tier 5

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

Continued…

   

Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect.

 

   

15A. NAME AND TITLE OF SIGNER (Type or print)

 

    Ron D. Stevens, Vice President                                                          

 

16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)

 

    Brian Mckain

15B. CONTRACTOR/OFFEROR

 

/s/ RON D. STEVENS

(Signature of person authorized to sign)

     

15C. DATE SIGNED  

 

7-7-20

 

16B. CONTRACT AUTHORITY

 

/s/ BRIAN MCKAIN

(Signature of Contracting Officer)

     

16C. DATE SIGNED

 

7-7-20

 

*

Blank spaces contained confidential information that 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.


CONTINUATION SHEET

  REQUISITION NO.  

Page

 

2

 

    Of

 

    2

 

              

 

CONTRACT/ORDER NO.

 

ACN-13-FX/179

 

AWARD/ EFFECTIVE DATE  

06/01/2020

  MASTER/AGENCY CONTRACT NO       SOLICITATION NO.  

SOLICITATION         ISSUE DATE

           
    ITEM NO    

 

 

SCHEDULE OF SUPPLIES/SERVICES

 

 

QUANTITY 

 

 

 UNIT 

 

 

    UNIT PRICE    

 

 

AMOUNT

 

 

 

 

1

 

 

 

 

TIERS: 6 - 8

TIER 6:

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

 

TIER 7:

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

 

TIER 8:

From:

[*] per cubic foot

To:

[*] per cubic foot

This is a decrease of [*].

 

[*]

 

Sub Rept Req’d: Y Carrier Code: FX Route Termini S: Various Route Termini End: Various Payment Terms: SEE CONTRACT

Discount Terms:

 

See Schedule

 

Accounting Info:

BFN: 670167

Period of Performance: 09/30/2013 to 09/29/2024

 

Change Item 1 to read as follows:

 

Day Network

 

Account Number: 53503

 

This is for estimation purposes only and is not a guarantee of contract value.

 

Omitted Attachment

 

An attachment to this exhibit regarding volume information 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 Securities and Exchange Commission or its staff upon request.

 

    

 

             

 

 

 

[*]

 

 

 

*

Blank spaces contained confidential information that 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.

Exhibit 10.4

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.

 

LOGO

Supplemental Agreement No. 15

to

Purchase Agreement No. 3712

between

The Boeing Company

And

Federal Express Corporation

Relating to Boeing Model 767-3S2F Aircraft

THIS SUPPLEMENTAL AGREEMENT No. 15 (SA-15), entered into as of June 25, 2020 by and between THE BOEING COMPANY (Boeing) and FEDERAL EXPRESS CORPORATION (Customer);

W I T N E S S E T H:

A.        WHEREAS, the parties entered into Purchase Agreement No. 3712, dated December 14, 2011 (Purchase Agreement), relating to the purchase and sale of certain Boeing Model 767- 3S2F Aircraft (Aircraft); and

B.        WHEREAS, Customer desires to defer the delivery month of eleven (11) Aircraft (SA-15 Rescheduled Aircraft), as set forth in the tables below:

 

Aircraft
Block

   MSN1      Table    Existing
Delivery Month
of Aircraft
    Revised
Delivery Month
of Aircraft
 

E

     63126      1-A2      [ *]      [ *] 

F

     63135      1-A2      [ *]      [ *] 

G

     63140      1-A2      [ *]      [ *] 

G

     63141      1-A2      [ *]      [ *] 

F

     63130      1-A2      [ *]      [ *] 

F

     63132      1-A2      [ *]      [ *] 

F

     63133      1-A2      [ *]      [ *] 

 

1 

Manufacture Serial Number(s) (MSNs) identified are for informational purposes only and subject to change.

 

BOEING PROPRIETARY

SA15–1

 

*

Blank spaces contained confidential information that 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.


Supplemental Agreement No.15 to

Purchase Agreement No. 3712

 

Aircraft
Block

   MSN2      Table    Existing
Delivery Month
of Aircraft
    Revised
Delivery Month
of Aircraft
 

C

     66247      1-B      [ *]      [ *] 

C

     66869      1-B      [ *]      [ *] 

C

     66865      1-B      [ *]      [ *] 

C

     66866      1-B      [ *]      [ *] 

C.        WHEREAS, Customer desires defer the delivery month of fifty (50) Option Aircraft (SA-15 Rescheduled Option Aircraft), as set forth in the tables below:

 

Attachment Number

to Letter Agreement

FED-PA-03712-LA-1106156R5;

Option Aircraft

   Existing
Delivery Month of

Option Aircraft
    Revised
Delivery Month of

Option Aircraft
 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

 

2 

Manufacture Serial Number(s) (MSNs) identified are for informational purposes only and subject to change.

 

BOEING PROPRIETARY

SA15–2

 

*

Blank spaces contained confidential information that 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.


Supplemental Agreement No.15 to

Purchase Agreement No. 3712

 

Attachment Number

to Letter Agreement

FED-PA-03712-LA-1106156R5;

Option Aircraft

   Existing
Delivery Month of

Option Aircraft
    Revised
Delivery Month of

Option Aircraft
 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

Attachment 1

     [ *]      [ *] 

 

Attachment Number

to Letter Agreement

FED-PA-03712-LA-1106156R5;

Option Aircraft

   Existing
Delivery Month of

Option Aircraft
    Revised
Delivery Month of

Option Aircraft
 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

Attachment 2

     [ *]      [ *] 

 

BOEING PROPRIETARY

SA15–3

 

*

Blank spaces contained confidential information that 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.


Supplemental Agreement No.15 to

Purchase Agreement No. 3712

 

D.        WHEREAS, Customer and Boeing desire to acknowledge that three (3) Block G Aircraft, each became a firm Block G Aircraft on the Determination Date (Firm Block G Aircraft) set forth in the table below, and in accordance with the terms of Letter Agreement 6-1162-SCR-146R2, Special Provision – Block B and Block G Aircraft;

 

Aircraft
Block

   MSN3      Table    Determination
Date
    Existing
Delivery Month
of Aircraft
    Revised
Delivery Month
of Aircraft
 

G

     63141      1-A2      [ *]      [ *]      [ *] 

G

     63142      1-A2      [ *]      [ *]      [ *] 

G

     63143      1-A2      [ *]      [ *]      [ *] 

E.        WHEREAS, Customer desires to have a right to purchase certain Option Aircraft [*], provided that [*];

F.        WHEREAS, Customer desires to the right to purchase certain Purchase Right Aircraft [*];

G.        WHEREAS, Customer and Boeing desire to [*];

H.        WHEREAS, Customer and Boeing desire to document previously agreed upon changes to the 767 Detail Specification with executed option proposals (Option Proposals) for such changes (Unincorporated Changes);

I.        WHEREAS, Customer and Boeing desire to update a reference in the Purchase Agreement to reflect the correct revision number;

 

3 

Manufacture Serial Number(s) (MSNs) identified are for informational purposes only and subject to change.

 

BOEING PROPRIETARY

SA15–4

 

*

Blank spaces contained confidential information that 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.


Supplemental Agreement No.15 to

Purchase Agreement No. 3712

 

J.        WHEREAS, Boeing desires provide special business considerations to Customer related to the two (2) rescheduled Aircraft set forth in the table below (SA-15 Block G Rescheduled Aircraft):

 

Aircraft
Block

   MSN4      Table    Existing
Delivery Month
of Aircraft
    Revised
Delivery Month
of Aircraft
 

G

     63140      1-A2      [ *]      [ *] 

G

     63141      1-A2      [ *]      [ *] 

K.        WHEREAS, Customer and Boeing agree to document that the considerations contained in SA-15 are [*].

NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree to supplement the Purchase Agreement as follows:

All terms used herein and in the Purchase Agreement, and not defined herein, shall have the same meaning as in the Purchase Agreement.

1.        Remove and replace, in its entirety, the Table of Contents with the revised Table of Contents attached hereto, to reflect the changes made by this SA-15.

2.        Revise and replace in its entirety, Table 1-A2 with a revised Table 1-A2, attached hereto, to (i) reflect the revised delivery date, [*], [*], and [*] resulting from the reschedule of each SA-15 Rescheduled Aircraft, as described in Recital Paragraph B above; and (ii) confirm the nature of three (3) Firm Block G Aircraft as firm, as described in Recital Paragraph D above.

3.        Revise and replace in its entirety, Table 1-B with a revised Table 1-B, attached hereto, revised to reflect the revised delivery date, [*], [*], and [*] resulting from the reschedule of the SA-15 Rescheduled Aircraft, as described in Recital Paragraph B above.

 

4 

Manufacture Serial Number(s) (MSNs) identified are for informational purposes only and subject to change.

 

BOEING PROPRIETARY

SA15–5

 

*

Blank spaces contained confidential information that 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.


Supplemental Agreement No.15 to

Purchase Agreement No. 3712

 

4.        Revise and replace in its entirety Letter Agreement FED-PA-03712-LA-1106156R4, Option Aircraft, with Letter Agreement FED-PA-03712-LA-1106156R5, Option Aircraft, attached hereto, to (i) reflect that in the event [*], as described in Recital Paragraph E above, Customer may exercise its right to purchase certain Option Aircraft [*]; and (ii) remove the reference to Letter Agreement FED-PA-3712-LA-2000391, [*], dated January 30, 2020, as it is no longer applicable to the Option Aircraft.

5.        Revise and replace in its entirety Attachment 1 to Letter Agreement FED-PA-03712-LA-1106156R4, Option Aircraft, with Attachment 1 to Letter Agreement FED-PA-03712-LA-1106156R5, Option Aircraft, attached hereto, to reflect the revised delivery date, [*], [*], and [*] resulting from the reschedule of each SA-15 Rescheduled Option Aircraft, as described in Recital Paragraph C above.

6.        Revise and replace in its entirety Attachment 2 to Letter Agreement FED-PA-03712-LA-1106156R4, Option Aircraft, with Attachment 2 to Letter Agreement FED-PA-03712-LA-1106156R5, Option Aircraft, attached hereto, to reflect the revised delivery date, [*], [*], and [*] resulting from the reschedule of each SA-15 Rescheduled Option Aircraft, as described in Recital Paragraph C above.

7.        Revise and replace in its entirety Attachment 3 to Letter Agreement FED-PA-03712-LA-1106156R4, Option Aircraft, with Attachment 3 to Letter Agreement FED-PA-03712-LA-1106156R5, Option Aircraft, attached hereto, to reflect (i) the revised delivery date for each of the SA-15 Rescheduled Aircraft, as described in Recital Paragraph B above; and (ii) the revised delivery date of each SA-15 Rescheduled Option Aircraft, as described in Recital Paragraph C above.

8.        Revise and replace in its entirety Attachment 4 to Letter Agreement FED-PA-03712-LA-1106156R4, Option Aircraft, with Attachment 4 to Letter Agreement FED-PA-03712-LA-1106156R5, Option Aircraft, attached hereto, to reflect (i) the revised delivery date for each of the SA-15 Rescheduled Aircraft, as described in Recital Paragraph B above; and (ii) the revised delivery date of each SA-15 Rescheduled Option Aircraft, as described in Recital Paragraph C above.

9.        Revise and replace in its entirety Letter Agreement FED-PA-03712-LA-1106158R5, Right to Purchase Additional Aircraft, with Letter Agreement FED-PA-03712-LA-1106158R6, Right to Purchase Additional Aircraft, attached hereto, to reflect that, in the event [*], as described in Recital Paragraph F above, Customer has the right to purchase certain Purchase Right Aircraft [*].

 

BOEING PROPRIETARY

SA15–6

 

*

Blank spaces contained confidential information that 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.


Supplemental Agreement No.15 to

Purchase Agreement No. 3712

 

10.        Revise and replace in its entirety Letter Agreement FED-PA-03712-LA-1106151R2, Special Matters Concerning [*] – Option Aircraft and Certain Purchase Right Aircraft, with Letter Agreement FED-PA-03712-LA-1106151R3, Special Matters Concerning [*] – Option Aircraft and Certain Purchase Right Aircraft, attached hereto, to [*], as described in Recital Paragraph G above.

11.        Revise and replace in its entirety Letter Agreement FED-PA-03712-LA-1208292R2, Special Matters Concerning [*] – Block B, Block C, Block E, Block F and Block G Aircraft, with Letter Agreement FED-PA-03712-LA-1208292R3, Special Matters Concerning [*] – Block B, Block C, Block E, Block F and Block G Aircraft, attached hereto, to [*], as described in Recital Paragraph G above.

12.        Revise and replace in its entirety Letter Agreement FED-PA-03712-LA-2000793, SA-14 Rescheduled Aircraft Delivery Matters, with Letter Agreement FED-PA-03712-LA-2000793R1, SA-14 Rescheduled Aircraft Delivery Matters, attached hereto, to update the reference to Letter Agreement FED-PA-03712-LA-1106154R2, as described in Recital Paragraph I above.

13.        Add Letter Agreement FED-PA-03712-LA-2002413, SA-15 Block G Rescheduled Aircraft—Additional Considerations, attached hereto, to reflect additional business considerations to be provided to Customer related to the SA-15 Block G Rescheduled Aircraft, as described in Recital Paragraph I above.

14.        Revise and replace in its entirety Letter Agreement FED-PA-3712-MISC-1907644, Special Considerations related to [*], with Letter Agreement FED-PA-3712-MISC-1907644R1, Special Considerations related to [*], attached hereto, to revise [*] impacted by the rescheduling of SA-15 Rescheduled Aircraft.

15.        Add Letter Agreement FED-PA-03712-LA-2002433, SA-15 Considerations and [*], attached hereto, to document that the considerations contained in SA-15 are [*], as described in Recital Paragraph K above.

