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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED August 31, 2022

OR

☐ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO__________

Commission File Number: 1-15829

FedEx Corporation

(Exact name of registrant as specified in its charter)

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)

Registrant’s telephone number, including area code: (901) 818-7500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol |  | Name of each exchange on which registered
Common Stock, par value $0.10 per share |  | FDX |  | New York Stock Exchange
0.450% Notes due 2025 |  | FDX 25A |  | New York Stock Exchange
1.625% Notes due 2027 |  | FDX 27 |  | New York Stock Exchange
0.450% Notes due 2029 |  | FDX 29A |  | New York Stock Exchange
1.300% Notes due 2031 |  | FDX 31 |  | New York Stock Exchange
0.950% Notes due 2033 |  | FDX 33 |  | New York Stock Exchange

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.

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

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.

Common Stock |  | Outstanding Shares at September 20, 2022
Common Stock, par value $0.10 per share |  | 260,219,792

FEDEX CORPORATION

INDEX

|  | PAGE
PART I. FINANCIAL INFORMATION |  |
ITEM 1. Financial Statements |  |
Condensed Consolidated Balance Sheets August 31, 2022 and May 31, 2022 |  | 3
Condensed Consolidated Statements of Income Three Months Ended August 31, 2022 and 2021 |  | 5
Condensed Consolidated Statements of Comprehensive Income Three Months Ended August 31, 2022 and 2021 |  | 6
Condensed Consolidated Statements of Cash Flows Three Months Ended August 31, 2022 and 2021 |  | 7
Condensed Consolidated Statements of Changes In Common Stockholders’ Investment Three Months Ended August 31, 2022 and 2021 |  | 8
Notes to Condensed Consolidated Financial Statements |  | 9
Report of Independent Registered Public Accounting Firm |  | 19
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition |  | 20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk |  | 39
ITEM 4. Controls and Procedures |  | 40
PART II. OTHER INFORMATION |  |
ITEM 1. Legal Proceedings |  | 40
ITEM 1A. Risk Factors |  | 40
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds |  | 40
ITEM 5. Other Information |  | 41
ITEM 6. Exhibits |  | 42
Signature |  | 43
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 |  |

- 2 -

FEDEX CORPORATION

CONDENSED CONSOLIDA TED BALANCE SHEETS

(IN MILLIONS)

|  | August 31, 2022 (Unaudited) |  |  | May 31, 2022 |
ASSETS |  |  |  |  |  |
CURRENT ASSETS |  |  |  |  |  |
Cash and cash equivalents |  | $ | 6,850 |  |  | $ | 6,897 |
Receivables, less allowances of $786 and $692 |  |  | 11,055 |  |  |  | 11,863 |
Spare parts, supplies, and fuel, less allowances of $363 and $360 |  |  | 647 |  |  |  | 637 |
Prepaid expenses and other |  |  | 1,054 |  |  |  | 968 |
Total current assets |  |  | 19,606 |  |  |  | 20,365 |
PROPERTY AND EQUIPMENT, AT COST |  |  | 76,712 |  |  |  | 75,275 |
Less accumulated depreciation and amortization |  |  | 37,906 |  |  |  | 37,184 |
Net property and equipment |  |  | 38,806 |  |  |  | 38,091 |
OTHER LONG-TERM ASSETS |  |  |  |  |  |
Operating lease right-of-use assets, net |  |  | 17,219 |  |  |  | 16,613 |
Goodwill |  |  | 6,316 |  |  |  | 6,544 |
Other assets |  |  | 3,879 |  |  |  | 4,381 |
Total other long-term assets |  |  | 27,414 |  |  |  | 27,538 |
|  | $ | 85,826 |  |  | $ | 85,994 |

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

- 3 -

FEDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE DATA)

|  | August 31, 2022 (Unaudited) |  |  | May 31, 2022 |
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT |  |  |  |  |  |
CURRENT LIABILITIES |  |  |  |  |  |
Current portion of long-term debt |  | $ | 139 |  |  | $ | 82 |
Accrued salaries and employee benefits |  |  | 2,263 |  |  |  | 2,531 |
Accounts payable |  |  | 4,167 |  |  |  | 4,030 |
Operating lease liabilities |  |  | 2,470 |  |  |  | 2,443 |
Accrued expenses |  |  | 4,726 |  |  |  | 5,188 |
Total current liabilities |  |  | 13,765 |  |  |  | 14,274 |
LONG-TERM DEBT, LESS CURRENT PORTION |  |  | 19,918 |  |  |  | 20,182 |
OTHER LONG-TERM LIABILITIES |  |  |  |  |  |
Deferred income taxes |  |  | 4,134 |  |  |  | 4,093 |
Pension, postretirement healthcare, and other benefit obligations |  |  | 4,055 |  |  |  | 4,448 |
Self-insurance accruals |  |  | 3,042 |  |  |  | 2,889 |
Operating lease liabilities |  |  | 15,118 |  |  |  | 14,487 |
Other liabilities |  |  | 654 |  |  |  | 682 |
Total other long-term liabilities |  |  | 27,003 |  |  |  | 26,599 |
COMMITMENTS AND CONTINGENCIES |  |  |  |  |  |
COMMON STOCKHOLDERS’ INVESTMENT |  |  |  |  |  |
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of August 31, 2022 and May 31, 2022 |  |  | 32 |  |  |  | 32 |
Additional paid-in capital |  |  | 3,751 |  |  |  | 3,712 |
Retained earnings |  |  | 33,060 |  |  |  | 32,782 |
Accumulated other comprehensive loss |  |  | (1,314 | ) |  |  | (1,103 | )
Treasury stock, at cost |  |  | (10,389 | ) |  |  | (10,484 | )
Total common stockholders’ investment |  |  | 25,140 |  |  |  | 24,939 |
|  | $ | 85,826 |  |  | $ | 85,994 |

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

- 4 -

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

|  | Three Months Ended August 31, |
|  | 2022 |  |  | 2021 |
REVENUE |  | $ | 23,242 |  |  | $ | 22,003 |
OPERATING EXPENSES: |  |  |  |  |  |
Salaries and employee benefits |  |  | 7,859 |  |  |  | 7,776 |
Purchased transportation |  |  | 5,767 |  |  |  | 5,659 |
Rentals and landing fees |  |  | 1,159 |  |  |  | 1,133 |
Depreciation and amortization |  |  | 1,024 |  |  |  | 971 |
Fuel |  |  | 1,822 |  |  |  | 1,009 |
Maintenance and repairs |  |  | 904 |  |  |  | 869 |
Business realignment and optimization costs |  |  | 38 |  |  |  | 67 |
Other |  |  | 3,478 |  |  |  | 3,121 |
|  |  | 22,051 |  |  |  | 20,605 |
OPERATING INCOME |  |  | 1,191 |  |  |  | 1,398 |
OTHER (EXPENSE) INCOME: |  |  |  |  |  |
Interest, net |  |  | (142 | ) |  |  | (160 | )
Other retirement plans income |  |  | 101 |  |  |  | 216 |
Other, net |  |  | 4 |  |  |  | 3 |
|  |  | (37 | ) |  |  | 59 |
INCOME BEFORE INCOME TAXES |  |  | 1,154 |  |  |  | 1,457 |
PROVISION FOR INCOME TAXES |  |  | 279 |  |  |  | 345 |
NET INCOME |  | $ | 875 |  |  | $ | 1,112 |
EARNINGS PER COMMON SHARE: |  |  |  |  |  |
Basic |  | $ | 3.37 |  |  | $ | 4.17 |
Diluted |  | $ | 3.33 |  |  | $ | 4.09 |
DIVIDENDS DECLARED PER COMMON SHARE |  | $ | 2.30 |  |  | $ | 1.50 |

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

- 5 -

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEM ENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(IN MILLIONS)

|  | Three Months Ended |
|  | August 31, |
|  | 2022 |  |  | 2021 |
NET INCOME |  | $ | 875 |  |  | $ | 1,112 |
OTHER COMPREHENSIVE INCOME (LOSS): |  |  |  |  |  |
Foreign currency translation adjustments, net of tax benefit of $18 in 2022 and tax benefit of $0 in 2021 |  |  | (209 | ) |  |  | (147 | )
Amortization of prior service credit, net of tax benefit of $0 in 2022 and $0 in 2021 |  |  | (2 | ) |  |  | (2 | )
|  |  | (211 | ) |  |  | (149 | )
COMPREHENSIVE INCOME |  | $ | 664 |  |  | $ | 963 |

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

- 6 -

FEDEX CORPORATION

CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN MILLIONS)

|  | Three Months Ended August 31, |
|  | 2022 |  |  | 2021 |
Operating Activities: |  |  |  |  |  |
Net income |  | $ | 875 |  |  | $ | 1,112 |
Adjustments to reconcile net income to cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  |  | 1,024 |  |  |  | 971 |
Provision for uncollectible accounts |  |  | 245 |  |  |  | 117 |
Stock-based compensation |  |  | 68 |  |  |  | 69 |
Other noncash items including leases and deferred income taxes |  |  | 774 |  |  |  | 884 |
Business realignment and optimization costs/(payments), net |  |  | (14 | ) |  |  | 36 |
Changes in assets and liabilities: |  |  |  |  |  |
Receivables |  |  | 259 |  |  |  | 726 |
Other assets |  |  | (170 | ) |  |  | (171 | )
Accounts payable and other liabilities |  |  | (1,473 | ) |  |  | (1,616 | )
Other, net |  |  | 19 |  |  |  | (44 | )
Cash provided by operating activities |  |  | 1,607 |  |  |  | 2,084 |
Investing Activities: |  |  |  |  |  |
Capital expenditures |  |  | (1,284 | ) |  |  | (1,570 | )
Purchase of investments |  |  | (35 | ) |  |  | — |
Proceeds from asset dispositions and other |  |  | 10 |  |  |  | 20 |
Cash used in investing activities |  |  | (1,309 | ) |  |  | (1,550 | )
Financing Activities: |  |  |  |  |  |
Principal payments on debt |  |  | (29 | ) |  |  | (64 | )
Proceeds from stock issuances |  |  | 81 |  |  |  | 84 |
Dividends paid |  |  | (299 | ) |  |  | (200 | )
Purchase of treasury stock |  |  | — |  |  |  | (549 | )
Other, net |  |  | — |  |  |  | (1 | )
Cash used in financing activities |  |  | (247 | ) |  |  | (730 | )
Effect of exchange rate changes on cash |  |  | (98 | ) |  |  | (38 | )
Net decrease in cash and cash equivalents |  |  | (47 | ) |  |  | (234 | )
Cash and cash equivalents at beginning of period |  |  | 6,897 |  |  |  | 7,087 |
Cash and cash equivalents at end of period |  | $ | 6,850 |  |  | $ | 6,853 |

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

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FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHA NGES IN COMMON STOCKHOLDERS’ INVESTMENT

(UNAUDITED)

(IN MILLIONS, EXCEPT SHARE DATA)

|  | Three Months Ended |
|  | August 31, |
|  | 2022 |  |  | 2021 |
Common Stock |  |  |  |  |  |
Beginning Balance |  | $ | 32 |  |  | $ | 32 |
Ending Balance |  |  | 32 |  |  |  | 32 |
Additional Paid-in Capital |  |  |  |  |  |
Beginning Balance |  |  | 3,712 |  |  |  | 3,481 |
Employee incentive plans and other |  |  | 39 |  |  |  | 129 |
Ending Balance |  |  | 3,751 |  |  |  | 3,610 |
Retained Earnings |  |  |  |  |  |
Beginning Balance |  |  | 32,782 |  |  |  | 29,817 |
Net Income |  |  | 875 |  |  |  | 1,112 |
Cash dividends declared ($2.30 and $1.50 per share) |  |  | (597 | ) |  |  | (400 | )
Employee incentive plans and other |  |  | — |  |  |  | (67 | )
Ending Balance |  |  | 33,060 |  |  |  | 30,462 |
Accumulated Other Comprehensive Loss |  |  |  |  |  |
Beginning Balance |  |  | (1,103 | ) |  |  | (732 | )
Other comprehensive income, net of tax benefit of $18 and $0 |  |  | (211 | ) |  |  | (149 | )
Ending Balance |  |  | (1,314 | ) |  |  | (881 | )
Treasury Stock |  |  |  |  |  |
Beginning Balance |  |  | (10,484 | ) |  |  | (8,430 | )
Purchase of treasury stock (0.0 and 1.9 million shares) |  |  | — |  |  |  | (549 | )
Employee incentive plans and other (0.7 and 0.6 million shares) |  |  | 95 |  |  |  | 77 |
Ending Balance |  |  | (10,389 | ) |  |  | (8,902 | )
Total Common Stockholders’ Investment Balance |  | $ | 25,140 |  |  | $ | 24,321 |

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

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FEDEX CORPORATION

NOTES TO CONDENSED CONSOLI DATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) General

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of FedEx Corporation (“FedEx”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission (“SEC”) instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, 2022 (“Annual Report”). Significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of August 31, 2022, and the results of our operations for the three-month periods ended August 31, 2022 and 2021, cash flows for the three-month periods ended August 31, 2022 and 2021, and changes in common stockholders’ investment for the three-month periods ended August 31, 2022 and 2021. Operating results for the three-month period ended August 31, 2022 are not necessarily indicative of the results that may be expected for the year ending May 31, 2023.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2023 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

REVENUE RECOGNITION.

