FedEx(US:FDX)2025-07-21 20:13Part I Business Overview FedEx offers global transportation, e-commerce, and business services, focusing on strategic consolidation, efficiency programs, and a planned FedEx Freight spin-off - On June 1, 2024, FedEx Ground and Corporate Services merged into Federal Express, forming a single integrated air-ground network24 - In December 2024, the Board decided to pursue a full spin-off of FedEx Freight into a new publicly traded company, expected by June 20262679 - The company is implementing strategic initiatives like DRIVE, Network 2.0, and Tricolor to enhance efficiency and profitability2930 - FedEx is changing its fiscal year-end from May 31 to December 31, effective June 1, 202627 Federal Express Segment Federal Express provides time-definite delivery globally, operating a vast network with 440,000 employees, facing competition and ongoing pilot union negotiations Federal Express Segment Key Metrics (as of May 31, 2025) | Metric | Value | | :--- | :--- | | Employees | ~440,000 | | Drop-off Locations | ~63,000 | | Aircraft | ~700 | | Motorized Vehicles | >175,000 | | Independent Contractors | ~5,700 | - A 5.9% average list price increase for U.S. domestic and international services was implemented on January 6, 202549 Jet Fuel Costs (Last 5 Fiscal Years) | Fiscal Year | Total Jet Fuel Costs (in millions) | Percentage of Consolidated Revenue | | :--- | :--- | :--- | | 2025 | $2,832 | 3.2% | | 2024 | $3,598 | 4.1% | | 2023 | $4,515 | 5.0% | | 2022 | $3,867 | 4.1% | | 2021 | $2,065 | 2.5% | - Negotiations for a successor collective bargaining agreement with the pilots' union (ALPA), amendable in November 2021, are ongoing with NMB mediation5758 FedEx Freight Segment FedEx Freight, a leading North American LTL provider, plans a spin-off by June 2026 and implemented price increases in January 2025 - FedEx Freight is planned to be separated into a new publicly traded company via a spin-off, expected by June 202679 FedEx Freight Segment Key Metrics (as of May 31, 2025) | Metric | Value | | :--- | :--- | | Employees | ~40,000 | | Motorized Vehicles | ~30,000 | | Service Centers | ~355 | - On January 6, 2025, FedEx Freight implemented average list price increases of 5.9% for PZONE/EZONE rates and 6.9% for FXF 1000/501 rates80 Other Operating Segments Other segments include FedEx Dataworks for data insights, FedEx Office for retail services, and FedEx Logistics for integrated supply chain solutions - FedEx Dataworks focuses on leveraging vast company data to enhance operational efficiency and customer supply chains via a centralized platform8485 - FedEx Office operates approximately 2,000 customer-facing stores, offering retail shipping, printing, and business solutions87 - FedEx Logistics offers comprehensive services including customs brokerage, global freight forwarding, and integrated supply chain solutions95 Regulation FedEx operations are subject to extensive U.S. and international regulations, including aviation, ground transport, environmental, and unique labor laws under the RLA - Air operations are regulated by the U.S. DOT for economic aspects and the FAA for operational and safety aspects103104 - Compliance with international emissions programs like CORSIA and EU ETS is expected to increase operating expenses115116117 - U.S. Federal Express employees are covered by the RLA, requiring nationwide unionization and mediation, minimizing local strike risks128129 Human Resource Management FedEx's HR is guided by 'People-Service-Profit' and 'Safety Above All', focusing on diversity, benefits, and learning, with specific hiring and turnover metrics in FY2025 - The company's culture is founded on the People-Service-Profit philosophy: caring for people drives excellent service and profit134 Fiscal 2025 Global Hiring and Turnover | Metric | Value | | :--- | :--- | | New Hires (Full- & Part-Time) | >406,000 | | Part-Time Turnover | 70% | | Full-Time Turnover | 24% | The Environment FedEx aims for carbon-neutral operations by 2040, focusing on vehicle electrification, sustainable aviation fuels, fleet modernization, and providing emissions data to customers - FedEx aims for carbon neutrality in its global operations by calendar 2040150 - Key targets include 100% electric new pickup-and-delivery vehicles by 2030 and 30% alternative jet fuel sourcing by 2030157160 - In fiscal 2025, the company permanently retired 12 aircraft as part of its fleet modernization and network efficiency strategy163 - The FedEx Sustainability Insights (FSI) tool, launched globally in 2024, provides customers with estimated CO2e emissions data for shipments169 Risk Factors FedEx faces significant risks from macroeconomic factors, operational execution, cybersecurity, intense competition, human resource management, and environmental regulations Macroeconomic and Market Risks FedEx is vulnerable to cyclical global economic