16.        This SA-15 will not be effective until executed and delivered by the parties on or prior to June 30, 2020.

17.        As a result of the changes incorporated in this SA- 15, [*]. The foregoing results in an [*] (SA-15 Payment Amount). The SA-15 Payment Amount will be due to Boeing no later than June 30, 2020.

 

BOEING PROPRIETARY

SA15–7

 

*

Blank spaces contained confidential information that 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.


Supplemental Agreement No.15 to

Purchase Agreement No. 3712

 

18.        References in the Purchase Agreement, any supplemental agreements and associated letter agreements to the tables, exhibits, supplemental exhibits and letter agreements listed in the left column of the below table shall be deemed to refer to the corresponding tables, exhibits, supplemental exhibits and letter agreements listed in the right column of the below table.

 

Reference

   Replacement Reference

FED-PA-03712-LA-1106156R4

   FED-PA-03712-LA-1106156R5

FED-PA-03712-LA-1106158R5

   FED-PA-03712-LA-1106158R6

FED-PA-03712-LA-2000793

   FED-PA-03712-LA-2000793R1

FED-PA-03712-LA-1106151R2

   FED-PA-03712-LA-1106151R3

FED-PA-03712-LA-1208292R2

   FED-PA-03712-LA-1208292R3

FED-PA-3712-MISC-1907644

   FED-PA-3712-MISC-1907644R1

EXECUTED as of the day and year first above written.

 

FEDERAL EXPRESS CORPORATION       THE BOEING COMPANY
By:  

/s/ Kevin A. Burkhart

    By:  

/s/ Cheryl Khera

Name:  

Kevin A. Burkhart

    Name:  

Cheryl Khera

Title:  

Vice President

    Title:  

Attorney-In-Fact

 

BOEING PROPRIETARY

SA15–8


TABLE OF CONTENTS

 

ARTICLES

      SA Number
  1   

Quantity, Model and Description

  
  2   

Delivery Schedule

  
  3   

Price

  
  4   

Payment

  
  5   

Additional Terms

  

TABLES

     
  1-A   

Firm Aircraft Information Table

   10
  1-A1   

Block B and Block C Aircraft Information Table

   13
  1-A2   

Block E, Block F and Block G Aircraft Information Table

   15
  1-B   

Exercised Option Aircraft Information Table

   15
  1-B1   

Exercised Block D Option Aircraft Information Table

     2
  1-C   

Exercised Purchase Right Aircraft Information Table

     2

EXHIBIT

     
  A   

Aircraft Configuration

     4
  B   

Aircraft Delivery Requirements and Responsibilities

  

SUPPLEMENTAL EXHIBITS

  
  AE1   

Escalation Adjustment/Airframe and Optional Features

  
  BFE1   

BFE Variables

     2
  CS1   

Customer Support Variables

  
  EE1   

Engine Escalation, Engine Warranty and Patent Indemnity

  
  SLP1   

Service Life Policy Components

  

 

FED-PA-03712     SA-15
  BOEING PROPRIETARY  


LETTER AGREEMENTS   

SA

Number

LA-1106151R2   

LA-Special Matters Concerning [*] – Option

  
     Aircraft and Certain Purchase Right Aircraft    615
LA-1106152   

LA-Special Matters Concerning [*] – Firm Aircraft

  
LA-1106153   

LA-Liquidated Damages Non-Excusable Delay

  
LA-1106154R2   

LA-Firm Aircraft and Option Aircraft Delivery Matters

       6
LA-1106155   

LA-Open Configuration Matters

  
LA-1106156R5   

LA-Option Aircraft

     15
     Attachment 1 to LA-1106156R5      15
     Attachment 2 to LA-1106156R5      15
     Attachment 3 to LA-1106156R5      15
     Attachment 4 to LA-1106156R5      15
LA-1106157   

AGTA Amended Articles

  
LA-1106158R6   

LA-Right to Purchase Additional Aircraft

     15
LA-1106159R1   

LA-Special Matters Concerning [*]

       1
LA-1106160   

LA-Spare Parts Initial Provisioning

  
LA-1106163   

LA-Demonstration Flight Waiver

  
LA-1106177R1   

LA-[*]

       6
LA-1106207R1   

LA-Special Matters Firm Aircraft

       1
LA-1106208R2   

LA-Special Matters Option Aircraft

       1
LA-1106574R1   

LA-Agreement for Deviation from the [*]

       6
LA-1106584R4   

LA-Aircraft Performance Guarantees

       6
LA-1106586   

LA-Miscellaneous Matters

  
LA-1106614R4   

LA-Special Matters for Purchase Right Aircraft

     12
LA-1106824   

LA-Customer Support Matters

  
LA-1208292R3   

LA-Special Matters Concerning [*] – Block B, Block C, Block E, Block F and Block G Aircraft

     15
LA-1208296R1   

LA-Special Matters for Block D Option Aircraft

       6
LA-1208949R1   

LA-Special Matters for Aircraft in Table 1-A1

     11
6-1162-SCR-146R2   

LA Special Provision – Block B and Block G Aircraft

     11
LA-1306854R1   

Performance Guarantees, Demonstrated Compliance

       6
6-1162-LKJ-0696R6   

LA-[*]

       6
6-1162-LKJ-0705   

LA-Special Matters for Block E, Block F and Block G Aircraft in Table 1-A2

  
6-1162-LKJ-0707   

LA- Agreement Regarding [*]

       6

 

FED-PA-03712     SA-15
  BOEING PROPRIETARY  

 

*

Blank spaces contained confidential information that 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.


6-1162-LKJ-0709   

LA-[*] Special Matters

       6
6-1162-LKJ-0728   

LA-Special Matters – SA-8 Early Exercise Aircraft

       8
6-1162-LKJ-0744   

LA-Special Considerations – SA-10 Accelerated Aircraft

     10
6-1169-LKJ-0773   

LA-Special Matters – SA-11

     11
LA-2000793R1   

LA-SA-14 Rescheduled Aircraft Delivery Matters

     15
LA-1902775R1   

LA- 767 Unincorporated Changes

     15
LA-2002413   

LA-SA-15 Block G Rescheduled Aircraft –Additional Considerations

     15
LA-1907644R1   

LA-Special Considerations related to [*]

     15
LA-2002433   

SA-15 Considerations and [*]

     15

 

FED-PA-03712     SA-15
  BOEING PROPRIETARY  

 

*

Blank spaces contained confidential information that 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.


SUPPLEMENTAL AGREEMENTS

  

DATED AS OF:

Supplemental Agreement No. 1

   June 29, 2012

Supplemental Agreement No. 2

   October 8, 2012

Supplemental Agreement No. 3

   December 11, 2012

Supplemental Agreement No. 4

   December 10, 2013

Supplemental Agreement No. 5

   September 29, 2014

Supplemental Agreement No. 6

   July 21, 2015

Supplemental Agreement No. 7

   April 18, 2016

Supplemental Agreement No. 8

   June 10, 2016

Supplemental Agreement No. 9

   February 16, 2017

Supplemental Agreement No. 10

   May 10, 2017

Supplemental Agreement No. 11

   June 18, 2018

Supplemental Agreement No. 12

   June 24, 2019

Supplemental Agreement No. 13

   September 4, 2019

Supplemental Agreement No. 14

   February 28, 2020

Supplemental Agreement No. 15

   , 2020

 

FED-PA-03712     SA-15
  BOEING PROPRIETARY  


LOGO  

The Boeing Company

P.O. Box 3707

Seattle, WA 98124-2207        

 

 

FED-PA-03712-LA-1106158 R6

Federal Express Corporation

3610 Hacks Cross

Memphis, TN 38125

 

Subject:

Right to Purchase Additional Aircraft

 

Reference:

Purchase Agreement No. 3712 (Purchase Agreement) between The Boeing Company (Boeing) and Federal Express Corporation (Customer) relating to Model 767-3S2F aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. In addition, this Letter Agreement cancels and supersedes FED-PA-03712- LA-1106158R5 in its entirety. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

 

1.

Right to Purchase Incremental Aircraft.

Subject to the terms and conditions contained herein, Customer will have the right to purchase (Purchase Right) thirty-two (32) additional Boeing Model 767-3S2F aircraft as purchase right aircraft (Purchase Right Aircraft).

 

2.

Delivery.

2.1    The Purchase Right Aircraft delivery positions are [*].

2.2    The parties agree that [*]. In order for Customer to exercise Purchase Right Aircraft [*].

 

3.

Configuration.

The configuration for the Purchase Right Aircraft will be the Detail Specification for Model 767-3S2F aircraft at the revision level in effect at the time of the Supplemental Agreement. Such Detail Specification will be revised to include (i) changes required to obtain required regulatory certificates and (ii) other changes as mutually agreed upon by Boeing and Customer.

 

FED-PA-03712-LA-1106158 R6

Right to Purchase Additional Aircraft

   

SA-15

Page 1

BOEING PROPRIETARY

 

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LOGO  

 

4.

Price.

4.1    The Airframe Price, Engine Price, Optional Features Prices, and Aircraft Basic Price for the Purchase Right Aircraft shall remain in base year [*] and such prices will be subject to escalation to the scheduled delivery date of the Purchase Right Aircraft.

4.2    Subject to the provisions of Letter Agreement FED-PA-03712-LA- 1106151R3 “Special Matters Concerning [*] – Option Aircraft and Certain Purchase Right Aircraft, the Airframe Price, Engine Price, Optional Features Prices, and Aircraft Basic Price for each of the Purchase Right Aircraft will be adjusted for escalation in accordance with the Purchase Agreement.

4.3    The Advance Payment Base Price for each exercised Purchase Right Aircraft shall be developed in accordance with the terms of the Purchase Agreement and determined at the time of Supplemental Agreement.

 

5.

Payment.

At Supplemental Agreement for the Purchase Right Aircraft, advance payments will be payable as specified in the Purchase Agreement. The remainder of the Aircraft Price for the Purchase Right Aircraft will be paid at the time of delivery.

 

6.

Notice of Exercise and Payment of Deposit.

6.1    Customer may exercise a Purchase Right by giving written notice (Notice of Exercise) to Boeing. All Purchase Right aircraft must be exercised for delivery no later than [*]. Such Notice of Exercise shall be accompanied by payment, by electronic transfer to the account specified below, in accordance with the Purchase Agreement. Such amount will be the initial advance payment due at execution of the Supplemental Agreement.

[*]

6.2    The parties agree that Purchase Right Aircraft, once exercised, will be added to Table 1-C of the Purchase Agreement.

6.3    The parties agree that [*].

 

7.

Supplemental Agreement.

Following Customer’s exercise of a Purchase Right in accordance with the terms and conditions stated herein [*], the parties will sign a supplemental agreement for the purchase of such Purchase Right Aircraft (Supplemental Agreement) within thirty (30) calendar days of such exercise (Purchase Right Exercise). The Supplemental Agreement will include the provisions then contained in the Purchase Agreement as modified to reflect the provisions of this Letter Agreement and any additional mutually agreed terms and conditions.

 

FED-PA-03712-LA-1106158 R6

Right to Purchase Additional Aircraft

   

SA-15

Page 2

BOEING PROPRIETARY

 

*

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LOGO  

 

8.

[*].

[*].

 

9.

General Expiration of Rights.

Each Purchase Right shall expire at the time of execution of the Supplemental Agreement for the applicable Purchase Right Aircraft, or, if no such Supplemental Agreement is executed, on [*].

 

10.

Confidential Treatment.

Customer understands that Boeing considers certain commercial and financial information contained in this Letter Agreement as confidential. Each of Customer and Boeing agree that it will treat this Letter Agreement and the information contained herein as confidential. Customer agrees to limit the disclosure of the contents of this Letter Agreement to employees of Customer with a need to know and who understand that they are not to disclose its content to any other person or entity without the prior written consent of Boeing. Notwithstanding the foregoing, Customer may disclose this Letter Agreement and the terms and conditions herein to its parent company, FedEx Corporation, to the Board of Directors of its parent corporation, FedEx Corporation, to its professional advisors under a duty of confidentiality with respect thereto, and as required by law.

 

FED-PA-03712-LA-1106158 R6

Right to Purchase Additional Aircraft

   

SA-15

Page 3

BOEING PROPRIETARY

 

*

Blank spaces contained confidential information that 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.


LOGO  

 

Very truly yours,

 

THE BOEING COMPANY
By   /s/ Cheryl Khera
Its   Attorney-In-Fact

ACCEPTED AND AGREED TO this

 

Date:   June 25, 2020

 

FEDERAL EXPRESS CORPORATION
By   /s/ Kevin A. Burkhart
Its   Vice President

 

FED-PA-03712-LA-1106158 R6

Right to Purchase Additional Aircraft

   

SA-15

Page 4

BOEING PROPRIETARY


LOGO  

The Boeing Company

P.O. Box 3707

Seattle, WA 98124-2207        

 

 

FED-PA-03712-LA-1106156R5

Federal Express Corporation

3610 Hacks Cross

Memphis, TN 38125

 

Subject:

Option Aircraft

 

Reference:

Purchase Agreement No. 3712 (Purchase Agreement) between The Boeing Company (Boeing) and Federal Express Corporation (Customer) relating to Model 767-3S2F aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. In addition, this Letter Agreement cancels and supersedes FED-PA-03712-LA-1106156R4 in its entirety. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

 

1.

Right to Purchase Option Aircraft.

Subject to the terms and conditions contained in this Letter Agreement, Customer has the option to purchase thirty-five (35) additional Model 767-3S2F aircraft as option aircraft (Option Aircraft) and fifteen (15) additional Model 767-3S2F aircraft as Block D option aircraft (Block D Option Aircraft). Except as set forth herein, and in the Purchase Agreement, the Block D Option Aircraft are considered Option Aircraft.

