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.


	February 28, 2023 (Unaudited)		May 31, 2022		August 31, 2023 (Unaudited)		May 31, 2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	5,373	$	6,897	$	7,055	$	6,856
Receivables, less allowances of $784 and $692		10,721		11,863
Spare parts, supplies, and fuel, less allowances of $275 and $360		631		637
Receivables, less allowances of $762 and $800						10,207		10,188
Spare parts, supplies, and fuel, less allowances of $281 and $276						631		604
Prepaid expenses and other		1,219		968		994		962
Total current assets		17,944		20,365		18,887		18,610
PROPERTY AND EQUIPMENT, AT COST		79,335		75,275		81,992		80,624
Less accumulated depreciation and amortization		39,486		37,184		40,818		39,926
Net property and equipment		39,849		38,091		41,174		40,698
OTHER LONG-TERM ASSETS
Operating lease right-of-use assets, net		17,410		16,613		17,327		17,347
Goodwill		6,455		6,544		6,422		6,435
Other assets		4,117		4,381		3,766		4,053
Total other long-term assets		27,982		27,538		27,515		27,835
	$	85,775	$	85,994	$	87,576	$	87,143

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


	February 28, 2023 (Unaudited)			May 31, 2022			August 31, 2023 (Unaudited)			May 31, 2023
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt	$	147		$	82		$	351		$	126
Accrued salaries and employee benefits		2,266			2,531			2,365			2,475
Accounts payable		3,987			4,030			3,794			3,848
Operating lease liabilities		2,446			2,443			2,382			2,390
Accrued expenses		4,734			5,188			4,919			4,747
Total current liabilities		13,580			14,274			13,811			13,586
LONG-TERM DEBT, LESS CURRENT PORTION		20,122			20,182			20,145			20,453
OTHER LONG-TERM LIABILITIES
Deferred income taxes		4,313			4,093			4,450			4,489
Pension, postretirement healthcare, and other benefit obligations		3,779			4,448			3,021			3,130
Self-insurance accruals		3,201			2,889			3,583			3,339
Operating lease liabilities		15,373			14,487			15,338			15,363
Other liabilities		674			682			694			695
Total other long-term liabilities		27,340			26,599			27,086			27,016
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of February 28, 2023 and May 31, 2022		32			32
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of August 31, 2023 and May 31, 2023								32			32
Additional paid-in capital		3,735			3,712			3,800			3,769
Retained earnings		34,040			32,782			36,021			35,259
Accumulated other comprehensive loss		(1,308	)		(1,103	)		(1,356	)		(1,327	)
Treasury stock, at cost		(11,766	)		(10,484	)		(11,963	)		(11,645	)
Total common stockholders’ investment		24,733			24,939			26,534			26,088
	$	85,775		$	85,994		$	87,576		$	87,143

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


	Three Months Ended February 28,						Nine Months Ended February 28,						Three Months Ended August 31,
	2023			2022			2023			2022			2023			2022

REVENUE	$	22,169		$	23,641		$	68,225		$	69,118		$	21,681		$	23,242
OPERATING EXPENSES:
Salaries and employee benefits		7,817			8,244			23,468			24,155			7,785			7,859
Purchased transportation		5,402			6,272			16,834			18,172			5,036			5,767
Rentals and landing fees		1,205			1,225			3,559			3,535			1,151			1,159
Depreciation and amortization		1,031			986			3,101			2,952			1,071			1,024
Fuel		1,350			1,201			4,765			3,355			1,101			1,822
Maintenance and repairs		789			822			2,575			2,530			824			904
Business optimization and realignment costs		123			107			197			218			105			38
Other		3,410			3,458			10,317			9,880			3,123			3,478
		21,127			22,315			64,816			64,797			20,196			22,051
OPERATING INCOME		1,042			1,326			3,409			4,321			1,485			1,191
OTHER (EXPENSE) INCOME:
Interest, net		(122	)		(163	)		(391	)		(478	)		(91	)		(142	)
Other retirement plans, net		102			211			304			380			39			101
Other, net		—			1			(87	)		(11	)		(10	)		4
		(20	)		49			(174	)		(109	)		(62	)		(37	)
INCOME BEFORE INCOME TAXES		1,022			1,375			3,235			4,212			1,423			1,154
PROVISION FOR INCOME TAXES		251			263			801			944			345			279
NET INCOME	$	771		$	1,112		$	2,434		$	3,268		$	1,078		$	875
EARNINGS PER COMMON SHARE:
Basic	$	3.07		$	4.26		$	9.52		$	12.36		$	4.28		$	3.37
Diluted	$	3.05		$	4.20		$	9.46		$	12.17		$	4.23		$	3.33
DIVIDENDS DECLARED PER COMMON SHARE	$	1.15		$	0.75		$	4.60		$	3.00		$	1.26		$	2.30

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


	Three Months Ended						Nine Months Ended						Three Months Ended
	February 28,						February 28,						August 31,
	2023			2022			2023			2022			2023			2022
NET INCOME	$	771		$	1,112		$	2,434		$	3,268		$	1,078		$	875
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of tax (expense)/benefit of ($5) and $22 in 2023 and ($3) and $1 in 2022		80			91			(199	)		(150	)
Amortization of prior service credit, net of tax benefit of $0 and $1 in 2023 and $1 and $2 in 2022		(3	)		(1	)		(6	)		(5	)
Foreign currency translation adjustments, net of tax benefit of $4 in 2023 and $18 in 2022														(28	)		(209	)
Amortization of prior service credit, net of benefit of $0 in 2023 and $0 in 2022														(1	)		(2	)
		77			90			(205	)		(155	)		(29	)		(211	)
COMPREHENSIVE INCOME	$	848		$	1,202		$	2,229		$	3,113		$	1,049		$	664

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


	Nine Months Ended February 28,						Three Months Ended August 31,
	2023			2022			2023			2022
Operating Activities:
Net income	$	2,434		$	3,268		$	1,078		$	875
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		3,101			2,952			1,071			1,024
Provision for uncollectible accounts		536			327			103			245
Stock-based compensation		142			151			56			68
Retirement plans mark-to-market adjustments		—			260
Other noncash items including leases and deferred income taxes		2,425			2,498			728			774
Business optimization and realignment costs/(payments), net		20			128
Business optimization and realignment costs, net of payments								(73	)		(14	)
Changes in assets and liabilities:
Receivables		373			(66	)		(126	)		259
Other assets		(110	)		(235	)		(131	)		(170	)
Accounts payable and other liabilities		(3,534	)		(2,892	)		(470	)		(1,473	)
Other, net		14			(61	)		(6	)		19
Cash provided by operating activities		5,401			6,330			2,230			1,607
Investing Activities:
Capital expenditures		(4,420	)		(4,379	)		(1,290	)		(1,284	)
Purchase of investments		(82	)		(145	)		(2	)		(35	)
Proceeds from asset dispositions and other		72			71			12			10
Cash used in investing activities		(4,430	)		(4,453	)		(1,280	)		(1,309	)
Financing Activities:
Principal payments on debt		(123	)		(113	)		(66	)		(29	)
Proceeds from stock issuances		114			151			157			81
Dividends paid		(888	)		(598	)		(318	)		(299	)
Purchase of treasury stock		(1,500	)		(2,248	)		(500	)		—
Other, net		1			—
Cash used in financing activities		(2,396	)		(2,808	)		(727	)		(247	)
Effect of exchange rate changes on cash		(99	)		(91	)		(24	)		(98	)
Net decrease in cash and cash equivalents		(1,524	)		(1,022	)
Net increase (decrease) in cash and cash equivalents								199			(47	)
Cash and cash equivalents at beginning of period		6,897			7,087			6,856			6,897
Cash and cash equivalents at end of period	$	5,373		$	6,065		$	7,055		$	6,850

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

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ INVESTMENT

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~~2023 (“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 ~~February 28,~~August 31, 2023, and the results of our operations for the ~~three- and nine-month~~three-month periods ended ~~February 28,~~August 31, 2023 and 2022, cash flows for the ~~nine-month~~three-month periods ended ~~February 28,~~August 31, 2023 and 2022, and changes in common stockholders’ investment for the ~~three- and nine-month~~three-month periods ended ~~February 28,~~August 31, 2023 and 2022. Operating results for the ~~three- and nine-month periods~~three-month period ended ~~February 28,~~August 31, 2023 are not necessarily indicative of the results that may be expected for the year ending May 31, ~~2023.~~2024.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, ~~2023~~2024 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 $~~737~~688 million and $~~861~~686 million at ~~February 28,~~August 31, 2023 and May 31, ~~2022,~~2023, respectively. Contract assets net of deferred unearned revenue were $~~527~~466 million and $~~623~~484 million at ~~February 28,~~August 31, 2023 and May 31, ~~2022,~~2023, 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 $1521 million and $819 million at ~~February 28,~~August 31, 2023 and May 31, ~~2022,~~2023, 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 ~~February 28.~~August 31. This presentation is consistent with how we organize our segments internally for making operating decisions and measuring performance.


	Three Months Ended				Nine Months Ended				Three Months Ended
	2023		2022		2023		2022		2023		2022
REVENUE BY SERVICE TYPE
FedEx Express segment:
Package:
U.S. overnight box	$	2,165	$	2,275	$	6,718	$	6,694	$	2,188	$	2,316
U.S. overnight envelope		478		479		1,477		1,435		485		525
U.S. deferred		1,346		1,422		3,886		3,960		1,187		1,287
Total U.S. domestic package revenue		3,989		4,176		12,081		12,089		3,860		4,128
International priority		2,566		2,991		8,286		8,937		2,327		2,897
International economy		698		697		2,116		2,072		1,021		707
Total international export package revenue		3,264		3,688		10,402		11,009		3,348		3,604
International domestic(1)		1,003		1,016		3,013		3,277		1,024		974
Total package revenue		8,256		8,880		25,496		26,375		8,232		8,706
Freight:
U.S.		719		712		2,299		2,262		582		796
International priority		687		948		2,387		2,815		553		888
International economy		358		378		1,123		1,230		425		377
International airfreight		47		40		126		134		32		41
Total freight revenue		1,811		2,078		5,935		6,441		1,592		2,102
Other		278		346		905		1,059		261		319
Total FedEx Express segment		10,345		11,304		32,336		33,875		10,085		11,127
FedEx Ground segment		8,658		8,800		25,211		24,741		8,420		8,160
FedEx Freight segment		2,186		2,253		7,363		6,776		2,291		2,723
FedEx Services segment		87		65		225		177		72		70
Other and eliminations(2)		893		1,219		3,090		3,549		813		1,162
	$	22,169	$	23,641	$	68,225	$	69,118	$	21,681	$	23,242

(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. (“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 represented by the Air Line Pilots Association, International (“ALPA”) and are employed under a collective bargaining agreement that took effect on November 2, ~~2015, and~~2015. The agreement became amendable in November 2021. Bargaining for a successor agreement began in May 2021, and ~~continues. In~~in November 2022 the National Mediation Board (“NMB”) ~~began actively mediating the negotiations. The NMB~~, which is the U.S. governmental agency that oversees labor agreements for entities covered by the Railway Labor Act of 1926, as ~~amended.~~amended, began actively mediating the negotiations. During the first quarter of 2024, FedEx Express’s pilots failed to ratify the tentative successor agreement that was approved by ALPA’s FedEx Express Master Executive Council in June 2023. Bargaining for a successor agreement continues. 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 $3456 million for the three-month period ended ~~February 28,~~August 31, 2023 and $~~142~~ ~~million for the nine-month period ended February 28, 2023. Our stock-based compensation expense was $~~3968 million for the three-month period ended ~~February 28, 2022 and $151~~ ~~million for the nine-month period ended February 28,~~August 31, 2022. Due to its immateriality, additional disclosures related to stock-based compensation have been excluded from this quarterly report.

