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

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

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

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

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

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

	August 31, 2019 (Unaudited)		May 31, 2019		August 31, 2020 (Unaudited)		May 31, 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,389	$	2,319	$	6,954	$	4,881
Receivables, less allowances of $304 and $300		9,312		9,116
Receivables, less allowances of $485 and $390						10,508		10,102
Spare parts, supplies and fuel, less allowances of $337 and $335		574		553		593		572
Prepaid expenses and other		742		1,098		848		828
Total current assets		13,017		13,086		18,903		16,383
PROPERTY AND EQUIPMENT, AT COST		61,436		59,511		66,446		65,024
Less accumulated depreciation and amortization		29,826		29,082		32,184		31,416
Net property and equipment		31,610		30,429		34,262		33,608
OTHER LONG-TERM ASSETS
Operating lease right-of-use assets		13,819		—
Operating lease right-of-use assets, net						14,496		13,917
Goodwill		6,821		6,884		6,633		6,372
Other assets		3,185		4,004		3,354		3,257
Total other long-term assets		23,825		10,888		24,483		23,546
	$	68,452	$	54,403	$	77,648	$	73,537

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

	August 31, 2019 (Unaudited)			May 31, 2019			August 31, 2020 (Unaudited)			May 31, 2020
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt	$	35		$	964			87			51
Accrued salaries and employee benefits		1,522			1,741			1,756			1,569
Accounts payable		3,179			3,030			3,339			3,269
Operating lease liabilities		1,896			—			2,024			1,923
Accrued expenses		3,303			3,278			3,989			3,532
Total current liabilities		9,935			9,013			11,195			10,344
LONG-TERM DEBT, LESS CURRENT PORTION		18,726			16,617			23,204			21,952
OTHER LONG-TERM LIABILITIES
Deferred income taxes		2,953			2,821			3,171			3,162
Pension, postretirement healthcare and other benefit obligations		4,132			5,095			5,036			5,019
Self-insurance accruals		1,924			1,899			2,147			2,104
Operating lease liabilities		12,137			—			12,714			12,195
Deferred lease obligations		—			531
Other liabilities		479			670			719			466
Total other long-term liabilities		21,625			11,016			23,787			22,946
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of August 31, 2019 and May 31, 2019		32			32
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of August 31, 2020 and May 31, 2020								32			32
Additional paid-in capital		3,257			3,231			3,375			3,356
Retained earnings		25,048			24,648			26,108			25,216
Accumulated other comprehensive loss		(918	)		(865	)		(1,020	)		(1,147	)
Treasury stock, at cost		(9,253	)		(9,289	)		(9,033	)		(9,162	)
Total common stockholders’ investment		18,166			17,757			19,462			18,295
	$	68,452		$	54,403		$	77,648		$	73,537

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

	Three Months Ended						Three Months Ended August 31,
	August 31,						2020			2019
	2019			2018
REVENUES	$	17,048		$	17,052
REVENUE							$	19,321		$	17,048
OPERATING EXPENSES:
Salaries and employee benefits		6,087			6,260			6,852			6,087
Purchased transportation		4,028			3,967			4,977			4,028
Rentals and landing fees		920			823			936			920
Depreciation and amortization		879			808			926			879
Fuel		870			986			565			870
Maintenance and repairs		768			735			806			768
Other		2,519			2,402			2,669			2,519
		16,071			15,981			17,731			16,071
OPERATING INCOME		977			1,071			1,590			977
OTHER INCOME (EXPENSE):
Interest, net		(137	)		(127	)		(184	)		(137	)
Other retirement plans income		168			158			201			168
Other, net		(12	)		(1	)		(1	)		(12	)
		19			30			16			19
INCOME BEFORE INCOME TAXES		996			1,101			1,606			996
PROVISION FOR INCOME TAXES		251			266			361			251
NET INCOME	$	745		$	835		$	1,245		$	745
EARNINGS PER COMMON SHARE:
Basic	$	2.86		$	3.15		$	4.75		$	2.86
Diluted	$	2.84		$	3.10		$	4.72		$	2.84
DIVIDENDS DECLARED PER COMMON SHARE	$	1.30		$	1.30		$	1.30		$	1.30

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

	Three Months Ended						Three Months Ended
	August 31,						August 31,
	2019			2018			2020			2019
NET INCOME	$	745		$	835		$	1,245		$	745
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of tax benefit of $3 in 2019 and $24 in 2018		(83	)		(162	)
Amortization of prior service credit, net of tax benefit of $6 in 2019 and $7 in 2018		(21	)		(23	)
Foreign currency translation adjustments, net of tax benefit of $2 in 2020 and $3 in 2019								129			(83	)
Amortization of prior service credit, net of tax benefit of $1 in 2020 and $6 in 2019								(2	)		(21	)
		(104	)		(185	)		127			(104	)
COMPREHENSIVE INCOME	$	641		$	650		$	1,372		$	641

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

	Three Months Ended
	August 31,						Three Months Ended August 31,
	2019			2018			2020			2019
Operating Activities:
Net income	$	745		$	835		$	1,245		$	745
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		879			808			926			879
Provision for uncollectible accounts		105			82			143			105
Stock-based compensation		67			68			75			67
Deferred income taxes and other noncash items		694			23
Other noncash items and deferred income taxes								531			694
Changes in assets and liabilities:
Receivables		(267	)		(380	)		(387	)		(267	)
Other assets		(118	)		(120	)		(30	)		(118	)
Accounts payable and other liabilities		(1,537	)		(584	)		198			(1,537	)
Other, net		(3	)		(31	)		(50	)		(3	)
Cash provided by operating activities		565			701			2,651			565
Investing Activities:
Capital expenditures		(1,418	)		(1,179	)		(1,424	)		(1,418	)
Proceeds from asset dispositions and other		(1	)		78			6			(1	)
Cash used in investing activities		(1,419	)		(1,101	)		(1,418	)		(1,419	)
Financing Activities:
Proceeds from short-term borrowings, net		—			299
Principal payments on debt		(985	)		(2	)		(45	)		(985	)
Proceeds from debt issuances		2,093			—			959			2,093
Proceeds from stock issuances		12			25			82			12
Dividends paid		(170	)		(173	)		(170	)		(170	)
Purchase of treasury stock		(3	)		(625	)		—			(3	)
Other, net		(5	)		4			(1	)		(5	)
Cash provided by (used in) financing activities		942			(472	)
Cash provided by financing activities								825			942
Effect of exchange rate changes on cash		(18	)		(24	)		15			(18	)
Net increase (decrease) in cash and cash equivalents		70			(896	)
Net increase in cash and cash equivalents								2,073			70
Cash and cash equivalents at beginning of period		2,319			3,265			4,881			2,319
Cash and cash equivalents at end of period	$	2,389		$	2,369		$	6,954		$	2,389

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

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ INVESTMENT

	Three Months Ended						Three Months Ended
	August 31,						August 31,
	2019			2018			2020			2019
Common Stock
Beginning Balance	$	32		$	32		$	32		$	32
Ending Balance		32			32			32			32
Additional Paid-in-Capital
Additional Paid-in Capital
Beginning Balance		3,231			3,117			3,356			3,231
Employee incentive plans and other		26			37			19			26
Ending Balance		3,257			3,154			3,375			3,257
Retained Earnings
Beginning Balance		24,648			24,823			25,216			24,648
Net Income		745			835			1,245			745
Cash dividends declared ($1.30 and $1.30 per share)		(339	)		(344	)		(341	)		(339	)
Employee incentive plans and other		(2	)		1			(12	)		(2	)
Adoption of new accounting standards on June 1, 2019⁽¹⁾		(4	)		—			—			(4	)
Ending Balance		25,048			25,315			26,108			25,048
Accumulated Other Comprehensive Income
Beginning Balance		(865	)		(578	)		(1,147	)		(865	)
Other comprehensive income, net of tax benefit of $9 and $31		(104	)		(185	)
Other comprehensive income, net of tax benefit of $3 and $9								127			(104	)
Reclassification to retained earnings due to the adoption of a new accounting standard on June 1, 2019⁽²⁾		51			—			—			51
Ending Balance		(918	)		(763	)		(1,020	)		(918	)
Treasury Stock
Beginning Balance		(9,289	)		(7,978	)		(9,162	)		(9,289	)
Purchase of treasury stock (0.02 and 2.6 million shares)		(3	)		(625	)
Employee incentive plans and other (0.3 and 0.3 million shares)		39			38
Purchase of treasury stock (0.0 and 0.02 million shares)								—			(3	)
Employee incentive plans and other (1.0 and 0.3 million shares)								129			39
Ending Balance		(9,253	)		(8,565	)		(9,033	)		(9,253	)
Total Common Stockholders' Investment Balance	$	18,166		$	19,173		$	19,462		$	18,166

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

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, ~~2019~~2020 (“Annual Report”). Significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of August 31, ~~2019,~~2020, and the results of our operations for the three-month periods ended August 31, ~~2019~~2020 and ~~2018,~~2019, cash flows for the three-month periods ended August 31, ~~2019~~2020 and ~~2018,~~2019, and changes in common stockholders’ investment for the three-month periods ended August 31, ~~2019~~2020 and ~~2018.~~2019. Operating results for the three-month period ended August 31, ~~2019~~2020 are not necessarily indicative of the results that may be expected for the year ending May 31, ~~2020.~~2021.

~~RECLASSIFICATIONS. Certain reclassifications have been made to the prior years’ condensed consolidated financial statements to conform to the current year presentation.~~

Contract assets include billed and unbilled amounts resulting from in-transit ~~packages,~~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 ~~packages~~shipments totaled ~~$466~~$620 million and ~~$533~~$563 million at August 31, ~~2019~~2020 and May 31, ~~2019,~~2020, respectively. Contract assets net of deferred unearned revenue were ~~$338~~$450 million and ~~$364~~$456 million at August 31, ~~2019~~2020 and May 31, ~~2019,~~2020, 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 ~~$10~~$9 million and ~~$11~~$10 million at August 31, ~~2019~~2020 and May 31, ~~2019,~~2020, respectively. Contract liabilities are included within current liabilities in the accompanying unaudited condensed consolidated balance sheets.

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

	Three Months Ended				Three Months Ended
	2019		2018		2020		2019
REVENUE BY SERVICE TYPE
FedEx Express segment:
Package:
U.S. overnight box	$	1,866	$	1,886	$	1,861	$	1,866
U.S. overnight envelope		479		468		426		479
U.S. deferred		956		952		1,096		956
Total U.S. domestic package revenue		3,301		3,306		3,383		3,301
International priority		1,817		1,874		2,317		1,817
International economy		855		850		616		855
Total international export package revenue		2,672		2,724		2,933		2,672
International domestic⁽¹⁾		1,076		1,131		1,088		1,076
Total package revenue		7,049		7,161		7,404		7,049
Freight:
U.S.		695		730		833		695
International priority		464		533		653		464
International economy		516		519		371		516
International airfreight		66		85		75		66
Total freight revenue		1,741		1,867		1,932		1,741
Other		155		194		311		155
Total FedEx Express segment		8,945		9,222		9,647		8,945
FedEx Ground segment		5,179		4,799		7,040		5,179
FedEx Freight segment		1,905		1,959		1,826		1,905
FedEx Services segment		4		9		8		4
Other and eliminations⁽²⁾		1,015		1,063		800		1,015
	$	17,048	$	17,052	$	19,321	$	17,048

~~LEASES~~. We lease certain facilities, aircraft, equipment and vehicles under operating and finance leases that expire at various dates through 2059. A determination of whether a contract contains a lease is made at the inception of the arrangement. Our leased facilities include national, regional and metropolitan sorting facilities, retail facilities and administrative buildings. We leased 6% of our total aircraft fleet as of August 31, 2019 and May 31, 2019.

Our leases generally contain options to extend or terminate the lease. We reevaluate our leases on a regular basis to consider the economic and strategic incentives of exercising the renewal options, and how they align with our operating strategy. Therefore, substantially all the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the right-of-use asset and lease liability as the options to extend are not reasonably certain at lease commencement.

The lease liabilities are measured at the lease commencement date and determined using the present value of the minimum lease payments not yet paid and our incremental borrowing rate, which approximates the rate at which we would borrow, on a collateralized basis, over the term of a lease in the applicable currency environment. The interest rate implicit in the lease is generally not determinable in transactions where we are the lessee.

For real estate leases, we account for lease components and non-lease components (such as common area maintenance) as a single lease component. Certain real estate leases require additional payments based on sales volume and index based rate increases, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Certain leases contain fixed lease payments for items such as real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots of Federal Express Corporation (“FedEx Express”), who are a small number of its total employees, are employed under a collective bargaining agreement that took effect on November 2, 2015. The collective bargaining agreement is scheduled to become amendable in November 2021. Other than the pilots at FedEx Express, ~~and drivers at one FedEx Freight, Inc. facility, our U.S. employees have thus far chosen not to unionize (we acquired FedEx Supply Chain Distribution System, Inc. in 2015, which already had~~ a small number of our employees ~~who~~ are members of ~~unions). Additionally, certain FedEx Express non-U.S. employees are unionized, and a union has been certified to represent owner-drivers at a FedEx Freight Canada, Corp. facility.~~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 $75 million for the three-month period ended August 31, 2020 and $67 million for the three-month period ended August 31, ~~2019 and $68 million for the three-month period ended August 31, 2018.~~2019. Due to its immateriality, additional disclosures related to stock-based compensation have been excluded from this quarterly report.

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

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

If a derivative is designated as a cash flow hedge, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in other comprehensive income. For net investment hedges, the entire change in the fair value is recorded in ~~the currency translation adjustment section of~~ 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. ~~Accordingly, additional disclosures about cash flow hedges are excluded from this report. On~~As of August ~~13, 2019,~~31, 2020, we ~~designated €294~~had €640 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 ~~net investment.~~consolidated subsidiary. As of August 31, ~~2019,~~2020, the designated net investment’s net equity balance exceeds the balance outstanding on the euro-denominated debt and all other critical terms of the hedging instrument and hedged net investment continue to match. Therefore, the hedging relationship is consideredhedge remains effective.

RECENT ACCOUNTING GUIDANCE. New accounting rules and disclosure requirements can significantly impact 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.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new lease accounting standard, which requires lessees to put most leases on their balance sheets but recognize the expenses in their income statements in a manner similar to current practice. Lessees are required to recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Expenses related to leases determined to be operating leases are recognized on a straight-line basis, while those determined to be finance leases are recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement.

We adopted this new standard on June 1, 2019 using a modified retrospective transition method. Using the modified retrospective transition method of adoption, we did not adjust the balance sheet for comparative periods but recorded a cumulative effect adjustment to retained earnings on June 1, 2019. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption. We also elected the practical expedient to not separate lease and non-lease components for the majority of our classes of assets. For leases in which the lease and non-lease components have been combined, the lease expense includes expenses such as common area maintenance. We have made an accounting policy election not to recognize leases with an initial term of 12 months or less on the consolidated balance sheet.

The adoption of the new lease accounting standard resulted in the recognition of an operating lease liability of $14.2 billion and an operating right-of-use asset of $14.1 billion, with an immaterial impact on our income statement compared to the previous lease accounting model. Existing prepaid asset and net deferred rent liability balances of $154 million and $309 million, respectively, were recorded to the right-of-use asset. The cumulative effect of the adoption to retained earnings was an increase of $57 million ($47 million, net of tax), primarily related to the reclassification of deferred gains related to sale-leasebacks of aircraft. Substantially all of our lease arrangements are operating leases under the new standard. The new standard had a material impact on our balance sheet, but did not materially impact consolidated operating results and had no impact on operating cash flows.

In February 2018, the FASB issued ASU 2018-02 that permits companies to reclassify the income tax effect of the Tax Cuts and Jobs Act on items within Accumulated Other Comprehensive Income (“AOCI”) to retained earnings. We adopted this new standard on June 1, 2019.

~~In June 2016, the FASB issued~~ ASU 2016-13 that ~~changes how entities will measure credit losses~~amends the impairment model for most financial assets and certain other instruments that are not measured at fair value through net ~~income. These changes will be~~income, including trade receivables, to utilize an expected loss methodology in place of the incurred loss methodology. We adopted this standard effective June 1, 2020 (fiscal 2021). We ~~are assessing~~updated our process for estimating the expected credit loss to include a review of forecasted information that may impact expected collectability over the lifetime of the asset. See Note 2 for additional information. The adoption of this ~~new~~ standard did not have a material impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15 that reduces the complexity of accounting for costs of implementing a cloud computing service arrangement and aligns the accounting for capitalizing implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software. We adopted this standard effective June 1, 2020 (fiscal 2021) and applied these changes prospectively. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This standard is effective June 1, 2021 (fiscal 2022). We adopted this standard effective June 1, 2020 (fiscal 2021). The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06 that changes how entities account for convertible instruments and contracts in an entity’s own equity. These changes will be effective June 1, ~~2020.~~2022 (fiscal 2023). We are assessing the impact of this new standard on our consolidated financial statements and related disclosures.