 

2.

Delivery.

The number of Option Aircraft and associated delivery months are listed in the Attachment 1 to this Letter Agreement. The number of Block D Option Aircraft and associated delivery months are listed in the Attachment 2 to this Letter Agreement.

 

3.

Configuration.

The configuration for the Option Aircraft will be the Detail Specification for model 767-3S2F aircraft at the revision level in effect at the time of Supplemental Agreement. Such Detail Specification will be revised to include (i) changes required to obtain required regulatory certificates and (ii) other changes as mutually agreed upon by Customer and Boeing.

 

4.

Price.

4 .1    The Airframe Price, Engine Price, Optional Features Prices, and Aircraft Basic Price for each of the Option Aircraft will remain in base year [*] and such prices will be subject to escalation in accordance with the Purchase Agreement.

4.2    Subject to the provisions of letter agreement FED-PA-03712-LA-1106151R3; Special Matters Concerning [*] – Option Aircraft and Certain

 

FED-PA-03712-LA-1106156R5

Option Aircraft

   

SA-15

Page 1

BOEING PROPRIETARY

 

*

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LOGO  

 

Purchase Right Aircraft, the Airframe Price, Engine Price, Optional Features Prices, and Aircraft Basic Price for each of the Option Aircraft will be adjusted for escalation in accordance with the Purchase Agreement.

4.3    The Advance Payment Base Price for each exercised Option Aircraft will be developed in accordance with the terms of the Purchase Agreement and determined at the time of Supplemental Agreement.

 

5.

Payment.

5.1    Customer will pay an option deposit to Boeing in the amount of [*] (Option Deposit) for each Option Aircraft added to the Purchase Agreement. The parties acknowledge that Customer has previously paid an Option Deposit to Boeing in the amount of [*] for (i) each of the fifteen (15) Block D Option Aircraft in Attachment 2, and (ii) each of the thirty-five (35) Option Aircraft in Attachment 1 prior to the execution of Supplemental Agreement No. 15 to the Purchase Agreement (SA-15). If Customer exercises an option, the Option Deposit will be credited against the first advance payment due.

5.2    [*]

5.3    For the sake of clarity, Customer and Boeing agreed to [*], pursuant to paragraph 2 of letter agreement 6-1162-LKJ-0707, Agreement Regarding [*], dated July 15, 2015.

5.4    Following option exercise, advance payments will be payable as specified in the Purchase Agreement. The remainder of the Aircraft Price for the Option Aircraft will be paid at the time of delivery.

 

6.

Option Exercise.

61.    Customer will exercise [*], by giving written notice to Boeing on or before the first business day of the month that is [*] months prior to the month of delivery [*] (Option Exercise Date). [*]

6.2    [*]

6.2.1    [*]

6.2.2    [*]

6.2.3    [*]

6.2.4    [*]

6.2.5    [*]

6.3    Boeing and Customer agree that Option Aircraft, once exercised, will be added to Table 1-B or Table 1-B1, as applicable, of the Purchase Agreement.

 

7.

[*]

For the avoidance of doubt, [*] as described in letter agreement FED-PA-03712-LA-1106154R2, Firm Aircraft and Option Aircraft Delivery Matters and FED-PA-03712-LA-2000793R1, SA-14 Rescheduled Aircraft Delivery Matters.

 

FED-PA-03712-LA-1106156R5

Option Aircraft

   

SA-15

Page 2

BOEING PROPRIETARY

 

*

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LOGO  

 

8.

[*]

 

9.

[*].

 

10.

Supplemental Agreement.

10.1    Following Customer’s exercise of an option the parties will sign a supplemental agreement for the purchase of such Option Aircraft (Supplemental Agreement). The Supplemental Agreement will include the provisions of the Purchase Agreement as modified to reflect the provisions of this Letter Agreement.

10.2    Boeing and Customer will use their commercially reasonable efforts to sign a Supplemental Agreement within thirty (30) business days following the applicable Option Exercise Date.

 

FED-PA-03712-LA-1106156R5

Option Aircraft

   

SA-15

Page 3

BOEING PROPRIETARY

 

*

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LOGO  

 

11.

Confidential Treatment.

Customer understands that Boeing considers certain commercial and financial information contained in this Letter Agreement as confidential. Each of Customer and Boeing agree that it will treat this Letter Agreement and the information contained herein as confidential. Customer agrees to limit the disclosure of the contents of this Letter Agreement to employees of Customer with a need to know and who understand that they are not to disclose its content to any other person or entity without the prior written consent of Boeing. Notwithstanding the foregoing, Customer may disclose this Letter Agreement and the terms and conditions herein to its parent company, FedEx Corporation, to the Board of Directors of its parent corporation, FedEx Corporation, to its professional advisors under a duty of confidentiality with respect thereto, and as required by law.

 

ACCEPTED AND AGREED TO this      
Date:  

June 25, 2020

     
FEDERAL EXPRESS CORPORATION       THE BOEING COMPANY
By:  

/s/ Kevin A. Burkhart

    By:  

/s/ Cheryl Khera

Name:  

Kevin A. Burkhart

    Name:  

Cheryl Khera

Title:  

Vice President

    Title:  

Attorney-In-Fact

Attachments to Letter Agreement:

 

 

Attachment 1: Option Aircraft Delivery, Description, Price and Advance Payments

 

 

Attachment 2: Block D Option Aircraft Delivery, Description, Price and Advance Payments

 

 

Attachment 3: Production Cycle Option Schedule

 

 

Attachment 4: Firm Aircraft and Option Aircraft Delivery Schedule by Customer Fiscal Year

 

FED-PA-03712-LA-1106156R5

Option Aircraft

   

SA-15

Page 4

BOEING PROPRIETARY


LOGO  

The Boeing Company

P.O. Box 3707

Seattle, WA 98124-2207        

 

 

FED-PA-03712-LA-2000793 R1

Federal Express Corporation

3610 Hacks Cross

Memphis, TN 38125

 

Subject:

SA-14 Rescheduled Aircraft Delivery Matters

 

Reference:

Purchase Agreement No. 3712 (Purchase Agreement) between The Boeing Company (Boeing) and Federal Express Corporation (Customer) relating to Model 767-3S2F aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. In addition, this Letter Agreement cancels and supersedes FED-PA-03712-LA-2000793 in its entirety. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement. The information provided in this Letter Agreement will be applicable to the two (2) firm Aircraft identified in Table 1.2 to this Letter Agreement.

 

1.

SA-14 Rescheduled Aircraft.

1.1    For the avoidance of doubt, the two (2) firm Aircraft shown in Table 1.2 below (collectively, SA-14 Rescheduled Aircraft), shall be subject to letter agreement FED-PA-03712-LA-1106154R3, Firm Aircraft and Option Aircraft Delivery Matters.

Table 1.2:

 

Aircraft Block

   MSN      Table    Revised Delivery Month of Aircraft,
incorporated with SA-14.
 

C

     66868      Table 1-B      [ *] 

F

     63134      Table 1-A2      [ *] 

 

2.

Additional Delivery Flexibility for the SA-14 Rescheduled Aircraft.

2.1    In addition to the delivery flexibility described in letter agreement FED-PA-03712-LA-1106154R2, Firm Aircraft and Option Aircraft Delivery Matters, Boeing and Customer further agree to the delivery flexibility for the two (2) SA-14 Rescheduled Aircraft as set forth below.

2.2    Following notification from Customer to Boeing regarding [*] pursuant to letter agreement FED-PA-3712-LA-2000391, [*], Boeing reserves the right to [*]

 

FED-PA-03712-LA-2000793 R1

SA-14 Rescheduled Aircraft Delivery Matters

 

SA-15

Page 1

BOEING PROPRIETARY

 

*

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LOGO  

 

3.

Supplemental Agreement.

3.1    [*]

3.2    Boeing and Customer agree that the revised Delivery Dates(s) of the SA-14 Rescheduled Aircraft will be reflected in Table 1-B or Table 1-A2, as applicable, of the Purchase Agreement.

3.3    Boeing and Customer will use their commercially reasonable efforts to sign a Supplemental Agreement within thirty (30) business days following the applicable Option Exercise Date.

 

4.

Confidential Treatment.

Customer understands that Boeing considers certain commercial and financial information contained in this Letter Agreement as confidential. Each of Customer and Boeing agree that it will treat this Letter Agreement and the information contained herein as confidential. Customer agrees to limit the disclosure of the contents of this Letter Agreement to employees of Customer with a need to know and who understand that they are not to disclose its content to any other person or entity without the prior written consent of Boeing. Notwithstanding the foregoing, Customer may disclose this Letter Agreement and the terms and conditions herein to its parent company, FedEx Corporation, to the Board of Directors of its parent corporation, FedEx Corporation, to its professional advisors under a duty of confidentiality with respect thereto, and as required by law.

 

FED-PA-03712-LA-2000793 R1

SA-14 Rescheduled Aircraft Delivery Matters

 

SA-15

Page 2

BOEING PROPRIETARY

 

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LOGO  

 

ACCEPTED AND AGREED TO this      
Date:  

June 25, 2020

     
FEDERAL EXPRESS CORPORATION       THE BOEING COMPANY
By:  

/s/ Kevin A. Burkhart

    By:  

/s/ Cheryl Khera

Name:  

Kevin A. Burkhart

    Name:  

Cheryl Khera

Title:  

Vice President

    Title:  

Attorney-In-Fact

 

FED-PA-03712-LA-2000793 R1

SA-14 Rescheduled Aircraft Delivery Matters

 

SA-15

Page 3

BOEING PROPRIETARY


LOGO  

The Boeing Company

P.O. Box 3707

Seattle, WA 98124-2207        

 

 

FED-PA-03712-LA-2002413

Federal Express Corporation

3610 Hacks Cross Road

Memphis, TN 38125

 

Subject:

SA-15 Block G Rescheduled Aircraft—Additional Considerations

 

Reference:

(a) Purchase Agreement No. PA-3712 (Purchase Agreement) between The Boeing Company (Boeing) and Federal Express Corporation (Customer) relating to Model 767-3S2F aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

 

1.

SA-15 Block G Rescheduled Aircraft

1.1    For the purposes of this Letter Agreement, the following business considerations will apply only to the two (2) firm Aircraft identified in Table 1.2 below (collectively, SA-15 Block G Rescheduled Aircraft).

Table 1.2:

 

Aircraft

Block

   MSN1      Table      Existing Delivery
Month

of Aircraft
     Revised Delivery
Month of
Aircraft
 

G

     63140        1-A2        [*      [*

G

     63141        1-A2        [*      [*

The parties agree and acknowledge that the revisions to the delivery months of SA-15 Block G Rescheduled Aircraft outlined in Table 1.2 are due to [*]. In consideration of the revisions to the scheduled delivery outlined in Table 1.2, and in recognition of the parties’ long-standing relationship, Boeing will provide to Customer the business considerations outlined in this Letter Agreement.

 

1 

Manufacture Serial Number(s) (MSNs) identified are for informational purposes only and subject to change.

 

FED-PA-03712-LA-2002413

SA-15 Block G Rescheduled Aircraft—Additional Considerations

 

SA-15

Page 1

BOEING PROPRIETARY

 

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2.

SA-15 Block G Rescheduling Credit Memorandum.

In order to neutralize the effect escalation of the rescheduled delivery of the SA-15 Block G Rescheduled Aircraft, at the time of each delivery Boeing shall issue a credit memorandum equivalent to the difference between the Escalation Adjustment calculated using the existing delivery months for the SA-15 Block G Rescheduled Aircraft in Table 1.2 and the Escalation Adjustment using the revised delivery months outlined in Table 1.2 (SA-15 Block G Rescheduling Credit Memorandum).

 

3.

Escalation of Credit Memorandum.

Unless otherwise noted, the SA-15 Block G Rescheduling Credit Memorandum is in [*] base year dollars and will be escalated to the same time period as the Airframe pursuant to the Airframe Escalation formula set forth in the Purchase Agreement applicable to the SA-15 Block G Rescheduled Aircraft. The Credit Memoranda may, at the election of Customer, [*].

 

4.

Assignment.

Unless otherwise noted herein, the SA-15 Block G Rescheduling Credit Memorandum described in this Letter Agreement is provided as a financial accommodation to Customer and in consideration of Customer’s taking title to the SA-15 Block G Rescheduled Aircraft at time of delivery and becoming the operator of the Aircraft. This Letter Agreement cannot be assigned, in whole or in part, without the prior written consent of Boeing, which will not be unreasonably withheld.

 

5.

Confidential Treatment.

Customer understands that Boeing considers certain commercial and financial information contained in this Letter Agreement as confidential. Each of Customer and Boeing agree that it will treat this Letter Agreement and the information contained herein as confidential. Customer agrees to limit the disclosure of the contents of this Letter Agreement to employees of Customer with a need to know and who understand that they are not to disclose its content to any other person or entity without the prior written consent of Boeing. Notwithstanding the foregoing, Customer may disclose this Letter Agreement and the terms and conditions herein to its parent company, FedEx Corporation, to the Board of Directors of its parent corporation, FedEx Corporation, to its professional advisors under a duty of confidentiality with respect thereto, and as required by law.

