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, 2023 (“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, offering integrated business solutions through operating companies competing collectively, operating collaboratively, and innovating digitally as one FedEx. 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, 2024 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 – Business Optimization and Realignment Costs and – Outlook” and “Financial Condition – 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 first quarter results were negatively affected by volume pressures due to weak economic conditions.

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Inflation and Interest Rates

During the first quarter of 2024, global inflation decelerated year over year, but continues to be above historical levels. Additionally, global interest rates continue to rise in an effort to curb inflation. We are experiencing a decline in demand for our transportation services as inflation and interest rate increases are negatively affecting consumer and business spending. Additionally, we are experiencing higher costs to serve through higher wage rates and other direct operating expenses such as operational supplies. We expect inflation and high interest rates to continue to negatively affect our results of operations for the remainder of 2024.

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 affect our operating results either positively or negatively in the short-term. Lower fuel prices negatively affected yields through lower fuel surcharges and drove a decrease in fuel expense during the first quarter 2024 at all of our transportation segments.

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 temporary labor, security, and facility services and cargo handling), insurance, professional fees, 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
		2023				2022				Change
Revenue		$	21,681			$	23,242				(7	)
Operating income (loss):
FedEx Express segment			205				174				18
FedEx Ground segment			1,103				694				59
FedEx Freight segment			481				651				(26	)
Corporate, other, and eliminations			(304	)			(328	)			7
Consolidated operating income			1,485				1,191				25
Operating margin:
FedEx Express segment			2.0	%			1.6	%			40		bp
FedEx Ground segment			13.1	%			8.5	%			460		bp
FedEx Freight segment			21.0	%			23.9	%			(290	)	bp
Consolidated operating margin			6.8	%			5.1	%			170		bp
Consolidated net income		$	1,078			$	875				23
Diluted earnings per share		$	4.23			$	3.33				27

		Year-over-Year Changes
		Revenue				Operating Results
FedEx Express segment		$	(1,042	)		$	31
FedEx Ground segment			260				409
FedEx Freight segment			(432	)			(170	)
FedEx Services segment			2				—
Corporate, other, and eliminations			(349	)			24
		$	(1,561	)		$	294

Overview

Operating income improved 25% in the first quarter of 2024 due to the execution of our DRIVE program initiatives and our continued focus on revenue quality. These initiatives include structural flight takedowns, aligning staffing with volume levels, increasing linehaul and sort efficiency, temporarily parking aircraft, improving dock productivity, and shifting to one delivery wave per day in the U.S. at FedEx Express. Improvement in our base yields was more than offset by lower fuel surcharges and reduced demand for our services, primarily due to challenging macroeconomic conditions, resulting in a decrease in revenue in the first quarter of 2024.

Operating income includes expenses of $105 million ($81 million, net of tax, or $0.32 per diluted share) in the first quarter of 2024 associated with our business optimization strategy announced in 2023. We recognized $24 million ($19 million, net of tax, or $0.07 per diluted share) of costs in the first quarter of 2023 under this program. Operating income in the first quarter of 2023 also includes business realignment costs of $14 million ($11 million, net of tax, or $0.04 per diluted share) associated with our workforce reduction plan in Europe previously announced in 2021. See the “Business Optimization and Realignment Costs” section of this MD&A for more information.

In December 2021, our Board of Directors authorized a stock repurchase program of up to $5 billion of FedEx common stock. As part of the repurchase program, we entered into an accelerated share repurchase (“ASR”) agreement with a bank in June 2023 to repurchase an aggregate of $500 million of our common stock. The ASR transaction was completed in August 2023. Share repurchases had a benefit of $0.02 per diluted share for the first quarter of 2024. See Note 1 of the accompanying unaudited condensed consolidated financial statements, “Financial Condition – Liquidity and – Liquidity Outlook” below, and Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Form 10-Q for additional information on our repurchase program.