Contract Assets and Liabilities

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

Gross contract assets related to in-transit shipments total ed $774 million and $861 million at August 31, 2022 and May 31, 2022, respectively. Contract assets net of deferred unearned revenue we re $556 million and $623 million at August 31, 2022 and May 31, 2022, respectively. Contract assets are included within current assets in the accompanying unaudited condensed consolidated balance sheets. Contract liabilities related to advance payments from customer s were $14 million a nd $8 million at August 31, 2022 and May 31, 2022, respectively. Contract liabilities are included within current liabilities in the accompanying unaudited condensed consolidated balance sheets.

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Disaggregation of Revenue

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

|  | Three Months Ended |
|  | 2022 |  |  | 2021 |
REVENUE BY SERVICE TYPE |  |  |  |  |  |
FedEx Express segment: |  |  |  |  |  |
Package: |  |  |  |  |  |
U.S. overnight box |  | $ | 2,316 |  |  | $ | 2,170 |
U.S. overnight envelope |  |  | 525 |  |  |  | 482 |
U.S. deferred |  |  | 1,287 |  |  |  | 1,231 |
Total U.S. domestic package revenue |  |  | 4,128 |  |  |  | 3,883 |
International priority |  |  | 2,897 |  |  |  | 2,839 |
International economy |  |  | 707 |  |  |  | 669 |
Total international export package revenue |  |  | 3,604 |  |  |  | 3,508 |
International domestic(1) |  |  | 974 |  |  |  | 1,114 |
Total package revenue |  |  | 8,706 |  |  |  | 8,505 |
Freight: |  |  |  |  |  |
U.S. |  |  | 796 |  |  |  | 775 |
International priority |  |  | 888 |  |  |  | 873 |
International economy |  |  | 377 |  |  |  | 414 |
International airfreight |  |  | 41 |  |  |  | 47 |
Total freight revenue |  |  | 2,102 |  |  |  | 2,109 |
Other |  |  | 319 |  |  |  | 352 |
Total FedEx Express segment |  |  | 11,127 |  |  |  | 10,966 |
FedEx Ground segment |  |  | 8,160 |  |  |  | 7,677 |
FedEx Freight segment |  |  | 2,723 |  |  |  | 2,251 |
FedEx Services segment |  |  | 70 |  |  |  | 35 |
Other and eliminations(2) |  |  | 1,162 |  |  |  | 1,074 |
|  | $ | 23,242 |  |  | $ | 22,003 |

(1)
International domestic revenue relates to our international intra-country operations.
(2)
Includes the FedEx Office and Print Services, Inc. (“FedEx Office”), FedEx Logistics, Inc. (“FedEx Logistics”), and FedEx Dataworks (including ShopRunner, Inc.) (“FedEx Dataworks”) operating segments.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots of Federal Express Corporation (“FedEx Express”), who are a small number of its total employees, are employed under a collective bargaining agreement that took effect on November 2, 2015, and became amendable in November 2021. Bargaining for a successor agreement began in May 2021 and continues. A small number of our other employees are members of unions.

STOCK-BASED COMPENSATION. We have two types of equity-based compensation: stock options and restricted stock. The key terms of the stock option and restricted stock awards granted under our outstanding incentive stock plans and all financial disclosures about these programs are set forth in our Annual Report.

Our stock-based compensation expense w as $68 million f or the three-month period ended August 31, 2022 and $69 million for the three-month period ended August 31, 2021. Due to its immateriality, additional disclosures related to stock-based compensation have been excluded from this quarterly report.

BUSINESS REALIGNMENT AND OPTIMIZATION COSTS. In 2021, FedEx Express announced a workforce reduc tion plan in Europe related to the network integration of TNT Express. The plan will affect approximately 5,000 em ployees 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 through 2023 in accordance with local country processes and regulations.

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We incurred costs associated with our business realignment activitie s of $14 million ($11 million, net of tax, or $0.04 per dilu ted share) in the first quarter of 2023. We recognized $67 million ($52 million, net of tax, or $0.19 p er diluted share) of costs under this program in the fir st quarter of 2022. These costs are related to certain employee severance arrangements. Payments under this program totaled approximately $46 million in the first quarter of 2023. We expect the pre-tax cost of our business realignment activities to be approxim ately $420 million through 2023. 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 expectation and estimates.

In the first quarter of 2023, FedEx announced a comprehensive program to improve the company’s long-term profitability. This program includes a business optimization plan to drive efficiency among our transportation segments and lower our overhead and support costs. We plan to consolidate our sortation facilities and equipment, reduce pickup and delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimization.

We incurred costs associated with our business optimization acti vities of $24 million ($19 million, net of tax, or $0.07 pe r diluted share) in the first quarter of 2023. These costs are related to consulting services and are included in Corporate, other, and eliminations. We expect the pre-tax cost of our business optimization activities to be approximately $2.0 billion through 2025.

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

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. As of August 31, 2022, we had €93 million of debt designated as a net investment hedge to reduce the volatility of the U.S. dollar value of a portion of our net investment in a euro-denominated consolidated subsidiary. As of August 31, 2022, the hedge remains effective.

RECENT ACCOUNTING GUIDANCE. New accounting rules and disclosure requirements can significantly affect our reported results and the comparability of our financial statements. We believe the following new accounting guidance is relevant to the readers of our financial statements.

New Accounting Standards and Accounting Standards Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for applying accounting principles generally accepted in the United States to existing contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate to be discontinued because of reference rate reform. The guidance was effective upon issuance and can generally be applied through December 31, 2022. While there has been no material effect to our financial condition, results of operations, or cash flows from reference rate reform as of August 31, 2022, we continue to monitor our contracts and transactions for potential application of this ASU.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), which requires annual disclosures that increase the transparency of transactions involving government grants, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

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In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies the guidance of measuring the fair value of equity securities subject to contractual restrictions that prohibit the sale of the equity securities. The guidance will be effective for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years. We are assessing the impact of this new standard on our consolidated stateme nts.

EQUITY INVESTMENTS. Equity investments in private companies for which we do not have the ability to exercise significant influence are accounted for at cost, with adjustments for observable changes in prices or impairments, and are classified as “Other assets” on our consolidated balance sheets with adjustments recognized in “Other (expense) income, net” on our consolidated statements of income. Each reporting period, we perform a qualitative assessment to evaluate whether the investment is impaired. Our assessment includes a review of available recent operating results and trends, recent sales/acquisitions of the investee securities, and other publicly available data. If the investment is impaired, we write it down to its estimated fair value.

Equity investments that have readily determinable fair values, including investments for which we have elected the fair value option, are included in “Other assets” on our consolidated balance sheets and measured at fair value with changes recognized in “Other (expense) income, net” on our consolidated statements of income.

As of August 31, 2022, these investments were not material to our financial position or results of operations.

TREASURY SHARES. In December 2021, our Board of Directors authorized a new stock repurchase program of up to $5 billion of FedEx common stock. We did no t repurchase any shares of FedEx common stock during the first quarter of 2023. As of August 31, 20 22, $4.1 b illion remained available to use for repurchases under the program.

DIVIDENDS DECLARED PER COMMON SHARE. On August 12, 2022, our Board of Directors declared a quarterly dividend of $1.15 p er share of common stock. The dividend will be paid on October 3, 2022 to stockhol ders of record as of the close of business on September 2, 2022. Each quarterly dividend payment is subject to review and approval by our Board of Directors, and we evaluate our dividend payment amount on an annual basis. There are no material restrictions on our ability to declare dividends, nor are there any material restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans, or advances.

(2) Credit Losses

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

Credit losses were $245 million for the three-month period ended August 31, 2022 and $117 million for the three-month period ended August 31, 2021. Our allowance for credit losses wa s $426 million at August 31, 2022 and $340 million at May 31, 2022.

(3) Accumulated Other Comprehensive Loss

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

|  | 2022 |  |  | 2021 |
Foreign currency translation loss: |  |  |  |  |  |
Balance at beginning of period |  | $ | (1,148 | ) |  | $ | (785 | )
Translation adjustments |  |  | (209 | ) |  |  | (147 | )
Balance at end of period |  |  | (1,357 | ) |  |  | (932 | )
Retirement plans adjustments: |  |  |  |  |  |
Balance at beginning of period |  |  | 45 |  |  |  | 53 |
Reclassifications from AOCI |  |  | (2 | ) |  |  | (2 | )
Balance at end of period |  |  | 43 |  |  |  | 51 |
Accumulated other comprehensive (loss) at end of period |  | $ | (1,314 | ) |  | $ | (881 | )

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

|  | Amount Reclassified from AOCI |  |  | Affected Line Item in the Income Statement
|  | 2022 |  |  | 2021 |  |  |
Amortization of retirement plans prior service credits, before tax |  | $ | 2 |  |  | $ | 2 |  |  | Other retirement plans income
Income tax benefit |  |  | — |  |  |  | — |  |  | Provision for income taxes
AOCI reclassifications, net of tax |  | $ | 2 |  |  | $ | 2 |  |  | Net income

(4) Financing Arrangements

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.

FedEx Express has 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 with a net book value of $1.8 billion a t August 31, 2022. 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.

We have a $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement”) and a $1.5 billion three-year credit agreement (the “Three-Year Credit Agreement” and together with the Five-Year Credit Agreement, the “Credit Agreements”). The Five-Year Credit Agreement expires in March 2026 and includes a $250 million letter of credit sublimit. The Three-Year Credit Agreement expires in March 2025. The Credit Agreements are available to finance our operations and other cash flow needs. As of August 31, 2022, no commercial paper w as outstanding, and we had $250 million of the letter of credit sublimit unused under the Five-Year Credit Agreement. Outstanding commercial paper reduces the amount available to borrow under the Credit Agreements.

Our Credit Agreements contain a financial covenant requiring us to maintain a ratio of debt to consolidated earnings (excluding noncash retirement plans mark-to-market (“MTM”) adjustments, noncash pension service costs, and noncash asset impairment charges) before interest, taxes, depreciation, and amortization (“adjusted EBITDA”) of not more t han 3.5 to 1.0, calcu lated as of the last day of each fiscal quarter on a rolling four-quarters basis. The ratio of our debt to adjusted EBITD A was 1.83 to 1.0 a t August 31, 2022.

The financial covenant discussed above is the only significant restrictive 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.

Long-term debt, including current maturities and exclusive of finance leases, had carrying val ues of $19.5 billion at August 31, 2022 a nd $19.8 billion at May 31, 2022, compared with estimated fair values of $18.1 billion a t August 31, 2022 and $18.8 billion a t May 31, 2022. The annualized weighted-average interest rate on long-term debt was 3.5% at August 31, 2022. 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 w ithin 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.