 

FED-PA-03712-LA-2002413

SA-15 Block G Rescheduled Aircraft—Additional Considerations

 

SA-15

Page 2

BOEING PROPRIETARY

 

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LOGO

 

Very truly yours,

 

THE BOEING COMPANY
By  

/s/ Cheryl Khera

Its  

Attorney-In-Fact

ACCEPTED AND AGREED TO this
Date:  

June 25, 2020

FEDERAL EXPRESS CORPORATION
By  

/s/ Kevin A. Burkhart

Its  

Vice President

 

FED-PA-03712-LA-2002413

SA-15 Block G Rescheduled Aircraft—Additional Considerations

 

SA-15

Page 3

BOEING PROPRIETARY


LOGO  

The Boeing Company

P.O. Box 3707

Seattle, WA 98124-2207        

 

 

FED-PA-03712-LA-1106151 R3

Federal Express Corporation

3610 Hacks Cross

Memphis, TN 38125

 

Subject:

Special Matters Concerning [*] – Option Aircraft and Certain Purchase Right Aircraft

 

Reference:

Purchase Agreement No. 3712 (Purchase Agreement) between The Boeing Company (Boeing) and Federal Express Corporation (Customer) relating to Model 767-3S2F aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. In addition, this Letter Agreement cancels and supersedes Letter Agreement FED-PA-03712-LA-1106151R2 in its entirety. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement. The terms provided in this Letter Agreement will be applicable to exercised Option Aircraft, as identified in the Table 1-B and Table 1-B1 of the Purchase Agreement (Exercised Option Aircraft) and Purchase Right Aircraft, as identified in Table 1-C that are exercised and scheduled for delivery to Customer through [*] (Applicable Purchase Right Aircraft).

 

1.

[*]

1.1    Boeing will [*] for the Airframe Price and Optional Features Prices of each Exercised Option Aircraft and Applicable Purchase Right Aircraft for the period beginning [*] and continuing through [*], in accordance with the terms of this Letter Agreement.

1.2    Notwithstanding the [*], in the event Boeing reschedules an Exercised Option Aircraft delivery outside the [*] pursuant to the delivery flexibility described in Letter Agreement Option Aircraft (FED-PA-03712-LA-1106156R2) Boeing agrees that the [*] will extend to apply to such rescheduled Exercised Option Aircraft.

1.3    For the avoidance of doubt, in the event of an Excusable Delay or Non-Excusable Delay of an Exercised Option Aircraft or Applicable Purchase Right Aircraft, Boeing and Customer acknowledge that the [*] to the contracted delivery month will be applied to such Exercised Option Aircraft or Applicable Purchase Right Aircraft.

 

FED-PA-03712-LA-1106151R3

Special Matters Concerning [*] –

Option Aircraft and Certain Purchase Right Aircraft

 

SA-15

Page 1

BOEING PROPRIETARY

 

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1.4    If Boeing and Customer mutually agree to reschedule an Exercised Option Aircraft or Applicable Purchase Right Aircraft within the [*], the affected Exercised Option Aircraft or Applicable Purchase Right Aircraft will continue to receive the [*] described herein, [*] to the rescheduled delivery month.

1.5    The [*] for the Airframe Price and Optional Features Price of each Exercised Option Aircraft and Applicable Purchase Right Aircraft will be [*] during the [*] at a [*].

 

2.

Determining [*] for Aircraft Delivering Within the [*].

2.1    For Exercised Option Aircraft and Applicable Purchase Right Aircraft delivering within the [*], Boeing will, at time of Exercised Option Aircraft or Applicable Purchase Right Aircraft delivery, calculate the [*] of the Airframe Price and Optional Features Price using (i) [*] in accordance with the provisions of [*] to the Purchase Agreement ([*]) and (ii) the [*]. The final Aircraft Price will include the [*] Airframe Price and Optional Features Price utilizing the [*] or the [*], except as set forth below.

2.2    Notwithstanding paragraph 2.1 above, if [*] calculated pursuant to the [*], Customer will [*] on the Airframe Price and Optional Features Price [*] on the applicable Exercised Option Aircraft or Applicable Purchase Right Aircraft; or

2.3    If [*] calculated pursuant to the [*], Customer will [*] on the Airframe Price and Optional Features Price [*] on the applicable Exercised Option Aircraft or Applicable Purchase Right Aircraft. At least [*] of an Exercised Option Aircraft or Applicable Purchase Right Aircraft, but not [*] of a Exercised Option Aircraft or Applicable Purchase Right Aircraft, Boeing will provide Customer notification in the event the [*].

2.4    For an example of the determination of escalation factor applicable to the Airframe and Optional Features, refer to Attachment C to this Letter Agreement.

 

FED-PA-03712-LA-1106151R3

Special Matters Concerning [*] –

Option Aircraft and Certain Purchase Right Aircraft

 

SA-15

Page 2

BOEING PROPRIETARY

 

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3.

Effect on Advance Payments.

The amount and timing of advance payments Customer is required to pay to Boeing pursuant to the Purchase Agreement shall be unaffected by any terms set forth in this Letter Agreement.

 

4.

Aircraft Applicability.

Unless otherwise stated, the terms of this Letter Agreement shall only apply to the Exercised Option Aircraft and Applicable Purchase Right Aircraft.

 

5.

Applicability to Other Financial Consideration.

The escalation adjustment for any other sum identified in the Purchase Agreement as subject to escalation pursuant to Supplemental Exhibit AE1, and which pertains to an Exercised Option Aircraft and Applicable Purchase Right Aircraft, shall be calculated using the escalation methodology established in this Letter Agreement notwithstanding any other provisions of the Purchase Agreement to the contrary.

 

6.

Confidential Treatment.

Customer understands that Boeing considers certain commercial and financial information contained in this Letter Agreement as confidential. Each of Customer and Boeing agree that it will treat this Letter Agreement and the information contained herein as confidential. Customer agrees to limit the disclosure of the contents of this Letter Agreement to employees of Customer with a need to know and who understand that they are not to disclose its content to any other person or entity without the prior written consent of Boeing. Notwithstanding the foregoing, Customer may disclose this Letter Agreement and the terms and conditions herein to its parent company, FedEx Corporation, to the Board of Directors of its parent corporation, FedEx Corporation, to its professional advisors under a duty of confidentiality with respect thereto, and as required by law.

 

FED-PA-03712-LA-1106151R3

Special Matters Concerning [*] –

Option Aircraft and Certain Purchase Right Aircraft

 

SA-15

Page 3

BOEING PROPRIETARY

 

*

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LOGO

 

Very truly yours,

 

THE BOEING COMPANY
By  

/s/ Cheryl Khera

Its  

Attorney-In-Fact

ACCEPTED AND AGREED TO this
Date:  

June 25, 2020

FEDERAL EXPRESS CORPORATION
By  

/s/ Kevin A. Burkhart

Its  

Vice President

Attachments A, B and C

 

FED-PA-03712-LA-1106151R3

Special Matters Concerning [*] –

Option Aircraft and Certain Purchase Right Aircraft

 

SA-15

Page 4

BOEING PROPRIETARY

 

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LOGO  

The Boeing Company

P.O. Box 3707

Seattle, WA 98124-2207        

 

 

FED-PA-03712-LA-1208292 R3

Federal Express Corporation

3610 Hacks Cross

Memphis, TN 38125

 

Subject:

Special Matters Concerning [*] – Block B, Block C, Block E, Block F and Block G Aircraft

 

Reference:

Purchase Agreement No. 3712 (Purchase Agreement) between The Boeing Company (Boeing) and Federal Express Corporation (Customer) relating to Model 767-3S2F aircraft (Aircraft)

This letter agreement (Letter Agreement) cancels and supersedes Letter Agreement FED-PA-03712-LA-1208292R2 and amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement. The terms provided in this Letter Agreement will be applicable to Block B, Block C, Block E, Block F and Block G Aircraft.

 

1.

[*].

1.1    Boeing will [*] for the Airframe Price and Optional Features Prices of each Block B, Block C, Block E, Block F and Block G Aircraft for the period beginning [*] and continuing through [*], in accordance with the terms of this Letter Agreement.

1.2    Notwithstanding the [*], in the event Boeing reschedules a Block B, Block C, Block E, Block F or Block G Aircraft delivery outside the [*] pursuant to the delivery flexibility described in Letter Agreement Firm Aircraft Delivery Matters (FED-PA-03712-LA-1106154R2), Boeing agrees that the [*] will extend to apply to such rescheduled Block B, Block C, Block E, Block F or Block G Aircraft.

1.3    For the avoidance of doubt, in the event of an Excusable Delay or Non-Excusable Delay of a Block B, Block C, Block E, Block F or Block G Aircraft, Boeing and Customer acknowledge that the [*] to the contracted delivery month will be applied to such Block B, Block C, Block E, Block F or Block G Aircraft.

 

FED-PA-03712-LA-1208292R3

Special Matters Concerning [*] – Block B, Block C, Block E, Block F and Block G

Aircraft

 

SA-15

Page 1

BOEING PROPRIETARY

 

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1.4    If Boeing and Customer mutually agree to reschedule a Block B, Block C, Block E, Block F or Block G Aircraft within the [*], the affected Block B, Block C, Block E, Block F or Block G Aircraft will continue to receive the [*] described herein, [*] to the rescheduled delivery month.

1.5    The [*] for the Airframe Price and Optional Features Price of each Block B, Block C, Block E, Block F and Block G Aircraft will be [*] during the [*] at a [*].

 

2.

Determining [*] for Block B, Block C, Block E, Block F and Block G Aircraft Delivering Within the [*].

2.1    For Block B, Block C, Block E, Block F and Block G Aircraft delivering within the [*], Boeing will, at time of Block B, Block C, Block E, Block F and Block G Aircraft delivery, calculate the [*] of the Airframe Price and Optional Features Price using (i) [*] in accordance with the provisions of [*] to the Purchase Agreement [*] and (ii) the [*]. The final Block B, Block C, Block E, Block F and Block G Aircraft Price will include the [*] Airframe Price and Optional Features Price utilizing the [*] or the [*], except as set forth below.

2.2    Notwithstanding paragraph 2.1 above, if [*] calculated pursuant to the [*], Customer will [*] on the Airframe Price and Optional Features Price [*] on the applicable Block B, Block C, Block E, Block F and Block G Aircraft; or

2.3    If [*] calculated pursuant to the [*], Customer will [*] on the Airframe Price and Optional Features Price [*] on the applicable Block B, Block C, Block E, Block F and Block G Aircraft. At least [*] of a Block B, Block C, Block E, Block F or Block G Aircraft, but not [*] of a Block B, Block C, Block E, Block F or Block G Aircraft, Boeing will provide Customer notification in the event the [*].

2.4    For an example of the determination of escalation factor applicable to the Airframe and Optional Features, refer to Attachment C to this Letter Agreement.

 

FED-PA-03712-LA-1208292R3

Special Matters Concerning [*] – Block B, Block C, Block E, Block F and Block G

Aircraft

 

SA-15

Page 2

BOEING PROPRIETARY

 

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LOGO

 

3.

Effect on Advance Payments.

The amount and timing of advance payments Customer is required to pay to Boeing pursuant to the Purchase Agreement shall be unaffected by any terms set forth in this Letter Agreement.

 

4.

Block B, Block C, Block E, Block F and Block G Aircraft Applicability.

Unless otherwise stated, the terms of this Letter Agreement shall only apply to the Block B, Block C, Block E, Block F and Block G Aircraft set forth in Tables 1-A1, 1-A2 and 1-B of the Purchase Agreement as of the execution date of this Letter Agreement.

 

5.

Applicability to Other Financial Consideration.

The escalation adjustment for any other sum identified in the Purchase Agreement as subject to escalation pursuant to Supplemental Exhibit AE1, and which pertains to Block B, Block C, Block E, Block F and Block G Aircraft set forth in Tables 1-A1, 1-A2 and 1-B as of the date of this Letter Agreement, shall be calculated using the escalation methodology established in this Letter Agreement notwithstanding any other provisions of the Purchase Agreement to the contrary.

 

6.

Confidential Treatment.

Customer understands that Boeing considers certain commercial and financial information contained in this Letter Agreement as confidential. Each of Customer and Boeing agree that it will treat this Letter Agreement and the information contained herein as confidential. Customer agrees to limit the disclosure of the contents of this Letter Agreement to employees of Customer with a need to know and who understand that they are not to disclose its content to any other person or entity without the prior written consent of Boeing. Notwithstanding the foregoing, Customer may disclose this Letter Agreement and the terms and conditions herein to its parent company, FedEx Corporation, to the Board of Directors of its parent corporation, FedEx Corporation, to its professional advisors under a duty of confidentiality with respect thereto, and as required by law.

 

FED-PA-03712-LA-1208292R3

Special Matters Concerning [*] – Block B, Block C, Block E, Block F and Block G

Aircraft

 

SA-15

Page 3

BOEING PROPRIETARY

 

*

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LOGO

 

Very truly yours,

 

THE BOEING COMPANY
By  

/s/ Cheryl Khera

Its  

Attorney-In-Fact

ACCEPTED AND AGREED TO this
Date:  

June 25, 2020

FEDERAL EXPRESS CORPORATION
By  

/s/ Kevin A. Burkhart

Its  

Vice President

Attachments A, B and C

 

FED-PA-03712-LA-1208292R3

Special Matters Concerning [*] – Block B, Block C, Block E, Block F and Block G

Aircraft

 

SA-15

Page 4

BOEING PROPRIETARY

 

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The Boeing Company

P.O. Box 3707

Seattle, WA 98124-2207        

 

FED-PA-3712-MISC-1907644R1

Federal Express Corporation

3131 Democrat Road

Memphis, TN 38118

 

Attention:

Mr. Guy See

Managing Director – Aircraft Acquisitions & Sales

 

Subject:

Special Considerations related to [*]

 

References:

a)     Purchase Agreement 3712 between The Boeing Company (Boeing) and Federal Express Corporation (Customer) dated December 14, 2011 relating to Model 767-3S2F Aircraft (767 Purchase Agreement)

b)    Purchase Agreement 3715 between Boeing and Customer dated November 7, 2006 relating to Model 777-Freighter Aircraft (777 Purchase Agreement)

All terms used but not defined in this letter (Letter Agreement) amends and supplements the 767 Purchase Agreement. In addition, this Letter Agreement cancels and supersedes FED-PA-3712-MISC-1907644 in its entirety.