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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 decreased 7% in the first quarter of 2024 primarily due to lower fuel surcharges at all of our transportation segments and volume declines at FedEx Express and FedEx Freight, partially offset by base yield improvement at FedEx Ground and FedEx Freight.

FedEx Express revenue decreased 9% in the first quarter of 2024 primarily due to lower fuel surcharges, lower volume, and unfavorable service mix. FedEx Freight revenue decreased 16% in the first quarter of 2024 primarily due to lower shipments and fuel surcharges, partially offset by base yield improvement. Revenue at Corporate, other, and eliminations decreased during the first quarter of 2024 primarily due to lower yields and volumes at FedEx Logistics, Inc. (“FedEx Logistics”). FedEx Ground revenue increased 3% during the first quarter of 2024 primarily due to yield improvement and higher 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
		2023				2022				Change				2023				2022
Operating expenses:
Salaries and employee benefits		$	7,785			$	7,859				(1	)			35.9		%		33.8		%
Purchased transportation			5,036				5,767				(13	)			23.2				24.8
Rentals and landing fees			1,151				1,159				(1	)			5.3				5.0
Depreciation and amortization			1,071				1,024				5				5.0				4.4
Fuel			1,101				1,822				(40	)			5.1				7.8
Maintenance and repairs			824				904				(9	)			3.8				3.9
Business optimization and realignment costs			105				38				176				0.5				0.2
Other			3,123				3,478				(10	)			14.4				15.0
Total operating expenses			20,196				22,051				(8	)			93.2				94.9
Operating income		$	1,485			$	1,191				25				6.8		%		5.1		%

Operating income increased 25% in the first quarter of 2024 primarily due to our DRIVE program initiatives and base yield improvements at FedEx Ground and FedEx Freight, partially offset by lower volume and fuel surcharges. Our DRIVE initiatives include structural flight takedowns, aligning staffing with volume levels, improving linehaul and sort efficiency, temporarily parking aircraft, improving dock operations, and shifting to one delivery wave per day in the U.S. at FedEx Express.

Purchased transportation and fuel expense decreased in the first quarter of 2024 due to lower fuel prices and volumes. The decrease in purchased transportation expense was also due to lower rates during the first quarter of 2024. The decrease in Other operating expenses was driven by lower bad debt expense and outside service contracts expense. In addition, during the first quarter of 2024 we aligned staffing to lower volumes and increased productivity, which drove a decrease in salaries and employee benefits, partially offset by increased variable incentive compensation and higher wage rates. Maintenance and repairs decreased in the first quarter of 2024 primarily due to lower aircraft maintenance resulting from an increase in temporarily parked aircraft.

Business Optimization and Realignment Costs

In the second quarter of 2023, FedEx announced DRIVE, 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, lower our overhead and support costs, and transform our digital capabilities. 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 optimized network through Network 2.0.

In the fourth quarter of 2023, we announced one FedEx, a consolidation plan to ultimately bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corporation, becoming a single company operating a unified, fully integrated air-ground network under the respected FedEx brand. FedEx Freight, Inc. will continue to provide LTL freight transportation services as a stand-alone and separate company under Federal Express Corporation. The organizational redesign will be implemented in phases with full implementation expected in June 2024. One FedEx will help facilitate our DRIVE transformation program to improve long-term profitability, including Network 2.0, the multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada.

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We have announced the implementation of Network 2.0 in more than 20 markets, including the phased transition of all FedEx Ground operations and personnel in Canada to FedEx Express beginning in April 2024. Under Network 2.0, FedEx will continue to utilize both employee couriers and contracted service providers.

We incurred costs associated with our business optimization activities of $105 million ($81 million, net of tax, or $0.32 per diluted share) in the first quarter of 2024 and $24 million ($19 million, net of tax, or $0.07 per diluted share) in the first quarter of 2023. These costs were primarily related to professional services and severance. Business optimization costs are included in Corporate, other, and eliminations, FedEx Ground, and FedEx Express. The identification of these costs as business optimization-related expenditures is subject to our disclosure controls and procedures. We expect the pre-tax cost of our business optimization activities to be approximately $620 million in 2024 and approximately $2.0 billion through 2025. The timing and amount of our business optimization expenses may change as we revise and implement our plans.

