Accounting Exercise

Exercise 8
This assignment pertains to the Tesla case available from the course website.
1) Describe Tesla’s journey from a startup to 2017. Is this journey typical of a startup?
Why or why not?
2) Analyze how Tesla finance operations using debt and equity in 2016 and 2017.
Show the effects of these equity and debt transactions on Tesla’s balance sheet
during these years.
3) Use the following table to summarize the financial statement impact of Tesla’s
March 2017 public stock offering. Label the cash flow category for any cash impacts
and note any income-related impacts on equity. Assume that 1,536 thousand shares
were issued at $262.00 per share, and issuance costs were $2,787 thousand.
Assets
Liabilities
Equity
1
4) Use the following table to summarize the financial statement impact of the listed
transactions for Tesla’s 5.3% Senior Notes due in 2025. For this question, assume
the following:
•
The notes were issued on December 31, 2017 with a principal amount (face
value) of $1.8 billion, and with issuance costs of $24,450 thousand, giving the
initial carrying value of $1,775,550.
•
The coupon is payable annually on December 31, which implies an effective
interest rate of 5.5146%.
Assets
Liabilities
Equity
Initial issuance on
December 31, 2017
2018 coupon
payments and
interest expense
2019 coupon
payments and
interest expense
2025 payment of
face value
(assume that Tesla has
already recorded the
2025 coupon payment
and interest expense)
5) Do you expect 2025 interest expense to be more, less, or the same as 2019 interest
expense? Why?
6) Why might investors become reluctant to provide Tesla with capital in 2018 even
though they appeared eager to do so in earlier years? What information supports
your answer?
2
19-195
Revised December 7, 2023
Another Liquidity Crunch at Tesla?
Christopher Noe
Palo Alto, California, April 1, 2018 − Despite intense efforts to raise money, including a lastditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally
bankrupt. So bankrupt, you can’t believe it.
− Tweet from Elon Musk, Tesla CEO
The lighthearted nature of Elon Musk’s April Fool’s Day tweet contrasted with Tesla facing serious
financial pressures as the company sought to ramp up production of its Model 3 all-electric vehicle
(EV). Throughout 2017 and into 2018, Tesla was burning through cash, and investors were questioning
whether the company would need to raise additional capital. While the company had been successful
in the past at issuing both equity and debt, it was not clear whether investors would be receptive to
another round of fundraising. Not being able to raise capital would potentially imperil Tesla’s ability
to survive and risk turning Musk’s little joke into tragic reality.
Company Background
Originally incorporated by two engineers in July 2003 with the goal of sustainable transportation, Tesla
had grown over the next fifteen years into the world’s leading designer, manufacturer, and marketer of
high-performance EVs. Elon Musk joined the founding team after having successfully started and later
selling Zip2, an online city guide, and PayPal, the global electronic payments platform. 1 Named after
Nikola Tesla, best known for his 1888 invention of the electric AC induction motor, Tesla launched its
first model, the Roadster, in 2008. The $100,000 EV could reach a top speed of 130 mph, accelerate
Matt Weinberger and Katie Canales, “Elon Musk turns 47 today − here’s the incredible story of how he went from getting bullied in school
to the most interesting man in tech,” Business Insider, June 28, 2018, https://www.businessinsider.com/the-rise-of-elon-musk-2016-7
(accessed July 9, 2019).
1
This case was prepared by Senior Lecturer Christopher Noe. Research assistance was provided by Allan Wu.
Copyright © 2019, Christopher Noe. This work is licensed under the Creative Commons Attribution-Noncommercial-No Derivative
Works 3.0 Unported License. To view a copy of this license visit http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a
letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California 94105, USA.
ANOTHER LIQUIDITY CRUNCH AT TESLA?