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(5) Computation of Earnings Per Share

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

|  | 2022 |  |  | 2021 |
Basic earnings per common share: |  |  |  |  |  |
Net earnings allocable to common shares(1) |  | $ | 874 |  |  | $ | 1,110 |
Weighted-average common shares |  |  | 259 |  |  |  | 266 |
Basic earnings per common share |  | $ | 3.37 |  |  | $ | 4.17 |
Diluted earnings per common share: |  |  |  |  |  |
Net earnings allocable to common shares(1) |  | $ | 874 |  |  | $ | 1,110 |
Weighted-average common shares |  |  | 259 |  |  |  | 266 |
Dilutive effect of share-based awards |  |  | 3 |  |  |  | 5 |
Weighted-average diluted shares |  |  | 262 |  |  |  | 271 |
Diluted earnings per common share |  | $ | 3.33 |  |  | $ | 4.09 |
Anti-dilutive options excluded from diluted earnings per common share |  |  | 5.7 |  |  |  | 2.7 |

(1) Net earnings available to participating securities were immaterial in all periods presented.

(6) Retirement Plans

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

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

|  | 2022 |  |  | 2021 |
Defined benefit pension plans, net |  | $ | 59 |  |  | $ | (3 | )
Defined contribution plans |  |  | 244 |  |  |  | 180 |
Postretirement healthcare plans |  |  | 23 |  |  |  | 22 |
|  | $ | 326 |  |  | $ | 199 |

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

|  | U.S. Pension Plans |  |  | International Pension Plans |  |  | Postretirement Healthcare Plans |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Service cost |  | $ | 163 |  |  | $ | 208 |  |  | $ | 11 |  |  | $ | 15 |  |  | $ | 9 |  |  | $ | 12 |
Other retirement plans expense (income): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest cost |  |  | 304 |  |  |  | 256 |  |  |  | 9 |  |  |  | 12 |  |  |  | 14 |  |  |  | 10 |
Expected return on plan assets |  |  | (422 | ) |  |  | (478 | ) |  |  | (4 | ) |  |  | (14 | ) |  |  | — |  |  |  | — |
Amortization of prior service credit and other |  |  | (2 | ) |  |  | (2 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
|  |  | (120 | ) |  |  | (224 | ) |  |  | 5 |  |  |  | (2 | ) |  |  | 14 |  |  |  | 10 |
|  | $ | 43 |  |  | $ | (16 | ) |  | $ | 16 |  |  | $ | 13 |  |  | $ | 23 |  |  | $ | 22 |

For 2023, no 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 $400 million d uring the first quarter of 2023.

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(7) Business Segment Information

We provide a broad portfolio of transportation, e-commerce, and business services through companies competing collectively, operating collaboratively, and innovating digitally under the respected FedEx brand. 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.

Our reportable segments include the following businesses:

FedEx Express Segment | FedEx Express (express transportation, small-package ground delivery, and freight transportation)
| FedEx Custom Critical, Inc. (time-critical transportation)
FedEx Ground Segment | FedEx Ground (small-package ground delivery)
FedEx Freight Segment | FedEx Freight (LTL freight transportation)
FedEx Services Segment | FedEx Services (sales, marketing, information technology, communications, customer service, technical support, billing and collection services, and back-office functions)

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

FedEx Services Segment

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

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

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

Corporate, Other, and Eliminations

Corporate and other includes corporate headquarters costs for executive officers and certain legal and finance functions, including certain other costs and credits not attributed to our core business, as well as certain costs associated with developing our “innovate digitally” strategic pillar through our FedEx Dataworks operating segment. FedEx Dataworks is focused on creating solutions to transform the digital and physical experiences of our customers and team members.

Also included in Corporate and other are the FedEx Office operating segment, which provides an array of document and business services and retail access to our customers for our package transportation businesses, and the FedEx Logistics operating segment, which provides integrated supply chain management solutions, specialty transportation, customs brokerage, and global ocean and air freight forwarding.

The results of Corporate, other, and eliminations are not allocated to the other business segments.

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

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

|  | 2022 |  |  | 2021 |
Revenue: |  |  |  |  |  |
FedEx Express segment |  | $ | 11,127 |  |  | $ | 10,966 |
FedEx Ground segment |  |  | 8,160 |  |  |  | 7,677 |
FedEx Freight segment |  |  | 2,723 |  |  |  | 2,251 |
FedEx Services segment |  |  | 70 |  |  |  | 35 |
Other and eliminations |  |  | 1,162 |  |  |  | 1,074 |
|  | $ | 23,242 |  |  | $ | 22,003 |
Operating income (loss): |  |  |  |  |  |
FedEx Express segment |  | $ | 174 |  |  | $ | 567 |
FedEx Ground segment |  |  | 694 |  |  |  | 671 |
FedEx Freight segment |  |  | 651 |  |  |  | 390 |
Corporate, other, and eliminations |  |  | (328 | ) |  |  | (230 | )
|  | $ | 1,191 |  |  | $ | 1,398 |

(8) Commitments

As of August 31, 2022, our purchase commitments under various contracts for the remainder of 2023 and annually thereafter were as follows (in millions):

|  | Aircraft and Related |  |  | Other(1) |  |  | Total |
2023 (remainder) |  | $ | 1,705 |  |  | $ | 713 |  |  | $ | 2,418 |
2024 |  |  | 1,936 |  |  |  | 697 |  |  |  | 2,633 |
2025 |  |  | 1,403 |  |  |  | 504 |  |  |  | 1,907 |
2026 |  |  | 404 |  |  |  | 435 |  |  |  | 839 |
2027 |  |  | 307 |  |  |  | 171 |  |  |  | 478 |
Thereafter |  |  | 1,932 |  |  |  | 141 |  |  |  | 2,073 |
Total |  | $ | 7,687 |  |  | $ | 2,661 |  |  | $ | 10,348 |

(1)
Primarily equipment and advertising contracts.

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. As of August 31, 2022, our obligation to purchas e two Boeing 767-300 Freighter (“B767F”) aircraft is conditioned upon there being no event that causes FedEx Express or its employees not to be covered by the Railway Labor Act of 1926, as amended. Open purchase orders that are cancelable are not considered unconditiona l purchase obligations for financial reporting purposes and are not included in the table above.

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As of August 31, 2022, we had $803 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 August 31, 2022 with the year of expected delivery:

|  | Cessna SkyCourier 408 |  |  | ATR 72-600F |  |  | B767F |  |  | B777F |  |  | Total |
2023 (remainder) |  |  | 10 |  |  |  | 9 |  |  |  | 10 |  |  |  | 1 |  |  |  | 30 |
2024 |  |  | 12 |  |  |  | 6 |  |  |  | 14 |  |  |  | 4 |  |  |  | 36 |
2025 |  |  | 12 |  |  |  | 6 |  |  |  | 10 |  |  |  | 2 |  |  |  | 30 |
2026 |  |  | 14 |  |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 15 |
2027 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Thereafter |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  |  | 48 |  |  |  | 22 |  |  |  | 34 |  |  |  | 7 |  |  |  | 111 |

A summary of future minimum lease payments under noncancelable operating and finance leases with an initial or remaining term in excess of one year as of August 31, 2022 is as follows (in millions):

|  | Aircraft and Related Equipment |  |  | Facilities and Other |  |  | Total Operating Leases |  |  | Finance Leases |  |  | Total Leases |
2023 (remainder) |  | $ | 137 |  |  | $ | 2,042 |  |  | $ | 2,179 |  |  | $ | 87 |  |  | $ | 2,266 |
2024 |  |  | 109 |  |  |  | 2,630 |  |  |  | 2,739 |  |  |  | 59 |  |  |  | 2,798 |
2025 |  |  | 81 |  |  |  | 2,366 |  |  |  | 2,447 |  |  |  | 31 |  |  |  | 2,478 |
2026 |  |  | 78 |  |  |  | 2,099 |  |  |  | 2,177 |  |  |  | 30 |  |  |  | 2,207 |
2027 |  |  | 78 |  |  |  | 1,848 |  |  |  | 1,926 |  |  |  | 21 |  |  |  | 1,947 |
Thereafter |  |  | 164 |  |  |  | 8,694 |  |  |  | 8,858 |  |  |  | 668 |  |  |  | 9,526 |
Total lease payments |  |  | 647 |  |  |  | 19,679 |  |  |  | 20,326 |  |  |  | 896 |  |  |  | 21,222 |
Less imputed interest |  |  | (47 | ) |  |  | (2,691 | ) |  |  | (2,738 | ) |  |  | (352 | ) |  |  | (3,090 | )
Present value of lease liability |  | $ | 600 |  |  | $ | 16,988 |  |  | $ | 17,588 |  |  | $ | 544 |  |  | $ | 18,132 |

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 August 31, 2022, FedEx has entered into additional leases which have not yet commenced and are therefore not part of the right-of-use asset and liability. These leases are generally for build-to-suit facilities and have undiscounted future payments of approximately $2.2 billion that will commence when FedEx gains beneficial access to the leased asset. Commencement dates are expected to be from 2023 to 2024.

(9) Contingencies

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.

FedEx Ground Vehicle Accident Lawsuit. In July 2012, FedEx Ground was named as a defendant in a lawsuit filed in New Mexico state court related to a vehicle accident involving a driver employed by a service provider engaged by FedEx Ground that resulted in three fatalities, including the driver employed by the service provider. The complaint alleged personal injury and wrongful death. After trial, in January 2015, the jury awarded the plaintiffs compensatory damages of approximately $160 million. Following the trial judge’s recusal, this award was affirmed by the substitute judge in July 2015 and by the New Mexico Court of Appeals in February 2018, respectively. FedEx Ground subsequently sought a discretionary appeal to the New Mexico Supreme Court to address what FedEx Ground believed to be an excessive verdict. The New Mexico Supreme Court granted FedEx Ground’s appeal in June 2018. In May 2022, the New Mexico Supreme Court affirmed the decision of the New Mexico Court of Appeals.

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A loss reserve in the amount of approximately $370 million was recorded in FedEx’s consolidated financial statements for the year ended May 31, 2022, representing the approximately $160 million base amount of the judgment and accrued pre- and post-judgment interest, with a corresponding insurance receivable recorded for the base amount of the judgment in excess of FedEx Ground’s $7.5 million self-insured retention and insurance deductible. In July 2022 we paid approximately $370 million to plaintiffs and their counsel. Our insurance carriers funded the base amount of the judgment in excess of FedEx Ground’s self-insured retention and insurance deductible. We are vigorously pursuing reimbursement of each insurance carrier’s share of our payment of approximately $210 million of pre- and post-judgment interest through litigation and arbitration.

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 other 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.

(10) Supplemental Cash Flow Information

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

|  | 2022 |  |  | 2021 |
Cash payments for: |  |  |  |  |  |
Interest (net of capitalized interest) |  | $ | 154 |  |  | $ | 150 |
Income taxes |  | $ | 139 |  |  | $ | 92 |
Income tax refunds received |  |  | (36 | ) |  |  | (16 | )
Cash tax payments, net |  | $ | 103 |  |  | $ | 76 |

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REPORT O F INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

FedEx Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of FedEx Corporation (the Company) as of August 31, 2022, the related condensed consolidated statements of income, comprehensive income, cash flows, and changes in common stockholders’ investment for the three-month periods ended August 31, 2022 and 2021, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of May 31, 2022, the related consolidated statements of income, comprehensive income, cash flows, and changes in common stockholders’ investment for the year then ended, and the related notes (not presented herein); and in our report dated July 18, 2022, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2022 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

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.

/s/ Ernst & Young LLP

Memphis, Tennessee

September 22, 2022

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Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

GENERAL

The following Management’s Discussion and Analysis of Results of Operations and Financial Condition (“MD&A”) describes the principal factors affecting the results of operations, liquidity, capital resources, and critical accounting estimates of FedEx Corporation (“FedEx”). This discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended May 31, 2022 (“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. For the international regions of FedEx Express, some of these functions are performed on a regional basis and reported by FedEx Express in their natural expense line items. See “Reportable Segments” for further discussion. Additional information on our businesses can be found in our Annual Report.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2023 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 key indicators necessary to understand our operating results include:

•
the overall customer demand for our various services based on macroeconomic factors and the global economy;
•
the volumes of transportation services provided through our networks, primarily measured by our average daily volume and shipment weight and size;
•
the mix of services purchased by our customers;
•
the prices we obtain for our services, primarily measured by yield (revenue per package or pound or revenue per shipment or hundredweight for LTL freight shipments);
•
our ability to manage our cost structure (capital expenditures and operating expenses) to match shifting volume levels; and
•
the timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges.