In 2021, FedEx Express announced a workforce reduction plan in Europe related to the network integration of TNT Express. The plan affected approximately 5,000 employees in Europe across operational teams and back-office functions and was completed during 2023. 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. These costs were related to certain employee severance arrangements. The pre-tax cost of our business realignment activities through 2023 was approximately $430 million.

Income Taxes

Our effective tax rate was 24.2% for the first quarter of 2024 and 24.2% for the first quarter of 2023.

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 2024 attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. We continue to work towards obtaining a final judgment for the applicable refund amounts due to the regulation being invalid. Once the District Court enters a final judgment, the U.S. government could file an appeal with the U.S. Court of Appeals for the Sixth Circuit. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

Outlook

During 2024, operating income is expected to improve as a result of our DRIVE program initiatives focused on aligning our cost base with demand, reducing our permanent cost structure, and increasing the flexibility of our network. We expect the benefits from DRIVE to be partially offset by expense headwinds related to higher global inflation and variable incentive compensation. We expect revenue will be pressured by volatile macroeconomic conditions negatively affecting customer demand for our services. At FedEx Express, we expect decreased demand for our U.S. freight product due to a change in strategy of the U.S. Postal Service (“USPS”) and lower international export yields to negatively affect revenue and operating income in 2024.

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

Our capital expenditures for 2024 are expected to be approximately $5.7 billion, a decrease of $0.5 billion from 2023, as we continue to reduce our capital intensity relative to revenue. We expect lower aircraft spend and reduced investments in capacity projects to be partially offset by investments to optimize our networks and modernize our facilities.

We will continue to evaluate our investments in critical long-term strategic projects to ensure our capital expenditures are expected to generate high returns on investment and are balanced with our outlook for global economic conditions. For additional details on key 2024 capital projects, refer to the “Financial Condition – Capital Resources” and “Financial Condition – Liquidity Outlook” sections of this MD&A.

The uncertainty of a slowdown in the global economy, global inflation, geopolitical challenges, 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 the remainder of 2024 inherently less certain. See “Item 1A. Risk Factors” for more information.

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See the “Trends Affecting Our Business,” “Critical Accounting Estimates,” and “Forward-Looking Statements” sections of this MD&A for additional information.

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)

In the fourth quarter of 2023, FedEx announced one FedEx, a consolidation plan to ultimately bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corporation, becoming a single company operating a unified, fully integrated air-ground network under the respected FedEx brand. The organizational redesign will be implemented in phases with full implementation expected in June 2024. During the implementation process in 2024, each of our current reportable segments will continue to have discrete financial information that will be regularly reviewed when evaluating performance and making resource allocation decisions, and aligns with our management reporting structure and our internal financial reporting. In the first quarter of 2025, when the consolidation plan has been completed, we expect to begin reporting a new segment structure that will align with an updated management reporting structure and how management will evaluate performance and make resource allocation decisions under one FedEx.

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. (“FedEx Dataworks”) operating segment. FedEx Dataworks is focused on creating solutions to transform the digital and physical experiences of our customers and team members.

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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 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.

The improvement in operating results in Corporate, other, and eliminations in the first quarter of 2024 was primarily due to lower operating expenses at FedEx Logistics, partially offset by increased business optimization expenses at FedEx Corporate. The lower operating expenses at FedEx Logistics was primarily due to lower purchased transportation expense, bad debt expense, and outside service contracts expense.