 

1.

Background.

 

  1.1

[*].

 

  1.2

[*].

 

2.

Agreement.

 

  [*]

 

  2.1

[*].

2.1.1 [*].

2.1.2 Customer will take delivery of the [*] 767 Aircraft and [*] 767 Aircraft on the dates tendered in accordance with the 767 Purchase Agreement, and ferry these aircraft from Everett, Washington on their respective delivery dates.

 

FED-PA-3712-MISC-1907644 R1

Special Considerations related to [*]

   

SA-15

Page 1

BOEING PROPRIETARY

 

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2.1.3 Upon transfer of title to each of the [*] 767 Aircraft and [*] 767 Aircraft, Customer will have full custody and control of and responsibility for such Aircraft. If funds have not been paid to Boeing at the time of delivery of either of these Aircraft, then Boeing will apply advance payments held by Boeing under the 777 Purchase Agreement to pay all amounts due to Boeing at delivery of such Aircraft ([*] Amounts). Customer will then pay to Boeing an amount equal to the [*] Amounts on or before [*], to replenish the applied advance payments.

2.1.4 The approximate amount of funds to be paid to Boeing in [*] is [*], inclusive of the [*] Amounts described in paragraph 2.1.3. Such amount will be finally determined based on the amounts due to Boeing at delivery of the [*] 767 Aircraft.

2.1.5 [*]. Such amount will be finally determined based on the amounts due to Boeing at delivery of the [*] 767 Aircraft.

2.1.6 [*].

2.1.7 Customer will make the [*] to Boeing on [*], which will be applied to the 777 Purchase Agreement to the extent advance payments held by Boeing under the 777 Purchase Agreement were used to pay the [*]. [*].

2.1.8 [*].

 

  2.2

[*].

2.2.1 [*].

2.2.2 Customer will take delivery of the [*] 767 Aircraft on the dates tendered in accordance with the 767 Purchase Agreement, and ferry these aircraft from Everett, Washington on their respective delivery dates.

2.2.3 Upon transfer of title to each of the [*] 767 Aircraft, Customer will have full custody and control of and responsibility for such Aircraft. If funds have not been paid to Boeing at the time of delivery of either of these Aircraft, then Boeing will apply advance payments held by Boeing under the 777 Purchase Agreement to pay all amounts due to Boeing at delivery of such Aircraft ([*] Amounts). Customer will then pay to Boeing an amount equal to the [*] Amounts on or before [*], to replenish the applied advance payments.

2.2.4 The approximate amount of funds to be paid to Boeing in [*] is [*], inclusive of the [*] Amounts described in paragraph 2.2.3. Such amount will be finally determined based on the amounts due to Boeing at delivery of the [*] 767 Aircraft.

2.2.5 [*]. Such amount will be finally determined based on the amounts due to Boeing in [*].

 

FED-PA-3712-MISC-1907644R1

Special Considerations related to [*]

   

SA-15

Page 2

BOEING PROPRIETARY

 

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2.2.6 [*].

2.2.7 Customer will make the [*] to Boeing on [*], which will be applied to the 777 Purchase Agreement to the extent advance payments held by Boeing under the 777 Purchase Agreement were used to pay the [*]. [*].

2.2.8 [*].

2.3 [*].

[*].

2.3.1 [*].

2.3.2 [*].

2.3.3 [*].

2.3.4 [*].

 

3.

Confidentiality.

Customer understands and agrees that the information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer agrees to limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the reference (a) and (b) purchase agreements and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

 

FED-PA-3712-MISC-1907644R1

Special Considerations related to [*]

   

SA-15

Page 3

BOEING PROPRIETARY

 

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LOGO   

 

Very truly yours,

 

THE BOEING COMPANY
By   /s/ Cheryl Khera
Its   Attorney-In-Fact

ACCEPTED AND AGREED TO this

 

Date:   June 25, 2020

FEDERAL EXPRESS CORPORATION

 

By   /s/ Kevin A. Burkhart
Its   Vice President

 

FED-PA-3712-MISC-1907644R1

Special Considerations related to [*]

   

SA-15

Page 4

BOEING PROPRIETARY

 

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The Boeing Company

P.O. Box 3707

Seattle, WA 98124-2207        

 

FED-PA-3712-MISC-1902775R1

Federal Express Corporation

3131 Democrat Road

Memphis, TN 38118

 

Attention:

Mr. Guy See

Managing Director – Aircraft Acquisitions & Sales

 

Subject:

Revisions to the Detailed Specification and Associated Unincorporated Change Pricing for 767-3S2F Aircraft (Aircraft)

 

References:

Purchase Agreement 3712 between The Boeing Company (Boeing) and Federal Express Corporation (Customer) dated December 14, 2011 relating to Model 767-3S2F Aircraft (767 Purchase Agreement)

All terms used but not defined in this letter (Letter Agreement) shall have the same meaning as in the referenced 767 Purchase Agreement. This Letter Agreement cancels and supersedes FED-PA-3712-MISC-1902775 in its entirety.

 

1.

Background.

 

  1.1.

The 767 Purchase Agreement sets forth the detailed specifications pursuant to which Boeing manufactures Customer’s Aircraft.

 

  1.2.

Pursuant to Article 4, Detailed Specification Changes; of the AGTA, Boeing and Customer have agreed upon certain changes to the 767 Detail Specification by executing an option proposal (Option Proposal) for such change (Unincorporated Change). The Option Proposal details the pricing (Unincorporated Change Price), effective date for the Unincorporated Change, and applicable Aircraft by manufacturer serial number (MSN).

 

  1.3.

[*].

 

2.

Agreement.

 

  2.1

Boeing and Customer agree that [*].

 

  2.1.1

[*].

 

  2.2

[*].

 

FED-PA-3712-MISC-1902775R1

Follow-On Unincorporated Changes pricing for 767-3S2F Aircraftt

 

SA-15

Page 1

BOEING PROPRIETARY

 

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LOGO

 

3.

Confidentiality.

Customer understands and agrees that the information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer agrees to limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

Very truly yours,

 

THE BOEING COMPANY
By   /s/ Cheryl Khera
Its   Attorney-In-Fact

ACCEPTED AND AGREED TO this

 

Date:   June 25, 2020

FEDERAL EXPRESS CORPORATION

 

By   /s/ Kevin A. Burkhart
Its   Vice President

 

FED-PA-3712-MISC-1902775R1

Follow-On Unincorporated Changes pricing for 767-3S2F Aircraftt

 

SA-15

Page 2

BOEING PROPRIETARY


LOGO  

The Boeing Company

P.O. Box 3707

Seattle, WA 98124-2207        

 

FED-PA-03712-LA-2002433

Federal Express Corporation

3610 Hacks Cross Road

Memphis, TN 38125

 

Subject:

SA-15 Considerations and [*]

 

References:

(a)    Purchase Agreement No. 3712 (767 Purchase Agreement) between The Boeing Company (Boeing) and (Customer) dated December 14, 2011 relating to Model 767-300F aircraft (767 Aircraft)

(b)    Purchase Agreement No. 3157 (777 Purchase Agreement) between Boeing and Customer dated November 7, 2006 relating to Model 777F aircraft (777 Aircraft, and together with the 767 Aircraft collectively referred to as Aircraft throughout this letter)

(c)    Aircraft General Terms Agreement No. AGTA-FED (AGTA) between Boeing and Customer dated November 7, 2006

(d)    [*]

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

 

1.

Background.

 

  1.1

Boeing provided Customer the reference (d) [*] which [*].

 

  1.2

[*]. In response to Customer’s request, Boeing has agreed to defer certain Aircraft deliveries under the terms of Supplemental Agreement No. 15 to the 767 Purchase Agreement (SA-15).

 

  1.3

Boeing has informed Customer that [*]. The parties understand that [*]. [*].

 

FED-PA-03712-LA-2002433

SA-15 Considerations and [*]

   

SA-15

Page 1

BOEING PROPRIETARY

 

*

Blank spaces contained confidential information that 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.


LOGO

 

2.

[*].

Customer agrees that the considerations contained in SA-15 are [*].

 

3.

[*].

[*].

 

4.

Confidential Treatment.

Customer understands that Boeing considers certain commercial and financial information contained in this Letter Agreement as confidential. Each of Customer and Boeing agree that it will treat this Letter Agreement and the information contained herein as confidential. Customer agrees to limit the disclosure of the contents of this Letter Agreement to employees of Customer with a need to know and who understand that they are not to disclose its content to any other person or entity without the prior written consent of Boeing. Notwithstanding the foregoing, Customer may disclose this Letter Agreement and the terms and conditions herein to its parent company, FedEx Corporation, to the Board of Directors of its parent corporation, FedEx Corporation, to its professional advisors under a duty of confidentiality with respect thereto, and as required by law.

 

FED-PA-03712-LA-2002433

SA-15 Considerations and [*]

   

SA-15

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BOEING PROPRIETARY

 

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Blank spaces contained confidential information that 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.


LOGO

 

Very truly yours,

 

THE BOEING COMPANY
By   /s/ Cheryl Khera
Its   Attorney-In-Fact

ACCEPTED AND AGREED TO this

 

Date:   June 25, 2020

FEDERAL EXPRESS CORPORATION

 

By   /s/ Kevin A. Burkhart
Its   Vice President

Omitted Attachments

Certain attachments to this exhibit regarding delivery and pricing of certain B767F aircraft manufactured by The Boeing Company for FedEx 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 these attachments to the Securities and Exchange Commission or its staff upon request.

 

FED-PA-03712-LA-2002433

SA-15 Considerations and [*]

   

SA-15

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BOEING PROPRIETARY

 

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Blank spaces contained confidential information that 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.

Exhibit 10.5

FEDEX CORPORATION RETIREMENT PARITY PENSION PLAN

 

 

Amended and Restated

Effective June 15, 2020


Section 1. Purpose and Description. Federal Express Corporation, a Delaware corporation (the “Company”), established, effective June 1, 1993 (the “Effective Date”), the Federal Express Corporation Retirement Parity Pension Plan (the “Plan”). The Plan was amended, effective June 1, 1994, to increase the benefit provided from 80% to 100% of the difference of the “Unreduced Benefit” less the “Maximum Benefit,” as both terms are defined below. The Plan was amended and restated, effective June 1, 1996 to provide for the inclusion of Managing Directors, in addition to Officers, under the terms of the Plan. The Plan was restated, effective February 1, 1998 to provide for the inclusion of Managing Directors and Officers of FedEx Corporation (formerly FDX Corporation) and, effective December 1, 1998, Managing Directors and Officers of FedEx Global Logistics, Inc. (formerly FDX Global Logistics, Inc.), under the terms of the Plan. The Plan was restated, effective June 1, 1999, to conform the Plan to previous amendments and to provide that, upon retirement, an eligible Officer or Managing Director may elect certain lump-sum and installment distributions in lieu of receiving benefits in the same manner as such benefits would be paid from the Qualified Pension Plan. The Plan provisions, as in effect immediately prior to June 1, 1999, remained in effect for anyone who was not actively employed by the Company, FedEx Corporation, or FedEx Global Logistics, Inc. as an Officer or Managing Director on or after that date, unless the Plan specifically provides otherwise.

Effective May 31, 2003, the FedEx Ground Package System, Inc. and Certain Affiliates 401(a)(17) Benefit Plan and the FedEx Ground Package System, Inc. and Certain Affiliates Excess Plan were merged with and into the Plan and name of the Plan was changed to the FedEx Corporation Retirement Parity Pension Plan. The provisions of the merged plan applicable to the employees participating in the FedEx Ground Package System, Inc. and Certain Affiliates 401(a)(17) Benefit Plan continue to be set forth in Appendix A and the FedEx Ground Package System, Inc. and Certain Affiliates Excess Plan continue to be set forth in Appendix B. The provisions of Appendix A and Appendix B are applicable to the employees of FedEx Ground Package System, Inc., FedEx Custom Critical, Inc., FedEx Supply Chain Services, Inc., AutoQuik, Inc., and Urgent Freight, Inc.

Effective June 1, 2003, the Plan was amended in order to establish the provisions applicable to that portion of an eligible Officer’s or Managing Director’s accrued benefit that is determined pursuant to Appendix E of the Qualified Pension Plan (“Portable Pension Account”) beginning on or after June 1, 2003.

The Plan was restated, effective June 1, 2008, to conform the Plan to the terms of the Qualified Pension Plan and to provide for benefit accruals and benefit payments beginning June 1, 2008.

Effective January 1, 2020, the Plan was amended and restated to reflect (1) that employees who are hired on or after January 1, 2020 shall be eligible to accrue a three and one-half percent (3.5%) Excess Compensation Credit on compensation that exceeds the Code Section 401(a)(17) limit and (2) an increase of the three and one-half percent (3.5%) Excess Compensation Credit to eight percent (8%) effective January 1, 2021; and (3) that the definition of Plan eligible employee is expanded to include Officers and Managing Directors of FedEx Freight, Inc. who are hired on or after January 1, 2020 and Officers and Managing Directors of FedEx Office and Print Services, Inc.; FedEx Supply Chain Systems, Inc.; and their subsidiaries, effective January 1, 2021.

 

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The Plan is hereby amended and restated to reflect a one-year delay in the effective date from January 1, 2021 to January 1, 2022 for (1) the increase of the three and one-half percent (3.5%) Excess Compensation Credit to eight percent (8%); and (2) the expansion of the definition of Plan eligible employee to include and Officers and Managing Directors of FedEx Office and Print Services, Inc.; FedEx Supply Chain Systems, Inc.; and their subsidiaries.

