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.

	November 30, 2020 (Unaudited)		May 31, 2020		February 28, 2021 (Unaudited)		May 31, 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	8,339	$	4,881	$	8,856	$	4,881
Receivables, less allowances of $617 and $390		11,417		10,102
Spare parts, supplies and fuel, less allowances of $341 and $335		587		572
Receivables, less allowances of $697 and $390						11,481		10,102
Spare parts, supplies and fuel, less allowances of $345 and $335						583		572
Prepaid expenses and other		922		828		790		828
Total current assets		21,265		16,383		21,710		16,383
PROPERTY AND EQUIPMENT, AT COST		67,514		65,024		68,703		65,024
Less accumulated depreciation and amortization		32,904		31,416		33,713		31,416
Net property and equipment		34,610		33,608		34,990		33,608
OTHER LONG-TERM ASSETS
Operating lease right-of-use assets, net		14,845		13,917		14,964		13,917
Goodwill		6,702		6,372		6,977		6,372
Other assets		3,734		3,257		4,152		3,257
Total other long-term assets		25,281		23,546		26,093		23,546
	$	81,156	$	73,537	$	82,793	$	73,537

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

	November 30, 2020 (Unaudited)			May 31, 2020			February 28, 2021 (Unaudited)			May 31, 2020
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt	$	97		$	51		$	646		$	51
Accrued salaries and employee benefits		2,159			1,569			2,321			1,569
Accounts payable		3,733			3,269			3,990			3,269
Operating lease liabilities		2,123			1,923			2,133			1,923
Accrued expenses		4,003			3,532			4,476			3,532
Total current liabilities		12,115			10,344			13,566			10,344
LONG-TERM DEBT, LESS CURRENT PORTION		23,221			21,952			22,797			21,952
OTHER LONG-TERM LIABILITIES
Deferred income taxes		3,471			3,162			3,563			3,162
Pension, postretirement healthcare and other benefit obligations		5,088			5,019			4,773			5,019
Self-insurance accruals		2,250			2,104			2,314			2,104
Operating lease liabilities		13,009			12,195			12,990			12,195
Other liabilities		963			466			809			466
Total other long-term liabilities		24,781			22,946			24,449			22,946
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of November 30, 2020 and May 31, 2020		32			32
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of February 28, 2021 and May 31, 2020								32			32
Additional paid-in capital		3,400			3,356			3,445			3,356
Retained earnings		27,208			25,216			27,924			25,216
Accumulated other comprehensive loss		(898	)		(1,147	)		(764	)		(1,147	)
Treasury stock, at cost		(8,703	)		(9,162	)		(8,656	)		(9,162	)
Total common stockholders’ investment		21,039			18,295			21,981			18,295
	$	81,156		$	73,537		$	82,793		$	73,537

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

	Three Months Ended November 30,						Six Months Ended November 30,						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			February 28, 2021			February 29, 2020			February 28, 2021			February 29, 2020
REVENUE	$	20,563		$	17,324		$	39,884		$	34,372		$	21,510		$	17,487		$	61,394		$	51,859
OPERATING EXPENSES:
Salaries and employee benefits		7,443			6,235			14,295			12,322			8,010			6,382			22,305			18,704
Purchased transportation		5,407			4,328			10,384			8,356			5,660			4,558			16,044			12,914
Rentals and landing fees		1,006			924			1,942			1,844			1,131			964			3,073			2,808
Depreciation and amortization		936			901			1,862			1,780			956			908			2,818			2,688
Fuel		625			890			1,190			1,760			756			879			1,946			2,639
Maintenance and repairs		815			774			1,621			1,542			822			684			2,443			2,226
Business realignment costs														10			—			10			—
Asset impairment charges		—			66			—			66			—			—			—			66
Other		2,866			2,652			5,535			5,171			3,160			2,701			8,695			7,872
		19,098			16,770			36,829			32,841			20,505			17,076			57,334			49,917
OPERATING INCOME		1,465			554			3,055			1,531			1,005			411			4,060			1,942
OTHER (EXPENSE) INCOME:
Interest, net		(184	)		(151	)		(368	)		(288	)		(187	)		(155	)		(555	)		(443	)
Other retirement plans income		150			168			351			336			202			168			553			504
Other, net		(25	)		1			(26	)		(11	)		29			(4	)		3			(15	)
		(59	)		18			(43	)		37			44			9			1			46
INCOME BEFORE INCOME TAXES		1,406			572			3,012			1,568			1,049			420			4,061			1,988
PROVISION FOR INCOME TAXES		180			12			541			263			157			105			698			368
NET INCOME	$	1,226		$	560		$	2,471		$	1,305		$	892		$	315		$	3,363		$	1,620
EARNINGS PER COMMON SHARE:
Basic	$	4.64		$	2.15		$	9.40		$	5.00		$	3.36		$	1.21		$	12.75		$	6.21
Diluted	$	4.55		$	2.13		$	9.26		$	4.97		$	3.30		$	1.20		$	12.55		$	6.17
DIVIDENDS DECLARED PER COMMON SHARE	$	0.65		$	0.65		$	1.95		$	1.95		$	0.65		$	0.65		$	2.60		$	2.60

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

	Three Months Ended						Six Months Ended
	November 30,						November 30,						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			February 28, 2021			February 29, 2020			February 28, 2021			February 29, 2020
NET INCOME	$	1,226		$	560		$	2,471		$	1,305		$	892		$	315		$	3,363		$	1,620
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of tax expense of $6 and $4 in 2020 and $7 and $4 in 2019		124			72			253			(11	)
Amortization of prior service credit, net of tax benefit of $0 and $1 in 2020 and $6 and $12 in 2019		(2	)		(20	)		(4	)		(41	)
Foreign currency translation adjustments, net of tax expense of $1 and $5 in 2021 and tax benefit of $6 and $3 in 2020														136			(1	)		389			(12	)
Amortization of prior service credit, net of tax benefit of $0 and $1 in 2021 and $7 and $19 in 2020														(2	)		(20	)		(6	)		(61	)
		122			52			249			(52	)		134			(21	)		383			(73	)
COMPREHENSIVE INCOME	$	1,348		$	612		$	2,720		$	1,253		$	1,026		$	294		$	3,746		$	1,547

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

	Six Months Ended November 30,						Nine Months Ended
	2020			2019			February 28, 2021			February 29, 2020
Operating Activities:
Net income	$	2,471		$	1,305		$	3,363		$	1,620
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		1,862			1,780			2,818			2,688
Asset impairment charges		—			66			—			66
Provision for uncollectible accounts		291			208			428			295
Stock-based compensation		121			104			161			137
Retirement plan mark-to-market adjustment		52			—			52			—
Other noncash items and deferred income taxes		1,482			1,164			2,020			1,758
Changes in assets and liabilities:
Receivables		(1,100	)		(684	)		(1,187	)		(504	)
Other assets		(56	)		(162	)		(165	)		(149	)
Accounts payable and other liabilities		241			(1,691	)		63			(2,612	)
Other, net		(134	)		(16	)		(161	)		(21	)
Cash provided by operating activities		5,230			2,074			7,392			3,278
Investing Activities:
Capital expenditures		(2,826	)		(3,266	)		(4,202	)		(4,705	)
Business acquisitions, net of cash acquired								(225	)		—
Proceeds from asset dispositions and other		14			4			88			15
Cash used in investing activities		(2,812	)		(3,262	)		(4,339	)		(4,690	)
Financing Activities:
Proceeds from short-term borrowings, net		—			150			—			298
Principal payments on debt		(75	)		(1,021	)		(105	)		(1,045	)
Proceeds from debt issuances		970			2,093			970			2,093
Proceeds from stock issuances		431			26			482			38
Dividends paid		(341	)		(339	)		(513	)		(509	)
Purchase of treasury stock		—			(3	)		—			(3	)
Other, net		(12	)		(5	)		(13	)		(5	)
Cash provided by financing activities		973			901			821			867
Effect of exchange rate changes on cash		67			(1	)		101			(8	)
Net increase (decrease) in cash and cash equivalents		3,458			(288	)		3,975			(553	)
Cash and cash equivalents at beginning of period		4,881			2,319			4,881			2,319
Cash and cash equivalents at end of period	$	8,339		$	2,031		$	8,856		$	1,766

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						Six Months Ended
	November 30,						November 30,						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			February 28, 2021			February 29, 2020			February 28, 2021			February 29, 2020
Common Stock
Beginning Balance	$	32		$	32		$	32		$	32		$	32		$	32		$	32		$	32
Ending Balance		32			32			32			32			32			32			32			32
Additional Paid-in Capital
Beginning Balance		3,375			3,257			3,356			3,231			3,400			3,287			3,356			3,231
Employee incentive plans and other		25			30			44			56			45			37			89			93
Ending Balance		3,400			3,287			3,400			3,287			3,445			3,324			3,445			3,324
Retained Earnings
Beginning Balance		26,108			25,048			25,216			24,648			27,208			25,431			25,216			24,648
Net Income		1,226			560			2,471			1,305			892			315			3,363			1,620
Cash dividends declared ($0.65, $0.65, $1.95 and $1.95 per share)		(172	)		(170	)		(513	)		(509	)
Cash dividends declared ($0.65, $0.65, $2.60 and $2.60 per share)														(173	)		(170	)		(686	)		(679	)
Employee incentive plans and other		46			(7	)		34			(9	)		(3	)		(7	)		31			(16	)
Adoption of new accounting standards on June 1, 2019⁽¹⁾		—			—			—			(4	)		—			—			—			(4	)
Ending Balance		27,208			25,431			27,208			25,431			27,924			25,569			27,924			25,569
Accumulated Other Comprehensive Income
Beginning Balance		(1,020	)		(918	)		(1,147	)		(865	)		(898	)		(866	)		(1,147	)		(865	)
Other comprehensive income, net of tax (expense)/benefit of ($6), ($1), ($3) and $8		122			52			249			(52	)
Other comprehensive income, net of tax (expense)/benefit of ($1), $13, ($4) and $22														134			(21	)		383			(73	)
Reclassification to retained earnings due to the adoption of a new accounting standard on June 1, 2019⁽²⁾		—			—			—			51			—			—			—			51
Ending Balance		(898	)		(866	)		(898	)		(866	)		(764	)		(887	)		(764	)		(887	)
Treasury Stock
Beginning Balance		(9,033	)		(9,253	)		(9,162	)		(9,289	)		(8,703	)		(9,225	)		(9,162	)		(9,289	)
Purchase of treasury stock (0.02 million shares)		—			—			—			(3	)		—			—			—			(3	)
Employee incentive plans and other (2.4, 0.2, 3.4 and 0.5 million shares)		330			28			459			67
Employee incentive plans and other (0.3, 0.1, 3.7 and 0.6 million shares)														47			18			506			85
Ending Balance		(8,703	)		(9,225	)		(8,703	)		(9,225	)		(8,656	)		(9,207	)		(8,656	)		(9,207	)
Total Common Stockholders’ Investment Balance	$	21,039		$	18,659		$	21,039		$	18,659		$	21,981		$	18,831		$	21,981		$	18,831

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, 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 ~~November 30, 2020,~~February 28, 2021, and the results of our operations for the three- and ~~six-month~~nine-month periods ended ~~November 30,~~February 28, 2021 and February 29, 2020, ~~and 2019,~~ cash flows for the ~~six-month~~nine-month periods ended ~~November 30,~~February 28, 2021 and February 29, 2020, ~~and 2019,~~ and changes in common stockholders’ investment for the three- and ~~six-month~~nine-month periods ended ~~November 30, 2020~~February 28, 2021 and ~~2019.~~February 29, 2020. Operating results for the three- and ~~six-month~~nine-month periods ended ~~November 30,~~February 28, 2021 and February 29, 2020 are not necessarily indicative of the results that may be expected for the year ending May 31, 2021.

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

Gross contract assets related to in-transit shipments ~~totaled $701~~totaled $677 million and $563 million at ~~November 30, 2020~~February 28, 2021 and May 31, 2020, respectively. Contract assets net of deferred unearned revenue were ~~$499~~$544 million and $456 million at ~~November 30, 2020~~February 28, 2021 and May 31, 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 $9 million and $10 million at ~~November 30, 2020~~February 28, 2021 and May 31, 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 (in millions) for the periods ended ~~November 30.~~February 28, 2021 and February 29, 2020. This presentation is consistent with how we organize our segments internally for making operating decisions and measuring performance.

	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	2020		2019		2020		2019		2021		2020		2021		2020
REVENUE BY SERVICE TYPE
FedEx Express segment:
Package:
U.S. overnight box	$	2,012	$	1,864	$	3,873	$	3,730	$	2,078	$	1,865	$	5,951	$	5,595
U.S. overnight envelope		435		457		861		936		444		459		1,305		1,395
U.S. deferred		1,204		980		2,300		1,936		1,418		1,127		3,718		3,063
Total U.S. domestic package revenue		3,651		3,301		7,034		6,602		3,940		3,451		10,974		10,053
International priority		2,510		1,817		4,827		3,634		2,596		1,710		7,423		5,344
International economy		658		873		1,274		1,728		653		810		1,927		2,538
Total international export package revenue		3,168		2,690		6,101		5,362		3,249		2,520		9,350		7,882
International domestic⁽¹⁾		1,206		1,165		2,294		2,241		1,162		1,075		3,456		3,316
Total package revenue		8,025		7,156		15,429		14,205		8,351		7,046		23,780		21,251
Freight:
U.S.		799		698		1,632		1,393		860		739		2,492		2,132
International priority		737		473		1,390		937		775		439		2,165		1,376
International economy		408		541		779		1,057		383		499		1,162		1,556
International airfreight		65		70		140		136		56		61		196		197
Total freight revenue		2,009		1,782		3,941		3,523		2,074		1,738		6,015		5,261
Other⁽²⁾		334		146		645		301		363		140		1,008		441
Total FedEx Express segment		10,368		9,084		20,015		18,029		10,788		8,924		30,803		26,953
FedEx Ground segment		7,344		5,315		14,384		10,494		7,980		5,845		22,364		16,339
FedEx Freight segment		1,936		1,844		3,762		3,749		1,836		1,738		5,598		5,487
FedEx Services segment		8		5		16		9		8		6		24		15
Other and eliminations⁽³⁾		907		1,076		1,707		2,091		898		974		2,605		3,065
	$	20,563	$	17,324	$	39,884	$	34,372	$	21,510	$	17,487	$	61,394	$	51,859

IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, an impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets are less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.

During the second quarter of 2020, we made the decision to permanently retire from service 10 Airbus A310-300 aircraft and 12 related engines at FedEx Express to align with the needs of the U.S. domestic network and modernize its aircraft fleet. As a consequence of this decision, noncash impairment charges of $66 million ($50 million, net of tax, or $0.19 per diluted share) were recorded in the FedEx Express segment in the second quarter of 2020.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots of 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, a small number of our employees are members of unions.

BUSINESS ACQUISITION. On December 2,23, 2020, we ~~agreed to acquire~~acquired ShopRunner, ~~Inc. (“ShopRunner”),~~ an e-commerce platform that directly connects brands and merchants with online ~~shoppers. The cost of the acquisition will not be material and will be funded with~~shoppers for $225 million in cash from operations. ~~This acquisition is expected~~The majority of the purchase price was allocated to ~~be completed in December 2020, subject to customary conditions, including regulatory approval.~~goodwill and intangibles. The financial results of ShopRunner ~~will be~~are included in “Corporate, other and eliminations” from the date of acquisition and ~~are~~were not ~~expected to be~~ material to our results of ~~operations in 2021.~~operations; therefore, pro forma financial information has not been provided.

