Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


	August 31, 2022 (Unaudited)		May 31, 2022		November 30, 2022 (Unaudited)		May 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	6,850	$	6,897	$	4,646	$	6,897
Receivables, less allowances of $786 and $692		11,055		11,863
Spare parts, supplies, and fuel, less allowances of $363 and $360		647		637
Receivables, less allowances of $766 and $692						11,644		11,863
Spare parts, supplies, and fuel, less allowances of $365 and $360						655		637
Prepaid expenses and other		1,054		968		1,272		968
Total current assets		19,606		20,365		18,217		20,365
PROPERTY AND EQUIPMENT, AT COST		76,712		75,275		78,532		75,275
Less accumulated depreciation and amortization		37,906		37,184		38,811		37,184
Net property and equipment		38,806		38,091		39,721		38,091
OTHER LONG-TERM ASSETS
Operating lease right-of-use assets, net		17,219		16,613		17,373		16,613
Goodwill		6,316		6,544		6,377		6,544
Other assets		3,879		4,381		3,903		4,381
Total other long-term assets		27,414		27,538		27,653		27,538
	$	85,826	$	85,994	$	85,591	$	85,994

The accompanying notes are an integral part of these condensed consolidated financial statements.


	August 31, 2022 (Unaudited)			May 31, 2022			November 30, 2022 (Unaudited)			May 31, 2022
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt	$	139		$	82		$	172		$	82
Accrued salaries and employee benefits		2,263			2,531			2,420			2,531
Accounts payable		4,167			4,030			3,989			4,030
Operating lease liabilities		2,470			2,443			2,498			2,443
Accrued expenses		4,726			5,188			4,960			5,188
Total current liabilities		13,765			14,274			14,039			14,274
LONG-TERM DEBT, LESS CURRENT PORTION		19,918			20,182			20,076			20,182
OTHER LONG-TERM LIABILITIES
Deferred income taxes		4,134			4,093			4,188			4,093
Pension, postretirement healthcare, and other benefit obligations		4,055			4,448			4,115			4,448
Self-insurance accruals		3,042			2,889			3,106			2,889
Operating lease liabilities		15,118			14,487			15,290			14,487
Other liabilities		654			682			662			682
Total other long-term liabilities		27,003			26,599			27,361			26,599
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of August 31, 2022 and May 31, 2022		32			32
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of November 30, 2022 and May 31, 2022								32			32
Additional paid-in capital		3,751			3,712			3,487			3,712
Retained earnings		33,060			32,782			33,557			32,782
Accumulated other comprehensive loss		(1,314	)		(1,103	)		(1,385	)		(1,103	)
Treasury stock, at cost		(10,389	)		(10,484	)		(11,576	)		(10,484	)
Total common stockholders’ investment		25,140			24,939			24,115			24,939
	$	85,826		$	85,994		$	85,591		$	85,994

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Three Months Ended August 31,						Three Months Ended November 30,						Six Months Ended November 30,
	2022			2021			2022			2021			2022			2021

REVENUE	$	23,242		$	22,003		$	22,814		$	23,474		$	46,056		$	45,477
OPERATING EXPENSES:
Salaries and employee benefits		7,859			7,776			7,792			8,135			15,651			15,911
Purchased transportation		5,767			5,659			5,665			6,241			11,432			11,900
Rentals and landing fees		1,159			1,133			1,195			1,177			2,354			2,310
Depreciation and amortization		1,024			971			1,046			995			2,070			1,966
Fuel		1,822			1,009			1,593			1,145			3,415			2,154
Maintenance and repairs		904			869			882			839			1,786			1,708
Business realignment and optimization costs		38			67			36			44			74			111
Other		3,478			3,121			3,429			3,301			6,907			6,422
		22,051			20,605			21,638			21,877			43,689			42,482
OPERATING INCOME		1,191			1,398			1,176			1,597			2,367			2,995
OTHER (EXPENSE) INCOME:
Interest, net		(142	)		(160	)		(127	)		(155	)		(269	)		(315	)
Other retirement plans income		101			216
Other retirement plans, net								101			(47	)		202			169
Other, net		4			3			(91	)		(15	)		(87	)		(12	)
		(37	)		59			(117	)		(217	)		(154	)		(158	)
INCOME BEFORE INCOME TAXES		1,154			1,457			1,059			1,380			2,213			2,837
PROVISION FOR INCOME TAXES		279			345			271			336			550			681
NET INCOME	$	875		$	1,112		$	788		$	1,044		$	1,663		$	2,156
EARNINGS PER COMMON SHARE:
Basic	$	3.37		$	4.17		$	3.08		$	3.94		$	6.46		$	8.11
Diluted	$	3.33		$	4.09		$	3.07		$	3.88		$	6.41		$	7.97
DIVIDENDS DECLARED PER COMMON SHARE	$	2.30		$	1.50		$	1.15		$	0.75		$	3.45		$	2.25

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Three Months Ended						Three Months Ended						Six Months Ended
	August 31,						November 30,						November 30,
	2022			2021			2022			2021			2022			2021
NET INCOME	$	875		$	1,112		$	788		$	1,044		$	1,663		$	2,156
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of tax benefit of $18 in 2022 and tax benefit of $0 in 2021		(209	)		(147	)
Amortization of prior service credit, net of tax benefit of $0 in 2022 and $0 in 2021		(2	)		(2	)
Foreign currency translation adjustments, net of tax benefit of $9 and $27 in 2022 and $4 and $4 in 2021								(70	)		(94	)		(279	)		(241	)
Amortization of prior service credit, net of tax benefit of $1 and $1 in 2022 and $1 and $1 in 2021								(1	)		(2	)		(3	)		(4	)
		(211	)		(149	)		(71	)		(96	)		(282	)		(245	)
COMPREHENSIVE INCOME	$	664		$	963		$	717		$	948		$	1,381		$	1,911

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Three Months Ended August 31,						Six Months Ended November 30,
	2022			2021			2022			2021
Operating Activities:
Net income	$	875		$	1,112		$	1,663		$	2,156
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		1,024			971			2,070			1,966
Provision for uncollectible accounts		245			117			425			211
Stock-based compensation		68			69			108			112
Retirement plans mark-to-market adjustments								—			260
Other noncash items including leases and deferred income taxes		774			884			1,589			1,713
Business realignment and optimization costs/(payments), net		(14	)		36			(40	)		55
Changes in assets and liabilities:
Receivables		259			726			(512	)		(519	)
Other assets		(170	)		(171	)		(214	)		(236	)
Accounts payable and other liabilities		(1,473	)		(1,616	)		(1,994	)		(1,582	)
Other, net		19			(44	)		30			(54	)
Cash provided by operating activities		1,607			2,084			3,125			4,082
Investing Activities:
Capital expenditures		(1,284	)		(1,570	)		(3,142	)		(3,143	)
Purchase of investments		(35	)		—			(78	)		—
Proceeds from asset dispositions and other		10			20			20			31
Cash used in investing activities		(1,309	)		(1,550	)		(3,200	)		(3,112	)
Financing Activities:
Principal payments on debt		(29	)		(64	)		(32	)		(72	)
Proceeds from stock issuances		81			84			89			111
Dividends paid		(299	)		(200	)		(598	)		(400	)
Purchase of treasury stock		—			(549	)		(1,500	)		(748	)
Other, net		—			(1	)		1			—
Cash used in financing activities		(247	)		(730	)		(2,040	)		(1,109	)
Effect of exchange rate changes on cash		(98	)		(38	)		(136	)		(115	)
Net decrease in cash and cash equivalents		(47	)		(234	)		(2,251	)		(254	)
Cash and cash equivalents at beginning of period		6,897			7,087			6,897			7,087
Cash and cash equivalents at end of period	$	6,850		$	6,853		$	4,646		$	6,833

The accompanying notes are an integral part of these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ INVESTMENT


	Three Months Ended						Three Months Ended						Six Months Ended
	August 31,						November 30,						November 30,
	2022			2021			2022			2021			2022			2021
Common Stock
Beginning Balance	$	32		$	32		$	32		$	32		$	32		$	32
Ending Balance		32			32			32			32			32			32
Additional Paid-in Capital
Beginning Balance		3,712			3,481			3,751			3,610			3,712			3,481
Accelerated share repurchase (See Note 1)								(300	)		—			(300	)		—
Employee incentive plans and other		39			129			36			43			75			172
Ending Balance		3,751			3,610			3,487			3,653			3,487			3,653
Retained Earnings
Beginning Balance		32,782			29,817			33,060			30,462			32,782			29,817
Net Income		875			1,112			788			1,044			1,663			2,156
Cash dividends declared ($2.30 and $1.50 per share)		(597	)		(400	)
Cash dividends declared ($1.15, $0.75, $3.45, and $2.25 per share)								(291	)		(198	)		(888	)		(598	)
Employee incentive plans and other		—			(67	)		—			(1	)		—			(68	)
Ending Balance		33,060			30,462			33,557			31,307			33,557			31,307
Accumulated Other Comprehensive Loss
Beginning Balance		(1,103	)		(732	)		(1,314	)		(881	)		(1,103	)		(732	)
Other comprehensive income, net of tax benefit of $18 and $0		(211	)		(149	)
Other comprehensive income, net of tax benefit of $10, $5, $28, and $5								(71	)		(96	)		(282	)		(245	)
Ending Balance		(1,314	)		(881	)		(1,385	)		(977	)		(1,385	)		(977	)
Treasury Stock
Beginning Balance		(10,484	)		(8,430	)		(10,389	)		(8,902	)		(10,484	)		(8,430	)
Purchase of treasury stock (0.0 and 1.9 million shares)		—			(549	)
Employee incentive plans and other (0.7 and 0.6 million shares)		95			77
Purchase of treasury stock (7.9, 0.9, 7.9, and 2.8 million shares)								(1,200	)		(199	)		(1,200	)		(748	)
Employee incentive plans and other (0.1, 0.2, 0.8, and 0.8 million shares)								13			26			108			103
Ending Balance		(10,389	)		(8,902	)		(11,576	)		(9,075	)		(11,576	)		(9,075	)
Total Common Stockholders’ Investment Balance	$	25,140		$	24,321		$	24,115		$	24,940		$	24,115		$	24,940

The accompanying notes are an integral part of these condensed consolidated financial statements.

