As a result of the current global outbreak of COVID-19, FedEx has provided an update on the extent to which the COVID-19 pandemic has impacted its operations. The company has noted that results of its operations have been negatively impacted by weaker global economic conditions associated with the virus and anticipates further adverse impacts on its business, results of operations, cash flows and liquidity.
Globally, B2B demand across all transportation businesses has been negatively impacted by the virus with the exception of the US ‘FedEx Ground’ residential delivery services which has experienced a sharp increase in e-commerce volume. However, the shift in mix towards more B2C goods is expected to negatively impact margins and operating results.
FedEx has stated it is currently unable to estimate the full impact of the COVID-19 pandemic and as a result, it has suspended its forecasts for its results of operations, including forecasts for all of its operating segments. In addition to this Frederick W. Smith, the company’s Chairman of the Board and CEO has taken a 91% reduction in his base salary for a six-month period from April 1, 2020, to September 30, 2020.
On March 18, 2020, FedEx notified lenders that it would fully draw down its $1.5bn 364-day credit agreement that expires in March 2021 to increase its cash position to preserve financial flexibility. The company has an additional $2.0bn five-year credit agreement in place which expires in March 2025.
As of April 3, 2020, FedEx has $1.5bn outstanding under its credit facilities, $136m of outstanding commercial paper and $0.3m in outstanding letters of credit, leaving $1.86bn available under existing credit agreements for future borrowings.
FedEx is also taking cost actions to maintain cash flow and liquidity. The efforts involve reductions in operating expenses as it has adjusted its network to better align volumes with operating conditions. The company also implemented temporary surcharges for international package and airfreight shipments and eliminated its money-back guarantees. Further, FedEx expects to realise “relief provisions” from recently enacted COVID-19 legislation, including relief from certain excise taxes and payroll tax deferrals in the United States.
Source: FedEx