Christopher Noe
from 0-60 mph in just under four seconds, and travel 250 miles on a single charge. After Tesla
experienced a liquidity crunch in 2008 brought about by production delays and poor economic
conditions, Musk invested $80 million in the company and was named CEO. 2
In 2009, Tesla announced the Model S, a new line of luxury sedans. Production was expected to start
in mid-2012. Following the launch of the Roadster and the announcement of the Model S, Tesla went
public on June 29, 2010, raising a total of $226.1 million. 3 Although Tesla had never made a profit,
was initially expected to lose money until 2012, 4 and anticipated that its technology would take a decade
to become fully established, 5 strong demand for the company’s shares led to increasing the size of the
IPO by 20% from 11.1 million to 13.3 million shares at $17 a share, a price higher than was expected. 6
The IPO was highly successful, as Tesla closed its first day of trading at $23.89, a 41% increase. 7
The first delivery of the Model S, with a starting price of $60,000, was in June 2012. It was well
received, winning Motor Trend’s 2013 Car of the Year Award. 8 It was also the first car to receive a
perfect score from Consumer Reports magazine. 9 In February 2012, Tesla unveiled a prototype of the
Model X, an $80,000 crossover SUV, the first of which was delivered in September 2015. In March
2016, Tesla revealed the Model 3, the company’s first mass market EV, with the expectation of helping
the company transition away from its niche automobile manufacturer status. 10 The Model 3 had a
starting price of $27,500 after a $7,500 federal income tax credit.
At the end of 2015, Tesla introduced autopilot driving software to its vehicles enabling them to steer,
change lanes, and drive at highway speeds. 11 Drivers could download updates to the software “over the
air,” or wirelessly. Even though the autopilot software did not allow for fully autonomous driving –
drivers still needed to be alert behind the wheel and put their hands on the steering wheel every few
seconds to comply with safety laws – the technology was far ahead of what any other automobile
manufacturer offered at the time.
2
Ibid.
3
https://www.nasdaq.com/markets/ipos/company/tesla-inc-665410-63240 (accessed July 9, 2019).
4
Associated Press, “With First Share Offering, Tesla Bets on Electric Car’s Future,” The New York Times, June 28, 2010.
Lynn Cowan, “Investors Can Expect a Long Drive With Tesla − Start-Up Electric-Car Maker Has a Product, but the Technology Could
Take a Decade or More to Become Established,” The Wall Street Journal, June 28, 2010.
5
6
Associated Press, “Tesla Increases Its Share Price to $17,” The New York Times, June 29, 2010.
Lynn Cowan and Matt Jarzemsky, “Tesla Roars Out of the Garage Maker of Electric Cars Has Second-Best Opening Day This Year, Surging
41%,” The Wall Street Journal, June 30, 2010.
7
Angus MacKenzie, “2013 Motor Trend Car of the Year: Tesla Model S,” MotorTrend,
https://www.motortrend.com/news/2013-motor-trend-car-of-the-year-tesla-model-s/ (accessed July 9, 2019).
8
9
Peter Valdes-Dapena, “New Tesla earns perfect score from Consumer Reports,”
https://money.cnn.com/2015/08/27/autos/consumer-reports-tesla-p85d/index.html (accessed July 9, 2019).
CNN,
November
12,
2012,
August
27,
2015,
Roberto Baldwin, “Tesla unveils its $35,000 Model 3,” Engadget, March 31, 2016, https://www.engadget.com/2016/03/31/tesla-unveilsits-35-000-model-3/ (accessed July 9, 2019).
10
11
Drew Harwell, “Tesla’s Autopilot still requires a driver,” The Washington Post, October 16, 2015.
Rev. December 7, 2023
2
ANOTHER LIQUIDITY CRUNCH AT TESLA?
Christopher Noe
From the delivery of its first Roadsters, Tesla steadily increased vehicle production. Tesla’s cutting
edge technology and devoted customers along with expanding production all contributed to the
impression that the company represented the future of automobile manufacturing. Reflecting this
optimistic assessment, on April 10, 2017, Tesla became the most valuable American automobile
manufacturer when its market capitalization of $51 billion slightly surpassed that of General Motors
after having previously surpassed Ford’s. 12
In addition to EVs, Tesla ventured into other products. In 2014, to support its automotive efforts, the
company announced plans to build a multi-billion dollar car battery gigafactory with enough capacity
to supply 500,000 EVs annually. 13 Tesla subsequently partnered with Panasonic to build factories
located in Reno, NV and Buffalo, NY. 14 In addition to automobile batteries, the company also created
a home battery product, the Powerwall, allowing people to store energy from solar panels in case of
grid outages. 15
Tesla acquired SolarCity Corporation in November 2016 in an all-stock deal valued around $2.1
billion. 16 One of the largest solar energy companies in the U.S., SolarCity focused on designing and
installing solar panels on the roofs of homes and other buildings. The company’s leasing model was
credited with having contributed to wider adoption of solar panels. 17
Growing Pains
Despite its rising stock price, Tesla continually struggled to turn a profit. The company’s cash flow
from operations was also generally negative, reflecting the fact that it was not producing cars at
sufficiently high volume to benefit from manufacturing economies of scale. Meanwhile, Tesla was also
investing billions in its factories, charging stations, and sales and service network.
