v3.21.2
General (Policies)
 3 Months Ended
Aug. 31, 2021
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, 2021 (“Annual Report”). Significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of August 31, 2021, and the results of our operations for the three-month periods ended August 31, 2021 and 2020, cash flows for the three-month periods ended August 31, 2021 and 2020, and changes in common stockholders’ investment for the three-month periods ended August 31, 2021 and 2020. Operating results for the three-month period ended August 31, 2021 are not necessarily indicative of the results that may be expected for the year ending May 31, 2022.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2022 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.
Revenue Recognition

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 $718 million and $715 million at August 31, 2021 and May 31, 2021, respectively. Contract assets net of deferred unearned revenue were $514 million and $572 million at August 31, 2021 and May 31, 2021, respectively. Contract assets are included within current assets in the accompanying unaudited condensed consolidated balance sheets. Contract liabilities related to advance payments from customers were $11 million and $9 million at August 31, 2021 and May 31, 2021, 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

 

 

 

2021

 

 

2020

 

REVENUE BY SERVICE TYPE

 

 

 

 

 

 

 

 

FedEx Express segment:

 

 

 

 

 

 

 

 

Package:

 

 

 

 

 

 

 

 

U.S. overnight box

 

$

2,170

 

 

$

1,861

 

U.S. overnight envelope

 

 

482

 

 

 

426

 

U.S. deferred

 

 

1,231

 

 

 

1,096

 

Total U.S. domestic package revenue

 

 

3,883

 

 

 

3,383

 

International priority

 

 

2,839

 

 

 

2,317

 

International economy

 

 

669

 

 

 

616

 

Total international export package revenue

 

 

3,508

 

 

 

2,933

 

International domestic(1)

 

 

1,114

 

 

 

1,088

 

Total package revenue

 

 

8,505

 

 

 

7,404

 

Freight:

 

 

 

 

 

 

 

 

U.S.

 

 

775

 

 

 

833

 

International priority

 

 

873

 

 

 

653

 

International economy

 

 

414

 

 

 

371

 

International airfreight

 

 

47

 

 

 

75

 

Total freight revenue

 

 

2,109

 

 

 

1,932

 

Other

 

 

352

 

 

 

311

 

Total FedEx Express segment

 

 

10,966

 

 

 

9,647

 

FedEx Ground segment

 

 

7,677

 

 

 

7,040

 

FedEx Freight segment

 

 

2,251

 

 

 

1,826

 

FedEx Services segment

 

 

35

 

 

 

8

 

Other and eliminations(2)

 

 

1,074

 

 

 

800

 

 

 

$

22,003

 

 

$

19,321

 

(1)

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

(2)

Includes the FedEx Office and Print Services, Inc. (“FedEx Office”), FedEx Logistics, Inc. (“FedEx Logistics”), and FedEx Dataworks, Inc. (including ShopRunner, Inc.) (“FedEx Dataworks”) operating segments. The financial results of FedEx Dataworks are included in the period ended August 31, 2021.

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 $69 million for the three-month period ended August 31, 2021 and $75 million for the three-month period ended August 31, 2020. Due to its immateriality, additional disclosures related to stock-based compensation have been excluded from this quarterly report.
Business Realignment Costs

BUSINESS REALIGNMENT COSTS. In January 2021, FedEx Express announced a workforce reduction plan in Europe as it nears the completion of the network integration of TNT Express. The plan will impact between 5,500 and 6,300 employees in Europe across operational teams and back-office functions. The execution of the plan is subject to a works council consultation process that will occur over an 18-month period in accordance with local country processes and regulations.

We incurred costs during the first quarter of 2022 of $67 million ($52 million, net of tax, or $0.19 per diluted share) associated with our business realignment activities. We recognized $116 million ($90 million, net of tax, or $0.33 per diluted share) of costs under this program in the second half of 2021. These costs are related to certain employee severance arrangements. Payments under this program totaled approximately $31 million in the first quarter of 2022. We expect the pre-tax cost of our business realignment activities to range from $300 million to $575 million through fiscal 2023. The actual amount and timing of business realignment costs and related cost savings resulting from the workforce reduction plan are dependent on local country consultation processes and regulations and negotiated social plans. For additional information about the business realignment costs, see the section titled “Business Realignment Costs” included in Item 2 of this Form 10-Q (“Management’s Discussion and Analysis of Results of Operations and Financial Condition”).
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. As of August 31, 2021, we had €215 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, 2021, the hedge remains effective.