TREASURY SHARES. In January 2016, our Board of Directors ~~authorized~~approved a stock repurchase program of up to 25 million shares. We did 0t repurchase any shares of FedEx common stock during the first quarter of 2021. As of August 31, 2020, 5.1 million shares remained under the stock repurchase authorization. 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 limit was set for the completion of the program, and the program may be suspended or discontinued at any time.

During ~~the first quarter of~~ 2020, we ~~repurchased 0.02 million~~amended our amended and restated $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement”) and our $1.5 billion 364-day credit agreement (the “364-Day Credit Agreement” and together with the Five-Year Credit Agreement, the “Credit Agreements”). The amendments to the Credit Agreements, among other things, temporarily restrict us from repurchasing any shares of ~~FedEx~~our common stock ~~at an average price of $156.90 per share~~between May 27, 2020 and May 31, 2021.

See Note 4 for ~~a total of $3 million. As of August 31, 2019, 5.1 million shares remained under~~more information on the ~~stock repurchase authorization.~~amendments to the Credit Agreements.

DIVIDENDS DECLARED PER COMMON SHARE. On August ~~16, 2019,~~14, 2020, our Board of Directors declared a quarterly dividend of $0.65 per share of common stock. The dividend will be paid on October 1, ~~2019~~2020 to stockholders of record as of the close of business on September ~~9, 2019.~~4, 2020. 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. The amendments to the Credit Agreements discussed above under “Treasury Shares” temporarily restrict us from increasing the amount of our quarterly dividend payable per share of common stock from $0.65 per share between May 27, 2020 and May 31, 2021. There are no other 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.

We are exposed to credit losses primarily through our trade receivables. We assess ability to pay for certain customers by conducting a credit review, which considers the customer’s established credit rating and our assessment of creditworthiness. We determine the allowance for credit losses on accounts receivable using a combination of specific reserves for accounts that are deemed to exhibit credit loss indicators and general reserves that are determined using loss rates based on historical write-offs by geography and recent forecasted information, including underlying economic expectations. We update our estimate of credit loss reserves quarterly, considering recent write-offs and collections information and underlying economic expectations.

Our allowance for credit losses was $175 million at May 31, 2020. Credit losses charged to expense for the quarters ended August 31, 2020 and 2019, were $143 million and $105 million, respectively. Our allowance for credit losses as of August 31, 2020 is $222 million.

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

	2019			2018			2020			2019
Foreign currency translation loss:
Balance at beginning of period	$	(954	)	$	(759	)	$	(1,207	)	$	(954	)
Translation adjustments		(83	)		(162	)		129			(83	)
Reclassification to retained earnings due to the adoption of ASU 2018-02		1			—			—			1
Balance at end of period		(1,036	)		(921	)		(1,078	)		(1,036	)
Retirement plans adjustments:
Balance at beginning of period		89			181			60			89
Reclassifications from AOCI		(21	)		(23	)		(2	)		(21	)
Reclassification to retained earnings due to the adoption of ASU 2018-02		50			—			—			50
Balance at end of period		118			158			58			118
Accumulated other comprehensive (loss) at end of period	$	(918	)	$	(763	)	$	(1,020	)	$	(918	)

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

	Amount Reclassified from AOCI						Affected Line Item in the Income Statement	Amount Reclassified from AOCI						Affected Line Item in the Income Statement
	2019			2018				2020			2019
Amortization of retirement plans prior service credits, before tax	$	27		$	30		Salaries and employee benefits	$	3		$	27		Other retirement plans (expense) income
Income tax benefit		(6	)		(7	)	Provision for income taxes		(1	)		(6	)	Provision for income taxes
AOCI reclassifications, net of tax	$	21		$	23		Net income	$	2		$	21		Net income

We have a shelf registration statement filed with the SEC that allows us to sell, in one or more future offerings, any combination of our unsecured debt securities and common ~~stock.~~stock and allows pass through trusts formed by FedEx Express to sell, in one or more future offerings, pass through certificates.

During ~~the first quarter~~August 2020, FedEx Express issued $970 million of ~~2020, we issued $2.1 billion~~Pass Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of ~~senior unsecured debt under our current shelf registration statement, comprised of $1.0 billion of 3.10% fixed-rate notes~~1.875% due in February 2034 utilizing pass through trusts (the “Trusts”). The Certificates are secured by 19 Boeing aircraft with a net book value of $1.9 billion at August 2029, €500 million of 0.45% fixed-rate notes due in August 2025 and €500 million of 1.30% fixed-rate notes due in August 2031. We used the net proceeds to make voluntary contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) during the first quarter of 2020 and to redeem the $400 million aggregate principal amount of 2.30% notes due February 1, 2020 and the €500 million aggregate principal amount of 0.50% notes due April 9,31, 2020. The ~~remaining net~~payment obligations of FedEx Express in respect of the Certificates are fully and unconditionally guaranteed by FedEx. FedEx Express is using the proceeds ~~are being used~~from the issuance for general corporate purposes.

Each Trust meets the definition of a variable interest entity, or VIE, as defined in the Consolidations topic of the Codification (ASC 810), and must be considered for consolidation in our financial statements. Our assessment of the Trusts considers both quantitative and qualitative factors, including the purpose for which the Trust was established and the nature of the risks related to the Trusts. Neither FedEx nor FedEx Express invests in or possesses a financial interest in the Trusts. Rather, FedEx Express has an obligation to

make interest and principal payments, which are fully and unconditionally guaranteed by FedEx, and is not the primary beneficiary of the Trusts. Based on this analysis, we determined that we are not required to consolidate the Trusts.

We have a $2.0 billion ~~five-year credit agreement (the “Five-Year~~Five-Year Credit ~~Agreement”)~~Agreement and a $1.5 billion ~~364-day credit agreement (the “364-Day~~364-Day Credit ~~Agreement” and, together with the Five-Year Credit Agreement, the “Credit Agreements”).~~Agreement. The Five-Year Credit Agreement expires in March ~~2024~~2025 and includes a $250 million letter of credit sublimit. The 364-Day Credit Agreement expires in March ~~2020.~~2021. The Credit Agreements are available to finance our operations and other cash flow needs. The Credit Agreements contain a financial covenant requiring us to maintain a ratio of debt to consolidated earnings (excluding noncash retirement plans mark-to-market adjustments, noncash pension service costs and noncash asset impairment charges) before interest, taxes, depreciation and amortization (“adjusted EBITDA”) of not more than ~~3.5~~4.75 to 1.0, calculated as of ~~the end of the applicable quarter~~August 31, 2020 on a rolling four-quarters basis. The ratio of our debt to adjusted EBITDA was ~~2.41~~2.9 to 1.0 at August 31, ~~2019.~~2020. The Credit Agreements also contain the temporary covenants discussed in Note 1. We believe ~~this covenant is~~these covenants are the only significant restrictive ~~covenant~~covenants in the Credit Agreements. The Credit Agreements contain other customary covenants that do not, individually or in the aggregate, materially restrict the conduct of our business. We are in compliance with the financial covenant and all other covenants in the Credit Agreements and do not expect the covenants to affect our operations, including our liquidity or expected funding needs. If we failed to comply with the financial covenant or any other covenants in the Credit Agreements, our access to financing could become limited.

Information regarding changes to the ratio of debt to adjusted EBITDA required to be maintained under the Credit Agreements through the fourth quarter of 2021 is provided in our Annual Report.

As of August 31, ~~2019,~~2020, 0 commercial paper was ~~outstanding. However, $53~~outstanding and $0.3 million in letters of credit were outstanding, leaving ~~$3.447~~$3.5 billion available under the Credit Agreements for future borrowings.

~~(UNAUDITED)~~
Outstanding commercial paper reduces the amount available to borrow under the Credit Agreements.

Long-term debt, including current maturities and exclusive of finance leases, had carrying values of ~~$18.6~~$22.8 billion at August 31, ~~2019~~2020 and ~~$17.5~~$21.5 billion at May 31, ~~2019,~~2020, compared with estimated fair values of ~~$20.1~~$26.0 billion at August 31, ~~2019~~2020 and ~~$17.8~~$22.8 billion at May 31, ~~2019.~~2020. The annualized weighted-average interest rate on long-term debt was ~~3.4%~~3.5% at August 31, ~~2019.~~2020. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value of our long-term debt is classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

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

	2019		2018		2020		2019
Basic earnings per common share:
Net earnings allocable to common shares⁽¹⁾	$	744	$	834	$	1,243	$	744
Weighted-average common shares		260		265		262		260
Basic earnings per common share	$	2.86	$	3.15	$	4.75	$	2.86
Diluted earnings per common share:
Net earnings allocable to common shares⁽¹⁾	$	744	$	834	$	1,243	$	744
Weighted-average common shares		260		265		262		260
Dilutive effect of share-based awards		2		4		1		2
Weighted-average diluted shares		262		269		263		262
Diluted earnings per common share	$	2.84	$	3.10	$	4.72	$	2.84
Anti-dilutive options excluded from diluted earnings per common share		10.9		3.7		9.0		10.9

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

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

	2019		2018		2020		2019
Defined benefit pension plans, net	$	37	$	28	$	25	$	37
Defined contribution plans		142		144		159		142
Postretirement healthcare plans		22		19		21		22
	$	201	$	191	$	205	$	201

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

	U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans				U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans
	2019			2018			2019			2018			2019		2018		2020			2019			2020			2019			2020		2019
Service cost	$	192		$	172		$	24		$	24		$	11	$	9	$	213		$	192		$	23		$	24		$	11	$	11
Other retirement plans (income) expense:
Interest cost		250			238			11			13			11		10		240			250			10			11			10		11
Expected return on plan assets		(400	)		(377	)		(13	)		(12	)		—		—		(446	)		(400	)		(12	)		(13	)		—		—
Amortization of prior service credit and other		(27	)		(29	)		—			(1	)		—		—		(2	)		(27	)		(1	)		—			—		—
		(177	)		(168	)		(2	)		—			11		10		(208	)		(177	)		(3	)		(2	)		10		11
	$	15		$	4		$	22		$	24		$	22	$	19	$	5		$	15		$	20		$	22		$	21	$	22

For 2021, 0 pension contributions are required for our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) as they are fully funded under the Employee Retirement Income Security Act. We made voluntary contributions to our U.S. Pension Plans of $1.0 billion during the first quarter of 2020.

In 2020, we announced the closing of our U.S.-based defined benefit pension plans to new non-union employees hired on or after January 1, 2020. We will introduce an all-401-(k) plan retirement benefit structure for eligible employees with a higher company match of up to 8% across all U.S.-based operating companies in 2022. During calendar 2021, current eligible employees under the Portable Pension Account (“PPA”) pension formula will be given a one-time option to continue to be eligible for pension compensation credits under the existing PPA formula and ~~$250 million during~~remain in the ~~first quarter~~existing 401(k) plan with its match of ~~2019.~~up to 3.5%, or to cease receiving compensation credits under the pension plan and move to the new 401(k) plan with the higher match of up to 8%. Changes to the new 401(k) plan structure become effective beginning January 1, 2022. While this new program will provide employees greater flexibility and reduce our long-term pension costs, it will not have a material impact on current or near-term financial results.

We provide a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the respected FedEx brand. Our primary operating companies are FedEx Express, including TNT Express B.V. (“TNT 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.

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

Effective June 1, ~~2019,~~2020, the results of ~~the~~ FedEx ~~Office operating segment~~Cross Border are included in ~~“Corporate, other and eliminations.”~~the FedEx Express segment prospectively as the impact to prior periods was not material. This change was made to reflect our internal management reporting structure. ~~Prior year amounts have been revised to reflect current year presentation.~~

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 ~~transportation~~ 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 impact of its total allocated net operating costs on our ~~transportation~~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 ~~revenues~~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, as well as certain other costs and credits not attributed to our core business. These costs are not allocated to the other business segments.

Also included in corporate and other 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, ~~cross-border e-commerce technology and e-commerce transportation solutions,~~ customs brokerage and global ocean and air freight forwarding.

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment. Billings for such services are based on negotiated rates, which we believe approximate fair value, and are reflected as ~~revenues~~revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment ~~revenues~~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 ~~revenues~~revenue and operating income (loss) to our unaudited condensed consolidated financial statement totals for the three-month periods ended August 31 (in millions):

As of August 31, 2019, 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 $872 million and will commence when FedEx gains beneficial access to the leased asset. Commencement dates are expected to be from fiscal 2020 to fiscal 2022.

~~The following table is a summary of the components of net lease cost for the three months ended August 31 (in millions):~~

⁽¹⁾Expenses are primarily accounted for in the “Rentals and landing fees” line item. Additional amounts related to embedded leases are accounted for in the “Purchased transportation,” “Fuel” and “Other” line items in the unaudited condensed consolidated statements of income.

~~Supplemental cash flow information related to leases for the three months ended August 31 is as follows (in millions):~~

~~Supplemental balance sheet information related to leases as of August 31 is as follows (in millions, except lease term and discount rate):~~

~~A summary of future minimum lease payments under noncancelable operating and finance leases with an initial or remaining term in excess of one year at August 31, 2019 is as follows (in millions):~~

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 previously disclosed in our Annual Report and under the previous lease accounting standard, future minimum lease payments under noncancelable operating leases with an initial or remaining term in excess of one year at May 31, 2019 would have been as follows (in millions):

As of August 31, ~~2019,~~2020, our purchase commitments under various contracts for the remainder of ~~2020~~2021 and annually thereafter were as follows (in millions):

	Aircraft and Related		Other⁽¹⁾		Total		Aircraft and Related		Other⁽¹⁾		Total
2020 (remainder)	$	1,043	$	789	$	1,832
2021		2,436		691		3,127
2021 (remainder)							$	1,180	$	782	$	1,962
2022		2,392		470		2,862		2,166		670		2,836
2023		1,587		340		1,927		2,423		460		2,883
2024		503		192		695		1,015		302		1,317
2025								621		226		847
Thereafter		2,449		541		2,990		2,716		397		3,113
Total	$	10,410	$	3,023	$	13,433	$	10,121	$	2,837	$	12,958

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. As of August 31, ~~2019,~~2020, our obligation to purchase 6 Boeing 777 Freighter (“B777F”~~) aircraft and 5 Boeing 767-300 Freighter (“B767F”~~) aircraft is conditioned upon there being no event that causes FedEx Express or its employees not to be covered by the Railway Labor Act of 1926, as amended. Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above.

~~On June 24, 2019,~~During the first quarter of 2021, FedEx Express ~~exercised options to purchase an additional 6 B767F~~executed a contract amendment rescheduling Boeing 767-300 Freighter (“B767F”) aircraft ~~for delivery in 2022.~~deliveries as follows: 2021 – 18 aircraft; 2022 – 11 aircraft; 2023 – 13 aircraft; and 2024 – 4 aircraft.

As of August 31, ~~2019,~~2020, we had ~~$611~~$632 million in deposits and ~~and~~ progress payments on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our accompanying unaudited condensed consolidated balance sheets. Aircraft and related contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of August 31, ~~2019~~2020 with the year of expected delivery:

	Cessna SkyCourier 408		ATR 72-600F		B767F		B777F		Total		Cessna SkyCourier 408		ATR 72-600F		B767F		B777F		Total
2020 (remainder)		-		-		13		1		14
2021		12		5		18		2		37
2021 (remainder)												—		4		13		—		17
2022		12		6		18		3		39		9		7		11		5		32
2023		12		6		6		4		28		12		6		13		2		33
2024		14		6		-		4		24		12		6		4		4		26
2025												12		6		—		2		20
Thereafter		-		7		-		2		9		5		1		—		—		6
Total		50		30		55		16		151		50		30		41		13		134

~~FEDEX CORPORATION~~A summary of future minimum lease payments under noncancelable operating and finance leases with an initial or remaining term in excess of one year at August 31, 2020 is as follows (in millions):

~~(UNAUDITED)~~
As of August 31, 2020, 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 $1.1 billion, and will commence when FedEx gains beneficial access to the leased asset. Commencement dates are expected to be from 2021 to 2022.

