Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	November 30, 2018 (Unaudited)		May 31, 2018		August 31, 2019 (Unaudited)		May 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,123	$	3,265	$	2,389	$	2,319
Receivables, less allowances of $308 and $401		9,573		8,481
Spare parts, supplies and fuel, less allowances of $276 and $268		522		525
Receivables, less allowances of $304 and $300						9,312		9,116
Spare parts, supplies and fuel, less allowances of $337 and $335						574		553
Prepaid expenses and other		1,220		1,070		742		1,098
Total current assets		13,438		13,341		13,017		13,086
PROPERTY AND EQUIPMENT, AT COST		57,501		55,121		61,436		59,511
Less accumulated depreciation and amortization		28,114		26,967		29,826		29,082
Net property and equipment		29,387		28,154		31,610		30,429
OTHER LONG-TERM ASSETS
Operating lease right-of-use assets						13,819		—
Goodwill		6,908		6,973		6,821		6,884
Other assets		3,556		3,862		3,185		4,004
Total other long-term assets		10,464		10,835		23,825		10,888
	$	53,289	$	52,330	$	68,452	$	54,403

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

	November 30, 2018 (Unaudited)			May 31, 2018			August 31, 2019 (Unaudited)			May 31, 2019
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Short-term borrowings	$	250		$	—
Current portion of long-term debt		642			1,342		$	35		$	964
Accrued salaries and employee benefits		1,850			2,177			1,522			1,741
Accounts payable		3,400			2,977			3,179			3,030
Operating lease liabilities								1,896			—
Accrued expenses		3,354			3,131			3,303			3,278
Total current liabilities		9,496			9,627			9,935			9,013
LONG-TERM DEBT, LESS CURRENT PORTION		16,399			15,243			18,726			16,617
OTHER LONG-TERM LIABILITIES
Deferred income taxes		3,253			2,867			2,953			2,821
Pension, postretirement healthcare and other benefit obligations		1,735			2,187			4,132			5,095
Self-insurance accruals		1,844			1,784			1,924			1,899
Operating lease liabilities								12,137			—
Deferred lease obligations		605			551			—			531
Deferred gains, principally related to aircraft transactions		137			121
Other liabilities		526			534			479			670
Total other long-term liabilities		8,100			8,044			21,625			11,016
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of November 30, 2018 and May 31, 2018		32			32
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of August 31, 2019 and May 31, 2019								32			32
Additional paid-in capital		3,185			3,117			3,257			3,231
Retained earnings		26,080			24,823			25,048			24,648
Accumulated other comprehensive loss		(817	)		(578	)		(918	)		(865	)
Treasury stock, at cost		(9,186	)		(7,978	)		(9,253	)		(9,289	)
Total common stockholders’ investment		19,294			19,416			18,166			17,757
	$	53,289		$	52,330		$	68,452		$	54,403

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

	Three Months Ended						Six Months Ended
	November 30,						November 30,						Three Months Ended
	2018			2017			2018			2017			August 31,
				As Adjusted						As Adjusted			2019			2018
REVENUES	$	17,824		$	16,313		$	34,876		$	31,610		$	17,048		$	17,052
OPERATING EXPENSES:
Salaries and employee benefits		6,260			5,889			12,520			11,553			6,087			6,260
Purchased transportation		4,346			3,840			8,313			7,285			4,028			3,967
Rentals and landing fees		836			835			1,659			1,653			920			823
Depreciation and amortization		828			756			1,636			1,507			879			808
Fuel		1,052			818			2,038			1,521			870			986
Maintenance and repairs		751			665			1,486			1,340			768			735
Other		2,583			2,395			4,985			4,665			2,519			2,402
		16,656			15,198			32,637			29,524			16,071			15,981
OPERATING INCOME		1,168			1,115			2,239			2,086			977			1,071
OTHER INCOME (EXPENSE):
Interest, net		(129	)		(124	)		(241	)		(238	)		(137	)		(127	)
Other retirement plans income		158			147			316			293			168			158
Other, net		(20	)		1			(36	)		(20	)		(12	)		(1	)
		9			24			39			35			19			30
INCOME BEFORE INCOME TAXES		1,177			1,139			2,278			2,121			996			1,101
PROVISION FOR INCOME TAXES		242			364			508			750			251			266
NET INCOME	$	935		$	775		$	1,770		$	1,371		$	745		$	835
EARNINGS PER COMMON SHARE:
Basic	$	3.56		$	2.89		$	6.71		$	5.12		$	2.86		$	3.15
Diluted	$	3.51		$	2.84		$	6.60		$	5.03		$	2.84		$	3.10
DIVIDENDS DECLARED PER COMMON SHARE	$	0.65		$	0.50		$	1.95		$	1.50		$	1.30		$	1.30

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

	Three Months Ended						Six Months Ended						Three Months Ended
	November 30,						November 30,						August 31,
	2018			2017			2018			2017			2019			2018
NET INCOME	$	935		$	775		$	1,770		$	1,371		$	745		$	835
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of tax benefit of $7 and $31 in 2018 and tax benefit of $7 and tax expense of $18 in 2017		(31	)		(90	)		(193	)		19
Amortization of prior service credit, net of tax benefit of $7 and $14 in 2018 and tax benefit of $11 and $22 in 2017		(23	)		(19	)		(46	)		(38	)
Foreign currency translation adjustments, net of tax benefit of $3 in 2019 and $24 in 2018														(83	)		(162	)
Amortization of prior service credit, net of tax benefit of $6 in 2019 and $7 in 2018														(21	)		(23	)
		(54	)		(109	)		(239	)		(19	)		(104	)		(185	)
COMPREHENSIVE INCOME	$	881		$	666		$	1,531		$	1,352		$	641		$	650

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

	Six Months Ended						Three Months Ended
	November 30,						August 31,
	2018			2017			2019			2018
Operating Activities:
Net income	$	1,770		$	1,371		$	745		$	835
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		1,636			1,507			879			808
Provision for uncollectible accounts		160			116			105			82
Stock-based compensation		108			103			67			68
Deferred income taxes and other noncash items		236			327			694			23
Changes in assets and liabilities:
Receivables		(1,343	)		(983	)		(267	)		(380	)
Other assets		(111	)		(338	)		(118	)		(120	)
Accounts payable and other liabilities		(227	)		(564	)		(1,537	)		(584	)
Other, net		(50	)		(41	)		(3	)		(31	)
Cash provided by operating activities		2,179			1,498			565			701
Investing Activities:
Capital expenditures		(2,634	)		(2,621	)		(1,418	)		(1,179	)
Business acquisitions, net of cash acquired		—			(44	)
Proceeds from asset dispositions and other		53			12			(1	)		78
Cash used in investing activities		(2,581	)		(2,653	)		(1,419	)		(1,101	)
Financing Activities:
Proceeds from short-term borrowings		248			250
Proceeds from short-term borrowings, net								—			299
Principal payments on debt								(985	)		(2	)
Proceeds from debt issuances		1,233			—			2,093			—
Principal payments on debt		(785	)		(28	)
Proceeds from stock issuances		45			205			12			25
Dividends paid		(173	)		(268	)		(170	)		(173	)
Purchase of treasury stock		(1,271	)		(270	)		(3	)		(625	)
Other, net		1			3			(5	)		4
Cash used in financing activities		(702	)		(108	)
Cash provided by (used in) financing activities								942			(472	)
Effect of exchange rate changes on cash		(38	)		62			(18	)		(24	)
Net decrease in cash and cash equivalents		(1,142	)		(1,201	)
Net increase (decrease) in cash and cash equivalents								70			(896	)
Cash and cash equivalents at beginning of period		3,265			3,969			2,319			3,265
Cash and cash equivalents at end of period	$	2,123		$	2,768		$	2,389		$	2,369

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

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ INVESTMENT

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of FedEx Corporation (“FedEx”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission (“SEC”) instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, ~~2018~~2019 (“Annual Report”). ~~Accordingly, significant~~Significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of ~~November 30, 2018,~~August 31, 2019, and the results of our operations for the ~~three- and six-month~~three-month periods ended ~~November 30,~~August 31, 2019 and 2018, ~~and 2017 and~~ cash flows for the ~~six-month~~three-month periods ended ~~November 30,~~August 31, 2019 and 2018, and ~~2017.~~changes in common stockholders’ investment for the three-month periods ended August 31, 2019 and 2018. Operating results for the ~~three- and six-month periods~~three-month period ended ~~November 30, 2018~~August 31, 2019 are not necessarily indicative of the results that may be expected for the year ending May 31, ~~2019.~~2020.

RECLASSIFICATIONS. Certain reclassifications have been made to the prior years’ condensed consolidated financial statements to conform to the current year presentation.

We recognize revenue upon delivery of shipments for our transportation businesses and upon completion of services for our business services, logistics and trade services businesses. Transportation services are provided with the use of employees and independent businesses that contract with FedEx. FedEx is the principal to the transaction for most of these services and revenue is recognized on a gross basis based on the transfer of control to the customer. Costs associated with independent businesses are recognized as incurred and included in the caption “Purchased transportation” in the accompanying unaudited condensed consolidated statements of income.

For shipments in transit, revenue is recorded based on the percentage of service completed at the balance sheet date which results in our recognizing revenue over time as we perform the services in the contract because of the continuous transfer of control to the customer. Our customers receive the benefit of our services as the goods are transported from one location to another. If we were unable to complete delivery to the final location, another entity would not need to reperform the transportation service already performed. As control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance obligation.

The vast majority of our contracts include only one performance obligation, which is short in duration and spans only a few days. However, if a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative stand-alone selling prices of the promised goods or services underlying each performance obligation. We frequently sell standard transportation services with observable stand-alone sales prices. In these instances, the observable stand-alone sales are used to determine the stand-alone selling price.

We sell customized customer-specific solutions, such as logistics, through which we provide the service of integrating a complex set of tasks and components into a single capability (even if that single capability results in the delivery of multiple units). Therefore, the entire contract is accounted for as one performance obligation. In these cases, we typically use the expected cost plus a margin approach to estimate the stand-alone selling price of each performance obligation.

It is common for our contracts to contain customer incentives, guaranteed service refunds or other provisions that can either increase or decrease the transaction price. These variable amounts are generally awarded based upon certain incentive achievements or performance metrics. We estimate variable consideration as the most likely amount to which we expect to be entitled. Estimates for adjustments to revenue and accounts receivable are recognized at the time of shipment for certain customer initiatives, money-back service guarantees and billing corrections based on our assessment of historical, current and forecasted information available. Delivery costs are accrued as incurred.

Contracts are often modified to account for changes in the rates we charge our customers or to add additional distinct services. We consider contract modifications to exist when the modification either creates new enforceable rights and obligations or alters the existing arrangement. Contract modifications that add distinct goods or services are treated as separate contracts. Contract modifications that do not add distinct goods or services typically change the price of existing services. These contract modifications are accounted for prospectively as the remaining performance obligations are executed.

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

Gross contract assets related to in-transit packages totaled ~~$600~~$466 million and ~~$542~~$533 million at ~~November 30, 2018~~August 31, 2019 and May 31, ~~2018,~~2019, respectively. Contract assets net of deferred unearned revenue were ~~$423~~$338 million and ~~$363~~$364 million at ~~November 30, 2018~~August 31, 2019 and May 31, ~~2018,~~2019, respectively. Contract assets are included within current assets in the accompanying unaudited condensed consolidated balance sheets. Contract liabilities related to advance payments from customers were $9$10 million and ~~$13~~$11 million at ~~November 30, 2018~~August 31, 2019 and May 31, ~~2018,~~2019, respectively. Contract liabilities are included within current liabilities in the accompanying unaudited condensed consolidated balance sheets.

Our contract logistics, global trade services and certain transportation businesses engage in some transactions wherein they act as agents. Revenue from these transactions is recorded on a net basis. Net revenue includes billings to customers less third-party charges, including transportation or handling costs, fees, commissions and taxes and duties.

Certain of our revenue-producing transactions are subject to taxes, such as sales tax, assessed by governmental authorities. We present these revenues net of tax. Under the typical payment terms of our customer contracts, the customer pays at periodic intervals (e.g., every 15 days, 30 days, 45 days, etc.) for shipments included on invoices received. It is not customary business practice to extend payment terms past 90 days, and as such, we do not have a practice of including a significant financing component within our revenue contracts with customers.

The following table provides revenue by service type (dollars in millions) for the periods ended ~~November 30.~~August 31. This presentation is consistent with how we organize our segments internally for making operating decisions and measuring performance.

	Three Months Ended						Six Months Ended
	November 30,						November 30,						Three Months Ended
	2018			2017			2018			2017			2019		2018
REVENUE BY SERVICE TYPE
FedEx Express segment:
Package:
U.S. overnight box	$	1,948		$	1,787		$	3,834		$	3,537		$	1,866	$	1,886
U.S. overnight envelope		444			432			912			882			479		468
U.S. deferred		1,060			922			2,012			1,800			956		952
Total U.S. domestic package revenue		3,452			3,141			6,758			6,219			3,301		3,306
International priority		1,896			1,865			3,770			3,628			1,817		1,874
International economy		885			815			1,735			1,585			855		850
Total international export package revenue		2,781			2,680			5,505			5,213			2,672		2,724
International domestic⁽¹⁾		1,203			1,228			2,334			2,284			1,076		1,131
Total package revenue		7,436			7,049			14,597			13,716			7,049		7,161
Freight:
U.S.		792			688			1,522			1,301			695		730
International priority		564			541			1,097			995			464		533
International economy		554			481			1,073			862			516		519
International airfreight		83			100			168			183			66		85
Total freight revenue		1,993			1,810			3,860			3,341			1,741		1,867
Other		175			217			369			419			155		194
Total FedEx Express segment		9,604			9,076			18,826			17,476			8,945		9,222
FedEx Ground segment		5,142			4,525			9,941			8,770			5,179		4,799
FedEx Freight segment		1,918			1,673			3,877			3,337			1,905		1,959
FedEx Services segment		429			416			846			816			4		9
FedEx Trade Networks operating segment		966			834			1,850			1,633
Eliminations		(235	)		(211	)		(464	)		(422	)
Other and eliminations⁽²⁾														1,015		1,063
	$	17,824		$	16,313		$	34,876		$	31,610		$	17,048	$	17,052

LEASES. We lease certain facilities, aircraft, equipment and vehicles under operating and finance leases that expire at various dates through 2059. A determination of whether a contract contains a lease is made at the inception of the arrangement. Our leased facilities include national, regional and metropolitan sorting facilities, retail facilities and administrative buildings. We leased 6% of our total aircraft fleet as of August 31, 2019 and May 31, 2019.

Our leases generally contain options to extend or terminate the lease. We reevaluate our leases on a regular basis to consider the economic and strategic incentives of exercising the renewal options, and how they align with our operating strategy. Therefore, substantially all the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the right-of-use asset and lease liability as the options to extend are not reasonably certain at lease commencement.

The lease liabilities are measured at the lease commencement date and determined using the present value of the minimum lease payments not yet paid and our incremental borrowing rate, which approximates the rate at which we would borrow, on a collateralized basis, over the term of a lease in the applicable currency environment. The interest rate implicit in the lease is generally not determinable in transactions where we are the lessee.

For real estate leases, we account for lease components and non-lease components (such as common area maintenance) as a single lease component. Certain real estate leases require additional payments based on sales volume and index based rate increases, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Certain leases contain fixed lease payments for items such as real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots of Federal Express Corporation (“FedEx Express”), who are a small number of its total employees, are employed under a collective bargaining agreement that took effect on November 2, 2015. The collective bargaining agreement is scheduled to become amendable in November 2021. Other than the pilots at FedEx Express and drivers at one FedEx Freight, Inc. facility, our U.S. employees have thus far chosen not to unionize (we acquired FedEx Supply Chain Distribution System, Inc. ~~(“FedEx Supply Chain,” formerly GENCO Distribution System, Inc.)~~ in 2015, which already had a small number of employees who are members of unions). Additionally, certain of FedEx ~~Express’s~~Express non-U.S. employees are ~~unionized.~~unionized, and a union has been certified to represent owner-drivers at a FedEx Freight Canada, Corp. facility.

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

Our stock-based compensation expense was ~~$40~~$67 million for the three-month period ended ~~November 30, 2018~~August 31, 2019 and ~~$108 million for the six-month period ended November 30, 2018. Our stock-based compensation expense was $41~~$68 million for the three-month period ended ~~November 30, 2017 and $103 million for the six-month period ended November 30, 2017.~~August 31, 2018. Due to its immateriality, additional disclosures related to stock-based compensation have been excluded from this quarterly report.

DERIVATIVE FINANCIAL INSTRUMENTS. Our risk management strategy includes the select use of derivative instruments to reduce the effects of volatility in foreign currency exchange exposure on operating results and cash flows. In accordance with our risk management policies, we do not hold or issue derivative instruments for trading or speculative purposes. All derivative instruments are recognized in the financial statements at fair value, regardless of the purpose or intent for holding them.

When we become a party to a derivative instrument and intend to apply hedge accounting, we formally document the hedge relationship and the risk management objective for undertaking the hedge, which includes designating the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge or a net investment hedge.

If a derivative is designated as a cash flow hedge, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in other comprehensive income. For net investment hedges, the entire change in the fair value is recorded in the currency translation adjustment section of other comprehensive income. Any portion of a change in the fair value of a derivative that is considered to be ineffective, along with the change in fair value of any derivatives not designated in a hedging relationship, is immediately recognized in the income statement. We do not have any derivatives designated as a cash flow hedge for any period presented. Accordingly, additional disclosures about cash flow hedges are excluded from this report. On August 13, 2019, we designated €294 million of debt as a net investment hedge to reduce the volatility of the U.S. dollar value of a portion of our euro-denominated net investment. As of August 31, 2019, the designated net investment’s net equity balance exceeds the balance outstanding on the euro-denominated debt and all other critical terms of the hedging instrument and hedged net investment continue to match. Therefore, the hedging relationship is considered effective.