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 ~~$46~~$40 million for the three-month period ended ~~November 30, 2020~~February 28, 2021 and ~~$121~~$161 million for the ~~six-month~~nine-month period ended ~~November 30, 2020.~~February 28, 2021. Our stock-based compensation expense was ~~$37~~$33 million for the three-month period ended ~~November 30, 2019~~February 29, 2020 and ~~$104~~$137 million for the ~~six-month~~nine-month period ended ~~November 30, 2019.~~February 29, 2020. Due to its immateriality, additional disclosures related to stock-based compensation have been excluded from this quarterly report.

BUSINESS REALIGNMENT COSTS. In January 2021, FedEx Express announced a workforce reduction plan in Europe as it nears the completion of the network integration of TNT Express. The plan will impact between 5,500 and 6,300 employees in Europe across operational teams and back-office functions. The execution of the plan is subject to a works council consultation process that will occur over an 18-month period in accordance with local country processes and regulations.

We incurred costs of $10 million ($8 million, net of tax, or $0.03 per diluted share) during the third quarter of 2021 associated with our business realignment activities. These costs are related to certain employee severance arrangements. We expect the pre-tax cost of our business realignment activities to range from $300 million to $575 million. These charges are expected to be incurred through fiscal 2023 and will be classified as business realignment costs. The actual amount and timing of business realignment costs and related cost savings resulting from the workforce reduction plan are dependent on local country consultation processes and regulations and negotiated social plans.

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

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

If a derivative is designated as a cash flow hedge, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in other comprehensive income. For net investment hedges, the entire change in the fair value is recorded in other comprehensive income. Any portion of a change in the fair value of a derivative that is considered to be ineffective, along with the change in fair value of any derivatives not designated in a hedging relationship, is immediately recognized in the income statement. We do not have any derivatives designated as a cash flow hedge for any period presented. We have €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 subsidiary. As of ~~November 30, 2020,~~February 28, 2021, the hedge 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 ASU 2016-13 that amends the impairment model for most financial assets and certain other instruments that are not measured at fair value through net 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. We updated our process for estimating the expected credit loss to include a review of forecast information that may impact expected collectability over the lifetime of the asset. See Note 2 for additional information. The adoption of this 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 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. We early adopted this standard effective June 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

TREASURY SHARES. In January 2016, our Board of Directors approved a stock repurchase program of up to 25 million shares. We did 0t repurchase any shares of FedEx common stock during the ~~first half~~nine months of 2021. As of ~~November 30, 2020,~~February 28, 2021, 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 2020,~~Effective March 16, 2021, we further amended our amended and restated $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement”) and ~~our~~entered into a new $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~~no longer contain the temporary covenant added in the fourth quarter of 2020 restricting us from repurchasing any shares of our common ~~stock between May 27, 2020 and May 31, 2021.~~

stock. See Note 4 for more information on ~~the amendments to~~ the Credit Agreements.

DIVIDENDS DECLARED PER COMMON SHARE. On ~~November 20, 2020,~~February 12, 2021, our Board of Directors declared a quarterly dividend of $0.65 per share of common stock. The dividend will be paid on ~~December 28, 2020~~April 1, 2021 to stockholders of record as of the close of business on ~~December 14, 2020.~~March 8, 2021. 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~~Effective March 16, 2021, the Credit Agreements ~~discussed above under “Treasury Shares” temporarily restrict~~no longer contain the temporary covenant added in the fourth quarter of 2020 restricting us from increasing the amount of our quarterly dividend payable per share of common stock from $0.65 per ~~share between May 27, 2020 and May 31, 2021.~~share. 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 forecast information, including underlying economic expectations. We update our estimate of credit loss reserves quarterly, considering recent write-offs, collections information and underlying economic expectations.

Credit losses were ~~$148~~$137 million for the three-month period ended ~~November 30, 2020~~February 28, 2021 and ~~$291~~$428 million for the ~~six-month~~nine-month period ended ~~November 30, 2020.~~February 28, 2021. Credit losses were ~~$102~~$87 million for the three-month period ended ~~November 30, 2019~~February 29, 2020 and ~~$208~~$295 million for the ~~six-month~~nine-month period ended ~~November 30, 2019.~~February 29, 2020. Our allowance for credit losses was ~~$296~~$329 million as of ~~November 30, 2020~~February 28, 2021 and $175 million at May 31, 2020.

The following table provides changes in accumulated other comprehensive income (“AOCI”), net of tax, reported in our unaudited condensed consolidated financial statements for the periods ended ~~November 30~~February 28, 2021 and February 29, 2020 (in millions; amounts in parentheses indicate debits to AOCI):

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			2021			2020			2021			2020
Foreign currency translation loss:
Balance at beginning of period	$	(1,078	)	$	(1,036	)	$	(1,207	)	$	(954	)	$	(954	)	$	(964	)	$	(1,207	)	$	(954	)
Translation adjustments		124			72			253			(11	)		136			(1	)		389			(12	)
Reclassification to retained earnings due to the adoption of ASU 2018-02		—			—			—			1			—			—			—			1
Balance at end of period		(954	)		(964	)		(954	)		(964	)		(818	)		(965	)		(818	)		(965	)
Retirement plans adjustments:
Balance at beginning of period		58			118			60			89			56			98			60			89
Reclassifications from AOCI		(2	)		(20	)		(4	)		(41	)		(2	)		(20	)		(6	)		(61	)
Reclassification to retained earnings due to the adoption of ASU 2018-02		—			—			—			50			—			—			—			50
Balance at end of period		56			98			56			98			54			78			54			78
Accumulated other comprehensive (loss) at end of period	$	(898	)	$	(866	)	$	(898	)	$	(866	)	$	(764	)	$	(887	)	$	(764	)	$	(887	)

The following table presents details of the reclassifications from AOCI for the periods ended ~~November 30~~February 28, 2021 and February 29, 2020 (in millions; amounts in parentheses indicate debits to earnings):

	Amount Reclassified from AOCI											Affected Line Item in the Income Statement	Amount Reclassified from AOCI											Affected Line Item in the Income Statement
	Three Months Ended					Six Months Ended							Three Months Ended					Nine Months Ended
	2020		2019			2020			2019				2021		2020			2021			2020
Amortization of retirement plans prior service credits, before tax	$	2	$	26		$	5		$	53		Other retirement plans income	$	2	$	27		$	7		$	80		Other retirement plans income
Income tax benefit		—		(6	)		(1	)		(12	)	Provision for income taxes		—		(7	)		(1	)		(19	)	Provision for income taxes
AOCI reclassifications, net of tax	$	2	$	20		$	4		$	41		Net income	$	2	$	20		$	6		$	61		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 and allows pass through trusts formed by FedEx Express to sell, in one or more future offerings, pass through certificates.

During August 2020, FedEx Express issued $970 million of Pass Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of 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 ~~November 30, 2020.~~February 28, 2021. The payment obligations of FedEx Express in respect of the Certificates are fully and unconditionally guaranteed by FedEx. FedEx Express is using the proceeds 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 and a $1.5 billion 364-Day Credit Agreement. The Five-Year Credit Agreement expires in March ~~2025~~2026 and includes a $250 million letter of credit sublimit. The 364-Day Credit Agreement expires in March ~~2021.~~2022. The Credit Agreements are available to finance our operations and other cash flow needs. ~~The~~Prior to the amendment of the Five-Year Credit ~~Agreements contain~~Agreement and entry into the current 364-Day Credit Agreement on March 16, 2021, our credit agreements contained 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 ~~4.9~~4.75 to 1.0, calculated as of ~~November 30, 2020~~February 28, 2021 on a rolling four-quarters basis. The ratio of our debt to adjusted EBITDA was ~~2.6~~2.45 to 1.0 at ~~November 30, 2020. The Credit Agreements also contain~~February 28, 2021. Effective March 16, 2021, we are required to maintain a ratio of debt to adjusted EBITDA of not more than 3.5 to 1.0, calculated as of the ~~temporary covenants discussed in Note 1.~~end of the applicable quarter on a rolling four-quarter basis. We believe ~~these covenants are~~this covenant is the only significant restrictive ~~covenants~~covenant 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.~~

Outstanding commercial paper reduces the amount available to borrow under the Credit Agreements. As of ~~November 30, 2020,~~February 28, 2021, 0 commercial paper was outstanding and ~~$0.3~~$0.2 million in letters of credit were outstanding, leaving $3.5 billion available under the Credit Agreements for future borrowings.

Long-term debt, including current maturities and exclusive of finance leases, had carrying values of ~~$22.8~~$22.9 billion at ~~November 30, 2020~~February 28, 2021 and $21.5 billion at May 31, 2020, compared with estimated fair values of ~~$27.2~~$25.9 billion at ~~November 30, 2020~~February 28, 2021 and $22.8 billion at May 31, 2020. The annualized weighted-average interest rate on long-term debt was 3.5% at ~~November 30, 2020.~~February 28, 2021. 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 periods ended ~~November 30~~February 28, 2021 and February 29, 2020 was as follows (in millions, except per share amounts):

	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	2020		2019		2020		2019		2021		2020		2021		2020
Basic earnings per common share:
Net earnings allocable to common shares⁽¹⁾	$	1,224	$	559	$	2,466	$	1,303	$	889	$	314	$	3,356	$	1,617
Weighted-average common shares		264		261		263		261		265		261		263		261
Basic earnings per common share	$	4.64	$	2.15	$	9.40	$	5.00	$	3.36	$	1.21	$	12.75	$	6.21
Diluted earnings per common share:
Net earnings allocable to common shares⁽¹⁾	$	1,224	$	559	$	2,466	$	1,303	$	889	$	314	$	3,356	$	1,617
Weighted-average common shares		264		261		263		261		265		261		263		261
Dilutive effect of share-based awards		5		1		3		1		5		1		4		1
Weighted-average diluted shares		269		262		266		262		270		262		267		262
Diluted earnings per common share	$	4.55	$	2.13	$	9.26	$	4.97	$	3.30	$	1.20	$	12.55	$	6.17
Anti-dilutive options excluded from diluted earnings per common share		1.3		11.2		5.1		11.0		2.0		11.7		4.1		11.2

Our effective tax rate was ~~12.8%~~15.0% for the ~~second~~third quarter and ~~18.0%~~17.2% for the ~~first half~~nine months of 2021, compared to ~~2.1%~~25.0% for the ~~second~~third quarter and ~~16.8%~~18.5% for the ~~first half~~nine months of 2020. The tax rate for the third quarter of 2021 includes benefits of $108 million from a tax ~~rates include~~rate increase in the Netherlands applied to our deferred tax balances and associated with voluntary contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”). The tax rate for the nine months of 2021 also includes a benefit of $191 million from an increase in our 2020 tax loss ~~that the Coronavirus Aid, Relief, and Economic Security Act will allow to be carried back to 2015, when the U.S. federal income tax rate was 35%. The increase in our estimated 2020 tax loss is~~primarily attributable to ~~our~~an Application for Change in Accounting Method ~~filed with the Internal Revenue Service (“IRS”) during the fourth quarter of 2020~~ discussed below and other accelerated deductions ~~to be~~ claimed on the 2020 tax return. The ~~2020~~ tax ~~rates~~rate for the nine months of 2020 included a $133 million benefit from a valuation allowance ~~reduction which, when combined with substantially lower consolidated earnings, produced a significantly lower rate for the second quarter of 2020 compared to the second quarter of 2021.~~reduction.

We filed an application with the ~~IRS~~Internal Revenue Service (“IRS”) in 2020 requesting approval to change our accounting method for depreciation to allow retroactive application of tax regulations issued during 2020 on certain assets placed in service during 2018 and 2019. During the second quarter of 2021, the IRS issued guidance granting automatic approval to change the method of accounting for these assets resulting in an income tax benefit of $130 million for the second quarter.

During the second quarter of 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit seeks to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $233 million through 2019 attributable to our interpretation of the TCJA and the Internal Revenue Code. IfWe continue to pursue this lawsuit; however, if we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

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 periods ended ~~November 30~~February 28, 2021 and February 29, 2020 were as follows (in millions):

	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	2020		2019		2020		2019		2021		2020		2021		2020
Defined benefit pension plans, net	$	27	$	37	$	52	$	74	$	20	$	38	$	72	$	112
Defined contribution plans		153		136		311		278		182		147		493		425
Postretirement healthcare plans		20		21		41		43		21		21		62		64
Retirement plan mark-to-market (“MTM”) net loss		52		—		52		—		—		—		52		—
	$	252	$	194	$	456	$	395	$	223	$	206	$	679	$	601

Net periodic benefit cost of the pension and postretirement healthcare plans for the periods ended ~~November 30~~February 28, 2021 and February 29, 2020 included the following components (in millions):

	Three Months Ended																Three Months Ended
	U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans				U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans
	2020			2019			2020			2019			2020		2019		2021			2020			2021			2020			2021		2020
Service cost	$	212		$	192		$	26		$	24		$	11	$	10	$	213		$	192		$	19		$	25		$	11	$	10
Other retirement plans (income) expense:
Interest cost		239			250			11			11			9		11		240			250			10			11			10		11
Expected return on plan assets		(446	)		(401	)		(13	)		(13	)		—		—		(447	)		(400	)		(13	)		(13	)		—		—
Amortization of prior service credit and other		(2	)		(25	)		—			(1	)		—		—		(2	)		(26	)		—			(1	)		—		—
MTM net loss		—			—			52			—			—		—
		(209	)		(176	)		50			(3	)		9		11		(209	)		(176	)		(3	)		(3	)		10		11
	$	3		$	16		$	76		$	21		$	20	$	21	$	4		$	16		$	16		$	22		$	21	$	21

	Six Months Ended																Nine Months Ended
	U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans				U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans
	2020			2019			2020			2019			2020		2019		2021			2020			2021			2020			2021		2020
Service cost	$	425		$	384		$	49		$	48		$	22	$	21	$	638		$	576		$	68		$	73		$	33	$	31
Other retirement plans (income) expense:
Interest cost		479			500			21			22			19		22		719			750			31			33			29		33
Expected return on plan assets		(892	)		(801	)		(25	)		(26	)		—		—		(1,339	)		(1,201	)		(38	)		(39	)		—		—
Amortization of prior service credit and other		(4	)		(52	)		(1	)		(1	)		—		—		(6	)		(78	)		(1	)		(2	)		—		—
MTM net loss		—			—			52			—			—		—		—			—			52			—			—		—
		(417	)		(353	)		47			(5	)		19		22		(626	)		(529	)		44			(8	)		29		33
	$	8		$	31		$	96		$	43		$	41	$	43	$	12		$	47		$	112		$	65		$	62	$	64

~~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 $300 million during the nine months of 2021 and $1.0 billion during the ~~first half~~nine months of 2020.

We incurred a pre-tax, noncash MTM net loss of $52 million in the second quarter of 2021 related to amendments to the TNT Express Netherlands Pension Plan. Benefits for approximately 2,100 employees ~~will be~~were frozen effective December 31, 2020. ~~Effective~~On January 1, 2021, these employees ~~will begin~~began earning pension benefits under a separate, multi-employer pension plan. This $52 million net loss consists of a $106 million MTM loss due to a lower discount rate and a $54 million curtailment gain.

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 remain in the existing 401(k) plan with its match of 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 collaboratively and innovating digitally, under the respected FedEx brand. Our primary operating companies are FedEx Express, the world’s largest express transportation company; FedEx Ground Package System, Inc. (“FedEx Ground”), a leading North American provider of small-package ground delivery services; and FedEx Freight Corporation (“FedEx Freight”), a leading North American provider of less-than-truckload (“LTL”) freight transportation services. These companies represent our major service lines and, along with FedEx Corporate Services, Inc. (“FedEx Services”), constitute our reportable segments.

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

The FedEx Services segment operates combined sales, marketing, administrative and information-technology functions in shared services operations for U.S. customers of our major business units and certain back-office support to our operating segments which allows us to obtain synergies from the combination of these functions. For the international regions of FedEx Express, some of these functions are performed on a regional basis and reported by FedEx Express in their natural expense line items.

