filings.toolsItem 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
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Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
GENERAL
The following Management’s Discussion and Analysis of Results of Operations and Financial Condition (“MD&A”) describes the principal factors affecting the results of operations, liquidity, capital resources, and critical accounting estimates of FedEx Corporation (“FedEx”). This discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended May 31, 2022 (“Annual Report”). Our Annual Report includes additional information about our significant accounting policies, practices, and the transactions that underlie our financial results, as well as a detailed discussion of the most significant risks and uncertainties associated with our financial condition and operating results.
We provide a broad portfolio of transportation, e-commerce, and business services through companies competing collectively, operating collaboratively, and innovating digitally under the respected FedEx brand. Our primary operating companies are Federal Express Corporation (“FedEx Express”), the world’s largest express transportation company; FedEx Ground Package System, Inc. (“FedEx Ground”), a leading North American provider of small-package ground delivery services; and FedEx Freight Corporation (“FedEx Freight”), a leading North American provider of less-than-truckload (“LTL”) freight transportation services. These companies represent our major service lines and, along with FedEx Corporate Services, Inc. (“FedEx Services”), constitute our reportable segments.
Our FedEx Services segment provides sales, marketing, information technology, communications, customer service, technical support, billing and collection services, and certain back-office functions that support our operating segments. For the international regions of FedEx Express, some of these functions are performed on a regional basis and reported by FedEx Express in their natural expense line items. See “Reportable Segments” for further discussion. Additional information on our businesses can be found in our Annual Report.
Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2023 or ended May 31 of the year referenced, and comparisons are to the corresponding period of the prior year. References to our transportation segments include, collectively, the FedEx Express segment, the FedEx Ground segment, and the FedEx Freight segment.
The key indicators necessary to understand our operating results include:
the overall customer demand for our various services based on macroeconomic factors and the global economy;
the volumes of transportation services provided through our networks, primarily measured by our average daily volume and shipment weight and size;
the mix of services purchased by our customers;
the prices we obtain for our services, primarily measured by yield (revenue per package or pound or revenue per shipment or hundredweight for LTL freight shipments);
our ability to manage our cost structure (capital expenditures and operating expenses) to match shifting volume levels; and
the timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges.
Trends Affecting Our Business
The following trends significantly impact the indicators discussed above, as well as our business and operating results. See the risk factors identified under Part I, Item 1A. “Risk Factors” in our Annual Report, as updated by our quarterly reports on Form 10-Q, for more information. Additionally, see “Results of Operations – Consolidated Results – Outlook” and “Results of Operations – Consolidated Results – Liquidity Outlook” below for additional information on efforts we are taking to mitigate adverse trends.
Macroeconomic Conditions
While macroeconomic risks apply to most companies, we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of growth of global trade. Our results for the second quarter and first half of 2023 were adversely impacted by global volume softness due to weakening economic conditions.
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COVID-19 Pandemic
The coronavirus (“COVID-19”) pandemic has had varying impacts on the demand for our services and our business operations. The COVID-19 pandemic continued to disrupt our business in the second quarter of 2023, particularly within areas of Asia as lockdowns persisted and contributed to supply chain disruptions (discussed below).
Inflation and Interest Rates
Global inflation is well above normal and historical levels, impacting all areas of our business. Additionally, global interest rates are rising in an effort to curb inflation. We are experiencing a decline in demand for our transportation services as inflation and interest rate increases are negatively affecting consumer and business spending. Additionally, we are experiencing higher costs to serve through higher fuel prices, wage rates, purchased transportation costs, and other direct operating expenses such as operational supplies. We expect inflation and high interest rates to continue to negatively affect our results of operations for the remainder of 2023.
Supply Chain
Global supply chain disruptions continued to affect the economy in the second quarter of 2023, including the availability and cost of labor, as well as the supply of industrial goods. As a result, we experienced higher labor rates and purchased transportation costs, as well as delayed capital expenditures due to the availability of vehicles, trailers, and other package handling equipment.
Fuel
We must purchase large quantities of fuel to operate our aircraft and vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. The timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges can significantly affect our operating results. While fuel expense increased during the second quarter and first half of 2023 compared to the second quarter and first half of 2022 due to higher fuel prices, we were able to offset higher prices through yield management actions.
Geopolitical Conflicts
Given the nature of our business and our global operations, geopolitical conflicts may adversely affect our business and results of operations. The conflict between Russia and Ukraine that began in February 2022 continues as of the date of this quarterly report. The safety of our team members in Ukraine is our top priority. As we focus on the safety of our team members, we have suspended all services in Ukraine and Belarus. We also temporarily idled our operations in Russia and reduced our presence to the minimum required for purposes of maintaining a legal presence with active transport licenses. As a result, we incurred an immaterial amount of severance and other related expenses in the second quarter of 2023, which is included in business optimization expenses at FedEx Express. While we do not expect this conflict to have a direct material impact on our business or results of operations, the broader consequences are adversely affecting the global economy and fuel prices generally and may also have the effect of heightening other risks disclosed in our Annual Report. See “Results of Operations – Consolidated Results – Business Realignment and Optimization Costs” below for additional information.
RESULTS OF OPERATIONS
Many of our operating expenses are directly affected by revenue and volume levels, and we expect these operating expenses to fluctuate on a year-over-year basis consistent with changes in revenue and volumes. Therefore, the discussion of operating expense captions focuses on the key drivers and trends affecting expenses other than those factors strictly related to changes in revenue and volumes. The line item “Other operating expense” includes costs associated with outside service contracts (such as facility services and cargo handling, temporary labor, and security), insurance, professional fees, operational supplies, and bad debt.
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CONSOLIDATED RESULTS
The following tables compare summary operating results and changes in revenue and operating results (dollars in millions, except per share amounts) for the periods ended November 30:
| Three Months Ended | Percent | Six Months Ended | Percent | |||||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||
| Revenue | $ | 22,814 | $ | 23,474 | (3 | ) | $ | 46,056 | $ | 45,477 | 1 | |||||||||||||||
| Operating income (loss): | ||||||||||||||||||||||||||
| FedEx Express segment | 341 | 949 | (64 | ) | 515 | 1,516 | (66 | ) | ||||||||||||||||||
| FedEx Ground segment | 598 | 481 | 24 | 1,292 | 1,152 | 12 | ||||||||||||||||||||
| FedEx Freight segment | 440 | 334 | 32 | 1,091 | 724 | 51 | ||||||||||||||||||||
| Corporate, other, and eliminations | (203 | ) | (167 | ) | (22 | ) | (531 | ) | (397 | ) | (34 | ) | ||||||||||||||
| Consolidated operating income | 1,176 | 1,597 | (26 | ) | 2,367 | 2,995 | (21 | ) | ||||||||||||||||||
| Operating margin: | ||||||||||||||||||||||||||
| FedEx Express segment | 3.1 | % | 8.2 | % | (510 | ) | bp | 2.3 | % | 6.7 | % | (440 | ) | bp | ||||||||||||
| FedEx Ground segment | 7.1 | % | 5.8 | % | 130 | bp | 7.8 | % | 7.2 | % | 60 | bp | ||||||||||||||
| FedEx Freight segment | 17.9 | % | 14.7 | % | 320 | bp | 21.1 | % | 16.0 | % | 510 | bp | ||||||||||||||
| Consolidated operating margin | 5.2 | % | 6.8 | % | (160 | ) | bp | 5.1 | % | 6.6 | % | (150 | ) | bp | ||||||||||||
| Consolidated net income | $ | 788 | $ | 1,044 | (25 | ) | $ | 1,663 | $ | 2,156 | (23 | ) | ||||||||||||||
| Diluted earnings per share | $ | 3.07 | $ | 3.88 | (21 | ) | $ | 6.41 | $ | 7.97 | (20 | ) |
| Change in Revenue | Change in Operating Results | |||||||||||||||
| Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||||||||
| FedEx Express segment | $ | (741 | ) | $ | (580 | ) | $ | (608 | ) | $ | (1,001 | ) | ||||
| FedEx Ground segment | 129 | 612 | 117 | 140 | ||||||||||||
| FedEx Freight segment | 182 | 654 | 106 | 367 | ||||||||||||
| FedEx Services segment | (9 | ) | 26 | — | — | |||||||||||
| Corporate, other, and eliminations | (221 | ) | (133 | ) | (36 | ) | (134 | ) | ||||||||
| $ | (660 | ) | $ | 579 | $ | (421 | ) | $ | (628 | ) |
Overview
Our results for the second quarter of 2023 continued to be negatively impacted by macroeconomic conditions, including inflation well above normal and historical levels, and rising global interest rates. Additionally, our results were negatively affected by service challenges at FedEx Express. In response to market conditions, we continued implementing cost control actions and focusing on yield improvement and revenue quality to mitigate the effect of volume declines. These cost control actions included reducing flight frequencies, temporarily parking aircraft, temporarily delaying certain wage adjustments, consolidating sorts, and reducing select Sunday operations. Yield improvements, including fuel surcharge increases, more than offset the decline in volume, resulting in an increase in revenue for the first half of 2023.