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

In December 2017, the SEC staff issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance to registrants in accounting for income taxes under the Tax Cuts and Jobs Act (“TCJA”). SAB 118 was issued to address the application of U.S. generally accepted accounting principles in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to finalize the calculations for certain income tax effects of the TCJA. In accordance with SAB 118, we made reasonable estimates and recorded provisional amounts for the TCJA during 2018. Under the transitional provisions of SAB 118, we have a one-year measurement period to complete the accounting for the initial tax effects of the TCJA.

During the second quarter of 2019, we revised the provisional benefit associated with the remeasurement of our net U.S. deferred tax liability due to the corporate tax rate reduction under the TCJA. As a result, we recognized $4 million of tax expense resulting in a decrease to the $1.15 billion provisional benefit recorded in 2018. No other change to the provisional amounts recorded at May 31, 2018 has been recorded. We will continue to adjust provisional amounts for the impacts of the TCJA as more information and further guidance becomes available during the measurement period, which ends December 22, 2018.

~~In 2014,~~2016, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board issued a new accounting standard that supersedes virtually all existing revenue recognition guidance under generally accepted accounting principles in the United States. The fundamental principles of the new guidance are that companies should recognize revenue in a manner that reflects the timing of the transfer of services to customers and the amount of revenue recognized reflects the consideration that a company expects to receive for the goods and services provided. The new guidance establishes a five-step approach for the recognition of revenue. We adopted this standard as of June 1, 2018 (fiscal 2019) using the modified retrospective method of adoption as permitted by the standard. The new guidance did not have an impact on our revenue recognition policies, practices or systems; therefore, there was no cumulative-effect adjustment to retained earnings as of June 1, 2018.

In March 2017, the FASB issued an Accounting Standards Update (ASU 2017-07) that changes how employers that sponsor defined benefit pension or other postretirement benefit plans present the net periodic benefit cost in the income statement. This new guidance requires entities to report the service cost component in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component outside of income from operations. This standard impacts our operating income but has no impact on our net income or earnings per share. We adopted this standard effective June 1, 2018 (fiscal 2019) and applied these changes retrospectively. As such, prior year financial results are recast to conform to these new rules upon adoption.

~~The following table presents our results under our historical method of accounting and as adjusted to reflect our adoption of ASU 2017-07 (in millions):~~

~~In 2016, the FASB~~ issued a new lease accounting standard, which requires lessees to put most leases on their balance sheets but recognize the expenses in their income statements in a manner similar to current practice. ~~The new standard states that a lessee will~~Lessees are required to recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Expenses related to leases determined to be operating leases ~~will be~~are recognized on a straight-line basis, while those determined to be ~~financing~~finance leases ~~will be~~are recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement. ~~Based~~

We adopted this new standard on June 1, 2019 using a modified retrospective transition method. Using the modified retrospective transition method of adoption, we did not adjust the balance sheet for comparative periods but recorded a cumulative effect adjustment to retained earnings on June 1, 2019. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption. We also elected the practical expedient to not separate lease and non-lease components for the majority of our classes of assets. For leases in which the lease ~~portfolio, we currently anticipate recognizing a~~and non-lease components have been combined, the lease expense includes expenses such as common area maintenance. We have made an accounting policy election not to recognize leases with an initial term of 12 months or less on the consolidated balance sheet.

The adoption of the new lease accounting standard resulted in the recognition of an operating lease liability of $14.2 billion and ~~related~~an operating right-of-use asset ~~on our balance sheet~~ of ~~approximately $13~~$14.1 billion, with an immaterial impact on our income statement compared to the ~~current~~previous lease accounting model. ~~However,~~Existing prepaid asset and net deferred rent liability balances of $154 million and $309 million, respectively, were recorded to the ~~ultimate impact of the standard will depend on our lease portfolio as~~right-of-use asset. The cumulative effect of the adoption ~~date. We are currently accumulating~~to retained earnings was an increase of $57 million ($47 million, net of tax), primarily related to the reclassification of deferred gains related to sale-leasebacks of aircraft. Substantially all of ~~the necessary information required to properly account for the~~our lease arrangements are operating leases under the new standard. ~~Additionally, we are implementing an enterprise-wide lease management system to assist in the accounting~~The new standard had a material impact on our balance sheet, but did not materially impact consolidated operating results and ~~are evaluating~~ had no impact on operating cash flows.

See “Leases” and Note 7 for additional ~~changes to our processes and internal controls to ensure we meet the standard’s reporting and disclosure requirements. These changes will be effective June 1, 2019 (fiscal 2020)~~information.

In February 2018, the FASB issued ~~an Accounting Standards Update~~ASU 2018-02 that ~~will permit~~permits companies to reclassify the income tax effect of the ~~TCJA~~Tax Cuts and Jobs Act on items within ~~accumulated other comprehensive income (loss)~~Accumulated Other Comprehensive Income (“AOCI”) to retained earnings. We adopted this new standard on June 1, 2019.

In June 2016, the FASB issued ASU 2016-13 that changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. These changes will be effective June 1, ~~2019~~2020 (fiscal ~~2020)~~2021). We are ~~continuing to assess~~assessing the impact of this new standard on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued an Accounting Standards Update (ASU 2018-14) that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. We expect this new guidance will have minimal impact on our financial reporting. These changes will be effective June 1, 2020 (fiscal 2021) and will be applied retrospectively. We plan to early adopt in the fourth quarter of fiscal 2019.

~~In August 2018, the FASB issued an Accounting Standards Update (ASU 2018-15)~~ASU 2018-15 that reduces the complexity ~~for~~of accounting for costs of implementing a cloud computing service arrangement and aligns the accounting for capitalizing implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software. These changes will be effective June 1, ~~2020 (fiscal 2021).~~2020. We are assessing the impact of this new standard on our consolidated financial statements and related disclosures.

TREASURY SHARES. In January 2016, our Board of Directors authorized a ~~share~~stock repurchase program of up to 25 million shares. 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 limit was set for the completion of the program, and the program may be suspended or discontinued at any time.

During the ~~second~~first quarter of ~~2019,~~2020, we repurchased ~~2.8~~0.02 million shares of FedEx common stock at an average price of ~~$228.35~~$156.90 per share for a total of ~~$646~~$3 million. ~~During the first half of 2019, we purchased 5.4 million shares of FedEx common stock at an average price of $233.44 per share for a total of $1.3 billion.~~ As of ~~November 30, 2018, 6.3~~August 31, 2019, 5.1 million shares remained under the ~~current share~~stock repurchase authorization.

DIVIDENDS DECLARED PER COMMON SHARE. On ~~November~~August 16, ~~2018,~~2019, our Board of Directors declared a quarterly dividend of $0.65 per share of common stock. The dividend will be paid on ~~January 2,~~October 1, 2019 to stockholders of record as of the close of business on ~~December 10, 2018.~~September 9, 2019. Each quarterly dividend payment is subject to review and approval by our Board of Directors, and we evaluate our dividend payment amount on an annual basis.

The following table provides changes in AOCI, net of tax, reported in our unaudited condensed consolidated financial statements for the three-month periods ended ~~November 30~~August 31 (in millions; amounts in parentheses indicate debits to AOCI):

	Three Months Ended						Six Months Ended
	2018			2017			2018			2017			2019			2018
Foreign currency translation loss:
Balance at beginning of period	$	(921	)	$	(576	)	$	(759	)	$	(685	)	$	(954	)	$	(759	)
Translation adjustments		(31	)		(90	)		(193	)		19			(83	)		(162	)
Reclassification to retained earnings due to the adoption of ASU 2018-02														1			—
Balance at end of period		(952	)		(666	)		(952	)		(666	)		(1,036	)		(921	)
Retirement plans adjustments:
Balance at beginning of period		158			251			181			270			89			181
Reclassifications from AOCI		(23	)		(19	)		(46	)		(38	)		(21	)		(23	)
Reclassification to retained earnings due to the adoption of ASU 2018-02														50			—
Balance at end of period		135			232			135			232			118			158
Accumulated other comprehensive (loss) at end of period	$	(817	)	$	(434	)	$	(817	)	$	(434	)	$	(918	)	$	(763	)

The following table presents details of the reclassifications from AOCI for the three-month periods ended ~~November 30~~August 31 (in millions; amounts in parentheses indicate debits to earnings):

	Amount Reclassified from AOCI												Affected Line Item in the Income Statement
	Three Months Ended						Six Months Ended							Amount Reclassified from AOCI						Affected Line Item in the Income Statement
	2018			2017			2018			2017				2019			2018
Amortization of retirement plans prior service credits, before tax	$	30		$	30		$	60		$	60		Salaries and employee benefits	$	27		$	30		Salaries and employee benefits
Income tax benefit		(7	)		(11	)		(14	)		(22	)	Provision for income taxes		(6	)		(7	)	Provision for income taxes
AOCI reclassifications, net of tax	$	23		$	19		$	46		$	38		Net income	$	21		$	23		Net income

We have a shelf registration statement filed with the SEC that allows us to sell, in one or more future offerings, any combination of our unsecured debt securities and common stock.

During the ~~second~~first quarter of ~~2019,~~2020, we issued ~~$1.25~~$2.1 billion of senior unsecured debt under our current shelf registration statement, comprised of ~~$400 million~~$1.0 billion of ~~4.20%~~3.10% fixed-rate notes due in ~~October 2028, and $850~~August 2029, €500 million of ~~4.95%~~0.45% fixed-rate notes due in ~~October 2048. Interest on these~~August 2025 and €500 million of 1.30% fixed-rate notes ~~is paid semi-annually.~~due in August 2031. We used the net proceeds to make voluntary contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) during the first quarter of 2020 and to redeem the ~~$750~~$400 million aggregate principal amount of ~~8.00%~~2.30% notes due ~~January 15, 2019,~~February 1, 2020 and the €500 million aggregate principal amount of 0.50% notes due April 9, 2020. The remaining net proceeds are being used for general corporate purposes.

We have a ~~five-year~~ $2.0 billion ~~revolving~~five-year credit ~~facility that~~agreement (the “Five-Year Credit Agreement”) and a $1.5 billion 364-day credit agreement (the “364-Day Credit Agreement” and, together with the Five-Year Credit Agreement, the “Credit Agreements”). The Five-Year Credit Agreement expires in ~~November 2020. The facility, which~~March 2024 and includes a ~~$500~~$250 million letter of credit ~~sublimit, is~~sublimit. The 364-Day Credit Agreement expires in March 2020. The Credit Agreements are available to finance our operations and other cash flow needs. The ~~agreement contains~~Credit Agreements contain a financial covenant ~~which requires~~requiring us to maintain a ratio of debt to consolidated earnings (excluding ~~non-cash~~noncash retirement plans mark-to-market adjustments and ~~non-cash~~noncash asset impairment charges) before interest, taxes, depreciation and amortization (“adjusted EBITDA”) of not more than 3.5 to 1.0, calculated as of the end of the applicable quarter on a rolling four-quarters basis. The ratio of our debt to adjusted EBITDA was ~~2.1~~2.41 to 1.0 at ~~November 30, 2018.~~August 31, 2019. We believe this covenant is the only significant restrictive covenant in ~~our revolving credit agreement. Our revolving credit agreement contains~~the Credit Agreements. The Credit Agreements contain other customary covenants that do not, individually or in the aggregate, materially restrict the conduct of our business. We are in compliance with ~~this~~the financial covenant and all other covenants ~~of our revolving credit agreement~~in the Credit Agreements and do not expect the covenants to affect our operations, including our liquidity or expected funding needs. If we failed to comply with the financial covenant or any other covenants in the Credit Agreements, our access to financing could become limited.

~~During the second quarter~~As of August 31, 2019, ~~we issued~~0 commercial paper ~~to provide us with additional short-term liquidity. The maximum amount outstanding during the quarter~~ was $600 million. Our commercial paper program is backed by unused commitments under the revolving credit facility and borrowings under the program reduce the amount available under the credit facility. As of November 30, 2018, $250 million of commercial paper and $54outstanding. However, $53 million in letters of credit were outstanding, leaving ~~$1.696~~$3.447 billion available under the ~~revolving credit facility~~Credit Agreements for future borrowings.

Long-term debt, including current maturities and exclusive of ~~capital~~finance leases, had carrying values of ~~$16.9~~$18.6 billion at ~~November 30, 2018~~August 31, 2019 and ~~$16.5~~$17.5 billion at May 31, ~~2018,~~2019, compared with estimated fair values of ~~$16.2~~$20.1 billion at ~~November 30, 2018~~August 31, 2019 and ~~$16.6~~$17.8 billion at May 31, ~~2018.~~2019. The annualized weighted-average interest rate on long-term debt was ~~3.5%~~3.4% at ~~November 30, 2018.~~August 31, 2019. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value of our long-term debt is classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

The calculation of basic and diluted earnings per common share for the three-month periods ended ~~November 30~~August 31 was as follows (in millions, except per share amounts):

	Three Months Ended				Six Months Ended
	2018		2017		2018		2017		2019		2018
Basic earnings per common share:
Net earnings allocable to common shares⁽¹⁾	$	933	$	774	$	1,768	$	1,369	$	744	$	834
Weighted-average common shares		262		268		263		268		260		265
Basic earnings per common share	$	3.56	$	2.89	$	6.71	$	5.12	$	2.86	$	3.15
Diluted earnings per common share:
Net earnings allocable to common shares⁽¹⁾	$	933	$	774	$	1,768	$	1,369	$	744	$	834
Weighted-average common shares		262		268		263		268		260		265
Dilutive effect of share-based awards		4		4		5		4		2		4
Weighted-average diluted shares		266		272		268		272		262		269
Diluted earnings per common share	$	3.51	$	2.84	$	6.60	$	5.03	$	2.84	$	3.10
Anti-dilutive options excluded from diluted earnings per common share		4.0		2.9		3.8		3.0		10.9		3.7

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

Our effective tax rate was 20.6% for the second quarter and 22.3% for the first half of 2019, compared with 32.0% for the second quarter and 35.4% for the first half of 2018. The 2019 tax rate was favorably impacted by the TCJA, which resulted in benefits of approximately $150 million and $285 million during the second quarter and first half of 2019, respectively, primarily from the lower statutory tax rate on fiscal 2019 earnings. The 2019 tax rates were also favorably impacted by a tax benefit of approximately $60 million from accelerated deductions to be claimed on FedEx’s 2018 U.S. income tax return. The 2018 tax rate benefited from foreign tax credits associated with a dividend paid from our foreign operations and tax benefits from share-based payments. The 2018 tax rate was negatively impacted by costs incurred in connection with the integration of the foreign operations of FedEx Express and TNT Express B.V. (“TNT Express”), the effects of the NotPetya cyberattack on lower taxed foreign earnings and changes in uncertain tax positions.

On August 1, 2018, the U.S. Treasury Department released proposed regulations covering the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the TCJA. Certain guidance included in these proposed regulations is inconsistent with our interpretation that led to the recognition of a $225 million ($0.94 per diluted share) benefit in 2018 (the “2018 Benefit”). Notwithstanding this inconsistency, we are confident in our interpretation and intend to defend this position through litigation, if necessary. This proposed guidance is not authoritative and is subject to change in the regulatory review process. However, if the proposed guidance is included in the final regulations as drafted or we are ultimately unsuccessful in defending our position, we may be required to reverse the 2018 Benefit.

The U.S. Treasury Department has also released proposed regulations related to the business interest expense limitations, foreign tax credit guidance, base-erosion and anti-abuse tax provisions of the TCJA. This proposed guidance is not authoritative and is subject to change in the regulatory review process. We continue to review these proposed regulations and consider their potential impact on our effective tax rate.

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

Our retirement plans costs for the three-month periods ended ~~November 30~~August 31 were as follows (in millions):

	Three Months Ended				Six Months Ended
	2018		2017		2018		2017		2019		2018
Defined benefit pension plans, net	$	29	$	37	$	57	$	74	$	37	$	28
Defined contribution plans		133		124		277		251		142		144
Postretirement healthcare plans		18		18		37		37		22		19
	$	180	$	179	$	371	$	362	$	201	$	191

Net periodic benefit cost of the pension and postretirement healthcare plans for the three-month periods ended ~~November 30~~August 31 included the following components (in millions):

	Three Months Ended
	U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans				U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans
	2018			2017			2018			2017			2018		2017		2019			2018			2019			2018			2019		2018
Service cost	$	172		$	170		$	25		$	23		$	8	$	9	$	192		$	172		$	24		$	24		$	11	$	9
Other retirement plans (income) expense:
Interest cost		238			278			12			13			10		9		250			238			11			13			11		10
Expected return on plan assets		(376	)		(406	)		(12	)		(11	)		—		—		(400	)		(377	)		(13	)		(12	)		—		—
Amortization of prior service credit and other		(30	)		(29	)		—			(1	)		—		—		(27	)		(29	)		—			(1	)		—		—
		(168	)		(157	)		—			1			10		9		(177	)		(168	)		(2	)		—			11		10
	$	4		$	13		$	25		$	24		$	18	$	18	$	15		$	4		$	22		$	24		$	22	$	19

	Six Months Ended
	U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans
	2018			2017			2018			2017			2018		2017
Service cost	$	344		$	340		$	49		$	46		$	17	$	18
Other retirement plans (income) expense:
Interest cost		476			557			25			25			20		19
Expected return on plan assets		(753	)		(812	)		(24	)		(22	)		—		—
Amortization of prior service credit and other		(59	)		(59	)		(1	)		(1	)		—		—
		(336	)		(314	)		—			2			20		19
	$	8		$	26		$	49		$	48		$	37	$	37

~~Contributions~~We made voluntary contributions to our ~~tax-qualified~~ U.S. ~~domestic pension plans for~~Pension Plans of $1.0 billion during the ~~six-month periods ended November 30 were as follows (in millions):~~

We provide a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the respected FedEx brand. Our primary operating companies are FedEx Express, including TNT 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 ~~U.S.~~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.