Trends Affecting Our Business

The following trends significantly impact the indicators discussed above, as well as our business and operating results. See the risk factors identified under Part I, Item 1A. “Risk Factors” in our Annual Report, as updated by our quarterly reports on Form 10-Q, for more information. Additionally, see “Results of Operations – Consolidated Results – Outlook” and “Results of Operations – Consolidated Results – Liquidity Outlook” below for additional information on efforts we are taking to mitigate adverse trends.

Macroeconomic Conditions

While macroeconomic risks apply to most companies, we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of growth of global trade. Our results for the first quarter of 2023 were adversely impacted by global volume softness that accelerated in the final weeks of the quarter due to weakening economic conditions.

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COVID-19 Pandemic

The coronavirus (“COVID-19”) pandemic has had varying impacts on the demand for our services and our business operations. The COVID-19 pandemic continues to disrupt our business, particularly within areas in Asia as lockdowns have persisted into the first quarter of 2023 and contributed to supply chain disruptions (discussed below).

Inflation

Global inflation is well above normal and historical levels, impacting all areas of our business. We are experiencing a decline in demand for our transportation services as price increases are negatively impacting consumer and business spending. Additionally, we are experiencing higher costs to serve through higher fuel prices, wage rates, purchased transportation costs, and other direct operating expenses such as operational supplies. We expect inflation to continue to negatively impact our results of operations for the remainder of 2023.

Supply Chain

Global supply chain disruptions are continuing to impact the economy, including the availability and cost of labor, as well as the supply of industrial goods. As a result, we are experiencing higher labor rates and purchased transportation costs, as well as delayed capital expenditures due to the availability of vehicles, trailers, and other package handling equipment. These disruptions have resulted in increased direct costs and inefficiencies in our network operations.

Fuel

We must purchase large quantities of fuel to operate our aircraft and vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. The timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges can significantly impact our operating results. While fuel expense increased during the first quarter of 2023 compared to the first quarter of 2022 due to higher fuel prices, we were able to offset higher prices through yield management actions.

Geopolitical Conflicts

Given the nature of our business and our global operations, geopolitical conflicts may adversely affect our business and results of operations. The conflict in Russia and Ukraine that began in February 2022 continues as of the date of this quarterly report. The safety of our team members in Ukraine is our top priority. As we focus on the safety of our team members, we have suspended all services in Ukraine, Russia, and Belarus, which has not had and is not expected to have a direct material impact on our business or results of operations. However, the broader consequences of this conflict are adversely affecting the global economy and fuel prices generally, and may also have the effect of heightening other risks disclosed in our Annual Report.

RESULTS OF OPERATIONS

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

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CONSOLIDATED RESULTS

The following tables compare summary operating results and changes in revenue and operating results (dollars in millions, except per share amounts) for the periods ended August 31:

|  | Three Months Ended |  |  | Percent |  |
|  | 2022 |  |  | 2021 |  |  | Change |  |
Revenue |  | $ | 23,242 |  |  | $ | 22,003 |  |  |  | 6 |  |
Operating income (loss): |  |  |  |  |  |  |  |  |  |
FedEx Express segment |  |  | 174 |  |  |  | 567 |  |  |  | (69 | ) |
FedEx Ground segment |  |  | 694 |  |  |  | 671 |  |  |  | 3 |  |
FedEx Freight segment |  |  | 651 |  |  |  | 390 |  |  |  | 67 |  |
Corporate, other, and eliminations |  |  | (328 | ) |  |  | (230 | ) |  |  | (43 | ) |
Consolidated operating income |  |  | 1,191 |  |  |  | 1,398 |  |  |  | (15 | ) |
Operating margin: |  |  |  |  |  |  |  |  |  |
FedEx Express segment |  |  | 1.6 | % |  |  | 5.2 | % |  |  | (360 | ) | bp
FedEx Ground segment |  |  | 8.5 | % |  |  | 8.7 | % |  |  | (20 | ) | bp
FedEx Freight segment |  |  | 23.9 | % |  |  | 17.3 | % |  |  | 660 |  | bp
Consolidated operating margin |  |  | 5.1 | % |  |  | 6.4 | % |  |  | (130 | ) | bp
Consolidated net income |  | $ | 875 |  |  | $ | 1,112 |  |  |  | (21 | ) |
Diluted earnings per share |  | $ | 3.33 |  |  | $ | 4.09 |  |  |  | (19 | ) |

|  | Year-over-Year Changes |
|  | Revenue |  |  | Operating Results |
FedEx Express segment |  | $ | 161 |  |  | $ | (393 | )
FedEx Ground segment |  |  | 483 |  |  |  | 23 |
FedEx Freight segment |  |  | 472 |  |  |  | 261 |
FedEx Services segment |  |  | 35 |  |  |  | — |
Corporate, other, and eliminations |  |  | 88 |  |  |  | (98 | )
|  | $ | 1,239 |  |  | $ | (207 | )

Overview

Our results for the first quarter of 2023 were adversely impacted by global volume softness that accelerated in the final weeks of the quarter due to weakening economic conditions. In addition, our results were negatively impacted by service challenges at FedEx Express. In response to market conditions, we implemented cost control actions and continued to focus on yield management and revenue quality to mitigate the effect of volume declines. However, the impact of cost actions lagged volume declines, and operating expenses remained high relative to demand. Yield improvements, including fuel surcharge increases, more than offset the decline in volume, resulting in an increase in revenue for the first quarter of 2023.

Operating income includes business realignment costs of $14 million ($11 million, net of tax, or $0.04 per diluted share) in the first quarter of 2023, a $53 million decrease from the first quarter of 2022, associated with our workforce reduction plan in Europe previously announced in 2021, as well as $24 million ($19 million, net of tax, or $0.07 per diluted share) associated with our business optimization strategy announced in 2023. See the “Business Realignment and Optimization Costs” section of this MD&A for more information.

Operating income for the first quarter of 2022 included $29 million ($23 million, net of tax, or $0.08 per diluted share) of TNT Express integration expenses.

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

(1)
International domestic average daily package volume relates to our international intra-country operations. International export average daily package volume relates to our international priority and economy services.
(2)
Ground commercial average daily package volume is calculated on a 5-day-per-week basis, while home delivery and economy average daily package volumes are calculated on a 7-day-per-week basis.
(3)
International average daily freight pounds relate to our international priority, economy, and airfreight services.

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

(1)
International export revenue per package relates to our international priority and economy services. International domestic revenue per package relates to our international intra-country operations.
(2)
International freight revenue per pound relates to our international priority, economy, and airfreight services.

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Revenue

Revenue increased 6% in the first quarter of 2023 primarily due to yield management actions, including higher fuel surcharges, partially offset by global volume softness due to weakening economic conditions at all of our transportation segments. FedEx Express results were further impacted by reduced demand for our services.

Revenue at FedEx Ground increased 6% in the first quarter of 2023 primarily due to yield improvement, including higher fuel surcharges, and home delivery volume growth, partially offset by lower economy and commercial volume. FedEx Freight revenue increased 21% in the first quarter of 2023 primarily due to higher revenue per shipment, including higher fuel surcharges, partially offset by lower volume. Revenue at FedEx Express increased 1% in the first quarter of 2023 due to yield improvement, including higher fuel surcharges, partially offset by lower volume.

Operating Expenses

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

|  | Three Months Ended |  |  | Percent |  |  | Percent of Revenue |  |
|  | 2022 |  |  | 2021 |  |  | Change |  |  | 2022 |  |  |  | 2021 |  |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  | $ | 7,859 |  |  | $ | 7,776 |  |  |  | 1 |  |  |  | 33.8 |  | % |  |  | 35.3 |  | %
Purchased transportation |  |  | 5,767 |  |  |  | 5,659 |  |  |  | 2 |  |  |  | 24.8 |  |  |  |  | 25.7 |  |
Rentals and landing fees |  |  | 1,159 |  |  |  | 1,133 |  |  |  | 2 |  |  |  | 5.0 |  |  |  |  | 5.1 |  |
Depreciation and amortization |  |  | 1,024 |  |  |  | 971 |  |  |  | 5 |  |  |  | 4.4 |  |  |  |  | 4.4 |  |
Fuel |  |  | 1,822 |  |  |  | 1,009 |  |  |  | 81 |  |  |  | 7.8 |  |  |  |  | 4.6 |  |
Maintenance and repairs |  |  | 904 |  |  |  | 869 |  |  |  | 4 |  |  |  | 3.9 |  |  |  |  | 4.0 |  |
Business realignment and optimization costs |  |  | 38 |  |  |  | 67 |  |  |  | (43 | ) |  |  | 0.2 |  |  |  |  | 0.3 |  |
Other |  |  | 3,478 |  |  |  | 3,121 |  |  |  | 11 |  |  |  | 15.0 |  |  |  |  | 14.2 |  |
Total operating expenses |  |  | 22,051 |  |  |  | 20,605 |  |  |  | 7 |  |  |  | 94.9 |  |  |  |  | 93.6 |  |
Operating income |  | $ | 1,191 |  |  | $ | 1,398 |  |  |  | (15 | ) |  |  | 5.1 |  | % |  |  | 6.4 |  | %

Operating income declined in the first quarter of 2023 primarily due to lower volumes at each of our transportation segments as a result of global volume softness due to weakening economic conditions. In addition, operating income was negatively impacted by global inflation, which drove higher operating expenses related to purchased transportation and wage rates. These factors were partially offset by yield management actions, including higher fuel surcharges, at all of our transportation segments, as well as a reduction in variable incentive compensation.

Fuel expense increased 81% in the first quarter of 2023 due to higher fuel prices. Other operating expenses increased 11% primarily due to higher self-insurance accruals, bad debt, and outside service contracts. Purchased transportation increased 2% due to increased fuel prices and higher rates, partially offset by favorable currency impacts and lower volume. Salaries and employee benefits increased 1% due to merit increases and network inefficiencies, partially offset by favorable currency impacts and lower variable incentive compensation.

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Business Realignment and Optimization Costs

In 2021, FedEx Express announced a workforce reduction plan in Europe related to the network integration of TNT Express. The plan will affect approximately 5,000 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 through 2023 in accordance with local country processes and regulations.

We incurred costs associated with our business realignment activities of $14 million ($11 million, net of tax, or $0.04 per diluted share) in the first quarter of 2023. We recognized $67 million ($52 million, net of tax, or $0.19 per diluted share) of costs under this program in the first quarter of 2022. These costs are related to certain employee severance arrangements. Payments under this program totaled approximately $46 million in the first quarter of 2023. We expect the pre-tax cost of our business realignment activities to be approximately $420 million through 2023. We expect savings from our business realignment activities to be between $275 million and $350 million on an annualized basis beginning in 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.

In the first quarter of 2023, FedEx announced a comprehensive program to improve the company’s long-term profitability. This program includes a business optimization plan to drive efficiency among our transportation segments and lower our overhead and support costs. We plan to consolidate our sortation facilities and equipment, reduce pickup and delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimization.

We incurred costs associated with our business optimization activities of $24 million ($19 million, net of tax, or $0.07 per diluted share) in the first quarter of 2023. These costs are related to consulting services and are included in Corporate, other, and eliminations. We expect the pre-tax cost of our business optimization activities to be approximately $2.0 billion through 2025.

Income Taxes

Our effective tax rate was 24.2% for the first quarter of 2023, compared to 23.7% for the first quarter of 2022. The 2023 tax rate was unfavorably impacted by lower earnings in certain non-U.S. jurisdictions.

On August 16, 2022, the President signed the Inflation Reduction Act (“IRA”) into law. The IRA enacted a 15% corporate minimum tax effective in 2024, a 1% tax on share repurchases after December 31, 2022, and created and extended certain tax-related energy incentives. We currently do not expect the tax-related provisions of the IRA to have a material impact on our financial results.

