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Business Segment Information
 3 Months Ended
Aug. 31, 2016
Business Segment Information [Abstract]  
Business Segment Information

(6) Business Segment Information

 

We provide a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively under the respected FedEx brand. Our primary operating companies include FedEx Express, the world's largest express transportation company; TNT Express, an international express, small-package ground delivery and freight transportation company that was acquired near the end of our 2016 fourth quarter; FedEx Ground Package System, Inc. (“FedEx Ground”), a leading North American provider of small-package ground delivery services; and FedEx Freight, Inc. (“FedEx Freight”), a leading U.S. provider of less-than-truckload (“LTL”) freight services. These companies represent our major service lines and, along with FedEx Corporate Services, Inc. (“FedEx Services”), form the core of our reportable segments.

 

Our reportable segments include the following businesses:

 

FedEx Express Group:

 

FedEx Express Segment               FedEx Express (express transportation)

FedEx Trade Networks (air and ocean freight forwarding, customs brokerage and cross-border enablement technology and solutions)

                                   FedEx SupplyChain Systems (logistics services)

 

TNT Express Segment        TNT Express (international express transportation, small-

              package ground delivery and freight transportation)

 

FedEx Ground Segment               FedEx Ground (small-package ground delivery)

                                   GENCO (third-party logistics)

       

FedEx Freight Segment              FedEx Freight (LTL freight transportation)

                                    FedEx Custom Critical (time-critical transportation)

 

FedEx Services Segment               FedEx Services (sales, marketing, information technology,

communications, customer service, technical support, billing and collection services and back-office functions)

FedEx Office (document and business services and package

                                            acceptance)

 

 

FedEx Services Segment

 

The FedEx Services segment operates combined sales, marketing, administrative and information technology functions that support our transportation businesses and allow 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 by FedEx Express and reported in the FedEx Express segment in their natural expense line items. The FedEx Services segment includes: FedEx Services, which provides sales, marketing, information technology, communications, customer service, technical support, billing and collection services for U.S. customers of our major business units and certain back-office support to our other companies; and FedEx Office, which provides an array of document and business services and retail access to our customers for our package transportation businesses.

 

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

 

Operating expenses for each of our transportation segments include the allocations from the FedEx Services segment to the respective transportation segments. These allocations also include charges and credits for administrative services provided between operating companies. The allocations of net operating costs are based on metrics such as relative revenues 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.

 

Eliminations, Corporate and Other

 

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment. Billings for such services are based on negotiated rates, which we believe approximate fair value, and are reflected as revenues of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenues and expenses are eliminated in our consolidated results and are not separately identified in the following segment information, because the amounts are not material.

 

Corporate and other includes corporate headquarters costs for executive officers and certain legal and financial functions, as well as certain other costs and credits not attributed to our core business. These costs are not allocated to the business segments.

 

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

         2016 2015 
Revenues            
 FedEx Express segment      $ 6,656 $ 6,591 
 TNT Express segment        1,804  N/A 
 FedEx Ground segment        4,290   3,830 
 FedEx Freight segment         1,658   1,601 
 FedEx Services segment        395   390 
 Eliminations and other        (140)   (133) 
         $ 14,663 $ 12,279 
Operating Income            
 FedEx Express segment       $ 624 $ 545 
 TNT Express segment        (14)  N/A 
 FedEx Ground segment        610   537 
 FedEx Freight segment         135   132 
 Eliminations, corporate and other        (91)   (70) 
         $ 1,264 $ 1,144