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

Effective June 1, 2019, the results of the FedEx Office operating segment are included in “Corporate, other and eliminations.” This change was made to reflect our internal management reporting structure. Prior year amounts have been revised to reflect current year presentation.

The FedEx Services segment operates combined sales, marketing, administrative and information-technology functions in shared services operations ~~that~~for U.S. customers of our major business units and certain back-office support to our ~~transportation businesses and allow~~operating segments which allows us to obtain synergies from the combination of these functions. For the international regions of FedEx Express, some of these functions are performed on a regional basis and reported by FedEx Express in their natural expense line items. The FedEx Services segment includes: FedEx Services, which provides sales, marketing, information technology, communications, customer service, technical support, billing and collection services for U.S. customers of our major business units and certain back-office support to our other companies; and FedEx Office and Print Services, Inc. (“FedEx Office”), which provides an array of document and business services and retail access to our customers for our package transportation businesses.

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

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

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

Also included in corporate and other is the FedEx ~~Trade Networks, Inc. (“FedEx Trade Networks”)~~Office operating segment, which provides an array of document and business services and retail access to our customers for our package transportation businesses, and the FedEx Logistics operating segment, which provides integrated supply chain management solutions, specialty transportation, cross-border e-commerce technology and e-commerce transportation solutions, customs brokerage and global ocean and air freight forwarding through FedEx Trade Networks Transport & Brokerage, Inc.; cross-border enablement and technology solutions and e-commerce transportation solutions through FedEx Cross Border Technologies, Inc.; integrated supply chain management solutions through FedEx Supply Chain; time-critical shipment services through FedEx Custom Critical, Inc.; and, effective September 1, 2018, critical inventory and service parts logistics, 3-D printing and technology repair through FedEx Forward Depots, Inc.forwarding.

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

The following table provides a reconciliation of reportable segment revenues and operating income (loss) to our unaudited condensed consolidated financial statement totals for the three-month periods ended ~~November 30~~August 31 (in millions):

	Three Months Ended						Six Months Ended
	2018			2017			2018			2017			2019			2018
Revenues:
FedEx Express segment	$	9,604		$	9,076		$	18,826		$	17,476		$	8,945		$	9,222
FedEx Ground segment		5,142			4,525			9,941			8,770			5,179			4,799
FedEx Freight segment		1,918			1,673			3,877			3,337			1,905			1,959
FedEx Services segment		429			416			846			816			4			9
Other and eliminations		731			623			1,386			1,211			1,015			1,063
	$	17,824		$	16,313		$	34,876		$	31,610		$	17,048		$	17,052
Operating income (loss):
FedEx Express segment	$	620		$	601		$	987		$	921		$	285		$	388
FedEx Ground segment		586			496			1,253			1,102			644			676
FedEx Freight segment		148			108			324			273			194			176
Corporate, other and eliminations		(186	)		(90	)		(325	)		(210	)		(146	)		(169	)
	$	1,168		$	1,115		$	2,239		$	2,086		$	977		$	1,071

As of August 31, 2019, FedEx has entered into additional leases which have not yet commenced and are therefore not part of the right-of-use asset and liability. These leases are generally for build-to-suit facilities and have undiscounted future payments of approximately $872 million and will commence when FedEx gains beneficial access to the leased asset. Commencement dates are expected to be from fiscal 2020 to fiscal 2022.

The following table is a summary of the components of net lease cost for the three months ended August 31 (in millions):

⁽¹⁾Expenses are primarily accounted for in the “Rentals and landing fees” line item. Additional amounts related to embedded leases are accounted for in the “Purchased transportation,” “Fuel” and “Other” line items in the unaudited condensed consolidated statements of income.

Supplemental cash flow information related to leases for the three months ended August 31 is as follows (in millions):

Supplemental balance sheet information related to leases as of August 31 is as follows (in millions, except lease term and discount rate):

A summary of future minimum lease payments under noncancelable operating and finance leases with an initial or remaining term in excess of one year at August 31, 2019 is as follows (in millions):

While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations.

As previously disclosed in our Annual Report and under the previous lease accounting standard, future minimum lease payments under noncancelable operating leases with an initial or remaining term in excess of one year at May 31, 2019 would have been as follows (in millions):

As of ~~November 30, 2018,~~August 31, 2019, our purchase commitments under various contracts for the remainder of ~~2019~~2020 and annually thereafter were as follows (in millions):

	Aircraft and Related		Other⁽¹⁾		Total		Aircraft and Related		Other⁽¹⁾		Total
2019 (remainder)	$	832	$	572	$	1,404
2020		1,987		767		2,754
2020 (remainder)							$	1,043	$	789	$	1,832
2021		2,285		513		2,798		2,436		691		3,127
2022		1,867		367		2,234		2,392		470		2,862
2023		1,577		266		1,843		1,587		340		1,927
2024								503		192		695
Thereafter		3,015		534		3,549		2,449		541		2,990
Total	$	11,563	$	3,019	$	14,582	$	10,410	$	3,023	$	13,433

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. As of ~~November 30, 2018,~~August 31, 2019, our obligation to purchase ~~six~~6 Boeing 777 Freighter (“B777F”) aircraft and ~~five~~5 Boeing 767-300 Freighter (“B767F”) aircraft is conditioned upon there being no event that causes FedEx Express or its employees not to be covered by the Railway Labor Act of 1926, as amended. Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above.

On June 24, 2019, FedEx Express exercised options to purchase an additional 6 B767F aircraft for delivery in 2022.

As of ~~November 30, 2018,~~August 31, 2019, we had ~~$1.0 billion~~$611 million in deposits and progress payments on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our accompanying unaudited condensed consolidated balance sheets. Aircraft and related contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of ~~November 30, 2018~~August 31, 2019 with the year of expected delivery:

	Cessna SkyCourier 408		ATR 72-600F		B767F		B777F		Total		Cessna SkyCourier 408		ATR 72-600F		B767F		B777F		Total
2019 (remainder)		-		-		7		2		9
2020		-		-		17		5		22
2020 (remainder)												-		-		13		1		14
2021		12		5		18		2		37		12		5		18		2		37
2022		12		6		12		3		33		12		6		18		3		39
2023		12		6		6		4		28		12		6		6		4		28
2024												14		6		-		4		24
Thereafter		14		13		-		6		33		-		7		-		2		9
Total		50		30		60		22		162		50		30		55		16		151

~~A summary of future minimum lease payments under noncancelable operating leases with an initial or remaining term in excess of one year at November 30, 2018 is as follows (in millions):~~

Future minimum lease payments under capital leases were immaterial at November 30, 2018. While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations.(UNAUDITED)

Independent Contractor — Lawsuits and Administrative Proceedings. FedEx Ground is involved in lawsuits and administrative proceedings claiming that owner-operators engaged under operating agreements no longer in place should have been treated as employees of FedEx Ground, rather than independent contractors. In addition, we are defending joint-employer cases where it is alleged that FedEx Ground should be treated as an employer of the drivers employed by ~~owner-operators~~service providers engaged by FedEx Ground. These cases are in varying stages of litigation, and we are not currently able to estimate an amount or range of potential loss in all of these matters. However, we do not expect to incur, individually or in the aggregate, a material loss in these matters. Nevertheless, adverse determinations in matters related to owner-operators or service providers engaged by FedEx Ground could, among other things, entitle ~~certain~~former owner-operators to the reimbursement of certain expenses, and ~~their~~service providers’ drivers to certain wage payments from the ~~benefit of wage-and-hour laws,~~service providers and FedEx Ground, and result in employment and withholding tax and benefit liability for FedEx Ground. We continue to believe that owner-operators engaged by FedEx Ground ~~are~~were properly classified as independent contractors and that FedEx Ground is not an employer or joint employer of the ~~drivers of these independent contractors.~~service providers’ drivers.

~~City~~Federal Securities Litigation. On June 26, 2019 and ~~State~~July 2, 2019, FedEx and certain present and former officers were named as defendants in two putative class action securities lawsuits filed in the U.S. District Court for the Southern District of New ~~York Cigarette Suit.~~York. The ~~City~~complaints allege violations of ~~New York~~Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder relating to alleged misstatements or omissions in FedEx’s public filings with the SEC and other public statements during the period from September 19, 2017 to December 18, 2018. We are not currently able to estimate the probability of loss or the amount or range of potential loss, if any, at this stage of the litigation.

Environmental Matters. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the ~~State of New York filed two related lawsuits~~proceedings involve potential monetary sanctions that management reasonably believes could exceed $100,000.

On July 26, 2019, FedEx Freight received a pre-litigation offer from the San Bernardino District Attorney’s Office in California to settle a civil action that the District Attorney intended to file against FedEx ~~Ground in December 2013 and November 2014 arising from FedEx Ground’s~~Freight for alleged shipments of cigarettes to New York residents in contravention of several statutes, including the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and New York’s Public Health Law, as well as common law nuisance claims. The first-filed lawsuit alleges that FedEx Ground provided delivery services on behalf of four shippers, and the second-filed lawsuit alleges that FedEx Ground provided delivery services on behalf of six additional shippers; none of these shippers continue to ship in our network. On July 10, 2017, the City of New York and the State of New York filed a third lawsuit against FedEx Ground and included FedEx Freight as a co-defendant. This additional case identifies no shippers or shipments, but generally alleges violations of the ~~same laws~~state’s environmental and hazardous waste regulations. Specifically, the District Attorney alleged that ~~are the subject of the other two lawsuits.~~

~~On October 10,~~between 2015 and 2018, FedEx ~~Ground~~Freight illegally transported and ~~the City~~stored hazardous waste, failed to report releases of hazardous materials or substances, and ~~State of New York~~unlawfully released oil into a storm drain. In September 2019, we reached an agreement ~~in principle~~ to settle ~~the pending lawsuits arising from FedEx Ground’s and FedEx Freight’s alleged shipments of cigarettes to New York residents~~this matter for ~~$35.4 million.~~an immaterial amount. The settlement does not include any admission of liability by FedEx Ground or FedEx Freight. An accrual has been established for the amount of the settlement. Additionally, we have accrued $10.5 million for certain attorney’s fees in connection with this matter.agreement is subject to court approval.

Other ~~Matters~~. During the third quarter of 2017, FedEx Trade Networks informed U.S. Customs and Border Protection (“CBP”) that in connection with certain customs entries it may have made improper claims for (i) reduced-duty treatment and (ii) duty-free treatment. In the fourth quarter of 2017 we established accruals totaling $39.3 million for the then-current estimated probable loss for these matters. In the first quarter of 2018, FedEx Trade Networks tendered payments to CBP in these matters totaling $46.5 million, and an additional expense of $7.2 million was recognized. CBP acknowledged receipt of the amounts tendered in these matters.

In May 2018, FedEx Trade Networks was informed that CBP was demanding additional payment for duty loss plus interest in connection with the claims for reduced-duty treatment. In June 2018, we submitted a response to CBP challenging the additional demand. In October 2018, FedEx Trade Networks received notice from CBP that is has dropped the additional demand and that the claims for reduced-duty treatment and duty-free treatment are fully resolved.

Matters. FedEx and its subsidiaries are subject to other legal proceedings that arise in the ordinary course of business, including certain lawsuits containing various class-action allegations of wage-and-hour violations in which plaintiffs claim, among other things, that they were forced to work “off the clock,” were not paid overtime or were not provided work breaks or other benefits. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not have a material adverse effect on our financial position, results of operations or cash flows.

Cash paid for interest expense and income taxes for the ~~six-month~~three-month periods ended ~~November 30~~August 31 was as follows (in millions):

	2018			2017			2019			2018
Cash payments for:
Interest (net of capitalized interest)	$	308		$	238		$	164		$	203
Income taxes	$	220		$	617		$	55		$	93
Income tax refunds received		(6	)		(19	)		(12	)		(3	)
Cash tax payments, net	$	214		$	598		$	43		$	90

We are required to present condensed consolidating financial information in order for the subsidiary guarantors of our public debt to continue to be exempt from reporting under the Securities Exchange Act of 1934, as amended.

The guarantor subsidiaries, which are 100% owned by FedEx, guarantee ~~$16.9~~$18.6 billion of our public debt. The guarantees are full and unconditional and joint and several. Our guarantor subsidiaries were not determined using geographic, service line or other similar criteria, and as a result, the “Guarantor Subsidiaries” and “Non-guarantor Subsidiaries” columns each include portions of our domestic and international operations. Accordingly, this basis of presentation is not intended to present our financial condition, results of operations or cash flows for any purpose other than to comply with the specific requirements for subsidiary guarantor reporting.

Condensed consolidating financial statements for our guarantor subsidiaries and non-guarantor subsidiaries are presented in the following tables (in millions):

			Guarantor		Non-guarantor									Guarantor		Non-guarantor
	Parent		Subsidiaries		Subsidiaries		Eliminations			Consolidated		Parent		Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	688	$	187	$	1,310	$	(62	)	$	2,123	$	684	$	176	$	1,598	$	(69	)	$	2,389
Receivables, less allowances		40		5,848		3,868		(183	)		9,573		335		5,575		3,541		(139	)		9,312
Spare parts, supplies, fuel, prepaid expenses and other, less allowances		491		956		295		—			1,742		40		949		327		—			1,316
Total current assets		1,219		6,991		5,473		(245	)		13,438		1,059		6,700		5,466		(208	)		13,017
PROPERTY AND EQUIPMENT, AT COST		23		53,441		4,037		—			57,501		26		57,131		4,279		—			61,436
Less accumulated depreciation and amortization		17		26,166		1,931		—			28,114		17		27,715		2,094		—			29,826
Net property and equipment		6		27,275		2,106		—			29,387		9		29,416		2,185		—			31,610
INTERCOMPANY RECEIVABLE		845		1,628		—		(2,473	)		—		3,003		72		—		(3,075	)		—
OPERATING LEASE RIGHT-OF-USE ASSETS													32		11,538		2,249		—			13,819
GOODWILL		—		1,598		5,310		—			6,908		—		1,582		5,239		—			6,821
INVESTMENT IN SUBSIDIARIES		34,957		4,891		—		(39,848	)		—		34,439		4,970		—		(39,409	)		—
OTHER ASSETS		270		1,569		1,717		—			3,556		984		1,019		1,734		(552	)		3,185
	$	37,297	$	43,952	$	14,606	$	(42,566	)	$	53,289	$	39,526	$	55,297	$	16,873	$	(43,244	)	$	68,452
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Short-term borrowings	$	250	$	—	$	—	$	—		$	250
Current portion of long-term debt		567		69		6		—			642	$	—	$	26	$	9	$	—		$	35
Accrued salaries and employee benefits		49		1,192		609		—			1,850		91		985		446		—			1,522
Accounts payable		197		1,576		1,831		(204	)		3,400		191		1,444		1,747		(203	)		3,179
Operating lease liabilities													4		1,445		447		—			1,896
Accrued expenses		544		1,843		1,007		(40	)		3,354		512		1,895		902		(6	)		3,303
Total current liabilities		1,607		4,680		3,453		(244	)		9,496		798		5,795		3,551		(209	)		9,935
LONG-TERM DEBT, LESS CURRENT PORTION		16,101		287		11		—			16,399		18,395		286		45		—			18,726
INTERCOMPANY PAYABLE		—		—		2,473		(2,473	)		—		—		—		3,074		(3,074	)		—
OTHER LONG-TERM LIABILITIES
Deferred income taxes		92		3,055		106		—			3,253		—		2,929		576		(552	)		2,953
Operating lease liabilities													30		10,257		1,850		—			12,137
Other liabilities		203		3,643		1,002		(1	)		4,847		2,137		3,390		1,008		—			6,535
Total other long-term liabilities		295		6,698		1,108		(1	)		8,100		2,167		16,576		3,434		(552	)		21,625
STOCKHOLDERS’ INVESTMENT		19,294		32,287		7,561		(39,848	)		19,294
COMMON STOCKHOLDERS’ INVESTMENT													18,166		32,640		6,769		(39,409	)		18,166
	$	37,297	$	43,952	$	14,606	$	(42,566	)	$	53,289	$	39,526	$	55,297	$	16,873	$	(43,244	)	$	68,452

Guarantor

Non-guarantor

Parent

Subsidiaries

Subsidiaries

Eliminations

Consolidated

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$
1,485

$
257

$
1,538

$
(15
)

$
3,265

Receivables, less allowances

3

4,970

3,586

(78
)

8,481

Spare parts, supplies, fuel, prepaid expenses and other,
less allowances

425

878

292

—

1,595

Total current assets

1,913

6,105

5,416

(93
)

13,341

PROPERTY AND EQUIPMENT, AT COST

21

51,232

3,868

—

55,121

Less accumulated depreciation and amortization

17

25,111

1,839

—

26,967

Net property and equipment

4

26,121

2,029

—

28,154

INTERCOMPANY RECEIVABLE

1,487

924

—

(2,411
)

—

GOODWILL

—

1,709

5,264

—

6,973

INVESTMENT IN SUBSIDIARIES

33,370

4,082

—

(37,452
)

—

OTHER ASSETS

75

1,854

1,829

104

3,862

$
36,849

$
40,795

$
14,538

$
(39,852
)

$
52,330

LIABILITIES AND STOCKHOLDERS’ INVESTMENT

CURRENT LIABILITIES

Current portion of long-term debt

$
1,332

$
1

$
9

$
—

$
1,342

Accrued salaries and employee benefits

65

1,506

606

—

2,177

Accounts payable

16

1,332

1,719

(90
)

2,977

Accrued expenses

460

1,778

896

(3
)

3,131

Total current liabilities

1,873

4,617

3,230

(93
)

9,627

LONG-TERM DEBT, LESS CURRENT PORTION

14,942

288

13

—

15,243

INTERCOMPANY PAYABLE

—

—

2,411

(2,411
)