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 2024 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 and other cargo space 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 table compares 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
		2023				2022				Change
Revenue:
Package:
U.S. overnight box		$	2,188			$	2,316				(6	)
U.S. overnight envelope			485				525				(8	)
U.S. deferred			1,187				1,287				(8	)
Total U.S. domestic package revenue			3,860				4,128				(6	)
International priority			2,327				2,897				(20	)
International economy			1,021				707				44
Total international export package revenue			3,348				3,604				(7	)
International domestic(1)			1,024				974				5
Total package revenue			8,232				8,706				(5	)
Freight:
U.S.			582				796				(27	)
International priority			553				888				(38	)
International economy			425				377				13
International airfreight			32				41				(22	)
Total freight revenue			1,592				2,102				(24	)		Percent of Revenue
Other			261				319				(18	)		2023				2022
Total revenue			10,085				11,127				(9	)			100.0		%		100.0		%
Operating expenses:
Salaries and employee benefits			3,983				4,050				(2	)			39.5				36.4
Purchased transportation			1,374				1,478				(7	)			13.6				13.3
Rentals and landing fees			536				577				(7	)			5.3				5.2
Depreciation and amortization			538				513				5				5.3				4.6
Fuel			954				1,584				(40	)			9.5				14.2
Maintenance and repairs			496				562				(12	)			4.9				5.1
Business optimization and realignment costs			10				14				(29	)			0.1				0.1
Intercompany charges			492				484				2				4.9				4.3
Other			1,497				1,691				(11	)			14.9				15.2
Total operating expenses			9,880				10,953				(10	)			98.0		%	98.4			%
Operating income		$	205			$	174				18
Operating margin			2.0	%			1.6	%			40		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
		2023				2022				Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box			1,227				1,285				(5	)
U.S. overnight envelope			453				485				(7	)
U.S. deferred			970				1,070				(9	)
Total U.S. domestic ADV			2,650				2,840				(7	)
International priority			658				700				(6	)
International economy			333				260				28
Total international export ADV			991				960				3
International domestic(1)			1,742				1,706				2
Total ADV			5,383				5,506				(2	)
Revenue per package (yield):
U.S. overnight box		$	27.43			$	27.73				(1	)
U.S. overnight envelope			16.50				16.64				(1	)
U.S. deferred			18.81				18.50				2
U.S. domestic composite			22.41				22.36				—
International priority			54.39				63.72				(15	)
International economy			47.14				41.81				13
International export composite			51.95				57.78				(10	)
International domestic(1)			9.05				8.78				3
Composite package yield		$	23.53			$	24.33				(3	)
Freight Statistics
Average daily freight pounds:
U.S.			5,319				7,313				(27	)
International priority			4,390				6,042				(27	)
International economy			9,665				10,211				(5	)
International airfreight			703				956				(26	)
Total average daily freight pounds			20,077				24,522				(18	)
Revenue per pound (yield):
U.S.		$	1.69			$	1.68				1
International priority			1.94				2.26				(14	)
International economy			0.68				0.57				19
International airfreight			0.70				0.66				6
Composite freight yield		$	1.22			$	1.32				(8	)

(1)

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

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FedEx Express Segment Revenue

FedEx Express segment revenue decreased 9% in the first quarter of 2024 primarily due to lower fuel surcharges, volume softness, and a decline in international package and freight base yields.

Lower fuel surcharges had a significant negative impact on yields across all package and freight services during the first quarter of 2024. In addition, international export composite package yield decreased 10% in the first quarter of 2024 driven by reduced demand surcharges, a larger mix of e-commerce volume, and an increase in lower-yielding deferred volume related to the full reopening of the international economy service. Composite freight yield decreased 8% in the first quarter of 2024 due to reduced demand surcharges and an increased mix of deferred freight, also driven by the international economy product reopening.

U.S. domestic average daily package volumes declined 7% as macroeconomic factors led to reduced demand for our services. Global average daily freight pounds decreased 18% primarily as a result of weak macroeconomic conditions as well as lower volume from the U.S. Postal Service. These declines were partially offset by a 3% increase in international export package volume.