To fund its business, Tesla had to repeatedly raise additional capital following its IPO through a series
of equity and debt offerings. The equity offerings, as well as the stock exchanged in the acquisition of
SolarCity, nearly doubled Tesla’s shares outstanding in the eight years following its IPO (Exhibit 1).
The company’s long-term debt, including debt assumed in the SolarCity acquisition, grew to in excess
of $10 billion over this same period (Exhibit 2).
Increases in Tesla’s share count and debt level were particularly pronounced between 2015 and 2017.
Exhibit 3 provides Tesla’s 2015-17 balance sheets. Exhibits 4 and 5 provide information from Tesla’s
12
Center for Research in Security Prices.
13
Mike Ramsey, “Tesla Plans $5 Billion Car Battery Factory,” The Wall Street Journal, February 27, 2014.
14
Alan Ohnsman, “Tesla, Panasonic Plan Solar Panel Partnership At SolarCity’s New York Factory,” Forbes, October 17, 2016.
15
Chris Mooney, “Tesla unveils a new home battery,” The Washington Post, May 2, 2015.
16
Tim Higgins and Cassandra Sweet, “Tesla, SolarCity Merger Gets Shareholder Approval,” The Wall Street Journal, November 17, 2016.
Leanna Garfield, “Everything you need to know about the solar company Tesla wants to buy for $2.6 billion,” Business Insider, September
12, 2016, https://www.businessinsider.com/solarcity-tesla-solar-energy-2016-9 (accessed July 9, 2019).
17
Rev. December 7, 2023
3
ANOTHER LIQUIDITY CRUNCH AT TESLA?
Christopher Noe
statements of stockholders’ equity and debt footnotes for these years. Exhibit 6 contains 2015-17
summary income statement information for the company.
The start of production for the Model 3 in July 2017 represented an evolution of Tesla’s business model
from a high-end niche-market manufacturer to a mass market producer. The challenge for the company
was making cars on a much greater scale than any of its previous models. This challenge proved
difficult. The company repeatedly revised downward its production forecasts for the Model 3 and
pushed off the date where it expected to reach its production goal of 5,000 cars per week. 18 Production
of 5,000 cars per week was considered a critical number for Tesla to hit in order to become cash flow
positive.
While Model 3 production ramped up, Tesla’s quarterly cash burn rate accelerated, causing analysts to
question whether it would need to raise additional capital. One Goldman Sachs analyst wrote to clients
that “between its current operations, anticipated new product spend, and incremental capacity additions,
we see Tesla potentially requiring over $10 billion in external capital raises and debt re-financing by
2020.” 19
Responding to concerns about Tesla’s cash burn, Musk commented in the company’s 2018 first quarter
vehicle production and deliveries report that it would not “require an equity or debt raise this year, apart
from standard credit lines.” 20 This comment sounded similar to one from February 2012 when Musk
said that Tesla “doesn’t need to ever raise another financing round.” 21
Ultimately, the question of Tesla’s ability to survive hinged on a delicate balance between the
company’s need for additional capital and investors’ willingness to provide it. The looming question
was whether Musk’s casual bankruptcy tweet would turn out to be prophetic.
18
Tim Higgins, “Tesla’s Lackluster Model 3 Sales Miss Lowered Wall Street Expectations; The company again pushed backed its goal of
making 5,000 Model 3s a week by another quarter,” The Wall Street Journal, January 3, 2018.
19
Graham Rapier, “GOLDMAN SACHS: Tesla may need $10 billion in fresh cash in the next 18 months (TSLA),” Business Insider, May
17, 2018, https://markets.businessinsider.com/news/stocks/tesla-stock-price-tesla-will-need-10-billion-in-fresh-cash-before-2020-goldmansachs-says-2018-5-1024848274 (accessed July 9, 2019).
20
“Tesla Q1 2018 Vehicle Production and Deliveries,” Tesla press release, April 3, 2018.
21
David Rocker, “Remembrance of Markets Past,” Barron’s, August 28, 2017.
Rev. December 7, 2023
4
ANOTHER LIQUIDITY CRUNCH AT TESLA?
Christopher Noe
Exhibit 1
Tesla, Inc. Shares Outstanding 2010-17 (Millions)
Source: YCharts.