—

OTHER LONG-TERM LIABILITIES

Deferred income taxes

—

2,626

137

104

2,867

Other liabilities

619

3,432

1,126

—

5,177

Total other long-term liabilities

619

6,058

1,263

104

8,044

STOCKHOLDERS’ INVESTMENT

19,415

29,832

7,621

(37,452
)

19,416

$
36,849

$
40,795

$
14,538

$
(39,852
)

$
52,330

Parent

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

REVENUES

$
—

$
12,874

$
5,050

$
(100
)

$
17,824

OPERATING EXPENSES:

Salaries and employee benefits

34

4,797

1,429

—

6,260

Purchased transportation

—

2,650

1,731

(35
)

4,346

Rentals and landing fees

1

640

196

(1
)

836

Depreciation and amortization

—

709

119

—

828

Fuel

—

968

84

—

1,052

Maintenance and repairs

—

655

96

—

751

Intercompany charges, net

(152
)

(149
)

301

—

—

Other

117

1,675

863

(72
)

2,583

—

11,945

4,819

(108
)

16,656

OPERATING INCOME

—

929

231

8

1,168

OTHER INCOME (EXPENSE):

Equity in earnings of subsidiaries

935

48

—

(983
)

—

Interest, net

(180
)

63

(12
)

—

(129
)
Other retirement plans income

—

155

3

—

158

Intercompany charges, net

162

(124
)

(38
)

—

—

Other, net

18

(22
)

(7
)

(9
)

(20
)
INCOME BEFORE INCOME TAXES

935

1,049

177

(984
)

1,177

Provision for income taxes

—

217

25

—

242

NET INCOME

$
935

$
832

$
152

$
(984
)

$
935

COMPREHENSIVE INCOME

$
912

$
819

$
133

$
(983
)

$
881

Parent

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

REVENUES

$
—

$
12,044

$
4,362

$
(93
)

$
16,313

OPERATING EXPENSES:

Salaries and employee benefits

35

4,580

1,274

—

5,889

Purchased transportation

—

2,314

1,576

(50
)

3,840

Rentals and landing fees

1

640

197

(3
)

835

Depreciation and amortization

—

649

107

—

756

Fuel

—

746

72

—

818

Maintenance and repairs

—

584

81

—

665

Intercompany charges, net

(95
)

1

94

—

—

Other

59

1,592

784

(40
)

2,395

—

11,106

4,185

(93
)

15,198

OPERATING INCOME

—

938

177

—

1,115

OTHER INCOME (EXPENSE):

Equity in earnings of subsidiaries

775

40

—

(815
)

—

Interest, net

(130
)

11

(5
)

—

(124
)
Other retirement plans income

—

141

6

—

147

Intercompany charges, net

132

(70
)

(62
)

—

—

Other, net

(2
)

(8
)

11

—

1

INCOME BEFORE INCOME TAXES

775

1,052

127

(815
)

1,139

Provision for income taxes

—

225

139

—

364

NET INCOME

$
775

$
827

$
(12
)

$
(815
)

$
775

COMPREHENSIVE INCOME

$
756

$
817

$
(92
)

$
(815
)

$
666

Parent

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

REVENUES

$
—

$
25,241

$
9,837

$
(202
)

$
34,876

OPERATING EXPENSES:

Salaries and employee benefits

82

9,580

2,858

—

12,520

Purchased transportation

—

5,032

3,364

(83
)

8,313

Rentals and landing fees

3

1,271

388

(3
)

1,659

Depreciation and amortization

—

1,402

234

—

1,636

Fuel

—

1,871

167

—

2,038

Maintenance and repairs

1

1,301

184

—

1,486

Intercompany charges, net

(264
)

(375
)

639

—

—

Other

178

3,221

1,711

(125
)

4,985

—

23,303

9,545

(211
)

32,637

OPERATING INCOME

—

1,938

292

9

2,239

OTHER INCOME (EXPENSE):

Equity in earnings of subsidiaries

1,770

128

—

(1,898
)

—

Interest, net

(338
)

122

(25
)

—

(241
)
Other retirement plans income

—

311

5

—

316

Intercompany charges, net

304

(246
)

(58
)

—

—

Other, net

34

(76
)

16

(10
)

(36
)
INCOME BEFORE INCOME TAXES

1,770

2,177

230

(1,899
)

2,278

Provision for income taxes

—

432

76

—

508

NET INCOME

$
1,770

$
1,745

$
154

$
(1,899
)

$
1,770

COMPREHENSIVE INCOME

$
1,730

$
1,833

$
(133
)

$
(1,899
)

$
1,531

			Guarantor			Non-guarantor
	Parent		Subsidiaries			Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	826	$	158		$	1,381	$	(46	)	$	2,319
Receivables, less allowances		56		5,603			3,684		(227	)		9,116
Spare parts, supplies, fuel, prepaid expenses and other, less allowances		366		953			332		—			1,651
Total current assets		1,248		6,714			5,397		(273	)		13,086
PROPERTY AND EQUIPMENT, AT COST		25		55,341			4,145		—			59,511
Less accumulated depreciation and amortization		17		27,066			1,999		—			29,082
Net property and equipment		8		28,275			2,146		—			30,429
INTERCOMPANY RECEIVABLE		2,877		(405	)		—		(2,472	)		—
GOODWILL		—		1,589			5,295		—			6,884
INVESTMENT IN SUBSIDIARIES		33,725		5,449			—		(39,174	)		—
OTHER ASSETS		995		1,811			1,789		(591	)		4,004
	$	38,853	$	43,433		$	14,627	$	(42,510	)	$	54,403
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt	$	959	$	2		$	3	$	—		$	964
Accrued salaries and employee benefits		143		1,100			498		—			1,741
Accounts payable		16		1,469			1,808		(263	)		3,030
Accrued expenses		521		1,853			914		(10	)		3,278
Total current liabilities		1,639		4,424			3,223		(273	)		9,013
LONG-TERM DEBT, LESS CURRENT PORTION		16,322		287			8		—			16,617
INTERCOMPANY PAYABLE		—		—			2,472		(2,472	)		—
OTHER LONG-TERM LIABILITIES
Deferred income taxes		—		2,832			580		(591	)		2,821
Other liabilities		3,135		3,965			1,095		—			8,195
Total other long-term liabilities		3,135		6,797			1,675		(591	)		11,016
COMMON STOCKHOLDERS’ INVESTMENT		17,757		31,925			7,249		(39,174	)		17,757
	$	38,853	$	43,433		$	14,627	$	(42,510	)	$	54,403

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated			Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	23,611		$	8,216		$	(217	)	$	31,610		$	—		$	12,241		$	4,893		$	(86	)	$	17,048
OPERATING EXPENSES:
Salaries and employee benefits		73			8,949			2,531			—			11,553			20			4,685			1,382			—			6,087
Purchased transportation		—			4,377			3,040			(132	)		7,285			—			2,543			1,519			(34	)		4,028
Rentals and landing fees		2			1,267			388			(4	)		1,653			2			712			208			(2	)		920
Depreciation and amortization		—			1,288			219			—			1,507			—			761			118			—			879
Fuel		—			1,383			138			—			1,521			—			812			58			—			870
Maintenance and repairs		—			1,186			154			—			1,340			—			684			84			—			768
Intercompany charges, net		(211	)		115			96			—			—			(78	)		(481	)		559			—			—
Other		136			3,068			1,542			(81	)		4,665			56			1,668			845			(50	)		2,519
		—			21,633			8,108			(217	)		29,524			—			11,384			4,773			(86	)		16,071
OPERATING INCOME		—			1,978			108			—			2,086			—			857			120			—			977
OTHER INCOME (EXPENSE):
OTHER (EXPENSE) INCOME:
Equity in earnings of subsidiaries		1,371			37			—			(1,408	)		—			745			18			—			(763	)		—
Interest, net		(259	)		24			(3	)		—			(238	)		(151	)		12			2			—			(137	)
Other retirement plans income		—			283			10			—			293			—			163			5			—			168
Intercompany charges, net		263			(140	)		(123	)		—			—			164			(120	)		(44	)		—			—
Other, net		(4	)		(16	)		—			—			(20	)		(13	)		16			(15	)		—			(12	)
INCOME BEFORE INCOME TAXES		1,371			2,166			(8	)		(1,408	)		2,121			745			946			68			(763	)		996
Provision for income taxes		—			624			126			—			750			—			225			26			—			251
NET INCOME	$	1,371		$	1,542		$	(134	)	$	(1,408	)	$	1,371
COMPREHENSIVE INCOME	$	1,334		$	1,536		$	(110	)	$	(1,408	)	$	1,352
NET INCOME (LOSS)																$	745		$	721		$	42		$	(763	)	$	745
COMPREHENSIVE INCOME (LOSS)																$	731		$	705		$	(32	)	$	(763	)	$	641

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	12,367		$	4,787		$	(102	)	$	17,052
OPERATING EXPENSES:
Salaries and employee benefits		48			4,783			1,429			—			6,260
Purchased transportation		—			2,380			1,634			(47	)		3,967
Rentals and landing fees		1			631			192			(1	)		823
Depreciation and amortization		—			693			115			—			808
Fuel		—			902			84			—			986
Maintenance and repairs		—			646			89			—			735
Intercompany charges, net		(111	)		(226	)		337			—			—
Other		62			1,546			848			(54	)		2,402
		—			11,355			4,728			(102	)		15,981
OPERATING INCOME		—			1,012			59			—			1,071
OTHER (EXPENSE) INCOME:
Equity in earnings of subsidiaries		835			81			—			(916	)		—
Interest, net		(143	)		15			1			—			(127	)
Other retirement plans (expense) income		—			155			3			—			158
Intercompany charges, net		143			(122	)		(21	)		—			—
Other, net		—			(10	)		9			—			(1	)
INCOME (LOSS) BEFORE INCOME TAXES		835			1,131			51			(916	)		1,101
Provision for income taxes		—			215			51			—			266
NET INCOME (LOSS)	$	835		$	916		$	—		$	(916	)	$	835
COMPREHENSIVE INCOME (LOSS)	$	817		$	1,014		$	(265	)	$	(916	)	$	650

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated			Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	262		$	1,631	��	$	333		$	(47	)	$	2,179		$	(1,671	)	$	2,111		$	148		$	(23	)	$	565
INVESTING ACTIVITIES
Capital expenditures		(2	)		(2,337	)		(295	)		—			(2,634	)		(2	)		(1,317	)		(99	)		—			(1,418	)
Proceeds from asset dispositions and other		(45	)		83			15						53			(10	)		5			4			—			(1	)
CASH USED IN INVESTING ACTIVITIES		(47	)		(2,254	)		(280	)		—			(2,581	)		(12	)		(1,312	)		(95	)		—			(1,419	)
FINANCING ACTIVITIES
Proceeds from short-term borrowings		248			—			—			—			248
Net transfers from (to) Parent		(344	)		350			(6	)		—			—			1,002			(1,059	)		57			—			—
Payment on loan between subsidiaries																	(434	)		—			434			—			—
Intercompany dividends		—			113			(113	)		—			—			—			304			(304	)		—			—
Proceeds from debt issuances		1,233			—			—			—			1,233			2,093			—			—			—			2,093
Principal payments on debt		(750	)		(29	)		(6	)		—			(785	)		(956	)		(27	)		(2	)		—			(985	)
Proceeds from stock issuances		45			—			—			—			45			12			—			—			—			12
Dividends paid		(173	)		—			—			—			(173	)		(170	)		—			—			—			(170	)
Purchase of treasury stock		(1,271	)		—			—			—			(1,271	)		(3	)		—			—			—			(3	)
Other, net		—			128			(127	)		—			1			(3	)		—			(2	)		—			(5	)
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(1,012	)		562			(252	)		—			(702	)		1,541			(782	)		183			—			942
Effect of exchange rate changes on cash		—			(9	)		(29	)		—			(38	)		—			1			(19	)		—			(18	)
Net (decrease) increase in cash and cash equivalents		(797	)		(70	)		(228	)		(47	)		(1,142	)		(142	)		18			217			(23	)		70
Cash and cash equivalents at beginning of period		1,485			257			1,538			(15	)		3,265			826			158			1,381			(46	)		2,319
Cash and cash equivalents at end of period	$	688		$	187		$	1,310		$	(62	)	$	2,123		$	684		$	176		$	1,598		$	(69	)	$	2,389

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated			Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(1,959	)	$	3,504		$	(66	)	$	19		$	1,498		$	785		$	(159	)	$	102		$	(27	)	$	701
INVESTING ACTIVITIES
Capital expenditures		—			(2,474	)		(147	)		—			(2,621	)		—			(983	)		(196	)		—			(1,179	)
Business acquisitions, net of cash acquired		—			(44	)		—			—			(44	)
Proceeds from asset dispositions and other		—			12			—			—			12			(5	)		78			5			—			78
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		—			(2,506	)		(147	)		—			(2,653	)
CASH USED IN INVESTING ACTIVITIES																	(5	)		(905	)		(191	)		—			(1,101	)
FINANCING ACTIVITIES
Proceeds from short-term borrowings, net																	299			—			—			—			299
Net transfers from (to) Parent		947			(1,019	)		72			—			—			(853	)		763			90			—			—
Payment on loan between subsidiaries		167			—			(167	)		—			—
Proceeds from short-term borrowings		250			—			—			—			250
Intercompany dividends																	—			81			(81	)		—			—
Principal payments on debt		—			(18	)		(10	)		—			(28	)		—			—			(2	)		—			(2	)
Proceeds from stock issuances		205			—			—			—			205			25			—			—			—			25
Dividends paid		(268	)		—			—			—			(268	)		(173	)		—			—			—			(173	)
Purchase of treasury stock		(270	)		—			—			—			(270	)		(625	)		—			—			—			(625	)
Other, net		3			—			—			—			3			—			148			(144	)		—			4
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		1,034			(1,037	)		(105	)		—			(108	)		(1,327	)		992			(137	)		—			(472	)
Effect of exchange rate changes on cash		—			56			6			—			62			—			(5	)		(19	)		—			(24	)
Net (decrease) increase in cash and cash equivalents		(925	)		17			(312	)		19			(1,201	)
Net decrease in cash and cash equivalents																	(547	)		(77	)		(245	)		(27	)		(896	)
Cash and cash equivalents at beginning of period		1,884			325			1,807			(47	)		3,969			1,485			257			1,538			(15	)		3,265
Cash and cash equivalents at end of period	$	959		$	342		$	1,495		$	(28	)	$	2,768		$	938		$	180		$	1,293		$	(42	)	$	2,369

~~REPORT OF INDEPENDENT REGISTERED~~Report of Independent Registered Public Accounting Firm

We have reviewed the accompanying condensed consolidated balance sheet of FedEx Corporation (the Company) as of ~~November 30, 2018, and~~August 31, 2019, the related condensed consolidated statements of income, ~~and~~ comprehensive income, cash flows and changes in common stockholders’ investment for the three-month ~~and six-month~~ periods ended ~~November 30,~~August 31, 2019 and August 31, 2018 ~~and November 30, 2017 and the condensed consolidated statements of cash flows for the six-month periods ended November 30, 2018 and November 30, 2017,~~ and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of ~~FedEx Corporation~~the Company as of May 31, ~~2018, and~~2019, the related consolidated statements of income, comprehensive income, cash flows and changes in common stockholders’ investment ~~and cash flows~~ for the year then ended, and the related notes ~~and schedules~~ (not presented herein); and in our report dated July 16, ~~2018,~~2019, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, ~~2018,~~2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

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

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, contractual cash obligations 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, ~~2018~~2019 (“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 independently and managed collaboratively, under the respected FedEx brand. Our primary operating companies are Federal Express Corporation (“FedEx Express”), including TNT Express B.V. (“TNT 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 ~~U.S.~~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 ~~transportation~~operating segments. ~~The FedEx Services segment also provides customers with retail access to FedEx Express and FedEx Ground shipping services through FedEx Office and Print Services, Inc. (“FedEx Office”).~~ See “Reportable Segments” for further discussion. Additional information on our businesses can be found in our Annual Report.

As discussed in our Annual Report, as of June 1, 2019 the results of the FedEx ~~Trade Networks,~~Office and Print Services, Inc. (“FedEx ~~Trade Networks”~~Office”) operating segment ~~results~~ are included in “Corporate, other and ~~eliminations” in~~eliminations.” This change was made to reflect our ~~segment reporting.~~internal management reporting structure. Prior year amounts have been revised to conform to the current year presentation.