No business realignment costs were incurred in the second quarter of 2023. Operating income includes business realignment costs of $14 million ($11 million, net of tax, or $0.04 per diluted share) in the first half of 2023 associated with our workforce reduction plan in Europe previously announced in 2021. We recognized $44 million ($34 million, net of tax, or $0.13 per diluted share) of costs in the second quarter of 2022 and $111 million ($85 million, net of tax, or $0.31 per diluted share) in the first half of 2022 under this program. Operating income also includes $36 million ($27 million, net of tax, or $0.11 per diluted share) in the second quarter and $60 million ($46 million, net of tax, or $0.18 per diluted share) in the first half of 2023, associated with our business optimization strategy announced in 2023, which includes idling our operations in Russia. See the “Business Realignment and Optimization Costs” section of this MD&A for more information.
Operating income included TNT Express integration expenses of $34 million ($26 million, net of tax, or $0.10 per diluted share) in the second quarter and $63 million ($49 million, net of tax, or $0.18 per diluted share) in the first half of 2022.
Consolidated net income in the second quarter and first half of 2022 included a pre-tax, noncash net loss of $260 million ($195 million, net of tax; $0.73 per diluted share in the second quarter and $0.72 per diluted share in the first half of 2022) associated with our mark-to-market retirement plans accounting adjustments. See Note 6 of the accompanying unaudited condensed consolidated financial statements for more information.
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In December 2021, our Board of Directors authorized a stock repurchase program of up to $5 billion of FedEx common stock. As part of the repurchase program, we entered into an accelerated share repurchase (“ASR”) agreement with a bank in October 2022 to repurchase an aggregate of $1.5 billion of our common stock. Share repurchases had a benefit of $0.06 per diluted share for the second quarter and first half of 2023. See Note 1 of the accompanying unaudited condensed consolidated financial statements, “Financial Condition—Liquidity” below, and Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for additional information on our repurchase program.
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The following graphs for FedEx Express, FedEx Ground, and FedEx Freight show selected volume trends (in thousands) over the five most recent quarters:
(1)
International domestic average daily package volume relates to our international intra-country operations. International export average daily package volume relates to our international priority and economy services.
(2)
Ground commercial average daily package volume is calculated on a 5-day-per-week basis, while home delivery and economy average daily package volumes are calculated on a 7-day-per-week basis.
(3)
International average daily freight pounds relate to our international priority, economy, and airfreight services.
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The following graphs for FedEx Express, FedEx Ground, and FedEx Freight show selected yield trends over the five most recent quarters:
(1)
International export revenue per package relates to our international priority and economy services. International domestic revenue per package relates to our international intra-country operations.
(2)
International freight revenue per pound relates to our international priority, economy, and airfreight services.
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Revenue
Revenue decreased 3% in the second quarter and increased 1% in the first half of 2023. These results were positively impacted by yield improvement, including higher fuel surcharges, and negatively affected by global volume softness, at all of our transportation segments.
FedEx Freight revenue increased 8% in the second quarter and 14% in the first half of 2023 primarily due to yield improvement, including higher fuel surcharges, partially offset by lower volume. Revenue at FedEx Ground increased 2% in the second quarter and 4% in the first half of 2023 primarily due to yield improvement, including higher fuel surcharges, partially offset by lower volume. Revenue at FedEx Express decreased 6% in the second quarter and 3% in the first half of 2023 due to lower volume and unfavorable foreign currency, partially offset by yield improvement, including higher fuel surcharges. In the second quarter and first half of 2023, revenue at Corporate, other, and eliminations decreased due to lower volumes and yields at FedEx Logistics, Inc. (“FedEx Logistics”).
Operating Expenses
The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended November 30:
| Three Months Ended | Percent | Six Months Ended | Percent | ||||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||
| Salaries and employee benefits | $ | 7,792 | $ | 8,135 | (4 | ) | $ | 15,651 | $ | 15,911 | (2 | ) | |||||||||||||
| Purchased transportation | 5,665 | 6,241 | (9 | ) | 11,432 | 11,900 | (4 | ) | |||||||||||||||||
| Rentals and landing fees | 1,195 | 1,177 | 2 | 2,354 | 2,310 | 2 | |||||||||||||||||||
| Depreciation and amortization | 1,046 | 995 | 5 | 2,070 | 1,966 | 5 | |||||||||||||||||||
| Fuel | 1,593 | 1,145 | 39 | 3,415 | 2,154 | 59 | |||||||||||||||||||
| Maintenance and repairs | 882 | 839 | 5 | 1,786 | 1,708 | 5 | |||||||||||||||||||
| Business realignment and optimization costs | 36 | 44 | (18 | ) | 74 | 111 | (33 | ) | |||||||||||||||||
| Other | 3,429 | 3,301 | 4 | 6,907 | 6,422 | 8 | |||||||||||||||||||
| Total operating expenses | 21,638 | 21,877 | (1 | ) | 43,689 | 42,482 | 3 | ||||||||||||||||||
| Operating income | $ | 1,176 | $ | 1,597 | (26 | ) | $ | 2,367 | $ | 2,995 | (21 | ) |
| Percent of Revenue | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Salaries and employee benefits | 34.1 | % | 34.6 | % | 34.0 | % | 35.0 | % | ||||||||
| Purchased transportation | 24.8 | 26.6 | 24.8 | 26.2 | ||||||||||||
| Rentals and landing fees | 5.2 | 5.0 | 5.1 | 5.1 | ||||||||||||
| Depreciation and amortization | 4.6 | 4.2 | 4.5 | 4.3 | ||||||||||||
| Fuel | 7.0 | 4.9 | 7.4 | 4.7 | ||||||||||||
| Maintenance and repairs | 3.9 | 3.6 | 3.9 | 3.8 | ||||||||||||
| Business realignment and optimization costs | 0.2 | 0.2 | 0.2 | 0.2 | ||||||||||||
| Other | 15.0 | 14.1 | 15.0 | 14.1 | ||||||||||||
| Total operating expenses | 94.8 | 93.2 | 94.9 | 93.4 | ||||||||||||
| Operating margin | 5.2 | % | 6.8 | % | 5.1 | % | 6.6 | % |
Operating income declined in the second quarter and first half of 2023 primarily due to lower volumes at each of our transportation segments as a result of global volume softness. In addition, operating income was negatively affected by global inflation, which drove higher operating expenses related to fuel, other operating expenses, salaries and employee benefits, and purchased transportation. These factors were partially offset by yield improvement, including higher fuel surcharges, as well as cost control actions such as reducing flight frequencies, temporarily parking aircraft, temporarily delaying certain wage adjustments, consolidating sorts, and reducing select Sunday operations.
Fuel expense increased 39% in the second quarter and 59% in the first half of 2023 due to higher fuel prices. Other operating expenses increased 4% in the second quarter and 8% in the first half of 2023 primarily due to higher self-insurance accruals, bad debt, and outside service contracts, partially offset by favorable foreign currency impacts. Purchased transportation decreased 9% in the second quarter and 4% in the first half due to lower volume and favorable currency impacts, partially offset by increased fuel prices and higher rates. Salaries and employee benefits decreased 4% in the second quarter and 2% in the first half due to lower volumes, favorable currency impacts, and lower variable incentive compensation, partially offset by increased wage rates.
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Business Realignment and Optimization Costs
In 2021, FedEx Express announced a workforce reduction plan in Europe related to the network integration of TNT Express. The plan affects approximately 5,000 employees in Europe across operational teams and back-office functions. The execution of the plan is subject to a works council consultation process that will occur through 2023 in accordance with local country processes and regulations.
No business realignment costs were incurred in the second quarter of 2023. We incurred costs associated with our business realignment activities of $14 million ($11 million, net of tax, or $0.04 per diluted share) in the first half of 2023. We incurred costs associated with our business realignment activities of $44 million ($34 million, net of tax, or $0.13 per diluted share) in the second quarter and $111 million ($85 million, net of tax, or $0.31 per diluted share) in the first half of 2022. These costs are related to certain employee severance arrangements. Payments under this program totaled approximately $38 million in the second quarter and approximately $84 million in the first half of 2023. We expect the pre-tax cost of our business realignment activities to be approximately $415 million through 2023. We expect savings from our business realignment activities to be between $275 million and $350 million on an annualized basis beginning in 2024. The actual amount and timing of business realignment costs and related cost savings resulting from the workforce reduction plan are dependent on local country consultation processes and regulations and negotiated social plans and may differ from our current expectations and estimates.