Exhibit 2
Tesla, Inc. Long-Term Debt 2010-17 ($ Millions)
Note: Includes capital lease obligations.
Source: YCharts.
Rev. December 7, 2023
5
ANOTHER LIQUIDITY CRUNCH AT TESLA?
Christopher Noe
Exhibit 3
Tesla, Inc. Balance Sheets (Thousands)
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
$ 3,367,914
155,323
515,381
2,263,537
268,365
$ 3,393,216
105,519
499,142
2,067,454
194,465
$ 1,196,908
22,628
168,965
1,277,838
125,229
Total current assets
Operating lease vehicles, net
Solar energy systems, leased to be leased, net
Property, plant and equipment, net
Intangible assets, net
Goodwill
MyPower customer notes receivable, net of current portion
Restricted cash, net of current portion
Other assets
6,570,520
4,116,604
6,347,490
10,027,522
361,502
60,237
456,652
441,722
273,123
6,259,796
3,134,080
5,919,880
5,982,957
376,145
2,791,568
506,302
268,165
216,751
31,522
74,633
Total assets
28,655,372
22,664,076
8,092,460
Current liabilities
Accounts payable
Accrued liabilities and other
Deferred revenue
Resale value guarantees
Customer deposits
Current portion of long-term debt
Current portion of capital leases
2,390,250
1,731,366
1,015,253
787,333
853,919
799,849
96,700
1,860,341
1,210,028
763,126
179,504
663,859
1,114,650
35,497
916,148
422,798
423,961
136,831
283,370
617,716
15,450
Total current liabilities
Long-term debt, net of current portion
Capital leases, net of current portion
Deferred revenue, net of current portion
Resale value guarantees, net of current portion
Other long-term liabilities
7,674,670
8,828,985
589,334
1,177,799
2,309,222
2,442,970
5,827,005
5,892,016
77,484
851,790
2,210,423
1,891,449
2,816,274
2,023,153
17,222
446,105
1,293,741
364,976
Total liabilities
Redeemable noncontrolling interests in subsidiaries
Convertible senior notes
Stockholders’ equity
Common stock; $0.001 par value; 2,000,000 shares authorized;
168,797 and 161,561 shares issued and outstanding as of Dec.
31, 2017 and Dec. 31, 2016, respectively
23,022,980
397,734
70
16,750,167
367,039
8,784
6,961,471
169
161
131
Additional paid-in capital
Accumulated other comprehensive gain (loss)
Accumulated deficit
9,178,024
33,348
(4,974,299)
7,773,727
(23,740)
(2,997,237)
3,414,692
(3,556)
(2,322,323)
Total stockholders’ equity
Noncontrolling interests in subsidiaries
4,237,242
997,346
4,752,911
785,175
1,088,944
$ 28,655,372
$ 22,664,076
$ 8,092,460
Total liabilities and equity
1,791,403
3,403,334
47,285
Source: Tesla, Inc. 10-Ks, December 31, 2015-17.
Rev. December 7, 2023
6
ANOTHER LIQUIDITY CRUNCH AT TESLA?
Christopher Noe
Exhibit 4
Tesla, Inc. Stockholders’ Equity Information (Thousands)
Common Stock
Additional
Shares
Amount
Paid-In Capital
Balance as of Dec. 31, 2015
Issuance of common stock in May 2016 public offering
Issuance of common stock upon acquisition of SolarCity
Common stock issued, net of shares withheld for employee taxes
Stock-based compensation
Other
131,425
7,915
11,125
11,096
$ 131
8
11
11
$ 3,414,692
1,687,139
2,145,977
163,817
347,357
14,745
Balance as of Dec. 31, 2016
161,561
161
7,773,727
1,536
35
1,408
4,257
2
0
2
4
399,645
10,528
230,151
259,381
485,822
18,770
168,797
$ 169
$ 9,178,024
Issuance of common stock in March 2017 public offering
Issuance of common stock upon acquisitions
Exercise of conversion feature of convertible senior notes due in 2018
Common stock issued, net of shares withheld for employee taxes
Stock-based compensation
Other
Balance as of Dec. 31, 2017
Source: Tesla, Inc. 10-K, December 31, 2017.
Rev. December 7, 2023
7
ANOTHER LIQUIDITY CRUNCH AT TESLA?