(1) General

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of FedEx Corporation (“FedEx”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission (“SEC”) instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, 2022 (“Annual Report”). Significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of ~~August 31,~~November 30, 2022, and the results of our operations for the ~~three-month~~three- and six-month periods ended ~~August 31,~~November 30, 2022 and 2021, cash flows for the ~~three-month~~six-month periods ended ~~August 31,~~November 30, 2022 and 2021, and changes in common stockholders’ investment for the ~~three-month~~three- and six-month periods ended ~~August 31,~~November 30, 2022 and 2021. Operating results for the ~~three-month period~~three- and six-month periods ended ~~August 31,~~November 30, 2022 are not necessarily indicative of the results that may be expected for the year ending May 31, 2023.

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.

REVENUE RECOGNITION.

Contract Assets and Liabilities

Contract assets include billed and unbilled amounts resulting from in-transit shipments, as we have an unconditional right to payment only once all performance obligations have been completed (e.g., packages have been delivered). Contract assets are generally classified as current, and the full balance is converted each quarter based on the short-term nature of the transactions. Our contract liabilities consist of advance payments and billings in excess of revenue. The full balance of deferred revenue is converted each quarter based on the short-term nature of the transactions.

Gross contract assets related to in-transit shipments totaled $~~774~~883 million and $861 million at ~~August 31,~~November 30, 2022 and May 31, 2022, respectively. Contract assets net of deferred unearned revenue were $~~556~~655 million and $623 million at ~~August 31,~~November 30, 2022 and May 31, 2022, respectively. Contract assets are included within current assets in the accompanying unaudited condensed consolidated balance sheets. Contract liabilities related to advance payments from customers were $1415 million and $8 million at ~~August 31,~~November 30, 2022 and May 31, 2022, respectively. Contract liabilities are included within current liabilities in the accompanying unaudited condensed consolidated balance sheets.

- 9 -

Disaggregation of Revenue

The following table provides revenue by service type (in millions) for the periods ended ~~August 31.~~November 30. This presentation is consistent with how we organize our segments internally for making operating decisions and measuring performance.


	Three Months Ended				Three Months Ended				Six Months Ended
	2022		2021		2022		2021		2022		2021
REVENUE BY SERVICE TYPE
FedEx Express segment:
Package:
U.S. overnight box	$	2,316	$	2,170	$	2,237	$	2,249	$	4,553	$	4,419
U.S. overnight envelope		525		482		474		474		999		956
U.S. deferred		1,287		1,231		1,253		1,307		2,540		2,538
Total U.S. domestic package revenue		4,128		3,883		3,964		4,030		8,092		7,913
International priority		2,897		2,839		2,823		3,107		5,720		5,946
International economy		707		669		711		706		1,418		1,375
Total international export package revenue		3,604		3,508		3,534		3,813		7,138		7,321
International domestic(1)		974		1,114		1,036		1,147		2,010		2,261
Total package revenue		8,706		8,505		8,534		8,990		17,240		17,495
Freight:
U.S.		796		775		784		775		1,580		1,550
International priority		888		873		811		994		1,699		1,867
International economy		377		414		388		438		765		852
International airfreight		41		47		39		47		80		94
Total freight revenue		2,102		2,109		2,022		2,254		4,124		4,363
Other		319		352		308		361		627		713
Total FedEx Express segment		11,127		10,966		10,864		11,605		21,991		22,571
FedEx Ground segment		8,160		7,677		8,393		8,264		16,553		15,941
FedEx Freight segment		2,723		2,251		2,454		2,272		5,177		4,523
FedEx Services segment		70		35		68		77		138		112
Other and eliminations(2)		1,162		1,074		1,035		1,256		2,197		2,330
	$	23,242	$	22,003	$	22,814	$	23,474	$	46,056	$	45,477

(1)

International domestic revenue relates to our international intra-country operations.

(2)

Includes the FedEx Office and Print Services, Inc. (“FedEx Office”), FedEx Logistics, Inc. (“FedEx Logistics”), and FedEx Dataworks, Inc. (including ShopRunner, Inc.) (“FedEx Dataworks”) operating segments.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots of Federal Express Corporation (“FedEx Express”), who are a small number of its total employees, are employed under a collective bargaining agreement that took effect on November 2, 2015, and became amendable in November 2021. Bargaining for a successor agreement began in May 2021 and continues. In November 2022, the National Mediation Board (“NMB”) began actively mediating the negotiations. The NMB is the U.S. governmental agency that oversees labor agreements for entities covered by the Railway Labor Act of 1926, as amended. The conduct of mediated negotiations has no impact on our operations. A small number of our other employees are members of unions.

STOCK-BASED COMPENSATION. We have two types of equity-based compensation: stock options and restricted stock. The key terms of the stock option and restricted stock awards granted under our outstanding incentive stock plans and all financial disclosures about these programs are set forth in our Annual Report.

Our stock-based compensation expense was $6840 million for the three-month period ended ~~August 31,~~November 30, 2022 and $69108 million for the six-month period ended November 30, 2022. Our stock-based compensation expense was $43 million for the three-month period ended ~~August 31,~~November 30, 2021 and $112 million for the six-month period ended November 30, 2021. Due to its immateriality, additional disclosures related to stock-based compensation have been excluded from this quarterly report.

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 ~~will affect~~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.

- 10 -

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 ~~quarter~~half of 2023. We ~~recognized~~incurred costs associated with our business realignment activities of $6744 million ($5234 million, net of tax, or $~~0.19~~0.13 per diluted share) in the second quarter and $111 million ($85 million, net of ~~costs under this program~~tax, or $0.31 per diluted share) in the first ~~quarter~~half of 2022. These costs are related to certain employee severance arrangements. Payments under this program totaled approximately $4638 million in the second quarter and $84 million in the first ~~quarter~~half of 2023. We expect the pre-tax cost of our business realignment activities to be approximately $~~420~~415 million through 2023. 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 expectation 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. WeAt 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 Package System, Inc. (“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 ~~our~~ sortation facilities and equipment, reduce ~~pickup and delivery~~pickup-and-delivery routes, and optimize our enterprise linehaul ~~network~~networks by moving beyond discrete collaboration to an end-to-end ~~optimization.~~optimized network.

We incurred costs associated with our business optimization activities, including idling our operations in Russia, of $2436 million ($1927 million, net of tax, or $~~0.07~~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 ~~quarter~~half of 2023. These costs are primarily related to consulting services and are included in Corporate, other, and ~~eliminations. We expect the pre-tax cost of our business optimization activities to be approximately $~~eliminations and FedEx Express.~~2.0~~ ~~billion through 2025.~~

For additional information about the business realignment and optimization costs, see the section titled “Business Realignment and Optimization Costs” included in Item 2 of this Form 10-Q (“Management’s Discussion and Analysis of Results of Operations and Financial Condition”).

DERIVATIVE FINANCIAL INSTRUMENTS. Our risk management strategy includes the select use of derivative instruments to reduce the effects of volatility in foreign currency exchange exposure on operating results and cash flows. In accordance with our risk management policies, we do not hold or issue derivative instruments for trading or speculative purposes. All derivative instruments are recognized in the financial statements at fair value, regardless of the purpose or intent for holding them.

When we become a party to a derivative instrument and intend to apply hedge accounting, we formally document the hedge relationship and the risk management objective for undertaking the hedge, which includes designating the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge.

If a derivative is designated as a cash flow hedge, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in other comprehensive income. For net investment hedges, the entire change in the fair value is recorded in other comprehensive income. Any portion of a change in the fair value of a derivative that is considered to be ineffective, along with the change in fair value of any derivatives not designated in a hedging relationship, is immediately recognized in the income statement. We do not have any derivatives designated as a cash flow hedge for any period presented. As of ~~August 31,~~November 30, 2022, we had €93120 million of debt designated as a net investment hedge to reduce the volatility of the U.S. dollar value of a portion of our net investment in a euro-denominated consolidated subsidiary. As of ~~August 31,~~November 30, 2022, the hedge remains effective.

RECENT ACCOUNTING GUIDANCE. New accounting rules and disclosure requirements can significantly affect our reported results and the comparability of our financial statements. We believe the following new accounting guidance is relevant to the readers of our financial statements.

New Accounting Standards and Accounting Standards Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for applying accounting principles generally accepted in the United States to existing contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate to be discontinued because of reference rate reform. The guidance was effective upon issuance and can generally be applied through December 31, 2022. While there has been no material effect to our financial condition, results of operations, or cash flows from reference rate reform as of ~~August 31,~~November 30, 2022, we continue to monitor our contracts and transactions for potential application of this ASU.

- 11 -

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), which requires annual disclosures that increase the transparency of transactions involving government grants, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The adoption of this standard did not have a material ~~impact~~effect on our consolidated financial statements and related disclosures.

~~- 11 -~~

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies the guidance of measuring the fair value of equity securities subject to contractual restrictions that prohibit the sale of the equity securities. Our historical accounting is consistent with these clarifications. We early adopted this standard effective September 1, 2022. The ~~guidance~~adoption of this standard did not have an effect on our consolidated financial statements and related disclosures.

In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations, which requires a buyer in a supplier finance program (e.g., reverse factoring) to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The amendments do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. The changes will be effective ~~for fiscal years beginning after December 15,~~June 1, 2023 ~~and interim periods within those fiscal years.~~(fiscal 2024). We are assessing the ~~impact~~effect of this new standard on our consolidated financial statements.

EQUITY INVESTMENTS. Equity investments in private companies for which we do not have the ability to exercise significant influence are accounted for at cost, with adjustments for observable changes in prices or impairments, and are classified as “Other assets” on our consolidated balance sheets with adjustments recognized in “Other (expense) income, net” on our consolidated statements of income. Each reporting period, we perform a qualitative assessment to evaluate whether the investment is impaired. Our assessment includes a review of available recent operating results and trends, recent sales/acquisitions of the investee securities, and other publicly available data. If the investment is impaired, we write it down to its estimated fair value.

Equity investments that have readily determinable fair values, including investments for which we have elected the fair value option, are included in “Other assets” on our consolidated balance sheets and measured at fair value with changes recognized in “Other (expense) income, net” on our consolidated statements of income.

As of ~~August 31,~~November 30, 2022, these investments were not material to our financial position or results of operations.