In the first quarter of 2023, FedEx announced DRIVE, a comprehensive program to improve the company’s long-term profitability. This program includes a business optimization plan to drive efficiency among our transportation segments and lower our overhead and support costs. At FedEx Express, we plan to restructure the air network, optimize sorts and surface linehaul, drive efficiencies in Europe, and harmonize the global clearance process to lower costs. At FedEx Ground, we are transforming our pickup-and-delivery, package sortation, and transportation operations through enhanced planning tools, advanced data analytics, and increased focus on investment returns in order to drive efficiency improvements. Additionally, we plan to transform our back-office operations through automation, modernizing our infrastructure and further consolidating the shared-services functions, resulting in procurement and other cost savings from shared and allocated overhead expenses. The DRIVE program will also facilitate the achievement of Network 2.0, a plan to consolidate sortation facilities and equipment, reduce pickup-and-delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimized network.
We incurred costs associated with our business optimization activities, including idling our operations in Russia, of $36 million ($27 million, net of tax, or $0.11 per diluted share) in the second quarter and $60 million ($46 million, net of tax, or $0.18 per diluted share) in the first half of 2023. These costs are primarily related to consulting services and are included in Corporate, other, and eliminations and FedEx Express. We expect the pre-tax cost of our business optimization activities to be approximately $2.0 billion through 2025.
Income Taxes
Our effective tax rate was 25.6% for the second quarter and 24.9% for the first half of 2023, compared to 24.3% for the second quarter and 24.0% for the first half of 2022. The 2023 tax rates were unfavorably impacted primarily by lower earnings in certain non-U.S. jurisdictions.
On August 16, 2022, the president signed the Inflation Reduction Act (“IRA”) into law. The IRA enacted a 15% corporate minimum tax effective in 2024, a 1% tax on share repurchases after December 31, 2022, and created and extended certain tax-related energy incentives. We currently do not expect the tax-related provisions of the IRA to have a material effect on our financial results.
We are subject to taxation in the U.S. and various U.S. state, local, and foreign jurisdictions. We are currently under examination by the Internal Revenue Service for the 2016 through 2019 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. However, we believe we have recorded adequate amounts of tax, including interest and penalties, for any adjustments expected to occur.
During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit seeks to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $223 million through the second quarter of 2023 attributable to our interpretation of the TCJA and the Internal Revenue Code. We continue to pursue this lawsuit; however, if we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.
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Outlook
During the remainder of 2023, we expect revenue and operating profit to continue to decline as a result of reduced customer demand for our services. We will continue to execute on the previously identified cost control actions and identify additional opportunities to reduce cost in order to mitigate the impact of volume declines on our operating results. As part of these actions, we will manage capacity to lower demand levels, including further reducing flight frequencies, temporarily parking aircraft, and closing certain sort operations at FedEx Express, and reducing Sunday operations, closing certain sort operations, and taking other linehaul expense actions at FedEx Ground. We are also executing targeted actions to reduce shared and allocated overhead expenses, reducing vendor utilization, deferring certain technology projects, and closing certain FedEx Office locations. In addition, we remain focused on yield improvement and revenue quality to mitigate inflationary cost pressures and expect higher yields to have a favorable effect on our 2023 operating profit.
In response to volume declines, we are reducing our expected capital expenditures by $400 million from our previous forecast of $6.3 billion in 2023. We now expect capital expenditures of approximately $5.9 billion in 2023. For details on key 2023 capital projects, refer to the “Liquidity Outlook” section of this MD&A.
In the first quarter of 2023, FedEx announced DRIVE, a comprehensive program to improve the company’s long-term profitability. This program includes a business optimization plan to drive efficiency among our transportation segments and lower our overhead and support costs. We plan to consolidate our sortation facilities and equipment, reduce pickup-and-delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimized network. We expect the pre-tax cost of our business optimization activities to be approximately $2.0 billion through 2025.
During 2023, we expect to continue our ongoing initiatives aimed to transform and optimize the FedEx Express international business, particularly in Europe. These actions are focused on reducing the complexity and fragmentation of our international business, improving efficiency to meet changing customer expectations and business dynamics, lowering costs, increasing profitability, and improving service levels. As part of this strategy, in 2021 we announced a workforce reduction plan in Europe, which we expect to be substantially complete in 2023, with aggregate spend through the completion of the program anticipated to be approximately $415 million in cash expenditures. We expect savings from our business realignment activities to be between $275 million and $350 million on an annualized basis beginning in 2024.
See the “Business Realignment and Optimization Costs” section of this MD&A for additional information.
The uncertainty of a slowing global economy, global inflation well above normal and historical levels, geopolitical challenges including the ongoing conflict between Russia and Ukraine, and the impact these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for 2023 inherently less certain. See the “Trends Affecting Our Business” section of this MD&A for additional information.
RECENT ACCOUNTING GUIDANCE
See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting guidance.
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REPORTABLE SEGMENTS
FedEx Express, FedEx Ground, and FedEx Freight represent our major service lines and, along with FedEx Services, constitute our reportable segments. Our reportable segments include the following businesses:
| FedEx Express Segment | FedEx Express (express transportation, small-package ground delivery, and freight transportation) |
| FedEx Custom Critical, Inc. (time-critical transportation) | |
| FedEx Ground Segment | FedEx Ground (small-package ground delivery) |
| FedEx Freight Segment | FedEx Freight (LTL freight transportation) |
| FedEx Services Segment | FedEx Services (sales, marketing, information technology, communications, customer service, technical support, billing and collection services, and back-office functions) |
FEDEX SERVICES SEGMENT
The FedEx Services segment provides direct and indirect support to our operating segments, and we allocate all of the net operating costs of the FedEx Services segment to reflect the full cost of operating our businesses in the results of those segments. We review and evaluate the performance of our transportation segments based on operating income (inclusive of FedEx Services segment allocations). For the FedEx Services segment, performance is evaluated based on the effect of its total allocated net operating costs on our operating segments.
Operating expenses for each of our transportation segments include the allocations from the FedEx Services segment to the respective transportation segments. These allocations include charges and credits for administrative services provided between operating companies. The allocations of net operating costs are based on metrics such as relative revenue or estimated services provided. We believe these allocations approximate the net cost of providing these functions. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses.
CORPORATE, OTHER, AND ELIMINATIONS
Corporate and other includes corporate headquarters costs for executive officers and certain legal and finance functions, including certain other costs and credits not attributed to our core business, as well as certain costs associated with developing our “innovate digitally” strategic pillar through our FedEx Dataworks, Inc. (including ShopRunner, Inc.) (“FedEx Dataworks”) operating segment. FedEx Dataworks is focused on creating solutions to transform the digital and physical experiences of our customers and team members.
Also included in Corporate and other are the FedEx Office and Print Services, Inc. operating segment, which provides an array of document and business services and retail access to our customers for our package transportation businesses, and the FedEx Logistics, Inc. operating segment, which provides integrated supply chain management solutions, specialty transportation, customs brokerage, and global ocean and air freight forwarding.
The results of Corporate, other, and eliminations are not allocated to the other business segments.
In the second quarter and first half of 2023, the decrease in operating results in Corporate, other, and eliminations was primarily due to lower operating income at FedEx Logistics due to decreased revenue and an increase in bad debt, partially offset by decreased purchased transportation expense.
Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. For example, during the second quarter and first half of 2023 FedEx Ground provided delivery support for certain FedEx Express packages as part of our last-mile optimization efforts, and FedEx Freight provided road and intermodal support for both FedEx Ground and FedEx Express. In addition, FedEx Express is working with FedEx Logistics to secure air charters for U.S. customers. Billings for such services are based on negotiated rates, which we believe approximate fair value, and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.