The Plan is intended to be an “employee benefit pension plan,” as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974 (“ERISA”), and a plan that is “unfunded and is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees,” as provided in Sections 201, 301, and 401 of ERISA and the Department of Labor regulations promulgated under ERISA and is intended to comply with Section 409A of the Internal Revenue Code (the “Code”). The benefits provided by the Plan are not funded but shall be payable when due out of the assets of the Company as general, unsecured obligations of the Company.

Unless otherwise provided herein, defined terms used in this Plan shall have the same meaning attributed to such terms in the Qualified Pension Plan and the Federal Express Corporation Nonqualified Disability Plan for Officers (the “Officers Nonqualified Disability Plan”), as applicable.

Section 2. Eligibility. Prior to June 1, 2008, any employee of a participating employer (which shall mean the Company; on or after February 1, 1998, FedEx Corporation; on or after December 1, 1998, FedEx Global Logistics, Inc.; on or after March 1, 2000, FedEx Trade Networks, Inc., and FedEx Trade Networks Transport & Brokerage, Inc. (formerly, Tower Group International, Inc.); on or after May 1, 2000, World Tariff, Limited; on or after June 1, 2000, FedEx Corporate Services, Inc.; on or after March 1, 2001, FedEx Freight Corporation; on or after April 11, 2001, FedEx Trade Networks Trade Services, Inc.; on or after May 31, 2003, FedEx Ground Package System, Inc., FedEx Custom Critical, Inc., FedEx Supply Chain Services, Inc., AutoQuik, Inc. and Urgent Freight, Inc.; on or after June 1, 2001, Federal Express Virgin Islands, Inc.; on or after September 12, 2004, FedEx SmartPost, Inc.; on or after June 1, 2006, FedEx Customer Information Services, Inc.; and on or after November 15, 2006, FedEx Truckload Brokerage, Inc.) other than an Officer or Managing Director the terms of whose employment are governed by the collective bargaining agreement between the Company and the FedEx Pilots Association effective May 31, 1999 (“Agreement”) or any successor agreement thereto; on or after January 1, 2020, FedEx Freight, Inc.; on or after January 1, 2022, FedEx Office and Print Services, Inc. and FedEx Supply Chain Systems, Inc., who serves as an Officer after the Effective Date or, after June 1, 1996, as a Managing Director, has served as an Officer and/or Managing Director for a combined period of five consecutive years, including service prior to the Effective Date, and is an active participant in the FedEx Corporation Employees’ Pension Plan, as it currently exists and as it may be amended from time to time (the “Qualified Pension Plan”) or would be an active participant in the Qualified Pension Plan or the FedEx Freight Pension Plan (“Freight Pension Plan”) but for the fact that the Officer or Managing

 

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Director (1) is hired on or after January, 1, 2020; (2) is employed by FedEx Office and Print Services, Inc.; FedEx Supply Chain Systems, Inc.; or one of their subsidiaries; or (3) elected to forego accruing Compensation Credits under a Portable Pension Account in the Qualified Pension Plan or Freight Pension Plan, shall be eligible for the benefit described in subsection (c) of Section 3 below, subject to subsection (a) of Section 3. In addition, an Officer described above shall be eligible for the benefit described in subsection (d) of Section 3 below, subject to subsection (b) of Section 3.

The foregoing to the contrary notwithstanding, an employee of FedEx Custom Critical, Inc., AutoQuik, Inc., UrgentFreight, Inc., FedEx Truckload Brokerage, Inc., or FedEx Supply Chain Services, Inc. who is an Officer of either company prior to June 1, 2008 shall be eligible to participate in the Plan as provided in Section 1.12 of Appendix A to the Plan and Section 1.12 of Appendix B to the Plan. No employee of FedEx Custom Critical, Inc., AutoQuik, Inc., UrgentFreight, Inc., FedEx Truckload Brokerage, Inc. or FedEx Supply Chain Services, Inc. who was or is a Managing Director shall be eligible to participate in this Plan prior to June 1, 2008, unless (i) s/he was an Officer of one of these companies prior to June 1, 2008, or (ii) s/he was an Officer or Managing Director of another participating employer and has a combined period of five consecutive years as an Officer or Managing Director with all Controlled Group Members prior to June 1, 2008.

For the purpose of this Plan, the term “Officer” shall mean an officer of a participating employer elected to the position of vice-president or above, as evidenced in the minutes of each respective participating employer’s board of directors. The term “Managing Director” shall, for the purpose of this Plan, mean an employee of the Company or another participating employer who has been appointed to the position of managing director, as evidenced in the affected participating employer’s personnel information system, and shall also mean an employee having the title of “Staff Director” or “Director”.

In determining whether an Officer or Managing Director has served in such capacity for a combined period of five consecutive years, such Officer’s or Managing Director’s service with any Controlled Group Member (as that term is defined in the Qualified Pension Plan) shall be taken into account.

Any Eligible Employee of a Sponsoring Employer who, as of June 1, 2008 or later, serves as an Officer or a Managing Director shall be eligible for the benefit described in Section 4 below as of the later of (i) the date on which such individual is employed as an Officer or Managing Director, (ii) the date on which such individual becomes a participant in the Qualified Pension Plan, as it currently exists and as it may be amended from time to time, or (iii) June 1, 2008. An Officer or Managing Director who becomes a participant in this Plan on or after June 1, 2008 shall be vested in his benefit upon the completion of three (3) consecutive years as an Officer or Managing Director. An Officer or Managing Director (i) whose Separation from Service occurs prior to the completion of three (3) consecutive years as an Officer or Managing Director, or (ii) who ceases to be an Officer or Managing Director prior to the completion of three (3) consecutive years as an Officer or Managing Director shall not be eligible to receive a benefit under this Plan. A participant who was vested prior to June 1, 2008 will continue to be vested in the Plan benefit thereafter.

 

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Effective January 1, 2020, Officers and Managing Directors of FedEx Freight, Inc. and its subsidiaries, who are not accruing Compensation Credits under a Portable Pension Account in the FedEx Freight Pension Plan, may become eligible employees to participate in the Plan; provided, however, that such Officers and Directors shall be eligible to receive Excess Compensation Credits and Excess Compensation Interest Credits only.

Effective January 1, 2022, Officers and Managing Directors of FedEx Office and Print Services, Inc.; FedEx Supply Chain Systems, Inc.; and their subsidiaries may become eligible employees to participate in the Plan; provided, however, that such Officers and Managing Directors shall be eligible to receive Excess Compensation Credits and Excess Interest Credits only.

Notwithstanding the foregoing, an Officer or Managing Director who is hired on or after January 1, 2020 and who was participating in the FedEx Freight Retirement Parity Plan immediately prior to such hire date shall be eligible to receive Parity Compensation Credits, Parity Transition Credits, Additional Compensation Credits, Parity Interest Credits, and 415 Limit Credits but not Excess Compensation Credits or Excess Compensation Interest Credits.

Section 3. Benefit Amount and Limitations; Traditional Pension Benefit.

(a)    No benefits shall be accrued under the Traditional Pension Benefit formula and this Section 3 after May 31, 2008. Benefits which have been accrued under this Section by an eligible Officer or Managing Director through May 31, 2008 shall be payable as described in Section 5, Section 6 or Section 7 of the Plan.

Portable Pension Account benefits accrued by an eligible Officer or Managing Director on or after June 1, 2003 shall be as described in Section 4, below.

(b)    The Traditional Pension Benefit formula for an eligible Officer or Managing Director of FedEx Ground Package System, Inc. or FedEx SmartPost, Inc. or an eligible Officer of FedEx Custom Critical, Inc., AutoQuik, Inc., UrgentFreight, Inc. FedEx Truckload Brokerage, Inc. or FedEx Supply Chain Services, Inc. shall be as described in Appendix A and Appendix B to the Plan. No benefits shall be accrued under Appendix A and Appendix B to this Plan after May 31, 2008. Benefits which have been accrued under either Appendix by an eligible Officer or Managing Director through May 31, 2008 shall be payable as described in Section 5, Section 6 or Section 7 of the Plan.

Portable Pension Account benefits accrued by an eligible Officer or Managing Director on or after June 1, 2003 shall be as described in Section 4, below.

(c)    An Officer or Managing Director who meets the eligibility requirements of Section 2 above and who has an accrued benefit under the Traditional Pension Benefit (as that term is defined in Section 1.12 of Appendix E to the Qualified Pension Plan or Section 1.12 of Appendix G to the Qualified Pension Plan) provisions of the Qualified Pension Plan shall, regardless of whether such benefit under the Qualified Pension Plan has been reduced due to the limits imposed by Code Section415 (limitations on benefits) or Section 401(a)(17) (limitations on annual compensation), be paid from the Plan a benefit equal to 100% of the difference between the Unreduced Benefit and the Maximum Benefit.

 

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For the purpose of this Section 3, the monthly “Unreduced Benefit” shall mean the benefit that would be provided to the Officer or Managing Director pursuant to the Traditional Pension Benefit provisions of the Qualified Pension Plan, except that (1) if applicable, the Unreduced Benefit shall be calculated without regard to the limits imposed by Code Section 415 (limitations on benefits) and Section 401(a)(17) (annual compensation limit), and (2) “Average Compensation” taken into account with respect to a participating Officer or Managing Director shall have the same meaning as set forth under the Qualified Pension Plan, but shall not be limited by the application of Code Section 401(a)(17), except that, with respect to Officers or Managing Directors who (i) are actively employed by a participating employer as Officers or Managing Directors on or after June 1, 1999, (ii) except for those employees who are Officers or Managing Directors as of April 27, 2000, are not Officers or Managing Directors the terms of whose employment are governed by the collective bargaining agreement between Federal Express Corporation and the FedEx Pilots Association effective May 31, 1999 (or any successor agreement thereto), (iii) retire on or after June 1, 1999, and (iv) were participants in this Plan prior to June 1, 2008, the number of whole calendar years over which the arithmetic average is determined shall be three (3) years instead of five (5) years.

For the purpose of this Section 3, the monthly “Maximum Benefit” shall mean the benefit actually provided to the Officer or Managing Director under the Traditional Pension Benefit provisions of the Qualified Pension Plan.

(d)    In addition to the benefit described in subsection (3)(c) above, with respect to that portion of the accrued benefit of an Officer who meets the eligibility requirements of Section 2 above and who has an accrued benefit under the Traditional Pension Benefit provisions of the Qualified Pension Plan, shall also be paid from this Plan the difference between such Officer’s Maximum Benefit under the Traditional Pension Benefit provisions of the Qualified Pension Plan and what such Officer’s Maximum Benefit would have been had such Officer received credit for a Year of Service under the Traditional Pension Benefit provisions of the Qualified Pension Plan for each year that such Officer is eligible to receive, and does in fact receive, a benefit under the Federal Express Corporation Nonqualified Disability Plan for Officers, as it currently exists or as it may be amended from time to time (the “Officers Nonqualified Disability Plan”).

For purposes of determining eligibility for an increased benefit as contemplated by this subsection, such increased benefit shall be provided for each Plan Year during which an Officer’s Hours of Service under the Qualified Pension Plan plus such Officer’s “Phantom Hours of Service” while receiving benefits under the Officers Nonqualified Disability Plan are equal to a Year of Service under the Qualified Pension Plan. Phantom Hours of Service shall be credited at the same rate under this subsection as if the Officer receiving benefits under the Officers Nonqualified Disability Plan had been actively at work and receiving credit for Hours of Service under the Qualified Pension Plan. Notwithstanding the above, an Officer shall not receive credit under this subsection for the same Plan Year for which such Officer receives credit for a Year of Service under the Qualified Pension Plan.

 

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(e)    The foregoing to the contrary notwithstanding, the benefit payable from this Plan to an employee who was an Officer or Managing Director as of April 27, 2000 and the terms of whose employment are governed by the Agreement (or any successor agreement thereto) and who, as of May 31, 1999, had an accrued benefit under this Plan, shall be reduced by the total amount of pension benefits payable to such Officer or Managing Director under the Federal Express Corporation Pilots’ Money Purchase Pension Plan, the Federal Express Corporation Non-Qualified Section 415 Excess Pension Plan for Pilots and the Federal Express Corporation Non-Qualified Pension Plan for Pilots, pursuant to the terms of the Agreement (or any successor agreement thereto).

(f)    Except as specifically provided herein, this Plan is not intended to provide any increased benefit which could otherwise be provided under the Qualified Pension Plan. An Officer’s or Managing Director’s benefit under this Plan shall be decreased to the extent that such Officer’s or Managing Director’s benefit under the Qualified Pension Plan is so increased.

Section 4. Benefit Amount and Limitations: Parity Portable Pension Account Benefit.

(a)    An Officer or Managing Director who meets the eligibility requirements of Section 2 above and who has an accrued benefit under the Portable Pension Account (as that term is defined in Section 1.06 of Appendix E to the Qualified Pension Plan or Section 1.06 of Appendix G to the Qualified Pension Plan) provisions of the Qualified Pension Plan shall, regardless of whether such benefit under the Qualified Pension Plan has been reduced due to the limits imposed by Code Section 415 (limitations on benefits) or Section 401(a)(17) (limitations on annual compensation), be paid from the Plan a benefit equal to his/her Parity Portable Pension Account.

The Parity Portable Pension Account shall be established for each eligible participant as of the participant’s entry date into this Plan, and shall be credited with Parity Compensation Credits, Parity Transition Credits (if eligible), Additional Compensation Credits and Parity Interest Credits for each Plan Year following the establishment of the Parity Portable Pension Account, and with a 415 Limit Credit (if applicable) as of the participant’s date of retirement where:

 

  (i)

Parity Compensation Credit for any Plan Year shall equal (A) minus (B) as follows:

 

  (A)

is the Compensation Credit for such Plan Year as calculated under the Qualified Pension Plan but without regard to the limit imposed by Code Section 401(a)(17) (annual compensation limit) and subject to the provisions in subsections (1) and (2):

 

  (1)

for Officers and Managing Directors who become participants in this Plan on or before June 1, 2008 (except Managing Directors of FedEx Custom Critical, Inc., FedEx Truckload Brokerage, Inc, and FedEx Supply Chain Services, Inc. who become participants in the Plan as of June 1, 2008) with retroactive credits as if the Officer or Managing Director had been a participant in this Plan as of the date he participated in the Qualified Pension Plan.

