8-KEarnings & ResultsLeadership ChangesFinancial Events+1

FEDEX CORP 8-K Report, Financial Results (Jun 4, 2012)

Filed June 4, 2012For Securities:FDX

Summary

FedEx Corporation filed an 8-K on June 4, 2012, primarily to report on financial matters related to its fourth quarter and fiscal year ending May 31, 2012. A significant event was the decision by FedEx Express to permanently retire 18 Airbus A310-200 aircraft and 26 related engines, along with six Boeing MD10-10 aircraft and 17 related engines. This action, aimed at aligning U.S. domestic air network capacity with current and anticipated shipment volumes, resulted in a non-cash impairment charge of $134 million ($0.26 per diluted share). Additionally, FedEx Express is accelerating the depreciation of other aircraft to better align with the delivery schedule of new Boeing freighters. This accelerated depreciation is expected to total $196 million over the next three fiscal years, though the net impact on depreciation over the longer term is projected to be a reduction due to the retirements. The company indicated no cash expenditures are expected from these fleet actions. In a separate note, the company's Board approved excluding these non-recurring items from the fiscal 2012 Annual Incentive Compensation (AIC) plan payouts, aiming to better reflect core financial performance.

Key Highlights

  • 1FedEx Express is permanently retiring 18 Airbus A310-200 aircraft and 6 Boeing MD10-10 aircraft, along with related engines.
  • 2A non-cash impairment charge of $134 million ($0.26 per diluted share) was recorded in Q4 FY2012 due to these retirements.
  • 3The fleet retirement aims to align FedEx Express's U.S. domestic air network capacity with current and projected shipment volumes.
  • 4FedEx Express is accelerating depreciation on an additional 31 Boeing MD10-10s, 18 Airbus A310-200s, and other aircraft.
  • 5Accelerated depreciation is expected to total $196 million over the next three fiscal years, with $69 million in FY2013.
  • 6The net impact on depreciation is expected to be a reduction over the long term due to retirements.
  • 7No current or future cash expenditures are anticipated from these fleet actions.
  • 8Non-recurring items (impairment charge and a small gain from asset sale) were excluded from FY2012 Annual Incentive Compensation payouts to better reflect core performance.

Frequently Asked Questions

The primary reasons are to align FedEx Express's U.S. domestic air network capacity with current and anticipated shipment volumes, and to synchronize aircraft retirement with the delivery schedule of new Boeing 767-300F and Boeing 757-200 aircraft.

A non-cash impairment charge of $134 million ($0.26 per diluted share) was recorded in the fourth quarter of fiscal year 2012. Additionally, accelerated depreciation is expected to total $196 million over the next three fiscal years, though the net impact on depreciation is projected to decrease over time due to the retirements.

No, FedEx stated that it does not expect to be required to make any current or future cash expenditures as a result of these aircraft actions.

The Board of Directors decided to exclude the non-cash impairment charge and a small gain from the sale of Japanese operations from the calculation of fiscal year 2012 Annual Incentive Compensation (AIC) payouts. This decision was made to ensure that the AIC payout more accurately reflects FedEx's core financial performance for the year.