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FEDEX EXPRESS SEGMENT
FedEx Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight including priority, deferred, and economy services, which provide delivery on a time-definite or day-definite basis. The following tables compare revenue, operating expenses, operating income (dollars in millions), operating margin, and operating expenses as a percent of revenue for the periods ended November 30:
| Three Months Ended | Percent | Six Months Ended | Percent | |||||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Package: | ||||||||||||||||||||||||||
| U.S. overnight box | $ | 2,237 | $ | 2,249 | (1 | ) | $ | 4,553 | $ | 4,419 | 3 | |||||||||||||||
| U.S. overnight envelope | 474 | 474 | — | 999 | 956 | 4 | ||||||||||||||||||||
| U.S. deferred | 1,253 | 1,307 | (4 | ) | 2,540 | 2,538 | — | |||||||||||||||||||
| Total U.S. domestic package revenue | 3,964 | 4,030 | (2 | ) | 8,092 | 7,913 | 2 | |||||||||||||||||||
| International priority | 2,823 | 3,107 | (9 | ) | 5,720 | 5,946 | (4 | ) | ||||||||||||||||||
| International economy | 711 | 706 | 1 | 1,418 | 1,375 | 3 | ||||||||||||||||||||
| Total international export package revenue | 3,534 | 3,813 | (7 | ) | 7,138 | 7,321 | (2 | ) | ||||||||||||||||||
| International domestic(1) | 1,036 | 1,147 | (10 | ) | 2,010 | 2,261 | (11 | ) | ||||||||||||||||||
| Total package revenue | 8,534 | 8,990 | (5 | ) | 17,240 | 17,495 | (1 | ) | ||||||||||||||||||
| Freight: | ||||||||||||||||||||||||||
| U.S. | 784 | 775 | 1 | 1,580 | 1,550 | 2 | ||||||||||||||||||||
| International priority | 811 | 994 | (18 | ) | 1,699 | 1,867 | (9 | ) | ||||||||||||||||||
| International economy | 388 | 438 | (11 | ) | 765 | 852 | (10 | ) | ||||||||||||||||||
| International airfreight | 39 | 47 | (17 | ) | 80 | 94 | (15 | ) | ||||||||||||||||||
| Total freight revenue | 2,022 | 2,254 | (10 | ) | 4,124 | 4,363 | (5 | ) | ||||||||||||||||||
| Other | 308 | 361 | (15 | ) | 627 | 713 | (12 | ) | ||||||||||||||||||
| Total revenue | 10,864 | 11,605 | (6 | ) | 21,991 | 22,571 | (3 | ) | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Salaries and employee benefits | 3,938 | 4,141 | (5 | ) | 7,988 | 8,225 | (3 | ) | ||||||||||||||||||
| Purchased transportation | 1,432 | 1,623 | (12 | ) | 2,910 | 3,174 | (8 | ) | ||||||||||||||||||
| Rentals and landing fees | 586 | 649 | (10 | ) | 1,163 | 1,284 | (9 | ) | ||||||||||||||||||
| Depreciation and amortization | 520 | 510 | 2 | 1,033 | 1,002 | 3 | ||||||||||||||||||||
| Fuel | 1,372 | 989 | 39 | 2,956 | 1,857 | 59 | ||||||||||||||||||||
| Maintenance and repairs | 534 | 525 | 2 | 1,096 | 1,098 | — | ||||||||||||||||||||
| Business realignment and optimization costs | 11 | 44 | (75 | ) | 25 | 111 | (77 | ) | ||||||||||||||||||
| Intercompany charges | 477 | 497 | (4 | ) | 961 | 1,005 | (4 | ) | ||||||||||||||||||
| Other | 1,653 | 1,678 | (1 | ) | 3,344 | 3,299 | 1 | |||||||||||||||||||
| Total operating expenses | 10,523 | 10,656 | (1 | ) | 21,476 | 21,055 | 2 | |||||||||||||||||||
| Operating income | $ | 341 | $ | 949 | (64 | ) | $ | 515 | $ | 1,516 | (66 | ) | ||||||||||||||
| Operating margin | 3.1 | % | 8.2 | % | (510 | ) | bp | 2.3 | % | 6.7 | % | (440 | ) | bp |
(1)
International domestic revenue relates to our international intra-country operations.
| Percent of Revenue | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Salaries and employee benefits | 36.3 | % | 35.7 | % | 36.3 | % | 36.4 | % | ||||||||
| Purchased transportation | 13.2 | 14.0 | 13.2 | 14.1 | ||||||||||||
| Rentals and landing fees | 5.4 | 5.6 | 5.3 | 5.7 | ||||||||||||
| Depreciation and amortization | 4.8 | 4.4 | 4.7 | 4.4 | ||||||||||||
| Fuel | 12.6 | 8.5 | 13.5 | 8.2 | ||||||||||||
| Maintenance and repairs | 4.9 | 4.5 | 5.0 | 4.9 | ||||||||||||
| Business realignment and optimization costs | 0.1 | 0.4 | 0.1 | 0.5 | ||||||||||||
| Intercompany charges | 4.4 | 4.3 | 4.4 | 4.5 | ||||||||||||
| Other | 15.2 | 14.4 | 15.2 | 14.6 | ||||||||||||
| Total operating expenses | 96.9 | 91.8 | 97.7 | 93.3 | ||||||||||||
| Operating margin | 3.1 | % | 8.2 | % | 2.3 | % | 6.7 | % |
- 31 -
The following table compares selected statistics (in thousands, except yield amounts) for the periods ended November 30:
| Three Months Ended | Percent | Six Months Ended | Percent | |||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||
| Package Statistics | ||||||||||||||||||||||||
| Average daily package volume (ADV): | ||||||||||||||||||||||||
| U.S. overnight box | 1,283 | 1,477 | (13 | ) | 1,284 | 1,444 | (11 | ) | ||||||||||||||||
| U.S. overnight envelope | 458 | 517 | (11 | ) | 471 | 516 | (9 | ) | ||||||||||||||||
| U.S. deferred | 1,042 | 1,285 | (19 | ) | 1,057 | 1,268 | (17 | ) | ||||||||||||||||
| Total U.S. domestic ADV | 2,783 | 3,279 | (15 | ) | 2,812 | 3,228 | (13 | ) | ||||||||||||||||
| International priority | 736 | 834 | (12 | ) | 718 | 802 | (10 | ) | ||||||||||||||||
| International economy | 285 | 289 | (1 | ) | 272 | 276 | (1 | ) | ||||||||||||||||
| Total international export ADV | 1,021 | 1,123 | (9 | ) | 990 | 1,078 | (8 | ) | ||||||||||||||||
| International domestic(1) | 1,950 | 2,141 | (9 | ) | 1,826 | 2,071 | (12 | ) | ||||||||||||||||
| Total ADV | 5,754 | 6,543 | (12 | ) | 5,628 | 6,377 | (12 | ) | ||||||||||||||||
| Revenue per package (yield): | ||||||||||||||||||||||||
| U.S. overnight box | $ | 27.69 | $ | 24.18 | 15 | $ | 27.71 | $ | 23.91 | 16 | ||||||||||||||
| U.S. overnight envelope | 16.44 | 14.55 | 13 | 16.55 | 14.49 | 14 | ||||||||||||||||||
| U.S. deferred | 19.06 | 16.14 | 18 | 18.77 | 15.64 | 20 | ||||||||||||||||||
| U.S. domestic composite | 22.61 | 19.51 | 16 | 22.48 | 19.15 | 17 | ||||||||||||||||||
| International priority | 60.87 | 59.15 | 3 | 62.28 | 57.92 | 8 | ||||||||||||||||||
| International economy | 39.58 | 38.85 | 2 | 40.66 | 38.97 | 4 | ||||||||||||||||||
| International export composite | 54.93 | 53.93 | 2 | 56.33 | 53.08 | 6 | ||||||||||||||||||
| International domestic(1) | 8.43 | 8.50 | (1 | ) | 8.60 | 8.53 | 1 | |||||||||||||||||
| Composite package yield | $ | 23.54 | $ | 21.81 | 8 | $ | 23.93 | $ | 21.43 | 12 | ||||||||||||||
| Freight Statistics | ||||||||||||||||||||||||
| Average daily freight pounds: | ||||||||||||||||||||||||
| U.S. | 7,503 | 8,666 | (13 | ) | 7,406 | 8,348 | (11 | ) | ||||||||||||||||
| International priority | 5,757 | 6,969 | (17 | ) | 5,902 | 6,778 | (13 | ) | ||||||||||||||||
| International economy | 11,668 | 13,062 | (11 | ) | 10,928 | 12,362 | (12 | ) | ||||||||||||||||
| International airfreight | 948 | 1,241 | (24 | ) | 952 | 1,234 | (23 | ) | ||||||||||||||||
| Total average daily freight pounds | 25,876 | 29,938 | (14 | ) | 25,188 | 28,722 | (12 | ) | ||||||||||||||||
| Revenue per pound (yield): | ||||||||||||||||||||||||
| U.S. | $ | 1.66 | $ | 1.42 | 17 | $ | 1.67 | $ | 1.45 | 15 | ||||||||||||||
| International priority | 2.24 | 2.26 | (1 | ) | 2.25 | 2.15 | 5 | |||||||||||||||||
| International economy | 0.53 | 0.53 | — | 0.55 | 0.54 | 2 | ||||||||||||||||||
| International airfreight | 0.65 | 0.59 | 10 | 0.66 | 0.59 | 12 | ||||||||||||||||||
| Composite freight yield | $ | 1.24 | $ | 1.20 | 3 | $ | 1.28 | $ | 1.19 | 8 |
(1)
International domestic statistics relate to our international intra-country operations.