TREASURY SHARES. In December 2021, our Board of Directors authorized a new stock repurchase program of up to $5 billion of FedEx common stock. ~~We did~~ 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 $no1.5~~t repurchase any~~ billion of our common stock.

During the second quarter of 2023, 7.9 million shares were delivered under the ASR agreement, which represented approximately 80% of the total number of shares to be delivered. The final number of shares will be delivered upon settlement of the ASR agreement in December 2022 and will be determined based on a discount to the volume-weighted average price of our stock during the term of the transaction. The repurchased shares were accounted for as a reduction to common stockholders’ investment in the accompanying consolidated balance sheet and resulted in a reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share. The 7.9 million shares delivered under the ASR agreement were the only shares of FedEx common stock we repurchased during the ~~first~~second quarter of 2023. The amount of the purchase price related to the shares to be delivered in December 2022 was accounted for as a reduction to additional paid-in capital in the accompanying consolidated statement of stockholders’ investment for the three-month and six-month periods ended November 30, 2022.

During the six months ended November 30, 2022, we repurchased 7.9 million shares of FedEx common stock at an average of $151.46 per share for a total of $1.2 billion. As of ~~August 31,~~November 30, 2022, approximately $~~4.1~~2.6 billion remained available to use for repurchases under the program.

Shares under the 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.

- 12 -

DIVIDENDS DECLARED PER COMMON SHARE. On ~~August 12,~~November 18, 2022, our Board of Directors declared a quarterly dividend of $1.15 per share of common stock. The dividend will be paid on ~~October~~January 3, ~~2022~~2023 to stockholders of record as of the close of business on ~~September 2,~~December 12, 2022. 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.

(3) Accumulated Other Comprehensive Loss

The following table provides changes in accumulated other comprehensive income (“AOCI”), net of tax, reported in our unaudited condensed consolidated financial statements for the ~~three-month~~ periods ended ~~August 31~~November 30 (in millions; amounts in parentheses indicate debits to AOCI):

2022

2021

Foreign currency translation loss:

Balance at beginning of period

$
(1,148
)

$
(785
)
Translation adjustments

(209
)

(147
)
Balance at end of period

(1,357
)

(932
)
Retirement plans adjustments:

Balance at beginning of period

45

53

Reclassifications from AOCI

(2
)

(2
)
Balance at end of period

43

51

Accumulated other comprehensive (loss) at end of period

$
(1,314
)

$
(881
)

~~- 12 -~~


	Three Months Ended						Six Months Ended
	2022			2021			2022			2021
Foreign currency translation loss:
Balance at beginning of period	$	(1,357	)	$	(932	)	$	(1,148	)	$	(785	)
Translation adjustments		(70	)		(94	)		(279	)		(241	)
Balance at end of period		(1,427	)		(1,026	)		(1,427	)		(1,026	)
Retirement plans adjustments:
Balance at beginning of period		43			51			45			53
Reclassifications from AOCI		(1	)		(2	)		(3	)		(4	)
Balance at end of period		42			49			42			49
Accumulated other comprehensive (loss) at end of period	$	(1,385	)	$	(977	)	$	(1,385	)	$	(977	)

The following table presents details of the reclassifications from AOCI for the ~~three-month~~ periods ended ~~August 31~~November 30 (in millions; amounts in parentheses indicate debits to earnings):


						Amount Reclassified from AOCI												Affected Line Item in the Income Statement
	Amount Reclassified from AOCI				Affected Line Item in the Income Statement	Three Months Ended						Six Months Ended
	2022		2021			2022			2021			2022			2021
Amortization of retirement plans prior service credits, before tax	$	2	$	2	Other retirement plans income	$	2		$	3		$	4		$	5		Other retirement plans, net
Income tax benefit		—		—	Provision for income taxes		(1	)		(1	)		(1	)		(1	)	Provision for income taxes
AOCI reclassifications, net of tax	$	2	$	2	Net income	$	1		$	2		$	3		$	4		Net income

(5) Computation of Earnings Per Share

The calculation of basic and diluted earnings per common share for the ~~three-month~~ periods ended ~~August 31~~November 30 was as follows (in millions, except per share amounts):


					Three Months Ended				Six Months Ended
	2022		2021		2022		2021		2022		2021
Basic earnings per common share:
Net earnings allocable to common shares(1)	$	874	$	1,110	$	786	$	1,042	$	1,660	$	2,152
Weighted-average common shares		259		266		255		265		257		265
Basic earnings per common share	$	3.37	$	4.17	$	3.08	$	3.94	$	6.46	$	8.11
Diluted earnings per common share:
Net earnings allocable to common shares(1)	$	874	$	1,110	$	786	$	1,042	$	1,660	$	2,152
Weighted-average common shares		259		266		255		265		257		265
Dilutive effect of share-based awards		3		5		1		3		2		5
Weighted-average diluted shares		262		271		256		268		259		270
Diluted earnings per common share	$	3.33	$	4.09	$	3.07	$	3.88	$	6.41	$	7.97
Anti-dilutive options excluded from diluted earnings per common share		5.7		2.7		9.5		4.2		7.6		3.5

(1) Net earnings available to participating securities were immaterial in all periods presented.

(6) Retirement Plans

We sponsor programs that provide retirement benefits to most of our employees. These programs include defined benefit pension plans, defined contribution plans, and postretirement healthcare plans. Key terms of our retirement plans are provided in our Annual Report.

Our retirement plans costs for the ~~three-month~~ periods ended ~~August 31~~November 30 were as follows (in millions):


						Three Months Ended					Six Months Ended
	2022		2021			2022		2021			2022		2021
Defined benefit pension plans, net	$	59	$	(3	)	$	58	$	(2	)	$	117	$	(5	)
Defined contribution plans		244		180			228		171			472		351
Postretirement healthcare plans		23		22			23		23			46		45
Retirement plans MTM net loss							—		260			—		260
	$	326	$	199		$	309	$	452		$	635	$	651

Net periodic benefit cost of the pension and postretirement healthcare plans for the ~~three-month~~ periods ended ~~August 31~~November 30 included the following components (in millions):

U.S. Pension Plans

International Pension Plans

Postretirement Healthcare Plans

2022

2021

2022

2021

2022

2021

Service cost

$
163

$
208

$
11

$
15

$
9

$
12

Other retirement plans expense (income):

Interest cost

304

256

9

12

14

10

Expected return on plan assets

(422
)

(478
)

(4
)

(14
)

—

—

Amortization of prior service credit and other

(2
)

(2
)

—

—

—

—

(120
)

(224
)

5

(2
)

14

10

$
43

$
(16
)

$
16

$
13

$
23

$
22


	Three Months Ended
	U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans
	2022			2021			2022			2021			2022		2021
Service cost	$	163		$	208		$	10		$	14		$	9	$	12
Other retirement plans expense (income):
Interest cost		305			255			8			7			14		11
Expected return on plan assets		(422	)		(477	)		(4	)		(6	)		—		—
Amortization of prior service credit and other		(2	)		(2	)		—			(1	)		—		—
MTM net loss		—			36			—			224			—		—
		(119	)		(188	)		4			224			14		11
	$	44		$	20		$	14		$	238		$	23	$	23


	Six Months Ended
	U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans
	2022			2021			2022			2021			2022		2021
Service cost	$	326		$	416		$	21		$	29		$	18	$	24
Other retirement plans expense (income):
Interest cost		609			511			17			19			28		21
Expected return on plan assets		(844	)		(955	)		(8	)		(20	)		—		—
Amortization of prior service credit and other		(4	)		(4	)		—			(1	)		—		—
MTM net loss		—			36			—			224			—		—
		(239	)		(412	)		9			222			28		21
	$	87		$	4		$	30		$	251		$	46	$	45

For 2023, no pension contributions are required for our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) as they are fully funded under the Employee Retirement Income Security Act. We made voluntary contributions to our U.S. Pension Plans of $400 million during the first half of 2023.

In the second quarter of ~~2023.~~2022, we incurred a pre-tax, noncash MTM net loss of $36 million related to the U.S. FedEx Freight Pension Plan. During the second quarter of 2022, 21% of FedEx Freight Corporation (“FedEx Freight”) employees elected to move from a pension/401(k) benefit structure to a new 401(k)-only structure with a higher company match effective January 1, 2022. The $36 million net loss consisted of a $75 million MTM loss due to a lower discount rate, partially offset by a $39 million curtailment gain.

We incurred an additional pre-tax, noncash MTM net loss of $224 million in the second quarter of 2022 related to the termination of the TNT Express Netherlands Pension Plan. Effective October 1, 2021, the responsibility of all pension assets and liabilities of this plan was transferred to a separate, multi-employer pension plan.

(7) Business Segment Information

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 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 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)

References to our transportation segments include, collectively, the FedEx Express segment, the FedEx Ground segment, and the FedEx Freight segment.

FedEx Services Segment

The FedEx Services segment operates combined sales, marketing, administrative, and information-technology functions in shared services operations for U.S. customers of our major business units and certain back-office support to our operating segments which allows us to obtain synergies from the combination of these functions. 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.

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 also 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.

- 16 -

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 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 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 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.

~~- 15 -~~

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. 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.

The following table provides a reconciliation of reportable segment revenue and operating income (loss) to our unaudited condensed consolidated financial statement totals for the ~~three-month~~ periods ended ~~August 31~~November 30 (in millions):


							Three Months Ended						Six Months Ended
	2022			2021			2022			2021			2022			2021
Revenue:
FedEx Express segment	$	11,127		$	10,966		$	10,864		$	11,605		$	21,991		$	22,571
FedEx Ground segment		8,160			7,677			8,393			8,264			16,553			15,941
FedEx Freight segment		2,723			2,251			2,454			2,272			5,177			4,523
FedEx Services segment		70			35			68			77			138			112
Other and eliminations		1,162			1,074			1,035			1,256			2,197			2,330
	$	23,242		$	22,003		$	22,814		$	23,474		$	46,056		$	45,477
Operating income (loss):
FedEx Express segment	$	174		$	567		$	341		$	949		$	515		$	1,516
FedEx Ground segment		694			671			598			481			1,292			1,152
FedEx Freight segment		651			390			440			334			1,091			724
Corporate, other, and eliminations		(328	)		(230	)		(203	)		(167	)		(531	)		(397	)
	$	1,191		$	1,398		$	1,176		$	1,597		$	2,367		$	2,995

(8) Commitments

As of ~~August 31,~~November 30, 2022, our purchase commitments under various contracts for the remainder of 2023 and annually thereafter were as follows (in millions):


	Aircraft and Related		Other(1)		Total		Aircraft and Related		Other(1)		Total
2023 (remainder)	$	1,705	$	713	$	2,418	$	957	$	465	$	1,422
2024		1,936		697		2,633		1,990		744		2,734
2025		1,403		504		1,907		1,436		529		1,965
2026		404		435		839		396		451		847
2027		307		171		478		302		180		482
Thereafter		1,932		141		2,073		1,925		141		2,066
Total	$	7,687	$	2,661	$	10,348	$	7,006	$	2,510	$	9,516

(1)

Primarily equipment and advertising contracts.