Service Provider Lawsuits ~~and Administrative Proceedings.~~. FedEx Ground is ~~involved~~defending lawsuits in lawsuits and administrative proceedings claiming that owner-operators engaged under operating agreements no longer in place should have been treated as employees of FedEx Ground, rather than independent contractors. In addition, we are defending joint-employer cases wherewhich it is alleged that FedEx Ground should be treated as ana joint employer of ~~the~~ drivers employed by service providers engaged by FedEx Ground. These cases are in varying stages of litigation, and we are not currently able to estimate an amount or range of potential loss in all of these matters. However, we do not expect to incur, individually or in the aggregate, a material loss in these matters. Nevertheless, adverse determinations in these matters ~~related to owner-operators or service providers engaged by FedEx Ground~~ could, among other things, entitle ~~former owner-operators to the reimbursement of certain expenses, and~~ service providers’ drivers to certain wage payments from the service providers and FedEx Ground, and result in employment and withholding tax and benefit liability for FedEx Ground. We continue to believe that ~~owner-operators engaged by FedEx Ground were properly classified as independent contractors and that~~ FedEx Ground is not an employer or joint employer of the ~~service providers’ drivers.~~drivers of these independent businesses.

Federal Securities Litigation and Derivative Lawsuits. On June 26, 2019 and July 2, 2019, FedEx and certain present and former officers were named as defendants in two putative class action securities lawsuits filed in the U.S. District Court for the Southern District of New York. The complaints, which have been consolidated, allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder relating to alleged misstatements or omissions in FedEx’s public filings with the SEC and other public statements during the period from September 19, 2017 to December 18, 2018. We are not currently able to estimate the probability of loss or the amount or range of potential loss, if any, at this stage of the litigation.

On September 17, 2019 and November 6, 2019, FedEx, its Board of Directors and certain present and former directors and officers were named as defendants in two stockholder derivative lawsuits filed in the U.S. District Court for the District of Delaware. The

complaints, which were subsequently consolidated, repeated the allegations in the federal securities litigation complaints, and asserted new claims against the FedEx Board of Directors and certain present and former directors and officers for breach of fiduciary duty, waste of corporate assets, unjust enrichment, insider selling and violations of the federal securities laws. On June 24, 2020, the consolidated lawsuit was dismissed with prejudice. The plaintiff did not appeal the dismissal by the July 24, 2020 deadline.

Derivative Lawsuit Related to New York Cigarette Litigation. On October 3, 2019, FedEx and certain present and former FedEx directors and officers were named as defendants in a stockholder derivative lawsuit filed in the Delaware Court of Chancery. The complaint alleges the defendants breached their fiduciary duties in connection with the activities alleged in lawsuits filed by the City of New York and the State of New York against FedEx Ground in December 2013 and November 2014 and against FedEx Ground and FedEx Freight in July 2017. The underlying lawsuits related to the alleged shipment of cigarettes to New York residents in contravention of several statutes, as well as common law nuisance claims, and were dismissed by the court in December 2018 following entry into a final settlement agreement for approximately $35 million. The settlement did not include any admission of liability by FedEx Ground or FedEx Freight. In addition to the settlement amount, we recognized approximately $10 million for certain attorney’s fees in connection with the underlying lawsuits. We are not currently able to estimate the probability of loss or the amount or range of potential loss, if any, at this stage of the lawsuit. On August 14, 2019, a separate stockholder derivative lawsuit alleging similar breaches of fiduciary duty was filed in the Delaware Court of Chancery. The plaintiff voluntarily dismissed this lawsuit on June 25, 2020.

Environmental Matters. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that management reasonably believes could exceed $100,000.

~~On July 26, 2019, FedEx Freight received~~Prior to our acquisition of TNT Express, a ~~pre-litigation offer from~~lawsuit was filed in Simões Filho, Bahia, Brazil against a subsidiary of TNT Express alleging violations of Brazilian environmental laws. Specifically, the ~~San Bernardino District Attorney’s Office~~lawsuit alleges that in ~~California~~2012, certain employees unlawfully discarded non-toxic trash on a highway. We could be subject to ~~settle a civil action~~monetary sanctions and fines related to such activity that exceed $100,000. We believe that the ~~District Attorney intended to file against FedEx Freight for alleged violations~~aggregate amount of ~~the state’s environmental~~any such sanctions and hazardous waste regulations. Specifically, the District Attorney alleged that between 2015 and 2018, FedEx Freight illegally transported and stored hazardous waste, failed to report releases of hazardous materials or substances, and unlawfully released oil into a storm drain. In September 2019, we reached an agreement to settle this matter for an immaterial amount. The settlement agreement is subject to court approval.fines will be immaterial.

Other ~~Matters.~~ Matters. FedEx and its subsidiaries are subject to other legal proceedings that arise in the ordinary course of business, including certain lawsuits containing various class-action allegations of wage-and-hour violations in which plaintiffs claim, among other things, that they were forced to work “off the clock,” were not paid overtime or were not provided work breaks or other ~~benefits.~~benefits, as well as lawsuits containing allegations that FedEx and its subsidiaries are responsible for third-party losses related to vehicle accidents that could exceed our insurance coverage for such losses. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not have a material adverse effect on our financial position, results of operations or cash flows.

Cash paid for interest expense and income taxes for the three-month periods ended August 31 was as follows (in millions):

	2019			2018			2020			2019
Cash payments for:
Interest (net of capitalized interest)	$	164		$	203		$	182		$	164
Income taxes	$	55		$	93		$	134		$	55
Income tax refunds received		(12	)		(3	)		(11	)		(12	)
Cash tax payments, net	$	43		$	90
Cash tax (refunds) payments, net							$	123		$	43

We are required to present condensed consolidating financial information in order for the subsidiary guarantors of our public debt to continue to be exempt from reporting under the Securities Exchange Act of 1934, as amended.

The guarantor subsidiaries, which are 100% owned by FedEx, guarantee $18.6 billion of our public debt. The guarantees are full and unconditional and joint and several. Our guarantor subsidiaries were not determined using geographic, service line or other similar criteria, and as a result, the “Guarantor Subsidiaries” and “Non-guarantor Subsidiaries” columns each include portions of our domestic and international operations. Accordingly, this basis of presentation is not intended to present our financial condition, results of operations or cash flows for any purpose other than to comply with the specific requirements for subsidiary guarantor reporting.

~~Condensed consolidating financial statements for our guarantor subsidiaries and non-guarantor subsidiaries are presented in the following tables (in millions):~~

Guarantor

Non-guarantor

Parent

Subsidiaries

Subsidiaries

Eliminations

Consolidated

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$
684

$
176

$
1,598

$
(69
)

$
2,389

Receivables, less allowances

335

5,575

3,541

(139
)

9,312

Spare parts, supplies, fuel, prepaid expenses and other,
less allowances

40

949

327

—

1,316

Total current assets

1,059

6,700

5,466

(208
)

13,017

PROPERTY AND EQUIPMENT, AT COST

26

57,131

4,279

—

61,436

Less accumulated depreciation and amortization

17

27,715

2,094

—

29,826

Net property and equipment

9

29,416

2,185

—

31,610

INTERCOMPANY RECEIVABLE

3,003

72

—

(3,075
)

—

OPERATING LEASE RIGHT-OF-USE ASSETS

32

11,538

2,249

—

13,819

GOODWILL

—

1,582

5,239

—

6,821

INVESTMENT IN SUBSIDIARIES

34,439

4,970

—

(39,409
)

—

OTHER ASSETS

984

1,019

1,734

(552
)

3,185

$
39,526

$
55,297

$
16,873

$
(43,244
)

$
68,452

LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT

CURRENT LIABILITIES

Current portion of long-term debt

$
—

$
26

$
9

$
—

$
35

Accrued salaries and employee benefits

91

985

446

—

1,522

Accounts payable

191

1,444

1,747

(203
)

3,179

Operating lease liabilities

4

1,445

447

—

1,896

Accrued expenses

512

1,895

902

(6
)

3,303

Total current liabilities

798

5,795

3,551

(209
)

9,935

LONG-TERM DEBT, LESS CURRENT PORTION

18,395

286

45

—

18,726

INTERCOMPANY PAYABLE

—

—

3,074

(3,074
)

—

OTHER LONG-TERM LIABILITIES

Deferred income taxes

—

2,929

576

(552
)

2,953

Operating lease liabilities

30

10,257

1,850

—

12,137

Other liabilities

2,137

3,390

1,008

—

6,535

Total other long-term liabilities

2,167

16,576

3,434

(552
)

21,625

COMMON STOCKHOLDERS’ INVESTMENT

18,166

32,640

6,769

(39,409
)

18,166

$
39,526

$
55,297

$
16,873

$
(43,244
)

$
68,452

Guarantor

Non-guarantor

Parent

Subsidiaries

Subsidiaries

Eliminations

Consolidated

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$
826

$
158

$
1,381

$
(46
)

$
2,319

Receivables, less allowances

56

5,603

3,684

(227
)

9,116

Spare parts, supplies, fuel, prepaid expenses and other,
less allowances

366

953

332

—

1,651

Total current assets

1,248

6,714

5,397

(273
)

13,086

PROPERTY AND EQUIPMENT, AT COST

25

55,341

4,145

—

59,511

Less accumulated depreciation and amortization

17

27,066

1,999

—

29,082

Net property and equipment

8

28,275

2,146

—

30,429

INTERCOMPANY RECEIVABLE

2,877

(405
)

—

(2,472
)

—

GOODWILL

—

1,589

5,295

—

6,884

INVESTMENT IN SUBSIDIARIES

33,725

5,449

—

(39,174
)

—

OTHER ASSETS

995

1,811

1,789

(591
)

4,004

$
38,853

$
43,433

$
14,627

$
(42,510
)

$
54,403

LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT

CURRENT LIABILITIES

Current portion of long-term debt

$
959

$
2

$
3

$
—

$
964

Accrued salaries and employee benefits

143

1,100

498

—

1,741

Accounts payable

16

1,469

1,808

(263
)

3,030

Accrued expenses

521

1,853

914

(10
)

3,278

Total current liabilities

1,639

4,424

3,223

(273
)

9,013

LONG-TERM DEBT, LESS CURRENT PORTION

16,322

287

8

—

16,617

INTERCOMPANY PAYABLE

—

—

2,472

(2,472
)

—

OTHER LONG-TERM LIABILITIES

Deferred income taxes

—

2,832

580

(591
)

2,821

Other liabilities

3,135

3,965

1,095

—

8,195

Total other long-term liabilities

3,135

6,797

1,675

(591
)

11,016

COMMON STOCKHOLDERS’ INVESTMENT

17,757

31,925

7,249

(39,174
)

17,757

$
38,853

$
43,433

$
14,627

$
(42,510
)

$
54,403

Parent

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

REVENUES

$
—

$
12,241

$
4,893

$
(86
)

$
17,048

OPERATING EXPENSES:

Salaries and employee benefits

20

4,685

1,382

—

6,087

Purchased transportation

—

2,543

1,519

(34
)

4,028

Rentals and landing fees

2

712

208

(2
)

920

Depreciation and amortization

—

761

118

—

879

Fuel

—

812

58

—

870

Maintenance and repairs

—

684

84

—

768

Intercompany charges, net

(78
)

(481
)

559

—

—

Other

56

1,668

845

(50
)

2,519

—

11,384

4,773

(86
)

16,071

OPERATING INCOME

—

857

120

—

977

OTHER (EXPENSE) INCOME:

Equity in earnings of subsidiaries

745

18

—

(763
)

—

Interest, net

(151
)

12

2

—

(137
)
Other retirement plans income

—

163

5

—

168

Intercompany charges, net

164

(120
)

(44
)

—

—

Other, net

(13
)

16

(15
)

—

(12
)
INCOME BEFORE INCOME TAXES

745

946

68

(763
)

996

Provision for income taxes

—

225

26

—

251

NET INCOME (LOSS)

$
745

$
721

$
42

$
(763
)

$
745

COMPREHENSIVE INCOME (LOSS)

$
731

$
705

$
(32
)

$
(763
)

$
641

Parent

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

REVENUES

$
—

$
12,367

$
4,787

$
(102
)

$
17,052

OPERATING EXPENSES:

Salaries and employee benefits

48

4,783

1,429

—

6,260

Purchased transportation

—

2,380

1,634

(47
)

3,967

Rentals and landing fees

1

631

192

(1
)

823

Depreciation and amortization

—

693

115

—

808

Fuel

—

902

84

—

986

Maintenance and repairs

—

646

89

—

735

Intercompany charges, net

(111
)

(226
)

337

—

—

Other

62

1,546

848

(54
)

2,402

—

11,355

4,728

(102
)

15,981

OPERATING INCOME

—

1,012

59

—

1,071

OTHER (EXPENSE) INCOME:

Equity in earnings of subsidiaries

835

81

—

(916
)

—

Interest, net

(143
)

15

1

—

(127
)
Other retirement plans (expense) income

—

155

3

—

158

Intercompany charges, net

143

(122
)

(21
)

—

—

Other, net

—

(10
)

9

—

(1
)
INCOME (LOSS) BEFORE INCOME TAXES

835

1,131

51

(916
)

1,101

Provision for income taxes

—

215

51

—

266

NET INCOME (LOSS)

$
835

$
916

$
—

$
(916
)

$
835

COMPREHENSIVE INCOME (LOSS)

$
817

$
1,014

$
(265
)

$
(916
)

$
650

Parent

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

CASH PROVIDED BY (USED IN) OPERATING
   ACTIVITIES

$
(1,671
)

$
2,111

$
148

$
(23
)

$
565

INVESTING ACTIVITIES

Capital expenditures

(2
)

(1,317
)

(99
)

—

(1,418
)
Proceeds from asset dispositions and other

(10
)

5

4

—

(1
)
CASH USED IN INVESTING
   ACTIVITIES

(12
)

(1,312
)

(95
)

—

(1,419
)
FINANCING ACTIVITIES

Net transfers from (to) Parent

1,002

(1,059
)

57

—

—

Payment on loan between subsidiaries

(434
)

—

434

—

—

Intercompany dividends

—

304

(304
)

—

—

Proceeds from debt issuances

2,093

—

—

—

2,093

Principal payments on debt

(956
)

(27
)

(2
)

—

(985
)
Proceeds from stock issuances

12

—

—

—

12

Dividends paid

(170
)

—

—

—

(170
)
Purchase of treasury stock

(3
)

—

—

—

(3
)
Other, net

(3
)

—

(2
)

—

(5
)
CASH (USED IN) PROVIDED BY FINANCING
   ACTIVITIES

1,541

(782
)

183

—

942

Effect of exchange rate changes on cash

—

1

(19
)

—

(18
)
Net (decrease) increase in cash and cash equivalents

(142
)

18

217

(23
)

70

Cash and cash equivalents at beginning of period

826

158

1,381

(46
)

2,319

Cash and cash equivalents at end of period

$
684

$
176

$
1,598

$
(69
)

$
2,389

Parent

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES

$
785

$
(159
)

$
102

$
(27
)

$
701

INVESTING ACTIVITIES

Capital expenditures

—

(983
)

(196
)

—

(1,179
)
Proceeds from asset dispositions and other

(5
)

78

5

—

78

CASH USED IN INVESTING ACTIVITIES

(5
)

(905
)

(191
)

—

(1,101
)
FINANCING ACTIVITIES

Proceeds from short-term borrowings, net

299

—

—

—

299

Net transfers from (to) Parent

(853
)

763

90

—

—

Intercompany dividends

—

81

(81
)

—

—

Principal payments on debt

—

—

(2
)

—

(2
)
Proceeds from stock issuances

25

—

—

—

25

Dividends paid

(173
)

—

—

—

(173
)
Purchase of treasury stock

(625
)

—

—

—

(625
)
Other, net

—

148

(144
)

—

4

CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES

(1,327
)

992

(137
)

—

(472
)
Effect of exchange rate changes on cash

—

(5
)

(19
)

—

(24
)
Net decrease in cash and cash equivalents

(547
)

(77
)

(245
)

(27
)

(896
)
Cash and cash equivalents at beginning of period

1,485

257

1,538

(15
)

3,265

Cash and cash equivalents at end of period

$
938

$
180

$
1,293

$
(42
)

$
2,369

We have reviewed the accompanying condensed consolidated balance sheet of FedEx Corporation (the Company) as of August 31, ~~2019,~~2020, the related condensed consolidated statements of income, comprehensive income, cash flows and changes in common stockholders’ investment for the three-month periods ended August 31, ~~2019~~2020 and ~~August 31, 2018~~2019, 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, ~~2019,~~2020, 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 ~~16, 2019,~~20, 2020, 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, ~~2019,~~2020, 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~~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, contractual cash obligations 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, ~~2019~~2020 (“Annual Report”). Our Annual Report includes additional information about our significant accounting policies, practices and the transactions that underlie our financial results, as well as a detailed discussion of the most significant risks and uncertainties associated with our financial condition and operating results.

We provide a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the respected FedEx brand. Our primary operating companies are Federal Express Corporation (“FedEx Express”), including TNT Express B.V. (“TNT 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. See “Reportable Segments” for further discussion. Additional information on our businesses can be found in our Annual Report.