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

Except as otherwise specified, references to years indicate our fiscal year ending May 31, ~~2019~~2020 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 following tables compare summary operating results and changes in revenue and operating income (dollars in millions, except per share amounts) for the periods ended ~~November 30:~~August 31:

	Three Months Ended						Percent				Six Months Ended						Percent				Three Months Ended						Percent
	2018			2017			Change				2018			2017			Change				2019			2018			Change
Revenues	$	17,824		$	16,313			9			$	34,876		$	31,610			10			$	17,048		$	17,052			—
Operating income (loss):
FedEx Express segment		620			601			3				987			921			7				285			388			(27	)
FedEx Ground segment		586			496			18				1,253			1,102			14				644			676			(5	)
FedEx Freight segment		148			108			37				324			273			19				194			176			10
Corporate, other and eliminations		(186	)		(90	)		(107	)			(325	)		(210	)		(55	)			(146	)		(169	)		14
Consolidated operating income		1,168			1,115			5				2,239			2,086			7				977			1,071			(9	)
Operating margin:
FedEx Express segment		6.5	%		6.6	%		(10	)	bp		5.2	%		5.3	%		(10	)	bp		3.2	%		4.2	%		(100	)	bp
FedEx Ground segment		11.4	%		11.0	%		40		bp		12.6	%		12.6	%		—		bp		12.4	%		14.1	%		(170	)	bp
FedEx Freight segment		7.7	%		6.5	%		120		bp		8.4	%		8.2	%		20		bp		10.2	%		9.0	%		120		bp
Consolidated operating margin		6.6	%		6.8	%		(20	)	bp		6.4	%		6.6	%		(20	)	bp		5.7	%		6.3	%		(60	)	bp
Consolidated net income	$	935		$	775			21			$	1,770		$	1,371			29			$	745		$	835			(11	)
Diluted earnings per share	$	3.51		$	2.84			24			$	6.60		$	5.03			31			$	2.84		$	3.10			(8	)

	Change in Revenue				Change in Operating Income						Year-over-Year Changes
	Three Months Ended		Six Months Ended		Three Months Ended			Six Months Ended			Revenue			Operating Income (Loss)
FedEx Express segment	$	528	$	1,350	$	19		$	66		$	(277	)	$	(103	)
FedEx Ground segment		617		1,171		90			151			380			(32	)
FedEx Freight segment		245		540		40			51			(54	)		18
FedEx Services segment		13		30		—			—			(5	)		—
Corporate, other and eliminations		108		175		(96	)		(115	)		(48	)		23
	$	1,511	$	3,266	$	53		$	153		$	(4	)	$	(94	)

As of June 1, 2018, we adopted new accounting guidance that changes how employers that sponsor defined benefit pension or other postretirement benefit plans present net periodic benefit cost in their income statement. This new guidance requires us to report only the service cost component in the salaries and employee benefits line item. The other components of net benefit cost are required to be presented in the income statement in other income, outside of income from operations. This new guidance impactsConsolidated operating income declined during the first quarter of 2020 primarily due to weakening global economic conditions, increased costs to accommodate expanding services and ~~margin but has no impact on net income or earnings per share. We have applied these changes retrospectively.~~

~~The comparison of our second~~continued mix shift to lower-yielding services, including growth in e-commerce volumes. Our first quarter ~~and first half results between 2019 and 2018 is significantly affected by the direct and indirect effects at FedEx Express of the NotPetya cyberattack in June 2017. Our prior year~~2020 results were negatively impacted by ~~the NotPetya cyberattack by an estimated~~approximately $100 million ~~($0.31 per diluted share) in~~due to one fewer operating day. In addition, the ~~second~~loss of business from a large customer at FedEx Express and FedEx Ground negatively impacted our results during the first quarter of ~~2018 and~~2020. These factors were partially offset by an estimated $400 million ($1.10 per diluted share) in the first half of 2018, primarily from loss of revenue associated with decreased shipments in the TNT Express network, as well as incremental costs to restore information-technology systems. Additional information on the NotPetya cyberattack can be found in our Annual Report. During the second quarter of 2019, we purchased insurance coverage designed to address certain aspects of cyber risks.

Our consolidated operating income improved during the second quarter and first half of 2019 due to volume growth, increased yields and the favorable net impact of fuel at all of our transportation segments. In addition, lower variable incentive compensation accruals benefited our results in the second quarter of 2019. A change in product mix from FedEx Express international package volume to freight volume, which intensified during the second quarter of 2019,expenses, increased ~~costs and negatively impacted operating margins in the second quarter and first half of 2019. In addition, growth in U.S. deferred package volumes~~yields at FedEx ~~Express~~Freight and FedEx Ground and higher ~~operating costs in salaries and employee benefits and maintenance and repairs negatively impacted operating margins in the second quarter and first half of 2019. Furthermore,~~volume at FedEx ~~Express, operating results were negatively impacted by increasing softness in international volumes during~~Ground. Lower variable incentive compensation expenses benefited the ~~quarter, as we saw a significant slowing of the Eurozone economy, as well as continued softness in economic conditions in Asia.~~

We accelerated the timing of our merit pay increases for certain of our hourly employees during late 2018 following the enactment of the Tax Cuts and Jobs Act (“TCJA”), ahead of the normal October 2018 timing. The impact of this expense timing difference negatively affected the year-over-year comparison of ~~the first half of 2019~~our results by approximately ~~$75~~$300 million in the first quarter of 2020.

We incurred TNT Express integration expenses totaling $71 million ($5855 million, net of tax, or $0.21 per diluted share).

We recognized an income tax benefit of approximately $150 million ($0.56 per diluted share) and $285 million ($1.06 per diluted share) during the second quarter and first half of 2019, respectively, primarily related to a lower statutory income tax rate on fiscal 2019 earnings as a result of the enactment of the TCJA. In addition, our prior year results included a tax benefit of approximately $80 million ($0.29 per diluted share) recognized in the second quarter of 2018 attributable to foreign tax credits associated with a dividend paid from our foreign operations. See the “Income Taxes” section below for further information.

We incurred TNT Express integration expenses totaling $114 million ($90 million, net of tax, or $0.34 per diluted share) in the second quarter and $235 million ($188 million, net of tax, or $0.70 per diluted share) in the first ~~half~~quarter of ~~2019, an $8~~2020, a $50 million decrease from the ~~second~~first quarter ~~and $1 million increase from the first half~~ of ~~2018.~~2019. The integration expenses are predominantly incremental costs directly associated with the integration of TNT Express, including professional and legal fees, salaries and employee benefits, travel and advertising expenses, ~~and travel,~~ and include any restructuring charges at TNT Express. Internal salaries and employee benefits are included only to the extent the individuals are assigned full-time to integration activities. These costs were incurred at FedEx Express and FedEx Corporate. The identification of these costs as integration-related expenditures is subject to our disclosure controls and procedures.

Our second quarter and first half of 2019 results include $46 million ($46 million, net of tax, or $0.17 per diluted share) of charges related to certain expected losses and professional fees in connection with an agreement in principle to settle a litigation matter involving FedEx Ground. These items are included in “Corporate, other and eliminations.” See Note 9 of the accompanying unaudited condensed consolidated financial statements for further discussion.

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

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

Revenues ~~increased 9% in the second quarter and 10%~~were flat in the first ~~half~~quarter of ~~2019 due to~~2020 as higher volumes and ~~increased~~ yields at FedEx Ground were offset by one fewer operating day at all of our transportation ~~segments. Revenues~~segments, as well as the loss of business from a large customer at FedEx Express ~~increased 6% in the second quarter~~ and 8% in the first half of 2019 primarily due to international package and freight volume recovery from the NotPetya cyberattack and U.S. domestic package volume growth. However, we experienced a deceleration in international package volume growth during the quarter at FedEx ~~Express, as we saw a significant slowing of the Eurozone economy, as well as continued softness in economic conditions in Asia.~~Ground. At FedEx Ground, revenues increased ~~14% in the second quarter and 13%~~8% in the first ~~half~~quarter of ~~2019~~2020 due to volume growth and increased yields. Revenues at FedEx Express decreased 3% in the first quarter of 2020 primarily due to unfavorable exchange rates and lower freight pounds reflecting macroeconomic weakness and trade uncertainty. FedEx Freight revenues ~~increased 15% in the second quarter and 16%~~decreased 3% in the first ~~half~~quarter of ~~2019~~2020 due to decreased average daily shipments, partially offset by higher revenue per ~~shipment and average daily shipments. Higher fuel surcharges had a positive impact on revenues at all of our transportation segments in the second quarter and first half of 2019.~~shipment.

The following tables compare operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the periods ended ~~November 30:~~August 31:

	Percent of Revenue
	Three Months Ended						Six Months Ended						Three Months Ended				Percent			Percent of Revenue
	2018			2017			2018			2017			2019		2018		Change			2019			2018
Operating expenses:
Salaries and employee benefits		35.1	%		36.1	%		35.9	%		36.5	%	$	6,087	$	6,260		(3	)		35.7	%		36.7	%
Purchased transportation		24.4			23.6			23.8			23.1			4,028		3,967		2			23.6			23.3
Rentals and landing fees		4.7			5.1			4.8			5.2			920		823		12			5.4			4.8
Depreciation and amortization		4.6			4.6			4.7			4.8			879		808		9			5.2			4.7
Fuel		5.9			5.0			5.8			4.8			870		986		(12	)		5.1			5.8
Maintenance and repairs		4.2			4.1			4.3			4.2			768		735		4			4.5			4.3
Other		14.5			14.7			14.3			14.8			2,519		2,402		5			14.8			14.1
Total operating expenses		93.4			93.2			93.6			93.4			16,071		15,981		1			94.3			93.7
Operating margin		6.6	%		6.8	%		6.4	%		6.6	%
Operating income													$	977	$	1,071		(9	)		5.7	%		6.3	%

~~Operating margin~~Our results declined in the ~~second~~first quarter due to a change in product mix from FedEx Express international package volume to freight volume. In addition, growth in U.S. deferred package volumes and higher operating costs in salaries and employee benefits and maintenance and repairs at FedEx Express contributed to the operating margin decline in the second quarter and first half of 2019. Furthermore, our results were negatively impacted by increasing softness in international volumes during the quarter at FedEx Express, as we saw a significant slowing of the Eurozone economy, as well as continued softness in economic conditions in Asia.

~~Purchased transportation costs increased 13% in the second quarter and 14% in the first half of 2019~~2020 primarily due to ~~higher volumes~~weakening global economic conditions and continued mix shift to lower-yielding services, including growth in deferred services driven by e-commerce. In addition, one fewer operating day at all of our transportation segments, ~~as well as~~the loss of business from a large customer at FedEx Express and FedEx Ground and higher purchased transportation costs, including higher rates and increased ~~rates, including fuel costs~~capacity for six-day-per-week operations year-round at FedEx Ground, negatively impacted our results during the first quarter of 2020. These items were partially offset by lower variable incentive compensation expenses, increased yields at FedEx Freight and FedEx ~~Freight.~~ Ground and higher volume at FedEx Ground.

The adoption of the new lease accounting standard during the first quarter of 2020 resulted in a reclassification from other operating expense to rentals and landing fees expense of approximately $50 million and maintenance and repairs expense to rentals and landing fees expense of approximately $10 million. These amounts were reclassified in order to properly align the lease and rental expenses to the appropriate line items in accordance with the new standard and are excluded from the following year-over-year expense change discussion.

Salaries and employee benefits expense ~~increased 6% in the second quarter and 8%~~decreased 3% in the first ~~half~~quarter of ~~2019~~2020 primarily due to ~~merit increases, including the impact of accelerated merit increases, and~~lower variable incentive compensation expenses, partially offset by higher staffing to support volume growth at ~~all~~FedEx Express and FedEx Ground. Other operating expense increased 5% in the first quarter of ~~our~~2020 primarily due to higher self-insurance accruals at FedEx Ground and higher outside service contracts at FedEx Express. Depreciation and amortization expense increased 9% in the first quarter of 2020 primarily due to continued strategic investment programs at all transportation segments. ~~Lower variable incentive compensation accruals partially offset these higher expenses~~Purchased transportation costs increased 2% in the ~~second~~first quarter of ~~2019.~~2020 primarily due to increased contractor settlement rates and expansion of the FedEx Ground network to six-day-per-week operations year-round in January 2019, as well as higher volumes at FedEx Ground. Maintenance and repairs expense increased ~~13% in the second quarter and 11%~~4% in the first ~~half~~quarter of ~~2019~~2020 primarily due to ~~the timing of~~higher aircraft engine maintenance ~~events~~expense at FedEx Express.

The following graph for our transportation segments shows our average cost of jet and vehicle fuel per gallon for the five most recent quarters:

Fuel expense ~~increased 29% in the second quarter and 34%~~decreased 12% in the first ~~half~~quarter of ~~2019~~2020 primarily due to ~~increased~~decreased fuel prices. However, fuel prices represent only one component of the factors we consider meaningful in understanding the impact of fuel on our business. Consideration must also be given to the fuel surcharge revenue we collect. Accordingly, we believe discussion of the net impact of fuel on our results, which is a comparison of the year-over-year change in these two factors, is important to understand the impact of fuel on our business. In order to provide information about the impact of fuel surcharges on the trend in revenue and yield growth, we have included the comparative weighted-average fuel surcharge percentages in effect for the ~~second~~first quarters of ~~2019~~2020 and ~~2018~~2019 in the accompanying discussion of each of our transportation segments.

Most of our fuel surcharges are adjusted on a weekly basis. The fuel surcharge is based on a weekly fuel price from two weeks prior to the week in which it is assessed. Some FedEx Express international fuel surcharges incorporate a timing lag of approximately six to eight weeks.

The manner in which we purchase fuel also influences the net impact of fuel on our results. For example, our contracts for jet fuel purchases at FedEx Express are tied to various indices, including the U.S. Gulf Coast index. While many of these indices are aligned, each index may fluctuate at a different pace, driving variability in the prices paid for jet fuel. Furthermore, under these contractual arrangements, approximately 70% of our jet fuel is purchased based on the index price for the preceding week, with the remainder of our purchases tied to the index price for the preceding month and preceding day, rather than based on daily spot rates. These contractual provisions mitigate the impact of rapidly changing daily spot rates on our jet fuel purchases.

Because of the factors described above, our operating results may be affected should the market price of fuel suddenly change by a significant amount or change by amounts that do not result in an adjustment in our fuel surcharges, which can significantly affect our earnings either positively or negatively in the short-term.

The net impact of fuel had a slight benefit to operating income in the first quarter of 2020 as decreased fuel prices more than offset lower fuel surcharges.

We routinely review our fuel ~~surcharges and~~surcharges. On March 18, 2019, we updated the tables used to determine our fuel ~~surcharge methodology.~~surcharges for FedEx Express U.S. domestic services and at FedEx Ground. On September 10, 2018, we updated the tables used to determine our fuel surcharges at FedEx Express and FedEx Ground.

The net impact of fuel ~~had a significant benefit to~~on operating income indescribed above and for each segment below excludes the ~~second quarter and first half of 2019 as higher fuel surcharges more than offset increased fuel prices.~~impact from these table changes.

The net impact of fuel on our operating results does not consider the effects that fuel surcharge levels may have on our business, including changes in demand and shifts in the mix of services purchased by our customers. In addition, our purchased transportation expense may be impacted by fuel costs. While fluctuations in fuel surcharge percentages can be significant from period to period, fuel surcharges represent one of the many individual components of our pricing structure that impact our overall revenue and yield. Additional components include the mix of services sold, the base price and extra service charges we obtain for these services and the level of pricing discounts offered.

Our effective tax rate was ~~20.6% for the second quarter and 22.3%~~25.2% for the first ~~half~~quarter of ~~2019,~~2020, compared with ~~32.0% for the second quarter and 35.4%~~24.2% for the first ~~half~~quarter of ~~2018.~~2019. The ~~2019~~2020 tax rate was ~~favorably~~ impacted by ~~the TCJA, which resulted~~decreased earnings in benefits of approximately $150 million and $285 million during the second quarter and first half of 2019, respectively, primarily from the lower statutory tax rate on fiscal 2019 earnings. The 2019 tax rates were also favorably impacted by a tax benefit of approximately $60 million from accelerated deductions to be claimed on FedEx’s 2018 U.S. income tax return. The 2018 tax rate benefited from foreign tax credits associated with a dividend paid from our foreign operations and tax benefits from share-based payments. The 2018 tax rate was negatively impacted by costs incurred in connection with the integration of the foreign operations of FedEx Express and TNT Express, the effects of the NotPetya cyberattack on lower taxed foreign earnings and changes in uncertain tax positions.

We are subject to taxation in the United States and various U.S. state, local and foreign jurisdictions. We are currently under examination by the Internal Revenue Service (“IRS”) for the 2016 and 2017 tax years. In addition, we are currently under appeals proceedings with respect to the IRS’s proposed audit adjustment for the 2014 and 2015 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next twelve months and could result in a change in our balance of unrecognized tax benefits. The ~~expected~~ impact of any changes ~~would~~is not expected to be material to our consolidated financial statements. As of ~~November 30, 2018,~~August 31, 2019, there were no material changes to our liabilities for unrecognized tax benefits subsequent to May 31, ~~2018.~~2019.

We expect ~~volume growth at all~~operating income declines for the remainder of ~~our transportation segments to support~~2020 resulting from lower revenue ~~and earnings growth in the second half of 2019, prior to any mark-to-market retirement plans adjustment and costs associated with a new voluntary employee buyout program (discussed below).~~

Our expectations for earnings growth in 2019 are dependent on key external factors, including fuel prices, moderate U.S. domestic economic growth and no further weakening in international economic conditions from our current forecast.

~~During the first half of 2019, we experienced an accelerating shift in service mix~~ at FedEx Express from international package volume to freight volume, which intensified during the second quarter and increased costs and negatively impacted operating margin. In addition, growth in U.S. deferred package volumes and higher operating costs at FedEx Ground.

Our outlook on global trade has weakened since the previous quarter due to escalating trade tensions, including increased tariffs on Chinese goods, increasing softness in ~~our FedEx Express operations negatively impacted margins during the first half of 2019. Furthermore, during the second quarter of 2019, we experienced declining trends~~European markets and declines in ~~revenue growth in our~~industrial production. Our international operations are much more sensitive to changes in global trade than our U.S. domestic operations because of the higher concentration of business-to-business shipments internationally. The softer economic outlook is expected to create an ongoing revenue shortfall from planned levels, particularly in Europe and ~~Asia. Absent significant improvements~~Asia Pacific. The cost of maintaining two separate networks in ~~international economic conditions, including a more stable trade environment,~~Europe while we ~~expect these trends to continue for~~execute the remainder of our fiscal year. As a response to these trends, we have implemented new cost-reduction actions (as described below); however, the benefits of some of these actions will not be fully realized immediately.

~~While we still believe that we will realize the benefits that we expected when we acquired~~ TNT Express ~~reductions in base business levels largely due to increasing international economic weakness during the second quarter, which~~integration is expected to ~~continue, and a change in service mix following~~compound the ~~NotPetya cyberattack in 2018 will delay~~impact of the ~~realization of those benefits past 2020. As a consequence,~~revenue shortfall on our ~~operating profit improvement goal for~~near-term results.