We are subject to taxation in the U.S. and various U.S. state, local, and foreign jurisdictions. We are currently under examination by the Internal Revenue Service for the 2016 through 2019 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. However, we believe we have recorded adequate amounts of tax, including interest and penalties, for any adjustments expected to occur.

During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit seeks to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $223 million through the first quarter of 2023 attributable to our interpretation of the TCJA and the Internal Revenue Code. We 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.

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Outlook

During 2023, we expect revenue growth to be driven by higher yields, partially offset by lower volumes, particularly at FedEx Express, resulting primarily from slowing economic conditions. Operating income in 2023 is expected to be negatively impacted by lower volumes and higher operating expenses. For the remainder of 2023, we will continue to take cost control actions to help mitigate the impact of slowing economic conditions and reduced volumes on our operating results. As part of these actions, we will manage capacity to lower demand levels, including reducing flight frequencies and temporarily parking aircraft at FedEx Express, and reducing Sunday operations, closing select sort operations and taking other linehaul expense actions at FedEx Ground. We are also executing targeted actions to reduce shared and allocated overhead expenses, including lowering variable incentive compensation, reducing vendor utilization, deferring certain projects, and closing certain FedEx Office and corporate office locations. In addition, we remain focused on yield management and revenue quality to mitigate inflationary cost pressures.

In the first quarter of 2023, FedEx announced a comprehensive program to improve the company’s long-term profitability. This program includes a business optimization plan to drive efficiency among our transportation segments and lower our overhead and support costs. We plan to consolidate our sortation facilities and equipment, reduce pickup and delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration to an end-to-end optimization. We expect the pre-tax cost of our business optimization activities to be approximately $2.0 billion through 2025.

During 2023, we expect to continue our ongoing initiatives aimed to transform and optimize the FedEx Express international business, particularly in Europe. These actions are focused on reducing the complexity and fragmentation of our international business, improving efficiency to meet changing customer expectations and business dynamics, lowering costs, increasing profitability, and improving service levels. As part of this strategy, in 2021 we announced a workforce reduction plan in Europe, which we expect to be substantially complete in 2023, with aggregate spend through the completion of the program anticipated to be approximately $420 million in cash expenditures. We expect savings from our business realignment activities to be between $275 million and $350 million on an annualized basis beginning in 2024.

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

The uncertainty of a slowing global economy, geopolitical challenges including the ongoing conflict between Russia and Ukraine, and the impact these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for 2023 inherently less certain. See the “Trends Affecting Our Business” section of this MD&A for additional information.

Other Outlook Matters. For details on key 2023 capital projects, refer to the “Liquidity Outlook” section of this MD&A.

RECENT ACCOUNTING GUIDANCE

See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting guidance.

REPORTABLE SEGMENTS

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, small-package ground delivery, and freight transportation)
| FedEx Custom Critical, Inc. (time-critical transportation)
FedEx Ground Segment | FedEx Ground (small-package ground delivery)
FedEx Freight Segment | FedEx Freight (LTL freight transportation)
FedEx Services Segment | FedEx Services (sales, marketing, information technology, communications, customer service, technical support, billing and collection services, and back-office functions)

- 27 -

FEDEX SERVICES SEGMENT

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

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

CORPORATE, OTHER, AND ELIMINATIONS

Corporate and other includes corporate headquarters costs for executive officers and certain legal and finance functions, including certain other costs and credits not attributed to our core business, as well as certain costs associated with developing our “innovate digitally” strategic pillar through our FedEx Dataworks, Inc. (including ShopRunner, Inc.) (“FedEx Dataworks”) operating segment. FedEx Dataworks is focused on creating solutions to transform the digital and physical experiences of our customers and team members.

Also included in Corporate and other are the FedEx Office and Print Services, Inc. operating segment, which provides an array of document and business services and retail access to our customers for our package transportation businesses, and the FedEx Logistics, Inc. (“FedEx Logistics”) operating segment, which provides integrated supply chain management solutions, specialty transportation, customs brokerage, and global ocean and air freight forwarding.

The results of Corporate, other, and eliminations are not allocated to the other business segments.

In the first quarter of 2023, the decrease in operating results in Corporate, other, and eliminations was primarily due to lower operating income at FedEx Logistics, due to an increase in bad debt accruals partially offset by increased revenue.

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 first quarter of 2023 FedEx Ground provided delivery support for certain FedEx Express packages as part of our last-mile optimization efforts, and FedEx Freight provided road and intermodal support for both FedEx Ground and FedEx Express. In addition, FedEx Express is working with FedEx Logistics to secure air charters for U.S. customers. Billings for such services are based on negotiated rates, which we believe approximate fair value, and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

- 28 -

FEDEX EXPRESS SEGMENT

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 August 31:

|  | Three Months Ended |  |  | Percent |  |  |  |  |  |  |  |  |
|  | 2022 |  |  | 2021 |  |  | Change |  |  |  |  |  |  |  |  |
Revenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Package: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. overnight box |  | $ | 2,316 |  |  | $ | 2,170 |  |  |  | 7 |  |  |  |  |  |  |  |  |
U.S. overnight envelope |  |  | 525 |  |  |  | 482 |  |  |  | 9 |  |  |  |  |  |  |  |  |
U.S. deferred |  |  | 1,287 |  |  |  | 1,231 |  |  |  | 5 |  |  |  |  |  |  |  |  |
Total U.S. domestic package revenue |  |  | 4,128 |  |  |  | 3,883 |  |  |  | 6 |  |  |  |  |  |  |  |  |
International priority |  |  | 2,897 |  |  |  | 2,839 |  |  |  | 2 |  |  |  |  |  |  |  |  |
International economy |  |  | 707 |  |  |  | 669 |  |  |  | 6 |  |  |  |  |  |  |  |  |
Total international export package revenue |  |  | 3,604 |  |  |  | 3,508 |  |  |  | 3 |  |  |  |  |  |  |  |  |
International domestic(1) |  |  | 974 |  |  |  | 1,114 |  |  |  | (13 | ) |  |  |  |  |  |  |  |
Total package revenue |  |  | 8,706 |  |  |  | 8,505 |  |  |  | 2 |  |  |  |  |  |  |  |  |
Freight: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  |  | 796 |  |  |  | 775 |  |  |  | 3 |  |  |  |  |  |  |  |  |
International priority |  |  | 888 |  |  |  | 873 |  |  |  | 2 |  |  |  |  |  |  |  |  |
International economy |  |  | 377 |  |  |  | 414 |  |  |  | (9 | ) |  |  |  |  |  |  |  |
International airfreight |  |  | 41 |  |  |  | 47 |  |  |  | (13 | ) |  |  |  |  |  |  |  |
Total freight revenue |  |  | 2,102 |  |  |  | 2,109 |  |  |  | — |  |  | Percent of Revenue |  |
Other |  |  | 319 |  |  |  | 352 |  |  |  | (9 | ) |  | 2022 |  |  |  | 2021 |  |
Total revenue |  |  | 11,127 |  |  |  | 10,966 |  |  |  | 1 |  |  |  | 100.0 |  | % |  |  | 100.0 |  | %
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  |  | 4,050 |  |  |  | 4,084 |  |  |  | (1 | ) |  |  | 36.4 |  |  |  |  | 37.2 |  |
Purchased transportation |  |  | 1,478 |  |  |  | 1,551 |  |  |  | (5 | ) |  |  | 13.3 |  |  |  |  | 14.2 |  |
Rentals and landing fees |  |  | 577 |  |  |  | 635 |  |  |  | (9 | ) |  |  | 5.2 |  |  |  |  | 5.8 |  |
Depreciation and amortization |  |  | 513 |  |  |  | 492 |  |  |  | 4 |  |  |  | 4.6 |  |  |  |  | 4.5 |  |
Fuel |  |  | 1,584 |  |  |  | 868 |  |  |  | 82 |  |  |  | 14.2 |  |  |  |  | 7.9 |  |
Maintenance and repairs |  |  | 562 |  |  |  | 573 |  |  |  | (2 | ) |  |  | 5.1 |  |  |  |  | 5.2 |  |
Business realignment and optimization costs |  |  | 14 |  |  |  | 67 |  |  |  | (79 | ) |  |  | 0.1 |  |  |  |  | 0.6 |  |
Intercompany charges |  |  | 484 |  |  |  | 508 |  |  |  | (5 | ) |  |  | 4.3 |  |  |  |  | 4.6 |  |
Other |  |  | 1,691 |  |  |  | 1,621 |  |  |  | 4 |  |  |  | 15.2 |  |  |  |  | 14.8 |  |
Total operating expenses |  |  | 10,953 |  |  |  | 10,399 |  |  |  | 5 |  |  |  | 98.4 |  | % |  |  | 94.8 |  | %
Operating income |  | $ | 174 |  |  | $ | 567 |  |  |  | (69 | ) |  |  |  |  |  |  |  |
Operating margin |  |  | 1.6 | % |  |  | 5.2 | % |  |  | (360 | ) | bp |  |  |  |  |  |  |

(1)
International domestic revenue relates to our international intra-country operations.

- 29 -

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

|  | Three Months Ended |  |  | Percent |
|  | 2022 |  |  | 2021 |  |  | Change |
Package Statistics |  |  |  |  |  |  |  |  |
Average daily package volume (ADV): |  |  |  |  |  |  |  |  |
U.S. overnight box |  |  | 1,285 |  |  |  | 1,413 |  |  |  | (9 | )
U.S. overnight envelope |  |  | 485 |  |  |  | 514 |  |  |  | (6 | )
U.S. deferred |  |  | 1,070 |  |  |  | 1,251 |  |  |  | (14 | )
Total U.S. domestic ADV |  |  | 2,840 |  |  |  | 3,178 |  |  |  | (11 | )
International priority |  |  | 700 |  |  |  | 771 |  |  |  | (9 | )
International economy |  |  | 260 |  |  |  | 263 |  |  |  | (1 | )
Total international export ADV |  |  | 960 |  |  |  | 1,034 |  |  |  | (7 | )
International domestic(1) |  |  | 1,706 |  |  |  | 2,004 |  |  |  | (15 | )
Total ADV |  |  | 5,506 |  |  |  | 6,216 |  |  |  | (11 | )
Revenue per package (yield): |  |  |  |  |  |  |  |  |
U.S. overnight box |  | $ | 27.73 |  |  | $ | 23.62 |  |  |  | 17 |
U.S. overnight envelope |  |  | 16.64 |  |  |  | 14.42 |  |  |  | 15 |
U.S. deferred |  |  | 18.50 |  |  |  | 15.14 |  |  |  | 22 |
U.S. domestic composite |  |  | 22.36 |  |  |  | 18.79 |  |  |  | 19 |
International priority |  |  | 63.72 |  |  |  | 56.64 |  |  |  | 13 |
International economy |  |  | 41.81 |  |  |  | 39.10 |  |  |  | 7 |
International export composite |  |  | 57.78 |  |  |  | 52.18 |  |  |  | 11 |
International domestic(1) |  |  | 8.78 |  |  |  | 8.56 |  |  |  | 3 |
Composite package yield |  | $ | 24.33 |  |  | $ | 21.05 |  |  |  | 16 |
Freight Statistics |  |  |  |  |  |  |  |  |
Average daily freight pounds: |  |  |  |  |  |  |  |  |
U.S. |  |  | 7,313 |  |  |  | 8,040 |  |  |  | (9 | )
International priority |  |  | 6,042 |  |  |  | 6,594 |  |  |  | (8 | )
International economy |  |  | 10,211 |  |  |  | 11,683 |  |  |  | (13 | )
International airfreight |  |  | 956 |  |  |  | 1,227 |  |  |  | (22 | )
Total average daily freight pounds |  |  | 24,522 |  |  |  | 27,544 |  |  |  | (11 | )
Revenue per pound (yield): |  |  |  |  |  |  |  |  |
U.S. |  | $ | 1.68 |  |  | $ | 1.48 |  |  |  | 14 |
International priority |  |  | 2.26 |  |  |  | 2.04 |  |  |  | 11 |
International economy |  |  | 0.57 |  |  |  | 0.55 |  |  |  | 4 |
International airfreight |  |  | 0.66 |  |  |  | 0.60 |  |  |  | 10 |
Composite freight yield |  | $ | 1.32 |  |  | $ | 1.18 |  |  |  | 12 |

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

- 30 -

FedEx Express Segment Revenue

FedEx Express segment revenue increased 1% in the first quarter of 2023 due to global package yield management actions, including higher fuel surcharges, partially offset by decreased global volume and unfavorable exchange rates.