The FedEx Services segment provides direct and indirect support to our operating segments, and we allocate all of the net operating costs of the FedEx Services segment to reflect the full cost of operating our businesses in the results of those segments. We review and evaluate the performance of our transportation segments based on operating income (inclusive of FedEx Services segment allocations). For the FedEx Services segment, performance is evaluated based on the impact of its total allocated net operating costs on our operating segments.

Operating expenses for each of our transportation segments include the allocations from the FedEx Services segment to the respective transportation segments. These allocations also include charges and credits for administrative services provided between operating companies. The allocations of net operating costs are based on metrics such as relative revenue or estimated services provided. We believe these allocations approximate the net cost of providing these functions. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses.

Also included in ~~corporate~~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, customs brokerage and global ocean and air freight forwarding. Additionally, Corporate and other includes the financial results of ShopRunner beginning December 23, 2020.

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 revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

The following table provides a reconciliation of reportable segment revenue and operating income (loss) to our unaudited condensed consolidated financial statement totals for the periods ended ~~November 30~~February 28, 2021 and February 29, 2020 (in millions):

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			2021			2020			2021			2020
Revenue:
FedEx Express segment	$	10,368		$	9,084		$	20,015		$	18,029		$	10,788		$	8,924		$	30,803		$	26,953
FedEx Ground segment		7,344			5,315			14,384			10,494			7,980			5,845			22,364			16,339
FedEx Freight segment		1,936			1,844			3,762			3,749			1,836			1,738			5,598			5,487
FedEx Services segment		8			5			16			9			8			6			24			15
Other and eliminations		907			1,076			1,707			2,091			898			974			2,605			3,065
	$	20,563		$	17,324		$	39,884		$	34,372		$	21,510		$	17,487		$	61,394		$	51,859
Operating income (loss):
FedEx Express segment	$	900		$	236		$	1,610		$	521		$	463		$	137		$	2,073		$	658
FedEx Ground segment		552			342			1,386			986			702			355			2,088			1,341
FedEx Freight segment		252			141			526			335			119			113			645			448
Corporate, other and eliminations		(239	)		(165	)		(467	)		(311	)		(279	)		(194	)		(746	)		(505	)
	$	1,465		$	554		$	3,055		$	1,531		$	1,005		$	411		$	4,060		$	1,942

As of ~~November 30, 2020,~~February 28, 2021, our purchase commitments under various contracts for the remainder of 2021 and annually thereafter were as follows (in millions):

	Aircraft and Related		Other⁽¹⁾		Total		Aircraft and Related		Other⁽¹⁾		Total
2021 (remainder)	$	771	$	550	$	1,321	$	162	$	299	$	461
2022		2,203		678		2,881		2,211		754		2,965
2023		2,389		461		2,850		2,397		520		2,917
2024		1,000		302		1,302		1,002		333		1,335
2025		602		226		828		479		249		728
Thereafter		2,679		397		3,076		2,803		454		3,257
Total	$	9,644	$	2,614	$	12,258	$	9,054	$	2,609	$	11,663

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. As of ~~November 30, 2020,~~February 28, 2021, our obligation to purchase 6 Boeing 777 Freighter (“B777F”) 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.

During the first quarter of 2021, FedEx Express executed a contract amendment rescheduling Boeing 767-300 Freighter (“B767F”) aircraft deliveries as follows: 2021 – 18 aircraft; 2022 – 11 aircraft; 2023 – 13 aircraft; and 2024 – 4 aircraft.

As of ~~November 30, 2020,~~February 28, 2021, we had ~~$830~~ $983 million in deposits and progress payments on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our accompanying unaudited condensed consolidated balance sheets. Aircraft and related contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of ~~November 30, 2020~~February 28, 2021 with the year of expected delivery:

	Cessna SkyCourier 408		ATR 72-600F		B767F		B777F		Total		Cessna SkyCourier 408		ATR 72-600F		B767F		B777F		Total
2021 (remainder)		—		3		11		—		14		—		2		7		—		9
2022		9		8		11		5		33		9		8		11		5		33
2023		12		6		13		2		33		12		6		13		2		33
2024		12		6		4		4		26		12		6		4		4		26
2025		12		6		—		2		20		12		6		—		2		20
Thereafter		5		1		—		—		6		5		1		—		—		6
Total		50		30		39		13		132		50		29		35		13		127

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 ~~November 30, 2020~~February 28, 2021 is as follows (in millions):

	Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases			Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases
2021 (remainder)	$	177		$	1,111		$	1,288		$	17		$	1,305		$	31		$	478		$	509		$	10		$	519
2022		234			2,275			2,509			60			2,569			234			2,390			2,624			107			2,731
2023		198			2,014			2,212			25			2,237			198			2,107			2,305			26			2,331
2024		102			1,758			1,860			24			1,884			102			1,844			1,946			25			1,971
2025		69			1,539			1,608			24			1,632			69			1,619			1,688			24			1,712
Thereafter		245			7,785			8,030			707			8,737			245			8,230			8,475			707			9,182
Total lease payments		1,025			16,482			17,507			857			18,364			879			16,668			17,547			899			18,446
Less imputed interest		(77	)		(2,298	)		(2,375	)		(377	)		(2,752	)		(71	)		(2,353	)		(2,424	)		(373	)		(2,797	)
Present value of lease liability	$	948		$	14,184		$	15,132		$	480		$	15,612		$	808		$	14,315		$	15,123		$	526		$	15,649

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

As of ~~November 30, 2020,~~February 28, 2021, 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 ~~$1.6~~$1.7 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. FedEx Ground is defending lawsuits in which it is alleged that FedEx Ground should be treated as a joint employer of 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 could, among other things, entitle 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 FedEx Ground is not an employer or joint employer of the drivers of these independent businesses.

Federal Securities Litigation. 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~~were subsequently consolidated, ~~allege~~alleged 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~~On February 4, 2021, the consolidated lawsuit was dismissed with prejudice. The plaintiff did not ~~currently able to estimate~~appeal the ~~probability of loss or~~dismissal by the ~~amount or range of potential loss, if any, at this stage of the litigation.~~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.

Other 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, 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.

Environmental Matters. SEC regulations require us to disclose certain information about proceedings arising under federal, state, or local environmental provisions if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to the SEC regulations, FedEx uses a threshold of $1 million or more for purposes of determining whether disclosure of any such proceedings is required. Applying this threshold, there are no environmental matters required to be disclosed for this period.

Cash paid for interest expense and income taxes for the ~~six-month~~nine-month periods ended ~~November 30~~February 28, 2021 and February 29, 2020 was as follows (in millions):

	2020			2019			2021			2020
Cash payments for:
Interest (net of capitalized interest)	$	377		$	279		$	593		$	511
Income taxes	$	526		$	162		$	934		$	291
Income tax refunds received		(22	)		(23	)		(42	)		(321	)
Cash tax payments, net	$	504		$	139
Cash tax payments (refunds), net							$	892		$	(30	)

We have reviewed the accompanying condensed consolidated balance sheet of FedEx Corporation (the Company) as of ~~November 30, 2020,~~February 28, 2021, the related condensed consolidated statements of income, comprehensive income and changes in common stockholders’ investment for the three- and ~~six-month~~nine-month periods ended ~~November 30,~~February 28, 2021 and February 29, 2020, ~~and 2019,~~ the condensed consolidated statements of cash flows for the ~~six-month~~nine-month periods ended ~~November 30,~~February 28, 2021 and February 29, 2020, ~~and 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, 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 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, 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 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, 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 collaboratively and innovating digitally, under the respected FedEx brand. Our primary operating companies are Federal Express Corporation (“FedEx Express”), the world’s largest express transportation company; FedEx Ground Package System, Inc. (“FedEx Ground”), a leading North American provider of small-package ground delivery services; and FedEx Freight Corporation (“FedEx Freight”), a leading North American provider of less-than-truckload (“LTL”) freight transportation services. These companies represent our major service lines and, along with FedEx Corporate Services, Inc. (“FedEx Services”), constitute our reportable segments.

Our FedEx Services segment provides sales, marketing, information technology, communications, customer service, technical support, billing and collection services, and certain back-office functions that support our operating segments. See the “Reportable Segments” section of this MD&A for further discussion. Additional information on our businesses can be found in our Annual Report.

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 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 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, ~~uniforms~~professional fees and ~~professional fees.~~uniforms.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 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 (loss) (dollars in millions, except per share amounts) for the periods ended ~~November 30:~~February 28, 2021 and February 29, 2020:

	Three Months Ended						Percent				Six Months Ended						Percent				Three Months Ended						Percent				Nine Months Ended						Percent
	2020			2019			Change				2020			2019			Change				2021			2020			Change				2021			2020			Change
Revenue	$	20,563		$	17,324			19			$	39,884		$	34,372			16			$	21,510		$	17,487			23			$	61,394		$	51,859			18
Operating income (loss):
FedEx Express segment		900			236			281				1,610			521			209				463			137			238				2,073			658			215
FedEx Ground segment		552			342			61				1,386			986			41				702			355			98				2,088			1,341			56
FedEx Freight segment		252			141			79				526			335			57				119			113			5				645			448			44
Corporate, other and eliminations		(239	)		(165	)		(45	)			(467	)		(311	)		(50	)			(279	)		(194	)		(44	)			(746	)		(505	)		(48	)
Consolidated operating income		1,465			554			164				3,055			1,531			100				1,005			411			145				4,060			1,942			109
Operating margin:
FedEx Express segment		8.7	%		2.6	%		610		bp		8.0	%		2.9	%		510		bp		4.3	%		1.5	%		280		bp		6.7	%		2.4	%		430		bp
FedEx Ground segment		7.5	%		6.4	%		110		bp		9.6	%		9.4	%		20		bp		8.8	%		6.1	%		270		bp		9.3	%		8.2	%		110		bp
FedEx Freight segment		13.0	%		7.6	%		540		bp		14.0	%		8.9	%		510		bp		6.5	%		6.5	%		—		bp		11.5	%		8.2	%		330		bp
Consolidated operating margin		7.1	%		3.2	%		390		bp		7.7	%		4.5	%		320		bp		4.7	%		2.4	%		230		bp		6.6	%		3.7	%		290		bp
Consolidated net income	$	1,226		$	560			119			$	2,471		$	1,305			89			$	892		$	315			183			$	3,363		$	1,620			108
Diluted earnings per share	$	4.55		$	2.13			114			$	9.26		$	4.97			86			$	3.30		$	1.20			175			$	12.55		$	6.17			103

	Change in Revenue						Change in Operating Income (Loss)						Change in Revenue						Change in Operating Income (Loss)
	Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended			Three Months Ended			Nine Months Ended			Three Months Ended			Nine Months Ended
FedEx Express segment	$	1,284		$	1,986		$	664		$	1,089		$	1,864		$	3,850		$	326		$	1,415
FedEx Ground segment		2,029			3,890			210			400			2,135			6,025			347			747
FedEx Freight segment		92			13			111			191			98			111			6			197
FedEx Services segment		3			7			—			—			2			9			—			—
Corporate, other and eliminations		(169	)		(384	)		(74	)		(156	)		(76	)		(460	)		(85	)		(241	)
	$	3,239		$	5,512		$	911		$	1,524		$	4,023		$	9,535		$	594		$	2,118

~~Elevated~~Residential delivery volume growth, reflecting increased e-commerce demand ~~for our residential delivery services, resulting from the ongoing impact of~~accelerated by the coronavirus (“COVID-19”) pandemic, as well as yield improvement related to pricing initiatives, continued ~~during~~in the ~~second~~third quarter, of 2021. In addition, demand for our business-to-business delivery services strengthened relative to the first quarter of 2021 as COVID-19-related restrictions moderated globally during the second quarter. As a result,driving strong growth in our revenue and operating income ~~improved~~ during the ~~second~~third quarter and ~~first half~~nine months of 2021. We continued to incur increased operating expenses to support ~~elevated~~unprecedented levels of demand for our services in the COVID-19 pandemic ~~environment,~~environment. Our business is labor and capital intensive in nature, which has required us to incur higher costs to operate our networks during the pandemic, including increased wage rates and costs associated with additional ~~labor expenses,~~personnel in place to support our operations and to meet regulatory requirements. Higher costs ofassociated with operating our seven-day network at FedEx Ground and ~~costs of~~ operating our air network to support higher demand in key international supply chains impacted by constrained commercial air ~~capacity. We~~capacity were also incurred in the third quarter and nine months of 2021. In addition, we incurred increased operating expenses related to 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, of approximately ~~$50~~$60 million in the ~~second~~third quarter and ~~$150~~$210 million in the ~~first half~~nine months of 2021. ~~In addition, we incurred costs associated with network contingencies, including additional personnel to support operations through the peak season during the pandemic.~~

Our consolidated operating income improved during both the ~~second~~third quarter and ~~first half~~nine months of 2021 due to residential volume growth at FedEx Ground, international export and U.S. domestic package volume growth at FedEx Express ~~residential volume growth at FedEx Ground~~ and pricing initiatives across all of our transportation segments. Higher ~~purchased transportation expenses at FedEx Ground are also driven by increased residential product mix in both the second quarter and first half of 2021. Additionally, higher~~ variable incentive compensation expense negatively impacted year-over-year ~~second~~third quarter comparisons by approximately ~~$215~~$485 million and ~~first half~~nine-month comparisons by approximately ~~$410 million.~~$895 million, which includes approximately $125 million in special bonuses paid in January 2021 to our front-line operational team members at FedEx Express. Severe winter weather also negatively impacted year-over-year third quarter and nine-month operating income comparisons by an estimated $350 million, primarily affecting revenue. Additionally, higher purchased transportation expenses at FedEx Ground were incurred in both the third quarter and nine months of 2021.

~~The loss of business from a large customer negatively impacted earnings in 2020. In addition, during~~During the second quarter of 2020, we recorded asset impairment charges of $66 million ($50 million, net of tax, or $0.19 per diluted share) associated with the decision to permanently retire certain aircraft and related engines at FedEx Express. See Note 1 of the accompanying unaudited condensed consolidated financial statements for additional information.

We incurred integration expenses totaling ~~$48~~$49 million ($3639 million, net of tax, or ~~$0.13~~$0.14 per diluted share) in the ~~second~~third quarter and ~~$97~~$146 million ($74113 million, net of tax, or ~~$0.28~~$0.42 per diluted share) in the ~~first half~~nine months of 2021, a ~~$16~~$23 million decrease from the ~~second~~third quarter and a ~~$38~~$61 million decrease from the ~~first half~~nine months of 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, travel and advertising 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 integration expenses do not include costs associated with our business realignment activities. See the “Business Realignment Costs” section of this MD&A for further information.

Consolidated net income in the ~~second quarter and first half~~nine months of 2021 includes a pre-tax, noncash mark-to-market (“MTM”) net loss of $52 million ($41 million, net of tax, or $0.15 per diluted share) associated with freezing our TNT Express Netherlands Pension Plan. See the “Retirement Plan MTM Adjustment” section of this MD&A and Note 7 of the accompanying unaudited condensed consolidated financial statements for additional information.

The comparison of net income between 2021 and 2020 is affected by a tax benefit of ~~$191~~$299 million ($~~0.71~~1.12 per diluted share) recognized during the nine months of 2021, of which we recognized $108 million during the third quarter of 2021 from a tax rate increase in the Netherlands applied to deferred tax balances and associated with voluntary contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) and a benefit of $191 million during the second quarter of 2021 primarily attributable to guidance issued by the Internal Revenue Service (“IRS”) ~~during the quarter, and~~. We also recognized a tax benefit of $133 million ($0.51 per diluted share) during the nine months of 2020 from the reduction of a valuation ~~allowance recognized during the second quarter and first half of 2020.~~allowance. See the “Income Taxes” section of this MD&A for further information.