As discussed in our Annual Report, as of June 1, ~~2019 the results of~~2020 FedEx Cross Border Holdings, Inc. (“FedEx Cross Border”) is included in the FedEx ~~Office and Print Services, Inc. (“FedEx Office”) operating segment are included in “Corporate, other and eliminations.”~~Express segment. This change was made to reflect our internal management reporting structure. ~~Prior year amounts have been revised to conform to the current year presentation.~~

Many of our operating expenses are directly impacted by revenue and volume levels, and we expect these operating expenses to fluctuate on a year-over-year basis consistent with changes in ~~revenues~~revenue and volumes. Therefore, the discussion of operating expense captions focuses on the key drivers and trends impacting expenses other than those factors strictly related to changes in ~~revenues~~revenue and volumes. The line item “Other operating expense” includes costs associated with outside service contracts (such as facility services and cargo handling, temporary labor and security), insurance, ~~professional fees,~~ uniforms and ~~advertising.~~professional fees.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, ~~2020~~2021 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 tables compare summary operating results and changes in revenue and operating income (dollars in millions, except per share amounts) for the periods ended August 31:

	Three Months Ended						Percent				Three Months Ended						Percent
	2019			2018			Change				2020			2019			Change
Revenues	$	17,048		$	17,052			—
Revenue											$	19,321		$	17,048			13
Operating income (loss):
FedEx Express segment		285			388			(27	)			710			285			149
FedEx Ground segment		644			676			(5	)			834			644			30
FedEx Freight segment		194			176			10				274			194			41
Corporate, other and eliminations		(146	)		(169	)		14				(228	)		(146	)		(56	)
Consolidated operating income		977			1,071			(9	)			1,590			977			63
Operating margin:
FedEx Express segment		3.2	%		4.2	%		(100	)	bp		7.4	%		3.2	%		420		bp
FedEx Ground segment		12.4	%		14.1	%		(170	)	bp		11.8	%		12.4	%		(60	)	bp
FedEx Freight segment		10.2	%		9.0	%		120		bp		15.0	%		10.2	%		480		bp
Consolidated operating margin		5.7	%		6.3	%		(60	)	bp		8.2	%		5.7	%		250		bp
Consolidated net income	$	745		$	835			(11	)		$	1,245		$	745			67
Diluted earnings per share	$	2.84		$	3.10			(8	)		$	4.72		$	2.84			66

	Year-over-Year Changes						Year-over-Year Changes
	Revenue			Operating Income (Loss)			Revenue			Operating Income (Loss)
FedEx Express segment	$	(277	)	$	(103	)	$	702		$	425
FedEx Ground segment		380			(32	)		1,861			190
FedEx Freight segment		(54	)		18			(79	)		80
FedEx Services segment		(5	)		—			4			—
Corporate, other and eliminations		(48	)		23			(215	)		(82	)
	$	(4	)	$	(94	)	$	2,273		$	613

~~Consolidated operating income declined~~The coronavirus (“COVID-19”) pandemic continued to impact our business during the first quarter of ~~2020 primarily due to weakening global economic conditions, increased costs to accommodate expanding~~2021, specifically resulting in unprecedented demand for our residential delivery services, ~~and continued mix shift to lower-yielding~~rivaling our peak holiday season traffic. Additionally, demand for our commercial services ~~including growth in e-commerce volumes. Our~~improved sequentially throughout the first quarter ~~2020 results were negatively impacted by~~of 2021 as businesses reopened around the world. During the first quarter of 2021, we incurred approximately $100 million ~~due~~of increased operating expenses related to ~~one fewer~~personal protective equipment and medical/safety supplies, as well as additional security and cleaning services in order to protect our team members and customers during the COVID-19 pandemic.

Our consolidated operating ~~day. In addition, the loss of business from a large customer at FedEx Express and FedEx Ground negatively impacted our results~~income improved during the first quarter of ~~2020. These factors were partially offset by lower variable incentive compensation expenses, increased yields~~2021 due to international export and U.S. domestic package volume growth at FedEx ~~Freight and~~Express, residential volume growth at FedEx Ground and ~~higher volume~~yield improvement at FedEx ~~Ground. Lower variable incentive compensation expenses benefited the comparison~~Ground and FedEx Freight. In addition, our results were positively impacted by approximately $130 million due to an additional operating day at all of our ~~results by approximately $300 million~~transportation segments in the first quarter of ~~2020.~~2021. We incurred higher purchased transportation costs and salaries and employee benefits expense to support increased volumes in the first quarter of 2021. Additionally, higher variable incentive compensation expense negatively impacted year-over-year first quarter comparisons by $195 million, approximately half of which was due to the reversal of long-term incentive compensation accruals in the prior year. The provisions recorded for variable compensation during the first quarter of 2021 were for non-executive officer team members based on the assumption that current performance trends will continue during the fiscal year.

We incurred TNT Express integration expenses totaling ~~$71~~$49 million ($5538 million, net of tax, or ~~$0.21~~$0.14 per diluted share) in the first quarter of ~~2020,~~2021, a ~~$50~~$22 million decrease from the first quarter of ~~2019.~~2020. The integration expenses are predominantly incremental costs directly associated with the integration of TNT Express, including professional and legal fees, salaries and employee benefits, advertising and travel ~~and advertising expenses, and include any restructuring charges at TNT Express.~~expenses. Internal salaries and employee benefits are included only to the extent the individuals are assigned

full-time to integration activities. These costs were incurred at FedEx Express and FedEx Corporate. The identification of these costs as integration-related expenditures is subject to our disclosure controls and procedures.

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:

~~Revenues were flat~~Revenue increased 13% in the first quarter of ~~2020 as higher volumes and yields~~2021 primarily due to volume growth in residential delivery services at FedEx Ground ~~were offset by~~and U.S. domestic package volume at FedEx Express, both reflecting increased e-commerce demand due to the continuing impacts of the COVID-19 pandemic. International export package volume growth at FedEx Express and yield improvement at FedEx Ground and FedEx Freight also contributed to the increase in revenue during the first quarter of 2021. In addition, one ~~fewer~~additional operating day at all of our transportation segments ~~as well as~~positively impacted revenue in the ~~loss~~first quarter of ~~business~~2021. These positive factors were partially offset by lower fuel surcharges at all of our transportation segments.

At FedEx Ground, revenue increased 36% in the first quarter of 2021 primarily due to residential delivery volume growth, including the sharp increase in demand resulting from ~~a large customer~~stay-at-home orders and other responsive measures to the COVID-19 pandemic. Revenue at FedEx Express ~~and FedEx Ground. At FedEx Ground, revenues~~ increased 8% in the first quarter of ~~2020~~2021 due to international export and U.S. domestic package volume growth, ~~and increased yields. Revenues at~~partially offset by lower fuel surcharges. FedEx ~~Express~~Freight revenue decreased 3%4% in the first quarter of ~~2020 primarily due to unfavorable exchange rates and lower freight pounds reflecting macroeconomic weakness and trade uncertainty. FedEx Freight revenues decreased 3% in the first quarter of 2020~~2021 due to decreased average daily shipments, partially offset by higher revenue per shipment.

The following tables compare operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended August 31:

	Three Months Ended				Percent			Percent of Revenue						Three Months Ended				Percent			Percent of Revenue
	2019		2018		Change			2019			2018			2020		2019		Change			2020			2019
Operating expenses:
Salaries and employee benefits	$	6,087	$	6,260		(3	)		35.7	%		36.7	%	$	6,852	$	6,087		13			35.5	%		35.7	%
Purchased transportation		4,028		3,967		2			23.6			23.3			4,977		4,028		24			25.8			23.6
Rentals and landing fees		920		823		12			5.4			4.8			936		920		2			4.8			5.4
Depreciation and amortization		879		808		9			5.2			4.7			926		879		5			4.8			5.2
Fuel		870		986		(12	)		5.1			5.8			565		870		(35	)		2.9			5.1
Maintenance and repairs		768		735		4			4.5			4.3			806		768		5			4.2			4.5
Other		2,519		2,402		5			14.8			14.1			2,669		2,519		6			13.8			14.8
Total operating expenses		16,071		15,981		1			94.3			93.7			17,731		16,071		10			91.8			94.3
Operating income	$	977	$	1,071		(9	)		5.7	%		6.3	%	$	1,590	$	977		63			8.2	%		5.7	%

~~Our results declined~~The increase in volumes noted above under “Revenue” resulted in a 24% increase in purchased transportation costs driven by FedEx Ground and a 13% increase in salaries and employee benefits expense driven by FedEx Ground and FedEx Express in the first quarter of ~~2020 primarily~~2021. Purchased transportation was also negatively impacted by contractor settlement rate increases at FedEx Ground, including in connection with the ongoing expansion of U.S. operations to seven days per week year-round. In addition, salaries and employee benefits expense increased due to ~~weakening global economic conditions~~merit increases and ~~continued mix shift to lower-yielding services, including growth in deferred services driven by e-commerce. In addition, one fewer operating day~~higher variable incentive compensation at all of our transportation segments the loss of business from a large customer at FedEx Express and FedEx Ground and higher purchased transportation costs, including higher rates and increased capacity for six-day-per-week operations year-round at FedEx Ground, negatively impacted our results during the first quarter of 2020. These items were partially offset by lower variable incentive compensation expenses, increased yields at FedEx Freight and FedEx Ground and higher volume at FedEx Ground.

The adoption of the new lease accounting standard during the first quarter of 2020 resulted in a reclassification from other operating expense to rentals and landing fees expense of approximately $50 million and maintenance and repairs expense to rentals and landing fees expense of approximately $10 million. These amounts were reclassified in order to properly align the lease and rental expenses to the appropriate line items in accordance with the new standard and are excluded from the following year-over-year expense change discussion.

~~Salaries and employee benefits expense decreased 3%~~ in the first quarter of 2020 primarily due to lower variable incentive compensation expenses, partially offset by higher staffing to support volume growth at FedEx Express and FedEx Ground. Other operating expense increased 5% in the first quarter of 2020 primarily due to higher self-insurance accruals at FedEx Ground and higher outside service contracts at FedEx Express. Depreciation and amortization expense increased 9% in the first quarter of 2020 primarily due to continued strategic investment programs at all transportation segments. Purchased transportation costs increased 2% in the first quarter of 2020 primarily due to increased contractor settlement rates and expansion of the FedEx Ground network to six-day-per-week operations year-round in January 2019, as well as higher volumes at FedEx Ground. Maintenance and repairs expense increased 4% in the first quarter of 2020 primarily due to higher aircraft engine maintenance expense at FedEx Express.2021.

The following graph for our transportation segments shows our average cost of jet and vehicle fuel per gallon for the five most recent quarters:

Fuel expense decreased ~~12%~~35% in the first quarter of ~~2020 primarily~~2021 due to decreased fuel prices. ~~However, fuel~~Fuel prices represent only one component of the factors we consider meaningful in understanding the impact of fuel on our business. Consideration must also be given to the fuel surcharge revenue we collect. Accordingly, we believe discussion of the net impact of fuel on our results, which is a comparison of the year-over-year change in these two factors, is important to understand the impact of fuel on our business. In order to provide information about the impact of fuel surcharges on the trend in revenue and yield growth, we have included the comparative weighted-average fuel surcharge percentages in effect for the first quarters of ~~2020~~2021 and ~~2019~~2020 in the accompanying discussion of each of our transportation segments.

Most of our fuel surcharges are adjusted on a weekly basis. The fuel surcharge is based on a weekly fuel price from two weeks prior to the week in which it is assessed. Some FedEx Express international fuel surcharges incorporate a timing lag of approximately six to eight weeks.

The manner in which we purchase fuel also influences the net impact of fuel on our results. For example, our contracts for jet fuel purchases at FedEx Express are tied to various indices, including the U.S. Gulf Coast index. While many of these indices are aligned, each index may fluctuate at a different pace, driving variability in the prices paid for jet fuel. Furthermore, under these contractual arrangements, approximately 70% of our jet fuel is purchased based on the index price for the preceding week, with the remainder of our purchases tied to the index price for the preceding month and preceding day, rather than based on daily spot rates. These contractual provisions mitigate the impact of rapidly changing daily spot rates on our jet fuel purchases.

Because of the factors described above, our operating results may be affected should the market price of fuel suddenly change by a significant amount or change by amounts that do not result in an adjustment in our fuel surcharges, which can significantly affect our earnings either positively or negatively in the short-term.

~~The net impact of fuel had a slight benefit to operating income in the first quarter of 2020 as decreased fuel prices more than offset lower fuel surcharges.~~

We routinely review our fuel surcharges. ~~On March 18, 2019, we updated the tables used to determine our~~Additional information on table changes affecting fuel surcharges ~~for FedEx Express U.S. domestic services and at FedEx Ground. On September 10, 2018, we updated the tables used to determine~~can be found in our ~~fuel surcharges at FedEx Express and FedEx Ground.~~Annual Report. The net impact of fuel on operating income described ~~above~~below and for each segment below excludes the impact from these table changes.

The net impact of fuel had a slightly negative impact to operating income in the first quarter of 2021 due to lower fuel surcharges, partially offset by decreased fuel prices.

The net impact of fuel on our operating results does not consider the effects that fuel surcharge levels may have on our business, including changes in demand and shifts in the mix of services purchased by our customers. In addition, our purchased transportation expense may be impacted by fuel costs. While fluctuations in fuel surcharge percentages can be significant from period to period, fuel surcharges represent one of the many individual components of our pricing structure that impact our overall revenue and yield. Additional components include the mix of services sold, the base price and extra service charges we obtain for these services and the level of pricing discounts offered.

Our effective tax rate was 22.5% for the first quarter of 2021, compared to 25.2% for the first quarter of ~~2020, compared with 24.2% for the first quarter of 2019.~~2020. The ~~2020~~2021 tax rate was favorably impacted by ~~decreased~~changes in our corporate legal entity structure, including the tax status of certain foreign entities, and increased earnings in certain non-U.S. jurisdictions.

We are subject to taxation in the United States and various U.S. state, local and foreign jurisdictions. We are currently under examination by the Internal Revenue Service ~~(“IRS”)~~ for the 2016 and 2017 ~~tax years. In addition, we are currently under appeals proceedings with respect to the IRS’s proposed audit adjustment for the 2014 and 2015~~ tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next twelve months and could result in a change in our balance of unrecognized tax benefits. The impact of any changes is not expected to be material to our consolidated financial statements. ~~As of August 31, 2019, there were no material changes to our liabilities for unrecognized tax benefits subsequent to May 31, 2019.~~

~~We expect~~The uncertainty over the continuing and ultimate impact the COVID-19 pandemic will have on the global economy generally, and our business in particular, makes any expectations for 2021 inherently less clear. However, based on the current trends in our business, we anticipate increased demand to result in higher revenue and operating income ~~declines~~at FedEx Ground and FedEx Express for the remainder of ~~2020 resulting from lower~~2021. In addition, yield management and improved productivity is anticipated to contribute to revenue and operating income growth at FedEx ~~Express~~Freight in 2021. If our current trends continue, we expect certain expenses, including higher variable incentive compensation accruals and ~~higher~~increased supply and other costs related to the COVID-19 pandemic, to continue to be incurred during 2021.

Government travel warnings and restrictions related to the COVID-19 pandemic are expected to continue to impact the demand for commercial air travel, thereby reducing available air capacity. Therefore, we expect continued strong demand for international priority shipments for the remainder of 2021 to necessitate increased usage of our assets to support demand in key international supply chains. We will continue managing network capacity, flexing our network and making adjustments as needed to align with volumes and operating ~~costs at~~conditions.

~~Our outlook on global trade has weakened since the previous quarter due~~Ground seven-day residential delivery coverage to escalating trade tensions, including increased tariffs on Chinese goods, increasing softness in European markets and declines in industrial production. Our international operations are much more sensitive to changes in global trade than our U.S. domestic operations becausenearly 95 percent of the ~~higher concentration~~U.S. population and will continue to optimize our network capacity to meet evolving customer needs. During the second half of business-to-business shipments internationally. The softer economic outlook is expected to create an ongoing revenue shortfall from planned levels, particularly in Europe and Asia Pacific. The cost of maintaining two separate networks in Europe while2021, we ~~execute the TNT Express integration is expected to compound the impact of the revenue shortfall~~will focus on ~~our near-term results.~~

~~In the~~last-mile residential delivery optimization by directing certain U.S. ~~domestic package market, incremental costs associated with modernizing our~~day-definite residential FedEx Express ~~network and permanently expanding our~~shipments into the FedEx Ground network ~~operations~~ to ~~seven days per week year-round, combined with short-term volume declines from the loss of a large customer, has created a near-term cost-to-volume disparity. However, we~~increase efficiency and lower our cost-to-serve. We also are ~~confident that our investments in our U.S. domestic package operations will ultimately result in higher revenue that more than offsets the implementation costs associated with these programs.~~

In response to the current economic conditions, we are making adjustments to our global FedEx Express air network to better match capacity with demand. These capacity adjustments will result in accelerating planned aircraft retirements over the current and next fiscal years, and we are parking additional aircraft after the 2020 peak season. These actions could result in higher depreciation expense and/or immaterial asset impairments in future periods. In addition, we continue to be focused on ~~cost reductions by limiting discretionary spending~~improving revenue quality and ~~deferring non-critical hiring.~~lowering costs through advanced technology aimed at improving productivity and safety.