In the U.S. domestic package market, incremental costs associated with modernizing our FedEx Express ~~segment~~network and permanently expanding our FedEx Ground network operations to seven days per week year-round, combined with short-term volume declines from the loss of ~~$1.2 billion to $1.5 billion from 2017~~a large customer, has created a near-term cost-to-volume disparity. However, we are confident that our investments in our U.S. domestic package operations will ~~not be realized~~ultimately result in ~~2020.~~higher revenue that more than offsets the implementation costs associated with these programs.

In response to the current ~~business and~~ economic conditions, ~~we have implemented cost controls over discretionary spending at FedEx Express and FedEx Services for the remainder of 2019, and~~ we are making adjustments to our global FedEx Express air network to ~~reduce capacity. We~~better match capacity with demand. These capacity adjustments will ~~also offer voluntary buyout incentives to certain U.S.-based employees as part of our ongoing efforts to improve efficiencies~~result in accelerating planned aircraft retirements over the current and ~~reduce costs. It is anticipated that~~next fiscal years, and we are parking additional aircraft after the ~~vast majority of employees eligible for these incentives will be staff employees at FedEx Express and FedEx Services. Similar programs are being considered for employees~~2020 peak season. These actions could result in ~~our international regions.~~

~~The U.S.-based employee voluntary buyout program will include voluntary severance payments~~higher depreciation expense and/or immaterial asset impairments in future periods. In addition, we continue to be ~~calculated based~~focused on ~~four weeks of gross base salary for every year of FedEx service up to a maximum payment of two years of pay~~cost reductions by limiting discretionary spending and funding to healthcare reimbursement accounts. These incentives will not include any changes to retirement eligibility or payments. However, employees who are eligible for this program and are also eligible to retire may elect to accept the buyout and retire.deferring non-critical hiring.

Costs of the benefits to be provided under the voluntary program will be recognized in the period that eligible employees accept their offers, which is expected to be predominantly in the fourth quarter of 2019 for the U.S.-based program. We expect the pre-tax cost of the U.S.-based program to range from $450 million to $575 million in pre-tax cash expenditures, but actual costs will depend on employee acceptance rates. We expect savings from the U.S.-based program to be between $225 million to $275 million on an annualized basis beginning in 2020.

~~During~~For the remainder of ~~2019,~~2020, we will continue to execute our TNT Express integration plans and ~~will be~~are focused on ~~integrating~~completing projects across our European hub and station locations that will allow interoperability between the ~~largest~~ground networks for both FedEx Express and ~~most complex~~TNT Express packages, which will further lower costs as the related FedEx Express linehaul operations are optimized. In addition, we continue to focus on the operational network integration process for the key countries in Europe, which ~~include the largest~~represent a significant percentage of international revenue, workforces and facilities. Integration activities in Europe are complex and require consultations with works councils and employee representatives in a number of countries. While we expect to make significant progress on integration activities in 2020, particularly in Europe, integration work will continue thereafter. After 2020, the next key integration milestones include completing a single portfolio of services and air network integration. We ~~continue~~expect to incur approximately $280 million of integration expenses in the remainder of 2020 in the form of professional fees, outside service contracts, salaries and wages and other operating expense. We expect the aggregate integration program ~~expense,~~expenses, including restructuring charges at TNT Express, ~~through 2020~~ to be approximately ~~$1.5~~$1.7 billion through 2021, and ~~expect to incur approximately $450 million of these costs during 2019. However, based on the timing of the completion of integration activities and any international voluntary employee buyout program,~~ we may incur additional ~~integration~~ costs, ~~after 2020.~~including investments that will further transform and optimize the combined businesses. The timing and amount of integration expenses and capital investments in any future period may change as we ~~continue to execute the integration of TNT Express.~~revise and implement our plans.

~~At FedEx Ground and FedEx Freight, we will continue executing operational improvement programs~~Our expectations for the remainder of ~~2019 that~~2020 are ~~designed to increase operational efficiency~~dependent on key external factors, including moderate U.S. economic growth, current fuel price expectations, no further weakening in international economic conditions from our current forecast and ~~safety, enhance service offerings to our customers~~no additional adverse developments in international trade policies and reduce our cost structure. FedEx Ground is once again running six- and seven-day operations through the holiday season, and will continue six-day operations throughout its U.S. network year-round to serve the rapidly growing demand for e-commerce services.relations.

Other Outlook Matters. For details on key ~~2019~~2020 capital projects, refer to the “Liquidity Outlook” section of this MD&A.

FedEx Ground previously announced plans to implement the Independent Service Provider (“ISP”) model throughout its entire U.S. pickup-and-delivery network. The transition to the ISP model is being accomplished on a district-by-district basis and we are now targeting the transition to be completed during the second quarter of 2020. As of November 30, 2018, over two-thirds of FedEx Ground volume was being delivered by small businesses operating under the ISP model. The costs associated with these transitions will be recognized in the periods incurred and are not expected to be material to any future quarter.

See “Forward-Looking Statements” and Part II, Item 1A “Risk Factors” for a discussion of these and other potential risks and uncertainties that could materially affect our future performance.

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

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:

The operating expense line item “Intercompany charges” on the accompanying unaudited condensed consolidated financial statements of our transportation segments reflects the allocations from the FedEx Services segment to the respective ~~transportation~~operating segments. The allocations of net operating costs are based on metrics such as relative revenues or estimated services provided.

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

Also included in corporate and other is the FedEx ~~Trade Networks~~Office operating segment, which provides an array of document and business services and retail access to our customers for our package transportation businesses, and the FedEx Logistics, Inc. operating segment, which provides integrated supply chain management solutions, specialty transportation, cross-border e-commerce technology and e-commerce transportation solutions, customs brokerage and global ocean and air freight forwarding through FedEx Trade Networks Transport & Brokerage, Inc.; cross-border enablement and technology solutions and e-commerce transportation solutions through FedEx Cross Border Technologies, Inc.; integrated supply chain management solutions through FedEx Supply Chain Distribution System, Inc. (“FedEx Supply Chain”); time-critical shipment services through FedEx Custom Critical, Inc.; and, effective September 1, 2018, critical inventory and service parts logistics, 3-D printing and technology repair through FedEx Forward Depots, Inc. (“FedEx Forward Depots”). In the second quarter and first half of 2019, the operating loss increase in “Corporate, other and eliminations” was driven primarily by the litigation matter at FedEx Ground (discussed above), operating losses at FedEx Supply Chain, the inclusion of FedEx Forward Depots following the realignment of FedEx Trade Networks in the fourth quarter of 2018 and lower transportation volumes due to weakness in the international economy.forwarding.

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. Prior year amounts have been revised to conform to the current year presentation, including revised statistical information. The following tables compare revenues, operating expenses, operating income (dollars in millions), operating margin and operating expenses as a percent of revenue for the periods ended ~~November 30:~~August 31:

	Three Months Ended						Percent				Six Months Ended						Percent				Three Months Ended						Percent
	2018			2017			Change				2018			2017			Change				2019			2018			Change
Revenues:
Package:
U.S. overnight box	$	1,948		$	1,787			9			$	3,834		$	3,537			8			$	1,866		$	1,886			(1	)
U.S. overnight envelope		444			432			3				912			882			3				479			468			2
U.S. deferred		1,060			922			15				2,012			1,800			12				956			952			—
Total U.S. domestic package revenue		3,452			3,141			10				6,758			6,219			9				3,301			3,306			—
International priority		1,896			1,865			2				3,770			3,628			4				1,817			1,874			(3	)
International economy		885			815			9				1,735			1,585			9				855			850			1
Total international export package revenue		2,781			2,680			4				5,505			5,213			6				2,672			2,724			(2	)
International domestic⁽¹⁾		1,203			1,228			(2	)			2,334			2,284			2				1,076			1,131			(5	)
Total package revenue		7,436			7,049			5				14,597			13,716			6				7,049			7,161			(2	)
Freight:
U.S.		792			688			15				1,522			1,301			17				695			730			(5	)
International priority		564			541			4				1,097			995			10				464			533			(13	)
International economy		554			481			15				1,073			862			24				516			519			(1	)
International airfreight		83			100			(17	)			168			183			(8	)			66			85			(22	)
Total freight revenue		1,993			1,810			10				3,860			3,341			16				1,741			1,867			(7	)		Percent of Revenue
Other		175			217			(19	)			369			419			(12	)			155			194			(20	)		2019			2018
Total revenues		9,604			9,076			6				18,826			17,476			8				8,945			9,222			(3	)			100.0	%		100.0	%
Operating expenses:
Salaries and employee benefits		3,441			3,339			3				6,914			6,553			6				3,372			3,473			(3	)			37.7			37.7
Purchased transportation		1,354			1,304			4				2,661			2,488			7				1,232			1,307			(6	)			13.8			14.2
Rentals and landing fees		474			492			(4	)			944			976			(3	)			513			470			9				5.7			5.1
Depreciation and amortization		449			410			10				885			825			7				462			436			6				5.2			4.7
Fuel		899			703			28				1,744			1,306			34				743			845			(12	)			8.3			9.2
Maintenance and repairs		514			445			16				1,016			904			12				517			502			3				5.8			5.4
Intercompany charges		527			514			3				1,066			1,011			5				469			518			(9	)			5.2			5.6
Other		1,326			1,268			5				2,609			2,492			5				1,352			1,283			5				15.1			13.9
Total operating expenses		8,984			8,475			6				17,839			16,555			8				8,660			8,834			(2	)			96.8	%		95.8	%
Operating income	$	620		$	601			3			$	987		$	921			7			$	285		$	388			(27	)
Operating margin		6.5	%		6.6	%		(10	)	bp		5.2	%		5.3	%		(10	)	bp		3.2	%		4.2	%		(100	)	bp

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended ~~November 30:~~

	Three Months Ended				Percent			Six Months Ended				Percent			Three Months Ended				Percent
	2018		2017		Change			2018		2017		Change			2019		2018		Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box		1,308		1,248		5			1,269		1,217		4			1,218		1,231		(1	)
U.S. overnight envelope		532		547		(3	)		541		552		(2	)		562		551		2
U.S. deferred		1,082		938		15			998		907		10			976		916		7
Total U.S. domestic ADV		2,922		2,733		7			2,808		2,676		5			2,756		2,698		2
International priority		555		552		1			540		530		2			530		526		1
International economy		302		277		9			289		264		9			294		276		7
Total international export ADV		857		829		3			829		794		4			824		802		3
International domestic⁽¹⁾		2,670		2,706		(1	)		2,530		2,475		2			2,352		2,396		(2	)
Total ADV		6,449		6,268		3			6,167		5,945		4			5,932		5,896		1
Revenue per package (yield):
U.S. overnight box	$	23.63	$	22.73		4		$	23.60	$	22.70		4		$	23.94	$	23.57		2
U.S. overnight envelope		13.24		12.53		6			13.16		12.48		5			13.32		13.09		2
U.S. deferred		15.54		15.58		—			15.75		15.51		2			15.29		15.98		(4	)
U.S. domestic composite		18.75		18.24		3			18.80		18.15		4			18.71		18.85		(1	)
International priority		54.25		53.70		1			54.52		53.54		2			53.52		54.80		(2	)
International economy		46.45		46.77		(1	)		46.92		46.86		—			45.52		47.43		(4	)
International export composite		51.50		51.38		—			51.87		51.32		1			50.67		52.26		(3	)
International domestic⁽¹⁾		7.15		7.20		(1	)		7.21		7.21		—			7.15		7.26		(2	)
Composite package yield		18.30		17.86		2			18.49		18.03		3		$	18.57	$	18.69		(1	)
Freight Statistics
Average daily freight pounds:
U.S.		8,917		8,475		5			8,608		8,095		6			8,015		8,309		(4	)
International priority		5,684		5,660		—			5,469		5,260		4			4,792		5,260		(9	)
International economy		15,373		13,231		16			14,401		11,733		23			13,717		13,459		2
International airfreight		1,759		2,145		(18	)		1,738		1,997		(13	)		1,555		1,717		(9	)
Total average daily freight pounds		31,733		29,511		8			30,216		27,085		12			28,079		28,745		(2	)
Revenue per pound (yield):
U.S.	$	1.41	$	1.29		9		$	1.38	$	1.26		10		$	1.36	$	1.35		1
International priority		1.57		1.52		3			1.57		1.48		6			1.51		1.56		(3	)
International economy		0.57		0.58		(2	)		0.58		0.57		2			0.59		0.59		—
International airfreight		0.75		0.74		1			0.75		0.72		4			0.66		0.76		(13	)
Composite freight yield		1.00		0.97		3			1.00		0.96		4		$	0.97	$	1.00		(3	)

FedEx Express segment revenues ~~increased 6% in the second quarter and 8%~~decreased 3% in the first ~~half~~quarter of ~~2019~~2020 primarily due to ~~international package~~the loss of business from a large customer, one fewer operating day, unfavorable exchange rates and lower freight ~~volume recovery from the NotPetya cyberattack~~pounds reflecting macroeconomic weakness and ~~U.S. domestic package volume growth. Higher fuel surcharges also contributed to an increase~~trade uncertainty.

Average daily freight pounds decreased 2% in ~~revenue in both the second quarter and~~ the first ~~half~~quarter of ~~2019. However, FedEx Express experienced a deceleration~~2020 primarily due to lower volume in international ~~package volume growth during~~freight services. Freight yields decreased 3% in the first quarter ~~as we saw a significant slowing~~ of ~~the Eurozone economy, as well as continued softness in economic conditions in Asia.~~

~~U.S.~~2020 primarily due to unfavorable exchange rates, base yield declines and lower fuel surcharges. International domestic package average daily volumes ~~increased 7% in the second quarter and 5%~~decreased 2% in the first ~~half~~quarter of ~~2019 driven by deferred and overnight services, as e-commerce continues~~2020 primarily due to ~~drive growth. U.S.~~yield management actions. International domestic package yields ~~increased 3% in the second quarter and 4%~~decreased 2% in the first ~~half~~quarter of ~~2019 driven primarily~~2020 as base yield improvement was more than offset by higher fuel surcharges. Average daily freight pounds increased 8% in the second quarter and 12% in the first half of 2019 primarily due to higher volume in international freight services, driven by recovery from the NotPetya cyberattack and an overall product mix shift from package to freight. Freight yields increased 3% in the second quarter and 4% in the first half of 2019 primarily due to U.S. domestic freight services driven by higher fuel surcharges and higher baseunfavorable exchange rates. International export package average daily volumes increased 3% in the ~~second~~first quarter ~~and 4% in the first half~~ of ~~2019~~2020 primarily due to ~~the recovery from the NotPetya cyberattack.~~growth in our international economy service offering. However, international package volume growth has slowed across most regions as ~~discussed above.~~a result of macroeconomic weakness and trade uncertainty. International export package yields ~~slightly increased~~decreased 3% in the ~~second~~first quarter ~~and first half~~ of ~~2019 as higher fuel surcharges were offset~~2020 driven by unfavorable exchange rates, lower package weights, base yield declines and ~~unfavorable exchange rates.~~lower fuel surcharges. U.S. domestic package average daily volumes increased 2% in the first quarter of 2020 led by deferred services, as e-commerce continues to drive growth, despite the loss of business from a large customer. U.S. domestic package yields decreased 1% in the first quarter of 2020 driven by lower package weights.

FedEx Express’s U.S. domestic and outbound fuel surcharge and international fuel ~~surcharges~~surcharge ranged as follows for the periods ended ~~November 30:~~

	Three Months Ended						Six Months Ended						Three Months Ended
	2018			2017			2018			2017			2019			2018
U.S. Domestic and Outbound Fuel Surcharge:
Low		7.90	%		4.42	%		7.02	%		2.21	%		7.27	%		7.02	%
High		10.80			4.87			10.80			4.87			8.45			7.27
Weighted-average		8.60			4.63			7.87			3.67			7.55			7.11
International Fuel Surcharges:
International Export and Freight Fuel Surcharge:
Low		8.65			5.65			8.47			3.38			6.87			8.12
High		18.82			12.16			18.82			13.75			18.22			18.09
Weighted-average		16.77			10.54			16.58			9.66			15.55			14.60
International Domestic Fuel Surcharge:
Low														3.27			2.25
High														19.47			18.24
Weighted-average														7.50			5.68

On ~~November 5, 2018,~~September 16, 2019, FedEx Express announced a 4.9% average list price increase for U.S. domestic, U.S. export and U.S. import services effective January ~~7, 2019.~~6, 2020. On March 18, 2019, we updated the tables used to determine our fuel surcharges for FedEx Express U.S. domestic services. On January ~~1, 2018,~~7, 2019, FedEx Express implemented a 4.9% average list price increase for U.S. domestic, U.S. export and U.S. import services. On September 10, 2018, we updated the tables used to determine our fuel surcharges at FedEx Express.

FedEx Express segment operating income ~~increased during~~decreased 27% in the ~~second~~first quarter ~~and first half~~ of ~~2019~~2020 primarily due to ~~higher revenues~~weakening global economic conditions and continued mix shift to lower-yielding services, including lower weights due to growth in deferred services resulting from e-commerce. In addition, one fewer operating day, the ~~positive net impact~~loss of ~~fuel, as well as lower variable incentive compensation accruals. A change in product mix~~business from ~~international package volume to freight volume, which intensified during the second quarter of 2019, increased costs~~a large customer and decreased yields negatively impacted operating ~~margins in the second quarter~~income and ~~first half of 2019. In addition, growth in U.S. deferred package volumes and higher operating costs in salaries and employee benefits and maintenance and repairs negatively impacted~~ operating margin in the ~~second~~first quarter ~~and~~of 2020. Lower variable incentive compensation expenses benefited operating income comparisons by approximately $160 million in the first ~~half~~quarter of 2019. Furthermore, FedEx Express results were negatively impacted by increasing softness in international volumes during the quarter, as we saw a significant slowing of the Eurozone economy, as well as continued softness in economic conditions in Asia.2020.