~~- 10 -~~

BUSINESS OPTIMIZATION AND REALIGNMENT COSTS. In the ~~first~~second 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. At FedEx Express, we~~costs, and transform our digital capabilities. We plan to reconfigure the air network, optimize sorts and surface linehaul, drive efficiencies in Europe, and harmonize the global clearance process. At FedEx Ground Package System, Inc. (“FedEx Ground”), we are transformingconsolidate 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 sortation facilities and equipment, reduce pickup-and-delivery routes, and optimize our enterprise linehaul ~~networks~~network by moving beyond discrete collaboration to an end-to-end optimized ~~network.~~network through Network 2.0.

- 10 -

In the fourth quarter of 2023, we announced one FedEx, a consolidation plan to ultimately bring FedEx Express, FedEx Ground Package System, Inc. (“FedEx Ground”), FedEx Corporate Services, Inc. (“FedEx Services”), and other FedEx operating companies into Federal Express Corporation, becoming a single company operating a unified, fully integrated air-ground network under the respected FedEx brand. FedEx Freight, Inc. will continue to provide less-than-truckload (“LTL”) freight transportation services as a stand-alone and separate company under Federal Express Corporation. The organizational redesign will be implemented in phases with full implementation expected in June 2024. One FedEx will help facilitate our DRIVE transformation program to improve long-term profitability, including Network 2.0, the multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada.

We have announced the implementation of Network 2.0 in more than 20 markets, including the phased transition of all FedEx Ground operations and personnel in Canada to FedEx Express beginning in April 2024. Under Network 2.0, FedEx will continue to utilize both employee couriers and contracted service providers.

We incurred costs associated with our business optimization activities of $~~120~~105 million ($9281 million, net of tax, or $~~0.36~~0.32 per diluted share) in the ~~third~~first quarter ~~and~~of 2024. We recognized $~~180~~24 million ($~~138~~19 million, net of tax, or $~~0.53~~0.07 per diluted share) of costs under this program in the ~~nine months~~first quarter of 2023. These costs were primarily related to ~~consulting~~professional services ~~severance~~ and ~~related costs associated with organizational changes announced in the third quarter of 2023, and idling our operations in Russia. These business~~severance. Business optimization costs are included in Corporate, other, and eliminations, FedEx Ground, and FedEx Express.

In 2021, FedEx Express announced a workforce reduction plan in Europe related to the network integration of TNT Express. The plan affected approximately 5,000 employees in Europe across operational teams and back-office functions and ~~is substantially complete as of February 28, 2023.~~

~~We incurred costs associated with our business realignment activities of $~~3 ~~million ($~~2 ~~million, net of tax, or $0.01~~ ~~per diluted share)~~was completed in ~~the third quarter and $~~17 ~~million ($~~13 ~~million, net of tax, or $0.05~~ ~~per diluted share) in the nine months of~~ 2023. We incurred costs associated with our business realignment activities of $~~107~~14 million ($8211 million, net of tax, or $~~0.31~~0.04 per diluted share) in the ~~third~~first quarter ~~and $218~~ ~~million ($168~~ ~~million, net~~ of ~~tax, or $0.63~~ ~~per diluted share) in the nine months of 2022.~~2023. These costs ~~are~~were related to certain employee severance arrangements. ~~Payments under this program totaled approximately $~~18 ~~million in the third quarter and $102~~ ~~million in the nine months of 2023. We expect the~~The pre-tax cost of our business realignment activities ~~to be~~through 2023 was approximately $~~415~~430 ~~million through 2023.~~

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

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.

- 11 -

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 ~~February 28,~~August 31, 2023, we had €~~136~~158 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 ~~February 28,~~August 31, 2023, the hedge remains effective.

SUPPLIER FINANCE PROGRAM. We offer a voluntary Supply Chain Finance (“SCF”) program through one of our financial institutions to certain of our suppliers. We agree to commercial terms with our suppliers, including prices, quantities, and payment terms, and they issue invoices to us based on the agreed-upon contractual terms. If our suppliers choose to participate in the SCF program, they determine which invoices, if any, to sell to the financial institution to receive an early discounted payment, while we settle the net payment amount with our financial institution on the payment due dates. We guarantee these payments with the financial institution.

Amounts due to our suppliers that participate in the SCF program are included in accounts payable in our consolidated balance sheets. We have been informed by the participating financial institutions that as of August 31, 2023 and May 31, 2023, suppliers have been approved to sell to them $74 million and $76 million, respectively, of our outstanding payment obligations.

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.

~~- 11 -~~

~~New~~Recently Adopted Accounting Standards ~~and Accounting Standards Not Yet Adopted~~

In ~~March 2020,~~September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848), and in December 2022 subsequently issued ASU 2022-06, to temporarily ease the potential burden in accounting for reference rate reform. The standard 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, 2024. While there has been no material effect to our financial condition, results of operations, or cash flows from reference rate reform as of February 28, 2023, we continue to monitor our contracts and transactions for potential application of this ASU.

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 effect on our consolidated financial statements and related disclosures.

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 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~~We adopted this standard effective June 1, 2023 ~~(fiscal 2024)~~. ~~We are assessing the effect~~The adoption of this ~~new~~ standard did not have a material effect on our consolidated financial ~~statements.~~statements and related disclosures.

Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), and in December 2022 subsequently issued ASU 2022-06, to temporarily ease the potential burden in accounting for reference rate reform. The standards provide 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 standards 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 standards were effective upon issuance and can generally be applied through December 31, 2024. 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, 2023, we continue to monitor our contracts and transactions for potential application of these ASUs.

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 ~~February 28,~~August 31, 2023, 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. As part of the repurchase program, we entered into an accelerated share repurchase (“ASR”) agreement with a bank in ~~October 2022~~June 2023 to repurchase an aggregate of $~~1.5~~500 ~~billion~~million of our common stock.

- 12 -

During the ~~third~~first quarter of ~~2023, the ASR transaction was completed, and~~2024, ~~1.3~~2.0 million shares were ~~delivered~~repurchased under the ASR ~~agreement.~~agreement at an average price of $256.41 per share for a total of $500 million. The final number of shares delivered upon settlement of the ASR agreement was 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 ~~1.3~~2.0 million shares delivered under the ASR agreement were the only shares of FedEx common stock we ~~repurchased~~purchased during the ~~third~~first quarter of ~~2023.~~2024. We did

~~During the nine months ended February 28, 2023, we repurchased~~ no~~9.2~~ ~~million~~t repurchase any shares of FedEx common stock ~~at an average price~~during the first quarter of $~~163.39~~ ~~per share for a total of $1.5~~ ~~billion.~~2023. As of ~~February 28,~~August 31, 2023, approximately $~~2.6~~2.1 billion remained available to use for repurchases under the program.

~~- 12 -~~

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.

DIVIDENDS DECLARED PER COMMON SHARE.On ~~February 17,~~August 18, 2023, our Board of Directors declared a quarterly dividend of $~~1.15~~1.26 per share of common stock. The dividend will be paid on ~~April 3,~~October 2, 2023 to stockholders of record as of the close of business on ~~March 13,~~September 11, 2023. 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 ~~February 28~~August 31 (in millions; amounts in parentheses indicate debits to AOCI):


	Three Months Ended						Nine Months Ended
	2023			2022			2023			2022			2023			2022
Foreign currency translation loss:
Balance at beginning of period	$	(1,427	)	$	(1,026	)	$	(1,148	)	$	(785	)	$	(1,362	)	$	(1,148	)
Translation adjustments		80			91			(199	)		(150	)		(28	)		(209	)
Balance at end of period		(1,347	)		(935	)		(1,347	)		(935	)		(1,390	)		(1,357	)
Retirement plans adjustments:
Balance at beginning of period		42			49			45			53			35			45
Reclassifications from AOCI		(3	)		(1	)		(6	)		(5	)		(1	)		(2	)
Balance at end of period		39			48			39			48			34			43
Accumulated other comprehensive (loss) at end of period	$	(1,308	)	$	(887	)	$	(1,308	)	$	(887	)	$	(1,356	)	$	(1,314	)

- 13 -

The following table presents details of the reclassifications from AOCI for the three-month periods ended ~~February 28~~August 31 (in millions; amounts in parentheses indicate debits to earnings):


	Amount Reclassified from AOCI											Affected Line Item in the Income Statement
	Three Months Ended					Nine Months Ended							Amount Reclassified from AOCI				Affected Line Item in the Income Statement
	2023		2022			2023			2022				2023		2022
Amortization of retirement plans prior service credits, before tax	$	3	$	2		$	7		$	7		Other retirement plans, net	$	1	$	2	Other retirement plans, net
Income tax benefit		—		(1	)		(1	)		(2	)	Provision for income taxes		—		—	Provision for income taxes
AOCI reclassifications, net of tax	$	3	$	1		$	6		$	5		Net income	$	1	$	2	Net income

(5) Computation of Earnings Per Share

The calculation of basic and diluted earnings per common share for the three-month periods ended ~~February 28~~August 31 was as follows (in millions, except per share amounts):


	Three Months Ended				Nine Months Ended
	2023		2022		2023		2022		2023		2022
Basic earnings per common share:
Net earnings allocable to common shares(1)	$	770	$	1,110	$	2,430	$	3,262	$	1,077	$	874
Weighted-average common shares		251		261		255		264		251		259
Basic earnings per common share	$	3.07	$	4.26	$	9.52	$	12.36	$	4.28	$	3.37
Diluted earnings per common share:
Net earnings allocable to common shares(1)	$	770	$	1,110	$	2,430	$	3,262	$	1,077	$	874
Weighted-average common shares		251		261		255		264		251		259
Dilutive effect of share-based awards		2		4		2		4		3		3
Weighted-average diluted shares		253		265		257		268		254		262
Diluted earnings per common share	$	3.05	$	4.20	$	9.46	$	12.17	$	4.23	$	3.33
Anti-dilutive options excluded from diluted earnings per common share		7.8		4.4		7.7		3.8		6.2		5.7

(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 ~~February 28~~August 31 were as follows (in millions):


	2023		2022
Defined benefit pension plans, net	$	91	$	59
Defined contribution plans		240		244
Postretirement healthcare plans		23		23
	$	354	$	326

Three Months Ended

Nine Months Ended

2023

2022

2023

2022

Defined benefit pension plans, net

$
59

$
2

$
176

$
(3
)
Defined contribution plans

242

226

714

577

Postretirement healthcare plans

24

22

70

67

Retirement plans MTM net loss

—

—

—

260

$
325

$
250

$
960

$
901

Net periodic benefit cost of the pension and postretirement healthcare plans for the three-month periods ended ~~February 28~~August 31 included the following components (in millions):

Three Months Ended

U.S. Pension Plans

International Pension Plans

Postretirement Healthcare Plans

2023

2022

2023

2022

2023

2022

Service cost

$
162

$
209

$
13

$
14

$
10

$
12

Other retirement plans expense (income):

Interest cost

304

254

8

8

14

10

Expected return on plan assets

(422
)