conditions, including inflation, geopolitical conflicts, and volatile fuel prices, which impact volumes and costs - The transportation industry is highly cyclical and susceptible to economic trends, directly impacting FedEx's transported goods volumes173 - Demand, especially for priority services, faces pressure from elevated inflation and interest rates impacting consumer and business spending174 - Volatile fuel prices are beyond control; surcharges mitigate costs but may shift customers to lower-yielding services or reduce demand180181 Operating Risks Operational risks include failed transformation execution, data breaches, high self-insurance costs, potential terrorism, and reliance on third-party providers - Failure to execute the DRIVE transformation, including network integration, could lead to higher costs, customer loss, and business disruption182183184 - Significant data breaches or tech disruptions could lead to sensitive information loss, reputational harm, and adverse business impact186191 - FedEx is self-insured for various liabilities; significant claim increases or "nuclear" verdicts could exceed reserves and adversely affect results197198 Strategic Risks Strategic risks include the successful execution of the DRIVE transformation, the FedEx Freight spin-off, intense competition, and managing capital-intensive capacity - The planned FedEx Freight spin-off is complex, involving significant costs, potential dis-synergies, management distraction, and no guaranteed financial benefits210211212 - The highly competitive transportation market includes high-volume shippers like Amazon developing in-house delivery, acting as both customers and competitors217218 - The capital-intensive business requires significant investments; misjudging volume projections could lead to costly over- or under-capacity221 Human Resource Management Risks HR risks include potential labor disruptions, changes to RLA jurisdiction, challenges in talent attraction and retention, and legal challenges to independent contractor status - Legislative or administrative actions could remove Federal Express employees from RLA jurisdiction, risking local work stoppages and system disruption225227 - Failure to attract and retain talent, especially in high-turnover roles, could increase costs and adversely affect service levels229230 - Legal challenges to contracted service providers' independent employer status could increase operating costs and tax liabilities if adverse233 Environmental, Climate, and Weather Risks Environmental risks include increased GHG regulations, challenges in achieving carbon neutrality by 2040, and operational disruptions from adverse weather and natural disasters - Increased GHG emissions regulation could impose substantial costs, including higher fuel prices and capital expenditures for fleet and infrastructure updates237 - Achieving the 2040 carbon neutrality goal faces significant risks from the availability and cost of sustainable fuels and electric vehicle infrastructure239240 - Operations are exposed to adverse weather and natural disasters; prolonged disruption at key hubs like Memphis could significantly affect business242 Cybersecurity FedEx integrates cybersecurity into enterprise risk management, overseen by the Board's CyTOC and led by a CISO, with no material incidents reported in the last three fiscal years - The Board's Cyber and Technology Oversight Committee (CyTOC) oversees the company's cyber and technology-related risks260 - The CISO, reporting to the CEO, leads an information security organization of over 400 professionals262264 - FedEx has not identified any material cybersecurity threats or incidents affecting its business, operations, or financial condition in the last three fiscal years258 Properties FedEx's properties include a fleet of 698 aircraft, commitments for 56 more, and major sorting hubs globally, including Memphis Federal Express Aircraft Fleet (as of May 31, 2025) | Description | Owned (aircraft) | Leased (aircraft) | Total (aircraft) | | :--- | :--- | :--- | :--- | | Boeing B777F | 56 | 3 | 59 | | Boeing MD-11 | 34 | — | 34 | | Boeing 767F | 145 | — | 145 | | Airbus A300-600 | 58 | — | 58 | | Boeing 757-200 | 90 | — | 90 | | ATR-72 600F | 24 | — | 24 | | ATR-72 | 19 | — | 19 | | ATR-42 | 16 | — | 16 | | Cessna 408 | 27 | — | 27 | | Cessna 208B | 226 | — | 226 | | Total | 695 | 3 | 698 | Aircraft Purchase Commitments (as of May 31, 2025) | Year | Cessna SkyCourier 408 (aircraft) | ATR 72-600F (aircraft) | B767F (aircraft) | B777F (aircraft) | Total (aircraft) | | :--- | :--- | :--- | :--- | :--- | :--- | | 2026 | 19 | 3 | 7 | — | 29 | | 2027 | 4 | 3 | — | 5 | 12 | | 2028 | — | 4 | — | 5 | 9 | | 2029 | — | 4 | — | — | 4 | | 2030 | — | 2 | — | — | 2 | | Total | 23 | 16 | 7 | 10 | 56 | - The company's primary sorting facility and worldwide air network hub is located at Memphis International