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FedEx Corp. said Chairman and CEO Fred Smith is taking a salary cut, effective April 1, from $115,402 per month to $10,728 per month through Sept. 30, in response to the coronavirus pandemic.
With Smith’s payroll withholding and other deductions, his salary will be $1 per pay period, according to a filing with the Securities and Exchange Commission by the Memphis, Tenn.-based package company.
Also, FedEx announced it is tapping a $1.5 billion line of credit to keep its cash flowing during the crisis.
“In this uncertain business environment, we’re taking proactive steps to best position FedEx for our employees, customers and shareholders. The debt offering and the chairman’s voluntary salary reduction will help mitigate the impacts of COVID-19 on FedEx,” the company said in a statement to Transport Topics.
“We elected to draw down the full amount available under our 364-day credit agreement in order to increase our cash position to preserve financial flexibility in light of disrupted access to commercial paper markets and current uncertainty in the global financial markets resulting from the COVID-19 pandemic,” the April 3 SEC filing stated.
As of April 3, FedEx said it had $1.5 billion outstanding under its credit facilities, $136 million of outstanding commercial paper and outstanding letters of credit. That leaves $1.86 billion available under its existing credit agreements for future borrowings, it said.
The company said because of the coronavirus, there has been a shift in business domestically and internationally.
“Globally, business-to-business demand across all of our transportation businesses has been negatively impacted by the COVID-19 pandemic.”
And, as more people stay home, business has increased domestically.
“In the United States, while demand for FedEx Ground Package System Inc. residential delivery services has increased due to sharp increases in e-commerce volume resulting from shelter-in-place and other responsive measures, the shift in mix is expected to negatively impact margins and operating results. Due to the significant uncertainty caused by the COVID-19 pandemic and the related deterioration in global economic conditions, we have suspended forecasts for our results of operations, including forecasts for all of our operating segment results.”
China was the first nation to feel the impact of the coronavirus, and most of its factories and businesses were shut down in January and February because of the pandemic and the Chinese New Year.
Most economists believe China is beginning to restart its industrial and manufacturing base, but economic activity in the United States has slumped.
“Since March 17, 2020, business demand in Asia remains elevated due to backlogs caused by the COVID-19 pandemic and the impact of responsive measures in Asia in early calendar 2020, as well as decreases in cargo capacity on passenger airlines,” the SEC statement said. “However, due to weakening economic conditions in Europe and the United States and resulting decreases in demand for goods manufactured in Asia, there are no assurances that these increased levels of demand will be sustainable. Demand in Europe has been negatively impacted by shelter-in-place and other responsive measures taken in response to the COVID-19 pandemic in many European countries.”
FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 15 on the TT Top 50 list of the largest logistics companies.
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