- 32 -
FedEx Express Segment Revenue
FedEx Express segment revenue decreased 6% in the second quarter and 3% in the first half of 2023 due to decreased global volume and unfavorable exchange rates, partially offset by global package yield improvement, including higher fuel surcharges.
Total average daily package volume decreased 12% in the second quarter and first half of 2023, and total average daily freight pounds decreased 14% in the second quarter and 12% in the first half of 2023, due to global volume softness primarily driven by lower demand for our services. Yield improvement, including higher fuel surcharges, drove increases in U.S. domestic package yield of 16% in the second quarter and 17% in the first half of 2023, international export package yield of 2% in the second quarter and 6% in the first half of 2023, and composite freight yield of 3% in the second quarter and 8% in the first half of 2023. Unfavorable exchange rates negatively impacted international package and freight yields.
FedEx Express Segment Operating Income
FedEx Express segment operating income decreased 64% in the second quarter and 66% in the first half of 2023 primarily due to global volume declines, partially offset by yield improvement, including higher fuel surcharges. We continued cost control actions during the second quarter of 2023 to mitigate the impact of volume declines, including structural air network changes and temporary parking of aircraft. The impact of these cost actions lagged accelerating volume declines, and operating expenses remained high relative to demand in the second quarter and first half of 2023. Currency exchange rates had a negative effect on revenue, a positive effect on expenses, and a slightly negative effect on operating income in the second quarter and first half of 2023.
Fuel expense increased 39% in the second quarter and 59% in the first half of 2023 due to increased fuel prices. Purchased transportation expense decreased 12% in the second quarter and 8% in the first half of 2023 primarily due to favorable exchange rates and lower utilization, partially offset by increased rates. Salaries and employee benefits decreased 5% in the second quarter and 3% in the first half of 2023 due to favorable currency exchange rates, decreased volume, and lower variable incentive compensation, partially offset by increased wage rates. Rentals and landing fees decreased 10% in the second quarter and 9% in the first half of 2023 due to decreased aircraft leases and favorable currency exchange rates. Other operating expense decreased 1% in the second quarter and increased 1% in the first half of 2023. The second quarter decrease was primarily due to favorable currency exchange rates, partially offset by higher bad debt expense. The first half increase was primarily due to higher bad debt expense, partially offset by favorable currency exchange rates.
No business realignment costs were incurred in the second quarter of 2023. We incurred costs associated with our business realignment activities of $14 million in the first half of 2023 associated with our workforce reduction plan in Europe. We recognized $44 million of costs in the first quarter of 2022 and $111 million in the first half of 2022 under this program. Additionally, FedEx Express segment results include business optimization costs of $11 million in the second quarter and first half of 2023, which includes costs associated with idling our business in Russia. See the “Business Realignment and Optimization Costs” section of this MD&A for more information.
FedEx Express segment results include $27 million of TNT Express integration expenses in the second quarter and $53 million of such expenses in the first half of 2022.
- 33 -
FEDEX GROUND SEGMENT
FedEx Ground service offerings include day-certain delivery to businesses in the U.S. and Canada and to 100% of U.S. residences. The following tables compare revenue, operating expenses, operating income (dollars in millions), operating margin, selected package statistics (in thousands, except yield amounts), and operating expenses as a percent of revenue for the periods ended November 30:
| Three Months Ended | Percent | Six Months Ended | Percent | |||||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||
| Revenue | $ | 8,393 | $ | 8,264 | 2 | $ | 16,553 | $ | 15,941 | 4 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Salaries and employee benefits | 1,727 | 1,855 | (7 | ) | 3,364 | 3,468 | (3 | ) | ||||||||||||||||||
| Purchased transportation | 3,828 | 3,915 | (2 | ) | 7,541 | 7,418 | 2 | |||||||||||||||||||
| Rentals | 414 | 348 | 19 | 804 | 666 | 21 | ||||||||||||||||||||
| Depreciation and amortization | 249 | 223 | 12 | 495 | 449 | 10 | ||||||||||||||||||||
| Fuel | 10 | 7 | 43 | 19 | 13 | 46 | ||||||||||||||||||||
| Maintenance and repairs | 162 | 149 | 9 | 317 | 285 | 11 | ||||||||||||||||||||
| Intercompany charges | 493 | 480 | 3 | 983 | 971 | 1 | ||||||||||||||||||||
| Other | 912 | 806 | 13 | 1,738 | 1,519 | 14 | ||||||||||||||||||||
| Total operating expenses | 7,795 | 7,783 | — | 15,261 | 14,789 | 3 | ||||||||||||||||||||
| Operating income | $ | 598 | $ | 481 | 24 | $ | 1,292 | $ | 1,152 | 12 | ||||||||||||||||
| Operating margin | 7.1 | % | 5.8 | % | 130 | bp | 7.8 | % | 7.2 | % | 60 | bp | ||||||||||||||
| Average daily package volume (ADV)(1): | ||||||||||||||||||||||||||
| Ground commercial | 4,523 | 4,774 | (5 | ) | 4,445 | 4,595 | (3 | ) | ||||||||||||||||||
| Home delivery | 4,084 | 4,328 | (6 | ) | 3,997 | 4,035 | (1 | ) | ||||||||||||||||||
| Economy | 828 | 1,278 | (35 | ) | 778 | 1,220 | (36 | ) | ||||||||||||||||||
| Total ADV | 9,435 | 10,380 | (9 | ) | 9,220 | 9,850 | (6 | ) | ||||||||||||||||||
| Revenue per package (yield) | $ | 11.55 | $ | 10.26 | 13 | $ | 11.52 | $ | 10.27 | 12 |
(1)
Ground commercial ADV is calculated on a 5-day-per-week basis, while home delivery and economy ADV are calculated on a 7-day-per-week basis.
| Percent of Revenue | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Salaries and employee benefits | 20.6 | % | 22.4 | % | 20.3 | % | 21.8 | % | ||||||||
| Purchased transportation | 45.6 | 47.4 | 45.6 | 46.5 | ||||||||||||
| Rentals | 4.9 | 4.2 | 4.9 | 4.2 | ||||||||||||
| Depreciation and amortization | 3.0 | 2.7 | 3.0 | 2.8 | ||||||||||||
| Fuel | 0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||
| Maintenance and repairs | 1.9 | 1.8 | 1.9 | 1.8 | ||||||||||||
| Intercompany charges | 5.9 | 5.8 | 5.9 | 6.1 | ||||||||||||
| Other | 10.9 | 9.8 | 10.5 | 9.5 | ||||||||||||
| Total operating expenses | 92.9 | 94.2 | 92.2 | 92.8 | ||||||||||||
| Operating margin | 7.1 | % | 5.8 | % | 7.8 | % | 7.2 | % |
FedEx Ground Segment Revenue
FedEx Ground segment revenue increased 2% in the second quarter and 4% in the first half of 2023 primarily due to yield improvement, including higher fuel surcharges, partially offset by lower volumes.
FedEx Ground yield increased 13% in the second quarter and 12% in the first half of 2023 primarily due to higher fuel surcharges, continued focus on revenue quality, and product mix. Total average daily volume decreased 9% in the second quarter and 6% in the first half of 2023 primarily due to volume softness. In addition, strategic actions to improve revenue quality for higher-yielding business-to-consumer volume drove a mix shift from economy to home delivery services in the second quarter and first half of 2023.
- 34 -
FedEx Ground Segment Operating Income
FedEx Ground segment operating income increased 24% in the second quarter and 12% in the first half of 2023 primarily due to yield improvement, including higher fuel surcharges, partially offset by increased purchased transportation rates, higher other operating expense, higher rentals, higher salaries and employee benefits, and lower volume. The second quarter and first half of 2023 results benefited from certain cost reduction actions to mitigate the effect of volume declines, primarily the consolidation of certain sort and linehaul operations, reduction in Sunday delivery coverage, and deferral of certain wage adjustments.
Other operating expense increased 13% in the second quarter and 14% in the first half of 2023 primarily due to higher self-insurance accruals. Rentals increased 19% in the second quarter and 21% in the first half of 2023 due to the completion of previously committed multi-year expansion projects. Purchased transportation expense decreased 2% in the second quarter of 2023 and increased 2% in the first half of 2023. The second quarter decrease is primarily due to lower volumes, partially offset by higher fuel prices and higher base rates. The first half increase is primarily due to higher fuel prices and higher base rates, partially offset by lower volumes. Salaries and employee benefits decreased 7% in the second quarter and 3% in the first half of 2023 primarily due to lower volume and lower variable incentive compensation, partially offset by higher wage rates.