FedEx Express segment results included approximately ~~$99~~$57 million of TNT Express integration expenses in the ~~second~~first quarter ~~and $201~~of 2020, a $45 million ~~of such expenses in the first half of 2019, a $3 million increase from the second quarter and $17 million increase~~decrease from the first ~~half~~quarter of ~~2018.~~2019.

The lease standard reclassification discussed in the “Overview” section above is excluded from the following year-over-year expense change discussion. Salaries and employee benefits expense ~~increased~~decreased 3% in the ~~second~~first quarter of 2020 primarily due to lower variable incentive compensation expenses, the inclusion of certain TNT Express restructuring expenses in the first quarter of 2019, favorable exchange rates and one fewer operating day, partially offset by higher staffing to support package volume growth. Other operating expense increased 5% in the first quarter of 2020 primarily due to higher outside service contract expenses, which includes costs associated with cloud computing services. Purchased transportation expense decreased 6% in the first ~~half~~quarter of ~~2019~~2020 primarily due to merit increases, including impacts of the accelerated merit increase during late 2018 following the passage of the TCJA (described in the “Overview” section above) and higher staffing to support volume growth. The increase in salaries and employee benefits expense in the second quarter of 2019 was partially offset by lower variable incentive compensation accruals. Purchased transportation expense increased 4% in the second quarter and 7% in the first half of 2019 primarily due to higher volume, partially offset by favorable exchange ~~rates. Maintenance~~rates and ~~repairs~~one fewer operating day.

Fuel expense ~~increased 16% in the second quarter and~~decreased 12% in the first ~~half~~quarter of ~~2019 primarily~~2020 due to ~~the timing of aircraft engine maintenance events.~~

~~Fuel expense increased 28% in the second quarter and 34% in the first half of 2019 due to higher~~decreased fuel prices. ~~However, the~~The net impact of fuel had a ~~significant~~slight benefit to operating income in the ~~second~~first quarter ~~and first half~~ of ~~2019,~~2020 as ~~higher~~decreased fuel ~~surcharges~~prices more than offset ~~increased~~lower fuel ~~prices.~~surcharges. See the “Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.

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 revenues, 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 ~~November 30:~~August 31:

Three Months Ended

Percent

Six Months Ended

Percent

2018

2017

Change

2018

2017

Change

Revenues

$
5,142

$
4,525

14

$
9,941

$
8,770

13

Operating expenses:

Salaries and employee benefits

891

767

16

1,696

1,447

17

Purchased transportation

2,342

2,014

16

4,404

3,790

16

Rentals

200

190

5

391

374

5

Depreciation and amortization

180

166

8

353

327

8

Fuel

4

4

—

7

6

17

Maintenance and repairs

84

77

9

161

152

6

Intercompany charges

394

366

8

791

725

9

Other

461

445

4

885

847

4

Total operating expenses

4,556

4,029

13

8,688

7,668

13

Operating income

$
586

$
496

18

$
1,253

$
1,102

14

Operating margin

11.4
%

11.0
%

40

bp

12.6
%

12.6
%

—

bp
Average daily package volume

9,237

8,576

8

8,721

8,125

7

Revenue per package (yield)

$
8.81

$
8.35

6

$
8.88

$
8.41

6

	Percent of Revenue												Three Months Ended						Percent				Percent of Revenue
	Three Months Ended						Six Months Ended						2019			2018			Change				2019			2018
	2018			2017			2018			2017
Revenues													$	5,179		$	4,799			8				100.0	%		100.0	%
Operating expenses:
Salaries and employee benefits		17.3	%		17.0	%		17.1	%		16.5	%		871			805			8				16.8			16.8
Purchased transportation		45.5			44.5			44.3			43.2			2,303			2,062			12				44.5			43.0
Rentals		3.9			4.2			3.9			4.2			239			191			25				4.6			4.0
Depreciation and amortization		3.5			3.7			3.5			3.7			193			173			12				3.7			3.6
Fuel		0.1			0.1			0.1			0.1			3			3			—				—			—
Maintenance and repairs		1.6			1.7			1.6			1.7			87			77			13				1.7			1.6
Intercompany charges		7.7			8.0			8.0			8.3			375			388			(3	)			7.3			8.1
Other		9.0			9.8			8.9			9.7			464			424			9				9.0			8.8
Total operating expenses		88.6			89.0			87.4			87.4			4,535			4,123			10				87.6	%		85.9	%
Operating income													$	644		$	676			(5	)
Operating margin		11.4	%		11.0	%		12.6	%		12.6	%		12.4	%		14.1	%		(170	)	bp
Average daily package volume														8,834			8,221			7
Revenue per package (yield)													$	9.13		$	8.96			2

FedEx Ground segment revenues increased ~~14% in the second quarter and 13%~~8% in the first ~~half~~quarter of ~~2019~~2020 due to volume growth and increased ~~yields.~~ yields, despite one fewer operating day and the loss of business from a large customer.

Average daily volume ~~at FedEx Ground~~ increased ~~8% in the second quarter and~~ 7% in the first ~~half~~quarter of ~~2019~~2020 primarily due to continued growth in residential services driven by e-commerce. FedEx Ground ~~yield~~yields increased 6%2% in ~~both the second quarter and~~ the first ~~half~~quarter of ~~2019~~2020 primarily ~~driven by~~due to higher base yields, extra service charges and higher fuel ~~surcharges and base yields.~~surcharges.

The FedEx Ground fuel surcharge is based on a rounded average of the national U.S. on-highway average price for a gallon of diesel fuel, as published by the Department of Energy. The fuel surcharge ranged as follows for the periods ended ~~November 30:~~August 31:

	Three Months Ended						Six Months Ended						Three Months Ended
	2018			2017			2018			2017			2019			2018
Low		6.25	%		4.50	%		6.25	%		4.00	%		6.75	%		6.30	%
High		7.75			5.25			7.75			5.25			7.25			6.50
Weighted-average		7.40			5.02			6.87			4.68			7.04			6.30

On ~~November 5, 2018,~~September 16, 2019, FedEx Ground announced a 4.9% average list price increase effective January ~~7, 2019.~~6, 2020. On March 18, 2019, we updated the tables used to determine our fuel surcharges at FedEx Ground. On January ~~1, 2018,~~7, 2019, FedEx Ground implemented a 4.9% average list price increase. ~~In addition, as announced on~~On September ~~18, 2017, dimensional weight pricing applies~~10, 2018, we updated the tables used to ~~the majority of~~determine our fuel surcharges at FedEx ~~SmartPost shipments effective January 22, 2018.~~Ground.

FedEx Ground segment operating income ~~increased 18% in the second quarter and 14%~~decreased 5% in the first ~~half~~quarter of ~~2019~~2020 due to higher purchased transportation costs, resulting from increased contractor settlement rates and higher volumes, including expanding to six-day-per-week operations year-round starting in January 2019, as well as increased staffing costs to support network expansion. In addition, the loss of business from a large customer negatively impacted our results during the first quarter of 2020. These items were partially offset by volume growth and increased ~~yields and the positive net impact of fuel. Operating margin remained flat~~yields. Additionally, lower variable incentive compensation expenses benefited operating income comparisons by approximately $50 million in the first ~~half~~quarter of ~~2019 as higher purchased transportation, staffing and network expansion costs offset~~2020.

The lease standard reclassification discussed in the ~~benefits~~“Overview” section above is excluded from ~~higher revenues.~~

the following year-over-year expense change discussion. Purchased transportation expense increased ~~16%~~12% in ~~both~~ the ~~second~~first quarter of 2020 due to increased contractor settlement rates and higher volumes, including expanding to six-day per week operations year-round, partially offset by decreased fuel costs. Other operating expense increased 9% in the first ~~half~~quarter of ~~2019~~2020 primarily due to higher ~~volumes,~~self-insurance accruals and increased ~~rates and higher fuel costs.~~bad debt expense. Salaries and employee benefits expense increased ~~16% in the second quarter and 17%~~8% in the first ~~half~~quarter of ~~2019~~2020 primarily due to additional staffing to support volume growth, ~~merit increases and network expansion. Lower~~including expanding to six-day-per-week operations year-round, partially offset by lower variable incentive compensation ~~accruals partially offset these increased expenses in the second quarter of 2019.~~expenses.

The net impact of fuel had a ~~significant~~slight benefit to operating income in the ~~second~~first quarter ~~and first half~~ of ~~2019,~~2020 as ~~higher~~decreased fuel ~~surcharges~~prices more than offset ~~increased~~lower fuel ~~prices.~~surcharges. See the “Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.

FedEx Ground is involved in lawsuits and administrative proceedings claiming that owner-operators engaged under operating agreements no longer in place should have been treated as employees of FedEx Ground, rather than independent contractors. In addition, we are defending joint-employer cases where it is alleged that FedEx Ground should be treated as an employer of the drivers employed by owner-operators engaged by FedEx Ground. These cases are in varying stages of litigation. We will continue to vigorously defend ourselves in these proceedings and continue to believe that owner-operators engaged by FedEx Ground are properly classified as independent contractors and that FedEx Ground is not an employer or joint employer of the drivers of these independent contractors.

~~For additional information on the~~ FedEx Ground previously announced plans to implement the Independent Service Provider (“ISP”) model throughout its entire U.S. pickup-and-delivery network. The transition to the ISP model ~~see “Other Outlook Matters”~~is being accomplished on a district-by-district basis and we are now targeting the transition to be completed during the second quarter of 2020. As of August 31, 2019, approximately 80% of standard FedEx Ground volume (excluding FedEx SmartPost volume) was being delivered by small businesses operating under ~~Consolidated Results of this MD&A.~~the ISP model. The costs associated with these transitions will be recognized in the periods incurred and are not expected to be material to any future quarter.

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 revenues, operating expenses, operating income (dollars in millions), operating margin, selected statistics and operating expenses as a percent of revenue for the periods ended ~~November 30:~~August 31:

	Three Months Ended						Percent				Six Months Ended						Percent				Three Months Ended						Percent				Percent of Revenue
	2018			2017			Change				2018			2017			Change				2019			2018			Change				2019			2018
Revenues	$	1,918		$	1,673			15			$	3,877		$	3,337			16			$	1,905		$	1,959			(3	)			100.0	%		100.0	%
Operating expenses:
Salaries and employee benefits		919			820			12				1,847			1,613			15				919			928			(1	)			48.3			47.4
Purchased transportation		250			208			20				509			406			25				187			259			(28	)			9.8			13.2
Rentals		42			37			14				84			73			15				52			42			24				2.7			2.1
Depreciation and amortization		76			72			6				154			140			10				94			78			21				4.9			4.0
Fuel		150			112			34				287			209			37				123			137			(10	)			6.5			7.0
Maintenance and repairs		63			59			7				125			115			9				65			62			5				3.4			3.2
Intercompany charges		137			127			8				275			252			9				126			138			(9	)			6.6			7.0
Other		133			130			2				272			256			6				145			139			4				7.6			7.1
Total operating expenses		1,770			1,565			13				3,553			3,064			16				1,711			1,783			(4	)			89.8	%		91.0	%
Operating income	$	148		$	108			37			$	324		$	273			19			$	194		$	176			10
Operating margin		7.7	%		6.5	%		120		bp		8.4	%		8.2	%		20		bp		10.2	%		9.0	%		120		bp
Average daily shipments (in thousands):
Average daily shipments (in thousands)
Priority		81.7			76.3			7				81.4			75.3			8				78.5			81.2			(3	)
Economy		35.4			32.3			10				35.0			32.0			9				32.8			34.6			(5	)
Total average daily shipments		117.1			108.6			8				116.4			107.3			8				111.3			115.8			(4	)
Weight per shipment (lbs):
Weight per shipment (lbs)
Priority		1,203			1,201			—				1,211			1,192			2				1,156			1,218			(5	)
Economy		1,043			1,153			(10	)			1,026			1,150			(11	)			960			1,009			(5	)
Composite weight per shipment		1,155			1,187			(3	)			1,155			1,180			(2	)			1,098			1,156			(5	)
Revenue per shipment:
Revenue per shipment
Priority	$	249.76		$	232.25			8			$	248.24		$	229.17			8			$	255.45		$	246.77			4
Economy		297.73			286.35			4				295.00			281.64			5				295.75			292.33			1
Composite revenue per shipment	$	264.27		$	248.36			6			$	262.29		$	244.81			7			$	267.34		$	260.39			3
Revenue per hundredweight:
Revenue per hundredweight
Priority	$	20.76		$	19.34			7			$	20.50		$	19.22			7			$	22.10		$	20.26			9
Economy		28.55			24.84			15				28.76			24.49			17				30.81			28.97			6
Composite revenue per hundredweight	$	22.89		$	20.93			9			$	22.71		$	20.75			9			$	24.35		$	22.53			8

FedEx Freight segment revenues ~~increased 15% in the second quarter and 16%~~decreased 3% in the first ~~half~~quarter of ~~2019~~2020 due to decreased average daily shipments and one fewer operating day, partially offset by higher revenue per ~~shipment and average~~shipment.

Average daily ~~shipments.~~shipments decreased 4% in the first quarter of 2020 due to lower demand for our service offerings as a result of softening economic conditions. Revenue per shipment increased ~~6% in the second quarter and 7%~~3% in the first ~~half~~quarter of ~~2019~~2020 primarily due to higher base rates ~~driven by~~reflecting our ongoing yield management initiatives, ~~and higher fuel surcharges. Average daily shipments increased 8% in both the second quarter and first half of 2019 due to higher demand for our service offerings.~~partially offset by lower weight per shipment.

The weekly indexed fuel surcharge is based on the average of the U.S. on-highway prices for a gallon of diesel fuel, as published by the Department of Energy. The indexed FedEx Freight fuel surcharge ranged as follows for the periods ended ~~November 30:~~August 31:

	Three Months Ended						Six Months Ended						Three Months Ended
	2018			2017			2018			2017			2019			2018
Low		24.90	%		22.40	%		24.60	%		20.90	%		23.50	%		24.60	%
High		25.60			23.20			25.60			23.20			24.40			25.00
Weighted-average		25.19			22.70			24.97			21.96			23.90			24.77

On ~~November 5, 2018,~~September 16, 2019, FedEx Freight announced a 5.9% average list price increase in certain U.S. and other shipping rates effective January ~~7, 2019.~~6, 2020. On January ~~1, 2018,~~7, 2019, FedEx Freight implemented a ~~4.9%~~5.9% average list price increase in certain U.S. and other shipping rates.

FedEx Freight segment operating income increased ~~37% in the second quarter and 19%~~10% in the first ~~half~~quarter of ~~2019 and~~2020 primarily due to higher revenue per shipment, partially offset by decreased average daily shipments. In addition, lower variable incentive compensation expenses benefited operating ~~margin improved 120 basis points in the second quarter and 20 basis points~~income comparisons by approximately $30 million in the first ~~half~~quarter of ~~2019~~2020.

The lease standard reclassification discussed in the “Overview” section above is excluded from the following year-over-year expense change discussion. Purchased transportation expense decreased 28% in first quarter of 2020 primarily ~~driven by higher revenue per shipment.~~

~~Salaries~~due to lower utilization of third-party transportation providers. Depreciation and ~~employee benefits~~amortization expense increased ~~12% in the second quarter and 15%~~21% in the first ~~half~~quarter of ~~2019 driven primarily by higher staffing levels~~2020 due to ~~support volume growth~~investments in vehicles and ~~merit increases. Purchased transportation~~trailers.

Fuel expense ~~increased 20% in the second quarter and 25%~~decreased 10% in the first ~~half of 2019 due to increased rates, higher fuel costs and higher volumes. Lower variable incentive compensation accruals partially offset these increased expenses in the second~~ quarter of ~~2019.~~

~~Fuel expense increased 34% in the second quarter and 37% in the first half of 2019~~2020 primarily due to ~~higher~~decreased fuel prices. The net impact of fuel had a ~~significant benefit~~slightly negative impact to operating income in the ~~second~~first quarter ~~and first half~~ of ~~2019~~2020 as ~~higher~~lower fuel surcharges more than offset ~~increased~~decreased fuel prices. See the “Fuel” section of this MD&A for a description and additional discussion of the net impact of fuel on our operating results.

Cash and cash equivalents totaled ~~$2.1~~$2.4 billion at ~~November 30, 2018,~~August 31, 2019, compared to ~~$3.3~~$2.3 billion at May 31, ~~2018.~~2019. The following table provides a summary of our cash flows for the ~~six-month~~three-month periods ended ~~November 30~~August 31 (in millions):

	2018			2017			2019			2018
Operating activities:
Net income	$	1,770		$	1,371		$	745		$	835
Noncash charges and credits		2,140			2,053			1,745			981
Changes in assets and liabilities		(1,731	)		(1,926	)		(1,925	)		(1,115	)
Cash provided by operating activities		2,179			1,498			565			701
Investing activities:
Capital expenditures		(2,634	)		(2,621	)		(1,418	)		(1,179	)
Business acquisitions, net of cash acquired		—			(44	)
Proceeds from asset dispositions and other		53			12			(1	)		78
Cash used in investing activities		(2,581	)		(2,653	)		(1,419	)		(1,101	)
Financing activities:
Proceeds from short-term borrowings		248			250
Proceeds from short-term borrowings, net								—			299
Proceeds from debt issuances		1,233			—			2,093			—
Principal payments on debt		(785	)		(28	)		(985	)		(2	)
Proceeds from stock issuances		45			205			12			25
Dividends paid		(173	)		(268	)		(170	)		(173	)
Purchase of treasury stock		(1,271	)		(270	)		(3	)		(625	)
Other		1			3			(5	)		4
Cash used in financing activities		(702	)		(108	)
Cash provided by (used in) financing activities								942			(472	)
Effect of exchange rate changes on cash		(38	)		62			(18	)		(24	)
Net decrease in cash and cash equivalents	$	(1,142	)	$	(1,201	)
Net increase (decrease) in cash and cash equivalents							$	70		$	(896	)
Cash and cash equivalents at the end of period	$	2,123		$	2,768		$	2,389		$	2,369

Cash flows from operating activities ~~increased $681~~decreased $136 million in the first ~~half~~quarter of ~~2019~~2020 primarily due to higher pension contributions and lower net income, ~~and decreased tax payments,~~ partially offset by ~~increased variable compensation payments and higher interest payments.~~noncash credits resulting from the adoption of the new lease accounting standard. See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of our adoption of the new lease accounting standard. Capital expenditures increased ~~slightly~~ during the first ~~half~~quarter of ~~2019~~2020 primarily due to increased spending on vehicles and trailers at FedEx Freight, higher spending related to facilities ~~as well as package handling~~ and ~~ground support equipment~~aircraft at FedEx Express ~~higher~~and increased spending ~~related to~~on information technology at FedEx Services, ~~and aircraft and related equipment purchases at~~ FedEx Express and FedEx Freight. These items were partially offset by lower spending ~~on network expansion projects~~across all asset categories at FedEx Ground. See “Capital Resources” for a discussion of capital expenditures during ~~2019~~2020 and ~~2018.~~2019.