Yield improvement, including higher fuel surcharges, drove increases in U.S domestic package yield of 19%, international export package yield of 11%, composite freight yield of 12%, and international domestic package yield of 3% in the first quarter of 2023. Unfavorable exchange rates negatively impacted international package and freight yield. Total average daily package volumes decreased 11% and total average daily freight pounds decreased 11% due to weakening macroeconomic conditions and reduced demand for our services.

FedEx Express Segment Operating Income

FedEx Express segment operating income decreased 69% in the first quarter of 2023 primarily due to global volume declines. The impact of cost actions lagged volume declines, and operating expenses remained high relative to demand. These factors were partially offset by yield management actions, including higher fuel surcharges. Currency exchange rates had a negative impact on revenue and a positive impact on expenses but did not have an impact on operating income in the first quarter of 2023.

Fuel expense increased 82% in the first quarter of 2023 due to increased fuel prices. Other operating expense increased 4% in the first quarter of 2023 due to higher bad debt accruals. Purchased transportation expense decreased 5% in the first quarter of 2023 primarily due to favorable exchange rates, partially offset by higher rates, including fuel, paid to third-party transportation providers. Salaries and employee benefits decreased 1% in the first quarter of 2023 due to favorable currency exchange rates and lower variable incentive compensation, partially offset by merit increases.

FedEx Express segment results include business realignment costs of $14 million in the first quarter of 2023 associated with our workforce reduction plan in Europe. We recognized $67 million of costs under this program in the first quarter of 2022. See the “Business Realignment and Optimization Costs” section of this MD&A for more information.

FedEx Express segment results included $26 million of TNT Express integration expenses in the first quarter of 2022.

FEDEX GROUND SEGMENT

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 August 31:

|  | Three Months Ended |  |  | Percent |  |  |  | Percent of Revenue |  |
|  | 2022 |  |  | 2021 |  |  | Change |  |  |  | 2022 |  |  |  | 2021 |  |
Revenue |  | $ | 8,160 |  |  | $ | 7,677 |  |  |  | 6 |  |  |  |  | 100.0 |  | % |  |  | 100.0 |  | %
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  |  | 1,637 |  |  |  | 1,613 |  |  |  | 1 |  |  |  |  | 20.1 |  |  |  |  | 21.0 |  |
Purchased transportation |  |  | 3,713 |  |  |  | 3,503 |  |  |  | 6 |  |  |  |  | 45.5 |  |  |  |  | 45.6 |  |
Rentals |  |  | 390 |  |  |  | 318 |  |  |  | 23 |  |  |  |  | 4.8 |  |  |  |  | 4.1 |  |
Depreciation and amortization |  |  | 246 |  |  |  | 226 |  |  |  | 9 |  |  |  |  | 3.0 |  |  |  |  | 3.0 |  |
Fuel |  |  | 9 |  |  |  | 6 |  |  |  | 50 |  |  |  |  | 0.1 |  |  |  |  | 0.1 |  |
Maintenance and repairs |  |  | 155 |  |  |  | 136 |  |  |  | 14 |  |  |  |  | 1.9 |  |  |  |  | 1.8 |  |
Intercompany charges |  |  | 490 |  |  |  | 491 |  |  |  | — |  |  |  |  | 6.0 |  |  |  |  | 6.4 |  |
Other |  |  | 826 |  |  |  | 713 |  |  |  | 16 |  |  |  |  | 10.1 |  |  |  |  | 9.3 |  |
Total operating expenses |  |  | 7,466 |  |  |  | 7,006 |  |  |  | 7 |  |  |  |  | 91.5 |  | % |  |  | 91.3 |  | %
Operating income |  | $ | 694 |  |  | $ | 671 |  |  |  | 3 |  |  |  |  |  |  |  |  |  |
Operating margin |  |  | 8.5 | % |  |  | 8.7 | % |  |  | (20 | ) | bp |  |  |  |  |  |  |  |
Average daily package volume (ADV)(1): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ground commercial |  |  | 4,368 |  |  |  | 4,425 |  |  |  | (1 | ) |  |  |  |  |  |  |  |  |
Home delivery |  |  | 3,912 |  |  |  | 3,747 |  |  |  | 4 |  |  |  |  |  |  |  |  |  |
Economy |  |  | 730 |  |  |  | 1,164 |  |  |  | (37 | ) |  |  |  |  |  |  |  |  |
Total ADV |  |  | 9,010 |  |  |  | 9,336 |  |  |  | (3 | ) |  |  |  |  |  |  |  |  |
Revenue per package (yield) |  | $ | 11.48 |  |  | $ | 10.29 |  |  |  | 12 |  |  |  |  |  |  |  |  |  |

(1)
Ground commercial ADV is calculated on a 5-day-per-week basis, while home delivery and economy ADV are calculated on a 7-day-per-week basis.

- 31 -

FedEx Ground Segment Revenue

FedEx Ground segment revenue increased 6% in the first quarter of 2023 primarily due to yield management actions, including higher fuel surcharges, partially offset by lower volumes.

FedEx Ground yield increased 12% in the first quarter of 2023 primarily due to higher fuel surcharges, product mix, and pricing initiatives. Total average daily volume decreased 3% in the first quarter of 2023 primarily due to weakening macroeconomic conditions. In addition, strategic actions to improve revenue quality for higher yielding business-to-consumer volume drove a mix shift from economy to home delivery services in the first quarter of 2023.

FedEx Ground Segment Operating Income

FedEx Ground segment operating income increased 3% in the first quarter of 2023 primarily due to yield improvement, including fuel surcharges, and home delivery volume growth. These factors were partially offset by higher operating expenses driven by increased purchased transportation expense and other operating expense.

Purchased transportation expense increased 6% in the first quarter of 2023 due to higher fuel surcharges and base rates, partially offset by lower volume. Other operating expense increased 16% in the first quarter of 2023 primarily due to higher self-insurance accruals. Rentals expense increased 23% in the first quarter of 2023 due to network expansion, which occurred primarily in the second quarter of 2022. Salaries and employee benefits increased 1% in the first quarter of 2023 primarily due to lower productivity, partially offset by lower variable compensation.

FEDEX FREIGHT SEGMENT

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 August 31:

|  | Three Months Ended |  |  | Percent |  |  |  | Percent of Revenue |  |
|  | 2022 |  |  | 2021 |  |  | Change |  |  |  | 2022 |  |  |  | 2021 |  |
Revenue |  | $ | 2,723 |  |  | $ | 2,251 |  |  |  | 21 |  |  |  |  | 100.0 |  | % |  |  | 100.0 |  | %
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  |  | 1,059 |  |  |  | 988 |  |  |  | 7 |  |  |  |  | 38.9 |  |  |  |  | 43.9 |  |
Purchased transportation |  |  | 221 |  |  |  | 239 |  |  |  | (8 | ) |  |  |  | 8.1 |  |  |  |  | 10.6 |  |
Rentals |  |  | 65 |  |  |  | 59 |  |  |  | 10 |  |  |  |  | 2.4 |  |  |  |  | 2.6 |  |
Depreciation and amortization |  |  | 106 |  |  |  | 99 |  |  |  | 7 |  |  |  |  | 3.9 |  |  |  |  | 4.4 |  |
Fuel |  |  | 228 |  |  |  | 135 |  |  |  | 69 |  |  |  |  | 8.4 |  |  |  |  | 6.0 |  |
Maintenance and repairs |  |  | 80 |  |  |  | 63 |  |  |  | 27 |  |  |  |  | 2.9 |  |  |  |  | 2.8 |  |
Intercompany charges |  |  | 132 |  |  |  | 126 |  |  |  | 5 |  |  |  |  | 4.9 |  |  |  |  | 5.6 |  |
Other |  |  | 181 |  |  |  | 152 |  |  |  | 19 |  |  |  |  | 6.6 |  |  |  |  | 6.8 |  |
Total operating expenses |  |  | 2,072 |  |  |  | 1,861 |  |  |  | 11 |  |  |  |  | 76.1 |  | % |  |  | 82.7 |  | %
Operating income |  | $ | 651 |  |  | $ | 390 |  |  |  | 67 |  |  |  |  |  |  |  |  |  |
Operating margin |  |  | 23.9 | % |  |  | 17.3 | % |  |  | 660 |  | bp |  |  |  |  |  |  |  |
Average daily shipments (in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Priority |  |  | 76.2 |  |  |  | 80.3 |  |  |  | (5 | ) |  |  |  |  |  |  |  |  |
Economy |  |  | 32.1 |  |  |  | 33.5 |  |  |  | (4 | ) |  |  |  |  |  |  |  |  |
Total average daily shipments |  |  | 108.3 |  |  |  | 113.8 |  |  |  | (5 | ) |  |  |  |  |  |  |  |  |
Weight per shipment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Priority |  |  | 1,054 |  |  |  | 1,085 |  |  |  | (3 | ) |  |  |  |  |  |  |  |  |
Economy |  |  | 938 |  |  |  | 938 |  |  |  | — |  |  |  |  |  |  |  |  |  |
Composite weight per shipment |  |  | 1,020 |  |  |  | 1,041 |  |  |  | (2 | ) |  |  |  |  |  |  |  |  |
Revenue per shipment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Priority |  | $ | 369.60 |  |  | $ | 290.92 |  |  |  | 27 |  |  |  |  |  |  |  |  |  |
Economy |  |  | 423.59 |  |  |  | 333.02 |  |  |  | 27 |  |  |  |  |  |  |  |  |  |
Composite revenue per shipment |  | $ | 385.61 |  |  | $ | 303.32 |  |  |  | 27 |  |  |  |  |  |  |  |  |  |
Revenue per hundredweight |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Priority |  | $ | 35.06 |  |  | $ | 26.82 |  |  |  | 31 |  |  |  |  |  |  |  |  |  |
Economy |  |  | 45.16 |  |  |  | 35.50 |  |  |  | 27 |  |  |  |  |  |  |  |  |  |
Composite revenue per hundredweight |  | $ | 37.82 |  |  | $ | 29.13 |  |  |  | 30 |  |  |  |  |  |  |  |  |  |

- 32 -

FedEx Freight Segment Revenue

FedEx Freight segment revenue increased 21% in the first quarter of 2023 primarily due to yield management actions, including higher fuel surcharges.

Revenue per shipment increased 27% in the first quarter of 2023 primarily due to revenue quality initiatives, including higher fuel surcharges, which more than offset the effect of slightly lower weight per shipment. Average daily shipments decreased 5% in the first quarter of 2023 due to lower demand for our service offerings caused by weakening macroeconomic conditions.

FedEx Freight Segment Operating Income

FedEx Freight segment operating income increased 67% in the first quarter of 2023 driven by yield management actions, including higher fuel surcharges, partially offset by higher salaries and employee benefits and lower volumes.

Fuel expense increased 69% in the first quarter of 2023 primarily due to increased fuel prices. Salaries and employee benefits expense increased 7% in the first quarter of 2023 primarily due to higher pay initiatives and lower productivity, partially offset by lower volumes and variable incentive compensation.