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. ~~As of August 31, 2022, our obligation to purchase~~ ~~two~~ ~~Boeing 767-300 Freighter (“B767F”) aircraft is conditioned upon there being no event that causes FedEx Express or its employees not to be covered by the Railway Labor Act of 1926, as amended.~~ Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above.

- 1617 -

As of ~~August 31,~~November 30, 2022, we had $~~803~~770 million in deposits and progress payments on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our accompanying unaudited condensed consolidated balance sheets. Aircraft and related contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of ~~August 31,~~November 30, 2022 with the year of expected delivery:


	Cessna SkyCourier 408		ATR 72-600F		B767F		B777F		Total		Cessna SkyCourier 408		ATR 72-600F		B767F		B777F		Total
2023 (remainder)		10		9		10		1		30		7		7		5		—		19
2024		12		6		14		4		36		12		6		14		4		36
2025		12		6		10		2		30		12		6		10		2		30
2026		14		1		—		—		15		14		1		—		—		15
2027		—		—		—		—		—		—		—		—		—		—
Thereafter		—		—		—		—		—		—		—		—		—		—
Total		48		22		34		7		111		45		20		29		6		100

A summary of future minimum lease payments under noncancelable operating and finance leases with an initial or remaining term in excess of one year as of ~~August 31,~~November 30, 2022 is as follows (in millions):


	Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases			Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases
2023 (remainder)	$	137		$	2,042		$	2,179		$	87		$	2,266		$	86		$	1,349		$	1,435		$	98		$	1,533
2024		109			2,630			2,739			59			2,798			107			2,762			2,869			79			2,948
2025		81			2,366			2,447			31			2,478			82			2,484			2,566			31			2,597
2026		78			2,099			2,177			30			2,207			79			2,210			2,289			30			2,319
2027		78			1,848			1,926			21			1,947			79			1,944			2,023			21			2,044
Thereafter		164			8,694			8,858			668			9,526			166			9,198			9,364			669			10,033
Total lease payments		647			19,679			20,326			896			21,222			599			19,947			20,546			928			21,474
Less imputed interest		(47	)		(2,691	)		(2,738	)		(352	)		(3,090	)		(44	)		(2,714	)		(2,758	)		(348	)		(3,106	)
Present value of lease liability	$	600		$	16,988		$	17,588		$	544		$	18,132		$	555		$	17,233		$	17,788		$	580		$	18,368

While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations.

As of ~~August 31,~~November 30, 2022, FedEx has entered into additional leases which have not yet commenced and are therefore not part of the right-of-use asset and liability. These leases are generally for build-to-suit facilities and have undiscounted future payments of approximately $~~2.2~~2.8 billion that will commence when FedEx gains beneficial access to the leased asset. Commencement dates are expected to be from 2023 to 2024.

We have reviewed the accompanying condensed consolidated balance sheet of FedEx Corporation (the Company) as of ~~August 31,~~November 30, 2022, the related condensed consolidated statements of income, comprehensive income ~~cash flows,~~ and changes in common stockholders’ investment for the ~~three-month~~three- and six-month periods ended ~~August 31,~~November 30, 2022 and 2021, the condensed consolidated statements of cash flows for the six-month periods ended November 30, 2022 and 2021, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of May 31, 2022, the related consolidated statements of income, comprehensive income, cash flows, and changes in common stockholders’ investment for the year then ended, and the related notes (not presented herein); and in our report dated July 18, 2022, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2022 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

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 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.

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 ~~quarter~~half of 2023 were adversely impacted by global volume softness ~~that accelerated in the final weeks of the quarter~~ due to weakening economic conditions.

The coronavirus (“COVID-19”) pandemic has had varying impacts on the demand for our services and our business operations. The COVID-19 pandemic ~~continues~~continued to disrupt our business in the second quarter of 2023, particularly within areas inof Asia as lockdowns ~~have~~ persisted ~~into the first quarter of 2023~~ and contributed to supply chain disruptions (discussed below).

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 ~~price~~inflation and interest rate increases are negatively ~~impacting~~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 ~~impact~~affect our results of operations for the remainder of 2023.

Global supply chain disruptions ~~are continuing~~continued to ~~impact~~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 ~~are experiencing~~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. ~~These disruptions have resulted in increased direct costs and inefficiencies in our network operations.~~

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 ~~impact~~affect our operating results. While fuel expense increased during the second quarter and first ~~quarter~~half of 2023 compared to the second quarter and first ~~quarter~~half of 2022 due to higher fuel prices, we were able to offset higher prices through yield management actions.

Given the nature of our business and our global operations, geopolitical conflicts may adversely affect our business and results of operations. The conflict inbetween 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 ~~Belarus,~~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 ~~has~~is included in business optimization expenses at FedEx Express. While we do not ~~had and is not expected~~expect this conflict to have a direct material impact on our business or results of ~~operations. However,~~operations, the broader consequences ~~of this conflict~~ 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.

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, and operational supplies.~~debt.

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 ~~August 31:~~November 30:


	Three Months Ended						Percent				Three Months Ended						Percent				Six Months Ended						Percent
	2022			2021			Change				2022			2021			Change				2022			2021			Change
Revenue	$	23,242		$	22,003			6			$	22,814		$	23,474			(3	)		$	46,056		$	45,477			1
Operating income (loss):
FedEx Express segment		174			567			(69	)			341			949			(64	)			515			1,516			(66	)
FedEx Ground segment		694			671			3				598			481			24				1,292			1,152			12
FedEx Freight segment		651			390			67				440			334			32				1,091			724			51
Corporate, other, and eliminations		(328	)		(230	)		(43	)			(203	)		(167	)		(22	)			(531	)		(397	)		(34	)
Consolidated operating income		1,191			1,398			(15	)			1,176			1,597			(26	)			2,367			2,995			(21	)
Operating margin:
FedEx Express segment		1.6	%		5.2	%		(360	)	bp		3.1	%		8.2	%		(510	)	bp		2.3	%		6.7	%		(440	)	bp
FedEx Ground segment		8.5	%		8.7	%		(20	)	bp		7.1	%		5.8	%		130		bp		7.8	%		7.2	%		60		bp
FedEx Freight segment		23.9	%		17.3	%		660		bp		17.9	%		14.7	%		320		bp		21.1	%		16.0	%		510		bp
Consolidated operating margin		5.1	%		6.4	%		(130	)	bp		5.2	%		6.8	%		(160	)	bp		5.1	%		6.6	%		(150	)	bp
Consolidated net income	$	875		$	1,112			(21	)		$	788		$	1,044			(25	)		$	1,663		$	2,156			(23	)
Diluted earnings per share	$	3.33		$	4.09			(19	)		$	3.07		$	3.88			(21	)		$	6.41		$	7.97			(20	)


	Year-over-Year Changes					Change in Revenue						Change in Operating Results
	Revenue		Operating Results			Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended
FedEx Express segment	$	161	$	(393	)	$	(741	)	$	(580	)	$	(608	)	$	(1,001	)
FedEx Ground segment		483		23			129			612			117			140
FedEx Freight segment		472		261			182			654			106			367
FedEx Services segment		35		—			(9	)		26			—			—
Corporate, other, and eliminations		88		(98	)		(221	)		(133	)		(36	)		(134	)
	$	1,239	$	(207	)	$	(660	)	$	579		$	(421	)	$	(628	)

Our results for the ~~first~~second quarter of 2023 ~~were adversely~~continued to be negatively impacted by macroeconomic conditions, including inflation well above normal and historical levels, and rising global ~~volume softness that accelerated in the final weeks of the quarter due to weakening economic conditions. In addition,~~interest rates. Additionally, our results were negatively ~~impacted~~affected by service challenges at FedEx Express. In response to market conditions, we ~~implemented~~continued implementing cost control actions and ~~continued to focus~~focusing on yield ~~management~~improvement and revenue quality to mitigate the effect of volume declines. ~~However, the impact of~~These cost control actions ~~lagged volume declines,~~included reducing flight frequencies, temporarily parking aircraft, temporarily delaying certain wage adjustments, consolidating sorts, and ~~operating expenses remained high relative to demand.~~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 ~~quarter~~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 ~~quarter~~half of 2023 ~~a $53 million decrease from the first quarter of 2022,~~ associated with our workforce reduction plan in Europe previously announced in ~~2021, as well as $24~~2021. We recognized $44 million ($1934 million, net of tax, or ~~$0.07~~$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.~~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 ~~for the first quarter~~included TNT Express integration expenses of ~~2022 included $29~~$34 million ($2326 million, net of tax, or ~~$0.08~~$0.10 per diluted share) in the second quarter and $63 million ($49 million, net of ~~TNT Express integration expenses.~~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.

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.