(478
)

(3
)

(3
)

—

—

Amortization of prior service credit and other

(1
)

(1
)

(2
)

(1
)

—

—

(119
)

(225
)

3

4

14

10

$
43

$
(16
)

$
16

$
18

$
24

$
22


	Nine Months Ended
	U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans				U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans
	2023			2022			2023			2022			2023		2022		2023			2022			2023			2022			2023		2022
Service cost	$	488		$	625		$	34		$	43		$	28	$	36	$	136		$	163		$	10		$	11		$	7	$	9
Other retirement plans expense (income):
Interest cost		913			765			25			27			42		31		341			304			10			9			16		14
Expected return on plan assets		(1,266	)		(1,433	)		(11	)		(23	)		—		—		(400	)		(422	)		(4	)		(4	)		—		—
Amortization of prior service credit and other		(5	)		(5	)		(2	)		(2	)		—		—		(2	)		(2	)		—			—			—		—
MTM net loss		—			36			—			224			—		—
		(358	)		(637	)		12			226			42		31		(61	)		(120	)		6			5			16		14
	$	130		$	(12	)	$	46		$	269		$	70	$	67	$	75		$	43		$	16		$	16		$	23	$	23

For ~~2023,~~2024, no pension contributions are required for our tax-qualified U.S. domestic pension ~~plans~~plan (“U.S. Pension ~~Plans”~~Plan”) as ~~they are~~it is fully funded under the Employee Retirement Income Security Act. We made a voluntary ~~contributions~~contribution of $200 million to our U.S. Pension ~~Plans~~Plan in the first quarter of 2024 and anticipate making $~~800~~600 million of additional voluntary contributions during the ~~nine months~~remainder of ~~2023.~~

~~In the second quarter of 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.2024.

(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.~~as one FedEx. Our primary operating companies are FedEx Express, the world’s largest express transportation company; 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”)~~LTL freight transportation services. These companies represent our major service lines and, along with FedEx ~~Corporate~~ Services, ~~Inc. (“FedEx Services”),~~ constitute our reportable segments.

- 16 -

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)

In the fourth quarter of 2023, FedEx announced one FedEx, a consolidation plan to ultimately bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corporation, becoming a single company operating a unified, fully integrated air-ground network under the respected FedEx brand. The organizational redesign will be implemented in phases with full implementation expected in June 2024. During the implementation process in 2024, each of our current reportable segments will continue to have discrete financial information that will be regularly reviewed when evaluating performance and making resource allocation decisions, and aligns with our management reporting structure and our internal financial reporting. In the first quarter of 2025 when the consolidation plan has been completed, we expect to begin reporting a new segment structure that will align with an updated management reporting structure and how management will evaluate performance and make resource allocation decisions under one FedEx.

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.

- 1617 -

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. ~~ShopRunner, Inc. was merged into FedEx Dataworks during the third quarter of 2023.~~

Also included in Corporate and other ~~are~~is 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.

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 ~~February 28~~August 31 (in millions):


	Three Months Ended						Nine Months Ended
	2023			2022			2023			2022			2023			2022
Revenue:
FedEx Express segment	$	10,345		$	11,304		$	32,336		$	33,875		$	10,085		$	11,127
FedEx Ground segment		8,658			8,800			25,211			24,741			8,420			8,160
FedEx Freight segment		2,186			2,253			7,363			6,776			2,291			2,723
FedEx Services segment		87			65			225			177			72			70
Other and eliminations		893			1,219			3,090			3,549			813			1,162
	$	22,169		$	23,641		$	68,225		$	69,118		$	21,681		$	23,242
Operating income (loss):
FedEx Express segment	$	119		$	520		$	634		$	2,036		$	205		$	174
FedEx Ground segment		844			641			2,136			1,793			1,103			694
FedEx Freight segment		386			337			1,477			1,061			481			651
Corporate, other, and eliminations		(307	)		(172	)		(838	)		(569	)		(304	)		(328	)
	$	1,042		$	1,326		$	3,409		$	4,321		$	1,485		$	1,191

(8) Commitments

As of ~~February 28,~~August 31, 2023, our purchase commitments under various contracts for the remainder of ~~2023~~2024 and annually thereafter were as follows (in millions):


	Aircraft and Related		Other(1)		Total		Aircraft and Aircraft Related		Other(1)		Total
2023 (remainder)	$	271	$	228	$	499
2024		1,944		717		2,661
2024 (remainder)							$	1,162	$	505	$	1,667
2025		1,565		550		2,115		1,565		606		2,171
2026		568		442		1,010		591		492		1,083
2027		296		172		468		290		221		511
2028								263		129		392
Thereafter		1,913		139		2,052		1,654		88		1,742
Total	$	6,557	$	2,248	$	8,805	$	5,525	$	2,041	$	7,566

(1)

Primarily ~~equipment~~information technology and advertising contracts.

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above.

- 1718 -

As of ~~February 28,~~August 31, 2023, we had $~~930~~685 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 ~~February 28,~~August 31, 2023 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)		5		4		3		—		12
2024		13		8		14		4		39
2024 (remainder)												12		8		8		2		30
2025		12		6		10		2		30		12		6		10		2		30
2026		14		1		—		—		15		14		1		2		—		17
2027		—		—		—		—		—		—		—		—		—		—
2028												—		—		—		—		—
Thereafter		—		—		—		—		—		—		—		—		—		—
Total		44		19		27		6		96		38		15		20		4		77

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 ~~February 28,~~August 31, 2023 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)	$	34		$	570		$	604		$	34		$	638
2024		103			2,905			3,008			91			3,099
2024 (remainder)																$	89		$	2,101		$	2,190		$	310		$	2,500
2025		84			2,600			2,684			38			2,722			112			2,796			2,908			38			2,946
2026		81			2,322			2,403			30			2,433			110			2,511			2,621			30			2,651
2027		80			2,046			2,126			22			2,148			109			2,204			2,313			22			2,335
2028																	109			1,889			1,998			21			2,019
Thereafter		170			9,790			9,960			669			10,629			236			8,623			8,859			648			9,507
Total lease payments		552			20,233			20,785			884			21,669			765			20,124			20,889			1,069			21,958
Less imputed interest		(43	)		(2,923	)		(2,966	)		(345	)		(3,311	)		(88	)		(3,081	)		(3,169	)		(339	)		(3,508	)
Present value of lease liability	$	509		$	17,310		$	17,819		$	539		$	18,358		$	677		$	17,043		$	17,720		$	730		$	18,450

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 ~~February 28,~~August 31, 2023, 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 $~~2.3~~1.8 billion that will commence when FedEx gains beneficial access to the leased asset. Commencement dates are expected to be from ~~2023~~2024 to ~~2024~~2027.

We have reviewed the accompanying condensed consolidated balance sheet of FedEx Corporation (the Company) as of ~~February 28,~~August 31, 2023, the related condensed consolidated statements of income, comprehensive income, cash flows, and changes in common stockholders’ investment for the ~~three- and nine-month~~three-month periods ended ~~February 28, 2023 and 2022, the condensed consolidated statements of cash flows for the nine-month periods ended February 28,~~August 31, 2023 and 2022, 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,~~2023, 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,~~17, 2023, 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~~2023, 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~~2023 (“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, offering integrated business solutions through operating companies competing collectively, operating collaboratively, and innovating digitally ~~under the respected FedEx brand.~~as one FedEx. 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~~2024 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 – Business Optimization and Realignment Costs and – Outlook” and ~~“Results of Operations – Consolidated Results~~“Financial Condition – 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 first quarter results ~~for the third quarter and nine months of 2023~~ were ~~adversely impacted~~negatively affected by ~~lower global volumes~~volume pressures due to weak economic conditions.

The coronavirus (“COVID-19”) pandemic had varying impacts on the demand for our services and our business operations and has contributed to global supply chain disruptions, particularly in 2022. We are shifting to operating in a more stable post-COVID-19 environment with less restrictions. Supply and demand trends are beginning to normalize resulting in improvements in the availability of labor and vehicles, trailers, and other package handling equipment.

~~Global~~During the first quarter of 2024, global inflation ~~is well~~decelerated year over year, but continues to be above ~~normal and~~ historical ~~levels, impacting all areas of our business.~~levels. Additionally, global interest rates ~~are rising~~continue to rise in an effort to curb inflation. We are experiencing a decline in demand for our transportation services as inflation and interest rate increases are negatively 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 affect our results of operations for the remainder of ~~2023.~~2024.

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 affect our operating ~~results. While~~results either positively or negatively in the short-term. Lower fuel prices negatively affected yields through lower fuel surcharges and drove a decrease in fuel expense ~~increased~~ during the ~~third~~first quarter ~~and nine months of 2023 compared to the third quarter and nine months of 2022 due to higher fuel prices, we were able to offset higher prices through yield management actions.~~

~~Given the nature~~2024 at all of our business and our global operations, geopolitical conflicts may adversely affect our business and results of operations. The conflict between 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 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 is included in business optimization expenses at FedEx Express for the nine months of 2023. While we do not expect this conflict to have a direct material impact on our business or results of operations, the broader consequences 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 Optimization and Realignment Costs” below for additional information.transportation segments.

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 temporary labor, security, and facility services and cargo ~~handling, temporary labor, and security)~~handling), insurance, professional fees, and operational ~~supplies, and bad debt.~~supplies.

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 ~~February 28:~~August 31:


	Three Months Ended						Percent				Nine Months Ended						Percent				Three Months Ended						Percent
	2023			2022			Change				2023			2022			Change				2023			2022			Change
Revenue	$	22,169		$	23,641			(6	)		$	68,225		$	69,118			(1	)		$	21,681		$	23,242			(7	)
Operating income (loss):
FedEx Express segment		119			520			(77	)			634			2,036			(69	)			205			174			18
FedEx Ground segment		844			641			32				2,136			1,793			19				1,103			694			59
FedEx Freight segment		386			337			15				1,477			1,061			39				481			651			(26	)
Corporate, other, and eliminations		(307	)		(172	)		(78	)			(838	)		(569	)		(47	)			(304	)		(328	)		7
Consolidated operating income		1,042			1,326			(21	)			3,409			4,321			(21	)			1,485			1,191			25
Operating margin:
FedEx Express segment		1.2	%		4.6	%		(340	)	bp		2.0	%		6.0	%		(400	)	bp		2.0	%		1.6	%		40		bp
FedEx Ground segment		9.7	%		7.3	%		240		bp		8.5	%		7.2	%		130		bp		13.1	%		8.5	%		460		bp
FedEx Freight segment		17.7	%		15.0	%		270		bp		20.1	%		15.7	%		440		bp		21.0	%		23.9	%		(290	)	bp
Consolidated operating margin		4.7	%		5.6	%		(90	)	bp		5.0	%		6.3	%		(130	)	bp		6.8	%		5.1	%		170		bp
Consolidated net income	$	771		$	1,112			(31	)		$	2,434		$	3,268			(26	)		$	1,078		$	875			23
Diluted earnings per share	$	3.05		$	4.20			(27	)		$	9.46		$	12.17			(22	)		$	4.23		$	3.33			27


	Change in Revenue						Change in Operating Results						Year-over-Year Changes
	Three Months Ended			Nine Months Ended			Three Months Ended			Nine Months Ended			Revenue			Operating Results
FedEx Express segment	$	(959	)	$	(1,539	)	$	(401	)	$	(1,402	)	$	(1,042	)	$	31
FedEx Ground segment		(142	)		470			203			343			260			409
FedEx Freight segment		(67	)		587			49			416			(432	)		(170	)
FedEx Services segment		22			48			—			—			2			—
Corporate, other, and eliminations		(326	)		(459	)		(135	)		(269	)		(349	)		24
	$	(1,472	)	$	(893	)	$	(284	)	$	(912	)	$	(1,561	)	$	294

~~Our results for~~Operating income improved 25% in the ~~third~~first quarter of ~~2023~~2024 due to the execution of our DRIVE program initiatives and our continued ~~to be negatively impacted by macroeconomic conditions, including inflation well above normal~~focus on revenue quality. These initiatives include structural flight takedowns, aligning staffing with volume levels, increasing linehaul and historical levels, and rising global interest rates. In response to market conditions, we continued implementing cost reductions and focusing on yield improvement and revenue quality to mitigate the effect of volume declines. These cost reductions include reducing flight hours,sort efficiency, temporarily parking aircraft, improving dock productivity, ~~reducing certain peak wage programs, consolidating~~ and ~~closing sorts, canceling network capacity projects, and reducing select Sunday operations. Volume declines were partially~~shifting to one delivery wave per day in the U.S. at FedEx Express. Improvement in our base yields was more than offset by ~~yield improvements, including~~lower fuel ~~surcharge increases,~~surcharges and reduced demand for our services, primarily due to challenging macroeconomic conditions, resulting in a decrease in revenue in the ~~third~~first quarter ~~and nine months~~ of ~~2023.~~2024.