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

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

Revenue increased ~~19%~~23% in the ~~second~~third quarter and ~~16%~~18% in the ~~first half~~nine months of 2021 primarily due to volume growth in residential delivery services at FedEx Ground and U.S. domestic package volume growth at FedEx Express, both reflecting increased e-commerce demand ~~resulting from the ongoing impact of~~accelerated by the COVID-19 pandemic. ~~In addition, demand for our business-to-business delivery services strengthened relative to the first quarter of 2021 as COVID-19-related restrictions moderated globally during the second quarter.~~ International export package volume growth at FedEx Express and pricing initiatives across all of our transportation segments also contributed to the increase in revenue during the ~~second~~third quarter and ~~first half of 2021. Additionally, one additional operating day at all of our transportation segments positively impacted revenue in the first half~~nine months of 2021. These positive factors were partially offset by lower fuel surcharges at all of our transportation segments and severe winter weather during ~~both~~ the ~~second~~third quarter and ~~first half~~nine months of 2021, as well as one fewer operating weekday at all of our transportation segments in the third quarter of 2021.

At FedEx Ground, revenue increased ~~38%~~37% in both the ~~second~~third quarter and ~~37% in the first half~~nine months of 2021 primarily due to residential delivery volume growth. ~~This sharp increase in demand is the result of a shift in consumer shopping patterns accelerated by the COVID-19 pandemic.~~ Revenue at FedEx Express increased 21% in the third quarter and 14% in the ~~second quarter and 11% in the first half~~nine months of 2021 due to international export and U.S. domestic package volume growth. International export volume increased in the third quarter and nine months of 2021 driven by strong demand for international priority shipments due to air freight capacity constraints. FedEx Freight revenue increased 5%6% in the ~~second~~third quarter of 2021 primarily due to higher revenue per ~~shipment.~~shipment and increased average daily shipments. Revenue at FedEx Freight ~~remained flat~~increased 2% in the ~~first half~~nine months of 2021 primarily due to higher revenue per shipment, partially offset by decreased average daily shipments.

The following tables compare operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended ~~November 30:~~February 28, 2021 and February 29, 2020:

	Three Months Ended				Percent			Six Months Ended				Percent			Three Months Ended				Percent			Nine Months Ended				Percent
	2020		2019		Change			2020		2019		Change			2021		2020		Change			2021		2020		Change
Operating expenses:
Salaries and employee benefits	$	7,443	$	6,235		19		$	14,295	$	12,322		16		$	8,010	$	6,382		26		$	22,305	$	18,704		19
Purchased transportation		5,407		4,328		25			10,384		8,356		24			5,660		4,558		24			16,044		12,914		24
Rentals and landing fees		1,006		924		9			1,942		1,844		5			1,131		964		17			3,073		2,808		9
Depreciation and amortization		936		901		4			1,862		1,780		5			956		908		5			2,818		2,688		5
Fuel		625		890		(30	)		1,190		1,760		(32	)		756		879		(14	)		1,946		2,639		(26	)
Maintenance and repairs		815		774		5			1,621		1,542		5			822		684		20			2,443		2,226		10
Business realignment costs																10		—	NM				10		—	NM
Asset impairment charges		—		66	NM				—		66	NM				—		—		—			—		66	NM
Other		2,866		2,652		8			5,535		5,171		7			3,160		2,701		17			8,695		7,872		10
Total operating expenses		19,098		16,770		14			36,829		32,841		12			20,505		17,076		20			57,334		49,917		15
Operating income	$	1,465	$	554		164		$	3,055	$	1,531		100		$	1,005	$	411		145		$	4,060	$	1,942		109

	Percent of Revenue												Percent of Revenue
	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			2021			2020			2021			2020
Operating expenses:
Salaries and employee benefits		36.2	%		36.0	%		35.8	%		35.8	%		37.2	%		36.5	%		36.3	%		36.1	%
Purchased transportation		26.3			25.0			26.0			24.3			26.3			26.1			26.1			24.9
Rentals and landing fees		4.9			5.3			4.9			5.4			5.3			5.5			5.0			5.4
Depreciation and amortization		4.6			5.2			4.7			5.2			4.4			5.2			4.6			5.2
Fuel		3.0			5.1			3.0			5.1			3.5			5.0			3.2			5.1
Maintenance and repairs		4.0			4.5			4.0			4.5			3.8			3.9			4.0			4.3
Business realignment costs														0.1			—			—			—
Asset impairment charges		—			0.4			—			0.2			—			—			—			0.1
Other		13.9			15.3			13.9			15.0			14.7			15.4			14.2			15.2
Total operating expenses		92.9			96.8			92.3			95.5			95.3			97.6			93.4			96.3
Operating margin		7.1	%		3.2	%		7.7	%		4.5	%		4.7	%		2.4	%		6.6	%		3.7	%

Volume growth, as discussed in the “Revenue” section of this MD&A, contributed to a ~~25%~~26% increase in ~~purchased transportation costs~~salaries and employee benefits expense in the ~~second~~third quarter and a ~~24%~~19% increase in the ~~first half~~nine months of 2021, as well as an increase in purchased transportation costs of 24% in both the third quarter and nine months of 2021. Higher variable incentive compensation expense and merit increases also contributed to an increase in salaries and employee benefits ~~expense of 19%~~ in both the ~~second~~third quarter and ~~16% in the first half~~nine months of 2021. ~~Purchased~~In addition, purchased transportation costs were also higher in both the ~~second~~third quarter and ~~first half~~nine months of 2021 ~~driven by~~primarily due to increased residential product mix at FedEx Ground. ~~In addition, salaries and employee benefits expense increased in both the second quarter and first half of 2021 due to higher variable incentive compensation expense and merit increases.~~

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

Fuel expense decreased ~~30%~~14% in the ~~second~~third quarter and ~~32%~~26% in the ~~first half~~nine months of 2021 due to lower fuel prices. 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 ~~second~~third quarters of 2021 and 2020 in the accompanying discussion of each of our transportation segments.

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 on operating income described below and for each segment below excludes the impact from ~~these~~ table changes.

The net impact of fuel had a ~~slight benefit~~slightly negative impact to operating income in the ~~second~~third quarter and ~~first half~~nine months of 2021 as lower fuel surcharges outpaced decreased fuel ~~prices outpaced lower fuel surcharges.~~prices.

In January 2021, FedEx Express announced a workforce reduction plan in Europe as it nears the completion of the network integration of TNT Express. The plan will impact between 5,500 and 6,300 employees in Europe across operational teams and back-office functions. The execution of the plan is subject to a works council consultation process that will occur over an 18-month period in accordance with local country processes and regulations.

We incurred costs of $10 million ($8 million, net of tax, or $0.03 per diluted share) during the third quarter of 2021 associated with our business realignment activities. These costs are related to certain employee severance arrangements. We expect the pre-tax cost of our business realignment activities to range from $300 million to $575 million. These charges are expected to be incurred through fiscal 2023 and will be classified as business realignment costs. We expect savings from our business realignment activities to be between $275 million and $350 million on an annualized basis beginning in fiscal 2024. The actual amount and timing of business realignment costs and related cost savings resulting from the workforce reduction plan are dependent on local country consultation processes and regulations and negotiated social plans and may differ from our current expectations and estimates.

We incurred a pre-tax, noncash MTM net loss of $52 million ($41 million, net of tax, or $0.15 per diluted share) in the second quarter of 2021 related to amendments to the TNT Express Netherlands Pension Plan. Benefits for approximately 2,100 employees ~~will be~~were frozen effective December 31, 2020. ~~Effective~~On January 1, 2021, these employees ~~will begin~~began earning pension benefits under a separate, multi-employer pension plan. See Note 7 of the accompanying unaudited condensed consolidated financial statements for additional information.

Our effective tax rate was ~~12.8%~~15.0% for the ~~second~~third quarter and ~~18.0%~~17.2% for the ~~first half~~nine months of 2021, compared to ~~2.1%~~25.0% for the ~~second~~third quarter and ~~16.8%~~18.5% for the ~~first half~~nine months of 2020. The tax rate for the third quarter of 2021 includes benefits of $108 million from a tax ~~rates include~~rate increase in the Netherlands applied to our deferred tax balances and associated with voluntary contributions to our U.S. Pension Plans. The tax rate for the nine months of 2021 also includes a benefit of $191 million from an increase in our 2020 tax loss that the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) will allow to be carried back to 2015, when the U.S. federal income tax rate was 35%. The increase in our estimated 2020 tax loss isprimarily attributable to ~~our~~an Application for Change in Accounting Method ~~filed with the IRS during the fourth quarter of 2020~~ discussed below and other accelerated deductions ~~to be~~ claimed on the 2020 tax return. The ~~2020~~ tax ~~rates~~rate for the nine months of 2020 included a $133 million benefit from a valuation allowance ~~reduction which, when combined with substantially lower consolidated earnings, produced a significantly lower rate for the second quarter of 2020 compared to the second quarter of 2021.~~reduction.

We filed an application with the IRS in 2020 requesting approval to change our accounting method for depreciation to allow retroactive application of tax regulations issued during 2020 on certain assets placed in service during 2018 and 2019. During the second quarter of 2021, the IRS issued guidance granting automatic approval to change the method of accounting for these assets resulting in an income tax benefit of $130 million for the second quarter.

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 IRS for the 2016 and 2017 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.

On December 2,23, 2020, we ~~agreed to acquire~~acquired ShopRunner, Inc. (“ShopRunner”), an e-commerce platform that directly connects brands and merchants with online ~~shoppers. The cost of the acquisition will not be material and will be funded with~~shoppers, for $225 million in cash from operations. ~~This acquisition is expected~~The majority of the purchase price was allocated to ~~be completed in December 2020, subject to customary conditions, including regulatory approval.~~goodwill and intangibles. The financial results of ShopRunner ~~will be~~are included in “Corporate, other and eliminations” from the date of acquisition and ~~are~~were not ~~expected to be~~ material to our results of ~~operations in 2021.~~

We anticipate ~~the continuing impacts of the COVID-19 pandemic will drive~~continued increased demand for our e-commerce services at FedEx Ground and FedEx Express, ~~services in the second half~~international export volume growth at FedEx Express and pricing initiatives across all of ~~the fiscal year resulting in~~our transportation segments to drive improved ~~year-over-year~~ revenue and operating income ~~at those two segments for~~in the ~~remainder~~fourth quarter of 2021. In addition, ~~yield management~~higher yields and ~~improved productivity is~~volume are anticipated to ~~contribute to~~drive revenue and operating income growth at the FedEx Freight segment in ~~2021. However,~~ the ~~uncertainty concerning the COVID-19 pandemic, as well as the potential for additional government-related restrictions, continues to make any expectations for the second half~~fourth quarter of ~~2021 inherently less certain. If our current trends continue, we~~2021.

We expect ~~certain expenses, including~~ higher variable incentive compensation accruals, ~~rising~~higher labor costs, increased maintenance costs and increased supply and other costs related to the COVID-19 pandemic to ~~continue to~~ be incurred ~~during~~in the ~~remainder~~fourth quarter of 2021. ~~We also expect headwinds~~Going forward, we may incur costs associated with debt reduction and refinancing transactions, which may be material. See the “Liquidity Outlook” section of this MD&A for more information. In addition, we will record $100 million of expense in the fourth quarter of 2021 related to ~~the December 31, 2020 expiration of the aviation excise tax holiday created by the CARES Act~~our recently announced pledge to Yale University to advance carbon sequestration solutions.

Governmental, business and ~~a higher effective income tax rate for the second half of 2021.~~

~~Government travel warnings as well as existing restrictions related~~individuals’ actions in response to the COVID-19 pandemic are expected to continue to impact the demand for commercial air travel, thereby reducing available air freight capacity. As a result of these ongoing capacity constraints, we expect continued strong demand for international priority shipments ~~for~~in the ~~remainder~~fourth quarter of 2021 to necessitate increased usage of our assets to support demand in key international supply chains. ~~In addition, we anticipate a modest increase in volumes from the delivery of COVID-19 vaccines.~~ We will continue managing network capacity, flexing our network and making adjustments as needed to align with volumes and operating conditions.

In response to current business conditions, we are extending certain surcharges beyond the peak shipping period, although at a reduced rate. These surcharges will begin on January 18, 2021 and may be adjusted in future periods as business or market conditions evolve.

We have expanded FedEx Ground seven-day residential delivery coverage to ~~nearly 95 percent~~virtually all of the U.S. population and will continue to optimize our network capacity to meet evolving customer needs. During the ~~remainder~~fourth quarter of 2021, we will continue to focus on last-mile residential delivery optimization, including by directing certain U.S. day-definite residential FedEx Express shipments into the FedEx Ground network to increase efficiency and lower our cost-to-serve. We also are focused on improving revenue quality and lowering costs through advanced technology aimed at improving productivity and safety.

We are continuing to execute our TNT Express integration plans and are scheduled to complete the integration of the FedEx Express and TNT Express 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 are expected to improve our European revenue and profitability, which continue to underperform our expectations for that market. We expect to complete the final phase of international air network interoperability in early calendar 2022.

We expect to incur approximately ~~$80~~$55 million of integration expenses in the ~~remainder~~fourth quarter of 2021 in the form of professional fees, outside service contracts, salaries and wages and other operating expenses. We expect the aggregate integration program expenses to be $1.7 billion through the completion of the physical network integration of TNT Express into FedEx Express in 2022.

As we approach the completion of the physical network integration of TNT Express in 2022, we are evaluating opportunities and pursuing initiatives in addition to the integration to continue to transform and optimize the FedEx Express international business, particularly in Europe. These actions are focused on reducing the complexity and fragmentation of our international business, improving efficiency to meet changing customer expectations and business dynamics, lowering costs, increasing profitability and improving service levels. We expect to incur additional costs, over multiple years, which may be material, including transformation costs and capital investments related to these actions. As part of this strategy, in January 2021 we announced a workforce reduction plan in Europe. We expect the pre-tax cost of the severance benefits to be provided under the plan to range from $300 million to $575 million in cash expenditures through fiscal 2023. See the “Business Realignment Costs” section of this MD&A for additional information.

Our expectations for the ~~remainder~~fourth quarter of 2021 are dependent on key external factors, including continued recovery in U.S. industrial production and global trade, no ~~further weakening of global economic conditions or~~ additional ~~shut-downs related to the COVID-19 pandemic,~~COVID-19-related business restrictions and current fuel price ~~expectations, and no additional adverse developments in international trade policies and relations.~~expectations.

Other Outlook Matters. For details on key 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:

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 revenue or estimated services provided.

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, the results of the FedEx Logistics, Inc. (“FedEx Logistics”) and FedEx Office and Print Services, Inc. (“FedEx Office”) operating segments, as well as the results of ShopRunner beginning December 23, 2020, are included in ~~corporate~~Corporate and other. FedEx Logistics provides integrated supply chain management solutions, specialty transportation, customs brokerage and global ocean and air freight forwarding. FedEx Office provides an array of document and business services and retail access to our customers for our package transportation businesses. ~~FedEx Logistics provides integrated supply chain management solutions, specialty transportation, customs brokerage and global ocean and air freight forwarding.~~

In the ~~second~~third quarter and ~~first half~~nine months of 2021, the decrease in revenue in “Corporate, other and eliminations” was due to a significant decline in non-shipping revenue at FedEx Office resulting from the COVID-19 pandemic. The transfer of FedEx Custom Critical and FedEx Cross Border into the FedEx Express segment contributed to the decrease in revenue in the ~~second~~third quarter and ~~first half~~nine months of 2021. These factors were partially offset by higher transportation yields driven by constrained market capacity resulting from the COVID-19 pandemic in the third quarter and nine months of 2021.