Airport, occupying 953 acres272273 Legal Proceedings FedEx is subject to various legal proceedings and claims arising in the ordinary course of business, with details referenced in Note 21 - The company is subject to legal proceedings and claims in the ordinary course of business; refer to Note 21 for details286 Information about our Executive Officers This section provides information on FedEx's executive officers as of July 21, 2025, including their roles and experience - Rajesh Subramaniam, 59, serves as President and Chief Executive Officer of FedEx Corporation288 - John W. Dietrich, 60, serves as Executive Vice President and Chief Financial Officer289 Part II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities FedEx common stock (FDX) is NYSE-listed, with ongoing dividends and a $5.0 billion stock repurchase program, of which $1.6 billion remained as of July 21, 2025 - In March 2024, the Board authorized a new stock repurchase program for up to $5.0 billion of common stock296 Share Repurchases (Q4 FY2025) | Period | Total Shares Purchased (shares) | Average Price Paid per Share ($) | Approximate Dollar Value Remaining ($ in millions) | | :--- | :--- | :--- | :--- | | Mar. 1-31, 2025 | 1,775,000 | $242.43 | $2,134 | | Apr. 1-30, 2025 | 287,186 | $242.78 | $2,064 | | May 1-31, 2025 | — | $— | $2,064 | | Total | 2,062,186 | | $2,064 | - As of July 21, 2025, approximately $1.6 billion remained available for repurchases under the current program297 Management's Discussion and Analysis of Results of Operations and Financial Condition (MD&A) FY2025 saw flat revenue at $87.9 billion, a 6% operating income decline to $5.2 billion, and 2% diluted EPS drop to $16.81, impacted by volume shifts and costs, with FY2026 projecting $1 billion in cost reductions and $4.5 billion in capital expenditures Consolidated Results Summary (FY2025 vs. FY2024) | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Consolidated Revenue | $87,926 M | $87,693 M | 0% | | Consolidated Operating Income | $5,217 M | $5,559 M | (6)% | | Consolidated Net Income | $4,092 M | $4,331 M | (6)% | | Diluted EPS | $16.81 | $17.21 | (2)% | - Operating income in 2025 was negatively affected by $756 million in business optimization costs, $21 million in asset impairment charges, and $38 million in FedEx Freight spin-off costs316320321322 - For fiscal 2026, capital expenditures are projected at approximately $4.5 billion, an increase of $0.4 billion from 2025, driven by network modernization360 - The company repurchased 10.9 million shares for $3.0 billion in fiscal 2025, benefiting diluted EPS by $0.44325 Consolidated Results FY2025 consolidated revenue was flat at $87.9 billion, operating income decreased 6% to $5.2 billion, impacted by FedEx Freight, service mix, USPS contract expiration, and optimization costs Year-over-Year Change in Operating Results by Segment (in millions) | Segment | Revenue Change ($ in millions) | Operating Results Change ($ in millions) | | :--- | :--- | :--- | | Federal Express | $641 | $66 | | FedEx Freight | ($537) | ($332) | | Corporate, other, and eliminations | $129 | ($76) | | Total | $233 | ($342) | - Purchased transportation expense increased 4% in 2025 due to higher rates and volume, while fuel expense decreased 20% due to lower prices and usage334336339 - The effective tax rate for 2025 was 24.8%, down from 25.8% in 2024, benefiting from corporate legal entity structure changes352 Federal Express Segment Federal Express revenue increased 1% to $75.3 billion in FY2025, with operating income up 1% to $4.9 billion, driven by international economy and U.S. ground volume growth, offset by priority and freight declines Federal Express Segment Financials (FY2025 vs. FY2024) | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $75,304 M | $74,663 M | 1% | | Operating Income | $4,885 M | $4,819 M | 1% | | Operating Margin | 6.5% | 6.5% | 0 bp | - International economy average daily package volume grew 40% and U.S. ground home delivery/economy volume grew 5%, driven by e-commerce377381 - U.S. average daily freight pounds decreased 44%, primarily due to the USPS contract expiration on September 29, 2024377381 FedEx Freight Segment FedEx Freight revenue decreased 6% to $8.9 billion in FY2025, with operating income down 18% to $1.5 billion, driven by reduced demand and lower fuel surcharges FedEx Freight Segment Financials (FY2025 vs. FY2024) | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $8,892 M | $9,429 M | (6)% | | Operating Income | $1,489 M | $1,821 M | (18)% | | Operating Margin | 16.7% | 19.3% | (260) bp | | Avg. Daily Shipments | 90.1 K | 94.0 K | (4)% | - Revenue decreased primarily due to lower shipments from reduced industrial demand, lower fuel surcharges, and decreased weight per shipment387388 Financial Condition FedEx's financial condition is solid with $5.5 billion cash, but FY25 operating cash flow decreased to $7.0 