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General (Policies)
 6 Months Ended
Nov. 30, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

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 November 30, 2020, and the results of our operations for the three- and six-month periods ended November 30, 2020 and 2019, cash flows for the six-month periods ended November 30, 2020 and 2019, and changes in common stockholders’ investment for the three- and six-month periods ended November 30, 2020 and 2019. Operating results for the three- and six-month periods ended November 30, 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

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 $701 million and $563 million at November 30, 2020 and May 31, 2020, respectively. Contract assets net of deferred unearned revenue were $499 million and $456 million at November 30, 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 November 30, 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 November 30. This presentation is consistent with how we organize our segments internally for making operating decisions and measuring performance.

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

REVENUE BY SERVICE TYPE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FedEx Express segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Package:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. overnight box

 

$

2,012

 

 

$

1,864

 

 

$

3,873

 

 

$

3,730

 

U.S. overnight envelope

 

 

435

 

 

 

457

 

 

 

861

 

 

 

936

 

U.S. deferred

 

 

1,204

 

 

 

980

 

 

 

2,300

 

 

 

1,936

 

Total U.S. domestic package revenue

 

 

3,651

 

 

 

3,301

 

 

 

7,034

 

 

 

6,602

 

International priority

 

 

2,510

 

 

 

1,817

 

 

 

4,827

 

 

 

3,634

 

International economy

 

 

658

 

 

 

873

 

 

 

1,274

 

 

 

1,728

 

Total international export package revenue

 

 

3,168

 

 

 

2,690

 

 

 

6,101

 

 

 

5,362

 

International domestic(1)

 

 

1,206

 

 

 

1,165

 

 

 

2,294

 

 

 

2,241

 

Total package revenue

 

 

8,025

 

 

 

7,156

 

 

 

15,429

 

 

 

14,205

 

Freight:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

799

 

 

 

698

 

 

 

1,632

 

 

 

1,393

 

International priority

 

 

737

 

 

 

473

 

 

 

1,390

 

 

 

937

 

International economy

 

 

408

 

 

 

541

 

 

 

779

 

 

 

1,057

 

International airfreight

 

 

65

 

 

 

70

 

 

 

140

 

 

 

136

 

Total freight revenue

 

 

2,009

 

 

 

1,782

 

 

 

3,941

 

 

 

3,523

 

Other(2)

 

 

334

 

 

 

146

 

 

 

645

 

 

 

301

 

Total FedEx Express segment

 

 

10,368

 

 

 

9,084

 

 

 

20,015

 

 

 

18,029

 

FedEx Ground segment

 

 

7,344

 

 

 

5,315

 

 

 

14,384

 

 

 

10,494

 

FedEx Freight segment

 

 

1,936

 

 

 

1,844

 

 

 

3,762

 

 

 

3,749

 

FedEx Services segment

 

 

8

 

 

 

5

 

 

 

16

 

 

 

9

 

Other and eliminations(3)

 

 

907

 

 

 

1,076

 

 

 

1,707

 

 

 

2,091

 

 

 

$

20,563

 

 

$

17,324

 

 

$

39,884

 

 

$

34,372

 

 

(1)

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

 

(2)

Includes the operations of FedEx Custom Critical, Inc. (“FedEx Custom Critical”) and FedEx Cross Border Holdings, Inc. (“FedEx Cross Border”) for the periods ended November 30, 2020. Effective March 1, 2020 and June 1, 2020, respectively, the results of FedEx Custom Critical and FedEx Cross Border are included in the Federal Express Corporation (“FedEx Express”) segment prospectively.

 

(3)

Includes the FedEx Logistics, Inc. (“FedEx Logistics”) and FedEx Office and Print Services, Inc. (“FedEx Office”) operating segments.
Impairment of Long-Lived Assets

IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, an impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets are less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.

During the second quarter of 2020, we made the decision to permanently retire from service 10 Airbus A310-300 aircraft and 12 related engines at FedEx Express to align with the needs of the U.S. domestic network and modernize its aircraft fleet. As a consequence of this decision, noncash impairment charges of $66 million ($50 million, net of tax, or $0.19 per diluted share) were recorded in the FedEx Express segment in the second quarter of 2020.

Stock-based Compensation

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 $46 million for the three-month period ended November 30, 2020 and $121 million for the six-month period ended November 30, 2020. Our stock-based compensation expense was $37 million for the three-month period ended November 30, 2019 and $104 million for the six-month period ended November 30, 2019. Due to its immateriality, additional disclosures related to stock-based compensation have been excluded from this quarterly report.
Derivative Financial Instruments

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. We have €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 subsidiary. As of November 30, 2020, the hedge remains effective.