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. For example, during the ~~second quarter and first half~~nine months of 2021, FedEx Freight provided road and intermodal support for both FedEx Ground and FedEx Express and FedEx Ground provided delivery support for certain FedEx Express packages as part of our last-mile optimization efforts. Billings for such services are based on negotiated rates, which we believe approximate fair value, and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

FedEx Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight including priority, deferred and economy services, which provide delivery on a time-definite or day-definite basis. The following tables compare revenue, operating expenses, operating income (dollars in millions), operating margin and operating expenses as a percent of revenue for the periods ended ~~November 30:~~February 28, 2021 and February 29, 2020:

	Three Months Ended						Percent				Six Months Ended						Percent				Three Months Ended						Percent				Nine Months Ended						Percent
	2020			2019			Change				2020			2019			Change				2021			2020			Change				2021			2020			Change
Revenue:
Package:
U.S. overnight box	$	2,012		$	1,864			8			$	3,873		$	3,730			4			$	2,078		$	1,865			11			$	5,951		$	5,595			6
U.S. overnight envelope		435			457			(5	)			861			936			(8	)			444			459			(3	)			1,305			1,395			(6	)
U.S. deferred		1,204			980			23				2,300			1,936			19				1,418			1,127			26				3,718			3,063			21
Total U.S. domestic package revenue		3,651			3,301			11				7,034			6,602			7				3,940			3,451			14				10,974			10,053			9
International priority		2,510			1,817			38				4,827			3,634			33				2,596			1,710			52				7,423			5,344			39
International economy		658			873			(25	)			1,274			1,728			(26	)			653			810			(19	)			1,927			2,538			(24	)
Total international export package revenue		3,168			2,690			18				6,101			5,362			14				3,249			2,520			29				9,350			7,882			19
International domestic⁽¹⁾		1,206			1,165			4				2,294			2,241			2				1,162			1,075			8				3,456			3,316			4
Total package revenue		8,025			7,156			12				15,429			14,205			9				8,351			7,046			19				23,780			21,251			12
Freight:
U.S.		799			698			14				1,632			1,393			17				860			739			16				2,492			2,132			17
International priority		737			473			56				1,390			937			48				775			439			77				2,165			1,376			57
International economy		408			541			(25	)			779			1,057			(26	)			383			499			(23	)			1,162			1,556			(25	)
International airfreight		65			70			(7	)			140			136			3				56			61			(8	)			196			197			(1	)
Total freight revenue		2,009			1,782			13				3,941			3,523			12				2,074			1,738			19				6,015			5,261			14
Other⁽²⁾		334			146			129				645			301			114				363			140			159				1,008			441			129
Total revenue		10,368			9,084			14				20,015			18,029			11				10,788			8,924			21				30,803			26,953			14
Operating expenses:
Salaries and employee benefits		3,922			3,405			15				7,664			6,777			13				4,352			3,520			24				12,016			10,297			17
Purchased transportation		1,449			1,267			14				2,753			2,499			10				1,460			1,212			20				4,213			3,711			14
Rentals and landing fees		542			505			7				1,046			1,018			3				650			538			21				1,696			1,556			9
Depreciation and amortization		482			469			3				959			931			3				490			478			3				1,449			1,409			3
Fuel		529			754			(30	)			1,025			1,497			(32	)			647			744			(13	)			1,672			2,241			(25	)
Maintenance and repairs		542			514			5				1,093			1,031			6				549			429			28				1,642			1,460			12
Business realignment costs																						10			—		NM					10			—		NM
Asset impairment charges		—			66		NM					—			66		NM					—			—			—				—			66		NM
Intercompany charges		486			500			(3	)			947			969			(2	)			509			500			2				1,456			1,469			(1	)
Other		1,516			1,368			11				2,918			2,720			7				1,658			1,366			21				4,576			4,086			12
Total operating expenses		9,468			8,848			7				18,405			17,508			5				10,325			8,787			18				28,730			26,295			9
Operating income	$	900		$	236			281			$	1,610		$	521			209			$	463		$	137			238			$	2,073		$	658			215
Operating margin		8.7	%		2.6	%		610		bp		8.0	%		2.9	%		510		bp		4.3	%		1.5	%		280		bp		6.7	%		2.4	%		430		bp

	Percent of Revenue												Percent of Revenue
	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			2021			2020			2021			2020
Operating expenses:
Salaries and employee benefits		37.8	%		37.5	%		38.3	%		37.6	%		40.3	%		39.5	%		39.0	%		38.2	%
Purchased transportation		14.0			13.9			13.8			13.9			13.5			13.6			13.7			13.8
Rentals and landing fees		5.2			5.6			5.2			5.6			6.0			6.0			5.5			5.8
Depreciation and amortization		4.7			5.2			4.8			5.1			4.6			5.4			4.7			5.2
Fuel		5.1			8.3			5.1			8.3			6.0			8.3			5.4			8.3
Maintenance and repairs		5.2			5.6			5.5			5.7			5.1			4.8			5.4			5.4
Business realignment costs														0.1			—			—			—
Asset impairment charges		—			0.7			—			0.4			—			—			—			0.2
Intercompany charges		4.7			5.5			4.7			5.4			4.7			5.6			4.7			5.5
Other		14.6			15.1			14.6			15.1			15.4			15.3			14.9			15.2
Total operating expenses		91.3			97.4			92.0			97.1			95.7			98.5			93.3			97.6
Operating margin		8.7	%		2.6	%		8.0	%		2.9	%		4.3	%		1.5	%		6.7	%		2.4	%

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended ~~November 30:~~February 28, 2021 and February 29, 2020:

	Three Months Ended				Percent			Six Months Ended				Percent			Three Months Ended				Percent			Nine Months Ended				Percent
	2020		2019		Change			2020		2019		Change			2021		2020		Change			2021		2020		Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box		1,453		1,244		17			1,369		1,231		11			1,529		1,258		22			1,421		1,240		15
U.S. overnight envelope		512		547		(6	)		497		554		(10	)		508		536		(5	)		501		548		(9	)
U.S. deferred		1,339		1,012		32			1,272		994		28			1,562		1,215		29			1,367		1,067		28
Total U.S. domestic ADV		3,304		2,803		18			3,138		2,779		13			3,599		3,009		20			3,289		2,855		15
International priority		748		565		32			722		548		32			765		542		41			736		546		35
International economy		296		315		(6	)		277		304		(9	)		294		293		—			283		300		(6	)
Total international export ADV		1,044		880		19			999		852		17			1,059		835		27			1,019		846		20
International domestic⁽¹⁾		2,635		2,669		(1	)		2,464		2,509		(2	)		2,353		2,405		(2	)		2,427		2,475		(2	)
Total ADV		6,983		6,352		10			6,601		6,140		8			7,011		6,249		12			6,735		6,176		9
Revenue per package (yield):
U.S. overnight box	$	21.98	$	23.78		(8	)	$	22.10	$	23.86		(7	)	$	21.91	$	23.54		(7	)	$	22.04	$	23.75		(7	)
U.S. overnight envelope		13.50		13.26		2			13.53		13.29		2			14.08		13.59		4			13.72		13.39		2
U.S. deferred		14.27		15.39		(7	)		14.12		15.34		(8	)		14.65		14.73		(1	)		14.32		15.11		(5	)
U.S. domestic composite		17.54		18.70		(6	)		17.51		18.71		(6	)		17.66		18.21		(3	)		17.56		18.53		(5	)
International priority		53.26		51.03		4			52.24		52.25		—			54.71		50.07		9			53.08		51.53		3
International economy		35.29		43.94		(20	)		35.84		44.71		(20	)		35.87		43.88		(18	)		35.85		44.44		(19	)
International export composite		48.17		48.49		(1	)		47.69		49.55		(4	)		49.49		47.90		3			48.30		49.01		(1	)
International domestic⁽¹⁾		7.27		6.92		5			7.27		7.03		3			7.96		7.09		12			7.49		7.05		6
Composite package yield	$	18.24	$	17.88		2		$	18.26	$	18.21		—		$	19.21	$	17.90		7		$	18.58	$	18.11		3
Freight Statistics
Average daily freight pounds:
U.S.		9,511		8,364		14			9,175		8,188		12			9,943		8,356		19			9,426		8,244		14
International priority		6,234		5,230		19			5,862		5,010		17			6,286		4,752		32			6,000		4,924		22
International economy		13,560		15,241		(11	)		12,581		14,473		(13	)		12,135		13,806		(12	)		12,435		14,252		(13	)
International airfreight		1,605		1,726		(7	)		1,590		1,640		(3	)		1,417		1,422		—			1,534		1,567		(2	)
Total average daily freight pounds		30,910		30,561		1			29,208		29,311		—			29,781		28,336		5			29,395		28,987		1
Revenue per pound (yield):
U.S.	$	1.33	$	1.32		1		$	1.39	$	1.34		4		$	1.40	$	1.40		—		$	1.39	$	1.36		2
International priority		1.88		1.43		31			1.85		1.47		26			1.99		1.47		35			1.90		1.47		29
International economy		0.48		0.56		(14	)		0.48		0.57		(16	)		0.51		0.57		(11	)		0.49		0.57		(14	)
International airfreight		0.64		0.65		(2	)		0.69		0.65		6			0.64		0.68		(6	)		0.67		0.66		2
Composite freight yield	$	1.03	$	0.93		11		$	1.05	$	0.95		11		$	1.12	$	0.97		15		$	1.08	$	0.96		13

FedEx Express segment revenue increased 21% in the third quarter and 14% in the ~~second quarter and 11% in the first half~~nine months of 2021 due to international export and U.S. domestic package volume growth, partially offset by lower fuel surcharges. ~~The demand for our U.S. domestic residential service offerings continued to accelerate during the second quarter of 2021 due to the COVID-19 pandemic.~~ Revenue was also positively impacted by pricing initiatives resulting from global air freight capacity constraints in the ~~second~~third quarter and ~~first half~~nine months of 2021. These factors were partially offset by severe winter weather in the third quarter and nine months of 2021 and one ~~additional~~fewer operating ~~day~~weekday in the ~~first half of 2021. FedEx Express segment revenue includes a benefit from a reduction in aviation excise taxes on cargo provided by the CARES Act in the second~~third quarter ~~and first half~~ of 2021.

International export package average daily volumes increased ~~19%~~27% in the ~~second~~third quarter and ~~17%~~20% in the ~~first half~~nine months of 2021 led by volume growth from Asia-Pacific and Europe. International export package yields ~~decreased 4%~~increased 3% in the ~~first half~~third quarter of 2021 primarily due to favorable exchange rates. International export package yields decreased 1% in the nine months of 2021 primarily due to lower fuel surcharges, ~~and base yield declines driven by lower weight per package,~~ partially offset by favorable exchange rates and pricing initiatives resulting from global air freight capacity constraints. U.S. domestic package average daily volumes increased ~~18%~~20% in the ~~second~~third quarter and ~~13%~~15% in the ~~first half~~nine months of 2021 driven by growth in deferred service offerings, reflecting increased e-commerce demand resulting from the COVID-19 ~~pandemic.~~pandemic, as well as growth in overnight box service offerings. U.S. domestic package yields decreased 6%3% in ~~both~~ the ~~second~~third quarter and ~~first half~~5% in the nine months of 2021 due to ~~decreased base yields driven by~~ lower ~~weight per~~ package ~~as well as~~weights and lower fuel surcharges. Average daily freight pounds increased 5% in the third quarter and 1% in the nine months of 2021 primarily due to volume growth in international priority and U.S. services. Composite freight yields increased ~~11%~~15% in ~~both~~ the ~~second~~third quarter and ~~first half~~13% in the nine months of 2021 primarily due to improved base ~~yields, partially offset by lower fuel surcharges.~~yields. Other revenue increased 159% in the third quarter and 129% in the ~~second quarter and 114% in the first half~~nine months of 2021 due to the transfer of FedEx Custom Critical and FedEx Cross Border into the FedEx Express segment.

FedEx Express’s U.S. domestic and outbound fuel surcharge and international fuel surcharge ranged as follows for the periods ended ~~November 30:~~February 28, 2021 and February 29, 2020:

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			2021			2020			2021			2020
U.S. Domestic and Outbound Fuel Surcharge:
Low		3.50	%		7.21	%		2.73	%		7.21	%		4.61	%		7.25	%		2.73	%		7.21	%
High		3.83			8.45			4.12			8.45			6.44			8.00			6.44			8.45
Weighted-average		3.64			7.53			3.54			7.54			5.21			7.38			4.13			7.48
International Export and Freight Fuel Surcharge:
Low		1.17			6.74			0.28			6.74			2.96			6.66			0.28			6.66
High		16.52			18.56			17.00			18.56			19.88			18.09			19.88			18.56
Weighted-average		10.67			15.64			10.49			15.59			13.48			15.23			11.51			15.47
International Domestic Fuel Surcharge:
Low		2.62			3.20			2.62			3.20			4.25			2.98			2.62			2.98
High		19.21			19.40			20.33			19.47			20.39			19.18			20.39			19.47
Weighted-average		5.91			7.29			5.92			7.39			6.28			7.32			6.04			7.36

FedEx Express segment operating income increased ~~281%~~substantially in the ~~second~~third quarter and ~~209% in the first half~~nine months of 2021 due to international export and U.S. domestic package volume growth. FedEx Express segment operating results include benefits of approximately ~~$70~~$30 million in the ~~second~~third quarter and ~~$135~~$165 million in the ~~first half~~nine months of 2021 ~~related to a benefit~~ from a reduction in aviation excise taxes provided by the ~~CARES Act.~~Coronavirus Aid, Relief, and Economic Security Act, which expired on December 31, 2020. These factors were partially offset by higher variable incentive compensation expense of approximately $340 million in the third quarter and $570 million in the nine months of 2021, which includes approximately $125 million in special bonuses paid in January 2021 to our front-line operational team members. In addition, severe winter weather negatively impacted operating income by an estimated $240 million in the third quarter and nine months of 2021, primarily affecting revenue. One fewer operating weekday also negatively impacted operating income in the third quarter of 2021. We continued to incur increased costs of operating our global network in the COVID-19 pandemic environment in the third quarter and nine months of 2021, which is partially impacted by constrained commercial air capacity. Results for the ~~second quarter and first half~~nine months of 2020 were negatively impacted by $66 million of asset impairment charges associated with the decision to permanently retire certain aircraft and related engines at FedEx Express. These factors were partially offset by higher variable incentive compensation expense of approximately $120 million in the second quarter and $230 million in the first half of 2021. In addition, we continued to incur increased operating expenses to support elevated levels of demand for our services in the COVID-19 pandemic environment in the second quarter and first half of 2021, including costs of operating our global network to support higher demand, which is partially impacted by constrained commercial air capacity.engines.

FedEx Express segment results included ~~$43~~$41 million of integration expenses in the ~~second~~third quarter and ~~$80~~$121 million of such expenses in the ~~first half~~nine months of 2021, a $6$21 million decrease from the ~~second~~third quarter and a ~~$26~~$47 million decrease from the ~~first half~~nine months of 2020.

Salaries and employee benefits expense increased ~~15%~~24% in the ~~second~~third quarter and ~~13%~~17% in the ~~first half~~nine months of 2021 primarily due to staffing to support volume growth and higher variable incentive compensation expense. In addition, higher labor expenses and increased costs associated with network contingencies as a result of the COVID-19 pandemic contributed to the increase in salaries and employee benefits expense in both the ~~second~~third quarter and ~~first half~~nine months of 2021. Purchased transportation expense increased 20% in the third quarter and 14% in the ~~second quarter and 10% in the first half~~nine months of 2021 primarily due to the transfer of FedEx Custom Critical and FedEx Cross Border into the FedEx Express segment. Other operating expense increased ~~11%~~21% in the ~~second~~third quarter and 7%12% in the ~~first half~~nine months of 2021 primarily due to higher outside service contract expense and bad debt expense. Additionally, higher operating supplies, partially offset by decreased travel, both driven by the COVID-19 pandemic, negatively impacted other operating expense in ~~both~~ the ~~second~~nine months of 2021. Maintenance and repairs expense increased 28% in the third quarter and ~~first half~~12% in the nine months of ~~2021.~~2021 primarily due to an increase in flight hours resulting from higher package volumes.