billion, while capital expenditures were $4.1 billion and $3.0 billion in stock was repurchased Cash Flow Summary (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Cash from Operating Activities | $7,036 | $8,312 | | Cash used in Investing Activities | ($4,092) | ($5,200) | | Cash used in Financing Activities | ($4,019) | ($3,426) | | Net Decrease in Cash | ($999) | ($355) | - Capital expenditures decreased 22% to $4.1 billion in 2025, primarily due to lower spending on aircraft, vehicles, and facilities392396 - The company repurchased $3.0 billion of its common stock in fiscal 2025393 Critical Accounting Estimates Critical accounting estimates include pension assumptions, income tax provisions, self-insurance accruals, and long-lived asset valuation, all subject to management judgment and potential material impact - Pension accounting is highly sensitive; a 50-basis-point decrease in discount rate would increase PBO by approximately $1.4 billion419 - Self-insurance accruals totaled $5.9 billion as of May 31, 2025; a 5% change in claim severity would impact reserves and expenses by approximately $295 million426 - In FY2025, the company recorded a noncash impairment charge of $21 million related to the permanent retirement of 12 aircraft and eight engines434 - Goodwill stood at $6.6 billion as of May 31, 2025; annual impairment testing in Q4 2025 and 2024 found no impairment443447 Financial Statements and Supplementary Data This section presents FedEx's consolidated financial statements for FY2025, including balance sheets, income, cash flows, and equity, along with management and auditor reports on internal controls Key Financial Statement Balances (as of May 31, 2025) | Account | Value (in millions) | | :--- | :--- | | Assets | | | Total Current Assets | $18,386 | | Net Property and Equipment | $41,642 | | Total Assets | $87,627 | | Liabilities & Equity | | | Total Current Liabilities | $15,411 | | Long-Term Debt, less current portion | $19,151 | | Total Liabilities | $59,553 | | Total Common Stockholders' Investment | $28,074 | - Management concluded internal control over financial reporting was effective as of May 31, 2025, with Ernst & Young LLP issuing an unqualified opinion467471479 Notes to Consolidated Financial Statements Notes provide detailed disclosures on accounting policies and financial figures, covering segment reorganization, debt, leases, taxes, retirement plans, and purchase commitments - Note 1 details significant events including 'one FedEx' consolidation, planned FedEx Freight spin-off, and fiscal year-end change507509510 - Note 7 discloses $19.2 billion in senior unsecured debt and details February 2025 debt exchange offers for FedEx Freight separation600607608 - Note 14 shows the U.S. Pension Plan had a funded status surplus of $626 million at May 31, 2025, an improvement from a $487 million deficit in 2024673 - Note 19 outlines total purchase commitments of $7.0 billion, including $4.7 billion for aircraft and related equipment707 Part III Directors, Executive Officers, and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2025 proxy statement - Information regarding directors and corporate governance is incorporated by reference from the forthcoming 2025 proxy statement725 Executive Compensation Information regarding director and executive compensation is incorporated by reference from the forthcoming 2025 proxy statement - Information regarding executive compensation is incorporated by reference from the forthcoming 2025 proxy statement726 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership of beneficial owners, management, and related stockholder matters is incorporated by reference from the forthcoming 2025 proxy statement - Information regarding security ownership is incorporated by reference from the forthcoming 2025 proxy statement727 Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related person transactions, and director independence is incorporated by reference from the forthcoming 2025 proxy statement - Information regarding related transactions and director independence is incorporated by reference from the forthcoming 2025 proxy statement728 Principal Accountant Fees and Services Information on principal accountant fees and services, including preapproval policies, is incorporated by reference from the forthcoming 2025 proxy statement - Information regarding principal accountant fees and services is incorporated by reference from the forthcoming 2025 proxy statement729 Part IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including corporate governance and debt instruments - This section provides a comprehensive list of all exhibits filed with the Form 10-K, including corporate governance documents, debt indentures, and compensatory plans731732 Form 10-K Summary This item is not applicable as no Form 10-K summary was provided - No Form 10-K summary is provided752