~~For the remainder of 2020, we will continue~~We are continuing to execute our TNT Express integration plans and are ~~focused on completing projects across our European hub and station locations that will allow interoperability between~~scheduled to complete the ~~ground networks for both~~integration of the FedEx Express and TNT Express ~~packages,~~linehaul and pickup-and-delivery operations and begin offering an enhanced portfolio of international services in 2021. We will leverage the capabilities that TNT Express adds to our portfolio, which ~~will further lower costs as the related FedEx Express linehaul operations~~ are ~~optimized. In addition, we~~expected to improve our European revenue and profitability, which continue to ~~focus on the operational network integration process~~underperform our expectations for the key countries in Europe, which represent a significant percentage of international revenue, workforces and facilities. Integration activities in Europe are complex and require consultations with works councils and employee representatives in a number of countries.that market. While we expect to make significant progress on integration activities in ~~2020,~~2021, particularly in Europe, integration work will continue ~~thereafter. After 2020,~~after 2021. We expect to complete the ~~next key integration milestones include completing a single portfolio~~final phase of ~~services and~~international air network ~~integration.~~ interoperability in early calendar 2022.

We expect to incur approximately ~~$280~~$125 million of integration expenses in the remainder of ~~2020~~2021 in the form of professional fees, outside service contracts, salaries and wages and other operating ~~expense.~~expenses. We expect the aggregate integration program expenses ~~including restructuring charges at TNT Express,~~ to be approximately $1.7 billion through ~~2021,~~the completion of the physical network integration of TNT Express into FedEx Express in 2022. We continue to pursue actions in addition to the integration to further transform and weoptimize the FedEx Express international business, particularly in Europe, including expansion of our e-commerce capabilities and lowering our overhead costs. We may incur additional costs, including capital investments ~~that will further transform and optimize the combined businesses.~~related to these actions. The timing and amount of integration and other expenses, ~~and~~including capital investments, ~~in any future period~~ may change as we revise and implement our plans.

Our expectations for the remainder of ~~2020~~2021 are dependent on key external factors, including ~~moderate U.S.~~no further weakening of global economic ~~growth,~~conditions or additional shut-downs related to the COVID-19 pandemic, current fuel price expectations, ~~no further weakening in international economic conditions from our current forecast~~ and no additional adverse developments in international trade policies and relations.

Other Outlook Matters. For details on key ~~2020~~2021 capital projects, refer to the “Liquidity Outlook” section of this MD&A.

See “Forward-Looking Statements” and Part II, Item 1A “Risk Factors” for a discussion of these and other potential risks and uncertainties that could materially affect our future performance.

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:

Effective June 1, 2020, the results of FedEx Cross Border are included in the FedEx Express segment prospectively as the impact to prior periods was not material. This change was made to reflect our internal management reporting structure.

The operating expense line item “Intercompany charges” on the accompanying unaudited condensed consolidated financial statements of our transportation segments reflects the allocations from the FedEx Services segment to the respective operating segments. The allocations of net operating costs are based on metrics such as relative ~~revenues~~revenue or estimated services provided.

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 impact of its total allocated net operating costs on our operating segments. 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.

Also, the results of the FedEx Logistics, Inc. (“FedEx Logistics”) and FedEx Office and Print Services, Inc. (”FedEx Office”) operating segments are included in corporate and ~~other is the~~other. 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~~businesses. FedEx Logistics ~~Inc. operating segment, which~~ provides integrated supply chain management solutions, specialty transportation, ~~cross-border e-commerce technology and e-commerce transportation solutions,~~ customs brokerage and global ocean and air freight forwarding.

In the first quarter of 2021, the decrease in revenue in “Corporate, other and eliminations” was driven primarily by the inclusion of FedEx Custom Critical and FedEx Cross Border in the FedEx Express segment and a significant decline in non-shipping revenue at FedEx Office resulting from the COVID-19 pandemic.

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. ~~Prior year amounts have been revised to conform to the current year presentation, including revised statistical information.~~ The following tables compare ~~revenues,~~revenue, operating expenses, operating income (dollars in millions), operating margin and operating expenses as a percent of revenue for the periods ended August 31:

	Three Months Ended						Percent										Three Months Ended						Percent
	2019			2018			Change										2020			2019			Change
Revenues:
Package:
U.S. overnight box	$	1,866		$	1,886			(1	)								$	1,861		$	1,866			—
U.S. overnight envelope		479			468			2										426			479			(11	)
U.S. deferred		956			952			—										1,096			956			15
Total U.S. domestic package revenue		3,301			3,306			—										3,383			3,301			2
International priority		1,817			1,874			(3	)									2,317			1,817			28
International economy		855			850			1										616			855			(28	)
Total international export package revenue		2,672			2,724			(2	)									2,933			2,672			10
International domestic⁽¹⁾		1,076			1,131			(5	)									1,088			1,076			1
Total package revenue		7,049			7,161			(2	)									7,404			7,049			5
Freight:
U.S.		695			730			(5	)									833			695			20
International priority		464			533			(13	)									653			464			41
International economy		516			519			(1	)									371			516			(28	)
International airfreight		66			85			(22	)									75			66			14
Total freight revenue		1,741			1,867			(7	)		Percent of Revenue							1,932			1,741			11			Percent of Revenue
Other		155			194			(20	)		2019			2018
Other⁽²⁾																		311			155			101			2020			2019
Total revenues		8,945			9,222			(3	)			100.0	%		100.0	%		9,647			8,945			8				100.0	%		100.0	%
Operating expenses:
Salaries and employee benefits		3,372			3,473			(3	)			37.7			37.7			3,742			3,372			11				38.8			37.7
Purchased transportation		1,232			1,307			(6	)			13.8			14.2			1,304			1,232			6				13.5			13.8
Rentals and landing fees		513			470			9				5.7			5.1			504			513			(2	)			5.2			5.7
Depreciation and amortization		462			436			6				5.2			4.7			477			462			3				5.0			5.2
Fuel		743			845			(12	)			8.3			9.2			496			743			(33	)			5.1			8.3
Maintenance and repairs		517			502			3				5.8			5.4			551			517			7				5.7			5.8
Intercompany charges		469			518			(9	)			5.2			5.6			461			469			(2	)			4.8			5.2
Other		1,352			1,283			5				15.1			13.9			1,402			1,352			4				14.5			15.1
Total operating expenses		8,660			8,834			(2	)			96.8	%		95.8	%		8,937			8,660			3				92.6	%		96.8	%
Operating income	$	285		$	388			(27	)								$	710		$	285			149
Operating margin		3.2	%		4.2	%		(100	)	bp								7.4	%		3.2	%		420		bp

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

	Three Months Ended				Percent			Three Months Ended				Percent
	2019		2018		Change			2020		2019		Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box		1,218		1,231		(1	)		1,287		1,218		6
U.S. overnight envelope		562		551		2			483		562		(14	)
U.S. deferred		976		916		7			1,207		976		24
Total U.S. domestic ADV		2,756		2,698		2			2,977		2,756		8
International priority		530		526		1			696		530		31
International economy		294		276		7			260		294		(12	)
Total international export ADV		824		802		3			956		824		16
International domestic⁽¹⁾		2,352		2,396		(2	)		2,298		2,352		(2	)
Total ADV		5,932		5,896		1			6,231		5,932		5
Revenue per package (yield):
U.S. overnight box	$	23.94	$	23.57		2		$	22.25	$	23.94		(7	)
U.S. overnight envelope		13.32		13.09		2			13.56		13.32		2
U.S. deferred		15.29		15.98		(4	)		13.97		15.29		(9	)
U.S. domestic composite		18.71		18.85		(1	)		17.48		18.71		(7	)
International priority		53.52		54.80		(2	)		51.18		53.52		(4	)
International economy		45.52		47.43		(4	)		36.46		45.52		(20	)
International export composite		50.67		52.26		(3	)		47.18		50.67		(7	)
International domestic⁽¹⁾		7.15		7.26		(2	)		7.28		7.15		2
Composite package yield	$	18.57	$	18.69		(1	)	$	18.28	$	18.57		(2	)
Freight Statistics
Average daily freight pounds:
U.S.		8,015		8,309		(4	)		8,849		8,015		10
International priority		4,792		5,260		(9	)		5,501		4,792		15
International economy		13,717		13,459		2			11,633		13,717		(15	)
International airfreight		1,555		1,717		(9	)		1,575		1,555		1
Total average daily freight pounds		28,079		28,745		(2	)		27,558		28,079		(2	)
Revenue per pound (yield):
U.S.	$	1.36	$	1.35		1		$	1.45	$	1.36		7
International priority		1.51		1.56		(3	)		1.83		1.51		21
International economy		0.59		0.59		—			0.49		0.59		(17	)
International airfreight		0.66		0.76		(13	)		0.74		0.66		12
Composite freight yield	$	0.97	$	1.00		(3	)	$	1.08	$	0.97		11

FedEx Express segment ~~revenues decreased 3%~~revenue increased 8% in the first quarter of ~~2020 primarily~~2021 due to international export and U.S. domestic package volume growth, partially offset by lower fuel surcharges. The demand for our domestic residential service offerings continued to increase due to the ~~loss of business~~COVID-19 pandemic, resulting in higher growth in deferred services. Revenue was also positively impacted by pricing initiatives resulting from ~~a large customer,~~global air freight capacity constraints and one ~~fewer~~additional operating day ~~unfavorable exchange rates~~in the first quarter of 2021.

International export package average daily volumes increased 16% in the first quarter of 2021 led by volume growth in Asia-Pacific and Europe. International export package yields decreased 7% in the first quarter of 2021 primarily driven by base yield declines and lower fuel surcharges, partially offset by pricing initiatives resulting from global air freight ~~pounds reflecting macroeconomic weakness and trade uncertainty.~~

~~Average~~capacity constraints. Total average daily freight pounds decreased 2% in the first quarter of ~~2020~~2021 primarily due to lower ~~volume in~~ international freight services. Freight yields decreased 3% in the first quarter of 2020 primarily due to unfavorable exchange rates, base yield declines and lower fuel surcharges. International domestic package average daily volumes decreased 2% in the first quarter of 2020 primarily due to yield management actions. International domestic package yields decreased 2% in the first quarter of 2020 as base yield improvement was more than offset by unfavorable exchange rates. International export package average daily volumes increased 3% in the first quarter of 2020 primarily due to growth in our international economy service offering. However, international package volume ~~growth has slowed across most regions~~ as a result of macroeconomic weakness and ~~trade uncertainty. International export package~~the COVID-19 pandemic, partially offset by an increase in U.S. domestic volume. Composite freight yields ~~decreased 3%~~increased 11% in the first quarter of ~~2020 driven~~2021 primarily due to improved base yields, partially offset by ~~unfavorable exchange rates, lower package weights, base yield declines and~~ lower fuel surcharges. U.S. domestic package average daily volumes increased 2%8% in the first quarter of ~~2020 led~~2021 driven by growth in deferred service offerings and overnight box volume, partially offset by a decrease in overnight envelope shipments. The growth in deferred services ~~as e-commerce continues~~was accelerated due to ~~drive growth, despite~~ the ~~loss of business from a large customer.~~COVID-19 pandemic. U.S. domestic package yields decreased 1%7% in the first quarter of ~~2020~~2021 driven by lower ~~package weights.~~fuel surcharges, lower

weight per package and unfavorable product mix. Other revenue increased 101% due to inclusion of FedEx Custom Critical and FedEx Cross Border in the FedEx Express segment in the first quarter of 2021.

FedEx Express’s U.S. domestic and outbound fuel surcharge and international fuel surcharge ranged as follows for the periods ended August 31:

	Three Months Ended						Three Months Ended
	2019			2018			2020			2019
U.S. Domestic and Outbound Fuel Surcharge:
Low		7.27	%		7.02	%		2.73	%		7.27	%
High		8.45			7.27			4.12			8.45
Weighted-average		7.55			7.11			3.43			7.55
International Export and Freight Fuel Surcharge:
Low		6.87			8.12			0.28			6.87
High		18.22			18.09			17.00			18.22
Weighted-average		15.55			14.60			10.29			15.55
International Domestic Fuel Surcharge:
Low		3.27			2.25			4.19			3.27
High		19.47			18.24			20.33			19.47
Weighted-average		7.50			5.68			5.93			7.50

On September 16, 2019, FedEx Express announced a 4.9% average list price increase for U.S. domestic, U.S. export and U.S. import services effective January 6, 2020. On March 18, 2019, we updated the tables used to determine our fuel surcharges for FedEx Express U.S. domestic services. On January 7, 2019, FedEx Express implemented a 4.9% average list price increase for U.S. domestic, U.S. export and U.S. import services. On September 10, 2018, we updated the tables used to determine our fuel surcharges at FedEx Express.

FedEx Express segment operating income ~~decreased 27%~~increased 149% in the first quarter of ~~2020~~2021 primarily due to ~~weakening global economic conditions~~international export and ~~continued mix shift to lower-yielding services, including lower weights due to~~U.S. domestic package volume growth ~~in deferred services resulting from e-commerce. In addition, one fewer~~and increased network operating ~~day, the loss of business from a large customer and decreased yields negatively impacted operating~~efficiency. Operating income and operating margin were positively impacted by one additional operating day in the first quarter of ~~2020. Lower~~2021. FedEx Express segment operating results include approximately $65 million related to a benefit from a reduction in aviation excise taxes provided by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). These factors were partially offset by higher salaries and employee benefits expense to support increased volume and higher variable incentive compensation ~~expenses benefited operating income comparisons by approximately $160~~expense of $110 million in the first quarter of ~~2020.~~2021, approximately half of which was due to the reversal of long-term incentive compensation accruals in the prior year.

FedEx Express segment results included ~~approximately $57~~$37 million of TNT Express integration expenses in the first quarter of ~~2020,~~2021, a ~~$45~~$20 million decrease from the first quarter of ~~2019.~~2020.

~~The lease standard reclassification discussed in the “Overview” section above is excluded from the following year-over-year expense change discussion.~~ Salaries and employee benefits ~~expense decreased 3%~~increased 11% in the first quarter of ~~2020~~2021 primarily due to ~~lower~~staffing to support volume growth, and higher variable incentive compensation expenses, the inclusion of certain TNT Express restructuring expenses in the first quarter of 2019, favorable exchange rates and one fewer operating day, partially offset by higher staffing to support package volume growth. Other operating expense increased 5% in the first quarter of 2020 primarily due to higher outside service contract expenses, which includes costs associated with cloud computing services.expense. Purchased transportation expense ~~decreased~~increased 6% in the first quarter of ~~2020~~2021 primarily due to ~~favorable exchange rates~~the inclusion of FedEx Custom Critical and ~~one fewer~~FedEx Cross Border in the FedEx Express segment, partially offset by lower freight volumes, resulting in lower utilization of third-party transportation providers. Other operating ~~day.~~

~~Fuel~~ expense ~~decreased 12%~~increased 4% in the first quarter of ~~2020~~2021 primarily due to higher operating supplies offset by decreased travel, driven by the COVID-19 pandemic. In addition, higher outside service contract expense and bad debt expense negatively impacted other operating expense.

Fuel expense decreased 33% in the first quarter of 2021 due to decreased fuel prices. The net impact of fuel had a ~~slight benefit~~slightly negative impact to operating income in the first quarter of ~~2020~~2021 as lower fuel surcharges outpaced decreased fuel ~~prices more than offset lower fuel surcharges.~~prices. See the “Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.