Fuel expense decreased ~~30%~~13% in the ~~second~~third quarter and ~~32%~~25% in the ~~first half~~nine months of 2021 due to lower fuel ~~prices.~~prices, partially offset by higher aircraft and vehicle usage. The net impact of fuel had a slightly negative impact to operating income in the ~~second~~third quarter and ~~first half~~nine months of 2021 as lower fuel surcharges 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.

FedEx Ground service offerings include day-certain delivery to businesses in the U.S. and Canada and to 100% of U.S. residences. The following tables compare revenue, operating expenses, operating income (dollars in millions), operating margin, selected package statistics (in thousands, except yield amounts) and operating expenses as a percent of revenue for the periods ended ~~November 30:~~February 28, 2021 and February 29, 2020:

	Three Months Ended						Percent			Six Months Ended						Percent			Three Months Ended						Percent			Nine Months Ended						Percent
	2020			2019			Change			2020			2019			Change			2021			2020			Change			2021			2020			Change
Revenue	$	7,344		$	5,315			38		$	14,384		$	10,494			37		$	7,980		$	5,845			37		$	22,364		$	16,339			37
Operating expenses:
Salaries and employee benefits		1,557			971			60			2,831			1,842			54			1,652			1,046			58			4,483			2,888			55
Purchased transportation		3,488			2,561			36			6,779			4,864			39			3,745			2,908			29			10,524			7,772			35
Rentals		289			249			16			553			488			13			306			256			20			859			744			15
Depreciation and amortization		205			195			5			409			388			5			214			197			9			623			585			6
Fuel		5			4			25			9			7			29			6			4			50			15			11			36
Maintenance and repairs		124			98			27			231			185			25			125			101			24			356			286			24
Intercompany charges		446			394			13			878			769			14			480			405			19			1,358			1,174			16
Other		678			501			35			1,308			965			36			750			573			31			2,058			1,538			34
Total operating expenses		6,792			4,973			37			12,998			9,508			37			7,278			5,490			33			20,276			14,998			35
Operating income	$	552		$	342			61		$	1,386		$	986			41		$	702		$	355			98		$	2,088		$	1,341			56
Operating margin		7.5	%		6.4	%		110	bp		9.6	%		9.4	%		20	bp		8.8	%		6.1	%		270	bp		9.3	%		8.2	%		110	bp
Average daily package volume		12,315			9,556			29			11,931			9,192			30			13,206			10,536			25			12,347			9,637			28
Revenue per package (yield)	$	9.42		$	8.80			7		$	9.38		$	8.96			5		$	9.72		$	8.78			11		$	9.49		$	8.90			7

	Percent of Revenue												Percent of Revenue
	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			2021			2020			2021			2020
Operating expenses:
Salaries and employee benefits		21.2	%		18.3	%		19.7	%		17.6	%		20.7	%		17.9	%		20.0	%		17.7	%
Purchased transportation		47.5			48.2			47.1			46.3			46.9			49.7			47.1			47.6
Rentals		3.9			4.7			3.9			4.6			3.8			4.4			3.8			4.5
Depreciation and amortization		2.8			3.7			2.8			3.7			2.7			3.4			2.8			3.6
Fuel		0.1			0.1			0.1			0.1			0.1			0.1			0.1			0.1
Maintenance and repairs		1.7			1.8			1.6			1.8			1.6			1.7			1.6			1.7
Intercompany charges		6.1			7.4			6.1			7.3			6.0			6.9			6.1			7.2
Other		9.2			9.4			9.1			9.2			9.4			9.8			9.2			9.4
Total operating expenses		92.5			93.6			90.4			90.6			91.2			93.9			90.7			91.8
Operating margin		7.5	%		6.4	%		9.6	%		9.4	%		8.8	%		6.1	%		9.3	%		8.2	%

FedEx Ground segment revenue increased ~~38%~~37% in both the ~~second~~third quarter and ~~37% in the first half~~nine months of 2021 primarily due to residential delivery volume ~~growth. This sharp increase in~~growth reflecting increased e-commerce demand ~~resulted from a shift in consumer shopping patterns~~ accelerated by the COVID-19 pandemic. ~~In addition, we experienced increased demand for our business-to-business delivery services relative~~Additionally, improved yield related to ~~the first quarter of 2021 as COVID-19-related restrictions moderated during the second quarter. Additionally, revenue was~~pricing initiatives positively impacted ~~by yield management~~revenue in the ~~second~~third quarter and ~~first half~~nine months of 2021. These factors were partially offset by severe winter weather in the third quarter and nine months of 2021 and one ~~additional~~fewer operating ~~day~~weekday in the ~~first half~~third quarter of 2021.

Average daily volume increased ~~29%~~25% in the ~~second~~third quarter and ~~30%~~28% in the ~~first half~~nine months of 2021 primarily due to continued growth in residential services driven by ~~e-commerce.~~e-commerce, as well as growth in commercial services. FedEx Ground yields increased 11% in the third quarter and 7% in the ~~second quarter and 5% in the first half~~nine months of 2021 primarily due to ~~yield improvement actions, partially offset by lower fuel surcharges.~~ pricing initiatives.

The FedEx Ground fuel surcharge is based on a rounded average of the national U.S. on-highway price for a gallon of diesel fuel, as published by the Department of Energy. The fuel surcharge ranged as follows for the periods ended ~~November 30:~~February 28, 2021 and February 29, 2020:

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			2021			2020			2021			2020
Low		5.50	%		6.75	%		5.50	%		6.75	%		5.75	%		6.50	%		5.50	%		6.50	%
High		5.75			7.00			5.75			7.25			7.00			7.00			7.00			7.25
Weighted-average		5.73			6.92			5.74			6.98			6.30			6.91			5.93			6.96

FedEx Ground segment operating income increased ~~61%~~98% in the ~~second~~third quarter and ~~41%~~56% in the ~~first half~~nine months of 2021 primarily due to residential delivery volume growth and yield improvement. These factors were partially offset by higher purchased transportation ~~contractor settlement rates resulting from~~service provider settlements related to residential product mix, ~~as well as additional~~increased labor expenses and higher self-insurance accruals in the ~~second~~third quarter and ~~first half~~nine months of 2021. In addition, severe winter weather negatively impacted operating income by an estimated $85 million in the third quarter and nine months of 2021, primarily affecting revenue.

Purchased transportation expense increased ~~36%~~29% in the ~~second~~third quarter and ~~39%~~35% in the ~~first half~~nine months of 2021 due to higher volume and increased residential product mix. Salaries and employee benefits expense increased ~~60%~~58% in the ~~second~~third quarter and ~~54%~~55% in the ~~first half~~nine months of 2021 due to additional staffing to support volume growth, including costs associated with operating our seven-day network, merit increases and higher variable incentive compensation expense. In addition, higher labor expenses and increased costs associated with network contingencies as a result of the COVID-19 pandemic contributed to the increase in salaries and employee benefits expense in both the ~~second~~third quarter and ~~first half~~nine months of 2021. Other operating expense increased ~~35%~~31% in the ~~second~~third quarter and ~~36%~~34% in the ~~first half~~nine months of 2021 primarily due to higher self-insurance accruals, higher outside service contract expense and ~~higher operating supplies driven by the COVID-19 pandemic.~~increased volume-related expenses.

The net impact of fuel had a ~~moderate~~slight benefit to operating income in the ~~second~~third quarter and ~~first half~~nine months of 2021 as decreased fuel prices 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 Freight LTL service offerings include priority services when speed is critical and economy services when time can be traded for savings. The following tables compare revenue, operating expenses, operating income (dollars in millions), operating margin, selected statistics and operating expenses as a percent of revenue for the periods ended ~~November 30:~~February 28, 2021 and February 29, 2020:

	Three Months Ended						Percent				Six Months Ended						Percent				Three Months Ended						Percent				Nine Months Ended						Percent
	2020			2019			Change				2020			2019			Change				2021			2020			Change				2021			2020			Change
Revenue	$	1,936		$	1,844			5			$	3,762		$	3,749			—			$	1,836		$	1,738			6			$	5,598		$	5,487			2
Operating expenses:
Salaries and employee benefits		915			900			2				1,773			1,819			(3	)			911			846			8				2,684			2,665			1
Purchased transportation		209			187			12				379			374			1				203			176			15				582			550			6
Rentals		59			52			13				115			104			11				57			54			6				172			158			9
Depreciation and amortization		105			97			8				211			191			10				104			92			13				315			283			11
Fuel		90			132			(32	)			155			255			(39	)			103			130			(21	)			258			385			(33	)
Maintenance and repairs		57			68			(16	)			110			133			(17	)			54			59			(8	)			164			192			(15	)
Intercompany charges		122			130			(6	)			241			256			(6	)			128			133			(4	)			369			389			(5	)
Other		127			137			(7	)			252			282			(11	)			157			135			16				409			417			(2	)
Total operating expenses		1,684			1,703			(1	)			3,236			3,414			(5	)			1,717			1,625			6				4,953			5,039			(2	)
Operating income	$	252		$	141			79			$	526		$	335			57			$	119		$	113			5			$	645		$	448			44
Operating margin		13.0	%		7.6	%		540		bp		14.0	%		8.9	%		510		bp		6.5	%		6.5	%		—		bp		11.5	%		8.2	%		330		bp
Average daily shipments (in thousands):
Priority		78.1			77.4			1				74.6			78.0			(4	)			72.6			70.5			3			��	74.0			75.5			(2	)
Economy		32.9			32.6			1				31.5			32.7			(4	)			31.1			29.8			4				31.3			31.8			(2	)
Total average daily shipments		111.0			110.0			1				106.1			110.7			(4	)			103.7			100.3			3				105.3			107.3			(2	)
Weight per shipment (lbs):
Priority		1,106			1,139			(3	)			1,101			1,147			(4	)			1,110			1,137			(2	)			1,104			1,144			(3	)
Economy		1,015			983			3				1,006			971			4				950			1,000			(5	)			988			980			1
Composite weight per shipment		1,079			1,092			(1	)			1,073			1,095			(2	)			1,062			1,096			(3	)			1,070			1,096			(2	)
Revenue per shipment:
Priority	$	264.05		$	258.90			2			$	262.02		$	257.14			2			$	275.44		$	265.17			4			$	266.30		$	259.61			3
Economy		313.35			295.29			6				308.15			295.53			4				315.11			308.65			2				310.39			299.59			4
Composite revenue per shipment	$	278.66		$	270.38			3			$	275.71		$	268.83			3			$	287.32		$	279.40			3			$	279.42		$	272.09			3
Revenue per hundredweight:
Priority	$	23.86		$	22.74			5			$	23.79		$	22.41			6			$	24.82		$	23.33			6			$	24.12		$	22.69			6
Economy		30.88			30.05			3				30.62			30.43			1				33.16			30.85			7				31.40			30.57			3
Composite revenue per hundredweight	$	25.82		$	24.75			4			$	25.69		$	24.54			5			$	27.06		$	25.49			6			$	26.12		$	24.84			5

	Percent of Revenue												Percent of Revenue
	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			2021			2020			2021			2020
Operating expenses:
Salaries and employee benefits		47.3	%		48.8	%		47.1	%		48.5	%		49.6	%		48.7	%		48.0	%		48.6	%
Purchased transportation		10.8			10.1			10.1			10.0			11.1			10.1			10.4			10.0
Rentals		3.0			2.8			3.1			2.8			3.1			3.1			3.1			2.9
Depreciation and amortization		5.4			5.3			5.6			5.1			5.7			5.3			5.6			5.1
Fuel		4.7			7.2			4.1			6.8			5.6			7.5			4.6			7.0
Maintenance and repairs		2.9			3.7			2.9			3.6			2.9			3.4			2.9			3.5
Intercompany charges		6.3			7.1			6.4			6.8			7.0			7.6			6.6			7.1
Other		6.6			7.4			6.7			7.5			8.5			7.8			7.3			7.6
Total operating expenses		87.0			92.4			86.0			91.1			93.5			93.5			88.5			91.8
Operating margin		13.0	%		7.6	%		14.0	%		8.9	%		6.5	%		6.5	%		11.5	%		8.2	%

FedEx Freight segment revenue increased 5%6% in the ~~second~~third quarter of 2021 primarily due to higher revenue per ~~shipment.~~shipment and increased average daily shipments, partially offset by lower fuel surcharges and one fewer operating weekday. FedEx Freight segment revenue ~~remained flat~~increased 2% in the ~~first half~~nine months of 2021 primarily due to higher revenue per shipment, partially offset by lower fuel surcharges and decreased average daily shipments. In addition, severe winter weather negatively impacted revenue in the third quarter and nine months of 2021.

Revenue per shipment increased 3% in both the ~~second~~third quarter and ~~first half~~nine months of 2021 primarily due to higher base rates reflecting our ongoing revenue quality initiatives, partially offset by lower fuel surcharges and lower weight per shipment. Average daily shipments increased 1%3% in the ~~second~~third quarter of 2021 due to volumes returning to pre-COVID-19 levels. Despite the increased demand in the ~~second~~third quarter of 2021, demand for our service offerings in the ~~first half~~nine months of 2021 was negatively impacted by the COVID-19 pandemic and related supply chain disruptions, resulting in a 4%2% decrease in average daily shipments.

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 ~~November 30:~~February 28, 2021 and February 29, 2020:

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	2020			2019			2020			2019			2021			2020			2021			2020
Low		21.00	%		23.50	%		21.00	%		23.50	%		21.40	%		23.00	%		21.00	%		23.00	%
High		21.40			24.00			21.40			24.40			24.00			24.00			24.00			24.40
Weighted-average		21.10			23.80			21.20			23.80			22.50			23.70			21.60			23.80

FedEx Freight segment operating income increased ~~79%~~5% in the ~~second~~third quarter and ~~57%~~44% in the ~~first half~~nine months of 2021 driven by continued focus on revenue quality initiatives, aligning our cost structure with current business levels and improving operational efficiencies. These positive factors more than offset the negative impact on volumes from the COVID-19 pandemic and weaker economic conditions for the ~~first half~~nine months of 2021. In addition, severe winter weather negatively impacted operating income by an estimated $25 million in the third quarter and nine months of 2021, primarily affecting revenue.

Salaries and employee benefits expense increased ~~only 2%~~8% in the ~~second~~third quarter of 2021 primarily due to ~~improved operational productivity, in spite of~~ higher variable incentive compensation expense, ~~merit increases and~~ higher ~~volumes. Salaries and employee benefits expense decreased 3% in the first half of 2021 primarily due to improved operational productivity and lower~~ volumes ~~partially offset by higher variable incentive compensation expense~~ and merit increases. Purchased transportation expense increased ~~12%~~15% in the ~~second~~third quarter and 6% in the nine months of 2021 primarily due to higher utilization of third-party ~~rail providers~~purchased transportation and ~~increased rates from third-party motor~~rail providers.