Christopher Noe
Exhibit 5
Tesla, Inc. Debt Information (Thousands)
Net Carrying Value
Dec. 31, 2017
Current
1.50% Convertible Senior Notes due in 2018
0.25% Convertible Senior Notes due in 2019
1.25% Convertible Senior Notes due in 2021
2.375% Convertible Senior Notes due in 2022
5.30% Senior Notes due in 2025
Credit Agreement
Warehouse Agreements
Canada Credit Facility
Vehicle and Other Loans
2.75% Convertible Senior Notes due in 2018*
1.625% Convertible Senior Notes due in 2019*
Zero-Coupon Convertible Senior Notes due in 2020*
Term Loan due in December 2017*
Term Loan due in December 2018*
Term Loan due in January 2021*
Revolving Credit Facilities*
Solar-Backed Notes*
Other*
Total Debt
Long-Term
$ 5,442
195,382
31,106
15,944
222,171
Dec. 31, 2016
Current
Dec. 31, 2015
Long-Term
$ 196,229
869,092
1,186,131
841,973
1,775,550
1,109,000
477,867
55,603
261
73,708
18,489
17,235
511,389
86,475
Current
Long-Term
$ 617,716
827,620
1,132,029
795,405
1,092,748
969,000
316,292
48,853
6,536
212,223
483,820
89,418
135,000
75,715
156,884
5,885
31,835
135,200
169,352
158,733
1,085,424
502,135
5,860
500,074
19,627
207,713
176,169
427,944
560,161
641,951
$ 799,849
$ 8,828,985
$ 1,114,650
$ 5,892,016
$ 617,716
$ 2,023,153
Note: * Assumed in the SolarCity acquisition.
Source: Tesla, Inc. 10-Ks, December 31, 2015-17.
Rev. December 7, 2023
8
ANOTHER LIQUIDITY CRUNCH AT TESLA?
Christopher Noe
Exhibit 6
Tesla, Inc. Summary Income Statement Information (Thousands)
2017
2016
2015
Revenue
$ 11,758,751
$ 7,000,132
$ 4,046,025
EBITDA
3,917
279,759
(294,039)
(1,632,086)
(667,340)
(716,629)
471,259
198,810
118,851
EBIT
Interest Expense
Source: Tesla, Inc. 10-K, December 31, 2017.
Rev. December 7, 2023
9
Exercise 7B
This assignment asks you to examine debt-related information for Federal Express
(NYSE:FDX), a large delivery and freight services company. The questions refer to the
financial statements and notes in Exhibit 1.
1) Complete the following table listing FedEx’s share repurchases:
Fiscal year
2021
Shares repurchased
Dollar amount
(6/1/2020 – 5/31/2021)
2022
(6/1/2021 – 5/31/2022)
2023
(6/1/2022 – 5/31/2023)
2) Complete the following table listing FedEx’s dividends:
Fiscal year
2021
Dividends declared
Per share
Total
Dividends
paid
(6/1/2020 – 5/31/2021)
2022
(6/1/2021 – 5/31/2022)
2023
(6/1/2022 – 5/31/2023)
•
For 2023, the dividends declared exceed the dividends paid. What balance
sheet account do you expect balances this difference?
3) Compare the time trend of cash dividends and stock buybacks for FedEx. How
would you explain the difference?
1
4) Use the following table to summarize the pretax impact of hypothetical transactions
on FedEx’s financial statements, labeling the cash flow category for any cash impacts
and noting any income-related impacts on equity.
Assets
(Example) Issue $50 of
stock
+ 50 Cash (CFF)
Liabilities
Equity
+ 50 (Common +
APIC)
Repurchased 5M shares at a
price of $300.00 per share.
Issued 5M ‘new’ shares at a
price of $300.00 per share.
Reissued 5M ‘old’ shares
from Treasury stock at a
price of $300.00 per share.
FedEx had originally paid
$250.00 per share.
Declared a dividend of
$2.00 per share. At the
time, FedEx had 262M
shares outstanding.
Paid the dividend declared
in the previous transaction.