FINANCIAL CONDITION

LIQUIDITY

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

|  | 2022 |  |  | 2021 |
Operating activities: |  |  |  |  |  |
Net income |  | $ | 875 |  |  | $ | 1,112 |
Business realignment and optimization costs/(payments), net |  |  | (14 | ) |  |  | 36 |
Other noncash charges and credits |  |  | 2,111 |  |  |  | 2,041 |
Changes in assets and liabilities |  |  | (1,365 | ) |  |  | (1,105 | )
Cash provided by operating activities |  |  | 1,607 |  |  |  | 2,084 |
Investing activities: |  |  |  |  |  |
Capital expenditures |  |  | (1,284 | ) |  |  | (1,570 | )
Purchase of investments |  |  | (35 | ) |  |  | — |
Proceeds from asset dispositions and other |  |  | 10 |  |  |  | 20 |
Cash used in investing activities |  |  | (1,309 | ) |  |  | (1,550 | )
Financing activities: |  |  |  |  |  |
Principal payments on debt |  |  | (29 | ) |  |  | (64 | )
Proceeds from stock issuances |  |  | 81 |  |  |  | 84 |
Dividends paid |  |  | (299 | ) |  |  | (200 | )
Purchase of treasury stock |  |  | — |  |  |  | (549 | )
Other, net |  |  | — |  |  |  | (1 | )
Cash used in financing activities |  |  | (247 | ) |  |  | (730 | )
Effect of exchange rate changes on cash |  |  | (98 | ) |  |  | (38 | )
Net decrease in cash and cash equivalents |  | $ | (47 | ) |  | $ | (234 | )
Cash and cash equivalents at the end of period |  | $ | 6,850 |  |  | $ | 6,853 |

Cash flows from operating activities decreased $477 million in the first quarter of 2023 primarily due to lower net income and working capital changes, including our voluntary pension contribution, partially offset by lower variable incentive compensation payments. Capital expenditures decreased during the first quarter of 2023 primarily due to decreased spending on aircraft and related equipment at FedEx Express. See “Capital Resources” for a discussion of capital expenditures during 2023 and 2022.

In December 2021, our Board of Directors authorized a stock repurchase program of up to $5 billion of FedEx common stock. During the first quarter of 2023, we did not repurchase any shares of FedEx common stock. As of August 31, 2022, $4.1 billion remained available to use for repurchases under the current stock repurchase program. Shares under the current repurchase program may be repurchased from time to time in the open market or in privately negotiated transactions. The timing and volume of repurchases are at the discretion of management, based on the capital needs of the business, the market price of FedEx common stock, and general market conditions. No time limits were set for the completion of the program, and the program may be suspended or discontinued at any time.

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CAPITAL RESOURCES

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

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

|  | Three Months Ended |  |  |  |
|  | 2022 |  |  | 2021 |  |  | Percent Change |
Aircraft and related equipment |  | $ | 203 |  |  | $ | 764 |  |  |  | (73 | )
Package handling and ground support equipment |  |  | 436 |  |  |  | 309 |  |  |  | 41 |
Vehicles and trailers |  |  | 217 |  |  |  | 87 |  |  |  | 149 |
Information technology |  |  | 201 |  |  |  | 183 |  |  |  | 10 |
Facilities and other |  |  | 227 |  |  |  | 227 |  |  |  | — |
Total capital expenditures |  | $ | 1,284 |  |  | $ | 1,570 |  |  |  | (18 | )
FedEx Express segment |  | $ | 530 |  |  | $ | 1,048 |  |  |  | (49 | )
FedEx Ground segment |  |  | 441 |  |  |  | 352 |  |  |  | 25 |
FedEx Freight segment |  |  | 150 |  |  |  | 13 |  |  |  | 1,054 |
FedEx Services segment |  |  | 129 |  |  |  | 137 |  |  |  | (6 | )
Other |  |  | 34 |  |  |  | 20 |  |  |  | 70 |
Total capital expenditures |  | $ | 1,284 |  |  | $ | 1,570 |  |  |  | (18 | )

Capital expenditures decreased in the first quarter of 2023 primarily due to decreased spending on aircraft and related equipment at FedEx Express, partially offset by increased spending on vehicles and trailers at FedEx Freight and FedEx Ground, as well as package handling equipment at all transportation segments.

GUARANTOR FINANCIAL IN FORMATION

We are providing the following information in compliance with Rule 13-01 of Regulation S-X, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” with respect to our senior unsecured debt securities and Pass-Through Certificates, Series 2020-1AA (the “Certificates”).

The $18.9 billion principal amount of the senior unsecured notes were issued by FedEx under a shelf registration statement and are guaranteed by certain direct and indirect subsidiaries of FedEx (“Guarantor Subsidiaries”). FedEx owns, directly or indirectly, 100% of each Guarantor Subsidiary. The guarantees are (1) unsecured obligations of the respective Guarantor Subsidiary, (2) rank equally with all of their other unsecured and unsubordinated indebtedness, and (3) are full and unconditional and joint and several. If we sell, transfer, or otherwise dispose of all of the capital stock or all or substantially all of the assets of a Guarantor Subsidiary to any person that is not an affiliate of FedEx, the guarantee of that Guarantor Subsidiary will terminate, and holders of debt securities will no longer have a direct claim against such subsidiary under the guarantee.

Additionally, FedEx fully and unconditionally guarantees the payment obligation of FedEx Express in respect of the $866 million principal amount of the Certificates. See Note 4 of the accompanying unaudited condensed consolidated financial statements and Note 7 to the financial statements included in our Annual Report for additional information regarding the terms of the Certificates.

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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.

Parent and Guarantor Subsidiaries

The following table presents the summarized balance sheet information as of August 31, 2022 and May 31, 2022 (in millions):

|  | August 31, 2022 |  |  | May 31, 2022 |
Current Assets |  | $ | 12,057 |  |  | $ | 11,768 |
Intercompany Receivable |  |  | 3,364 |  |  |  | 4,157 |
Total Assets |  |  | 89,039 |  |  |  | 88,331 |
Current Liabilities |  |  | 10,081 |  |  |  | 10,324 |
Intercompany Payable |  |  | — |  |  |  | — |
Total Liabilities |  |  | 60,044 |  |  |  | 58,883 |

The following table presents the summarized statement of income information for the three-month period ended August 31, 2022 (in millions):

Revenue |  | $ | 17,113 |
Intercompany Charges, net |  |  | (1,513 | )
Operating Income |  |  | 1,353 |
Intercompany Charges, net |  |  | 30 |
Income Before Income Taxes |  |  | 1,325 |
Net Income |  | $ | 1,099 |

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.

Parent Guarantor and Subsidiary Issuer

The following table presents the summarized balance sheet information as of August 31, 2022 and May 31, 2022 (in millions):

|  | August 31, 2022 |  |  | May 31, 2022 |
Current Assets |  | $ | 5,301 |  |  | $ | 4,687 |
Intercompany Receivable |  |  | — |  |  |  | — |
Total Assets |  |  | 69,764 |  |  |  | 68,449 |
Current Liabilities |  |  | 5,192 |  |  |  | 5,155 |
Intercompany Payable |  |  | 9,021 |  |  |  | 7,473 |
Total Liabilities |  |  | 48,728 |  |  |  | 47,830 |

The following table presents the summarized statement of income information for the three-month period ended August 31, 2022 (in millions):

Revenue |  | $ | 6,214 |
Intercompany Charges, net |  |  | (1,130 | )
Operating Income |  |  | 209 |
Intercompany Charges, net |  |  | 67 |
Income Before Income Taxes |  |  | 705 |
Net Income |  | $ | 653 |

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LIQUIDITY OUTLOOK

In response to current business and economic conditions as referenced above in the “Outlook” section of this MD&A, we are continuing to actively manage and optimize our capital allocation in response to the challenging macroeconomic environment, inflationary pressures, rising fuel prices, and geopolitical conflicts. We have $6.9 billion in cash at August 31, 2022 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 three-year credit agreement (the “Three-Year Credit Agreement” and together with the Five-Year Credit Agreement, the “Credit Agreements”), and we believe that our cash and cash equivalents, cash from operations, and available financing sources will be adequate to meet our liquidity needs, which include operational requirements, expected capital expenditures, voluntary pension contributions, dividend payments, and stock repurchases.

We expect to repurchase $1.5 billion of our common stock in fiscal 2023, with $1.0 billion occurring during the second quarter of 2023.

Our cash and cash equivalents balance at August 31, 2022 includes $2.0 billion of cash in foreign jurisdictions associated with our permanent reinvestment strategy. We are able to access the majority of this cash without a material tax cost and do not believe that the indefinite reinvestment of these funds impairs our ability to meet our U.S. domestic debt or working capital obligations.

In response to macroeconomic trends in our business, we are lowering our expected capital expenditures by $500 million in 2023. We now expect capital expenditures of approximately $6.3 billion in 2023. We expect increased investment in replacement vehicles including our vehicle electrification initiative, information technology, and strategic investments aimed to optimize operations across our networks to be offset with lower aircraft fleet modernization spend. We invested $0.2 billion in aircraft and related equipment in the first quarter of 2023 and expect to invest an additional $1.5 billion for aircraft and related equipment during the remainder of 2023. Included within our expected 2023 capital expenditures are our continued investments in the FedEx Express Indianapolis hub and FedEx Express Memphis World Hub, which are expected to total $1.8 billion and $1.5 billion, respectively, over the life of each project. While we continue to invest in our business, the capital intensity relative to revenue is expected to remain below historical levels.

There have been no material changes to the contractual commitments described in Part II, Item 7 in our Annual Report. We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity.

We have several aircraft modernization programs underway that are supported by the purchase of Boeing 777 Freighter and Boeing 767-300 Freighter aircraft. These aircraft are significantly more fuel-efficient per unit than the aircraft types previously utilized, and these expenditures are necessary to achieve significant long-term operating savings and to replace older aircraft. Our ability to delay the timing of these aircraft-related expenditures is limited without incurring significant costs to modify existing purchase agreements.

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

The Five-Year Credit Agreement expires in March 2026 and includes a $250 million letter of credit sublimit. The Three-Year Credit Agreement expires in March 2025. The Credit Agreements are available to finance our operations and other cash flow needs.

During the first quarter of 2023, we made voluntary contributions totaling $400 million to our U.S. Pension Plans. We anticipate making $400 million of additional voluntary contributions during the remainder of 2023. There are currently no anticipated required minimum contributions to our U.S. Pension Plans based on our funded status and the fact we have a credit balance related to our cumulative excess voluntary pension contributions over those required that exceeds $3.5 billion. The credit balance is subtracted from plan assets to determine the minimum funding requirements. Therefore, we could eliminate all required contributions to our principal U.S. Pension Plans for several years if we were to choose to waive part of that credit balance in any given year. Our U.S. Pension Plans have ample funds to meet expected benefit payments.

Standard & Poor’s has assigned us a senior unsecured debt credit rating of BBB, a Certificates rating of AA-, a commercial paper rating of A-2, and a ratings outlook of “stable.” Moody’s Investors Service has assigned us an unsecured debt credit rating of Baa2, a Certificates rating of Aa3, a commercial paper rating of P-2, and a ratings outlook of “stable.” If our credit ratings drop, our interest expense may increase. If our commercial paper ratings drop below current levels, we may have difficulty utilizing the commercial paper market. If our senior unsecured debt credit ratings drop below investment grade, our access to financing may become limited.

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CRITICAL ACCOUNTING ESTIMATES

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 change of events or circumstances that would indicate that a reevaluation of the goodwill of our reporting units is required as of August 31, 2022, 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 and Finance Committee of our Board of Directors and with our independent registered public accounting firm.