FedEx Express Segment Operating Income

FedEx Express segment operating income increased 18% in the first quarter of 2024 due to operating expense improvements resulting from our DRIVE program, as we focused on reducing our permanent cost structure and increasing the flexibility of our network. These initiatives include structural flight takedowns, aligning staffing with volume levels, temporarily parking aircraft, and shifting to one delivery wave per day in the U.S. Reduced revenue, including lower volume from the USPS, partially offset our operating income improvement in the first quarter of 2024.

Fuel expense decreased 40% in the first quarter of 2024 due to a 31% decrease in fuel prices and a 13% decrease in total fuel gallons. Other operating expense decreased 11% in the first quarter of 2024 primarily due to lower outside service contracts expense resulting from a decrease in temporary labor usage and lower bad debt expense. Purchased transportation expense decreased 7% in the first quarter of 2024 primarily due to lower rates for third-party transportation services, partially offset by increased utilization of these services. Salaries and employee benefits expense decreased 2% in the first quarter of 2024 primarily due to decreased staffing to align with lower volume, partially offset by higher variable incentive compensation and wage rates. Maintenance and repairs decreased 12% in the first quarter of 2024 primarily due to lower aircraft maintenance resulting from an increase in aircraft temporarily parked.

FedEx Express segment results include business optimization costs of $10 million in the first quarter of 2024 associated with our plan to drive efficiency and lower our overhead and support costs.

FedEx Express segment results include $14 million of business realignment costs in the first quarter of 2023 associated with our workforce reduction plan in Europe.

During the first quarter of 2024, FedEx Express’s pilots failed to ratify the tentative successor agreement that was approved by the Air Line Pilots Association, International’s FedEx Express Master Executive Council in June 2023. Bargaining for a successor agreement continues. The conduct of mediated negotiations has no impact on our operations. See Note 1 of the accompanying unaudited condensed consolidated financial statements for additional information.

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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 table compares 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
		2023				2022				Change				2023				2022
Revenue		$	8,420			$	8,160				3				100.0		%		100.0		%
Operating expenses:
Salaries and employee benefits			1,667				1,637				2				19.8				20.1
Purchased transportation			3,427				3,713				(8	)			40.7				45.5
Rentals			423				390				8				5.0				4.8
Depreciation and amortization			273				246				11				3.3				3.0
Fuel			7				9				(22	)			0.1				0.1
Maintenance and repairs			159				155				3				1.9				1.9
Business optimization and realignment costs			17				—			NM					0.2				—
Intercompany charges			508				490				4				6.0				6.0
Other			836				826				1				9.9				10.1
Total operating expenses			7,317				7,466				(2	)			86.9		%		91.5		%
Operating income		$	1,103			$	694				59
Operating margin			13.1	%			8.5	%			460		bp
Average daily package volume (ADV)(1):
Ground commercial			4,479				4,368				3
Home delivery			3,846				3,912				(2	)
Economy			736				730				1
Total ADV			9,061				9,010				1
Revenue per package (yield)		$	11.80			$	11.48				3

(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.

FedEx Ground Segment Revenue

FedEx Ground segment revenue increased 3% in the first quarter of 2024 primarily due to yield improvement. Yield increased in the first quarter of 2024 primarily due to base yield improvement, partially offset by lower fuel surcharges. Total average daily volume increased 1% in the first quarter of 2024 primarily due to increased demand for our commercial services related to changing market conditions.

FedEx Ground Segment Operating Income

FedEx Ground segment operating income increased 59% in the first quarter of 2024 primarily due to yield improvement and reduced operating expenses. We lowered our costs in the first quarter of 2024 through DRIVE initiatives that lowered linehaul expense and improved dock and pickup-and-delivery productivity. In addition, we also continued to realize benefits from consolidated sort operations and reduced Sunday deliveries during the first quarter of 2024.

Purchased transportation expense decreased 8% in the first quarter of 2024 primarily due to lower fuel prices and base rates. Rentals and depreciation expense increased 8% and 11%, respectively, in the first quarter of 2024 due to the completion of previously committed multi-year expansion projects. Salaries and employee benefits increased 2% in the first quarter of 2024 due to higher wage rates and variable incentive compensation, partially offset by an increase in productivity.

