10-QPeriod: Q3 FY2010

FEDEX CORP Quarterly Report for Q3 Ended Feb 28, 2010

Filed March 19, 2010For Securities:FDX

Summary

This 10-Q filing for FedEx Corp. (FDX) for the period ending February 27, 2010, primarily details amendments to Management Retention Agreements (MRAs) for executive officers, approved by the Board of Directors on March 18, 2010. These amendments significantly alter the terms of employment and severance packages in the event of a change of control or qualifying termination. Key changes to the MRAs include a shortened post-change-of-control employment term from three years to two years, guaranteed incentive compensation opportunities but not guaranteed payout amounts, and a reduction in the lump-sum severance payment upon a qualifying termination. Furthermore, the company will no longer cover excise taxes for executives, and benefit continuation is reduced from 36 months of cash equivalent to 18 months of actual coverage. Investors should note these changes as they impact executive compensation and potential change-of-control scenarios.

Financial Highlights

38 data points
Beta

Revenue

$8.70B

Net Income

$239.00M

2.7% Net Margin

EPS (Diluted)

$0.76

Total Assets

$24.88B

Cash & Equivalents

$1.55B

Free Cash Flow

$551.00M

Financial Statements
Beta
Revenue$8.70B
Operating Income$416.00M
Net Income$239.00M
EPS (Basic)$0.76
EPS (Diluted)$0.76
Shares Outstanding (Basic)312.00M
Shares Outstanding (Diluted)315.00M

Key Highlights

  • 1FedEx amended Management Retention Agreements (MRAs) for executive officers on March 18, 2010.
  • 2The post-change-of-control employment term under MRAs was reduced from three years to two years.
  • 3Guaranteed annual incentive compensation payout amounts were eliminated, replaced with guaranteed opportunities.
  • 4Severance payments upon a qualifying termination were reduced, from a complex formula involving base salary, target incentives, and pension benefits, to a simpler two times annual base salary plus two times target annual incentive compensation.
  • 5Executive benefit continuation in case of qualifying termination was reduced from 36 months of cash equivalent to 18 months of actual medical, dental, and vision benefits.
  • 6FedEx will no longer pay excise taxes incurred by executive officers related to change-of-control payments.
  • 7No material changes were reported from previously disclosed risk factors in the Annual Report.

Frequently Asked Questions

The most significant changes include a reduced employment term post-change-of-control (from 3 years to 2 years), elimination of guaranteed incentive payouts (replaced by guaranteed opportunities), a reduced severance cash payment, a shorter period of continued benefits coverage (18 months instead of a 36-month cash equivalent), and the elimination of FedEx covering executive excise taxes.

While the filing doesn't explicitly state the 'why,' such amendments often aim to align executive compensation more closely with shareholder interests, reduce potential costs for the company in change-of-control scenarios, and adapt to evolving corporate governance best practices. The reduction in severance and benefits could be a response to shareholder feedback or a desire to manage executive compensation costs more conservatively.

These changes are primarily relevant to executive compensation and potential future payouts in specific scenarios (change of control, termination). By reducing severance packages and benefit continuation, the company is potentially reducing future financial liabilities associated with executive departures. This could be viewed positively by investors concerned about executive compensation levels and potential golden parachute costs.

This specific 10-Q filing states that there have been no material changes from the risk factors disclosed in the company's Annual Report. For details on legal proceedings, investors are referred to Note 9 of the accompanying condensed consolidated financial statements, which is not provided in this excerpt but would be found in the full filing.