FedEx executed a 2-for-1
stock split
2
Exhibit – FedEx’s financial statements and notes
FEDEX CORPORATION
CONSOLIDATED BALANCE SHEETS
May 31,
(IN MILLIONS)
ASSETS
Cash and cash equivalents
Receivables, less allowances of $800 and $692
Spare parts, supplies, and fuel, less allowances of $276 and $360
Prepaid expenses and other
May 31, 2023
$
6,856
10,188
604
962
Total current assets
Net property and equipment
Operating lease right-of-use assets, net
Goodwill
Other assets
TOTAL ASSETS
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
Current portion of long-term debt
Accrued salaries and employee benefits
Accounts payable
Operating lease liabilities
Accrued expenses
May 31, 2022
$
18,610
40,698
17,347
6,435
4,053
$
$
6,897
11,863
637
968
20,365
38,091
16,613
6,544
4,381
87,143
$
85,994
126
2,475
3,848
2,390
4,747
$
82
2,531
4,030
2,443
5,188
Total current liabilities
LONG-TERM DEBT, LESS CURRENT PORTION
OTHER LONG-TERM LIABILITIES
Deferred income taxes
Pension, postretirement healthcare, and other benefit obligations
Self-insurance accruals
Operating lease liabilities
Other liabilities
13,586
20,453
14,274
20,182
4,489
3,130
3,339
15,363
695
4,093
4,448
2,889
14,487
682
Total other long-term liabilities
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
Common stock, $0.10 par value; 800 million shares authorized;
318 million shares issued as of May 31, 2023 and 2022
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost
27,016
26,599
32
3,769
35,259
(1,327 )
(11,645 )
32
3,712
32,782
(1,103 )
(10,484 )
Total common stockholders’ investment
TOTAL LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
26,088
$
87,143
24,939
$
85,994
3
FEDEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Years ended May 31,
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
REVENUE
OPERATING EXPENSES:
Salaries and employee benefits
Purchased transportation
Rentals and landing fees
Depreciation and amortization
Fuel
Maintenance and repairs
Goodwill and other asset impairment charges
Business optimization and realignment costs
Other
2023
$
2022
90,155
$
2021
93,512
$
83,959
31,019
21,790
4,738
4,176
5,909
3,357
117
309
13,828
32,058
24,118
4,712
3,970
5,115
3,372
—
278
13,644
30,173
21,674
4,155
3,793
2,882
3,328
—
116
11,981
TOTAL OPERATING EXPENSES
85,243
87,267
78,102
OPERATING INCOME
OTHER INCOME (EXPENSE):
Interest expense
Interest income
Other retirement plans income (expense)
Loss on debt extinguishment
Other, net
4,912
6,245
5,857
(694 )
198
1,054
—
(107 )
(689 )
53
(726 )
—
13
(793 )
52
1,983
(393 )
(32 )
TOTAL OTHER INCOME (EXPENSE)
451
(1,349 )
817
INCOME BEFORE INCOME TAXES
PROVISION FOR INCOME TAXES
5,363
1,391
4,896
1,070
6,674
1,443
NET INCOME
$
3,972
$
3,826
$
5,231
BASIC EARNINGS PER COMMON SHARE
$
15.60
$
14.54
$
19.79
DILUTED EARNINGS PER COMMON SHARE
$
15.48
$
14.33
$
19.45
FEDEX CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended May 31,
(IN MILLIONS)
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of
tax benefit/(expense) of
$25 in 2023, $17 in 2022, and ($13) in 2021
Amortization of prior service credits and other, net
of tax benefits of $2
in 2023, $2 in 2022, and $3 in 2021
2023
$
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
COMPREHENSIVE INCOME
$
2022
3,972
$
2021
3,826
$
5,231
(214 )
(363 )
422
(10 )
(8 )
(7 )
(224 )
(371 )
415
3,748
$
3,455
$
5,646
4
FEDEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended May 31,
(IN MILLIONS)
2023
2022
OPERATING ACTIVITIES
Net income
$
3,972
$
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
4,176
Provision for uncollectible accounts
696
Other noncash items including leases and deferred
income taxes
3,472
Stock-based compensation
182
Retirement plans mark-to-market adjustments
(650 )
Loss on extinguishment of debt
—
Goodwill and other asset impairment charges
117
Business optimization and realignment costs, net of
payments
23
Changes in assets and liabilities:
Receivables
782
Other current assets
48
Pension and postretirement healthcare assets and
liabilities, net
(623 )
Accounts payable and other liabilities
(3,331 )
Other, net
(16 )