The following graphs for FedEx Express, FedEx Ground, and FedEx Freight show selected volume trends (in thousands) over the five most recent quarters:

The following graphs for FedEx Express, FedEx Ground, and FedEx Freight show selected yield trends over the five most recent quarters:

Revenue decreased 3% in the second quarter and increased 6%1% in the first ~~quarter~~half of ~~2023 primarily due to~~2023. These results were positively impacted by yield ~~management actions,~~improvement, including higher fuel surcharges, ~~partially offset~~and negatively affected by global volume softness, ~~due to weakening economic conditions~~ at all of our transportation segments. ~~FedEx Express results were further impacted by reduced demand for our services.~~

~~Revenue at~~ FedEx ~~Ground~~Freight revenue increased 6%8% in the second quarter and 14% in the first ~~quarter~~half of 2023 primarily due to yield improvement, including higher fuel surcharges, ~~and home delivery volume growth,~~ partially offset by lower ~~economy~~volume. Revenue at FedEx Ground increased 2% in the second quarter and ~~commercial volume. FedEx Freight revenue increased 21%~~4% in the first ~~quarter~~half of 2023 primarily due to ~~higher revenue per shipment,~~yield improvement, including higher fuel surcharges, partially offset by lower volume. Revenue at FedEx Express ~~increased 1%~~decreased 6% in the second quarter and 3% in the first ~~quarter~~half of 2023 due to lower volume and unfavorable foreign currency, partially offset by yield improvement, including higher fuel ~~surcharges, partially offset by~~surcharges. In the second quarter and first half of 2023, revenue at Corporate, other, and eliminations decreased due to lower ~~volume.~~volumes and yields at FedEx Logistics, Inc. (“FedEx Logistics”).

The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended ~~August 31:~~November 30:


	Three Months Ended				Percent			Percent of Revenue						Three Months Ended				Percent			Six Months Ended				Percent
	2022		2021		Change			2022			2021			2022		2021		Change			2022		2021		Change
Operating expenses:
Salaries and employee benefits	$	7,859	$	7,776		1			33.8	%		35.3	%	$	7,792	$	8,135		(4	)	$	15,651	$	15,911		(2	)
Purchased transportation		5,767		5,659		2			24.8			25.7			5,665		6,241		(9	)		11,432		11,900		(4	)
Rentals and landing fees		1,159		1,133		2			5.0			5.1			1,195		1,177		2			2,354		2,310		2
Depreciation and amortization		1,024		971		5			4.4			4.4			1,046		995		5			2,070		1,966		5
Fuel		1,822		1,009		81			7.8			4.6			1,593		1,145		39			3,415		2,154		59
Maintenance and repairs		904		869		4			3.9			4.0			882		839		5			1,786		1,708		5
Business realignment and optimization costs		38		67		(43	)		0.2			0.3			36		44		(18	)		74		111		(33	)
Other		3,478		3,121		11			15.0			14.2			3,429		3,301		4			6,907		6,422		8
Total operating expenses		22,051		20,605		7			94.9			93.6			21,638		21,877		(1	)		43,689		42,482		3
Operating income	$	1,191	$	1,398		(15	)		5.1	%		6.4	%	$	1,176	$	1,597		(26	)	$	2,367	$	2,995		(21	)

Operating income declined in the second quarter and first ~~quarter~~half of 2023 primarily due to lower volumes at each of our transportation segments as a result of global volume ~~softness due to weakening economic conditions.~~softness. In addition, operating income was negatively ~~impacted~~affected by global inflation, which drove higher operating expenses related to fuel, other operating expenses, salaries and employee benefits, and purchased ~~transportation and wage rates.~~transportation. These factors were partially offset by yield ~~management actions,~~improvement, including higher fuel surcharges, ~~at all of our transportation segments,~~ as well as ~~a reduction in variable incentive compensation.~~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 ~~81%~~39% in the second quarter and 59% in the first ~~quarter~~half of 2023 due to higher fuel prices. Other operating expenses increased ~~11%~~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.~~contracts, partially offset by favorable foreign currency impacts. Purchased transportation ~~increased 2%~~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, partially offset by favorable currency impacts and lower volume.~~rates. Salaries and employee benefits ~~increased 1%~~decreased 4% in the second quarter and 2% in the first half due to ~~merit increases and network inefficiencies, partially offset by~~lower volumes, favorable currency impacts, and lower variable incentive ~~compensation.~~compensation, partially offset by increased wage rates.

In 2021, FedEx Express announced a workforce reduction plan in Europe related to the network integration of TNT Express. The plan ~~will affect~~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 ~~quarter~~half of 2023. We ~~recognized $67~~incurred costs associated with our business realignment activities of $44 million ($5234 million, net of tax, or ~~$0.19~~$0.13 per diluted share) in the second quarter and $111 million ($85 million, net of ~~costs under this program~~tax, or $0.31 per diluted share) in the first ~~quarter~~half of 2022. These costs are related to certain employee severance arrangements. Payments under this program totaled approximately ~~$46~~$38 million in the second quarter and approximately $84 million in the first ~~quarter~~half of 2023. We expect the pre-tax cost of our business realignment activities to be approximately ~~$420~~$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. WeAt 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 ~~our~~ sortation facilities and equipment, reduce ~~pickup and delivery~~pickup-and-delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end ~~optimization.~~optimized network.

We incurred costs associated with our business optimization activities, including idling our operations in Russia, of ~~$24~~$36 million ($1927 million, net of tax, or ~~$0.07~~$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 ~~quarter~~half of 2023. These costs are primarily related to consulting services and are included in Corporate, other, and ~~eliminations.~~eliminations and FedEx Express. We expect the pre-tax cost of our business optimization activities to be approximately $2.0 billion through 2025.

Our effective tax rate was ~~24.2%~~25.6% for the second quarter and 24.9% for the first ~~quarter~~half of 2023, compared to ~~23.7%~~24.3% for the second quarter and 24.0% for the first ~~quarter~~half of 2022. The 2023 tax ~~rate was~~rates were unfavorably impacted primarily by lower earnings in certain non-U.S. jurisdictions.

On August 16, 2022, the ~~President~~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 ~~impact~~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 ~~first~~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.

During 2023, we expect revenue growth to be driven by higher yields, partially offset by lower volumes, particularly at FedEx Express, resulting primarily from slowing economic conditions. Operating income in 2023 is expected to be negatively impacted by lower volumes and higher operating expenses. For 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 ~~take~~execute on the previously identified cost control actions and identify additional opportunities to ~~help~~reduce cost in order to mitigate the impact of ~~slowing economic conditions and reduced volumes~~volume declines on our operating results. As part of these actions, we will manage capacity to lower demand levels, including further reducing flight frequencies, ~~and~~ temporarily parking aircraft, and closing certain sort operations at FedEx Express, and reducing Sunday operations, closing ~~select~~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, ~~including lowering variable incentive compensation,~~ reducing vendor utilization, deferring certain technology projects, and closing certain FedEx Office ~~and corporate office~~ locations. In addition, we remain focused on yield ~~management~~improvement and revenue quality to mitigate inflationary cost ~~pressures.~~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.

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 ~~$420~~$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.

~~Other Outlook Matters.~~ ~~For details on key 2023 capital projects, refer to the “Liquidity Outlook” section of this MD&A.~~

See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting guidance.

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:

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 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. ~~(“FedEx Logistics”)~~ 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 ~~quarter~~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, ~~accruals~~ partially offset by ~~increased revenue.~~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 ~~quarter~~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.

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 ~~August 31:~~November 30:


	Three Months Ended						Percent										Three Months Ended						Percent				Six Months Ended						Percent
	2022			2021			Change										2022			2021			Change				2022			2021			Change
Revenue:
Package:
U.S. overnight box	$	2,316		$	2,170			7									$	2,237		$	2,249			(1	)		$	4,553		$	4,419			3
U.S. overnight envelope		525			482			9										474			474			—				999			956			4
U.S. deferred		1,287			1,231			5										1,253			1,307			(4	)			2,540			2,538			—
Total U.S. domestic package revenue		4,128			3,883			6										3,964			4,030			(2	)			8,092			7,913			2
International priority		2,897			2,839			2										2,823			3,107			(9	)			5,720			5,946			(4	)
International economy		707			669			6										711			706			1				1,418			1,375			3
Total international export package revenue		3,604			3,508			3										3,534			3,813			(7	)			7,138			7,321			(2	)
International domestic(1)		974			1,114			(13	)									1,036			1,147			(10	)			2,010			2,261			(11	)
Total package revenue		8,706			8,505			2										8,534			8,990			(5	)			17,240			17,495			(1	)
Freight:
U.S.		796			775			3										784			775			1				1,580			1,550			2
International priority		888			873			2										811			994			(18	)			1,699			1,867			(9	)
International economy		377			414			(9	)									388			438			(11	)			765			852			(10	)
International airfreight		41			47			(13	)									39			47			(17	)			80			94			(15	)
Total freight revenue		2,102			2,109			—			Percent of Revenue							2,022			2,254			(10	)			4,124			4,363			(5	)
Other		319			352			(9	)		2022			2021				308			361			(15	)			627			713			(12	)
Total revenue		11,127			10,966			1				100.0	%		100.0	%		10,864			11,605			(6	)			21,991			22,571			(3	)
Operating expenses:
Salaries and employee benefits		4,050			4,084			(1	)			36.4			37.2			3,938			4,141			(5	)			7,988			8,225			(3	)
Purchased transportation		1,478			1,551			(5	)			13.3			14.2			1,432			1,623			(12	)			2,910			3,174			(8	)
Rentals and landing fees		577			635			(9	)			5.2			5.8			586			649			(10	)			1,163			1,284			(9	)
Depreciation and amortization		513			492			4				4.6			4.5			520			510			2				1,033			1,002			3
Fuel		1,584			868			82				14.2			7.9			1,372			989			39				2,956			1,857			59
Maintenance and repairs		562			573			(2	)			5.1			5.2			534			525			2				1,096			1,098			—
Business realignment and optimization costs		14			67			(79	)			0.1			0.6			11			44			(75	)			25			111			(77	)
Intercompany charges		484			508			(5	)			4.3			4.6			477			497			(4	)			961			1,005			(4	)
Other		1,691			1,621			4				15.2			14.8			1,653			1,678			(1	)			3,344			3,299			1
Total operating expenses		10,953			10,399			5				98.4	%		94.8	%		10,523			10,656			(1	)			21,476			21,055			2
Operating income	$	174		$	567			(69	)								$	341		$	949			(64	)		$	515		$	1,516			(66	)
Operating margin		1.6	%		5.2	%		(360	)	bp								3.1	%		8.2	%		(510	)	bp		2.3	%		6.7	%		(440	)	bp

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended ~~August 31:~~November 30:


	Three Months Ended				Percent			Three Months Ended				Percent			Six Months Ended				Percent
	2022		2021		Change			2022		2021		Change			2022		2021		Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box		1,285		1,413		(9	)		1,283		1,477		(13	)		1,284		1,444		(11	)
U.S. overnight envelope		485		514		(6	)		458		517		(11	)		471		516		(9	)
U.S. deferred		1,070		1,251		(14	)		1,042		1,285		(19	)		1,057		1,268		(17	)
Total U.S. domestic ADV		2,840		3,178		(11	)		2,783		3,279		(15	)		2,812		3,228		(13	)
International priority		700		771		(9	)		736		834		(12	)		718		802		(10	)
International economy		260		263		(1	)		285		289		(1	)		272		276		(1	)
Total international export ADV		960		1,034		(7	)		1,021		1,123		(9	)		990		1,078		(8	)
International domestic(1)		1,706		2,004		(15	)		1,950		2,141		(9	)		1,826		2,071		(12	)
Total ADV		5,506		6,216		(11	)		5,754		6,543		(12	)		5,628		6,377		(12	)
Revenue per package (yield):
U.S. overnight box	$	27.73	$	23.62		17		$	27.69	$	24.18		15		$	27.71	$	23.91		16
U.S. overnight envelope		16.64		14.42		15			16.44		14.55		13			16.55		14.49		14
U.S. deferred		18.50		15.14		22			19.06		16.14		18			18.77		15.64		20
U.S. domestic composite		22.36		18.79		19			22.61		19.51		16			22.48		19.15		17
International priority		63.72		56.64		13			60.87		59.15		3			62.28		57.92		8
International economy		41.81		39.10		7			39.58		38.85		2			40.66		38.97		4
International export composite		57.78		52.18		11			54.93		53.93		2			56.33		53.08		6
International domestic(1)		8.78		8.56		3			8.43		8.50		(1	)		8.60		8.53		1
Composite package yield	$	24.33	$	21.05		16		$	23.54	$	21.81		8		$	23.93	$	21.43		12
Freight Statistics
Average daily freight pounds:
U.S.		7,313		8,040		(9	)		7,503		8,666		(13	)		7,406		8,348		(11	)
International priority		6,042		6,594		(8	)		5,757		6,969		(17	)		5,902		6,778		(13	)
International economy		10,211		11,683		(13	)		11,668		13,062		(11	)		10,928		12,362		(12	)
International airfreight		956		1,227		(22	)		948		1,241		(24	)		952		1,234		(23	)
Total average daily freight pounds		24,522		27,544		(11	)		25,876		29,938		(14	)		25,188		28,722		(12	)
Revenue per pound (yield):
U.S.	$	1.68	$	1.48		14		$	1.66	$	1.42		17		$	1.67	$	1.45		15
International priority		2.26		2.04		11			2.24		2.26		(1	)		2.25		2.15		5
International economy		0.57		0.55		4			0.53		0.53		—			0.55		0.54		2
International airfreight		0.66		0.60		10			0.65		0.59		10			0.66		0.59		12
Composite freight yield	$	1.32	$	1.18		12		$	1.24	$	1.20		3		$	1.28	$	1.19		8

FedEx Express segment revenue ~~increased 1%~~decreased 6% in the second quarter and 3% in the first ~~quarter~~half of 2023 due to ~~global package yield management actions, including higher fuel surcharges, partially offset by~~ decreased global volume and unfavorable exchange ~~rates.~~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~~U.S. domestic package yield of ~~19%,~~16% in the second quarter and 17% in the first half of 2023, international export package yield of ~~11%,~~2% in the second quarter and 6% in the first half of 2023, and composite freight ~~yield of 12%, and international domestic package~~ yield of 3% in the second quarter and 8% in the first ~~quarter~~half of 2023. Unfavorable exchange rates negatively impacted international package and freight ~~yield. Total average daily package volumes decreased 11% and total average daily freight pounds decreased 11% due to weakening macroeconomic conditions and reduced demand for our services.~~yields.

FedEx Express segment operating income decreased ~~69%~~64% in the second quarter and 66% in the first ~~quarter~~half of 2023 primarily due to global volume ~~declines.~~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. These factors were partially offset by yield management actions, including higher fuel surcharges.~~demand in the second quarter and first half of 2023. Currency exchange rates had a negative ~~impact~~effect on revenue, a positive effect on expenses, and a ~~positive impact on expenses but did not have an impact~~slightly negative effect on operating income in the second quarter and first ~~quarter~~half of 2023.

Fuel expense increased ~~82%~~39% in the second quarter and 59% in the first ~~quarter~~half of 2023 due to increased fuel prices. ~~Other operating expense increased 4% in the first quarter of 2023 due to higher bad debt accruals.~~ Purchased transportation expense decreased 5%12% in the second quarter and 8% in the first ~~quarter~~half of 2023 primarily due to favorable exchange rates and lower utilization, partially offset by ~~higher rates, including fuel, paid to third-party transportation providers.~~increased rates. Salaries and employee benefits decreased 1%5% in the second quarter and 3% in the first ~~quarter~~half of 2023 due to favorable currency exchange rates, decreased volume, and lower variable incentive compensation, partially offset by ~~merit increases.~~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.

~~FedEx Express segment results include~~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 ~~quarter~~half of 2023 associated with our workforce reduction plan in Europe. We recognized ~~$67~~$44 million of costs ~~under this program~~ in the first quarter of ~~2022.~~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 ~~included $26~~include $27 million of TNT Express integration expenses in the second quarter and $53 million of such expenses in the first ~~quarter~~half of 2022.

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 ~~August 31:~~November 30:


	Three Months Ended						Percent				Percent of Revenue						Three Months Ended						Percent				Six Months Ended						Percent
	2022			2021			Change				2022			2021			2022			2021			Change				2022			2021			Change
Revenue	$	8,160		$	7,677			6				100.0	%		100.0	%	$	8,393		$	8,264			2			$	16,553		$	15,941			4
Operating expenses:
Salaries and employee benefits		1,637			1,613			1				20.1			21.0			1,727			1,855			(7	)			3,364			3,468			(3	)
Purchased transportation		3,713			3,503			6				45.5			45.6			3,828			3,915			(2	)			7,541			7,418			2
Rentals		390			318			23				4.8			4.1			414			348			19				804			666			21
Depreciation and amortization		246			226			9				3.0			3.0			249			223			12				495			449			10
Fuel		9			6			50				0.1			0.1			10			7			43				19			13			46
Maintenance and repairs		155			136			14				1.9			1.8			162			149			9				317			285			11
Intercompany charges		490			491			—				6.0			6.4			493			480			3				983			971			1
Other		826			713			16				10.1			9.3			912			806			13				1,738			1,519			14
Total operating expenses		7,466			7,006			7				91.5	%		91.3	%		7,795			7,783			—				15,261			14,789			3
Operating income	$	694		$	671			3									$	598		$	481			24			$	1,292		$	1,152			12
Operating margin		8.5	%		8.7	%		(20	)	bp								7.1	%		5.8	%		130		bp		7.8	%		7.2	%		60		bp
Average daily package volume (ADV)(1):
Ground commercial		4,368			4,425			(1	)									4,523			4,774			(5	)			4,445			4,595			(3	)
Home delivery		3,912			3,747			4										4,084			4,328			(6	)			3,997			4,035			(1	)
Economy		730			1,164			(37	)									828			1,278			(35	)			778			1,220			(36	)
Total ADV		9,010			9,336			(3	)									9,435			10,380			(9	)			9,220			9,850			(6	)
Revenue per package (yield)	$	11.48		$	10.29			12									$	11.55		$	10.26			13			$	11.52		$	10.27			12

FedEx Ground segment revenue increased 6%2% in the second quarter and 4% in the first ~~quarter~~half of 2023 primarily due to yield ~~management actions,~~improvement, including higher fuel surcharges, partially offset by lower volumes.

FedEx Ground yield increased 13% in the second quarter and 12% in the first ~~quarter~~half of 2023 primarily due to higher fuel surcharges, continued focus on revenue quality, and product ~~mix, and pricing initiatives.~~mix. Total average daily volume decreased 3%9% in the second quarter and 6% in the first ~~quarter~~half of 2023 primarily due to ~~weakening macroeconomic conditions.~~volume softness. In addition, strategic actions to improve revenue quality for ~~higher yielding~~higher-yielding business-to-consumer volume drove a mix shift from economy to home delivery services in the second quarter and first ~~quarter~~half of 2023.

FedEx Ground segment operating income increased 3%24% in the second quarter and 12% in the first ~~quarter~~half of 2023 primarily due to yield improvement, including higher fuel surcharges, ~~and home delivery volume growth. These factors were~~ partially offset ~~by higher operating expenses driven~~ by increased purchased transportation ~~expense and~~rates, higher other operating ~~expense.~~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.

~~Purchased transportation expense increased 6% in the first quarter of 2023 due to higher fuel surcharges and base rates, partially offset by lower volume.~~ Other operating expense increased ~~16%~~13% in the second quarter and 14% in the first ~~quarter~~half of 2023 primarily due to higher self-insurance accruals. Rentals ~~expense~~ increased ~~23%~~19% in the second quarter and 21% in the first ~~quarter~~half of 2023 due to ~~network~~the completion of previously committed multi-year expansion ~~which occurred primarily~~projects. Purchased transportation expense decreased 2% in the second quarter of ~~2022.~~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 ~~increased 1%~~decreased 7% in the second quarter and 3% in the first ~~quarter~~half of 2023 primarily due to lower ~~productivity,~~volume and lower variable incentive compensation, partially offset by ~~lower variable compensation.~~higher wage rates.