Operating income includes ~~$120~~expenses of $105 million ($9281 million, net of tax, or ~~$0.36~~$0.32 per diluted share) in the ~~third~~first quarter ~~and $180 million ($138 million, net~~ of ~~tax, or $0.53 per diluted share) in the nine months of 2023~~2024 associated with our business optimization strategy announced in 2023. We recognized $24 million ($19 million, net of tax, or $0.07 per diluted share) of costs in the first quarter of 2023 under this program. Operating income in the first quarter of 2023 also includes business realignment costs of $3$14 million ($211 million, net of tax, or ~~$0.01~~$0.04 per diluted share) ~~in the third quarter and $17 million ($13 million, net of tax, or $0.05 per diluted share) in the nine months of 2023~~ associated with our workforce reduction plan in Europe previously announced in 2021. We recognized $107 million ($82 million, net of tax, or $0.31 per diluted share) of costs in the third quarter of 2022 and $218 million ($168 million, net of tax, or $0.63 per diluted share) in the nine months of 2022 under this program. See the “Business Optimization and Realignment Costs” section of this MD&A for more information.

Operating income included TNT Express integration expenses of $29 million ($23 million, net of tax, or $0.08 per diluted share) in the third quarter and $92 million ($71 million, net of tax, or $0.27 per diluted share) in the nine months of 2022.

Consolidated net income in the nine months of 2022 included a pre-tax, noncash net loss of $260 million ($195 million, net of tax; $0.73 per diluted share) associated with our mark-to-market retirement plans accounting adjustments. See Note 6 of the accompanying unaudited condensed consolidated financial statements for more information.

The comparison of net income between 2023 and 2022 is affected by a tax benefit of $78 million ($0.29 per diluted share) recognized in 2022 related to revisions of prior-year tax estimates for actual tax return results. See the “Income Taxes” section of this MD&A for additional 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, which was completed in December 2022,~~June 2023 to repurchase an aggregate of ~~$1.5 billion~~$500 million of our common stock. The ASR transaction was completed in August 2023. Share repurchases had a benefit of ~~$0.10~~$0.02 per diluted share for the ~~third~~first quarter ~~and $0.17 per diluted share for the nine months~~ of ~~2023.~~2024. See Note 1 of the accompanying unaudited condensed consolidated financial statements, “Financial ~~Condition—Liquidity”~~Condition – Liquidity and – Liquidity Outlook” 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 6%7% in the ~~third~~first quarter ~~and 1% in the nine months~~ of ~~2023~~2024 primarily due to ~~global volume declines~~lower fuel surcharges at all of our transportation segments and volume declines at FedEx Express and FedEx Freight, partially offset by base yield improvement ~~including higher fuel surcharges.~~at FedEx Ground and FedEx Freight.

FedEx Express revenue decreased 8%9% in the ~~third~~first quarter ~~and 5% in the nine months~~ of ~~2023~~2024 primarily due to lower ~~global~~fuel surcharges, lower volume, and unfavorable ~~foreign currency,~~service mix. FedEx Freight revenue decreased 16% in the first quarter of 2024 primarily due to lower shipments and fuel surcharges, partially offset by base yield ~~improvement, including higher fuel surcharges. In the third quarter and nine months of 2023, revenue~~improvement. Revenue at Corporate, other, and eliminations decreased during the first quarter of 2024 primarily due to lower ~~volumes~~yields and ~~yields~~volumes at FedEx Logistics, Inc. (“FedEx Logistics”). FedEx ~~Freight~~Ground revenue ~~decreased~~increased 3% induring the ~~third~~first quarter ~~and increased 9% in the nine months~~ of ~~2023. The third quarter decrease was primarily due to lower volumes, partially offset by yield improvement, including higher fuel surcharges. The nine-months increase was~~2024 primarily due to yield improvement ~~including~~and higher ~~fuel surcharges, partially offset by lower~~ volume. Revenue at FedEx Ground decreased 2% in the third quarter and increased 2% in the nine months of 2023. The third quarter decrease was primarily due to lower volumes, partially offset by yield improvement, including higher fuel surcharges. The nine-months increase was primarily due to yield improvement, including higher fuel surcharges, partially offset by lower volumes.

The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended ~~February 28:~~August 31:


	Percent of Revenue
	Three Months Ended						Nine Months Ended						Three Months Ended				Percent			Percent of Revenue
	2023			2022			2023			2022			2023		2022		Change			2023			2022
Operating expenses:
Salaries and employee benefits		35.3	%		34.9	%		34.4	%		34.9	%	$	7,785	$	7,859		(1	)		35.9	%		33.8	%
Purchased transportation		24.4			26.5			24.7			26.3			5,036		5,767		(13	)		23.2			24.8
Rentals and landing fees		5.4			5.2			5.2			5.1			1,151		1,159		(1	)		5.3			5.0
Depreciation and amortization		4.6			4.2			4.5			4.3			1,071		1,024		5			5.0			4.4
Fuel		6.1			5.1			7.0			4.8			1,101		1,822		(40	)		5.1			7.8
Maintenance and repairs		3.6			3.5			3.8			3.7			824		904		(9	)		3.8			3.9
Business optimization and realignment costs		0.5			0.4			0.3			0.3			105		38		176			0.5			0.2
Other		15.4			14.6			15.1			14.3			3,123		3,478		(10	)		14.4			15.0
Total operating expenses		95.3			94.4			95.0			93.7			20,196		22,051		(8	)		93.2			94.9
Operating margin		4.7	%		5.6	%		5.0	%		6.3	%
Operating income													$	1,485	$	1,191		25			6.8	%		5.1	%

Operating income ~~declined~~increased 25% in the ~~third~~first quarter of 2024 primarily due to our DRIVE program initiatives and ~~nine months~~base yield improvements at FedEx Ground and FedEx Freight, partially offset by lower volume and fuel surcharges. Our DRIVE initiatives include structural flight takedowns, aligning staffing with volume levels, improving linehaul and sort efficiency, temporarily parking aircraft, improving dock operations, and shifting to one delivery wave per day in the U.S. at FedEx Express.

Purchased transportation and fuel expense decreased in the first quarter of ~~2023~~2024 due to lower fuel prices and volumes. The decrease in purchased transportation expense was also due to lower rates during the first quarter of 2024. The decrease in Other operating expenses was driven by lower bad debt expense and outside service contracts expense. In addition, during the first quarter of 2024 we aligned staffing to lower volumes and increased productivity, which drove a decrease in salaries and employee benefits, partially offset by increased variable incentive compensation and higher wage rates. Maintenance and repairs decreased in the first quarter of 2024 primarily due to lower ~~volumes at each of our transportation segments, partially offset by yield improvement, including higher fuel surcharges, as well as cost reductions such as reducing flight hours,~~aircraft maintenance resulting from an increase in temporarily parking aircraft, improving productivity, reducing certain peak wage programs, consolidating and closing sorts, and reducing select Sunday operations. These cost reductions more than offset the effects of global inflation, which drove higher operating expenses related to fuel, other operating expenses, salaries and employee benefits, and purchased transportation.

Fuel expense increased 12% in the third quarter and 42% in the nine months of 2023 due to higher fuel prices, partially offset by lower usage. Other operating expenses increased 4% in the nine months of 2023 primarily due to higher self-insurance accruals and bad debt, partially offset by favorable foreign currency impacts, lower professional fees, and lower outside service contract expense. Purchased transportation decreased 14% in the third quarter and 7% in the nine months due to lower volume and favorable currency impacts, partially offset by increased fuel prices and lower productivity. Salaries and employee benefits decreased 5% in the third quarter and 3% in the nine months due to decreased staffing to align with lower volumes, favorable currency impacts, and lower variable incentive compensation, partially offset by increased wage rates.

In the ~~first~~second 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. At FedEx Express, we~~costs, and transform our digital capabilities. We plan to ~~reconfigure the air network, optimize sorts and surface linehaul, drive efficiencies in Europe, and harmonize the global clearance process. At FedEx Ground, we are transforming~~consolidate 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 sortation facilities and equipment, reduce pickup-and-delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimized ~~network.~~network through Network 2.0.

In the fourth quarter of 2023, we announced one FedEx, a consolidation plan to ultimately bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corporation, becoming a single company operating a unified, fully integrated air-ground network under the respected FedEx brand. FedEx Freight, Inc. will continue to provide LTL freight transportation services as a stand-alone and separate company under Federal Express Corporation. The organizational redesign will be implemented in phases with full implementation expected in June 2024. One FedEx will help facilitate our DRIVE transformation program to improve long-term profitability, including Network 2.0, the multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada.

We incurred costs associated with our business optimization activities of ~~$120~~$105 million ($9281 million, net of tax, or ~~$0.36~~$0.32 per diluted share) in the ~~third~~first quarter of 2024 and ~~$180~~$24 million ($~~138~~19 million, net of tax, or ~~$0.53~~$0.07 per diluted share) in the ~~nine months~~first quarter of 2023. These costs were primarily related to ~~consulting~~professional services ~~severance~~ and ~~related costs associated with organizational changes announced in the third quarter of 2023, and idling our operations in Russia. These business~~severance. Business optimization costs are included in Corporate, other, and eliminations, FedEx Ground, and FedEx Express. The identification of these costs as business optimization-related expenditures is subject to our disclosure controls and procedures. We expect the pre-tax cost of our business optimization activities to be approximately $620 million in 2024 and approximately $2.0 billion through 2025. The timing and amount of our business optimization expenses may change as we revise and implement our plans.

