NOTE 14: BUSINESS SEGMENT INFORMATION

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:

FedEx Express Segment	FedEx Express (express transportation)
	TNT Express (international express transportation, small-package ground delivery and freight transportation)

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

FedEx Freight Segment	FedEx Freight (LTL freight transportation)


FedEx Services Segment	FedEx Services (sales, marketing, information technology, communications, customer service, technical support, billing and collection services and back-office functions)
	FedEx Office (document and business services and package acceptance)

In 2018, FedEx Express and TNT Express are reported as one segment. This new segment is the result of combining the financial information of the FedEx Express and TNT Express segments (previously referred to as the FedEx Express group) as part of the operational integration of these two businesses. As integration activities have progressed, the FedEx Express and TNT Express businesses have lost their historical discrete financial profiles, as the businesses are being combined. Therefore, discrete financial information for FedEx Express and TNT Express does not exist in a manner to evaluate performance and make resource allocation decisions. In addition, this new reporting structure aligns with our management reporting structure and our internal financial reporting and compensation plans.

In the fourth quarter of 2018, we realigned our specialty logistics and e-commerce solutions in a new organizational structure under FedEx Trade Networks. The realignment allows us to improve our ability to deliver the capabilities of our specialty services companies to customers. The new organization includes FedEx Trade Networks Transport & Brokerage, Inc., FedEx Cross Border Technologies, Inc., FedEx Supply Chain, FedEx Custom Critical, Inc., and FedEx Forward Depots, Inc. FedEx Trade Networks operating segment results are included in “Corporate, other and eliminations” in our segment reporting. Prior period segment results for all of our transportation segments have been recast to conform to the current year presentation for these organizational structure changes.

FedEx Services Segment

The FedEx Services segment operates combined sales, marketing, administrative and information-technology functions in shared services operations 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 and reported by each respective company 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.

Other Intersegment Transactions

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

Also included in corporate and other is the FedEx Trade Networks operating segment, which provides customs brokerage and global ocean and air freight forwarding through FedEx Trade Networks Transport & Brokerage; cross-border enablement and technology solutions and e-commerce transportation solutions through FedEx Cross Border; integrated supply chain management solutions through FedEx Supply Chain; time-critical shipment services through FedEx Custom Critical; and, effective September 1, 2018, critical inventory and service parts logistics, 3-D printing and technology repair through FedEx Forward Depots.

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.

The following table provides a reconciliation of reportable segment revenues, depreciation and amortization, operating income (loss) and segment assets to consolidated financial statement totals (in millions) for the years ended or as of May 31:

	FedEx Express Segment		FedEx Ground Segment		FedEx Freight Segment		FedEx Services Segment		Corporate, other and eliminations⁽¹⁾			Consolidated Total
Revenues
2018	$	36,172	$	18,395	$	6,812	$	1,650	$	2,421		$	65,450
2017		33,824		16,503		6,070		1,621		2,301			60,319
2016		25,553		15,051		5,825		1,593		2,343			50,365
Depreciation and amortization
2018	$	1,679	$	681	$	296	$	382	$	57		$	3,095
2017		1,662		627		265		371		70			2,995
2016		1,377		556		244		384		70			2,631
Operating income (loss)
2018⁽²⁾	$	2,578	$	2,605	$	517	$	—	$	(830	)	$	4,870
2017⁽³⁾		2,769		2,279		390		—		(401	)		5,037
2016⁽⁴⁾		2,485		2,240		421		—		(2,069	)		3,077
Segment assets⁽⁵⁾
2018	$	31,753	$	15,458	$	7,389	$	6,377	$	(8,647	)	$	52,330
2017		31,307		12,969		6,527		5,682		(7,933	)		48,552
2016		20,798		11,407		6,104		5,390		2,260			45,959

⁽¹⁾	Includes TNT Express’s assets and immaterial financial results for 2016 from the time of acquisition (May 25, 2016).