FEDEX FREIGHT SEGMENT
FedEx Freight LTL service offerings include priority services when speed is critical and economy services when time can be traded for savings. The following tables compare revenue, operating expenses, operating income (dollars in millions), operating margin, selected statistics, and operating expenses as a percent of revenue for the periods ended November 30:
| Three Months Ended | Percent | Six Months Ended | Percent | |||||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||
| Revenue | $ | 2,454 | $ | 2,272 | 8 | $ | 5,177 | $ | 4,523 | 14 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Salaries and employee benefits | 1,039 | 1,029 | 1 | 2,098 | 2,017 | 4 | ||||||||||||||||||||
| Purchased transportation | 187 | 244 | (23 | ) | 408 | 483 | (16 | ) | ||||||||||||||||||
| Rentals | 66 | 62 | 6 | 131 | 121 | 8 | ||||||||||||||||||||
| Depreciation and amortization | 103 | 105 | (2 | ) | 209 | 204 | 2 | |||||||||||||||||||
| Fuel | 211 | 147 | 44 | 439 | 282 | 56 | ||||||||||||||||||||
| Maintenance and repairs | 88 | 67 | 31 | 168 | 130 | 29 | ||||||||||||||||||||
| Intercompany charges | 130 | 132 | (2 | ) | 262 | 258 | 2 | |||||||||||||||||||
| Other | 190 | 152 | 25 | 371 | 304 | 22 | ||||||||||||||||||||
| Total operating expenses | 2,014 | 1,938 | 4 | 4,086 | 3,799 | 8 | ||||||||||||||||||||
| Operating income | $ | 440 | $ | 334 | 32 | $ | 1,091 | $ | 724 | 51 | ||||||||||||||||
| Operating margin | 17.9 | % | 14.7 | % | 320 | bp | 21.1 | % | 16.0 | % | 510 | bp | ||||||||||||||
| Average daily shipments (in thousands): | ||||||||||||||||||||||||||
| Priority | 73.3 | 81.4 | (10 | ) | 74.8 | 80.9 | (8 | ) | ||||||||||||||||||
| Economy | 31.0 | 33.1 | (6 | ) | 31.6 | 33.3 | (5 | ) | ||||||||||||||||||
| Total average daily shipments | 104.3 | 114.5 | (9 | ) | 106.4 | 114.2 | (7 | ) | ||||||||||||||||||
| Weight per shipment (lbs): | ||||||||||||||||||||||||||
| Priority | 1,029 | 1,088 | (5 | ) | 1,042 | 1,086 | (4 | ) | ||||||||||||||||||
| Economy | 940 | 940 | — | 939 | 939 | — | ||||||||||||||||||||
| Composite weight per shipment | 1,002 | 1,045 | (4 | ) | 1,011 | 1,043 | (3 | ) | ||||||||||||||||||
| Revenue per shipment: | ||||||||||||||||||||||||||
| Priority | $ | 361.57 | $ | 305.87 | 18 | $ | 365.76 | $ | 298.27 | 23 | ||||||||||||||||
| Economy | 415.35 | 350.85 | 18 | 419.64 | 341.66 | 23 | ||||||||||||||||||||
| Composite revenue per shipment | $ | 377.53 | $ | 318.87 | 18 | $ | 381.74 | $ | 310.93 | 23 | ||||||||||||||||
| Revenue per hundredweight: | ||||||||||||||||||||||||||
| Priority | $ | 35.14 | $ | 28.11 | 25 | $ | 35.10 | $ | 27.46 | 28 | ||||||||||||||||
| Economy | 44.21 | 37.33 | 18 | 44.70 | 36.39 | 23 | ||||||||||||||||||||
| Composite revenue per hundredweight | $ | 37.66 | $ | 30.51 | 23 | $ | 37.74 | $ | 29.80 | 27 |
- 35 -
| Percent of Revenue | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Salaries and employee benefits | 42.3 | % | 45.3 | % | 40.5 | % | 44.6 | % | ||||||||
| Purchased transportation | 7.6 | 10.7 | 7.9 | 10.7 | ||||||||||||
| Rentals | 2.7 | 2.7 | 2.5 | 2.7 | ||||||||||||
| Depreciation and amortization | 4.2 | 4.6 | 4.0 | 4.5 | ||||||||||||
| Fuel | 8.6 | 6.5 | 8.5 | 6.2 | ||||||||||||
| Maintenance and repairs | 3.6 | 3.0 | 3.2 | 2.9 | ||||||||||||
| Intercompany charges | 5.3 | 5.8 | 5.1 | 5.7 | ||||||||||||
| Other | 7.8 | 6.7 | 7.2 | 6.7 | ||||||||||||
| Total operating expenses | 82.1 | 85.3 | 78.9 | 84.0 | ||||||||||||
| Operating margin | 17.9 | % | 14.7 | % | 21.1 | % | 16.0 | % |
FedEx Freight Segment Revenue
FedEx Freight segment revenue increased 8% in the second quarter and 14% in the first half of 2023 primarily due to yield improvement, including higher fuel surcharges, partially offset by lower volume.
Revenue per shipment increased 18% in the second quarter and 23% in the first half of 2023 primarily due to revenue quality initiatives, including higher fuel surcharges, partially offset by lower weight per shipment. Average daily shipments decreased 9% in the second quarter and 7% in the first half of 2023 due to volume softness.
FedEx Freight Segment Operating Income
FedEx Freight segment operating income increased 32% in the second quarter and 51% in the first half of 2023 driven by yield improvement, including higher fuel surcharges, partially offset by higher salaries and employee benefits and lower volumes.
Fuel expense increased 44% in the second quarter and 56% in the second half of 2023 primarily due to increased fuel prices. Salaries and employee benefits expense increased 1% in the second quarter and 4% in the first half of 2023 primarily due to merit increases, lower productivity, and a shift from purchased transportation to company linehaul, partially offset by lower volumes. Other operating expense increased 25% in the second quarter and 22% in the first half of 2023 primarily due to higher self-insurance accruals and bad debt. Purchased transportation expense decreased 23% in the second quarter and 16% in the first half of 2023 primarily due to reduced utilization due to a shift to company linehaul and lower volumes.
- 36 -
FINANCIAL CONDITION
LIQUIDITY
Cash and cash equivalents totaled $4.6 billion at November 30, 2022, compared to $6.9 billion at May 31, 2022, respectively. The following table provides a summary of our cash flows for the six-month periods ended November 30 (in millions):
| 2022 | 2021 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 1,663 | $ | 2,156 | ||||
| Business realignment and optimization costs/(payments), net | (40 | ) | 55 | |||||
| Other noncash charges and credits | 4,192 | 4,262 | ||||||
| Changes in assets and liabilities | (2,690 | ) | (2,391 | ) | ||||
| Cash provided by operating activities | 3,125 | 4,082 | ||||||
| Investing activities: | ||||||||
| Capital expenditures | (3,142 | ) | (3,143 | ) | ||||
| Purchase of investments | (78 | ) | — | |||||
| Proceeds from asset dispositions and other | 20 | 31 | ||||||
| Cash used in investing activities | (3,200 | ) | (3,112 | ) | ||||
| Financing activities: | ||||||||
| Principal payments on debt | (32 | ) | (72 | ) | ||||
| Proceeds from stock issuances | 89 | 111 | ||||||
| Dividends paid | (598 | ) | (400 | ) | ||||
| Purchase of treasury stock | (1,500 | ) | (748 | ) | ||||
| Other, net | 1 | — | ||||||
| Cash used in financing activities | (2,040 | ) | (1,109 | ) | ||||
| Effect of exchange rate changes on cash | (136 | ) | (115 | ) | ||||
| Net decrease in cash and cash equivalents | $ | (2,251 | ) | $ | (254 | ) | ||
| Cash and cash equivalents at the end of period | $ | 4,646 | $ | 6,833 |
Cash flows from operating activities decreased $957 million in the first half of 2023 primarily due to lower net income and decreased accounts payable, partially offset by lower variable incentive compensation payments. Capital expenditures were flat during the first half of 2023. See “Capital Resources” for a discussion of capital expenditures during 2023 and 2022.
In December 2021, our Board of Directors authorized a stock repurchase program of up to $5 billion of FedEx common stock. As part of the repurchase program, during the second quarter of 2023, we entered into an ASR agreement with a bank to repurchase an aggregate of $1.5 billion of our common stock. See Note 1 of the accompanying unaudited condensed consolidated financial statements, “Liquidity Outlook” below, and Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds” for additional information. As of November 30, 2022, $2.6 billion remained available for repurchases under the current stock repurchase program. Shares under the current repurchase program may be repurchased from time to time in the open market or in privately negotiated transactions. The timing and volume of repurchases are at the discretion of management, based on the capital needs of the business, the market price of FedEx common stock, and general market conditions. No time limits were set for the completion of the program, and the program may be suspended or discontinued at any time.