 

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  (2)

for all Managing Directors of FedEx Custom Critical, Inc., FedEx Truckload Brokerage, Inc, and FedEx Supply Chain Services, Inc. who become participants in the Plan as of June 1, 2008 and all other Managing Directors and Officers who become participants of this Plan after June 1, 2008, only for Plan Years ending after the later of (i) June 1, 2008 and (ii) the date such employee becomes an Officer or Managing Director.

 

  (B)

is the Compensation Credit accrued under the Qualified Pension Plan for such Plan Year.

 

  (ii)

Parity Transition Credit for any Plan Year beginning on or after June 1, 2008 shall equal (A) minus (B) as follows:

 

  (A)

is the Transition Credit for such Plan Year as calculated under the Qualified Pension Plan but without regard to the limit imposed by Code Section 401(a)(17) (annual compensation limit)

 

  (B)

is the Transition Credit accrued under the Qualified Pension Plan for such Plan Year.

 

  (iii)

Additional Compensation Credit for any Plan Year beginning on or after June 1, 2008 and any Plan Year beginning on or after June 1, 2011 shall equal 3.5% of the excess of (A) over (B), where

 

  (A)

is such Officer’s or Managing Director’s Compensation, but without regard to the limitations under Section 401(a)(17), and

 

  (B)

is the limit set forth under Code Section 401(a)(17) (annual compensation limit).

Additional Compensation Credits shall not be accrued for any Plan Years before June 1, 2008, the Plan Year beginning on June 1, 2009, or any Plan Year for which a Compensation Credit is not accrued under the Qualified Pension Plan.

With respect to the Plan Year beginning June 1, 2010, the Additional Compensation Credit shall equal 1.75% of the excess of (A) over (B), where

 

  (A)

is such Officer’s or Managing Director’s Compensation, but without regard to the limitations under Section 401(a)(17), and

 

  (B)

is the limit set forth under Code Section 401(a)(17) (annual compensation limit).

 

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  (iv)

Parity Interest Credit shall mean an amount credited to the Parity Portable Pension Account in the same manner and using the same Interest Credit Factor as in the Qualified Pension Plan.

 

  (v)

415 Limit Credit shall mean, for a participant whose total Qualified Pension Plan Benefit has been limited by Code Section 415, a cash balance value equal to the value of the shortfall in the Qualified Pension Plan, except to the extent already provided in Section 3, above.

(b)    In addition to the benefit described in subsection (a) above, with respect to that portion of the accrued benefit of an Officer who meets the eligibility requirements of Section 2 above and who has an accrued benefit under the Portable Pension Account provisions of the Qualified Pension Plan shall also be paid from this Plan, the difference between such Officer’s benefit under the Portable Pension Account provisions of the Qualified Pension Plan and the amount such Officer’s Qualified Pension Plan benefit would have been had such Officer received credit for a Year of Service under the Portable Pension Account provisions of the Qualified Pension Plan for each year that such Officer is eligible to receive, and does in fact receive, a benefit under the Federal Express Corporation Nonqualified Disability Plan for Officers, as it currently exists or as it may be amended from time to time (the “Officers Nonqualified Disability Plan”).

For purposes of determining eligibility for an increased benefit as contemplated by this subsection, such increased benefit shall be provided for each Plan Year during which an Officer’s Hours of Service under the Qualified Pension Plan plus such Officer’s “Phantom Hours of Service” while receiving benefits under the Officers Nonqualified Disability Plan are equal to a Year of Service under the Qualified Pension Plan. Phantom Hours of Service shall be credited at the same rate under this subsection as if the Officer receiving benefits under the Officers Nonqualified Disability Plan had been actively at work and receiving credit for Hours of Service under the Qualified Pension Plan. Notwithstanding the above, an Officer shall not receive credit under this subsection for the same Plan Year for which such Officer receives credit for a Year of Service under the Qualified Pension Plan.

(c)    The foregoing to the contrary notwithstanding, no individual shall be entitled to receive a Parity Compensation Credit, Parity Transition Credit or Additional Compensation Credit under this Plan for a Plan Year unless (i) s/he is an eligible Officer or Managing Director with any Controlled Group Member as of the last day of the Plan Year for which such credits would be accrued, or (ii) s/he incurs a Separation from Service as a Managing Director or Officer after having been credited with at least 1,000 Hours of Service in the Plan Year.

(d)    The foregoing to the contrary notwithstanding, the benefit payable from this Plan to an employee who was an Officer or Managing Director as of April 27, 2000 and the terms of whose employment are governed by the Agreement (or any successor agreement thereto) and who, as of May 31, 1999, had an accrued benefit under this Plan, shall be reduced by the total amount of pension benefits payable to such Officer or Managing Director under the Federal Express Corporation Pilots’ Money Purchase Pension Plan, the Federal Express Corporation Non-Qualified Section 415 Excess Pension Plan for Pilots, and the Federal Express Corporation Non-Qualified Pension Plan for Pilots, pursuant to the terms of the Agreement (or any successor agreement thereto).

 

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(e)    Except as specifically provided herein, this Plan is not intended to provide any increased benefit which could otherwise be provided under the Qualified Pension Plan. An Officer’s or Managing Director’s benefit under this Plan shall be decreased to the extent that such Officer’s or Managing Director’s benefit under the Qualified Pension Plan is so increased.

(f)    Effective January 1, 2022, no Officer or Managing Director who was hired on or after January 1, 2020 or any Officer or Managing Director of FedEx Office and Print Services, Inc.; FedEx Supply Chain Systems, Inc.; or their subsidiaries shall be eligible to receive Parity Compensation Credits, Parity Transition Credits, Additional Compensation Credits, Parity Interest Credits, or 415 Limit Credits. Notwithstanding the foregoing, an Officer or Managing Director who is hired on or after January 1, 2020 and who was participating in the FedEx Freight Retirement Parity Plan immediately prior to such hire date shall be eligible to receive Parity Compensation Credits, Parity Transition Credits, Additional Compensation Credits, Parity Interest Credits, and 415 Limit Credits but not Excess Compensation Credits or Excess Compensation Interest Credits.

Effective January 1, 2022, an Officer or Managing Director who elected to forego accruing Compensation Credits under a Portable Pension Account in the Qualified Pension Plan or the FedEx Freight Pension Plan shall not be eligible to receive Parity Compensation Credits, Parity Transition Credits, Additional Compensation Credits, or 415 Limit Credits; provided, however, such Officer or Managing Director shall be eligible to receive Excess Compensation Credit and Excess Compensation Interest Credits and Parity Interest Credits on any previously accrued Parity Portable Pension Account Benefit.

Section 5. Benefit Amount and Limitations: Excess Compensation Account Benefit.

(a)    An Officer or Managing Director who is hired on or after January 1, 2020 or an Officer or Managing Director who elected to forego accruing Compensation Credits under a Portable Pension Account in the Qualified Pension Plan or the FedEx Freight Pension Plan shall be paid from the Plan a benefit equal to his/her Excess Compensation Account. An Excess Compensation Account shall be established for each eligible participant as of the participant’s entry date into this Plan, and shall be credited with Excess Compensation Credits and Excess Compensation Interest Credits for each Plan Year following the establishment of the Excess Compensation Account where:

 

  (i)

Excess Compensation Credit for any Plan Year shall equal eight percent (8%) multiplied by the excess of the Officer’s or Managing Director’s compensation for the calendar year in which such Plan Year began that is limited under the Defined Contribution Plan due to the imposition of the Code Section 401(a)(17) limit. Notwithstanding the foregoing, for an Excess Compensation Credit that relates to compensation for calendar year 2020 or 2021, the eight percent (8%) in the preceding sentence shall be replaced with three and one-half percent (3.5%).

 

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  (ii)

Excess Compensation Interest Credit shall mean an amount credited to the Excess Compensation Account in the same manner and using the same Interest Credit Factor as in the Qualified Pension Plan.

(b)    Notwithstanding the foregoing, no individual shall be entitled to receive an Excess Compensation Credit under this Plan for a Plan Year unless (i) s/he is an eligible Officer or Managing Director with any Controlled Group Member as of the last day of the Plan Year in which such credit is calculated, or (ii) s/he incurs a Separation from Service as a Managing Director or Officer after having been credited with at least 1,000 Hours of Service in the Plan Year.

Section 6. Payment of Benefits: Benefits Accrued Prior to January 1, 2005 but Commencing Prior to January 1, 2009.

(a)    Unless an eligible Officer or Managing Director makes an election in the manner and within the time period specified in subsection (b) below, benefits under this Plan shall be paid in the same manner and at the same time as benefit payments under the Qualified Pension Plan and shall be subject to the same restrictions and limitations as provided therein, without regard to Code Sections 415 and 401(a)(17). The foregoing to the contrary notwithstanding, Officers of FedEx Custom Critical, Inc., AutoQuik, Inc. UrgentFreight, Inc., FedEx Truckload Brokerage, Inc., and FedEx Supply Chain Services, Inc.) are not eligible to make a lump sum election.

An eligible Officer or Managing Director shall, no later than twelve (12) months prior to the date on which benefits commence under the Qualified Pension Plan, elect one of the following options under which benefits shall be payable under this Plan. An eligible Officer or Managing Director may elect to receive his or her benefit:

 

  (i)

in a single lump sum, payable on the date on which benefit payments commence under the Qualified Pension Plan;

 

  (ii)

in a single lump sum, payable twelve (12) months following the date on which benefit payments commence under the Qualified Pension Plan;

 

  (iii)

in a single lump sum payable twenty-four (24) months following the date on which benefit payments commence under the Qualified Pension Plan;

 

  (iv)

in two equal installments (each being equal to one-half of the lump sum amount described in clause (i) above), the first installment payable on the date on which benefit payments commence under the Qualified Pension Plan, and the second installment payable twelve (12) months following the date on which benefit payments commence under the Qualified Pension Plan; or

 

  (v)

in two equal installments (each being equal to one-half of the lump sum amount described in clause (ii) above), the first installment payable twelve (12) months following the date on which benefit payments commence under the Qualified

 

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  Pension Plan, and the second installment payable twenty-four (24) months following the date on which benefit payments commence under the Qualified Pension Plan.

(b)    In the event that any eligible Officer or Managing Director elects to receive a lump sum or installment benefit under subsection (a) above, the amount of each such distribution shall be calculated as of the Annuity Starting Date. The amount of the lump sum distribution payable under this Section 5(b) shall be calculated based upon the benefit payable as of the Annuity Starting Date by using an interest rate equal to the annual interest rate on thirty (30) year Treasury Constant Maturities as published in Federal Reserve releases G.13 and H.15 in effect for the second (2nd) month before the month in which the beginning of the Plan Year in which the calculation is performed (which shall be the stability period for purposes of the Plan) and the mortality table set forth in Revenue Ruling 2001-62, based on a blend of fifty percent (50%) of the male and female mortality rates set forth in the 1994 Group Annuity Reserving Table (“94 GAR”).

(c)    An eligible Officer or Managing Director may revoke the election made in this section and elect another manner in which his or her benefit from this Plan shall be payable, but only if such revocation and subsequent election occur no later than twelve (12) months prior to the date on which benefits commence under the Qualified Pension Plan with respect to such Officer or Managing Director.

(d)    If the value of the annuity benefit payable to an Officer or Managing Director is less than $100 per month, the benefit payable to such Officer or Managing Director may be paid as a lump sum.

Section 7. Payment of Benefits: Benefits Accrued After December 31, 2004 but Commencing Prior to January 1, 2009.

The Traditional Pension Benefit provided under this Plan which is accrued by an eligible Officer or Managing Director after December 31, 2004 shall be paid as a single lump sum no earlier than the later of (i) six (6) months following the eligible Officer’s or Managing Director’s Separation from Service, or (ii) his or her attainment of age 55. The amount of the lump sum distribution shall be calculated as of the later of the Officer’s or Managing Director’s attainment of age 55 or Separation from Service. The amount of the lump sum distribution payable under this Section 6 shall be calculated based upon the benefit payable as of the later of the Officer’s or Managing Director’s Separation from Service or attainment of age 55 by using an interest rate equal to the annual interest rate on thirty (30) year Treasury Constant Maturities as published in Federal Reserve releases G.13 and H.15 in effect for the second (2nd) month before the month in which the beginning of the Plan Year in which the calculation is performed (which shall be the stability period for purposes of the Plan) and the mortality table set forth in Revenue Ruling 2001-62, based on a blend of fifty percent (50%) of the male and female mortality rates set forth in the 1994 Group Annuity Reserving Table (“94 GAR”).

 

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The Portable Pension Account Benefit provided under this Plan that is accrued by an eligible Officer or Managing Director after December 31, 2004 shall be calculated as of the date of the Officer’s or Managing Director’s Separation from Service and paid as a single lump sum no earlier than six (6) months following the eligible Officer’s or Managing Director’s Separation from Service.