FORWARD-LOOKING STATEMENTS

Certain statements in this report, including (but not limited to) those contained in “Trends Affecting Our Business,” “Business Realignment and Optimization Costs,” “Income Taxes,” “Outlook,” “Liquidity Outlook,” and “Critical Accounting Estimates,” and the “General,” “Financing Arrangements,” “Retirement Plans,” “Commitments,” and “Contingencies” notes to our unaudited condensed consolidated financial statements, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, cash flows, plans, objectives, future performance, and business and the assumptions underlying such statements. Forward-looking statements include those preceded by, followed by, or that include the words “will,” “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “plans,” “estimates,” “targets,” “forecasts,” “projects,” “intends,” or similar expressions. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking statements because of, among other things, potential risks and uncertainties, such as:

•
economic conditions in the global markets in which we operate;
•
significant changes in the volumes of shipments transported through our networks, customer demand for our various services, or the prices we obtain for our services;
•
our ability to meet our labor and purchased transportation needs while controlling related costs and maintain our company culture;
•
a significant data breach or other disruption to our technology infrastructure;
•
the continuing impact of the COVID-19 pandemic;
•
geopolitical developments and additional changes in international trade policies and relations;
•
the effect of any international conflicts or terrorist activities, including the current conflict between Russia and Ukraine, on the United States and global economies in general, the transportation industry, or FedEx in particular, and what effects these events will have on our costs and the demand for our services;
•
our ability to successfully implement our business strategy, effectively respond to changes in market dynamics and customer preferences, and achieve the anticipated benefits and associated cost savings of such strategies and actions, including our ability to successfully implement our comprehensive program to improve long-term profitability and cost control actions;
•
our ability to achieve our fiscal 2025 financial performance goals;
•
damage to our reputation or loss of brand equity;
•
changes in the business or financial soundness of the U.S. Postal Service (“USPS”), including strategic changes to its operations to reduce its reliance on the air network of FedEx Express, or our relationship with the USPS;

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•
the price and availability of jet and vehicle fuel, including significant increases in fuel prices as a result of the ongoing conflict between Russia and Ukraine;
•
our ability to manage our network capacity and cost structure for capital expenditures and operating expenses, and match it to shifting and future customer volume levels;
•
the effect of intense competition on our ability to maintain or increase our prices (including our fuel surcharges in response to rising fuel costs) or to maintain or grow our revenue and market share;
•
our ability to execute and effectively operate, integrate, leverage, and grow acquired businesses, and to continue to support the value we allocate to these acquired businesses, including their goodwill and other intangible assets;
•
the future rate of e-commerce growth and our ability to successfully expand our e-commerce services portfolio;
•
the timeline for recovery of passenger airline cargo capacity;
•
any effects on our businesses resulting from evolving or new U.S. domestic or international government regulations, laws, policies, and actions, which could be unfavorable to our business, including regulatory or other actions affecting data protection; global aviation or other transportation rights; increased air cargo, pilot flight and duty time, and other security or safety requirements; import and export controls; the use of new technology and accounting; trade (such as protectionist measures or restrictions on free trade); foreign exchange intervention in response to currency volatility; labor (such as joint employment standards or changes to the Railway Labor Act of 1926, as amended, affecting FedEx Express employees); environmental (such as global climate change legislation); or postal rules;
•
adverse changes in tax laws, regulations, and interpretations or challenges to our tax positions;
•
the effect of costs related to lawsuits in which it is alleged that FedEx Ground should be treated as an employer of drivers employed by service providers engaged by FedEx Ground;
•
increased insurance and claims expenses related to vehicle accidents, workers’ compensation claims, property and cargo loss, general business liabilities, and benefits paid under employee disability programs;
•
our ability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography;
•
our ability to achieve our goal of carbon neutrality for our global operations by calendar 2040;
•
our ability to successfully mitigate unique technological, operational, and regulatory risks related to our autonomous delivery strategy;
•
our ability to maintain good relationships with our employees and avoid attempts by labor organizations to organize groups of our employees, which could significantly increase our operating costs and reduce our operational flexibility, as well as the outcome of future negotiations to reach new collective bargaining agreements;
•
increasing costs, the volatility of costs and funding requirements, and other legal mandates for employee benefits, especially pension and healthcare benefits;
•
the effects of global climate change;
•
widespread outbreak of an illness or any other communicable disease, or any other public health crisis;
•
the United Kingdom’s exit from the EU (“Brexit”), including the economic, operational, regulatory, and financial impacts of any post-Brexit trade deal between the United Kingdom and EU;
•
the increasing costs of compliance with federal, state, and foreign governmental agency mandates (including the Foreign Corrupt Practices Act and the U.K. Bribery Act) and defending against inappropriate or unjustified enforcement or other actions by such agencies;
•
changes in foreign currency exchange rates, especially in the euro, Chinese yuan, British pound, Canadian dollar, Hong Kong dollar, Australian dollar, Japanese yen, and Mexican peso, which can affect our sales levels and foreign currency sales prices;

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•
any liability resulting from and the costs of defending against class-action, derivative, and other litigation, such as wage-and-hour, joint employment, securities, vehicle accident, and discrimination and retaliation claims, claims related to our mandatory and voluntary reporting and disclosure of climate change and other environmental, social, and governance topics, and any other legal or governmental proceedings, including the matters discussed in Note 9 of the accompanying unaudited condensed consolidated financial statements;
•
the impact of technology developments on our operations and on demand for our services, and our ability to continue to identify and eliminate unnecessary information-technology redundancy and complexity throughout the organization;
•
disruptions in global supply chains, which can limit the access of FedEx and our service providers to vehicles and other key capital resources and increase our costs;
•
governmental underinvestment in transportation infrastructure, which could increase our costs and adversely impact our service levels due to traffic congestion, prolonged closure of key thoroughfares, or sub-optimal routing of our vehicles and aircraft;
•
constraints, volatility, or disruption in the capital markets, our ability to maintain our current credit ratings, commercial paper ratings, and senior unsecured debt and pass-through certificate credit ratings, and our ability to meet Credit Agreement financial covenants;
•
other risks and uncertainties you can find in our press releases and SEC filings, including the risk factors identified under Part I, Item IA. “Risk Factors” in our Annual Report, as updated by our quarterly reports on Form 10-Q.

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.

Item 3. Quantitative and Qualitat ive Disclosures About Market Risk

As of August 31, 2022, there were no material changes in our market risk sensitive instruments and positions since our disclosures in our Annual Report.

The principal foreign currency exchange rate risks to which we are exposed relate to the euro, Chinese yuan, British pound, Canadian dollar, Hong Kong dollar, Australian dollar, Japanese yen, and Mexican peso. Historically, our exposure to foreign currency fluctuations is more significant with respect to our revenue than our expenses, as a significant portion of our expenses are denominated in U.S. dollars, such as aircraft and fuel expenses. During the first quarter of 2023, the U.S. dollar strengthened relative to the currencies of the foreign countries in which we operate, as compared to the first quarter of 2022, and this strengthening had a slightly positive effect on our results.

While we have market risk for changes in the price of vehicle and jet fuel, this risk is largely mitigated by our indexed fuel surcharges. For additional discussion of our indexed fuel surcharges, see the “Results of Operations and Outlook — Consolidated Results —Fuel” section of “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” included in our Annual Report.

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Item 4. Controls and Procedures

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 August 31, 2022 (the end of the period covered by this Quarterly Report on Form 10-Q).

During our fiscal quarter ended August 31, 2022, 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. We continue to monitor and assess the effects of remote work on our internal controls to minimize the impact on the design and operating effectiveness of our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Ri sk Factors

Other than the risk factors set forth below, there have been no material changes from the risk factors disclosed in our Annual Report in response to Part I, Item 1A of Form 10-K. Additional risks not currently known to us or that we currently deem to be immaterial also may materially affect our business, results of operations, financial condition, and the price of our common stock.

Our future financial results will suffer, and we may not be able to achieve our 2025 financial performance goals, if we fail to successfully implement our cost control actions and program to improve long-term profitability. We are making significant decisions in connection with our long-term business strategy. In addition to the initiatives and enhancements discussed in our Annual Report, in the first quarter of 2023, we announced a comprehensive program to improve FedEx’s long-term profitability. We are also continuing to take cost control actions for the remainder of 2023 to help mitigate the impact of slowing economic conditions and reduced volumes on our operating results. See Item 2 of this quarterly report (“Management’s Discussion and Analysis of Results of Operations and Financial Condition”) under “Results of Operations – Consolidated Results – Outlook” for additional information.

We may not be able to achieve the expected operational efficiencies, cost savings, and other benefits from these initiatives and enhancements. The actual amount and timing of costs to be incurred and related cost savings resulting from these initiatives and enhancements may differ from our current expectations and estimates. Changes in our business strategy may also expose us to new and heightened risks. If we are not able to successfully implement our cost control actions and program to improve long-term profitability, our future financial results will suffer and we may not be able to achieve our 2025 financial performance goals.

Our failure to meet our purchased transportation needs, as well as increases in purchased transportation costs, could adversely impact our business and results of operations. Our ability to meet our purchased transportation needs while controlling related costs is generally subject to numerous external factors, including the availability of qualified persons in the markets where service providers operate and unemployment levels within these markets, prevailing and competitive wage rates and other benefits, fuel and energy prices, changes in the business or financial soundness of service providers, interest in contracting with FedEx, inflation, safety levels of our operations, our reputation within the transportation market, the continuing effect of the COVID-19 pandemic and variant strains, the availability of child care, and vaccine mandates that may be announced in jurisdictions in which our service providers operate. Additionally, certain service providers (acting collectively or in coordination in some instances) are seeking to increase pay rates or modify contract terms and may refuse to provide service to FedEx, particularly during peak periods, in connection with such initiatives. While we believe we will be able to effectively meet our purchased transportation needs during the remainder of 2023, our inability to do so could increase our costs, hinder our ability to execute our business strategy, negatively impact service levels, and adversely affect our business and results of operations.

Item 2. Unregistered Sales of E quity Securities and Use of Proceeds

We did not repurchase any shares of FedEx common stock during the first quarter of 2023.

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In December 2021, our Board of Directors approved a stock repurchase program of up to $5 billion of FedEx common stock. Shares under the program may be repurchased from time to time in the open market or in privately negotiated transactions. As of September 20, 2022, $4.1 billion remains available to be used for repurchases under the program, which is the only such program that currently exists. The program does not have an expiration date and may be suspended or discontinued at any time.

Item 5. Other Information

Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Exchange Act. As part of its intellectual property (“IP”) protection efforts, FedEx has obtained and maintains patents and trademarks in Iran. Periodically, FedEx pays renewal fees, through IP service providers located in Lebanon, to the Iran Intellectual Property Office (“IIPO”) for these patents and trademarks and has sought to prosecute and defend such trademarks. On September 15, 2021, OFAC granted FedEx a specific license to make payments to IIPO at its account in Bank Melli, which was designated on November 5, 2018 by OFAC under its counterterrorism authority pursuant to Executive Order 13224. As authorized by OFAC’s specific license, in the quarter ended August 31, 2022, FedEx paid $92 to IIPO as part of its intellectual property protection efforts in Iran. FedEx plans to continue these activities, as authorized under the specific license.

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Item 6. Exhibits

Exhibit Number |  | Description of Exhibit
˄† 10.1 |  | Supplemental Agreement No. 36 (and related side letters) dated as of June 1, 2022, amending the Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between The Boeing Company and FedEx Express. (Filed as Exhibit 10.52 to FedEx’s FY22 Annual Report on Form 10-K, and incorporated herein by reference).
*10.2 |  | Second Amendment to FedEx Office Supplemental Retirement Plan dated June 20, 2022 (but effective as of August 1, 2022). (Filed as Exhibit 10.104 to FedEx’s FY22 Annual Report on Form 10-K, and incorporated herein by reference).
*10.3 |  | Amendment to the 2019 Omnibus Stock Incentive Plan dated and effective June 12, 2022. (Filed as Exhibit 10.107 to FedEx’s FY22 Annual Report on Form 10-K, and incorporated herein by reference).
10.4 |  | Cooperation Agreement, dated as of June 13, 2022, by and among FedEx, D. E. Shaw Oculus Portfolios, LLC and D. E. Shaw Valence Portfolios, LLC. (Filed as Exhibit 10.1 to FedEx’s Current Report on Form 8-K dated June 13, 2022 and filed June 14, 2022, and incorporated herein by reference).
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).

˄ Information in this exhibit identified by brackets is confidential and has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K because it is both (i) not material and (ii) the type FedEx treats as private or confidential.

† Certain attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K because the information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish supplementally a copy of such attachments to the SEC or its staff upon request.

*Management contracts/compensatory plans or arrangements.

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SIGNA TURE

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.

|  |  | FedEx Corporation
Date: September 22, 2022 |  |  | /s/ Jennifer L. Johnson
|  |  | Jennifer L. Johnson
|  |  | Corporate Vice President and
|  |  | Principal Accounting Officer

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