Cash provided by operating activities
INVESTING ACTIVITIES
Capital expenditures
Business acquisitions, net of cash acquired
Purchase of investments
Proceeds from asset dispositions and other
2021
3,826
$
5,231
3,970
403
3,793
577
2,931
190
1,578
—
—
2,887
200
(1,176 )
393
—
53
102
(310 )
(158 )
(1,389 )
(40 )
(697 )
(1,861 )
(93 )
(317 )
71
(197 )
8,848
9,832
10,135
(6,174 )
—
(84 )
84
(6,763 )
—
(147 )
94
(5,884 )
(228 )
—
102
Cash used in investing activities
FINANCING ACTIVITIES
Principal payments on debt
Proceeds from debt issuances
Proceeds from stock issuances
Dividends paid
Purchase of treasury stock
Other, net
(6,174 )
(6,816 )
(6,010 )
(152 )
—
231
(1,177 )
(1,500 )
1
(161 )
—
184
(793 )
(2,248 )
(1 )
(6,318 )
4,212
740
(686 )
—
(38 )
Cash used in financing activities
(2,597 )
(3,019 )
(2,090 )
Effect of exchange rate changes on cash
(118 )
(187 )
171
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
(41 )
6,897
(190 )
7,087
2,206
4,881
Cash and cash equivalents at end of period
$
6,856
$
6,897
$
7,087
5
FEDEX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ INVESTMENT
(IN MILLIONS, EXCEPT
SHARE DATA)
Common
Stock
Additional
Paid-in
Capital
3,356
—
$ 25,216
5,231
—
—
—
415
—
415
—
—
(686 )
—
—
(686 )
—
125
56
—
732
913
May 31, 2021
Net income
Other comprehensive
loss, net of tax of $19
Purchase of treasury
stock (8.9 million
shares)
Cash dividends
declared ($3.00 per
share)
Employee incentive
plans and other (1.4
million shares issued)
32
—
3,481
—
29,817
3,826
(732 )
—
(8,430 )
—
24,168
3,826
—
—
—
(371 )
—
(371 )
—
(9 )
—
—
(2,239 )
(2,248 )
—
—
(793 )
—
—
(793 )
—
240
(68 )
—
185
357
May 31, 2022
Net income
Other comprehensive
loss, net of tax of $27
Purchase of treasury
stock (9.2 million
shares)
Cash dividends
declared ($5.86 per
share)
Employee incentive
plans and other (1.9
million shares issued)
32
—
3,712
—
32,782
3,972
(1,103 )
—
(10,484 )
—
24,939
3,972
—
—
—
(224 )
—
(224 )
—
(82 )
—
—
(1,418 )
(1,500 )
—
—
(1,495 )
—
—
(1,495 )
—
139
—
—
257
396
3,769
$ 35,259
32
$
$
(1,147 ) $
—
Total
32
—
$
$
Treasury
Stock
May 31, 2020
$
Net income
Other comprehensive
gain, net of tax of
($10)
Cash dividends
declared ($2.60 per
share)
Employee incentive
plans and other (5.4
million shares issued)
May 31, 2023
$
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
(9,162 ) $ 18,295
—
5,231
(1,327 ) $ (11,645 ) $ 26,088
6
DIVIDENDS DECLARED PER COMMON SHARE.
Each quarterly dividend payment is subject to review and approval by our Board of
Directors, and we evaluate our dividend payment amount on an annual basis. There are no
material restrictions on our ability to declare dividends, nor are there any material
restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash
dividends, loans, or advances.
On April 5, 2023, our Board of Directors declared a quarterly cash dividend of $1.26 per
share of common stock. The dividend was paid on July 3, 2023 to stockholders of record as
of the close of business on June 12, 2023.
On June 14, 2022, our Board of Directors declared a quarterly cash dividend of $1.15 per
share of common stock. The dividend was paid on July 11, 2022 to stockholders of record
as of the close of business on June 27, 2022.
On June 14, 2021, our Board of Directors declared a quarterly dividend of $0.75 per share
of common stock. The dividend was paid on July 12, 2021 to stockholders of record as of
the close of business on June 28, 2021. Effective March 16, 2021, the Credit Agreements no
longer contain the temporary covenant added in the fourth quarter of 2020 restricting us
from increasing the amount of our quarterly dividend payable per share of common stock
from $0.65 per share.
On June 15, 2020, our Board of Directors declared a quarterly dividend of $0.65 per share
of common stock. The dividend was paid on July 13, 2020 to stockholders of record as of
the close of business on June 29, 2020. The amendments to the Credit Agreements
temporarily restrict us from increasing the amount of our quarterly dividend payable per
share of common stock from $0.65 per share between May 27, 2020 and May 31, 2021.
7