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 ~~August 31:~~November 30:


	Three Months Ended						Percent				Percent of Revenue						Three Months Ended						Percent				Six Months Ended						Percent
	2022			2021			Change				2022			2021			2022			2021			Change				2022			2021			Change
Revenue	$	2,723		$	2,251			21				100.0	%		100.0	%	$	2,454		$	2,272			8			$	5,177		$	4,523			14
Operating expenses:
Salaries and employee benefits		1,059			988			7				38.9			43.9			1,039			1,029			1				2,098			2,017			4
Purchased transportation		221			239			(8	)			8.1			10.6			187			244			(23	)			408			483			(16	)
Rentals		65			59			10				2.4			2.6			66			62			6				131			121			8
Depreciation and amortization		106			99			7				3.9			4.4			103			105			(2	)			209			204			2
Fuel		228			135			69				8.4			6.0			211			147			44				439			282			56
Maintenance and repairs		80			63			27				2.9			2.8			88			67			31				168			130			29
Intercompany charges		132			126			5				4.9			5.6			130			132			(2	)			262			258			2
Other		181			152			19				6.6			6.8			190			152			25				371			304			22
Total operating expenses		2,072			1,861			11				76.1	%		82.7	%		2,014			1,938			4				4,086			3,799			8
Operating income	$	651		$	390			67									$	440		$	334			32			$	1,091		$	724			51
Operating margin		23.9	%		17.3	%		660		bp								17.9	%		14.7	%		320		bp		21.1	%		16.0	%		510		bp
Average daily shipments (in thousands)
Average daily shipments (in thousands):
Priority		76.2			80.3			(5	)									73.3			81.4			(10	)			74.8			80.9			(8	)
Economy		32.1			33.5			(4	)									31.0			33.1			(6	)			31.6			33.3			(5	)
Total average daily shipments		108.3			113.8			(5	)									104.3			114.5			(9	)			106.4			114.2			(7	)
Weight per shipment
Weight per shipment (lbs):
Priority		1,054			1,085			(3	)									1,029			1,088			(5	)			1,042			1,086			(4	)
Economy		938			938			—										940			940			—				939			939			—
Composite weight per shipment		1,020			1,041			(2	)									1,002			1,045			(4	)			1,011			1,043			(3	)
Revenue per shipment
Revenue per shipment:
Priority	$	369.60		$	290.92			27									$	361.57		$	305.87			18			$	365.76		$	298.27			23
Economy		423.59			333.02			27										415.35			350.85			18				419.64			341.66			23
Composite revenue per shipment	$	385.61		$	303.32			27									$	377.53		$	318.87			18			$	381.74		$	310.93			23
Revenue per hundredweight
Revenue per hundredweight:
Priority	$	35.06		$	26.82			31									$	35.14		$	28.11			25			$	35.10		$	27.46			28
Economy		45.16			35.50			27										44.21			37.33			18				44.70			36.39			23
Composite revenue per hundredweight	$	37.82		$	29.13			30									$	37.66		$	30.51			23			$	37.74		$	29.80			27

FedEx Freight segment revenue increased ~~21%~~8% in the second quarter and 14% in the first ~~quarter~~half of 2023 primarily due to yield ~~management actions,~~improvement, including higher fuel ~~surcharges.~~surcharges, partially offset by lower volume.

Revenue per shipment increased ~~27%~~18% in the second quarter and 23% in the first ~~quarter~~half of 2023 primarily due to revenue quality initiatives, including higher fuel surcharges, ~~which more than~~partially offset ~~the effect of slightly~~by lower weight per shipment. Average daily shipments decreased 5%9% in the second quarter and 7% in the first ~~quarter~~half of 2023 due to ~~lower demand for our service offerings caused by weakening macroeconomic conditions.~~volume softness.

FedEx Freight segment operating income increased ~~67%~~32% in the second quarter and 51% in the first ~~quarter~~half of 2023 driven by yield ~~management actions,~~improvement, including higher fuel surcharges, partially offset by higher salaries and employee benefits and lower volumes.

Fuel expense increased ~~69%~~44% in the ~~first~~second quarter and 56% in the second half of 2023 primarily due to increased fuel prices. Salaries and employee benefits expense increased 7%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 ~~pay initiatives~~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 ~~productivity, partially offset by lower volumes and variable incentive compensation.~~volumes.

Cash and cash equivalents totaled ~~$6.9~~$4.6 billion at ~~August 31,~~November 30, 2022, ~~and~~compared to $6.9 billion at May 31, 2022, respectively. The following table provides a summary of our cash flows for the ~~three-month~~six-month periods ended ~~August 31~~November 30 (in millions):


	2022			2021			2022			2021
Operating activities:
Net income	$	875		$	1,112		$	1,663		$	2,156
Business realignment and optimization costs/(payments), net		(14	)		36			(40	)		55
Other noncash charges and credits		2,111			2,041			4,192			4,262
Changes in assets and liabilities		(1,365	)		(1,105	)		(2,690	)		(2,391	)
Cash provided by operating activities		1,607			2,084			3,125			4,082
Investing activities:
Capital expenditures		(1,284	)		(1,570	)		(3,142	)		(3,143	)
Purchase of investments		(35	)		—			(78	)		—
Proceeds from asset dispositions and other		10			20			20			31
Cash used in investing activities		(1,309	)		(1,550	)		(3,200	)		(3,112	)
Financing activities:
Principal payments on debt		(29	)		(64	)		(32	)		(72	)
Proceeds from stock issuances		81			84			89			111
Dividends paid		(299	)		(200	)		(598	)		(400	)
Purchase of treasury stock		—			(549	)		(1,500	)		(748	)
Other, net		—			(1	)		1			—
Cash used in financing activities		(247	)		(730	)		(2,040	)		(1,109	)
Effect of exchange rate changes on cash		(98	)		(38	)		(136	)		(115	)
Net decrease in cash and cash equivalents	$	(47	)	$	(234	)	$	(2,251	)	$	(254	)
Cash and cash equivalents at the end of period	$	6,850		$	6,853		$	4,646		$	6,833

Cash flows from operating activities decreased ~~$477~~$957 million in the first ~~quarter~~half of 2023 primarily due to lower net income and ~~working capital changes, including our voluntary pension contribution,~~decreased accounts payable, partially offset by lower variable incentive compensation payments. Capital expenditures ~~decreased~~were flat during the first ~~quarter~~half of ~~2023 primarily due to decreased spending on aircraft and related equipment at FedEx Express.~~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. ~~During~~As part of the ~~first~~repurchase program, during the second quarter of 2023, we ~~did not~~entered into an ASR agreement with a bank to repurchase ~~any shares~~an aggregate of ~~FedEx~~$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 ~~August 31,~~November 30, 2022, ~~$4.1~~$2.6 billion remained available ~~to use~~ 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.

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 ~~August 31~~November 30 (in millions):


																Percent Change 2022/2021
								Three Months Ended				Six Months Ended				Three Months			Six Months
	Three Months Ended							2022		2021		2022		2021		Ended			Ended
	2022		2021		Percent Change
Aircraft and related equipment	$	203	$	764		(73	)	$	671	$	582	$	874	$	1,346		15			(35	)
Package handling and ground support equipment		436		309		41			505		401		941		710		26			33
Vehicles and trailers		217		87		149			132		59		349		146		124			139
Information technology		201		183		10			248		284		449		467		(13	)		(4	)
Facilities and other		227		227		—			302		247		529		474		22			12
Total capital expenditures	$	1,284	$	1,570		(18	)	$	1,858	$	1,573	$	3,142	$	3,143		18			—

FedEx Express segment	$	530	$	1,048		(49	)	$	994	$	829	$	1,524	$	1,877		20			(19	)
FedEx Ground segment		441		352		25			572		455		1,013		807		26			26
FedEx Freight segment		150		13		1,054			90		28		240		41		221			485
FedEx Services segment		129		137		(6	)		168		233		297		370		(28	)		(20	)
Other		34		20		70			34		28		68		48		21			42
Total capital expenditures	$	1,284	$	1,570		(18	)	$	1,858	$	1,573	$	3,142	$	3,143		18			—

Capital expenditures ~~decreased~~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 ~~quarter~~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, as well as package handling equipment at all transportation segments.~~Ground.

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 ~~$18.9~~$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.

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.

The following table presents the summarized balance sheet information as of ~~August 31,~~November 30, 2022 and May 31, 2022 (in millions):


	August 31, 2022		May 31, 2022		November 30, 2022		May 31, 2022
Current Assets	$	12,057	$	11,768	$	10,485	$	11,768
Intercompany Receivable		3,364		4,157		3,561		4,157
Total Assets		89,039		88,331		88,870		88,331
Current Liabilities		10,081		10,324		10,232		10,324
Intercompany Payable		—		—		—		—
Total Liabilities		60,044		58,883		60,427		58,883

The following table presents the summarized statement of income information for the ~~three-month~~six-month period ended ~~August 31,~~November 30, 2022 (in millions):


Revenue	$	17,113		$	33,973
Intercompany Charges, net		(1,513	)		(2,798	)
Operating Income		1,353			2,323
Intercompany Charges, net		30			72
Income Before Income Taxes		1,325			2,298
Net Income	$	1,099		$	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.

The following table presents the summarized balance sheet information as of ~~August 31,~~November 30, 2022 and May 31, 2022 (in millions):


	August 31, 2022		May 31, 2022		November 30, 2022		May 31, 2022
Current Assets	$	5,301	$	4,687	$	3,382	$	4,687
Intercompany Receivable		—		—		—		—
Total Assets		69,764		68,449		68,975		68,449
Current Liabilities		5,192		5,155		5,178		5,155
Intercompany Payable		9,021		7,473		9,382		7,473
Total Liabilities		48,728		47,830		48,892		47,830

The following table presents the summarized statement of income information for the ~~three-month~~six-month period ended ~~August 31,~~November 30, 2022 (in millions):


Revenue	$	6,214		$	12,200
Intercompany Charges, net		(1,130	)		(2,022	)
Operating Income		209			320
Intercompany Charges, net		67			136
Income Before Income Taxes		705			1,314
Net Income	$	653		$	1,327

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 ~~$6.9~~$4.6 billion in cash at ~~August 31,~~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, ~~voluntary pension contributions,~~and dividend ~~payments, and stock repurchases.~~payments.

We ~~expect~~entered into an ASR agreement with a bank in October 2022 to repurchase an aggregate of $1.5 billion of our common stock in ~~fiscal 2023, with $1.0 billion occurring during~~ 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 ~~August 31,~~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 ~~macroeconomic~~continued softening of our volume trends ~~in our business,~~and lower revenue outlook, we are ~~lowering~~reducing our expected capital expenditures by ~~$500~~$400 million from our previous forecast of $6.3 billion in 2023. We now expect capital expenditures of approximately ~~$6.3~~$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 to be offset with lower aircraft fleet modernization spend.~~networks. We invested ~~$0.2~~$0.9 billion in aircraft and related equipment in the first ~~quarter~~half of 2023 and expect to invest an additional ~~$1.5~~$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 ~~$1.8~~$1.5 billion and ~~$1.5~~$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 ~~quarter~~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 ~~remainder~~second half of 2023. There are currently no ~~anticipated~~ 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.