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 ~~revenues,~~revenue, operating expenses, operating income (dollars in millions), operating margin, selected package statistics (in thousands, except yield amounts) and operating expenses as a percent of revenue for the periods ended August 31:

	Three Months Ended						Percent				Percent of Revenue						Three Months Ended						Percent				Percent of Revenue
	2019			2018			Change				2019			2018			2020			2019			Change				2020			2019
Revenues	$	5,179		$	4,799			8				100.0	%		100.0	%	$	7,040		$	5,179			36				100.0	%		100.0	%
Operating expenses:
Salaries and employee benefits		871			805			8				16.8			16.8			1,274			871			46				18.2			16.8
Purchased transportation		2,303			2,062			12				44.5			43.0			3,291			2,303			43				46.7			44.5
Rentals		239			191			25				4.6			4.0			264			239			10				3.8			4.6
Depreciation and amortization		193			173			12				3.7			3.6			204			193			6				2.9			3.7
Fuel		3			3			—				—			—			4			3			33				—			—
Maintenance and repairs		87			77			13				1.7			1.6			107			87			23				1.5			1.7
Intercompany charges		375			388			(3	)			7.3			8.1			432			375			15				6.1			7.3
Other		464			424			9				9.0			8.8			630			464			36				9.0			9.0
Total operating expenses		4,535			4,123			10				87.6	%		85.9	%		6,206			4,535			37				88.2	%		87.6	%
Operating income	$	644		$	676			(5	)								$	834		$	644			30
Operating margin		12.4	%		14.1	%		(170	)	bp								11.8	%		12.4	%		(60	)	bp
Average daily package volume		8,834			8,221			7										11,559			8,834			31
Revenue per package (yield)	$	9.13		$	8.96			2									$	9.33		$	9.13			2

FedEx Ground segment ~~revenues~~revenue increased 8%36% in the first quarter of ~~2020~~2021 primarily due to residential delivery volume growth, including the sharp increase in demand resulting from stay-at-home orders and ~~increased yields, despite~~other responsive measures to the COVID-19 pandemic. In addition, revenue was positively impacted by yield improvement and one ~~fewer~~additional operating day ~~and the loss of business from a large customer.~~

~~Average daily volume increased 7%~~ in the first quarter of ~~2020~~2021. Average daily volume increased 31% in the first quarter of 2021 primarily due to continued growth in residential services driven by e-commerce. FedEx Ground yields increased 2% in the first quarter of ~~2020~~2021 primarily due to ~~higher base yields, extra service charges and higher~~pricing initiatives, partially offset by lower fuel surcharges.

The FedEx Ground fuel surcharge is based on a rounded average of the national U.S. on-highway average price for a gallon of diesel fuel, as published by the Department of Energy. The fuel surcharge ranged as follows for the periods ended August 31:

	Three Months Ended						Three Months Ended
	2019			2018			2020			2019
Low		6.75	%		6.30	%		5.75	%		6.75	%
High		7.25			6.50			5.75			7.25
Weighted-average		7.04			6.30			5.75			7.04

On September 16, 2019, FedEx Ground announced a 4.9% average list price increase effective January 6, 2020. On March 18, 2019, we updated the tables used to determine our fuel surcharges at FedEx Ground. On January 7, 2019, FedEx Ground implemented a 4.9% average list price increase. On September 10, 2018, we updated the tables used to determine our fuel surcharges at FedEx Ground.

FedEx Ground segment operating income ~~decreased 5%~~increased 30% in the first quarter of ~~2020~~2021 primarily due to higher purchased transportation costs, resulting from increased contractor settlement rates and higher volumes, including expanding to six-day-per-week operations year-round starting in January 2019, as well as increased staffing costs to support network expansion. In addition, the loss of business from a large customer negatively impacted our results during the first quarter of 2020. These items were partially offset byresidential delivery volume growth and ~~increased yields. Additionally, lower variable incentive compensation expenses benefited operating income comparisons by approximately $50 million~~yield growth. In addition, in the first quarter of ~~2020.~~

~~The lease standard reclassification discussed in the “Overview” section above is excluded~~2021, operating income benefited from ~~the following year-over-year~~one additional operating day. These factors were partially offset by higher purchased transportation costs and salaries and employee benefits expense ~~change discussion. Purchased transportation expense~~to support increased ~~12%~~volumes in the first quarter of ~~2020 due to increased contractor settlement rates and higher volumes, including expanding to six-day per week operations year-round, partially offset by decreased fuel costs. Other operating~~2021.

Purchased transportation expense increased 9%43% in the first quarter of ~~2020 primarily~~2021 due to higher ~~self-insurance accruals~~volumes and increased ~~bad debt expense.~~contractor settlement rates, including as a result of the ongoing expansion of U.S. operations to seven days per week year-round. Salaries and employee benefits expense increased 8%46% in the first quarter of ~~2020 primarily~~2021 due to additional staffing to support volume growth, including ~~expanding~~the ongoing expansion of U.S. operations to ~~six-day-per-week operations~~seven days per week year-round, ~~partially offset by lower~~merit increases, and higher variable incentive ~~compensation expenses.~~compensation. Other operating expense increased 36% in the first quarter of 2021 primarily due to higher self-insurance accruals and higher operating supplies driven by the COVID-19 pandemic.

The net impact of fuel had a ~~slight benefit~~slightly positive impact to operating income in the first quarter of ~~2020~~2021 as decreased fuel prices ~~more than offset~~outpaced lower fuel surcharges. See the “Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.

FedEx Ground is involved in lawsuits and administrative proceedings claiming that owner-operators engaged under operating agreements no longer in place should have been treated as employees of FedEx Ground, rather than independent contractors. In addition, we are defending joint-employer cases where it is alleged that FedEx Ground should be treated as an employer of the drivers employed by owner-operators engaged by FedEx Ground. These cases are in varying stages of litigation. We will continue to vigorously defend ourselves in these proceedings and continue to believe that owner-operators engaged by FedEx Ground are properly classified as independent contractors and that FedEx Ground is not an employer or joint employer of the drivers of these independent contractors.

FedEx Ground previously announced plans to implement the Independent Service Provider (“ISP”) model throughout its entire U.S. pickup-and-delivery network. The transition to the ISP model is being accomplished on a district-by-district basis and we are now targeting the transition to be completed during the second quarter of 2020. As of August 31, 2019, approximately 80% of standard FedEx Ground volume (excluding FedEx SmartPost volume) was being delivered by small businesses operating under the ISP model. The costs associated with these transitions will be recognized in the periods incurred and are not expected to be material to any future quarter.

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

	Three Months Ended						Percent				Percent of Revenue						Three Months Ended						Percent				Percent of Revenue
	2019			2018			Change				2019			2018			2020			2019			Change				2020			2019
Revenues	$	1,905		$	1,959			(3	)			100.0	%		100.0	%	$	1,826		$	1,905			(4	)			100.0	%		100.0	%
Operating expenses:
Salaries and employee benefits		919			928			(1	)			48.3			47.4			858			919			(7	)			47.0			48.3
Purchased transportation		187			259			(28	)			9.8			13.2			170			187			(9	)			9.3			9.8
Rentals		52			42			24				2.7			2.1			56			52			8				3.1			2.7
Depreciation and amortization		94			78			21				4.9			4.0			106			94			13				5.8			4.9
Fuel		123			137			(10	)			6.5			7.0			65			123			(47	)			3.6			6.5
Maintenance and repairs		65			62			5				3.4			3.2			53			65			(18	)			2.9			3.4
Intercompany charges		126			138			(9	)			6.6			7.0			119			126			(6	)			6.5			6.6
Other		145			139			4				7.6			7.1			125			145			(14	)			6.8			7.6
Total operating expenses		1,711			1,783			(4	)			89.8	%		91.0	%		1,552			1,711			(9	)			85.0	%		89.8	%
Operating income	$	194		$	176			10									$	274		$	194			41
Operating margin		10.2	%		9.0	%		120		bp								15.0	%		10.2	%		480		bp
Average daily shipments (in thousands)
Priority		78.5			81.2			(3	)									71.3			78.5			(9	)
Economy		32.8			34.6			(5	)									30.1			32.8			(8	)
Total average daily shipments		111.3			115.8			(4	)									101.4			111.3			(9	)
Weight per shipment (lbs)
Priority		1,156			1,218			(5	)									1,096			1,156			(5	)
Economy		960			1,009			(5	)									998			960			4
Composite weight per shipment		1,098			1,156			(5	)									1,067			1,098			(3	)
Revenue per shipment
Priority	$	255.45		$	246.77			4									$	259.90		$	255.45			2
Economy		295.75			292.33			1										302.74			295.75			2
Composite revenue per shipment	$	267.34		$	260.39			3									$	272.62		$	267.34			2
Revenue per hundredweight
Priority	$	22.10		$	20.26			9									$	23.71		$	22.10			7
Economy		30.81			28.97			6										30.34			30.81			(2	)
Composite revenue per hundredweight	$	24.35		$	22.53			8									$	25.55		$	24.35			5

FedEx Freight segment ~~revenues decreased 3% in the first quarter of 2020 due to decreased average daily shipments and one fewer operating day, partially offset by higher~~ revenue ~~per shipment.~~

~~Average daily shipments~~ decreased 4% in the first quarter of ~~2020~~2021 due to decreased average daily shipments, partially offset by higher revenue per shipment. Average daily shipments decreased 9% in the first quarter of 2021 due to lower demand for our service offerings as a result of ~~softening economic conditions.~~the COVID-19 pandemic and related supply chain disruptions. Revenue per shipment increased 3%2% in the first quarter of ~~2020~~2021 primarily due to higher base rates reflecting our ongoing ~~yield management~~revenue quality initiatives, partially offset by lower weight per shipment.

The weekly indexed fuel surcharge is based on the average of the U.S. on-highway prices for a gallon of diesel fuel, as published by the Department of Energy. The indexed FedEx Freight fuel surcharge ranged as follows for the periods ended August 31:

	Three Months Ended						Three Months Ended
	2019			2018			2020			2019
Low		23.50	%		24.60	%		21.00	%		23.50	%
High		24.40			25.00			21.30			24.40
Weighted-average		23.90			24.77			21.20			23.90

On September 16, 2019, FedEx Freight announced a 5.9% average list price increase in certain U.S. and other shipping rates effective January 6, 2020. On January 7, 2019, FedEx Freight implemented a 5.9% average list price increase in certain U.S. and other shipping rates.

FedEx Freight segment operating income increased ~~10%~~41% in the first quarter of ~~2020 primarily due~~2021 driven by continued focus on revenue quality initiatives and aligning our cost structure with current and anticipated business levels, enabling FedEx Freight to ~~higher revenue per shipment, partially~~improve profit and more than offset bythe impact of lower volumes as a result of the COVID-19 pandemic and weaker economic conditions.

Salaries and employee benefits expense decreased ~~average daily shipments. In addition, lower variable incentive compensation expenses benefited operating income comparisons by approximately $30 million~~7% in the first quarter of ~~2020.~~

The lease standard reclassification discussed in the “Overview” section above is excluded from the following year-over-year expense change discussion. Purchased transportation expense decreased 28% in first quarter of 20202021 primarily due to lower ~~utilization of third-party transportation providers. Depreciation~~volumes, partially offset by higher variable incentive compensation and ~~amortization~~merit increases.

Fuel expense ~~increased 21%~~decreased 47% in the first quarter of ~~2020 due to investments in vehicles and trailers.~~

~~Fuel expense decreased 10% in the first quarter of 2020~~2021 primarily due to decreased fuel prices. The net impact of fuel had a slightly negative impact to operating income in the first quarter of ~~2020~~2021 as lower fuel surcharges ~~more than offset~~outpaced decreased fuel prices. See the “Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.

Cash and cash equivalents totaled ~~$2.4~~$7.0 billion at August 31, ~~2019,~~2020, compared to ~~$2.3~~$4.9 billion at May 31, ~~2019.~~2020. The following table provides a summary of our cash flows for the three-month periods ended August 31 (in millions):

	2019			2018			2020			2019
Operating activities:
Net income	$	745		$	835		$	1,245		$	745
Noncash charges and credits		1,745			981			1,675			1,745
Changes in assets and liabilities		(1,925	)		(1,115	)		(269	)		(1,925	)
Cash provided by operating activities		565			701			2,651			565
Investing activities:
Capital expenditures		(1,418	)		(1,179	)		(1,424	)		(1,418	)
Proceeds from asset dispositions and other		(1	)		78			6			(1	)
Cash used in investing activities		(1,419	)		(1,101	)		(1,418	)		(1,419	)
Financing activities:
Proceeds from short-term borrowings, net		—			299
Principal payments on debt								(45	)		(985	)
Proceeds from debt issuances		2,093			—			959			2,093
Principal payments on debt		(985	)		(2	)
Proceeds from stock issuances		12			25			82			12
Dividends paid		(170	)		(173	)		(170	)		(170	)
Purchase of treasury stock		(3	)		(625	)		—			(3	)
Other		(5	)		4
Cash provided by (used in) financing activities		942			(472	)
Other, net								(1	)		(5	)
Cash provided by financing activities								825			942
Effect of exchange rate changes on cash		(18	)		(24	)		15			(18	)
Net increase (decrease) in cash and cash equivalents	$	70		$	(896	)
Net increase in cash and cash equivalents							$	2,073		$	70
Cash and cash equivalents at the end of period	$	2,389		$	2,369		$	6,954		$	2,389

Cash flows from operating activities ~~decreased $136 million~~increased $2.1 billion in the first quarter of ~~2020~~2021 primarily due to ~~higher~~lower pension contributions, relief from certain taxes in the United States pursuant to the CARES Act, lower variable incentive compensation payments and ~~lower~~higher net income, partially offset by noncash credits resulting from the adoption of the new lease accounting standard. See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of our adoption of the new lease accounting standard.income. Capital expenditures ~~increased~~remained flat during the first quarter of ~~2020~~2021 primarily due to ~~increased~~higher spending related to aircraft and related equipment at FedEx Express, which was offset by decreased spending on vehicles and trailers at FedEx Freight ~~higher spending related to facilities and aircraft at FedEx Express and increased spending on information technology at FedEx Services, FedEx Express~~ and FedEx ~~Freight. These items were partially offset by lower spending across all asset categories at FedEx Ground.~~Express. See “Capital Resources” for a discussion of capital expenditures during ~~2020~~2021 and ~~2019.~~2020.

During ~~the first quarter~~August 2020, FedEx Express issued $970 million of ~~2020, we issued $2.1 billion~~Pass Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of ~~senior unsecured debt under our current shelf registration statement, comprised of $1.0 billion of 3.10% fixed-rate notes~~1.875% due in ~~August 2029, €500 million~~February 2034 utilizing pass through trusts. The Certificates are secured by 19 Boeing aircraft. The payment obligations of ~~0.45% fixed-rate notes due~~FedEx Express in ~~August 2025~~respect of the Certificates are fully and ~~€500 million of 1.30% fixed-rate notes due in August 2031. We used~~unconditionally guaranteed by FedEx. FedEx Express is using the ~~net~~ proceeds ~~to make voluntary contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) during~~from the first quarter of 2020 and to redeem the $400 million aggregate principal amount of 2.30% notes due February 1, 2020 and the €500 million aggregate principal amount of 0.50% notes due April 9, 2020. The remaining net proceeds are being usedissuance for general corporate purposes.

In January 2016, our Board of Directors approved a stock repurchase program of up to 25 million shares. During the first quarter of 2020, we repurchased 0.02 million shares of FedEx common stock at an average price of $156.90 per share See Note 4 for a total of $3 million. As of August 31, 2019, 5.1 million shares remained under the stock repurchase authorization. Shares under this 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 limit was set for the completion of the program, and the program may be suspended or discontinued at any time.additional information.

Our operations are capital intensive, characterized by significant investments in aircraft, vehicles and trailers, technology, facilities, and package handling and sort equipment. The amount and timing of capital additions depend on various factors, including pre-existing contractual commitments, anticipated volume growth, domestic and international economic conditions, new or enhanced services, geographical expansion of services, availability of satisfactory financing and actions of regulatory authorities.

The following table compares capital expenditures by asset category and reportable segment for the periods ended August 31 (in millions):



	Three Months Ended				Percent			Three Months Ended
	2019		2018		Change			2020		2019		Percent Change
Aircraft and related equipment	$	541	$	472		15		$	773	$	541		43
Package handling and ground support equipment		141		193		(27	)		217		141		54
Vehicles and trailers		261		160		63			37		261		(86	)
Information technology		222		175		27			194		222		(13	)
Facilities and other		253		179		41			203		253		(20	)
Total capital expenditures	$	1,418	$	1,179		20		$	1,424	$	1,418		—

FedEx Express segment	$	951	$	760		25		$	1,028	$	951		8
FedEx Ground segment		96		176		(45	)		204		96		113
FedEx Freight segment		186		90		107			39		186		(79	)
FedEx Services segment		151		125		21			118		151		(22	)
Other		34		28		21			35		34		3
Total capital expenditures	$	1,418	$	1,179		20		$	1,424	$	1,418		—

Capital expenditures ~~increased during~~remained flat in the first quarter of ~~2020~~2021 primarily due to ~~increased~~higher spending related to aircraft and related equipment at FedEx Express, which was offset by decreased spending on vehicles and trailers at FedEx Freight ~~higher spending related~~and FedEx Express.

We are providing the following information in compliance with Rule 13-01 of Regulation S-X, “Financial Disclosures aboutGuarantors and Issuers of Guaranteed Securities” with respect to our senior unsecured debt securities and the Certificates. As of August 31, 2020, we had outstanding $21.9 billion of senior unsecured debt securities and $970 million of Certificates.

Substantially all 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 obligations of FedEx Express in respect of the Certificates. See Note 6 to the financial statements included in our Annual Report for additional information regarding the terms of the senior unsecured debt securities and Note 4 of the accompanying consolidated financial statements for additional information regarding the terms of the Certificates.