FedEx Ground segment results include business optimization costs of $17 million in the first quarter of 2024 associated with our plan to drive efficiency and lower our overhead and support costs.

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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 table compares 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
		2023				2022				Change				2023				2022
Revenue		$	2,291			$	2,723				(16	)			100.0		%		100.0		%
Operating expenses:
Salaries and employee benefits			973				1,059				(8	)			42.5				38.9
Purchased transportation			149				221				(33	)			6.5				8.1
Rentals			68				65				5				2.9				2.4
Depreciation and amortization			107				106				1				4.7				3.9
Fuel			138				228				(39	)			6.0				8.4
Maintenance and repairs			75				80				(6	)			3.3				2.9
Intercompany charges			135				132				2				5.9				4.9
Other			165				181				(9	)			7.2				6.6
Total operating expenses			1,810				2,072				(13	)			79.0		%		76.1		%
Operating income		$	481			$	651				(26	)
Operating margin			21.0	%			23.9	%			(290	)	bp
Average daily shipments (in thousands):
Priority			66.1				76.2				(13	)
Economy			28.5				32.1				(11	)
Total average daily shipments			94.6				108.3				(13	)
Weight per shipment (lbs):
Priority			989				1,054				(6	)
Economy			876				938				(7	)
Composite weight per shipment			955				1,020				(6	)
Revenue per shipment:
Priority		$	353.01			$	369.60				(4	)
Economy			407.99				423.59				(4	)
Composite revenue per shipment		$	369.56			$	385.61				(4	)
Revenue per hundredweight:
Priority		$	35.71			$	35.06				2
Economy			46.59				45.16				3
Composite revenue per hundredweight		$	38.71			$	37.82				2

FedEx Freight Segment Revenue

FedEx Freight segment revenue decreased 16% in the first quarter of 2024. The first quarter decrease was primarily due to lower shipments and fuel surcharges, partially offset by base yield improvement.

Average daily shipments decreased 13% in the first quarter of 2024 due to reduced demand for our services, primarily resulting from macroeconomic conditions. Revenue per shipment decreased 4% in the first quarter of 2024 primarily due to lower fuel surcharges, partially offset by base yield improvement resulting from our continued focus on revenue quality.

FedEx Freight Segment Operating Income

FedEx Freight segment operating income decreased 26% in the first quarter of 2024 driven primarily by lower fuel surcharges and shipments, partially offset by base yield improvement.

Fuel expense decreased 39% in the first quarter of 2024 due to lower fuel prices and decreased shipments. Salaries and employee benefits expense decreased 8% in the first quarter of 2024 primarily due to lower staffing to align with decreased shipments and an increase in productivity, partially offset by higher wage rates. Purchased transportation expense decreased 33% in the first quarter of 2024 primarily due to lower shipments and fuel prices and a shift to company linehaul.

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FINANCIAL CONDITION

LIQUIDITY

Cash and cash equivalents totaled $7.1 billion at August 31, 2023, compared to $6.9 billion at May 31, 2023, respectively. The following table provides a summary of our cash flows for the three-month periods ended August 31 (in millions):

		2023				2022
Operating activities:
Net income		$	1,078			$	875
Business optimization and realignment costs, net of payments			(73	)			(14	)
Other noncash charges and credits			1,958				2,111
Changes in assets and liabilities			(733	)			(1,365	)
Cash provided by operating activities			2,230				1,607
Investing activities:
Capital expenditures			(1,290	)			(1,284	)
Purchase of investments			(2	)			(35	)
Proceeds from asset dispositions and other			12				10
Cash used in investing activities			(1,280	)			(1,309	)
Financing activities:
Principal payments on debt			(66	)			(29	)
Proceeds from stock issuances			157				81
Dividends paid			(318	)			(299	)
Purchase of treasury stock			(500	)			—
Cash used in financing activities			(727	)			(247	)
Effect of exchange rate changes on cash			(24	)			(98	)
Net increase (decrease) in cash and cash equivalents		$	199			$	(47	)
Cash and cash equivalents at the end of period		$	7,055			$	6,850