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 ~~August 31,~~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.

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,” ~~and~~ “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:

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.

As of ~~August 31,~~November 30, 2022, there were no material changes in our market risk sensitive instruments and positions since our disclosures in our Annual Report.

The principal foreign currency exchange rate risks to which we are exposed relate to the euro, Chinese yuan, British pound, Canadian dollar, Hong Kong dollar, Australian dollar, Japanese yen, and Mexican peso. Historically, our exposure to foreign currency fluctuations is more significant with respect to our revenue than our expenses, as a significant portion of our expenses are denominated in U.S. dollars, such as aircraft and fuel expenses. During the first ~~quarter~~half of 2023, the U.S. dollar strengthened relative to the currencies of the foreign countries in which we operate, as compared to the first ~~quarter~~six months of 2022, and this strengthening had a slightly ~~positive~~negative effect on our results.

While we have market risk for changes in the price of vehicle and jet fuel, this risk is largely mitigated by our indexed fuel surcharges. For additional discussion of our indexed fuel surcharges, see the “Results of Operations and Outlook — Consolidated Results —Fuel” section of “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” included in our Annual Report.

The management of FedEx, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to FedEx management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of ~~August 31,~~November 30, 2022 (the end of the period covered by this Quarterly Report on Form 10-Q).

During our fiscal quarter ended ~~August 31,~~November 30, 2022, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We continue to monitor and assess the effects of remote work on our internal controls to minimize the impact on the design and operating effectiveness of our internal control over financial reporting.

For a description of all material pending legal proceedings, see Note 9 of the accompanying unaudited condensed consolidated financial ~~statements.~~statements, which is incorporated by reference herein.

Other than the risk factors set forth below, there have been no material changes from the risk factors disclosed in our Annual Report in response to Part I, Item 1A of Form 10-K. Additional risks not currently known to us or that we currently deem to be immaterial also may materially affect our business, results of operations, financial condition, and the price of our common stock.

Our future financial results will suffer, and we may not be able to achieve our 2025 financial performance goals, if we fail to successfully implement our cost control actions and program to improve long-term profitability. We are making significant decisions in connection with our long-term business strategy. In addition to the initiatives and enhancements discussed in our Annual Report, in the first quarter of 2023, we announced a comprehensive program to improve FedEx’s long-term profitability. We are also continuing to ~~take~~implement cost control actions ~~for the remainder of 2023~~ to ~~help~~ mitigate the ~~impact~~effect of ~~slowing economic conditions and reduced volumes on our operating results.~~volume declines. See Item 2 of this quarterly report (“Management’s Discussion and Analysis of Results of Operations and Financial Condition”) under “Results of Operations – Consolidated Results – Outlook” for additional information.

We may not be able to achieve the expected operational efficiencies, cost savings, and other benefits from these initiatives and enhancements. The actual amount and timing of costs to be incurred and related cost savings resulting from these initiatives and enhancements may differ from our current expectations and estimates. These initiatives and enhancements could result in asset impairment charges. Changes in our business strategy may also expose us to new and heightened risks. If we are not able to successfully implement our cost control actions and program to improve long-term profitability, our future financial results will suffer and we may not be able to achieve our 2025 financial performance goals.

Our failure to meet our purchased transportation needs, as well as increases in purchased transportation costs, could adversely impact our business and results of operations. Our ability to meet our purchased transportation needs while controlling related costs is generally subject to numerous external factors, including the availability of qualified persons in the markets where service providers operate and unemployment levels within these markets, prevailing and competitive wage rates and other benefits, fuel and energy prices, changes in the business or financial soundness of service providers, interest in contracting with FedEx, inflation, safety levels of our operations, our reputation within the transportation market, the ~~continuing~~ effect of ~~the COVID-19 pandemic and variant strains,~~a widespread public health crisis, the availability of child care, and vaccine mandates that may be announced in jurisdictions in which our service providers operate. Additionally, certain service providers (acting collectively or in coordination in some instances) ~~are seeking~~may seek to increase pay rates or modify contract terms and may refuse to provide service to FedEx ~~particularly during peak periods,~~ in connection with such initiatives. While we believe we will be able to effectively meet our purchased transportation needs during the remainder of 2023, our inability to do so could increase our costs, hinder our ability to execute our business strategy, negatively impact service levels, and adversely affect our business and results of operations.

~~We did not repurchase any shares~~The following table provides information on FedEx’s repurchases of ~~FedEx~~our common stock during the ~~first~~second quarter of ~~2023.~~2023:

In December 2021, our Board of Directors approved a stock repurchase program of up to $5 billion of FedEx common stock. Shares under the program may be repurchased from time to time in the open market or in privately negotiated transactions. As of ~~September 20,~~December 16, 2022, ~~$4.1~~$2.6 billion remains available to be used for repurchases under the program, which is the only such program that currently exists. The program does not have an expiration date and may be suspended or discontinued at any time.

~~Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Exchange Act.~~ As part of ~~its intellectual property (“IP”) protection efforts, FedEx has obtained~~the repurchase program, we entered into an ASR agreement with a bank in October 2022 to repurchase $1.5 billion of our common stock. At the beginning of the repurchase period, we delivered $1.5 billion cash and ~~maintains patents~~received 7.9 million shares based on a stock price of $151.46. The final number of shares to be repurchased and ~~trademarks in Iran. Periodically, FedEx pays renewal fees, through IP service providers located in Lebanon, to~~ the Iran Intellectual Property Office (“IIPO”) for these patents and trademarks and has sought to prosecute and defend such trademarks. On September 15, 2021, OFAC granted FedEx a specific license to make payments to IIPO at its account in Bank Melli, which was designated on November 5, 2018 by OFAC under its counterterrorism authority pursuant to Executive Order 13224. As authorized by OFAC’s specific license, in the quarter ended August 31, 2022, FedEx paid $92 to IIPO as part of its intellectual property protection efforts in Iran. FedEx plans to continue these activities, as authorizedfinal average price per share under the ~~specific license.~~ASR agreement will depend on the volume-weighted average price of our stock, less a discount, during the term of the agreement. Purchases under the ASR agreement are expected to be completed in December 2022.

See Note 1 of the accompanying unaudited condensed consolidated financial statements for additional information regarding the ASR transaction.

˄ Information in this exhibit identified by brackets is confidential and has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K because it is both (i) not material and (ii) the type FedEx treats as private or confidential.

† Certain attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K because the information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish supplementally a copy of such attachments to the SEC or its staff upon request.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware	62-1721435
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

942 South Shady Grove Road, Memphis, Tennessee	38120
(Address of principal executive offices)	(ZIP Code)



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.10 per share	FDX	New York Stock Exchange
0.450% Notes due 2025	FDX 25A	New York Stock Exchange
1.625% Notes due 2027	FDX 27	New York Stock Exchange
0.450% Notes due 2029	FDX 29A	New York Stock Exchange
1.300% Notes due 2031	FDX 31	New York Stock Exchange
0.950% Notes due 2033	FDX 33	New York Stock Exchange


Large accelerated filer ☑	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐


Common Stock		Outstanding Shares at ~~September 20,~~December 16, 2022
Common Stock, par value $0.10 per share		~~260,219,792~~252,397,140


		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets ~~August 31,~~November 30, 2022 and May 31, 2022		3
Condensed Consolidated Statements of Income Three and Six Months Ended ~~August 31,~~November 30, 2022 and 2021		5
Condensed Consolidated Statements of Comprehensive Income Three and Six Months Ended ~~August 31,~~November 30, 2022 and 2021		6
Condensed Consolidated Statements of Cash Flows ~~Three~~Six Months Ended ~~August 31,~~November 30, 2022 and 2021		7
Condensed Consolidated Statements of Changes In Common Stockholders’ Investment Three and Six Months Ended ~~August 31,~~November 30, 2022 and 2021		8
Notes to Condensed Consolidated Financial Statements		9
Report of Independent Registered Public Accounting Firm		1920
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		2021
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		3943
ITEM 4. Controls and Procedures		4044

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		4044
ITEM 1A. Risk Factors		4044
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		40
~~ITEM 5. Other Information~~		4145
ITEM 6. Exhibits		4246
Signature		4347

Exhibit 15.1
Exhibit 22
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101.1 Interactive Data Files Exhibit 104.1 Cover Page Interactive Data File


☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program ($ in millions)
Sep. 1-30, 2022		—	$	—		—	$	4,070
Oct. 1-31, 2022		7,922,884		151.46		7,922,884		2,570
Nov. 1-30, 2022		—		—		—		2,570
Total		7,922,884				7,922,884	$	2,570


Exhibit Number		Description of Exhibit

˄† ~~10.1~~		Supplemental Agreement No. 36 (and related side letters) dated as of June 1, 2022, amending the Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between The Boeing Company and FedEx Express. (Filed as Exhibit 10.52 to FedEx’s FY22 Annual Report on Form 10-K, and incorporated herein by reference).

*~~10.2~~		Second Amendment to FedEx Office Supplemental Retirement Plan dated June 20, 2022 (but effective as of August 1, 2022). (Filed as Exhibit 10.104 to FedEx’s FY22 Annual Report on Form 10-K, and incorporated herein by reference).

*~~10.3~~		~~Amendment to the 2019 Omnibus Stock Incentive Plan dated and effective June 12, 2022. (Filed as Exhibit 10.107 to FedEx’s FY22 Annual Report on Form 10-K, and incorporated herein by reference).~~

~~10.4~~		Cooperation Agreement, dated as of June 13, 2022, by and among FedEx, D. E. Shaw Oculus Portfolios, LLC and D. E. Shaw Valence Portfolios, LLC. (Filed as Exhibit 10.1 to FedEx’s Current Report on Form 8-K dated June 13, 2022 and filed June 14, 2022, and incorporated herein by reference).

15.1		Letter re: Unaudited Interim Financial Statements.

22		List of Guarantor Subsidiaries and Subsidiary Issuers of Guaranteed Securities.

31.1		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.1		Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”).

104.1		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101.1).


			FedEx Corporation

Date: ~~September 22,~~December 20, 2022			/s/ Jennifer L. Johnson
			Jennifer L. Johnson
			Corporate Vice President and
			Principal Accounting Officer