FedEx Corp. Adopts Mark-to-Market Pension Accounting
June 12 2015 - 7:55AM
Business Wire
No impact to employee benefits; transparency
improved
FedEx Corp. (NYSE: FDX) said today it has adopted mark-to-market
pension accounting for its defined benefit pension and other
postretirement plans. This accounting change will have no effect on
employees’ pension benefits or the funding requirements for any
FedEx pension plans or FedEx cash flows.
This accounting method will make FedEx’s operating performance
easier to understand and more transparent by immediately
recognizing actuarial gains and losses in the fourth quarter of the
fiscal year rather than amortizing them over many years.
Mark-to-market accounting has been adopted by many large U.S.
corporations, and is considered the preferred accounting method
because it provides a more current picture of pension plan
performance.
“Adopting the mark-to-market approach will align our accounting
to provide greater transparency by removing certain legacy pension
costs from segment operating results and recognizing them in a
year-end adjustment,” said Alan B. Graf, Jr., executive vice
president and chief financial officer of FedEx Corp. “This change
has no operational or cash-flow impact and, importantly, does not
affect benefits for plan participants. In addition, the funded
status of our principal plan remains very strong.”
FedEx also announced it will lower its expected return on plan
assets to 6.50 percent for segment reporting in all periods and on
a consolidated basis starting in fiscal 2016. This change reflects
its outlook for long-term investment returns and the current
strategy for its investment portfolio.
The company said it will record an estimated $2.2 billion
non-cash, pretax charge for the fourth quarter of fiscal 2015 ($1.4
billion, net of tax, or $4.88 per diluted share for the fourth
quarter and $1.4 billion, net of tax, or $4.81 per diluted share
for fiscal year 2015) in connection with the changes in its pension
accounting methods.
FedEx will continue to record service cost, interest cost and
expected return on pension assets at the business segments which
will be included in the company’s annual earnings forecast. The
annual adjustment will reflect actual return on pension plan
assets, changes in discount rates and differences from other
actuarial assumptions. The balance-sheet funded status of
retirement plans is not affected by this change.
Financial results from prior periods have been recast to include
the impact of these changes in all periods.
Reconciliations between previously reported company earnings and
revised company earnings for fiscal years 2013 and 2014, for each
quarter of fiscal 2014, and for the first three quarters of fiscal
2015 are available to provide year-over-year comparability for
future periods. Go to http://investors.fedex.com/mtmtables.
Other Event
FedEx also announced today that FedEx Ground has reached an
agreement in principle with the plaintiffs in the independent
contractor litigation that is pending in the United States District
Court for the Northern District of California to settle the matter
for $228 million. The settlement is subject to court approval. As a
consequence, a charge of $197 million ($133 million net of tax, or
$0.47 per diluted share for the fourth quarter and $0.46 per
diluted share for fiscal 2015) was recorded in the fourth quarter
of fiscal 2015 to increase the reserve for this matter to the
amount of the settlement.
“FedEx Ground faced a unique challenge in defending this case
given the decision of the Ninth Circuit Court of Appeals last
summer. This settlement resolves claims dating back to 2000 that
concern a model FedEx Ground no longer operates,” said Christine P.
Richards, executive vice president and general counsel of FedEx
Corp.
Corporate Overview
FedEx Corp. (NYSE: FDX) provides customers and businesses
worldwide with a broad portfolio of transportation, e-commerce and
business services. With annual revenues of $47 billion, the company
offers integrated business applications through operating companies
competing collectively and managed collaboratively, under the
respected FedEx brand. Consistently ranked among the world's most
admired and trusted employers, FedEx inspires its more than 325,000
team members to remain "absolutely, positively" focused on safety,
the highest ethical and professional standards and the needs of
their customers and communities. For more information, visit
news.fedex.com.
Certain statements in this press release may be considered
forward-looking statements, such as statements relating to
management's views with respect to future events and financial
performance. Such forward-looking statements are subject to risks,
uncertainties and other factors which could cause actual results to
differ materially from historical experience or from future results
expressed or implied by such forward-looking statements. Potential
risks and uncertainties include, but are not limited to, economic
conditions in the global markets in which we operate, our ability
to execute on our profit improvement programs, legal challenges or
changes related to FedEx Ground’s owner-operators, new U.S.
domestic or international government regulation, the impact from
any terrorist activities or international conflicts, our ability to
effectively operate, integrate and leverage acquired businesses,
changes in fuel prices and currency exchange rates, our ability to
match capacity to shifting volume levels and other factors which
can be found in FedEx Corp.'s and its subsidiaries' press releases
and filings with the SEC.
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version on businesswire.com: http://www.businesswire.com/news/home/20150612005376/en/
FedEx Corp.Media Contact:Jess Bunn, 901-818-7463orInvestor
Contact:Mickey Foster, 901-818-7468
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