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.

- 23 -

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)

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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.

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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.

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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.

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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.

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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

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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.