We incurred costs associated with our business realignment activities of $3 million ($2 million, net of tax, or $0.01 per diluted share) in the third quarter and $17 million ($13 million, net of tax, or $0.05 per diluted share) in the nine months ofwas completed during 2023. We incurred costs associated with our business realignment activities of ~~$107~~$14 million ($8211 million, net of tax, or ~~$0.31~~$0.04 per diluted share) in the ~~third~~first quarter ~~and $218 million ($168 million, net~~ of ~~tax, or $0.63 per diluted share) in the nine months of 2022.~~2023. These costs ~~are~~were related to certain employee severance arrangements. ~~Payments under this program totaled approximately $18 million in the third quarter and $102 million in the nine months of 2023. We expect the~~The pre-tax cost of our business realignment activities ~~to be~~through 2023 was approximately ~~$415 million through 2023. We expect savings from our business realignment activities to be approximately $275 million on an annualized basis beginning in 2024.~~$430 million.

Our effective tax rate was ~~24.6%~~24.2% for the ~~third~~first quarter of 2024 and ~~24.8%~~24.2% for the ~~nine months~~first quarter of 2023, compared to 19.1% for the third quarter and 22.4% for the nine months of 2022. The 2023 tax rates were unfavorably impacted primarily by lower earnings in certain non-U.S. jurisdictions. The tax rates for 2022 include a benefit of $78 million related to revisions of prior-year tax estimates for actual tax return results.

On August 16, 2022, the 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 effect on our financial results.2023.

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 ~~third~~first quarter of ~~2023~~2024 attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. We continue to ~~pursue this lawsuit; however, if~~work towards obtaining a final judgment for the applicable refund amounts due to the regulation being invalid. Once the District Court enters a final judgment, the U.S. government could file an appeal with the U.S. Court of Appeals for the Sixth Circuit. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

InDuring 2024, operating income is expected to improve as a result of our DRIVE program initiatives focused on aligning our cost base with demand, reducing our permanent cost structure, and increasing the ~~fourth quarter~~flexibility of ~~2023,~~our network. We expect the benefits from DRIVE to be partially offset by expense headwinds related to higher global inflation and variable incentive compensation. We expect revenue will be pressured by volatile macroeconomic conditions negatively affecting customer demand for our services. At FedEx Express, we expect ~~macroeconomic conditions to continue to negatively impact revenue and operating profit. In addition, we expect reduced customer~~decreased demand for our U.S. freight product ~~at FedEx Express. We will continue~~due to ~~execute on~~a change in strategy of the ~~previously identified cost reduction actions~~U.S. Postal Service (“USPS”) and ~~identify additional opportunities to reduce cost in order to mitigate the impact of volume declines on our operating results. As part of these reductions, we will manage capacity to~~ lower demand levels, including further reducing flight hours at FedEx Express, and reducing Sunday operations, closing certain sort operations, and taking other linehaul expense actions at FedEx Ground. We are executing targeted actions to reduce shared and allocated overhead expenses, reducing vendor utilization, deferring certain technology projects, and discontinuing Same Day City operations at FedEx Office. In addition, we expect to achieve savings related to headcount attrition, and the elimination of certain global officer and director positions, previously announced in the third quarter of 2023. We remain focused on yield improvement and revenue quality to mitigate inflationary cost pressures and expect higherinternational export yields to ~~have a favorable effect on our 2023~~negatively affect revenue and operating ~~profit.~~

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. We plan to consolidate our sortation facilities and equipment, reduce pickup-and-delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimized network. We expect the pre-tax cost of our business optimization activities to be approximately $2.0 billion through 2025.

During 2023, we expect to complete the initial scope of 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 is substantially complete as of February 28, 2023. We expect savings from our business realignment activities to be approximately $275 million on an annualized basis beginningincome in 2024.

See the “Business Optimization and Realignment Costs” section of this MD&A for additional information.

Our capital expenditures for 2024 are expected to be approximately $5.7 billion, a decrease of $0.5 billion from 2023, as we continue to reduce our capital intensity relative to revenue. We expect lower aircraft spend and reduced investments in capacity projects to be partially offset by investments to optimize our networks and modernize our facilities.

We will continue to evaluate our investments in critical long-term strategic projects to ensure our capital expenditures are expected to generate high returns on investment and are balanced with our outlook for global economic conditions. For additional details on key 2024 capital projects, refer to the “Financial Condition – Capital Resources” and “Financial Condition – Liquidity Outlook” sections of this MD&A.

The uncertainty of a ~~slowing~~slowdown in the 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 the remainder of ~~2023~~2024 inherently less certain. See “Item 1A. Risk Factors” for more information.

See the “Trends Affecting Our ~~Business” and~~Business,” “Critical Accounting ~~Estimates”~~Estimates,” and “Forward-Looking Statements” sections of this MD&A for additional information.

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:

In the fourth quarter of 2023, FedEx announced one FedEx, a consolidation plan to ultimately bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corporation, becoming a single company operating a unified, fully integrated air-ground network under the respected FedEx brand. The organizational redesign will be implemented in phases with full implementation expected in June 2024. During the implementation process in 2024, each of our current reportable segments will continue to have discrete financial information that will be regularly reviewed when evaluating performance and making resource allocation decisions, and aligns with our management reporting structure and our internal financial reporting. In the first quarter of 2025, when the consolidation plan has been completed, we expect to begin reporting a new segment structure that will align with an updated management reporting structure and how management will evaluate performance and make resource allocation decisions under one FedEx.

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. (“FedEx Dataworks”) operating segment. FedEx Dataworks is focused on creating solutions to transform the digital and physical experiences of our customers and team members. ~~ShopRunner, Inc. was merged into FedEx Dataworks during the third quarter of 2023.~~

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.~~ 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 third quarter and nine months of 2023, the decrease~~The improvement in operating results in Corporate, other, and eliminations in the first quarter of 2024 was primarily due to lower operating ~~income~~expenses at FedEx Logistics, ~~due to decreased revenue and an increase in bad debt,~~ partially offset ~~by decreased purchased transportation expense. Additionally, operating results in Corporate, other, and eliminations were negatively impacted~~ by increased business optimization ~~costs~~expenses at FedEx Corporate. The lower operating expenses at FedEx Logistics was primarily due to lower purchased transportation expense, bad debt expense, and outside service contracts 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 ~~third~~first quarter ~~and nine months~~ of ~~2023~~2024 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 and other cargo space 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~~table compares revenue, operating expenses, operating income (dollars in millions), operating margin, and operating expenses as a percent of revenue for the periods ended ~~February 28:~~August 31:


	Three Months Ended						Percent				Nine Months Ended						Percent				Three Months Ended						Percent
	2023			2022			Change				2023			2022			Change				2023			2022			Change
Revenue:
Package:
U.S. overnight box	$	2,165		$	2,275			(5	)		$	6,718		$	6,694			—			$	2,188		$	2,316			(6	)
U.S. overnight envelope		478			479			—				1,477			1,435			3				485			525			(8	)
U.S. deferred		1,346			1,422			(5	)			3,886			3,960			(2	)			1,187			1,287			(8	)
Total U.S. domestic package revenue		3,989			4,176			(4	)			12,081			12,089			—				3,860			4,128			(6	)
International priority		2,566			2,991			(14	)			8,286			8,937			(7	)			2,327			2,897			(20	)
International economy		698			697			—				2,116			2,072			2				1,021			707			44
Total international export package revenue		3,264			3,688			(11	)			10,402			11,009			(6	)			3,348			3,604			(7	)
International domestic(1)		1,003			1,016			(1	)			3,013			3,277			(8	)			1,024			974			5
Total package revenue		8,256			8,880			(7	)			25,496			26,375			(3	)			8,232			8,706			(5	)
Freight:
U.S.		719			712			1				2,299			2,262			2				582			796			(27	)
International priority		687			948			(28	)			2,387			2,815			(15	)			553			888			(38	)
International economy		358			378			(5	)			1,123			1,230			(9	)			425			377			13
International airfreight		47			40			18				126			134			(6	)			32			41			(22	)
Total freight revenue		1,811			2,078			(13	)			5,935			6,441			(8	)			1,592			2,102			(24	)		Percent of Revenue
Other		278			346			(20	)			905			1,059			(15	)			261			319			(18	)		2023			2022
Total revenue		10,345			11,304			(8	)			32,336			33,875			(5	)			10,085			11,127			(9	)			100.0	%		100.0	%
Operating expenses:
Salaries and employee benefits		4,015			4,182			(4	)			12,003			12,407			(3	)			3,983			4,050			(2	)			39.5			36.4
Purchased transportation		1,373			1,566			(12	)			4,283			4,740			(10	)			1,374			1,478			(7	)			13.6			13.3
Rentals and landing fees		588			667			(12	)			1,751			1,951			(10	)			536			577			(7	)			5.3			5.2
Depreciation and amortization		533			490			9				1,566			1,492			5				538			513			5				5.3			4.6
Fuel		1,177			1,040			13				4,133			2,897			43				954			1,584			(40	)			9.5			14.2
Maintenance and repairs		456			509			(10	)			1,552			1,607			(3	)			496			562			(12	)			4.9			5.1
Business optimization and realignment costs		3			107			(97	)			28			218			(87	)			10			14			(29	)			0.1			0.1
Intercompany charges		459			494			(7	)			1,420			1,499			(5	)			492			484			2				4.9			4.3
Other		1,622			1,729			(6	)			4,966			5,028			(1	)			1,497			1,691			(11	)			14.9			15.2
Total operating expenses		10,226			10,784			(5	)			31,702			31,839			—				9,880			10,953			(10	)			98.0	%	98.4		%
Operating income	$	119		$	520			(77	)		$	634		$	2,036			(69	)		$	205		$	174			18
Operating margin		1.2	%		4.6	%		(340	)	bp		2.0	%		6.0	%		(400	)	bp		2.0	%		1.6	%		40		bp

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended ~~February 28:~~August 31:


	Three Months Ended				Percent			Nine Months Ended				Percent			Three Months Ended				Percent
	2023		2022		Change			2023		2022		Change			2023		2022		Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box		1,255		1,457		(14	)		1,275		1,448		(12	)		1,227		1,285		(5	)
U.S. overnight envelope		454		497		(9	)		466		510		(9	)		453		485		(7	)
U.S. deferred		1,141		1,357		(16	)		1,084		1,297		(16	)		970		1,070		(9	)
Total U.S. domestic ADV		2,850		3,311		(14	)		2,825		3,255		(13	)		2,650		2,840		(7	)
International priority		701		799		(12	)		712		801		(11	)		658		700		(6	)
International economy		280		282		(1	)		275		278		(1	)		333		260		28
Total international export ADV		981		1,081		(9	)		987		1,079		(9	)		991		960		3
International domestic(1)		1,805		1,866		(3	)		1,819		2,004		(9	)		1,742		1,706		2
Total ADV		5,636		6,258		(10	)		5,631		6,338		(11	)		5,383		5,506		(2	)
Revenue per package (yield):
U.S. overnight box	$	27.81	$	25.18		10		$	27.74	$	24.32		14		$	27.43	$	27.73		(1	)
U.S. overnight envelope		17.01		15.54		9			16.69		14.82		13			16.50		16.64		(1	)
U.S. deferred		19.02		16.90		13			18.86		16.07		17			18.81		18.50		2
U.S. domestic composite		22.57		20.34		11			22.51		19.55		15			22.41		22.36		—
International priority		59.05		60.43		(2	)		61.24		58.74		4			54.39		63.72		(15	)
International economy		40.20		39.85		1			40.51		39.26		3			47.14		41.81		13
International export composite		53.67		55.06		(3	)		55.47		53.72		3			51.95		57.78		(10	)
International domestic(1)		8.96		8.78		2			8.72		8.60		1			9.05		8.78		3
Composite package yield	$	23.63	$	22.89		3		$	23.83	$	21.90		9		$	23.53	$	24.33		(3	)
Freight Statistics
Average daily freight pounds:
U.S.		6,681		7,370		(9	)		7,170		8,029		(11	)		5,319		7,313		(27	)
International priority		5,290		6,595		(20	)		5,702		6,719		(15	)		4,390		6,042		(27	)
International economy		10,345		11,640		(11	)		10,738		12,126		(11	)		9,665		10,211		(5	)
International airfreight		1,142		1,123		2			1,014		1,198		(15	)		703		956		(26	)
Total average daily freight pounds		23,458		26,728		(12	)		24,624		28,072		(12	)		20,077		24,522		(18	)
Revenue per pound (yield):
U.S.	$	1.74	$	1.56		12		$	1.69	$	1.48		14		$	1.69	$	1.68		1
International priority		2.10		2.32		(9	)		2.20		2.20		—			1.94		2.26		(14	)
International economy		0.56		0.52		8			0.55		0.53		4			0.68		0.57		19
International airfreight		0.66		0.58		14			0.66		0.59		12			0.70		0.66		6
Composite freight yield	$	1.25	$	1.25		—		$	1.27	$	1.21		5		$	1.22	$	1.32		(8	)

FedEx Express segment revenue decreased 8%9% in the ~~third~~first quarter ~~and 5% in the nine months~~ of ~~2023~~2024 primarily due to ~~decreased global~~lower fuel surcharges, volume softness, and ~~unfavorable exchange rates, partially offset by~~a decline in international package ~~yield improvement.~~and freight base yields.