“Separation from Service” means a termination of substantial services for the Company. For purposes of applying the provisions of Code Section 409A, a reference to the Company shall also be deemed a reference to any affiliate thereof within the contemplation of Code Sections 414(b) and 414(c). A substantial employment relationship shall be considered to exist for so long as an individual is on an authorized leave of absence of up to six (6) months or, if longer, for so long as the individual retains a right to re-employment by law or contract. An individual who is on an authorized leave of absence shall not in any event be deemed to have a Separation from Service for so long as the Company has a reasonable expectation that the individual will again perform substantial services for the Company in any capacity, whether or not as an employee of the Company. An individual will not be treated as having incurred a Separation from Service where the individual’s level of future services for the Company is reasonably anticipated by the Company to exceed 20% of the average level of bona fide Company services provided by that individual in any capacity for the prior 36 month period, or the prior period of services if less, but will be treated as having incurred a Separation from Service at any time when such reasonably anticipated level of future services is equal to or less than such 20% average level of prior services.

Section 8. Payment of Benefits Commencing On or After January 1, 2009.

(a)    The Traditional Pension Benefit provided under this Plan that is accrued by an eligible Officer or Managing Director shall be paid as a single lump sum no earlier than the later of (i) six (6) months following the eligible Officer’s or Managing Director’s Separation from Service, (ii) his or her attainment of age 55, or (iii) as of January 1, 2009, with respect to Officers and Managing Directors who have incurred a Separation from Service but who had not commenced benefits prior to January 1, 2009.

The amount of the lump sum distribution payable under this Section 7(a) shall be calculated based upon the benefit payable as of the later of (i) the Officer’s or Managing Director’s Separation from Service, (ii) his or her attainment of age 55, or (iii) January 1, 2009, by using an interest rate equal to the annual interest rate on thirty (30) year Treasury Constant Maturities as published in Federal Reserve releases G.13 and H.15 in effect for the second (2nd) month before the month in which the beginning of the Plan Year in which the calculation is performed (which shall be the stability period for purposes of the Plan) and the mortality table set forth in Revenue Ruling 2001-62, based on a blend of fifty percent (50%) of the male and female mortality rates set forth in the 1994 Group Annuity Reserving Table (“94 GAR”).

(b)    The Portable Pension Account Benefit provided under this Plan that is accrued by an eligible Officer or Managing Director shall be calculated as of the date of the Officer’s or Managing Director’s Separation from Service and paid as a single lump sum no earlier than (i)

 

-12-


six (6) months following the eligible Officer’s or Managing Director’s Separation from Service, or (ii) as of January 1, 2009, with respect to Officers and Managing Directors who have incurred a Separation from Service but who had not commenced benefits prior to January 1, 2009.

(c)    The Excess Compensation Account Benefit provided under this Plan that is accrued by an eligible Officer or Managing Director shall be calculated as of the date of the Officer’s or Managing Director’s Separation from Service and paid as a single lump sum no earlier than six (6) months following the eligible Officer’s or Managing Director’s Separation from Service.

Section 9. Plan Administration. The Plan shall be administered by the Retirement Plans Department of FedEx Corporation (the “Administrator”). The Administrator shall have the responsibility to receive, evaluate and process all claims for benefits and shall cause payment of benefits to be made under the Plan in accordance with its terms. In connection with its duties, the Administrator shall have the authority to interpret the Plan’s provisions and to determine eligibility for Plan benefits. The Administrator shall have the authority to adopt such rules and procedures which it deems necessary for the administration of the Plan and recommend any modifications, changes or amendments to the Plan.

Section 10. The Committee. The Committee, as defined in the Qualified Pension Plan, shall have the authority to perform the administrative duties under the Plan, other than the duties of the Administrator. In connection with its duties, the Committee shall have the authority to interpret the Plan’s provisions and to determine eligibility for Plan benefits. The Committee is the named fiduciary of the Plan and shall adopt such rules and procedures that in its opinion are either necessary or desirable to implement and administer the Plan.

Section 11. Claims Procedures. The claims procedures for the Plan shall be the same as such procedures in the Qualified Pension Plan.

Section 12. Legal Expenses. An Officer or Managing Director shall be entitled to reimbursement from the Company for reasonable legal expenses incurred in successfully enforcing his or her right to benefits under the Plan. This right to reimbursement shall only be available if such Officer or Managing Director has applied for benefits in substantial compliance with the Administrator’s procedures, been denied benefits by the Administrator, timely requested a review of that denial as provided in Section 10 above and had the Administrator’s denial upheld.

 

-13-


Section 13. Non-Assignability of Benefits. Benefits under this Plan shall not be assignable or transferable in any manner, nor shall they be subject to garnishment, attachment, or other legal process, except as provided by ERISA and other applicable federal law, or as provided under a domestic relations order.

Section 14. Effect. Neither the establishment of the Plan nor any modification thereto, nor the creation of any account on the books of any participating employer hereunder, nor the payment of any benefit from the Plan shall be construed as giving an Officer, Managing Director, or any other person any legal or equitable right against a participating employer, its directors, officers, employees or agents, except that the provisions of this Section 13 shall neither impair nor extinguish any rights of any participating Officer or Managing Director with respect to any claim for benefits payable under this Plan.

Section 15. No Guarantee of Employment. Nothing contained in this Plan shall be construed as a contract of employment between a participating employer and any Officer or Managing Director or as a promise that any Officer or Managing Director shall continue in his or her present or comparable position or as a limit on the participating employer’s right to discharge such Officer or Managing Director.

Section 16. Amendment or Termination. The Company may amend or terminate the Plan at any time. An amendment shall become effective: (i) upon its execution in writing by duly authorized Officers of the participating employers, (ii) upon action of the Company’s Board of Directors or the Board of Directors of FedEx Corporation, or any committee thereof, or (iii) upon action of the Committee, as reflected in the Committee’s minutes or in the minutes of the Board of Directors of the Company or of FedEx Corporation or any committee thereof. The Plan’s termination shall become effective: (i) upon action of the Company’s Board of Directors or the Board of Directors of FedEx Corporation, or any committee thereof, or (ii) upon action of the Committee, as reflected in the Committee’s minutes or in the minutes of the Board of Directors of the Company or of FedEx Corporation or any committee thereof. However, no amendment or termination shall eliminate or reduce any benefits accrued under the Plan at the time of such amendment or termination.

Section 17. Agent for Service of Process. The Company is hereby designated as agent for service of process for all purposes provided herein.

Section 18. Governing Law. Except to the extent preempted by federal law, the provisions of this Plan shall be administered, construed and enforced in accordance with the laws of the State of Tennessee.

 

-14-


Section 19. Execution. This document may be executed in any number of counterparts and each fully executed counterpart shall be deemed an original.

 

-15-


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDERAL EXPRESS CORPORATION

Signed:

  /s/ Robbin S. Page                                                           

Name:

  Robbin S. Page                                                               

Title:

 

VP Human Resources                                                     

Date:   7/21/2020                                                                         


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX CORPORATION
Signed:   /s/ Judith H. Edge                                                                     
Name:   Judith H. Edge                                                                          
Title:   Corporate VP, Human Resources                                             
Date:   7/31/2020                                                                                   


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX CORPORATE SERVICES, INC.
Signed:   /s/ Judith H. Edge                                                                     
Name:   Judith H. Edge                                                                          
Title:   Corporate VP, Human Resources                                             
Date:   7/31/2020                                                                                   


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX CROSS BORDER HOLDINGS, INC.

Signed:

 

/s/ Michael E. Hagan                                                             

Name:

 

Michael E. Hagan                                                                  

Title:

 

Senior VP and General Counsel                                            

Date:

 

7/31/2020                                                                               


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX CROSS BORDER TECHNOLOGIES, INC.

Signed:

 

/s/ Michael E. Hagan                                                             

Name:

 

Michael E. Hagan                                                                  

Title:

 

Senior VP and General Counsel                                             

Date:

 

7/31/2020                                                                                


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX FORWARD DEPOTS, INC.

Signed:

 

/s/ Michael E. Hagan                                                             

Name:

 

Michael E. Hagan                                                                  

Title:

 

Senior VP and General Counsel                                            

Date:

 

7/31/2020                                                                               


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX LOGISTICS, INC.

Signed:

 

/s/ Michael E. Hagan                                                             

Name:

 

Michael E. Hagan                                                                  

Title:

 

Senior VP and General Counsel                                            

Date:

 

7/31/2020                                                                               


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDERAL TRADE NETWORKS TRADE SERVICES, LLC

Signed:

 

/s/ Michael E. Hagan                                                             

Name:

 

Michael E. Hagan                                                                  

Title:

 

Senior VP and General Counsel                                            

Date:

 

7/31/2020                                                                               


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

WORLD TARIFF, LTD.

Signed:

 

/s/ Michael E. Hagan                                                             

Name:

 

Michael E. Hagan                                                                  

Title:

 

Vice President and General Counsel                                    

Date:

 

7/31/2020                                                                               


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX FREIGHT CORPORATION
Signed:   /s/ Jeffery B. Greer                                                                     
Name:   Jeffery B. Greer                                                                          
Title:   Senior VP, Human Resources                                                     
Date:   7/27/2020                                                                                      


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX FREIGHT, INC.
Signed:   /s/ Jeffery B. Greer                                                                     
Name:   Jeffery B. Greer                                                                          
Title:   Senior VP, Human Resources                                                     
Date:   7/27/2020                                                                                      


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDERAL EXPRESS VIRGIN ISLANDS, INC.

Signed:

 

/s/ Marilyn Blanco-Reyes                                                          

Name:

 

Marilyn Blanco-Reyes                                                               

Title:

 

VP Legal/LAC                                                                           

Date:

 

7/21/2020                                                                                    


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX CUSTOM CRITICAL, INC.
Signed:   /s/ Allan W. Brown                                                                     

Name:

  Allan W. Brown                                                                          

Title:

  Vice President and General Counsel                                           
Date:   7/21/2020                                                                                      


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX TRADE NETWORKS TRANSPORT & BROKERAGE, INC.

Signed:

 

/s/ Michael E. Hagan                                                             

Name:

 

Michael E. Hagan                                                                  

Title:

 

Vice President                                                                        

Date:

 

7/31/2020                                                                                


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX SUPPLY CHAIN DISTRIBUTION SYSTEM, INC.
Signed:   /s/ Allan W. Brown                                                                     

Name:

  Allan W. Brown                                                                          

Title:

  Vice President and General Counsel                                           
Date:   7/29/2020                                                                                      


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX GROUND PACKAGE SYSTEM, INC.
Signed:   /s/ Chris Winton                                                                     
Name:   Chris Winton                                                                          
Title:   Senior VP, Human Resources                                                
Date:   7/27/2020                                                                                


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX OFFICE AND PRINT SERVICES, INC.

Signed:

 

/s/ Tracy Brightman                                                         

Name:

 

Tracy Brightman                                                             

Title:

 

SVP, Human Resources                                                   

Date:

 

7/21/2020                                                                           


IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted by affixing their signatures hereto.

 

FEDEX OFFICE COMMERCIAL PRESS, INC.

Signed:

 

/s/ Tracy Brightman                                                         

Name:

 

Tracy Brightman                                                              

Title:

 

VP, Human Resources                                                     

Date:

 

7/21/2020                                                                           

 

 

EXHIBIT 15.1

To the Stockholders and Board of Directors

FedEx Corporation

We are aware of the incorporation by reference in the following Registration Statements of FedEx Corporation:

 

(1) Registration Statement (Form S-8 No. 333-234010) pertaining to the 2019 Omnibus Stock Incentive Plan,

(2) Registration Statement (Form S-8 No. 333-222198) pertaining to the 2010 Omnibus Stock Incentive Plan,

(3) Registration Statement (Form S-8 No. 333-192957) pertaining to the 2010 Omnibus Stock Incentive Plan,

(4) Registration Statement (Form S-8 No. 333-171232) pertaining to the 2010 Omnibus Stock Incentive Plan,

(5) Registration Statement (Form S-8 No. 333-45037) pertaining to the Adjustment Program,

(6) Registration Statement (Form S-8 No. 333-100572) pertaining to the 2002 Stock Incentive Plan,

(7) Registration Statement (Form S-8 No. 333-111399) pertaining to the Incentive Stock Plan,

(8) Registration Statement (Form S-8 No. 333-121418) pertaining to the Incentive Stock Plan,

(9) Registration Statement (Form S-8 No. 333-130619) pertaining to the Incentive Stock Plan,

(10) Registration Statement (Form S-8 No. 333-156333) pertaining to the Incentive Stock Plan, and

(11) Registration Statement (Form S-3 No. 333-240157);

of our report dated September 15, 2020, relating to the unaudited condensed consolidated interim financial statements of FedEx Corporation that are included in its Form 10-Q for the quarter ended August 31, 2020.

/s/ Ernst & Young LLP

Memphis, Tennessee

September 15, 2020

 

 

EXHIBIT 31.1

CERTIFICATION 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

I, Frederick W. Smith, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of FedEx Corporation (the “registrant”);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 15, 2020

 

/s/ Frederick W. Smith

Frederick W. Smith

Chairman and

Chief Executive Officer

 

EXHIBIT 31.2

CERTIFICATION 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

I, Alan B. Graf, Jr., certify that:

1.

I have reviewed this quarterly report on Form 10-Q of FedEx Corporation (the “registrant”);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 15, 2020

 

/s/ Alan B. Graf, Jr.

Alan B. Graf, Jr.

Executive Vice President and

Chief Financial Officer

 

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of FedEx Corporation (“FedEx”) on Form 10-Q for the period ended August 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frederick W. Smith, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of FedEx.

Date: September 15, 2020

 

/s/ Frederick W. Smith

Frederick W. Smith

Chairman and

Chief Executive Officer

 

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of FedEx Corporation (“FedEx”) on Form 10-Q for the period ended August 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alan B. Graf, Jr., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of FedEx.

Date: September 15, 2020

 

/s/ Alan B. Graf, Jr.

Alan B. Graf, Jr.

Executive Vice President and

Chief Financial Officer