The following tables present summarized financial information for FedEx (as Parent) and the Guarantor Subsidiaries on a combined basis after transactions and balances within the combined entities have been eliminated.

The following table presents the summarized balance sheet information as of August 31, 2020 and May 31, 2020 (in millions):

The following table presents the summarized statement of income information as of August 31, 2020 (in millions):

The following tables present summarized financial information for FedEx (as Parent Guarantor) and FedEx Express (as Subsidiary Issuer) on a combined basis after transactions and balances within the combined entities have been eliminated.

The following table presents the summarized balance sheet information as of August 31, 2020 and May 31, 2020 (in millions):

The following table presents the summarized statement of income information as of August 31, 2020 (in millions):

In response to current business and economic conditions as referenced above in the “Outlook” section of this MD&A, we are taking actions to manage our cash flow and improve our liquidity, including review and consideration of opportunities and strategies for capital expenditure reductions and deferrals, operating expense reductions and alternative financing sources in addition to our credit facilities and ~~aircraft at FedEx Express, which included~~unsecured debt markets. In addition, we expect to benefit from certain of the ~~delivery~~relief provisions of ~~four Boeing 767-300 Freighter (“B767F”) aircraft~~recently enacted and ~~four Boeing 777 Freighter aircraft~~any future government programs intended to provide economic relief to U.S. and ~~increased spending on information technology at FedEx Services, FedEx Express~~global businesses in response to the COVID-19 pandemic, including relief from certain income, excise and ~~FedEx Freight. These items were partially offset by lower spending across all asset categories at FedEx Ground.~~

~~LIQUIDITY OUTLOOK~~payroll taxes in the United States pursuant to the CARES Act.

We believe that our cash and cash equivalents, cash flow from operations and available financing sources will be adequate to meet our internal and external liquidity ~~needs, including working capital, capital expenditure requirements, debt payment obligations, pension contributions and TNT Express integration expenses.~~needs. Our cash and cash equivalents balance at August 31, ~~2019~~2020 includes ~~$1.3~~$1.2 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, as the enactment of the Tax Cuts and Jobs Act ~~(“TCJA”)~~ significantly reduced the cost of repatriating foreign earnings from a U.S. tax perspective. We do not believe that the indefinite reinvestment of these funds impairs our ability to meet our U.S. domestic debt or working capital obligations.

Our capital expenditures are expected to be approximately ~~$5.9~~$5.1 billion in ~~2020, and~~2021, a $0.8 billion decrease from 2020. The slight increase in our expected capital expenditures from the estimate in our Annual Report is due to capital investment for additional capacity initiatives in support of increased volumes. Total capital expenditures will include ~~spending for~~ aircraft ~~and hub~~ modernization at FedEx Express and strategic investments ~~that increase our efficiency in handling large packages at FedEx Ground~~to improve productivity and ~~investments in technology across all transportation segments that will further optimize our networks and enhance our capabilities.~~safety. We invested ~~$0.5~~$0.8 billion in aircraft and related equipment in the first quarter of ~~2020 and expect to invest an additional $1.0 billion for aircraft and related equipment during the remainder of 2020.~~2021. In addition, we are making investments over multiple years ~~in our facilities~~ of approximately $1.5 billion to significantly expand the FedEx Express Indianapolis hub and approximately $1.5 billion to modernize the FedEx Express Memphis World Hub. We expect these investments in hubs will provide productivity gains. We anticipate that our cash flow from operations will be sufficient to fund our capital expenditures ~~in 2020.~~for the remainder of 2021. Historically, we have been successful in obtaining unsecured financing from both domestic and international sources, although the marketplace for such investment capital can become restricted depending on a variety of economic factors.

During the first quarter of ~~2020,~~2021, FedEx Express ~~exercised options to purchase an additional six B767F~~executed a contract amendment rescheduling Boeing 767-300 Freighter aircraft ~~for delivery in 2022.~~deliveries as follows: 2021 – 18 aircraft; 2022 – 11 aircraft; 2023 – 13 aircraft; and 2024 – 4 aircraft.

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.~~stock and allows pass through trusts formed by FedEx Express to sell, in one or more future offerings, pass through certificates.

~~During the first quarter of 2020, we made voluntary contributions totaling $1.0 billion to our U.S. Pension Plans.~~ We do not expect to make any ~~additional~~ contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension ~~Plans for the remainder of 2020.~~Plans”) during 2021. Our U.S. Pension Plans have ample funds to meet expected benefit payments.

Standard & Poor’s has assigned us a senior unsecured debt credit rating of BBB, a commercial paper rating of A-2 and a ratings outlook of ~~“stable.~~“negative.” Moody’s Investors Service has assigned us an unsecured debt credit rating of Baa2, a commercial paper rating of P-2 and a ratings outlook of ~~“stable.~~“negative.” 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 following table sets forth a summary of our~~There have been no material changes to the contractual ~~cash obligations as of August 31, 2019. Certain of these contractual obligations are reflected~~commitments described in Part II, Item 7 in our ~~balance~~Annual Report.

We do not have any guarantees or other off-balance sheet ~~while others are disclosed as future obligations under accounting principles generally accepted in the United States. We~~financing arrangements, including variable interest entities, which we believe could have ~~certain contingent liabilities that are not accrued in~~a material impact on our balance sheet in accordance with accounting principles generally accepted in the United States. These contingent liabilities are not included in the table below. We have other long-term liabilities reflected in our balance sheet, including deferred income taxes, qualified and nonqualified pension and postretirement healthcare plan liabilities and other self-insurance accruals. Unless statutorily required, the payment obligations associated with these liabilities are not reflected in the table below due to the absence of scheduled maturities. Accordingly, this table is not meant to represent a forecast of our total cash expenditures for any of the periods presented.financial condition or liquidity.

Payments Due by Fiscal Year (Undiscounted)
(in millions)

2020 ⁽¹⁾

2021

2022

2023

2024

Thereafter

Total

Operating activities:

Operating leases

$
1,757

$
2,246

$
2,014

$
1,787

$
1,490

$
7,538

$
16,832

Non-capital purchase obligations and other

909

765

518

362

226

2,757

5,537

Interest on long-term debt

459

649

649

621

599

10,184

13,161

Investing activities:

Aircraft and related capital
commitments

989

2,337

2,321

1,542

468

228

7,885

Other capital purchase obligations

59

25

23

23

1

5

136

Financing activities:

Debt

—

—

1,212

1,584

750

15,292

18,838

Finance leases

37

14

14

12

11

78

166

Total

$
4,210

$
6,036

$
6,751

$
5,931

$
3,545

$
36,082

$
62,555

Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above. Such purchase orders often represent authorizations to purchase rather than binding agreements. See Note 8 ofto the accompanying unaudited condensed consolidated financial statements for ~~more~~additional information on ~~such~~our purchase ~~orders.~~

The amounts reflected in the table above for operating leases represent undiscounted future minimum lease payments under noncancelable operating leases (principally facilities and aircraft) with an initial or remaining term in excess of one year at August 31, 2019. Under the new lease accounting rules, the majority of these leases are required to be recognized at the net present value on the balance sheet as a liability with an offsetting right-to-use asset.

Included in the table above within the caption entitled “Non-capital purchase obligations and other” is our estimate of the current portion of the liability ($125 million) for uncertain tax positions. We cannot reasonably estimate the timing of the long-term payments or the amount by which the liability will increase or decrease over time; therefore, the long-term portion of the liability ($36 million) is excluded from the table.

~~The amounts reflected in the table above for interest on long-term debt represent future interest payments due on our long-term debt.~~

The amounts reflected in the table above for capital purchase obligations represent noncancelable agreements to purchase capital-related equipment. Such contracts include those for certain purchases of aircraft, aircraft modifications, vehicles and trailers, facilities, computers and other equipment.

~~We had $611 million in deposits and progress payments as of August 31, 2019 on aircraft purchases and other planned aircraft-related transactions.~~

~~The amounts reflected in the table above for long-term debt represent future scheduled principal payments on our long-term debt.~~

The amounts reflected in the table above for finance leases represent undiscounted future minimum lease payments under noncancelable finance leases with an initial or remaining term in excess of one year at August 31, 2019.

~~Additional information on amounts included within the operating, investing and financing activities captions in the table above can be found in our Annual Report.~~commitments.

~~During the first quarter of 2020,~~On June 24, 2019, FedEx filed suit in U.S. District Court in the District of Columbia seeking to enjoin the U.S. Department of Commerce (the “DOC”) from enforcing prohibitions contained in the Export Administration Regulations ~~(the “EARs”)~~ against FedEx. ~~FedEx believes that~~On September 11, 2020, the ~~EARs violate common carriers’ rights~~court granted the DOC’s motion to ~~due process under~~dismiss the Fifth Amendment of the U.S. Constitution as they unreasonably hold common carriers strictly liable for shipments that may violate the EARs without requiring evidence that the carriers had knowledge of any violations.

~~The China State Post Bureau is currently conducting an investigation into the operations of FedEx Express regarding its handling of certain packages while attempting~~lawsuit. We intend to ~~comply with the EARs. FedEx Express has and will continue to fully cooperate with the Chinese authorities on the investigation.~~appeal this decision.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the financial statements of a complex, global corporation. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and new or better information.

GOODWILL. Goodwill is tested for impairment between annual tests whenever events or circumstances make it more likely than not that the fair value of a reporting unit has fallen below its carrying value. We do not believe there has been any other change of events or circumstances that would indicate that a reevaluation of the goodwill of our reporting units is required as of August 31, ~~2019,~~2020, nor do we believe the goodwill of our reporting units is at risk of failing impairment testing. For additional details on goodwill impairment testing, refer to Note 1 to the financial statements included in our Annual Report.

Information regarding our critical accounting estimates can be found in our Annual Report, including Note 1 to the financial statements therein. Management has discussed the development and selection of these critical accounting estimates with the Audit 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 ~~“Fuel,”~~ “Income Taxes,” “Outlook,” ~~“Independent Contractor and Independent Service Provider Models,”~~ “Liquidity ~~Outlook,” “Contractual Cash Obligations and Off-Balance Sheet Arrangements”~~Outlook” and “Critical Accounting Estimates,” and the “Financing Arrangements,” ~~“Leases,~~“Retirement Plans,” “Commitments” and “Contingencies” notes to ~~the~~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.~~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,” “projects,” “intends” or similar expressions. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking statements because of, among other things, potential risks and uncertainties, such as:

As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

As of August 31, ~~2019,~~2020, 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, Australian dollar and Mexican peso. Historically, our exposure to foreign currency fluctuations is more significant with respect to our ~~revenues~~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 ~~three months~~quarter of ~~2020,~~2021, the U.S. dollar ~~strengthened~~weakened relative to the currencies of the foreign countries in which we operate, as compared to ~~May 31, 2019,~~the first quarter of 2020, and this ~~strengthening~~weakening had a slightly positive impact on our results.

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

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, ~~(the “Exchange Act”),~~ is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to FedEx management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of August 31, ~~2019~~2020 (the end of the period covered by this Quarterly Report on Form 10-Q).

~~In the first quarter of 2020, we adopted Accounting Standards Update 2016-02,~~ ~~Leases (Topic 842)~~, and implemented new systems and internal controls in conjunction with the new lease standard. These changes have not materially affected, and are not reasonably likely to materially affect, our internal controls over financial reporting. During our fiscal quarter ended August 31, ~~2019,~~2020, 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. Due to the COVID-19 pandemic, the majority of our accounting, finance and legal employees continued working remotely. We continue to monitor the COVID-19 pandemic and its effects on the design and operating effectiveness of our internal control over financial reporting.

For a description of all material pending legal proceedings, see Note 9 of the accompanying unaudited condensed consolidated financial statements.

Other than the risk ~~factors~~factor set forth below, there have been no material changes from the risk factors disclosed in our Annual Report (under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition”) in response to Part I, Item 1A of Form 10-K.

~~Additional changes in international trade policies and relations could significantly reduce the volume of goods transported globally and adversely affect our business and results of operations.~~ The ~~U.S. government~~COVID-19 pandemic has ~~made significant changes in U.S. trade policy and has taken~~had certain actions that have negatively impacted U.S. trade, including imposing tariffs on certain goods imported into the United States. To date, several governments, including the European Union (“EU”), China and India, have imposed tariffs on certain goods imported from the United States. These actions contributed to weakness in the global economy that adversely affected our results of operations during fiscal 2019 and the first quarter of fiscal 2020, and we expect such weakness to continue to be present during the remainder of fiscal 2020. Any further changes in U.S. or international trade policy could trigger additional retaliatory actions by affected countries, resulting in “trade wars” and further increased costs for goods transported globally, which may reduce customer demand for these products if the parties having to pay those tariffs increase their prices, or in trading partners limiting their trade with countries that impose anti-trade measures. Political uncertainty surrounding international trade and other disputes could also have a negative effect on consumer confidence and spending. Such conditions could have an adverse ~~effect~~effects on our business, results of operations and financial condition, ~~as well as on~~and we expect such adverse effects will continue. The COVID-19 pandemic has negatively impacted the ~~price~~global economy, disrupted global supply chains and created significant volatility and disruption of ~~our common stock.~~financial markets.

~~Additionally,~~Due to the crucial role we play in moving supply chains and delivering critical relief, we are considered an essential business and we continue to operate under and respond to evolving governmental and other restrictions issued in the U.S. ~~government~~and globally. The disruption of global supply chains and the global economy has recently taken action to limit the ability of domestic companies to engage in commerce with certain foreign entities under certain circumstances. Given the nature of our business and our global recognizability, foreign governments may target FedEx by limiting the ability of foreign entities to do business with us in certain instances, imposing monetary or other penalties or taking other retaliatory action, which could have an adverse effect on our business, results of operations and financial condition, as well as on the price of our common stock. For example, the China State Post Bureau is currently conducting an investigation into the operations of FedEx Express regarding its handling of certain packages while attempting to comply with the Export Administration Regulations.

~~The United Kingdom’s vote to leave the EU could adversely impact~~materially affected our business, results of operations and financial condition. ~~There is substantial uncertainty surrounding~~We expect the United Kingdom’s 2016 vote to leave the EU (“Brexit”), which is scheduled for October 31, 2019. The suspension or further delay of Brexit beyond October 31, 2019 requires the unanimous agreement of all remaining EU member states. Anyfull impact of ~~Brexit depends~~the COVID-19 pandemic, including the extent of its effect on our financial condition and results of operations, to be dictated by future developments which remain uncertain and cannot be predicted, such as its duration and spread, the ~~terms~~success of ~~the United Kingdom’s withdrawal from the EU, if~~efforts to contain it ~~ultimately occurs. The ongoing uncertainty within the United Kingdom’s government~~ and ~~Parliament on the status of a withdrawal agreement could lead to economic stagnation until an ultimate resolution with respect to Brexit occurs. Such uncertainty also sustains~~treat its impact, the possibility of ~~a “hard Brexit,”~~subsequent widespread outbreaks, and the impact of actions taken in ~~which~~response. The COVID-19 pandemic has had, and we expect will continue to have, certain negative impacts on our business, including, but not limited to, the United Kingdom leaves the EU without a withdrawal agreement and associated transition period in place. A hard Brexit would likely cause significant market and economic disruption and negatively impact customer experience and service quality, and could depress the demand for our services.following:

~~Even if an agreement setting forth~~To the ~~terms~~extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many other risks described under the ~~United Kingdom’s withdrawal from the EU is approved, the withdrawal~~heading “Risk Factors” in our Annual Report, any of which could ~~result in a global economic downturn. The United Kingdom also could lose access to the single EU market~~materially and to the global trade deals negotiated by the EU on behalf of its members, depressing trade between the United Kingdom and other countries, which would negatively impact our international operations. Additionally, we may face new regulations regarding trade, aviation, tax, security and employees, among others, in the United Kingdom. Compliance with such regulations could be costly, negatively impactingadversely affect our business, results of operations and financial condition. ~~Brexit could also adversely affect European~~Such risks include, but are not limited to, additional changes in international trade policies and ~~worldwide economic~~relations; our ability to successfully integrate the businesses and ~~market conditions~~operations of FedEx Express and ~~could contribute to instability~~TNT Express in ~~global financial~~the expected time frame and ~~foreign exchange markets, including volatility in~~at the expected cost; our strong reputation and the value of the ~~euro~~FedEx brand; our ability to manage our capital intensive businesses; changes to the business and financial soundness of the U.S. Postal Service; workforce availability; employee healthcare benefit costs; constraints, volatility or disruption in the capital markets and our ability to access sources of financing and liquidity; and the ~~British pound.~~impact of litigation or claims from customers, team members, suppliers, regulators or other third parties relating to the COVID-19 pandemic or our actions in response to the pandemic.

