8-KMaterial AgreementsRegulation FDOther Events+1

FEDEX CORP 8-K Report, Material Agreement (May 8, 2018)

Filed May 8, 2018For Securities:FDX

Summary

FedEx Corporation (FDX) has filed an 8-K report on May 8, 2018, detailing a significant agreement to transfer pension obligations for approximately 41,000 retirees and beneficiaries to Metropolitan Life Insurance Company (MetLife). This transaction, expected to close on May 10, 2018, will reduce FedEx's U.S. pension plan liabilities by approximately $6 billion. The company anticipates recognizing a one-time, non-cash pension settlement charge in its fiscal 2018 fourth-quarter results as part of its mark-to-market pension accounting adjustments. In addition to the pension liability reduction, the filing also announces a realignment of FedEx's specialty logistics and e-commerce solutions under FedEx Trade Networks, Inc., effective from the fourth quarter of fiscal 2018. This organizational change will result in the exclusion of FedEx Trade Networks' results from the FedEx Express reportable segment, with prior period segment results being recast. Investors should note that the pension settlement charge is a non-cash item and the segment reporting change is an operational restructuring.

Key Highlights

  • 1FedEx to transfer pension benefit obligations for ~41,000 retirees to MetLife.
  • 2Transaction expected to reduce U.S. pension plan liabilities by approximately $6 billion.
  • 3The transfer will be effected through the purchase of a group annuity contract.
  • 4A one-time, non-cash pension settlement charge is expected in fiscal Q4 2018.
  • 5Organizational realignment of specialty logistics and e-commerce solutions under FedEx Trade Networks.
  • 6FedEx Trade Networks results will no longer be included in the FedEx Express segment.
  • 7Prior period segment results will be recast due to the organizational change.

Frequently Asked Questions

The primary financial impact is the reduction of FedEx's U.S. pension plan liabilities by approximately $6 billion. The company will also recognize a one-time, non-cash pension settlement charge in its fiscal 2018 fourth-quarter earnings.

MetLife will become responsible for guaranteeing and paying the pension benefits to the approximately 41,000 transferred participants. While payments will continue from the Pension Plans' trustee until August 1, 2018, MetLife is expected to assume administrative services and distributions at that time.

FedEx is realigning its specialty logistics and e-commerce solutions under FedEx Trade Networks, Inc. This means that the results for this business unit will no longer be reported within the FedEx Express segment starting from the fourth quarter of fiscal 2018, and historical segment data will be restated.

No, the filing specifies that the pension settlement charge is a 'one-time non-cash pension settlement charge.' The purchase of the annuity contract will be funded by the assets of the Pension Plans.