Cash flows from operating activities increased $623 million in the first quarter of 2024 primarily due to working capital changes, driven by an increase in accrued liabilities partially offset by a decrease in accounts receivable from the first quarter of 2023, and an increase in net income. Capital expenditures increased slightly during the three months of 2024 due to increased spending on aircraft and related equipment at FedEx Express, partially offset by decreased spending on package handling equipment and vehicles and trailers at FedEx Ground and FedEx Freight, as well as reduced spending on information technology at FedEx Services, FedEx Express, and FedEx Ground. See “Capital Resources” for a discussion of capital expenditures during 2024 and 2023.

In December 2021, our Board of Directors authorized a stock repurchase program of up to $5 billion of FedEx common stock. As part of the repurchase program, during the first quarter of 2024, we completed an ASR transaction with a bank to repurchase an aggregate of $500 million of our common stock. See Note 1 of the accompanying unaudited condensed consolidated financial statements, “Liquidity Outlook” below, and Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds” for additional information. As of August 31, 2023, $2.1 billion remained available 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
		2023				2022				Percent Change
Aircraft and related equipment		$	554			$	203				173
Package handling and ground support equipment			218				436				(50	)
Vehicles and trailers			167				217				(23	)
Information technology			153				201				(24	)
Facilities and other			198				227				(13	)
Total capital expenditures		$	1,290			$	1,284				—
FedEx Express segment		$	882			$	530				66
FedEx Ground segment			192				441				(56	)
FedEx Freight segment			91				150				(39	)
FedEx Services segment			98				129				(24	)
Other			27				34				(21	)
Total capital expenditures		$	1,290			$	1,284				—

Capital expenditures increased slightly in the first quarter of 2024 primarily due to increased spending on aircraft and related equipment at FedEx Express, partially offset by decreased spending on package handling equipment and vehicles and trailers at FedEx Ground and FedEx Freight, as well as reduced spending on information technology at FedEx Services, FedEx Express, and FedEx Ground.

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 $19.2 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 $814 million principal amount of the Certificates. See Note 4 of the accompanying unaudited condensed consolidated financial statements and Note 6 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, 2023 and May 31, 2023 (in millions):

		August 31, 2023				May 31, 2023
Current Assets		$	11,204			$	10,758
Intercompany Receivable			3,446				3,566
Total Assets			86,377				89,947
Current Liabilities			10,226				9,933
Intercompany Payable			—				—
Total Liabilities			55,905				59,837

The following table presents the summarized statement of income information for the three-month period ended August 31, 2023 (in millions):

Revenue		$	16,315
Intercompany Charges, net			(904	)
Operating Income			1,326
Intercompany Charges, net			49
Income Before Income Taxes			1,205
Net Income		$	906

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, 2023 and May 31, 2023 (in millions):

		August 31, 2023				May 31, 2023
Current Assets		$	4,562			$	4,408
Intercompany Receivable			—				—
Total Assets			71,262				70,016
Current Liabilities			6,503				5,100
Intercompany Payable			9,381				11,011
Total Liabilities			49,051				48,246

The following table presents the summarized statement of income information for the three-month period ended August 31, 2023 (in millions):

Revenue		$	5,565
Intercompany Charges, net			(527	)
Operating Income			(70	)
Intercompany Charges, net			9
Income Before Income Taxes			454
Net Income		$	585

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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 slowdown in the economy, inflationary pressures, rising fuel prices, and geopolitical conflicts. We have $7.1 billion in cash at August 31, 2023 and $3.5 billion in available liquidity under our $1.5 billion three-year credit agreement (the “Three-Year Credit Agreement”) and $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement” and together with the Three-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, and dividend payments.