~~Total average daily~~Lower fuel surcharges had a significant negative impact on yields across all package ~~volume~~and freight services during the first quarter of 2024. In addition, international export composite package yield decreased 10% in the ~~third~~first quarter of 2024 driven by reduced demand surcharges, a larger mix of e-commerce volume, and ~~11%~~an increase in lower-yielding deferred volume related to the full reopening of the international economy service. Composite freight yield decreased 8% in the ~~nine months~~first quarter of ~~2023,~~2024 due to reduced demand surcharges and ~~total~~an increased mix of deferred freight, also driven by the international economy product reopening.

U.S. domestic average daily ~~freight pounds decreased 12% in the third quarter and nine months of 2023, due~~package volumes declined 7% as macroeconomic factors led to reduced demand for our services. ~~Yield improvement, including higher fuel surcharges, drove increases~~Global average daily freight pounds decreased 18% primarily as a result of weak macroeconomic conditions as well as lower volume from the U.S. Postal Service. These declines were partially offset by a 3% increase in ~~U.S. domestic package yield of 11% in the third quarter and 15% in the nine months of 2023,~~ international export package yield of 3% in the nine months of 2023, and composite freight yield of 5% in the nine months of 2023. International export package yield decreased 3% in the third quarter of 2023 due to unfavorable exchange rates and base yield declines, partially offset by higher fuel surcharges. Additionally, unfavorable exchange rates negatively impacted all international package and freight yields in the third quarter and nine months of 2023.volume.

FedEx Express segment operating income ~~decreased 77%~~increased 18% in the ~~third~~first quarter ~~and 69% in the nine months~~ of ~~2023 primarily~~2024 due to ~~global~~operating expense improvements resulting from our DRIVE program, as we focused on reducing our permanent cost structure and increasing the flexibility of our network. These initiatives include structural flight takedowns, aligning staffing with volume declines, partially offset by yield improvement, including higher fuel surcharges. We continued cost reductions during the third quarter of 2023 to mitigate the impact of volume declines, including reducing flight hours,levels, temporarily parking aircraft, ~~improving productivity,~~ and ~~consolidating routes and closing sorts. The impact of these cost reductions lagged volume declines, and operating expenses remained high relative~~shifting to ~~demand~~one delivery wave per day in the ~~third quarter and nine months of 2023. Currency exchange rates had a negative effect on~~U.S. Reduced revenue, ~~a positive effect on expenses, and a slightly negative effect on~~including lower volume from the USPS, partially offset our operating income improvement in the ~~third~~first quarter ~~and nine months~~ of ~~2023.~~2024.

Fuel expense ~~increased 13%~~decreased 40% in the ~~third~~first quarter ~~and 43% in the nine months~~ of ~~2023. The third quarter increase was~~2024 due to a 31% ~~increase~~decrease in fuel prices ~~partially offset by~~and a 13% ~~decline~~decrease in total fuel gallons. ~~The nine-months increase was~~Other operating expense decreased 11% in the first quarter of 2024 primarily due to lower outside service contracts expense resulting from a ~~54% increase~~decrease in ~~fuel prices, partially offset by a 7% decline in total fuel gallons.~~temporary labor usage and lower bad debt expense. Purchased transportation expense decreased ~~12%~~7% in the ~~third~~first quarter ~~and 10% in the nine months~~ of ~~2023~~2024 primarily due to ~~favorable exchange~~lower rates ~~and lower utilization.~~for third-party transportation services, partially offset by increased utilization of these services. Salaries and employee benefits expense decreased 4%2% in the ~~third~~first quarter ~~and 3% in the nine months~~ of ~~2023~~2024 primarily due to ~~favorable currency exchange rates,~~ decreased staffing to align with lower volume, ~~and lower~~partially offset by higher variable incentive compensation ~~partially offset by increased~~and wage rates. ~~Rentals~~Maintenance and ~~landing fees~~repairs decreased 12% in the ~~third~~first quarter ~~and 10%~~of 2024 primarily due to lower aircraft maintenance resulting from an increase in aircraft temporarily parked.

FedEx Express segment results include business optimization costs of $10 million in the ~~nine months~~first quarter of ~~2023 due~~2024 associated with our plan to ~~decreased aircraft leases and favorable currency exchange rates. Other operating expense decreased 6% in the third quarter and 1% in the nine months of 2023 due to favorable currency exchange rates~~drive efficiency and lower ~~outside service contract expense, partially offset by higher bad debt expense.~~our overhead and support costs.

FedEx Express segment results include $14 million of business realignment costs ~~of $3 million~~ in the ~~third~~first quarter ~~and $17 million in the nine months~~ of 2023 associated with our workforce reduction plan in Europe. ~~We recognized $107 million of costs in~~

During the ~~third~~first quarter of ~~2022 and $218 million in~~2024, FedEx Express’s pilots failed to ratify the ~~nine months of 2022 under this program. No business optimization costs were incurred in~~tentative successor agreement that was approved by the ~~third quarter of 2023 at FedEx Express.~~Air Line Pilots Association, International’s FedEx Express ~~segment results include business optimization costs~~Master Executive Council in June 2023. Bargaining for a successor agreement continues. The conduct of ~~$11 million in~~mediated negotiations has no impact on our operations. See Note 1 of the ~~nine months of 2023, which includes costs associated with idling our business in Russia. See the “Business Optimization and Realignment Costs” section of this MD&A~~accompanying unaudited condensed consolidated financial statements for ~~more~~additional information.

~~FedEx Express segment results include $24 million of TNT Express integration expenses in the third quarter and $77 million of such expenses in the nine months 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~~table compares 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 ~~February 28:~~August 31:


	Three Months Ended						Percent				Nine Months Ended						Percent				Three Months Ended						Percent				Percent of Revenue
	2023			2022			Change				2023			2022			Change				2023			2022			Change				2023			2022
Revenue	$	8,658		$	8,800			(2	)		$	25,211		$	24,741			2			$	8,420		$	8,160			3				100.0	%		100.0	%
Operating expenses:
Salaries and employee benefits		1,759			1,950			(10	)			5,123		$	5,418			(5	)			1,667			1,637			2				19.8			20.1
Purchased transportation		3,722			4,023			(7	)			11,263			11,441			(2	)			3,427			3,713			(8	)			40.7			45.5
Rentals		426			373			14				1,230			1,039			18				423			390			8				5.0			4.8
Depreciation and amortization		258			233			11				753			682			10				273			246			11				3.3			3.0
Fuel		9			9			—				28			22			27				7			9			(22	)			0.1			0.1
Maintenance and repairs		155			148			5				472			433			9				159			155			3				1.9			1.9
Business optimization and realignment costs																						17			—		NM					0.2			—
Intercompany charges		483			489			(1	)			1,466			1,460			—				508			490			4				6.0			6.0
Other		1,002			934			7				2,740			2,453			12				836			826			1				9.9			10.1
Total operating expenses		7,814			8,159			(4	)			23,075			22,948			1				7,317			7,466			(2	)			86.9	%		91.5	%
Operating income	$	844		$	641			32			$	2,136		$	1,793			19			$	1,103		$	694			59
Operating margin		9.7	%		7.3	%		240		bp		8.5	%		7.2	%		130		bp		13.1	%		8.5	%		460		bp
Average daily package volume (ADV)(1):
Ground commercial		4,226			4,503			(6	)			4,372			4,565			(4	)			4,479			4,368			3
Home delivery		4,359			4,860			(10	)			4,115			4,305			(4	)			3,846			3,912			(2	)
Economy		843			1,207			(30	)			800			1,216			(34	)			736			730			1
Total ADV		9,428			10,570			(11	)			9,287			10,086			(8	)			9,061			9,010			1
Revenue per package (yield)	$	11.80		$	10.62			11			$	11.61		$	10.40			12			$	11.80		$	11.48			3

FedEx Ground segment revenue ~~decreased 2%~~increased 3% in the ~~third~~first quarter ~~and increased 2% in the nine months~~ of ~~2023. The third quarter decrease was~~2024 primarily due to ~~lower volumes, partially offset by~~ yield improvement. ~~The nine-months increase was~~Yield increased in the first quarter of 2024 primarily due to base yield improvement, partially offset by lower ~~volumes.~~

~~FedEx Ground yield increased 11% in the third quarter and 12% in the nine months of 2023 primarily due to higher~~ fuel ~~surcharges, base yield improvement, and a mix shift towards higher-yielding business-to-consumer products in the third quarter and nine months of 2023.~~surcharges. Total average daily volume ~~decreased 11%~~increased 1% in the ~~third~~first quarter ~~and 8% in the nine months~~ of ~~2023~~2024 primarily due to ~~reduced~~increased demand for our ~~services.~~

FedEx Ground segment operating income increased ~~32%~~59% in the ~~third~~first quarter ~~and 19% in the nine months~~ of ~~2023~~2024 primarily due to yield improvement ~~including higher fuel surcharges, partially offset by lower volume~~ and ~~other~~reduced operating expenses. ~~The third~~We lowered our costs in the first quarter of 2024 through DRIVE initiatives that lowered linehaul expense and ~~nine months of 2023 results benefited~~improved dock and pickup-and-delivery productivity. In addition, we also continued to realize benefits from ~~certain cost reductions to mitigate the effect of volume declines, primarily a reduction in peak wage programs, the consolidation and closing of certain~~consolidated sort ~~and linehaul~~ operations ~~cancellation of network capacity projects,~~ and reduced Sunday ~~delivery coverage.~~deliveries during the first quarter of 2024.