- 37 -
CAPITAL RESOURCES
Our operations are capital intensive, characterized by significant investments in aircraft, package handling and sort equipment, vehicles and trailers, technology, and facilities. The amount and timing of capital investments depend on various factors, including pre-existing contractual commitments, anticipated volume growth, domestic and international economic conditions, new or enhanced services, geographical expansion of services, availability of satisfactory financing, and actions of regulatory authorities.
The following table compares capital expenditures by asset category and reportable segment for the periods ended November 30 (in millions):
| Percent Change 2022/2021 | ||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | Three Months | Six Months | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | Ended | Ended | |||||||||||||||||||
| Aircraft and related equipment | $ | 671 | $ | 582 | $ | 874 | $ | 1,346 | 15 | (35 | ) | |||||||||||||
| Package handling and ground support equipment | 505 | 401 | 941 | 710 | 26 | 33 | ||||||||||||||||||
| Vehicles and trailers | 132 | 59 | 349 | 146 | 124 | 139 | ||||||||||||||||||
| Information technology | 248 | 284 | 449 | 467 | (13 | ) | (4 | ) | ||||||||||||||||
| Facilities and other | 302 | 247 | 529 | 474 | 22 | 12 | ||||||||||||||||||
| Total capital expenditures | $ | 1,858 | $ | 1,573 | $ | 3,142 | $ | 3,143 | 18 | — | ||||||||||||||
| FedEx Express segment | $ | 994 | $ | 829 | $ | 1,524 | $ | 1,877 | 20 | (19 | ) | |||||||||||||
| FedEx Ground segment | 572 | 455 | 1,013 | 807 | 26 | 26 | ||||||||||||||||||
| FedEx Freight segment | 90 | 28 | 240 | 41 | 221 | 485 | ||||||||||||||||||
| FedEx Services segment | 168 | 233 | 297 | 370 | (28 | ) | (20 | ) | ||||||||||||||||
| Other | 34 | 28 | 68 | 48 | 21 | 42 | ||||||||||||||||||
| Total capital expenditures | $ | 1,858 | $ | 1,573 | $ | 3,142 | $ | 3,143 | 18 | — |
Capital expenditures increased in the second quarter of 2023 primarily due to increased spending on package handling equipment at FedEx Ground and FedEx Express, aircraft and related equipment at FedEx Express, and vehicles and trailers at FedEx Freight and FedEx Ground. Capital expenditures were flat in the first half of 2023 primarily due to decreased spending on aircraft and related equipment at FedEx Express, partially offset by increased spending on package handling equipment at all transportation segments, as well as vehicles and trailers at FedEx Freight and FedEx Ground.
GUARANTOR FINANCIAL IN****FORMATION
We are providing the following information in compliance with Rule 13-01 of Regulation S-X, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” with respect to our senior unsecured debt securities and Pass-Through Certificates, Series 2020-1AA (the “Certificates”).
The $19.0 billion principal amount of the senior unsecured notes were issued by FedEx under a shelf registration statement and are guaranteed by certain direct and indirect subsidiaries of FedEx (“Guarantor Subsidiaries”). FedEx owns, directly or indirectly, 100% of each Guarantor Subsidiary. The guarantees are (1) unsecured obligations of the respective Guarantor Subsidiary, (2) rank equally with all of their other unsecured and unsubordinated indebtedness, and (3) are full and unconditional and joint and several. If we sell, transfer, or otherwise dispose of all of the capital stock or all or substantially all of the assets of a Guarantor Subsidiary to any person that is not an affiliate of FedEx, the guarantee of that Guarantor Subsidiary will terminate, and holders of debt securities will no longer have a direct claim against such subsidiary under the guarantee.
Additionally, FedEx fully and unconditionally guarantees the payment obligation of FedEx Express in respect of the $866 million principal amount of the Certificates. See Note 4 of the accompanying unaudited condensed consolidated financial statements and Note 7 to the financial statements included in our Annual Report for additional information regarding the terms of the Certificates.
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The following tables present summarized financial information for FedEx (as Parent) and the Guarantor Subsidiaries on a combined basis after transactions and balances within the combined entities have been eliminated.
Parent and Guarantor Subsidiaries
The following table presents the summarized balance sheet information as of November 30, 2022 and May 31, 2022 (in millions):
| November 30, 2022 | May 31, 2022 | |||||||
| Current Assets | $ | 10,485 | $ | 11,768 | ||||
| Intercompany Receivable | 3,561 | 4,157 | ||||||
| Total Assets | 88,870 | 88,331 | ||||||
| Current Liabilities | 10,232 | 10,324 | ||||||
| Intercompany Payable | — | — | ||||||
| Total Liabilities | 60,427 | 58,883 |
The following table presents the summarized statement of income information for the six-month period ended November 30, 2022 (in millions):
| Revenue | $ | 33,973 | ||
| Intercompany Charges, net | (2,798 | ) | ||
| Operating Income | 2,323 | |||
| Intercompany Charges, net | 72 | |||
| Income Before Income Taxes | 2,298 | |||
| Net Income | $ | 1,846 |
The following tables present summarized financial information for FedEx (as Parent Guarantor) and FedEx Express (as Subsidiary Issuer) on a combined basis after transactions and balances within the combined entities have been eliminated.
Parent Guarantor and Subsidiary Issuer
The following table presents the summarized balance sheet information as of November 30, 2022 and May 31, 2022 (in millions):
| November 30, 2022 | May 31, 2022 | |||||||
| Current Assets | $ | 3,382 | $ | 4,687 | ||||
| Intercompany Receivable | — | — | ||||||
| Total Assets | 68,975 | 68,449 | ||||||
| Current Liabilities | 5,178 | 5,155 | ||||||
| Intercompany Payable | 9,382 | 7,473 | ||||||
| Total Liabilities | 48,892 | 47,830 |
The following table presents the summarized statement of income information for the six-month period ended November 30, 2022 (in millions):
| Revenue | $ | 12,200 | ||
| Intercompany Charges, net | (2,022 | ) | ||
| Operating Income | 320 | |||
| Intercompany Charges, net | 136 | |||
| Income Before Income Taxes | 1,314 | |||
| Net Income | $ | 1,327 |
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LIQUIDITY OUTLOOK
In response to current business and economic conditions as referenced above in the “Outlook” section of this MD&A, we are continuing to actively manage and optimize our capital allocation in response to the challenging macroeconomic environment, inflationary pressures, rising fuel prices, and geopolitical conflicts. We have $4.6 billion in cash at November 30, 2022 and $3.5 billion in available liquidity under our $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement”) and $1.5 billion three-year credit agreement (the “Three-Year Credit Agreement” and together with the Five-Year Credit Agreement, the “Credit Agreements”), and we believe that our cash and cash equivalents, cash from operations, and available financing sources will be adequate to meet our liquidity needs, which include operational requirements, expected capital expenditures, and dividend payments.
We entered into an ASR agreement with a bank in October 2022 to repurchase an aggregate of $1.5 billion of our common stock in the second quarter of 2023. Under the terms of the ASR agreement, approximately 80% of the shares were delivered to FedEx in the second quarter of 2023 and the remaining shares are anticipated to be delivered in December 2022.
Our cash and cash equivalents balance at November 30, 2022 includes $2.0 billion of cash in foreign jurisdictions associated with our permanent reinvestment strategy. We are able to access the majority of this cash without a material tax cost and do not believe that the indefinite reinvestment of these funds impairs our ability to meet our U.S. domestic debt or working capital obligations.
In response to continued softening of our volume trends and lower revenue outlook, we are reducing our expected capital expenditures by $400 million from our previous forecast of $6.3 billion in 2023. We now expect capital expenditures of approximately $5.9 billion in 2023. We expect our capital spend to be lower compared to 2022 due to lower aircraft fleet modernization spend, partially offset by increased investment in replacement vehicles including our vehicle electrification initiative, information technology, and strategic investments aimed to optimize operations across our networks. We invested $0.9 billion in aircraft and related equipment in the first half of 2023 and expect to invest an additional $0.5 billion for aircraft and related equipment during the remainder of 2023. Included within our expected 2023 capital expenditures are our continued investments in the FedEx Express Indianapolis hub and FedEx Express Memphis World Hub, which are expected to total $1.5 billion and $1.8 billion, respectively, over the life of each project. While we continue to invest in our business, the capital intensity relative to revenue is expected to remain below historical levels.
There have been no material changes to the contractual commitments described in Part II, Item 7 in our Annual Report. We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity.
We have several aircraft modernization programs underway that are supported by the purchase of Boeing 777 Freighter and Boeing 767-300 Freighter aircraft. These aircraft are significantly more fuel-efficient per unit than the aircraft types previously utilized, and these expenditures are necessary to achieve significant long-term operating savings and to replace older aircraft. Our ability to delay the timing of these aircraft-related expenditures is limited without incurring significant costs to modify existing purchase agreements.
