8-KLeadership Changes

FEDEX CORP 8-K Report, Executive Changes (Jun 4, 2018)

Filed June 4, 2018For Securities:FDX

Summary

FedEx Corporation filed an 8-K on June 4, 2018, detailing adjustments made to its incentive compensation plans for fiscal year 2018. The Board of Directors, acting on the Compensation Committee's recommendation, approved the exclusion of specific items from both the annual incentive compensation (AIC) plan and long-term incentive (LTI) plans. These exclusions are intended to better reflect the company's core financial performance by removing the impact of significant one-time events or non-operational items. Key items excluded include expenses related to U.S. Customs Border and Protection matters, costs associated with accelerated wage increases following the Tax Cuts and Jobs Act of 2017, impairment charges at FedEx Supply Chain, and provisional tax benefits. Additionally, the company is excluding mark-to-market pension accounting adjustments, including a significant pension settlement charge, and TNT Express integration costs. The company also modified its AIC plan target objective to be lower than the original business plan, partly to mitigate the financial impact of the NotPetya cyberattack on incentive payouts.

Key Highlights

  • 1FedEx is adjusting its fiscal 2018 incentive compensation plans (AIC and LTI) to exclude certain non-core financial items.
  • 2Exclusions include U.S. Customs Border and Protection expenses, accelerated wage increases due to the Tax Cuts and Jobs Act, and goodwill/asset impairment charges.
  • 3Mark-to-market pension accounting adjustments, including a significant pension settlement charge, are also excluded from incentive calculations.
  • 4TNT Express integration and restructuring costs are being removed from fiscal 2018 earnings for incentive plan purposes.
  • 5The company modified the target objective for the 2018 AIC Plan to be lower than the original business plan objective.
  • 6This modification aims to minimize the financial impact of the NotPetya cyberattack on incentive plan participants.
  • 7The stated purpose of these exclusions and modifications is to align incentive payouts more closely with FedEx's core financial performance.

Frequently Asked Questions

FedEx is adjusting its incentive compensation plans to exclude certain significant, non-recurring, or non-operational items from the calculation of performance metrics. This is intended to ensure that incentive payouts more accurately reflect the company's core operational and financial performance for fiscal year 2018.

The excluded items include expenses related to U.S. Customs Border and Protection matters, costs of accelerated wage increases due to the Tax Cuts and Jobs Act, goodwill and asset impairment charges at FedEx Supply Chain, provisional tax benefits from the TCJA, mark-to-market pension accounting adjustments (including a pension settlement charge), and TNT Express integration/restructuring costs.

The modification lowers the target objective for the 2018 Annual Incentive Compensation (AIC) Plan. This action, in part, helps to mitigate the financial impact of the NotPetya cyberattack on the incentive payouts for plan participants. It suggests that without this adjustment, the cyberattack's impact might have significantly reduced the likelihood of achieving the original target.

This 8-K filing specifically addresses adjustments for incentive compensation plans. While these excluded items might have affected reported earnings, the filing itself doesn't restate previously reported financial results. However, it clarifies how these items are treated for the purpose of calculating executive and employee bonuses and long-term incentives.