~~The following table provides information on FedEx’s repurchases~~We did not repurchase any shares of ~~our~~FedEx common stock during the first quarter of ~~2020:~~2021.

~~The repurchases were made under the~~On January 26, 2016, we announced a stock repurchase program approved by our Board of Directors, ~~and announced on January 26, 2016 and~~ through which we are authorized to purchase, in the open market or in privately negotiated transactions, up to an aggregate of 25 million shares of our common stock. As of September ~~13, 2019,~~11, 2020, 5.1 million shares remained authorized for purchase under the January 2016 stock repurchase program, which is the only such program that currently exists. The program does not have an expiration date. See Note 1 of the accompanying unaudited condensed consolidated financial statements for further discussion.

Each named executive officer, other than Frederick W. Smith, has received a base salary increase of 2% effective October 1, 2020.

† 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
0.700% Notes due 2022	FDX 22B	New York Stock Exchange
1.000% Notes due 2023	FDX 23A	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
1.300% Notes due 2031	FDX 31	New York Stock Exchange

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

Common Stock		Outstanding Shares at September ~~13, 2019~~11, 2020
Common Stock, par value $0.10 per share		~~260,910,309~~262,591,998

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets August 31, ~~2019~~2020 and May 31, ~~2019~~2020		3
Condensed Consolidated Statements of Income Three Months Ended August 31, ~~2019~~2020 and ~~2018~~2019		5
Condensed Consolidated Statements of Comprehensive Income Three Months Ended August 31, ~~2019~~2020 and ~~2018~~2019		6
Condensed Consolidated Statements of Cash Flows Three Months Ended August 31, ~~2019~~2020 and ~~2018~~2019		7
Condensed Consolidated Statements of Changes In Common Stockholders’ Investment Three Months Ended August 31, ~~2019~~2020 and ~~2018~~2019		8
Notes to Condensed Consolidated Financial Statements		9
Report of Independent Registered Public Accounting Firm		2819
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		2920
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		5142
ITEM 4. Controls and Procedures		5142

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		5243
ITEM 1A. Risk Factors		5243
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		5345
ITEM 5. Other Information		45
ITEM 6. Exhibits		5446
Signature		5648

Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
~~Exhibit 10.6~~
~~Exhibit 10.7~~
Exhibit 15.1
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


FedEx Express Segment	FedEx Express (express transportation)
	TNT Express (international express transportation, small-package ground delivery and freight transportation) FedEx Custom Critical, Inc. (time-critical transportation) FedEx Cross Border Holdings, Inc. (“FedEx Cross Border”) (cross-border e-commerce technology and e-commerce transportation solutions)

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)

	2019
Operating lease cost⁽¹⁾	$	674
Finance lease cost:
Amortization of right-of-use assets		3
Interest on lease liabilities		1
Total finance lease cost		4
Short-term lease cost		35
Variable lease cost⁽¹⁾		267
Net lease cost	$	980

	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	635
Operating cash flows paid for interest portion of finance leases		1
Financing cash flows paid for principal portion of finance leases		27
Right-of-use assets obtained in exchange for new operating lease liabilities	$	235
Right-of-use assets obtained in exchange for new finance lease liabilities	$	76

	2019
Operating leases:
Operating lease right-of-use assets	$	13,819

Current portion of operating lease liabilities		1,896
Operating lease liabilities		12,137
Total operating lease liabilities	$	14,033

Finance leases:
Net property and equipment	$	124

Current portion of long-term debt		35
Long-term debt, less current portion		94
Total finance lease liabilities	$	129

Weighted-average remaining lease term
Operating leases		10.2
Finance leases		10.3

Weighted-average discount rate
Operating leases		3.28	%
Finance leases		4.10	%

	Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases
2020 (remainder)	$	234		$	1,523		$	1,757		$	37		$	1,794
2021		207			2,039			2,246			14			2,260
2022		190			1,824			2,014			14			2,028
2023		154			1,633			1,787			12			1,799
2024		58			1,432		��	1,490			11			1,501
Thereafter		85			7,453			7,538			78			7,616
Total lease payments		928			15,904			16,832			166			16,998
Less imputed interest		(61	)		(2,738	)		(2,799	)		(37	)		(2,836	)
Present value of lease liability	$	867		$	13,166		$	14,033		$	129		$	14,162

	2020			2019
Revenue:
FedEx Express segment	$	9,647		$	8,945
FedEx Ground segment		7,040			5,179
FedEx Freight segment		1,826			1,905
FedEx Services segment		8			4
Other and eliminations		800			1,015
	$	19,321		$	17,048
Operating income (loss):
FedEx Express segment	$	710		$	285
FedEx Ground segment		834			644
FedEx Freight segment		274			194
Corporate, other and eliminations		(228	)		(146	)
	$	1,590		$	977

			Guarantor		Non-guarantor
	Parent		Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	684	$	176	$	1,598	$	(69	)	$	2,389
Receivables, less allowances		335		5,575		3,541		(139	)		9,312
Spare parts, supplies, fuel, prepaid expenses and other, less allowances		40		949		327		—			1,316
Total current assets		1,059		6,700		5,466		(208	)		13,017
PROPERTY AND EQUIPMENT, AT COST		26		57,131		4,279		—			61,436
Less accumulated depreciation and amortization		17		27,715		2,094		—			29,826
Net property and equipment		9		29,416		2,185		—			31,610
INTERCOMPANY RECEIVABLE		3,003		72		—		(3,075	)		—
OPERATING LEASE RIGHT-OF-USE ASSETS		32		11,538		2,249		—			13,819
GOODWILL		—		1,582		5,239		—			6,821
INVESTMENT IN SUBSIDIARIES		34,439		4,970		—		(39,409	)		—
OTHER ASSETS		984		1,019		1,734		(552	)		3,185
	$	39,526	$	55,297	$	16,873	$	(43,244	)	$	68,452
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt	$	—	$	26	$	9	$	—		$	35
Accrued salaries and employee benefits		91		985		446		—			1,522
Accounts payable		191		1,444		1,747		(203	)		3,179
Operating lease liabilities		4		1,445		447		—			1,896
Accrued expenses		512		1,895		902		(6	)		3,303
Total current liabilities		798		5,795		3,551		(209	)		9,935
LONG-TERM DEBT, LESS CURRENT PORTION		18,395		286		45		—			18,726
INTERCOMPANY PAYABLE		—		—		3,074		(3,074	)		—
OTHER LONG-TERM LIABILITIES
Deferred income taxes		—		2,929		576		(552	)		2,953
Operating lease liabilities		30		10,257		1,850		—			12,137
Other liabilities		2,137		3,390		1,008		—			6,535
Total other long-term liabilities		2,167		16,576		3,434		(552	)		21,625
COMMON STOCKHOLDERS’ INVESTMENT		18,166		32,640		6,769		(39,409	)		18,166
	$	39,526	$	55,297	$	16,873	$	(43,244	)	$	68,452

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	12,241		$	4,893		$	(86	)	$	17,048
OPERATING EXPENSES:
Salaries and employee benefits		20			4,685			1,382			—			6,087
Purchased transportation		—			2,543			1,519			(34	)		4,028
Rentals and landing fees		2			712			208			(2	)		920
Depreciation and amortization		—			761			118			—			879
Fuel		—			812			58			—			870
Maintenance and repairs		—			684			84			—			768
Intercompany charges, net		(78	)		(481	)		559			—			—
Other		56			1,668			845			(50	)		2,519
		—			11,384			4,773			(86	)		16,071
OPERATING INCOME		—			857			120			—			977
OTHER (EXPENSE) INCOME:
Equity in earnings of subsidiaries		745			18			—			(763	)		—
Interest, net		(151	)		12			2			—			(137	)
Other retirement plans income		—			163			5			—			168
Intercompany charges, net		164			(120	)		(44	)		—			—
Other, net		(13	)		16			(15	)		—			(12	)
INCOME BEFORE INCOME TAXES		745			946			68			(763	)		996
Provision for income taxes		—			225			26			—			251
NET INCOME (LOSS)	$	745		$	721		$	42		$	(763	)	$	745
COMPREHENSIVE INCOME (LOSS)	$	731		$	705		$	(32	)	$	(763	)	$	641

	August 31, 2020		May 31, 2020
Current Assets	$	13,016	$	11,014
Intercompany Receivable		3,442		3,985
Total Assets		78,198		62,089
Current Liabilities		7,758		7,030
Intercompany Payable		—		519
Total Liabilities		52,037		49,844

Revenue	$	14,215
Intercompany Charges, net		(658	)
Operating Income		1,143
Intercompany Charges, net		35
Income Before Income Taxes		1,221
Net Income	$	949

	Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases
2021 (remainder)	$	200		$	1,661		$	1,861		$	48		$	1,909
2022		229			2,120			2,349			27			2,376
2023		198			1,905			2,103			25			2,128
2024		102			1,672			1,774			24			1,798
2025		69			1,466			1,535			24			1,559
Thereafter		258			7,335			7,593			706			8,299
Total lease payments		1,056			16,159			17,215			854			18,069
Less imputed interest		(85	)		(2,392	)		(2,477	)		(381	)		(2,858	)
Present value of lease liability	$	971		$	13,767		$	14,738		$	473		$	15,211

Revenue	$	5,334
Intercompany Charges, net		(241	)
Operating Income		213
Intercompany Charges, net		135
Income Before Income Taxes		620
Net Income	$	601

	Payments Due by Fiscal Year (Undiscounted) (in millions)
	2020 ⁽¹⁾		2021		2022		2023		2024		Thereafter		Total
Operating activities:
Operating leases	$	1,757	$	2,246	$	2,014	$	1,787	$	1,490	$	7,538	$	16,832
Non-capital purchase obligations and other		909		765		518		362		226		2,757		5,537
Interest on long-term debt		459		649		649		621		599		10,184		13,161
Investing activities:
Aircraft and related capital commitments		989		2,337		2,321		1,542		468		228		7,885
Other capital purchase obligations		59		25		23		23		1		5		136
Financing activities:
Debt		—		—		1,212		1,584		750		15,292		18,838
Finance leases		37		14		14		12		11		78		166
Total	$	4,210	$	6,036	$	6,751	$	5,931	$	3,545	$	36,082	$	62,555

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Maximum Number of Shares That May Yet Be Purchased Under the Program
June 1-30, 2019		20,000	$	156.90		20,000		5,077,200
July 1-31, 2019		—		—		—		5,077,200
Aug. 1-31, 2019		—		—		—		5,077,200
Total		20,000	$	156.90		20,000

Exhibit Number		Description of Exhibit

4.1		~~Indenture,~~Pass Through Trust Agreement, dated as of ~~October 23, 2015,~~August 13, 2020, between FedEx ~~the Guarantors named therein~~Express and ~~Wells Fargo Bank, National Association, as trustee.~~Wilmington Trust Company. (Filed as Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed ~~October 23, 2015,~~August 13, 2020 (the “August 13, 2020 Form 8-K”), and incorporated herein by reference.)

4.2		Trust Supplement No. 2020-1AA, dated as of August 13, 2020, between FedEx Express and Wilmington Trust Company, as Trustee, to the Pass Through Trust Agreement dated as of August 13, 2020. (Filed as Exhibit 4.2 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

4.3		Guarantee of FedEx dated August 13, 2020. (Filed as Exhibit 4.3 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

4.4		Form of Pass Through Trust Certificate, Series 2020-1AA. (Included in Exhibit A to Exhibit 4.2 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

4.5		Intercreditor Agreement, dated as of August 13, 2020, among Wilmington Trust Company, as Trustee of the FedEx Pass Through Trust 2020-1AA, BNP Paribas, acting through its New York Branch, as Liquidity Provider, and Wilmington Trust Company, as Subordination Agent. (Filed as Exhibit 4.5 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

4.6		Revolving Credit Agreement (2020-1AA), dated as of August 13, 2020, between Wilmington Trust Company, as Subordination Agent, agent and trustee for the trustee of the FedEx Pass Through Trust 2020-1AA and as Borrower, and BNP Paribas, acting through its New York Branch, as Liquidity Provider. (Filed as Exhibit 4.6 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

*†4.7		Participation Agreement (N126FE), dated as of August 13, 2020, among FedEx Express, Wilmington Trust Company, as Pass Through Trustee under the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein. (Filed as Exhibit 4.7 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

**†4.8		Participation Agreement (N869FD), dated as of August 13, 2020, among FedEx Express, Wilmington Trust Company, as Pass Through Trustee under the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Wilmington Trust Company, in its individual capacity as set forth therein. (Filed as Exhibit 4.8 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

~~4.2~~ *4.9		~~Supplemental~~ Indenture ~~No. 9,~~and Security Agreement (N126FE), dated as of ~~July 24, 2019,~~August 13, 2020, between FedEx ~~the Guarantors named therein~~Express and ~~Wells Fargo Bank, National Association,~~Wilmington Trust Company, as ~~trustee.~~Loan Trustee. (Filed as Exhibit ~~4.2~~4.9 to ~~FedEx’s Current Report on~~the August 13, 2020 Form 8-K, ~~dated and filed July 24, 2019,~~ and incorporated herein by reference.)

~~4.3~~ **4.10		~~Form~~Indenture and Security Agreement (N869FD), dated as of ~~3.100% Note due 2029. (Included in~~August 13, 2020, between FedEx Express and Wilmington Trust Company, as Loan Trustee. (Filed as Exhibit ~~4.2~~4.10 to ~~FedEx’s Current Report on~~the August 13, 2020 Form 8-K, ~~dated and filed July 24, 2019,~~ and incorporated herein by reference.)

~~4.4~~ 4.11		~~Supplemental Indenture No. 10, dated as~~Form of Series 2020-1AA Equipment Notes. (Included in Exhibit 4.9 to the August 5, 2019, between FedEx, the Guarantors named therein, Wells Fargo Bank, National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent. (Filed as Exhibit 4.2 to FedEx’s Current Report on13, 2020 Form 8-K, ~~dated and filed August 5, 2019,~~ and incorporated herein by reference.)

~~4.5~~		~~Form of 0.450% Note due 2025. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed August 5, 2019, and incorporated herein by reference.)~~

~~4.6~~		~~Form of 1.300% Note due 2031. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed August 5, 2019, and incorporated herein by reference.)~~

*†˄10.1		Amendment dated ~~June~~July 7, ~~2019~~2020 (but effective as of ~~May 24, 2019)~~March 30, 2020), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and FedEx Express (the “USPS Transportation Agreement”).

†˄ 10.2		Amendment dated July 7, 2020 (but effective as of May 4, 2020), amending the USPS Transportation Agreement.

†˄ 10.3		Amendment dated July 7, 2020 (but effective as of June 1, 2020), amending the USPS Transportation Agreement.

†˄ 10.4		Supplemental Agreement No. 15 (and related side letters) dated as of June 25, 2020, amending the Boeing 767-3S2 Freighter Purchase Agreement.

~~10.2~~*10.5		~~Amendment dated~~Amended and Restated FedEx Retirement Parity Pension Plan, effective June 11, 2019 (but effective as of April 1, 2019), amending the USPS Transportation Agreement. An attachment to this exhibit has 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 the attachment to the SEC or its staff upon request.15, 2020.

*10.3		Amendment dated July 16, 2019 (but effective as of March 4, 2019), amending the USPS Transportation Agreement. An attachment to this exhibit has 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 the attachment to the SEC or its staff upon request.

*10.4		Amendment dated July 16, 2019 (but effective as of April 29, 2019), amending the USPS Transportation Agreement. An attachment to this exhibit has 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 the attachment to the SEC or its staff upon request.

*10.5		Letter Agreement dated as of July 9, 2019, amending the Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between The Boeing Company and FedEx Express. An attachment to this exhibit has 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 the attachment to the SEC or its staff upon request.

*10.6		Supplemental Agreement No. 12 (and related side letters) dated as of June 24, 2019, amending 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”). Certain attachments to this exhibit 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.

*10.7		Letter Agreement dated as of July 9, 2019, amending the Boeing 767-3S2 Freighter Purchase Agreement. An attachment to this exhibit has 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 the attachment to the SEC or its staff upon request.

15.1		Letter re: Unaudited Interim Financial Statements.

~~Exhibit~~ ~~Number~~		~~Description of Exhibit~~
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.

*99.1		Schedule I related to the FedEx Express Pass Through Certificates, Series 2020-1AA (the “Certificates”) (Filed as Exhibit 99.1 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

**99.2		Schedule II related to the Certificates (Filed as Exhibit 99.2 to the August 13, 2020 Form 8-K, and incorporated herein by reference.)

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

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

			FEDEX CORPORATION

Date: September ~~17, 2019~~15, 2020			/s/ JOHN L. MERINO
			JOHN L. MERINO
			CORPORATE VICE PRESIDENT AND
			PRINCIPAL ACCOUNTING OFFICER