⁽²⁾

Includes TNT Express integration expenses and restructuring charges of $477 million and a gain of $10 million associated with our annual MTM retirement plans accounting adjustment. These expenses are included in “Corporate, other and eliminations” and the FedEx Express segment. Also includes goodwill and other asset impairment charges of $380 million.

⁽³⁾

Includes TNT Express integration expenses and restructuring charges of $327 million and a gain of $24 million associated with our MTM retirement plans accounting. These expenses are included in “Corporate, other and eliminations” and the FedEx Express segment. Also includes $39 million of charges for legal reserves related to certain pending U.S. Customs and Border Protection (“CBP”) matters involving FedEx Trade Networks and $22 million of charges in connection with the settlement of and certain expected losses relating to independent contractor litigation matters at FedEx Ground. See Note 18 below for additional information.

⁽⁴⁾

Includes a $1.5 billion loss associated with our MTM retirement plans accounting. Also includes provisions for the settlement of and expected losses related to independent contractor litigation matters at FedEx Ground for $256 million and expenses related to the settlement of a CBP notice of action involving FedEx Trade Networks in the amount of $69 million, in each case net of recognized immaterial insurance recovery, and transaction and integration-planning expenses related to our TNT Express acquisition of $113 million.

⁽⁵⁾	Segment assets include intercompany receivables.

The following table provides a reconciliation of reportable segment capital expenditures to consolidated totals for the years ended May 31 (in millions):

	FedEx Express Segment		FedEx Ground Segment		FedEx Freight Segment		FedEx Services Segment		Other		Consolidated Total
2018	$	3,461	$	1,178	$	490	$	477	$	57	$	5,663
2017		2,725		1,490		431		416		54		5,116
2016		2,350		1,556		428		432		52		4,818

The following table presents revenue by service type and geographic information for the years ended or as of May 31 (in millions):

	2018		2017		2016
REVENUE BY SERVICE TYPE
FedEx Express segment:
Package:
U.S. overnight box	$	7,273	$	6,955	$	6,763
U.S. overnight envelope		1,788		1,750		1,662
U.S. deferred		3,738		3,526		3,379
Total U.S. domestic package revenue		12,799		12,231		11,804
International priority		7,356		6,940		5,697
International economy		3,255		2,876		2,282
Total international export package revenue		10,611		9,816		7,979
International domestic⁽¹⁾		4,587		4,227		1,285
Total package revenue		27,997		26,274		21,068
Freight:
U.S.		2,797		2,527		2,481
International priority		2,179		1,910		999
International economy		1,916		1,740		385
International airfreight		368		355		126
Total freight revenue		7,260		6,532		3,991
Other		915		1,018		494
Total FedEx Express segment		36,172		33,824		25,553
FedEx Ground segment		18,395		16,503		15,051
FedEx Freight segment		6,812		6,070		5,825
FedEx Services segment		1,650		1,621		1,593
Other and eliminations⁽²⁾		2,421		2,301		2,343
	$	65,450	$	60,319	$	50,365
GEOGRAPHICAL INFORMATION⁽³⁾
Revenues:
U.S.	$	43,581	$	40,269	$	38,070
International:
FedEx Express segment		20,417		18,817		11,083
FedEx Ground segment		407		331		275
FedEx Freight segment		181		149		137
FedEx Services segment		3		10		10
Other⁽²⁾		861		743		790
Total international revenue		21,869		20,050		12,295
	$	65,450	$	60,319	$	50,365
Noncurrent assets:
U.S.	$	30,362	$	28,141	$	25,942
International		8,627		7,783		8,028
	$	38,989	$	35,924	$	33,970

⁽¹⁾	International domestic revenues relate to our intra-country operations.

⁽²⁾	Includes the FedEx Trade Networks operating segment and TNT Express’s revenue for 2016 from the time of acquisition (May 25, 2016).

⁽³⁾

International revenue includes shipments that either originate in or are destined to locations outside the United States, which could include U.S. payors. Noncurrent assets include property and equipment, goodwill and other long-term assets. Our flight equipment is registered in the U.S. and is included as U.S. assets; however, many of our aircraft operate internationally.