Salaries and employee benefits decreased 10% in the third quarter and 5% in the nine months of 2023 primarily due to decreased staffing to align with lower volume, lower variable incentive compensation, and increased productivity, partially offset by higher wage rates. Purchased transportation expense decreased 7%8% in the ~~third~~first quarter ~~and 2% in the nine months~~ of ~~2023~~2024 primarily due to lower ~~volumes, partially offset by higher~~ fuel prices and ~~lower productivity. Other operating~~base rates. Rentals and depreciation expense increased 7%8% and 11%, respectively, in the ~~third~~first quarter ~~and 12% in the nine months~~ of 2023 primarily due to higher self-insurance accruals and higher outside service contracts expense, partially offset by lower bad debt expense. Rentals increased 14% in the third quarter and 18% in the nine months of 20232024 due to the completion of previously committed multi-year expansion projects. Salaries and employee benefits increased 2% in the first quarter of 2024 due to higher wage rates and variable incentive compensation, partially offset by an increase in productivity.

FedEx Ground segment results include business optimization costs of $17 million in the first quarter of 2024 associated with our plan to drive efficiency and lower our overhead and support costs.

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~~table compares revenue, operating expenses, operating income (dollars in millions), operating margin, selected statistics, and operating expenses as a percent of revenue for the periods ended ~~February 28:~~August 31:


	Percent of Revenue												Three Months Ended						Percent				Percent of Revenue
	Three Months Ended						Nine Months Ended						2023			2022			Change				2023			2022
	2023			2022			2023			2022
Revenue													$	2,291		$	2,723			(16	)			100.0	%		100.0	%
Operating expenses:
Salaries and employee benefits		43.3	%		45.0	%		41.3	%		44.7	%		973			1,059			(8	)			42.5			38.9
Purchased transportation		7.8			10.5			7.9			10.6			149			221			(33	)			6.5			8.1
Rentals		3.0			2.7			2.7			2.7			68			65			5				2.9			2.4
Depreciation and amortization		3.4			4.4			3.8			4.5			107			106			1				4.7			3.9
Fuel		7.4			6.7			8.2			6.4			138			228			(39	)			6.0			8.4
Maintenance and repairs		3.5			2.9			3.3			2.9			75			80			(6	)			3.3			2.9
Intercompany charges		6.0			5.7			5.3			5.7			135			132			2				5.9			4.9
Other		7.9			7.1			7.4			6.8			165			181			(9	)			7.2			6.6
Total operating expenses		82.3			85.0			79.9			84.3			1,810			2,072			(13	)			79.0	%		76.1	%
Operating income													$	481		$	651			(26	)
Operating margin		17.7	%		15.0	%		20.1	%		15.7	%		21.0	%		23.9	%		(290	)	bp
Average daily shipments (in thousands):
Priority														66.1			76.2			(13	)
Economy														28.5			32.1			(11	)
Total average daily shipments														94.6			108.3			(13	)
Weight per shipment (lbs):
Priority														989			1,054			(6	)
Economy														876			938			(7	)
Composite weight per shipment														955			1,020			(6	)
Revenue per shipment:
Priority													$	353.01		$	369.60			(4	)
Economy														407.99			423.59			(4	)
Composite revenue per shipment													$	369.56		$	385.61			(4	)
Revenue per hundredweight:
Priority													$	35.71		$	35.06			2
Economy														46.59			45.16			3
Composite revenue per hundredweight													$	38.71		$	37.82			2

FedEx Freight segment revenue decreased 3%16% in the ~~third~~first quarter ~~and increased 9% in the nine months~~ of ~~2023.~~2024. The ~~third~~first quarter decrease was primarily due to lower ~~volumes, partially offset by yield improvement. The nine-months increase was primarily due to yield improvement, partially offset by lower volumes.~~

~~Revenue per shipment increased 11% in the third quarter~~shipments and ~~19% in the nine months of 2023 primarily due to continued focus on revenue quality, including higher~~ fuel surcharges, partially offset by ~~lower weight per shipment.~~ base yield improvement.

Average daily shipments decreased ~~12%~~13% in the ~~third~~first quarter ~~and 8% in the nine months~~ of ~~2023~~2024 due to reduced demand for our ~~services.~~services, primarily resulting from macroeconomic conditions. Revenue per shipment decreased 4% in the first quarter of 2024 primarily due to lower fuel surcharges, partially offset by base yield improvement resulting from our continued focus on revenue quality.

FedEx Freight segment operating income ~~increased 15%~~decreased 26% in the ~~third~~first quarter of 2024 driven primarily by lower fuel surcharges and shipments, partially offset by base yield improvement.

Fuel expense decreased 39% in the nine months of 2023 driven by yield improvement, including higher fuel surcharges, partially offset by lower volumes. Additionally, FedEx Freight results were positively affected by a gain on the sale of a facility during the thirdfirst quarter of ~~2023.~~

~~Purchased transportation expense decreased 27% in the third-quarter and 19% in the nine months of 2023 primarily~~2024 due to lower ~~volumes and reduced utilization due to a shift to company linehaul. Fuel expense increased 7% in the third quarter and 38% in the nine months of 2023 primarily due to increased~~ fuel prices ~~partially offset by lower volume. Other operating expense increased 8% in the third quarter~~ and 17% in the nine months of 2023. The third-quarter increase was primarily due to higher self-insurance accruals, and the nine-months increase was primarily due to higher self-insurance accruals and bad debt expense. Maintenance and repairs expense increased 17% in the third quarter and 25% in the nine months of 2023 primarily due to higher costs associated with vehicle parts, outside vendor labor, and facility maintenance.decreased shipments. Salaries and employee benefits expense decreased 7%8% in the ~~third~~first quarter of 2024 primarily due to lower ~~volumes,~~staffing to align with decreased shipments and an increase in productivity, partially offset by higher wage ~~rates~~rates. Purchased transportation expense decreased 33% in the first quarter of 2024 primarily due to lower shipments and ~~lower productivity.~~fuel prices and a shift to company linehaul.

Cash and cash equivalents totaled ~~$5.4~~$7.1 billion at ~~February 28,~~August 31, 2023, compared to $6.9 billion at May 31, ~~2022,~~2023, respectively. The following table provides a summary of our cash flows for the ~~nine-month~~three-month periods ended ~~February 28~~August 31 (in millions):


	2023			2022			2023			2022
Operating activities:
Net income	$	2,434		$	3,268		$	1,078		$	875
Business optimization and realignment costs/(payments), net		20			128
Business optimization and realignment costs, net of payments								(73	)		(14	)
Other noncash charges and credits		6,204			6,188			1,958			2,111
Changes in assets and liabilities		(3,257	)		(3,254	)		(733	)		(1,365	)
Cash provided by operating activities		5,401			6,330			2,230			1,607
Investing activities:
Capital expenditures		(4,420	)		(4,379	)		(1,290	)		(1,284	)
Purchase of investments		(82	)		(145	)		(2	)		(35	)
Proceeds from asset dispositions and other		72			71			12			10
Cash used in investing activities		(4,430	)		(4,453	)		(1,280	)		(1,309	)
Financing activities:
Principal payments on debt		(123	)		(113	)		(66	)		(29	)
Proceeds from stock issuances		114			151			157			81
Dividends paid		(888	)		(598	)		(318	)		(299	)
Purchase of treasury stock		(1,500	)		(2,248	)		(500	)		—
Other, net		1			—
Cash used in financing activities		(2,396	)		(2,808	)		(727	)		(247	)
Effect of exchange rate changes on cash		(99	)		(91	)		(24	)		(98	)
Net decrease in cash and cash equivalents	$	(1,524	)	$	(1,022	)
Net increase (decrease) in cash and cash equivalents							$	199		$	(47	)
Cash and cash equivalents at the end of period	$	5,373		$	6,065		$	7,055		$	6,850

Cash flows from operating activities ~~decreased $929~~increased $623 million in the ~~nine months~~first quarter of ~~2023~~2024 primarily due to ~~lower~~working capital changes, driven by an increase in accrued liabilities partially offset by a decrease in accounts receivable from the first quarter of 2023, and an increase in net income. Capital expenditures increased slightly during the ~~nine~~three months of ~~2023~~2024 due to increased spending on aircraft and related equipment at FedEx Express, partially offset by decreased spending on package handling equipment and vehicles and trailers ~~partially offset by decreased aircraft~~at FedEx Ground and FedEx Freight, as well as reduced spending on information technology ~~spending.~~at FedEx Services, FedEx Express, and FedEx Ground. See “Capital Resources” for a discussion of capital expenditures during ~~2023~~2024 and ~~2022.~~2023.

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, during the ~~third~~first quarter of ~~2023,~~2024, we completed an ASR ~~agreement~~transaction with a bank to repurchase an aggregate of ~~$1.5 billion~~$500 million 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 ~~February 28,~~August 31, 2023, ~~$2.6~~$2.1 billion remained available 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 ~~February 28~~August 31 (in millions):


									Percent Change 2023/2022
	Three Months Ended				Nine Months Ended				Three Months			Nine Months			Three Months Ended
	2023		2022		2023		2022		Ended			Ended			2023		2022		Percent Change

Aircraft and related equipment	$	389	$	136	$	1,263	$	1,482		186			(15	)	$	554	$	203		173
Package handling and ground support equipment		383		410		1,324		1,120		(7	)		18			218		436		(50	)
Vehicles and trailers		154		227		503		373		(32	)		35			167		217		(23	)
Information technology		111		167		560		634		(34	)		(12	)		153		201		(24	)
Facilities and other		241		296		770		770		(19	)		—			198		227		(13	)
Total capital expenditures	$	1,278	$	1,236	$	4,420	$	4,379		3			1		$	1,290	$	1,284		—

FedEx Express segment	$	653	$	462	$	2,177	$	2,339		41			(7	)	$	882	$	530		66
FedEx Ground segment		456		572		1,469		1,379		(20	)		7			192		441		(56	)
FedEx Freight segment		104		84		344		125		24			175			91		150		(39	)
FedEx Services segment		37		94		334		464		(61	)		(28	)		98		129		(24	)
Other		28		24		96		72		17			33			27		34		(21	)
Total capital expenditures	$	1,278	$	1,236	$	4,420	$	4,379		3			1		$	1,290	$	1,284		—

Capital expenditures increased slightly in the ~~third~~first quarter of ~~2023~~2024 primarily due to increased spending on aircraft and related equipment at FedEx Express, partially offset by decreased spending on package handling equipment and vehicles and trailers at FedEx Ground and FedEx Freight, as well as reduced spending on information technology at FedEx Services, ~~and facilities at~~ FedEx Express, and FedEx Ground. Capital expenditures increased in the nine months of 2023 primarily due to increased spending on package handling equipment at FedEx Ground and FedEx Express and vehicles and trailers at FedEx Freight, partially offset by decreased spending on aircraft and related equipment at FedEx Express and information technology at FedEx Services.