We executed an ASR agreement in June 2023 to repurchase an aggregate of $500 million of our common stock that was completed in August 2023. See Note 1 of the accompanying unaudited condensed consolidated financial statements for more information. We expect to repurchase an additional $1.5 billion of our common stock in 2024.

Our cash and cash equivalents balance at August 31, 2023 includes $2.6 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.

Our capital expenditures for 2024 are expected to be approximately $5.7 billion, a decrease of $0.5 billion from 2023, as we continue to reduce our capital intensity relative to revenue. We expect lower aircraft spend and reduced capacity investment to be partially offset by investments to optimize our networks and modernize our facilities.

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

During the first quarter of 2024, we made voluntary contributions totaling $200 million to our tax-qualified U.S. domestic pension plan (“U.S. Pension Plan”). We anticipate making $600 million of additional voluntary contributions during the remainder of 2024. There are currently no required minimum contributions to our U.S. Pension Plan, and we maintain a credit balance related to our cumulative excess voluntary pension contributions over those required that exceeds $3.0 billion. The credit balance is subtracted from plan assets to determine the minimum funding requirements. Therefore, we have the flexibility to eliminate all required contributions to our principal U.S. Pension Plan for several years if we were to choose to waive part of that credit balance in any given year. Our U.S. Pension Plan has 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.

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.

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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, 2023, 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 Optimization and Realignment Costs,” “Income Taxes,” “Outlook,” “Liquidity Outlook,” “Critical Accounting Estimates,” and “Legal Proceedings,” 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;

geopolitical developments and additional changes in international trade policies and relations;

the price and availability of jet and vehicle fuel;

failure to successfully implement our business strategy and effectively respond to changes in market dynamics and customer preferences;

our ability to execute our DRIVE transformation program, including Network 2.0, and one FedEx consolidation plan in the expected time frame and at the expected cost and achieve the expected benefits and manage the potential risks associated with DRIVE and the one FedEx consolidation plan;

a significant data breach or other disruption to our technology infrastructure;

the future rate of e-commerce growth and our ability to successfully expand our e-commerce services portfolio;

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;

failure to receive or collect expected insurance coverage;

widespread outbreak of an illness or any other communicable disease or any other public health crisis, including the continuing impact of the COVID-19 pandemic;

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;

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;

damage to our reputation or loss of brand equity;

changes in the business or financial soundness of the USPS, including strategic changes to its operations to reduce its reliance on the air network of FedEx Express, or our relationship with the USPS;

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;

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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;

noncash impairment charges related to our goodwill and certain deferred tax assets;

failure to attract and retain employee talent and our ability to meet our labor and purchased transportation needs while controlling related costs and maintain our company culture;

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 negotiations to reach new collective bargaining agreements (including with the pilots of FedEx Express);

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;

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;

our ability to achieve or demonstrate progress on our goal of carbon neutrality for our global operations by calendar 2040;

our ability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography;

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;

increasing costs related to changing and heightened regulations and enforcement related to data protection;

our ability to mitigate the technological, operational, legal and regulatory, and reputational risks related to autonomous technology and artificial intelligence;

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;

loss or delay in the collection of accounts receivable;

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 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;

adverse rulings on appeals and in other future judicial decisions, subsequent adverse jury findings, and changes in judicial precedent;

the sufficiency of insurance coverage we purchase;

the effect 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;

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difficulties experienced by the companies with which we contract to fly smaller regional “feeder” aircraft in attracting and retaining pilots, which could cause a reduction of service offered to certain locations, service disruptions, increased costs of operations, and other difficulties;

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;

governmental underinvestment in transportation infrastructure, which could increase our costs and adversely affect our service levels due to traffic congestion, prolonged closure of key thoroughfares, or sub-optimal routing of our vehicles and aircraft;

successful completion of our planned stock repurchases;

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; and

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 and current reports on Form 8-K.

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.