Fuel expense decreased ~~32%~~21% in the ~~second~~third quarter and ~~39%~~33% in the ~~first half~~nine months of 2021 primarily due to lower fuel prices. The netimpact of fuel had a ~~slightly~~moderately negative impact to operating income in the ~~second~~third quarter and ~~first half~~nine months of 2021 as lower fuel surcharges 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 ~~$8.3~~$8.9 billion at ~~November 30, 2020,~~February 28, 2021, compared to $4.9 billion at May 31, ~~2020.~~2021. The following table provides a summary of our cash flows for the ~~six-month~~nine-month periods ended ~~November 30~~February 28, 2021 and February 29, 2020 (in millions):

	2020			2019			2021			2020
Operating activities:
Net income	$	2,471		$	1,305		$	3,363		$	1,620
Noncash charges and credits		3,808			3,322			5,479			4,944
Changes in assets and liabilities		(1,049	)		(2,553	)		(1,450	)		(3,286	)
Cash provided by operating activities		5,230			2,074			7,392			3,278
Investing activities:
Capital expenditures		(2,826	)		(3,266	)		(4,202	)		(4,705	)
Business acquisitions, net of cash acquired								(225	)		—
Proceeds from asset dispositions and other		14			4			88			15
Cash used in investing activities		(2,812	)		(3,262	)		(4,339	)		(4,690	)
Financing activities:
Proceeds from short-term borrowings, net		—			150			—			298
Principal payments on debt		(75	)		(1,021	)		(105	)		(1,045	)
Proceeds from debt issuances		970			2,093			970			2,093
Proceeds from stock issuances		431			26			482			38
Dividends paid		(341	)		(339	)		(513	)		(509	)
Purchase of treasury stock		—			(3	)		—			(3	)
Other, net		(12	)		(5	)		(13	)		(5	)
Cash provided by financing activities		973			901			821			867
Effect of exchange rate changes on cash		67			(1	)		101			(8	)
Net increase (decrease) in cash and cash equivalents	$	3,458		$	(288	)	$	3,975		$	(553	)
Cash and cash equivalents at the end of period	$	8,339		$	2,031		$	8,856		$	1,766

Cash flows from operating activities increased ~~$3.2~~$4.1 billion in the ~~first half~~nine months of 2021 primarily due to higher net income, the timing of variable incentive compensation payments and lower pension contributions. Capital expenditures decreased during the ~~first half~~nine months of 2021 primarily due to lower spending related to vehicles ~~and facilities~~ across all of our transportation segments. See the “Capital Resources” section of this MD&A for a discussion of capital expenditures during 2021 and 2020.

During August 2020, FedEx Express issued $970 million of Pass Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of 1.875% due in February 2034 utilizing pass through trusts. The Certificates are secured by 19 Boeing aircraft. The payment obligations of FedEx Express in respect of the Certificates are fully and unconditionally guaranteed by FedEx. FedEx Express is using the proceeds from the issuance for general corporate purposes. See Note 4 of the accompanying consolidated financial statements for additional information regarding the terms of the Certificates.

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 ~~November 30~~February 28, 2021 and February 29, 2020 (in millions):

									Percent Change														Percent Change
									2020/2019														2021/2020
	Three Months Ended				Six Months Ended				Three Months			Six Months			Three Months Ended				Nine Months Ended				Three Months			Nine Months
	2020		2019		2020		2019		Ended			Ended			2021		2020		2021		2020		Ended			Ended
Aircraft and related equipment	$	500	$	587	$	1,273	$	1,128		(15	)		13		$	536	$	399	$	1,809	$	1,527		34			18
Package handling and ground support equipment		344		267		561		408		29			38			304		228		865		636		33			36
Vehicles and trailers		104		399		141		660		(74	)		(79	)		139		260		280		920		(47	)		(70	)
Information technology		177		243		371		465		(27	)		(20	)		189		239		560		704		(21	)		(20	)
Facilities and other		277		352		480		605		(21	)		(21	)		208		313		688		918		(34	)		(25	)
Total capital expenditures	$	1,402	$	1,848	$	2,826	$	3,266		(24	)		(13	)	$	1,376	$	1,439	$	4,202	$	4,705		(4	)		(11	)

FedEx Express segment	$	804	$	1,061	$	1,832	$	2,012		(24	)		(9	)	$	732	$	929	$	2,564	$	2,941		(21	)		(13	)
FedEx Ground segment		387		447		591		543		(13	)		9			349		275		940		818		27			15
FedEx Freight segment		59		131		98		317		(55	)		(69	)		130		97		228		414		34			(45	)
FedEx Services segment		129		154		247		305		(16	)		(19	)		145		110		392		415		32			(6	)
Other		23		55		58		89		(58	)		(35	)		20		28		78		117		(29	)		(33	)
Total capital expenditures	$	1,402	$	1,848	$	2,826	$	3,266		(24	)		(13	)	$	1,376	$	1,439	$	4,202	$	4,705		(4	)		(11	)

Capital expenditures decreased during the ~~first half~~nine months of 2021 primarily due to lower spending related to vehicles ~~and facilities~~ across all of our transportation segments, as well as ~~decreased~~lower spending ~~on information technology~~related to facilities at FedEx ~~Services and FedEx Freight,~~Express, partially offset by higher spending related to aircraft at FedEx Express and increased spending on package handling equipment at FedEx ~~Ground and higher spending related to aircraft at FedEx Express.~~Ground.

We are providing the following information in compliance with Rule 13-01 of Regulation S-X, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” with respect to our senior unsecured debt securities and the Certificates. As of ~~November 30, 2020,~~February 28, 2021, we had outstanding ~~$21.9~~$22.0 billion of senior unsecured debt securities and ~~$970~~$944 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 ~~November 30, 2020~~February 28, 2021 and May 31, 2020 (in millions):

	November 30, 2020		May 31, 2020		February 28, 2021		May 31, 2020
Current Assets	$	14,448	$	11,014	$	14,277	$	11,014
Intercompany Receivable		3,866		3,985		4,443		3,985
Total Assets		81,975		62,089		87,174		62,089
Current Liabilities		8,392		7,030		9,393		7,030
Intercompany Payable		—		519		—		519
Total Liabilities		53,505		49,844		54,330		49,844

The following table presents the summarized statement of income information for the ~~six-month~~nine-month period ended ~~November 30, 2020~~February 28, 2021 (in millions):

Revenue	$	29,141		$	44,991
Intercompany Charges, net		(1,434	)		(2,060	)
Operating Income		2,206			2,967
Intercompany Charges, net		71			107
Income Before Income Taxes		2,354			3,187
Net Income	$	2,028		$	2,692

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 ~~November 30, 2020~~February 28, 2021 and May 31, 2020 (in millions):

	November 30, 2020		May 31, 2020		February 28, 2021		May 31, 2020
Current Assets	$	7,065	$	4,444	$	7,213	$	4,444
Intercompany Receivable		1,220		3,918		—		3,918
Total Assets		62,730		57,375		65,473		57,375
Current Liabilities		4,205		3,546		4,934		3,546
Intercompany Payable		6,233		7,853		5,193		7,853
Total Liabilities		46,161		45,140		46,327		45,140

The following table presents the summarized statement of income information for the ~~six-month~~nine-month period ended ~~November 30, 2020~~February 28, 2021 (in millions):

Revenue	$	10,988		$	17,048
Intercompany Charges, net		(575	)		(764	)
Operating Income		667			833
Intercompany Charges, net		274			418
Income Before Income Taxes		1,773			2,399
Net Income	$	1,727		$	2,332

In response to current business and economic conditions as referenced above in the “Outlook” section of this MD&A, we have and will continue to actively manage our cash flow ~~defer certain expenditures~~ and seek to protect capital for unforeseen challenges from the ongoing pandemic. With ~~over $8.3~~$8.9 billion in cash and $3.5 billion in available liquidity under our $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement”) and $1.5 billion 364-day credit agreement (“the 364-Day Credit Agreement” and together with the Five-Year Credit Agreement, the “Credit Agreements”), we believe that our cash and cash equivalents, cash flow from operations and available financing sources will be adequate to meet internal and external liquidity ~~needs.~~needs, including our capital expenditure expectations discussed below. As business and economic conditions improve, we will be evaluating our capital allocation strategy with a priority on strengthening our balance sheet.

Our cash and cash equivalents balance at ~~November 30, 2020~~February 28, 2021 includes ~~$1.9~~$2.4 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 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 ~~$5.1~~$5.7 billion in 2021, a ~~$0.8~~$0.2 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~~driven by timing of aircraft spend and acceleration of FedEx Ground capacity ~~initiatives in support of increased volumes.~~investments. Total capital expenditures will include aircraft modernization at FedEx Express and strategic investments to improve productivity and safety. We invested ~~$1.3~~$1.8 billion in aircraft and related equipment in the ~~first half~~nine months of 2021 and expect to invest an additional ~~$450~~$460 million for aircraft and related equipment during the ~~remainder~~fourth quarter of 2021. In addition, we are making investments over multiple years 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 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 2021, FedEx Express executed a contract amendment rescheduling Boeing 767-300 Freighter aircraft 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 and allows pass through trusts formed by FedEx Express to sell, in one or more future offerings, pass through certificates.

A key aspect of our capital allocation strategy moving forward will be strengthening our balance sheet and repayment of outstanding debt. Given our strong cash flows and liquidity position, we are evaluating potential transactions to reduce and refinance existing debt. The timing of and our ability to complete any such transactions will depend on a variety of factors, including economic and market conditions, and we would incur costs related to these transactions, which may be material.

The Five-Year Credit Agreement expires in March ~~2025~~2026 and includes a $250 million letter of credit sublimit. The 364-Day Credit Agreement expires in March ~~2021.~~2022. The Credit Agreements are available to finance our operations and other cash flow needs. See Note 1 and Note 4 of the accompanying unaudited condensed consolidated financial statements, as well as Part II, Item 5 (“Other Information”), for a description of the terms and significant covenants of the Credit Agreements.

~~Contributions~~During the nine months of 2021, we made voluntary contributions totaling $300 million to our ~~tax-qualified U.S. domestic pension plans (“~~U.S. Pension ~~Plans”) are~~Plans. We do not ~~required~~expect to make any additional contributions to our U.S. Pension Plans during ~~2021; however, we may make voluntary contributions in~~ the ~~second half~~fourth quarter of 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 “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 “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.

There have been no material changes to the contractual commitments described in Part II, Item 7 in our Annual Report.

We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity.

See Note 9 of the accompanying unaudited condensed consolidated financial statements for additional information on our purchase commitments.

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 against FedEx. On September 11, 2020, the court granted the DOC’s motion to dismiss the lawsuit. On November 5, 2020, we appealed 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 ~~November 30, 2020,~~February 28, 2021, 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 “Business Realignment Costs,” “Income Taxes,~~” “Business Acquisitions,~~” “Outlook” and “Liquidity Outlook” and the “General,” “Financing Arrangements,” “Income Taxes,” “Retirement Plans,” “Commitments” and “Contingencies” notes to our unaudited condensed consolidated financial statements, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, cash flows, plans, objectives, future performance and business and the assumptions underlying such statements. Forward-looking statements include those preceded by, followed by or that include the words “will,” “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “plans,” “estimates,” “targets,” “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 ~~November 30, 2020,~~February 28, 2021, 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 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 half~~nine months of 2021, the U.S. dollar weakened relative to the currencies of the foreign countries in which we operate, as compared to the first ~~six~~nine months of 2020, and this weakening had a slightly ~~positive~~negative 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, 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 ~~November 30, 2020~~February 28, 2021 (the end of the period covered by this Quarterly Report on Form 10-Q).

During our fiscal quarter ended ~~November 30, 2020,~~February 28, 2021, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 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 10 of the accompanying unaudited condensed consolidated financial statements.

Other than the risk factors 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.

The COVID-19 pandemic has had certain adverse effects on our business, results of operations and financial condition, and we expect such adverse effects will continue. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. 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. and globally. The disruption of global supply chains and the global economy has materially affected our business, results of operations and financial condition. We expect the full impact of 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 success of efforts to contain it and treat its impact, the possibility of additional subsequent widespread outbreaks and variant strains, and the impact of actions taken in 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 following:

To the 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 heading “Risk Factors” in our Annual Report, any of which could materially and adversely affect our business, results of operations and financial condition. Such risks include, but are not limited to, additional changes in international trade policies and relations; our ability to successfully integrate the businesses and operations of FedEx Express and TNT Express in the expected time frame and at the expected cost; our strong reputation and the value of the 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 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.

Failure to successfully implement our workforce reduction plan in Europe will cause our future financial results to suffer. We recently announced proposals to resize our European workforce as FedEx Express nears the completion of the network integration of TNT Express, including through consultations with works council representatives from across the region. The actual amount and timing of cost savings resulting from the workforce reduction plan are dependent on local country consultation processes and regulations and negotiated social plans may differ from our current expectations and estimates. If we are not able to successfully implement this plan, our future financial results may suffer.

The United Kingdom’s withdrawal from the European Union (“EU”) could adversely impact our business, results of operations and financial condition. On January 31, 2020, the United Kingdom left the EU (“Brexit”)~~. The United Kingdom~~, and on December 31, 2020, the EU ~~are now in a~~ transitional period during which the United Kingdom ~~will maintain~~maintained access to the EU single market and to the global trade deals negotiated by the EU on behalf of its members expired. Effective January 1, 2021, the United Kingdom and ~~remain subject~~EU agreed to a trade deal that governs the United Kingdom’s trade relationship with the EU ~~law, until December 31, 2020.~~post-Brexit. The trade deal is still in the process of being implemented.

The uncertainty regarding the status of Brexit has negatively impacted the United Kingdom’s and the EU’s economies. This negative impact will likely continue until the United Kingdom and EU ~~reach and implement a definitive resolution on their future trading relationship.~~complete the implementation of the post-Brexit trade deal. Any additional impact of Brexit will depend on the application of terms of ~~such resolution, if one is ultimately reached. Even if~~the trade deal. While the trade deal maintains the United ~~Kingdom maintains~~Kingdom’s access to the EU single market, EU free movement rights and ~~trade deals following~~ the ~~transition period, Brexit~~general principles of EU law no longer apply to the United Kingdom and new requirements and controls, including on the movement and reporting of goods, could result in further economic downturn globally. IfWe have developed plans to mitigate these potential costs and challenges; however, further discussion between the ~~United Kingdom ultimately loses access to~~parties on implementation of the ~~EU single market and~~ trade ~~deals,~~deal could trigger significant market and economic disruption, ~~would likely occur, our customer experience, service quality and international operations would likely be negatively impacted,~~ and the demand for our services could be depressed. AsFollowing Brexit, the movement of ~~December 17, 2020,~~goods between the United Kingdom and the remaining member states of the EU ~~have not reached a resolution regarding their future trading relationship beyond December 31, 2020.~~has become subject to additional inspections and documentation checks, which may create delays at ports of entry and departure and potentially impact our ability to effectively provide our services.

Additionally, depending on the application of the terms of the trade deal 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 impacting our business, results of operations and financial condition. ~~Brexit~~The post-Brexit trade deal could also adversely affect European and worldwide economic and market conditions and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the euro and the British pound.

We may not realize the expected benefits from our acquisition of ShopRunner and be unable to manage the additional risks associated with ShopRunner’s business. We acquired ShopRunner in December 2020, and ShopRunner now operates as part of FedEx Dataworks, a new organization focused on digital innovation and creation of solutions to expand our e-commerce platform. We may be unable to combine the businesses of FedEx and ShopRunner in a manner that permits us to achieve the operating and financial results and enhancements to our value proposition to customers we anticipated from the acquisition, the failure of which could result in the anticipated benefits of the transaction not being realized in the time frame currently anticipated, or at all. Further, it is possible that the integration process could result in unexpected integration issues, including related to the integration of information technology infrastructure and e-commerce platforms, and the loss of key historical ShopRunner employees. There can be no assurance that we can continue to support the value we have allocated to ShopRunner, including its goodwill and other intangible assets. All of these factors could adversely affect our results of operations.