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 ~~$19.1~~$19.2 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 ~~$840~~$814 million principal amount of the Certificates. See Note 4 of the accompanying unaudited condensed consolidated financial statements and Note 76 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 ~~February 28,~~August 31, 2023 and May 31, ~~2022~~2023 (in millions):


	February 28, 2023		May 31, 2022		August 31, 2023		May 31, 2023
Current Assets	$	10,265	$	11,768	$	11,204	$	10,758
Intercompany Receivable		3,310		4,157		3,446		3,566
Total Assets		89,572		88,331		86,377		89,947
Current Liabilities		9,840		10,324		10,226		9,933
Intercompany Payable		—		—		—		—
Total Liabilities		60,741		58,883		55,905		59,837

The following table presents the summarized statement of income information for the ~~nine-month~~three-month period ended ~~February 28,~~August 31, 2023 (in millions):


Revenue	$	50,758		$	16,315
Intercompany Charges, net		(3,742	)		(904	)
Operating Income		3,225			1,326
Intercompany Charges, net		121			49
Income Before Income Taxes		3,036			1,205
Net Income	$	2,308		$	906

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 ~~February 28,~~August 31, 2023 and May 31, ~~2022~~2023 (in millions):


	February 28, 2023		May 31, 2022		August 31, 2023		May 31, 2023
Current Assets	$	3,711	$	4,687	$	4,562	$	4,408
Intercompany Receivable		—		—		—		—
Total Assets		69,997		68,449		71,262		70,016
Current Liabilities		5,214		5,155		6,503		5,100
Intercompany Payable		10,592		7,473		9,381		11,011
Total Liabilities		49,661		47,830		49,051		48,246

The following table presents the summarized statement of income information for the ~~nine-month~~three-month period ended ~~February 28,~~August 31, 2023 (in millions):


Revenue	$	18,096		$	5,565
Intercompany Charges, net		(2,627	)		(527	)
Operating Income		200			(70	)
Intercompany Charges, net		189			9
Income Before Income Taxes		1,553			454
Net Income	$	1,495		$	585

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,~~slowdown in the economy, inflationary pressures, rising fuel prices, and geopolitical conflicts. We have ~~$5.4~~$7.1 billion in cash at ~~February 28,~~August 31, 2023 and $3.5 billion in available liquidity under our $1.5 billion three-year credit agreement (the “Three-Year Credit Agreement”) and $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~~Three-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, and dividend payments.

We executed an ASR agreement in June 2023 to repurchase an aggregate of $500 million of our common stock that was completed in August 2023. See Note 1 of the accompanying unaudited condensed consolidated financial statements for more information. We expect to repurchase an additional $1.5 billion of our common stock in 2024.

Our cash and cash equivalents balance at ~~February 28,~~August 31, 2023 includes ~~$2.3~~$2.6 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.

~~We expect~~Our capital expenditures of approximately $5.9 billion in 2023. We expect our capital spend to be lower compared to 2022 due to lower aircraft fleet modernization spend. We invested $1.3 billion in aircraft and related equipment in the nine months of 2023 and expect to invest an additional $0.2 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, which2024 are expected to ~~total $1.5~~be approximately $5.7 billion, ~~and $1.8~~a decrease of $0.5 billion ~~respectively, over the life of each project. While~~from 2023, as we continue to ~~invest in~~reduce our ~~business, the~~ capital intensity relative to ~~revenue is expected~~revenue. We expect lower aircraft spend and reduced capacity investment to ~~remain below historical levels.~~be partially offset by investments to optimize our networks and modernize our facilities.

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~~under way 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 Three-Year Credit Agreement expires in March 2025. 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 ~~nine months~~first quarter of ~~2023,~~2024, we made voluntary contributions totaling ~~$800~~$200 million to our tax-qualified U.S. domestic pension ~~plans~~plan (“U.S. Pension ~~Plans”~~Plan”). We ~~do not expect to make any~~anticipate making $600 million of additional voluntary contributions ~~to our U.S. Pension Plans in~~during the ~~fourth quarter~~remainder of ~~2023.~~2024. There are currently no required minimum contributions to our U.S. Pension ~~Plans based on our funded status~~Plan, and ~~the fact~~ we ~~have~~maintain a credit balance related to our cumulative excess voluntary pension contributions over those required that exceeds ~~$3.8~~$3.0 billion. The credit balance is subtracted from plan assets to determine the minimum funding requirements. Therefore, we ~~could~~have the flexibility to eliminate all required contributions to our principal U.S. Pension ~~Plans~~Plan 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~~Plan has 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. ~~Ongoing weak global economic conditions had~~We do not believe there has been any change of events or circumstances that would indicate that a ~~negative impact on our overall earnings and~~reevaluation of the ~~profitability~~goodwill of our reporting units ~~during~~is required as of August 31, 2023, ~~which has reduced our market capitalization. However,~~nor do we ~~do not~~ believe ~~that these factors indicate that~~ the ~~fair value~~goodwill of our reporting units ~~has more likely than not fallen below their carrying values as~~is at risk of ~~February 28, 2023. There is risk, however, if economic conditions deteriorate further, that we could record a noncash~~failing impairment ~~charge relating to goodwill during the fourth quarter of 2023 in connection with our annual impairment tests for one or more of our reporting units, particularly at FedEx Express.~~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 Optimization and Realignment Costs,” “Income Taxes,” “Outlook,” “Liquidity Outlook,” “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 ~~February 28,~~August 31, 2023, 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 ~~nine months~~quarter of ~~2023,~~2024, the U.S. dollar strengthened relative to the currencies of the foreign countries in which we operate, as compared to the first ~~nine months~~quarter of ~~2022,~~2023, and this strengthening had a slightly 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 ~~February 28,~~August 31, 2023 (the end of the period covered by this Quarterly Report on Form 10-Q).

During the ~~third~~first quarter of ~~2023,~~2024, we successfully completed a significant migration to an enterprise resource planning cloud-based financial system for a number of our domestic operating companies, building on the phased migration plan which began with our international operating companies in prior years. We implemented new internal controls in conjunction with the migration. During our fiscal quarter ended ~~February 28,~~August 31, 2023, no change occurred in our internal control over financial reporting, including the new controls described above, 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.~~

Additional migrations to the cloud-based financial system ~~will~~are expected to occur through 2024 and will result in further changes to our internal controls over financial reporting. As changes occur, we will evaluate quarterly whether such changes materially affect 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, which is incorporated by reference herein.

~~Other than the risk factors set forth below, there~~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 reductions 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 implement cost reductions to mitigate the effect of 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 reductions 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 service providers and 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 and availability, 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 effect of 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) may seek to increase pay rates or modify contract terms and may refuse to provide service to FedEx 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.

Changes in the business or financial soundness of the U.S. Postal Service (“USPS”), including strategic changes to its operations to reduce its reliance on the air network of FedEx Express, are likely to have an adverse effect on our results of operations and financial condition. The USPS is the largest customer of FedEx Express, which provides domestic air transportation services for the USPS’s First Class Mail, Priority Mail Express, and Priority Mail and transportation and delivery for the USPS’s international delivery service. See “Item 1. Business” of our Annual Report under “FedEx Express Segment” for more information.

Pursuant to previously announced plans to restructure its operations, the USPS continues to implement strategic changes to its operations to reduce its reliance on the air network of FedEx Express, which had an immaterial negative impact on our results of operations in the third quarter of 2023. FedEx Express expects lower volumes from the USPS in the fourth quarter of 2023 and in 2024. Additional changes in the USPS’s business, including further structural changes to its operations, network, volume levels, service offerings, service commitments, or pricing, could have additional negative impacts on our revenue, results of operations, and financial condition. The USPS’s contract with FedEx Express for domestic services expires on September 29, 2024, and there is no assurance that the contract will be renewed on terms that are commercially acceptable to FedEx.

The following table provides information on FedEx’s repurchases of our common stock during the ~~third~~first quarter of ~~2023:~~2024:

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 ~~March 14,~~September 20, 2023, ~~$2.6~~$2.1 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.

As part of the repurchase program, we entered into an ASR ~~agreement~~transaction with a bank in ~~October 2022~~June 2023 to repurchase ~~$1.5 billion~~$500 million of our common stock. During the ~~third~~first quarter of ~~2023,~~2024, the ASR transaction was completed, and ~~1.3~~2.0 million shares were delivered under the ASR agreement. The shares delivered under the ASR agreement were the only shares of FedEx common stock we repurchased during the ~~third~~first quarter of ~~2023.~~2024.

See Note 1 of the accompanying unaudited condensed consolidated financial statements for additional information regarding the ASR ~~transaction.~~transaction and “Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition – Financial Condition – Liquidity Outlook” for information regarding our expected stock repurchases during the remainder of 2024.

~~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 and maintains patents 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, inDuring the quarter ended ~~February 28,~~August 31, 2023, no director or officer of FedEx ~~paid $120 to IIPO~~adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as ~~part~~such terms are defined in Item 408(a) of ~~its intellectual property protection efforts in Iran. FedEx plans to continue these activities, as authorized under the specific license.~~Regulation S-K.

* 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 ~~March 14,~~September 18, 2023
Common Stock, par value $0.10 per share		~~251,351,937~~251,420,447


		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets ~~February 28,~~August 31, 2023 and May 31, ~~2022~~2023		3
Condensed Consolidated Statements of Income Three ~~and Nine~~ Months Ended ~~February 28,~~August 31, 2023 and 2022		5
Condensed Consolidated Statements of Comprehensive Income Three ~~and Nine~~ Months Ended ~~February 28,~~August 31, 2023 and 2022		6
Condensed Consolidated Statements of Cash Flows ~~Nine~~Three Months Ended ~~February 28,~~August 31, 2023 and 2022		7
Condensed Consolidated Statements of Changes In Common Stockholders’ Investment Three ~~and Nine~~ Months Ended ~~February 28,~~August 31, 2023 and 2022		8
Notes to Condensed Consolidated Financial Statements		9
Report of Independent Registered Public Accounting Firm		2021
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		2122
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		4342
ITEM 4. Controls and Procedures		4442

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		4443
ITEM 1A. Risk Factors		4443
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		4643
ITEM 5. Other Information		4643
ITEM 6. Exhibits		4744
Signature		4845

Exhibit ~~10.1~~10.3
Exhibit ~~10.2~~10.4
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)
Dec. 1-31, 2022		1,257,868	$	163.39		1,257,868	$	2,570
Jan. 1-31, 2023		—		—		—		—
Feb. 1-28, 2023		—		—		—		—
Total		1,257,868				1,257,868		2,570


Exhibit Number		Description of Exhibit

~~3.1~~		~~Amended and Restated Bylaws of FedEx. (Filed as Exhibit 3.1 to FedEx’s Current Report on Form 8-K dated March 6, 2023 and filed March 6, 2023, and incorporated herein by reference.)~~

*10.1		~~Letter~~Sixteenth Amendment dated June 27, 2023 (but effective as of May 1, 2023) to the Composite Lease Agreement dated May 21, 2007 (but effective as of ~~December 15, 2022, amending~~January 1, 2007) between the ~~Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between The Boeing Company~~Memphis-Shelby County Airport Authority and FedEx ~~Express~~Express. (Filed as Exhibit 10.16 to FedEx’s FY23 Annual Report on Form 10-K, and ~~the Boeing 767-3S2 Freighter Purchase Agreement dated as of December 14, 2011 between The Boeing Company and FedEx Express (the “Boeing 767-3S2 Freighter Purchase Agreement”)~~incorporated herein by reference).

*^10.2		~~Letter~~Separation and Release Agreement, dated June 19, 2023, between FedEx and Michael C. Lenz (Filed as ~~of January 31,~~Exhibit 10.1 to FedEx’s Current Report on Form 8-K dated June 16, 2023 ~~amending~~and filed June 20, 2023, and incorporated herein by reference).

^10.3		First Amendment to the ~~Boeing 767-3S2 Freighter Purchase Agreement.~~FedEx Retirement Parity Pension Plan, effective June 30, 2022.

^10.4		Second Amendment to the FedEx Retirement Parity Pension Plan, effective September 30, 2023.

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: ~~March 16,~~September 20, 2023			/s/ Jennifer L. Johnson
			Jennifer L. Johnson
			Corporate Vice President and
			Principal Accounting Officer