We have a shelf registration statement filed with the Securities and Exchange Commission (“SEC”) that allows us to sell, in one or more future offerings, any combination of our unsecured debt securities and common stock and allows pass-through trusts formed by FedEx Express to sell, in one or more future offerings, pass-through certificates.
The Five-Year Credit Agreement expires in March 2026 and includes a $250 million letter of credit sublimit. The Three-Year Credit Agreement expires in March 2025. The Credit Agreements are available to finance our operations and other cash flow needs.
During the first half of 2023, we made voluntary contributions totaling $400 million to our U.S. Pension Plans. We anticipate making $400 million of additional voluntary contributions during the second half of 2023. There are currently no required minimum contributions to our U.S. Pension Plans based on our funded status and the fact we have a credit balance related to our cumulative excess voluntary pension contributions over those required that exceeds $3.5 billion. The credit balance is subtracted from plan assets to determine the minimum funding requirements. Therefore, we could eliminate all required contributions to our principal U.S. Pension Plans for several years if we were to choose to waive part of that credit balance in any given year. Our U.S. Pension Plans have ample funds to meet expected benefit payments.
Standard & Poor’s has assigned us a senior unsecured debt credit rating of BBB, a Certificates rating of AA-, a commercial paper rating of A-2, and a ratings outlook of “stable.” Moody’s Investors Service has assigned us an unsecured debt credit rating of Baa2, a Certificates rating of Aa3, a commercial paper rating of P-2, and a ratings outlook of “stable.” If our credit ratings drop, our interest expense may increase. If our commercial paper ratings drop below current levels, we may have difficulty utilizing the commercial paper market. If our senior unsecured debt credit ratings drop below investment grade, our access to financing may become limited.
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CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the financial statements of a complex, global corporation. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and new or better information.
GOODWILL. Goodwill is tested for impairment between annual tests whenever events or circumstances make it more likely than not that the fair value of a reporting unit has fallen below its carrying value. We do not believe there has been any change of events or circumstances that would indicate that a reevaluation of the goodwill of our reporting units is required as of November 30, 2022, nor do we believe the goodwill of our reporting units is at risk of failing impairment testing. For additional details on goodwill impairment testing, refer to Note 1 to the financial statements included in our Annual Report.
Information regarding our critical accounting estimates can be found in our Annual Report, including Note 1 to the financial statements therein. Management has discussed the development and selection of these critical accounting estimates with the Audit and Finance Committee of our Board of Directors and with our independent registered public accounting firm.
FORWARD-LOOKING STATEMENTS
Certain statements in this report, including (but not limited to) those contained in “Trends Affecting Our Business,” “Business Realignment and Optimization Costs,” “Income Taxes,” “Outlook,” “Liquidity Outlook,” “Critical Accounting Estimates,” and “Legal Proceedings,” and the “General,” “Financing Arrangements,” “Retirement Plans,” “Commitments,” and “Contingencies” notes to our unaudited condensed consolidated financial statements, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, cash flows, plans, objectives, future performance, and business and the assumptions underlying such statements. Forward-looking statements include those preceded by, followed by, or that include the words “will,” “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “plans,” “estimates,” “targets,” “forecasts,” “projects,” “intends,” or similar expressions. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking statements because of, among other things, potential risks and uncertainties, such as:
economic conditions in the global markets in which we operate;
significant changes in the volumes of shipments transported through our networks, customer demand for our various services, or the prices we obtain for our services;
our ability to successfully implement our business strategy, effectively respond to changes in market dynamics and customer preferences, and achieve the anticipated benefits and associated cost savings of such strategies and actions, including our ability to successfully implement our comprehensive program to improve long-term profitability and cost control actions;
our ability to achieve our fiscal 2025 financial performance goals;
damage to our reputation or loss of brand equity;
changes in the business or financial soundness of the U.S. Postal Service (“USPS”), including strategic changes to its operations to reduce its reliance on the air network of FedEx Express, or our relationship with the USPS;
our ability to meet our labor and purchased transportation needs while controlling related costs and maintain our company culture;
a significant data breach or other disruption to our technology infrastructure;
the continuing impact of the COVID-19 pandemic;
geopolitical developments and additional changes in international trade policies and relations;
the effect of any international conflicts or terrorist activities, including the current conflict between Russia and Ukraine, on the United States and global economies in general, the transportation industry, or FedEx in particular, and what effects these events will have on our costs and the demand for our services;
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the price and availability of jet and vehicle fuel, including significant increases in fuel prices as a result of the ongoing conflict between Russia and Ukraine;
our ability to manage our network capacity and cost structure for capital expenditures and operating expenses, and match it to shifting and future customer volume levels;
the effect of intense competition on our ability to maintain or increase our prices (including our fuel surcharges in response to rising fuel costs) or to maintain or grow our revenue and market share;
our ability to execute and effectively operate, integrate, leverage, and grow acquired businesses, and to continue to support the value we allocate to these acquired businesses, including their goodwill and other intangible assets;
the future rate of e-commerce growth and our ability to successfully expand our e-commerce services portfolio;
the timeline for recovery of passenger airline cargo capacity;
any effects on our businesses resulting from evolving or new U.S. domestic or international government regulations, laws, policies, and actions, which could be unfavorable to our business, including regulatory or other actions affecting data protection; global aviation or other transportation rights; increased air cargo, pilot flight and duty time, and other security or safety requirements; import and export controls; the use of new technology and accounting; trade (such as protectionist measures or restrictions on free trade); foreign exchange intervention in response to currency volatility; labor (such as joint employment standards or changes to the Railway Labor Act of 1926, as amended, affecting FedEx Express employees); environmental (such as global climate change legislation); or postal rules;
adverse changes in tax laws, regulations, and interpretations or challenges to our tax positions;
the effect of costs related to lawsuits in which it is alleged that FedEx Ground should be treated as an employer of drivers employed by service providers engaged by FedEx Ground;
increased insurance and claims expenses related to vehicle accidents, workers’ compensation claims, property and cargo loss, general business liabilities, and benefits paid under employee disability programs;
failure to receive or collect expected insurance coverage;
our ability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography;
our ability to achieve our goal of carbon neutrality for our global operations by calendar 2040;
our ability to successfully mitigate unique technological, operational, and regulatory risks related to our autonomous delivery strategy;
our ability to maintain good relationships with our employees and avoid attempts by labor organizations to organize groups of our employees, which could significantly increase our operating costs and reduce our operational flexibility, as well as the outcome of future negotiations to reach new collective bargaining agreements;
increasing costs, the volatility of costs and funding requirements, and other legal mandates for employee benefits, especially pension and healthcare benefits;
the effects of global climate change;
widespread outbreak of an illness or any other communicable disease, or any other public health crisis;
the United Kingdom’s exit from the EU (“Brexit”), including the economic, operational, regulatory, and financial impacts of any post-Brexit trade deal between the United Kingdom and EU;
the increasing costs of compliance with federal, state, and foreign governmental agency mandates (including the Foreign Corrupt Practices Act and the U.K. Bribery Act) and defending against inappropriate or unjustified enforcement or other actions by such agencies;
changes in foreign currency exchange rates, especially in the euro, Chinese yuan, British pound, Canadian dollar, Hong Kong dollar, Australian dollar, Japanese yen, and Mexican peso, which can affect our sales levels and foreign currency sales prices;
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loss or delay in the collection of accounts receivable;
any liability resulting from and the costs of defending against class-action, derivative, and other litigation, such as wage-and-hour, joint employment, securities, vehicle accident, and discrimination and retaliation claims, claims related to our mandatory and voluntary reporting and disclosure of climate change and other environmental, social, and governance topics, and any other legal or governmental proceedings, including the matters discussed in Note 9 of the accompanying unaudited condensed consolidated financial statements;
adverse rulings on appeals and in other future judicial decisions, subsequent adverse jury findings, and changes in judicial precedent;
the impact of technology developments on our operations and on demand for our services, and our ability to continue to identify and eliminate unnecessary information-technology redundancy and complexity throughout the organization;
disruptions in global supply chains, which can limit the access of FedEx and our service providers to vehicles and other key capital resources and increase our costs;
governmental underinvestment in transportation infrastructure, which could increase our costs and adversely impact our service levels due to traffic congestion, prolonged closure of key thoroughfares, or sub-optimal routing of our vehicles and aircraft;
constraints, volatility, or disruption in the capital markets, our ability to maintain our current credit ratings, commercial paper ratings, and senior unsecured debt and pass-through certificate credit ratings, and our ability to meet Credit Agreement financial covenants; and
other risks and uncertainties you can find in our press releases and SEC filings, including the risk factors identified under Part I, Item IA. “Risk Factors” in our Annual Report, as updated by our quarterly reports on Form 10-Q and current reports on Form 8-K.
As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise.
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