ShopRunner collects and stores certain personal data of its merchants and their buyers, its partners, consumers with whom it has a direct relationship, and users of its applications. Additionally, it uses third-party service providers and subprocessors to help deliver services to merchants and their buyers. These service providers and subprocessors may store or access personal data, including payment information and/or other confidential information. The foregoing factors increase the risk of data incidents and the amount of potential exposure in the event of a data breach. Developing privacy legislation within the United States may also create limitations or added requirements on the use of personal data within and among ShopRunner and the other FedEx operating companies. For more information, see the “Risk Factors” section of our Annual Report. Additionally, existing and future customer data in the systems and business of ShopRunner and FedEx may not be immediately interoperable, or may not be interoperable without significant added expense.

We may be unable to achieve our goal of carbon-neutral operations by 2040. On March 3, 2021, we announced a goal to achieve carbon-neutral operations globally by 2040. Achievement of this goal depends on our execution of operational strategies relating to vehicle electrification, development of sustainable customer solutions, identification and investment in alternative fuels, fuel conservation and aircraft modernization programs, and investments in our facilities and natural carbon sequestration.

Execution of these strategies and achievement of our 2040 goal is subject to risks and uncertainties, many of which are outside of our control. These risks and uncertainties include, but are not limited to: our ability to execute our strategies and achieve our goals within the currently projected costs and the expected timeframes; the availability of zero-emission electric vehicles, alternative fuels, fuel-efficient aircraft, and other materials and components; unforeseen production, design, operational, and technological difficulties; the outcome of research efforts and future technology developments, including the ability to scale projects and technologies on a commercially competitive basis such as carbon sequestration and/or other related processes; compliance with, and changes or additions to, global and regional regulations, taxes, charges, mandates, or requirements relating to greenhouse gas emissions, carbon costs, or climate-related goals; labor-related regulations and requirements that restrict or prohibit our ability to impose requirements on third parties who provide contracted transportation for our transportation networks; adapting products to customer preferences and customer acceptance of sustainable supply chain solutions; the actions of competitors and competitive pressures; and the pace of regional and global recovery from the COVID-19 pandemic.

There is no assurance that we will be able to successfully execute our strategies and achieve our 2040 goal of carbon-neutral operations. Failure to achieve our 2040 goal could damage our reputation and customer and other stakeholder relationships. Further, given investors’ increased focus related to environmental, social, and governance matters, such a failure could cause large stockholders to reduce their ownership of FedEx common stock and limit our access to financing. Such conditions could have an adverse effect on our business, results of operations and financial condition, as well as on the price of our common stock.

We did not repurchase any shares of FedEx common stock during the ~~second~~third quarter of 2021.

On January 26, 2016, we announced a stock repurchase program approved by our Board, 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 ~~December 15, 2020,~~March 16, 2021, 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.

~~Compensatory Arrangements~~Entry into a Material Definitive Agreement, Termination of ~~Certain Officers~~a Material Definitive Agreement, and Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

~~In June~~On March 16, 2021, FedEx, as borrower, entered into a Second Amended and Restated $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement”) and also entered into a $1.5 billion 364-day credit agreement (the “364-Day Credit Agreement” and, together with the Five-Year Credit Agreement, the “New Credit Agreements”). FedEx entered into each of the New Credit Agreements with a syndicate of banks and other financial institutions (the “Five-Year Lenders” and “364-Day Lenders,” respectively), including JPMorgan Chase Bank, N.A., individually and as administrative agent, Bank of America, N.A., individually and as syndication agent, and Citibank, N.A., The Bank of Nova Scotia, Wells Fargo Bank, National Association, and Truist Bank, each individually and as a co-documentation agent. The syndicate of lenders for each of the New Credit Agreements was arranged by JPMorgan Chase Bank, N.A., BofA Securities, Inc., Citibank, N.A., The Bank of Nova Scotia, Wells Fargo Securities, LLC, and Truist Securities, Inc., as joint lead arrangers and joint bookrunners.

The Five-Year Credit Agreement further amended and restated the $2.0 billion five-year credit agreement dated as of March 17, 2020, ~~we announced that given then-current economic~~among FedEx, JPMorgan Chase Bank, N.A., individually and ~~business uncertainty resulting from~~as administrative agent, and certain lenders (the “Prior Five-Year Credit Agreement”) to extend the ~~COVID-19 pandemic, there would not~~maturity date of the facility by one year to March 17, 2026. The 364-Day Credit Agreement replaces the $1.5 billion 364-day credit agreement dated as of March 17, 2020, among FedEx, JPMorgan Chase Bank, N.A., individually and as administrative agent, and certain lenders (the “Terminated Credit Agreement”). The Terminated Credit Agreement was terminated effective March 16, 2021. The terms of the Prior Five-Year Credit Agreement and the Terminated Credit Agreement are summarized in FedEx’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 17, 2020.

The Five-Year Credit Agreement provides the terms under which the Five-Year Lenders will make available to FedEx an unsecured multi-currency revolving credit facility in an aggregate amount of up to $2.0 billion, including a $250 million sub-limit for letters of credit. FedEx may elect to increase the aggregate amount available under the facility to up to a total of $2.5 billion. The 364-Day Credit Agreement provides the terms under which the 364-Day Lenders will make available to FedEx an unsecured multi-currency revolving credit facility in an aggregate amount of up to $1.5 billion.

Borrowings under the New Credit Agreements may be an annual incentive compensation plan for executive officers for fiscal 2021. In September 2020, based on strong financial results for the first quarter of fiscal 2021, FedEx’s Board, upon the recommendation of its Compensation Committee, approved an annual incentive planused for FedEx’s ~~employees, excluding executive officers (the “fiscal 2021 AIC Plan”). On December 14, 2020, the Board, upon the recommendation of its Compensation Committee, approved~~general corporate purposes, including FedEx’s executive officers in the fiscal 2021 AIC Plan. The decision to include executive officers in the plan was based on FedEx’s strong financial results for the first half of fiscal 2021 due in part to the leadership provided by the executive officers and successful execution of FedEx’s strategies during the COVID-19 pandemic.

In order to continue motivating management to improve FedEx’s overall financial performance, the performance measure selected for the fiscal 2021 AIC Plan is consolidated operating income. The consolidated operating income threshold, target, and maximum objectives under the fiscal 2021 AIC plan are specified levels of fiscal 2021 consolidated operating income. Actual consolidated operating income performance that exceeds the fiscal 2021 target objective for consolidated operating income under the fiscal 2021 AIC plan will result in an above-target payout opportunity, up to the maximum payout amount.

The maximum payout opportunity under the plan for each executive officer is 150% of the target amount. However, the actual payout for plan participants, including all executive officers other than FedEx’s Chairman of the Board and Chief Executive Officer (“Chairman and CEO”), may be adjusted downward depending on the achievement level of their respective individual performance objectives, as determined by the Chairman and CEO or President and Chief Operating Officer, as applicable. The AIC payout amount for the Chairman and CEO may be adjusted upward or downward by the independent Board members based on their annual evaluation of his performance, which will consider factors including (but not limited to) FedEx’s stock price performance, market share, analyst ratings, and performance versus competitors. In addition, the independent directors will consider the achievement of the Chairman and CEO’s individual objectives for fiscal 2021.acquisitions.

The ~~fiscal 2021 AIC target payouts for~~Five-Year Lenders’ and the 364-Day Lenders’ commitments under the New Credit Agreements will terminate on March 17, 2026 and March 15, 2022, respectively, unless terminated earlier by FedEx or by the administrative agent upon an event of default. FedEx’s ~~named executive officers, as~~obligations under the New Credit Agreements are guaranteed by the same FedEx subsidiaries that guarantee FedEx’s outstanding public debt securities.

Loans under the New Credit Agreements denominated in U.S. Dollars will bear interest at a ~~percentage of their respective base salary actually paid during fiscal 2021, are as follows:~~rate per year generally equal to, at FedEx’s election, either:

* Mr. Graf served as FedEx’s Executive Vice President and Chief Financial Officer until September 21, 2020 and will retire effective December 31, 2020. He is eligible

The New Credit Agreements contain additional procedures for transition to ~~receive~~ a ~~pro rata payout~~benchmark rate other than the LIBO Rate for Eurodollar Loans.

Loans under the ~~fiscal 2021 AIC plan based~~New Credit Agreements denominated in pounds sterling will be classified as Eurodollar Loans, while loans denominated in euros will bear interest at a rate per year equal to the euro interbank offered rate determined by the European Money Markets Institute displayed on the page EURIBOR01 of the Reuters Service.

Letters of Credit issued under the Five-Year Credit Agreement will be assessed a fee based upon the applicable margin charged for Eurodollar Loans. In addition, FedEx will pay the issuing banks a fronting fee of 0.125% per year on the undrawn and unexpired amount of each issued Letter of Credit.

FedEx will also pay commitment fees on the average daily undrawn amount of the facilities. The New Credit Agreements reinstated the commitment fees set forth in the Prior Five-Year Credit Agreement and the Terminated Credit Agreement prior to the amendments to such agreements entered into on May 27, 2020 (the “May 2020 Amendments”). The applicable margin for loans and the applicable commitment fees will vary depending upon FedEx’s senior unsecured non-credit-enhanced long-term debt ratings. For example, based upon FedEx’s current ratings of BBB (Standard & Poor’s) and Baa2 (Moody’s Investors Service), the applicable margin for ABR Loans would be 0.25%, the applicable margin for Eurodollar Loans would be 1.25%, and the applicable commitment fee rate would be 0.125% per year on undrawn commitments under the Five-Year Credit Agreement and 0.10% under the 364-Day Credit Agreement.

The New Credit Agreements contain customary affirmative and negative covenants, as well as customary events of default. The financial covenants in the New Credit Agreements require FedEx to maintain, at the end of each fiscal quarter, beginning with the quarter ending May 31, 2021, a ratio of consolidated total debt (short-term and long-term debt, including the current portion of such long-term debt) to consolidated EBITDA (less non-cash retirement plans mark-to-market adjustments, non-cash pension service costs and non-cash asset impairment charges and as at the ~~plan~~last day of any period ~~during which he is employed.~~of four consecutive fiscal quarters) that does not exceed 3.5 to 1.0. The New Credit Agreements do not contain the temporary covenants set forth in the May 2020 Amendments restricting FedEx from repurchasing any shares of its common stock or increasing the amount of its quarterly dividend payable per share of common stock from $0.65 per share.

Certain of the Five-Year Lenders and 364-Day Lenders, as well as certain of the lenders under the Prior Five-Year Credit Agreement and the Terminated Credit Agreement, and their affiliates engage in transactions with, and perform services for, FedEx and its affiliates in the ordinary course of business and have engaged, and may in the future engage, in other commercial banking transactions and investment banking, financial advisory and other financial services transactions with FedEx and its affiliates.

The Five-Year Credit Agreement and 364-Day Credit Agreement will be filed as exhibits to FedEx’s annual report on Form 10-K for the fiscal year ending May 31, 2021.

˄ 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 ~~December 15, 2020~~March 16, 2021
Common Stock, par value $0.10 per share		~~265,070,592~~265,342,075

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets ~~November 30, 2020~~ February 28, 2021 and May 31, 2020		3
Condensed Consolidated Statements of Income Three and ~~Six~~Nine Months Ended ~~November 30,~~February 28, 2021 and February 29, 2020 ~~and 2019~~		5
Condensed Consolidated Statements of Comprehensive Income Three and ~~Six~~Nine Months Ended ~~November 30,~~February 28, 2021 and February 29, 2020 ~~and 2019~~		6
Condensed Consolidated Statements of Cash Flows ~~Six~~Nine Months Ended ~~November 30,~~February 28, 2021 and February 29, 2020 ~~and 2019~~		7
Condensed Consolidated Statements of Changes In Common Stockholders’ Investment Three and ~~Six~~Nine Months Ended ~~November 30,~~February 28, 2021 and February 29, 2020 ~~and 2019~~		8
Notes to Condensed Consolidated Financial Statements		9
Report of Independent Registered Public Accounting Firm		20
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		21
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		46
ITEM 4. Controls and Procedures		46

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		47
ITEM 1A. Risk Factors		47
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		4950
ITEM 5. Other Information		4950
ITEM 6. Exhibits		5152
Signature		5253

Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 10.6
Exhibit 10.7
Exhibit 10.8
Exhibit ~~10.9~~
~~Exhibit~~ 15.1
Exhibit 22
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101.1 Interactive Data Files Exhibit 104.1 Cover Page Interactive Data File


FedEx Express Segment	FedEx Express (express transportation, small-package ground delivery and freight transportation)
	FedEx Custom Critical (time-critical transportation) 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)

FedEx Express Segment	FedEx Express (express transportation, small-package ground delivery and freight transportation)
	FedEx Custom Critical, Inc. (“FedEx Custom Critical”) (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)

~~Name~~•	Target Payout (the highest of (a) the interest rate quoted by the Wall Street Journal as the prime rate in the United States; (b) 0.5% plus the greater of (i) the federal funds effective rate and (ii) the overnight bank funding rate, each as determined by the Federal Reserve Bank of New York; and (c) the adjusted London Interbank Offered Rate (the “LIBO Rate”) for a ~~percentage of base salary)~~
~~Frederick W. Smith~~ ~~Chairman of~~one-month interest period plus 1.0%, plus the ~~Board and Chief Executive Officer~~	~~165~~	%
~~Michael C. Lenz~~ ~~Executive Vice President and Chief Financial Officer~~	~~120~~	%
~~Rajesh Subramaniam~~ ~~President and Chief Operating Officer~~	~~140~~	%
~~Donald F. Colleran~~ ~~President and Chief Executive Officer~~ ~~Federal Express Corporation~~	~~120~~	%
~~Robert B. Carter~~ ~~Executive Vice President,~~ ~~FedEx Information Services and~~ ~~Chief Information Officer~~	~~120~~	%
Alan B. Graf, Jr.* ~~Former Chief Financial Officer~~	~~120~~	%applicable margin for such loans (“ABR Loans”); or

Exhibit Number		Description of Exhibit

*˄10.1		Amendment dated ~~September 4,~~December 2, 2020 (but effective as of ~~January 6,~~June 1, 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 ~~September 4,~~December 2, 2020 (but effective as of ~~February 3,~~November 26, 2020), amending the USPS Transportation Agreement.

*˄10.3		Amendment dated ~~September 30,~~December 29, 2020 (but effective as of ~~March 2,~~September 28, 2020), amending the USPS Transportation Agreement.

*˄10.4		Amendment dated ~~October 22,~~December 29, 2020 (but effective as of ~~June 29,~~November 2, 2020), amending the USPS Transportation Agreement.~~Agreement~~.

*˄10.5		Amendment dated ~~October 22, 2020~~February 3, 2021 (but effective as of ~~August 3,~~November 30, 2020), amending the USPS Transportation Agreement.

*˄10.6		Amendment dated ~~October 22, 2020~~February 3, 2021 (but effective as of ~~August 31, 2020)~~January 4, 2021), amending the USPS Transportation ~~Agreement~~Agreement..

*˄10.7		Amendment dated ~~October 22, 2020~~February 8, 2021 (but effective as of ~~March 30, 2020)~~February 1, 2021), amending the USPS Transportation ~~Agreement~~Agreement..

~~10.8~~		~~Amendment dated October 30, 2020 (but effective as of October 23, 2020), amending the USPS Transportation Agreement~~.

*˄~~10.9~~ 10.8		Amendment dated ~~November 5, 2020~~February 12, 2021 (but effective as of ~~May 4,~~June 29, 2020), amending the USPS Transportation ~~Agreement~~Agreement..

15.1		Letter re: Unaudited Interim Financial Statements.

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

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

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

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

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

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

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

			FEDEX CORPORATION

Date: ~~December 17, 2020~~March 18, 2021			/s/ JOHN L. MERINO
			JOHN L. MERINO
			CORPORATE VICE PRESIDENT AND
			PRINCIPAL ACCOUNTING OFFICER