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General | 3 Months Ended
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Aug. 31, 2020
General [Abstract] |
General | (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. 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. 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.

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