During the ~~second~~first quarter of ~~2019,~~2020, we issued ~~$1.25~~$2.1 billion of senior unsecured debt under our current shelf registration ~~statement.~~statement, comprised of $1.0 billion of 3.10% fixed-rate notes due in August 2029, €500 million of 0.45% fixed-rate notes due in August 2025 and €500 million of 1.30% fixed-rate notes due in August 2031. We used the net proceeds to make voluntary contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) during the first quarter of 2020 and to redeem the ~~$750~~$400 million aggregate principal amount of ~~8.00%~~2.30% notes due ~~January 15, 2019,~~February 1, 2020 and the €500 million aggregate principal amount of 0.50% notes due April 9, 2020. The remaining net proceeds are being used for general corporate purposes. ~~See Note 3 of the accompanying unaudited condensed consolidated financial statements for further discussion.~~

During the second quarter of 2019, we issued commercial paper to provide us with additional short-term liquidity. As of November 30, 2018, we had $250 million of commercial paper outstanding. See Note 3 of the accompanying unaudited condensed consolidated financial statements for further discussion.

In January 2016, our Board of Directors approved a ~~share~~stock repurchase program of up to 25 million shares. During the ~~second~~first quarter of ~~2019,~~2020, we repurchased ~~2.8~~0.02 million shares of FedEx common stock at an average price of ~~$228.35~~$156.90 per share for a total of ~~$646~~$3 million. ~~During the first half of 2019, we repurchased 5.4 million shares of FedEx common stock at an average price of $233.44 per share for a total of $1.3 billion.~~ As of ~~November 30, 2018, 6.3~~August 31, 2019, 5.1 million shares remained under the ~~current share~~stock repurchase authorization. Shares under this 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 limit was set for the completion of the program, and the program may be suspended or discontinued at any time.

Our operations are capital intensive, characterized by significant investments in aircraft, vehicles and trailers, technology, facilities, and ~~package-~~package handling and sort equipment. The amount and timing of capital additions 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 ~~November 30~~August 31 (in millions):

									Percent Change
									2018/2017
	Three Months Ended				Six Months Ended				Three Months			Six Months			Three Months Ended				Percent
	2018		2017		2018		2017		Ended			Ended			2019		2018		Change
Aircraft and related equipment	$	604	$	629	$	1,075	$	1,040		(4	)		3		$	541	$	472		15
Package handling and ground support equipment		223		217		417		414		3			1			141		193		(27	)
Vehicles		275		390		435		511		(29	)		(15	)
Vehicles and trailers																261		160		63
Information technology		157		135		332		261		16			27			222		175		27
Facilities and other		196		206		375		395		(5	)		(5	)		253		179		41
Total capital expenditures	$	1,455	$	1,577	$	2,634	$	2,621		(8	)		—		$	1,418	$	1,179		20

FedEx Express segment	$	932	$	872	$	1,692	$	1,453		7			16		$	951	$	760		25
FedEx Ground segment		253		409		429		715		(38	)		(40	)		96		176		(45	)
FedEx Freight segment		136		172		227		199		(21	)		14			186		90		107
FedEx Services segment		119		112		260		220		6			18			151		125		21
Other		15		12		26		34		25			(24	)		34		28		21
Total capital expenditures	$	1,455	$	1,577	$	2,634	$	2,621		(8	)		—		$	1,418	$	1,179		20

Capital expenditures increased ~~slightly~~ during the first ~~half~~quarter of ~~2019~~2020 primarily due to increased spending on ~~facilities, as well as package handling~~vehicles and ~~ground support equipment~~trailers at FedEx ~~Express,~~Freight, higher spending related to ~~information technology at FedEx Services~~facilities and aircraft ~~and related equipment purchases~~ at FedEx Express, which included the delivery of ~~nine~~four Boeing 767-300 Freighter (“B767F”) aircraft and ~~two~~four Boeing 777 Freighter aircraft and increased spending on information technology at FedEx Services, FedEx Express and FedEx Freight. These items were partially offset by lower spending ~~on network expansion projects~~across all asset categories at FedEx Ground.

We believe that our cash and cash equivalents, cash flow from operations and available financing sources will be adequate to meet our liquidity needs, including working capital, capital expenditure requirements, debt payment obligations, pension contributions and TNT Express integration expenses. Our cash and cash equivalents balance at ~~November 30, 2018~~August 31, 2019 includes ~~$1.0~~$1.3 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, as the enactment of the ~~TCJA~~Tax Cuts and Jobs Act (“TCJA”) significantly reduced the cost of repatriating foreign earnings from a U.S. tax perspective. We 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 are expected to be approximately ~~$5.6~~$5.9 billion in ~~2019,~~2020, and include spending for aircraft and hub modernization at FedEx Express, ~~spending on facilities and sort equipment, primarily~~investments that increase our efficiency in handling large packages at ~~FedEx Express and~~ FedEx Ground and ~~spending for TNT Express integration-related investments.~~investments in technology across all transportation segments that will further optimize our networks and enhance our capabilities. We invested ~~$1.1~~$0.5 billion in aircraft and related equipment in the first ~~half~~quarter of ~~2019~~2020 and expect to invest an additional ~~$0.8~~$1.0 billion for aircraft and related equipment during the remainder of ~~2019.~~2020. In addition, we are making investments over ~~the next several~~multiple years ~~we will be investing~~in our facilities of approximately $1.5 billion to significantly expand the FedEx Express Indianapolis hub and approximately $1$1.5 billion to modernize the FedEx Express Memphis World Hub. We anticipate that our cash flow from operations will be sufficient to fund our capital expenditures in ~~2019.~~2020. Historically, we have been successful in obtaining unsecured financing, from both domestic and international sources, although the marketplace for such investment capital can become restricted depending on a variety of economic factors.

During the first quarter of 2020, FedEx Express exercised options to purchase an additional six B767F aircraft for delivery in 2022.

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.

~~For~~During the ~~remainder~~first quarter of ~~2019,~~2020, we ~~anticipate making additional~~made voluntary contributions totaling $1.0 billion to our ~~tax-qualified U.S. domestic pension plans (“~~U.S. Pension ~~Plans”),~~ ~~although at a much lower level than in 2018.~~Plans. We do not ~~anticipate~~expect to make any additional contributions to our U.S. Pension Plans ~~will be required~~ for the foreseeable future 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 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 partremainder of that credit balance in any given year. During the first half of 2019, we made voluntary contributions totaling $500 million to our U.S. Pension Plans. We expect to make an additional $500 million contribution to our U.S. Pension Plans during 2019.2020. 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 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 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.

The following table sets forth a summary of our contractual cash obligations as of ~~November 30, 2018.~~August 31, 2019. Certain of these contractual obligations are reflected in our balance sheet, while others are disclosed as future obligations under accounting principles generally accepted in the United States. ~~Except for the current portion of interest on long-term debt, this table does not include amounts already recorded in our balance sheet as current liabilities at November 30, 2018.~~ We have certain contingent liabilities that are not accrued in our balance sheet in accordance with accounting principles generally accepted in the United States. These contingent liabilities are not included in the table below. We have other long-term liabilities reflected in our balance sheet, including deferred income taxes, qualified and nonqualified pension and postretirement healthcare plan liabilities and other self-insurance accruals. Unless statutorily required, the payment obligations associated with these liabilities are not reflected in the table below due to the absence of scheduled maturities. Accordingly, this table is not meant to represent a forecast of our total cash expenditures for any of the periods presented.

	Payments Due by Fiscal Year (Undiscounted) (in millions)														Payments Due by Fiscal Year (Undiscounted) (in millions)
	2019 ⁽¹⁾		2020		2021		2022		2023		Thereafter		Total		2020 ⁽¹⁾		2021		2022		2023		2024		Thereafter		Total
Operating activities:
Operating leases	$	1,385	$	2,287	$	2,061	$	1,854	$	1,626	$	8,513	$	17,726	$	1,757	$	2,246	$	2,014	$	1,787	$	1,490	$	7,538	$	16,832
Non-capital purchase obligations and other		705		792		580		406		312		2,882		5,677		909		765		518		362		226		2,757		5,537
Interest on long-term debt		317		599		587		587		580		10,511		13,181		459		649		649		621		599		10,184		13,161
Quarterly contributions to our U.S. Pension Plans		—		—		—		—		—		—		—
Investing activities:
Aircraft and related capital commitments		761		1,935		2,193		1,805		1,508		661		8,863		989		2,337		2,321		1,542		468		228		7,885
Other capital purchase obligations		57		27		25		23		23		6		161		59		25		23		23		1		5		136
Financing activities:
Debt		570		968		—		—		1,601		13,958		17,097		—		—		1,212		1,584		750		15,292		18,838
Finance leases																37		14		14		12		11		78		166
Total	$	3,795	$	6,608	$	5,446	$	4,675	$	5,650	$	36,531	$	62,705	$	4,210	$	6,036	$	6,751	$	5,931	$	3,545	$	36,082	$	62,555

Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above. Such purchase orders often represent authorizations to purchase rather than binding agreements. See Note 8 of the accompanying unaudited condensed consolidated financial statements for more information on such purchase orders.

The amounts reflected in the table above for operating leases represent undiscounted future minimum lease payments under noncancelable operating leases (principally facilities and aircraft) with an initial or remaining term in excess of one year at ~~November 30, 2018.~~August 31, 2019. Under the new lease accounting rules, the majority of these leases are required to be recognized at the net present value on the balance sheet as a liability with an offsetting right-to-use asset.

Included in the table above within the caption entitled “Non-capital purchase obligations and other” is our estimate of the current portion of the liability ($~~119~~125 million) for uncertain tax positions. We cannot reasonably estimate the timing of the long-term payments or the amount by which the liability will increase or decrease over time; therefore, the long-term portion of the liability ($4236 million) is excluded from the table.

The amounts reflected in the table above for interest on long-term debt represent future interest payments due on our long-term debt.

The amounts reflected in the table above for capital purchase obligations represent noncancelable agreements to purchase capital-related equipment. Such contracts include those for certain purchases of aircraft, aircraft modifications, vehicles and trailers, facilities, computers and other equipment.

We had ~~$1.0 billion~~$611 million in deposits and progress payments as of ~~November 30, 2018~~August 31, 2019 on aircraft purchases and other planned aircraft-related transactions.

The amounts reflected in the table above for long-term debt represent future scheduled principal payments on our long-term debt.

The amounts reflected in the table above for finance leases represent undiscounted future minimum lease payments under noncancelable finance leases with an initial or remaining term in excess of one year at August 31, 2019.

Additional information on amounts included within the operating, investing and financing activities captions in the table above can be found in our Annual Report.

During the first quarter of 2020, FedEx filed suit in U.S. District Court in the District of Columbia seeking to enjoin the U.S. Department of Commerce from enforcing prohibitions contained in the Export Administration Regulations (the “EARs”) against FedEx. FedEx believes that the EARs violate common carriers’ rights to due process under the Fifth Amendment of the U.S. Constitution as they unreasonably hold common carriers strictly liable for shipments that may violate the EARs without requiring evidence that the carriers had knowledge of any violations.

The China State Post Bureau is currently conducting an investigation into the operations of FedEx Express regarding its handling of certain packages while attempting to comply with the EARs. FedEx Express has and will continue to fully cooperate with the Chinese authorities on the investigation.

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 other change of events or circumstances that would indicate that a reevaluation of the goodwill of our reporting units is required as of ~~November 30, 2018,~~August 31, 2019, 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 Committee of our Board of Directors and with our independent registered public accounting firm.

Certain statements in this report, including (but not limited to) those contained in ~~“General,”~~ “Fuel,” “Income Taxes,” “Outlook,” “Independent Contractor ~~Model,” “Liquidity,~~and Independent Service Provider Models,” “Liquidity Outlook,” “Contractual Cash Obligations and Off-Balance Sheet Arrangements” and “Critical Accounting Estimates,” and the ~~“General,”~~ “Financing Arrangements,” ~~“Income Taxes,~~“Leases,” “Commitments” and “Contingencies” notes to the 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. 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,” “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:

As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 3. Quantitative and ~~Qualitative~~Qualitative Disclosures About Market Risk

As of ~~November 30, 2018,~~August 31, 2019, there were no material changes in our market risk sensitive instruments and positions since our disclosures in our Annual Report.

The principal foreign currency exchange rate risks to which we are exposed relate to the euro, Chinese yuan, British pound, Canadian dollar, ~~Brazilian real~~Australian dollar and Mexican peso. Historically, our exposure to foreign currency fluctuations is more significant with respect to our revenues than our expenses, as a significant portion of our expenses are denominated in U.S. dollars, such as aircraft and fuel expenses. During the first ~~half~~three months of ~~2019,~~2020, the U.S. dollar strengthened relative to the currencies of the foreign countries in which we operate, as compared to May 31, ~~2018,~~2019, and this strengthening had a slightly positive impact on our results.

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

The management of FedEx, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to FedEx management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of ~~November 30, 2018~~August 31, 2019 (the end of the period covered by this Quarterly Report on Form 10-Q).

In the first quarter of 2020, we adopted Accounting Standards Update 2016-02, Leases (Topic 842), and implemented new systems and internal controls in conjunction with the new lease standard. These changes have not materially affected, and are not reasonably likely to materially affect, our internal controls over financial reporting. During our fiscal quarter ended ~~November 30, 2018,~~August 31, 2019, no change occurred in our internal control over financial reporting, including the new controls described above, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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

Other than the risk ~~factor~~factors set forth below, there have been no material changes from the risk factors disclosed in our Annual Report (under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition”) in response to Part I, Item 1A of Form 10-K.

Additional changes in international trade policies and relations could significantly reduce the volume of goods transported globally and adversely affect our business and results of operations. The U.S. government has made significant changes in U.S. trade policy and has taken certain actions that have negatively impacted U.S. trade, including imposing tariffs on certain goods imported into the United States. To date, several governments, including the European Union (“EU”), China and India, have imposed tariffs on certain goods imported from the United States. These actions contributed to ~~successfully implement~~weakness in the global economy that adversely affected our ~~cost-reduction initiatives~~results of operations during fiscal 2019 and ~~productivity enhancements will cause~~the first quarter of fiscal 2020, and we expect such weakness to continue to be present during the remainder of fiscal 2020. Any further changes in U.S. or international trade policy could trigger additional retaliatory actions by affected countries, resulting in “trade wars” and further increased costs for goods transported globally, which may reduce customer demand for these products if the parties having to pay those tariffs increase their prices, or in trading partners limiting their trade with countries that impose anti-trade measures. Political uncertainty surrounding international trade and other disputes could also have a negative effect on consumer confidence and spending. Such conditions could have an adverse effect on our ~~future~~business, results of operations and financial condition, as well as on the price of our common stock.

Additionally, the U.S. government has recently taken action to limit the ability of domestic companies to engage in commerce with certain foreign entities under certain circumstances. Given the nature of our business and our global recognizability, foreign governments may target FedEx by limiting the ability of foreign entities to do business with us in certain instances, imposing monetary or other penalties or taking other retaliatory action, which could have an adverse effect on our business, results ~~to suffer.~~ ~~We are implementing various cost-reduction initiatives, including a U.S.-based voluntary buyout program for eligible employees, international network capacity reductions at~~of operations and financial condition, as well as on the price of our common stock. For example, the China State Post Bureau is currently conducting an investigation into the operations of FedEx Express ~~limited hiring~~regarding its handling of certain packages while attempting to comply with the Export Administration Regulations.

The United Kingdom’s vote to leave the EU could adversely impact our business, results of operations and financial condition. There is substantial uncertainty surrounding the United Kingdom’s 2016 vote to leave the EU (“Brexit”), which is scheduled for October 31, 2019. The suspension or further delay of Brexit beyond October 31, 2019 requires the unanimous agreement of all remaining EU member states. Any impact of Brexit depends on the terms of the United Kingdom’s withdrawal from the EU, if it ultimately occurs. The ongoing uncertainty within the United Kingdom’s government and Parliament on the status of a withdrawal agreement could lead to economic stagnation until an ultimate resolution with respect to Brexit occurs. Such uncertainty also sustains the possibility of a “hard Brexit,” in ~~staff functions~~which the United Kingdom leaves the EU without a withdrawal agreement and ~~reductions~~associated transition period in ~~discretionary spending. If~~place. A hard Brexit would likely cause significant market and economic disruption and negatively impact customer experience and service quality, and could depress the demand for our services.

Even if an agreement setting forth the terms of the United Kingdom’s withdrawal from the EU is approved, the withdrawal could result in a global economic downturn. The United Kingdom also could lose access to the single EU market and to the global trade deals negotiated by the EU on behalf of its members, depressing trade between the United Kingdom and other countries, which would negatively impact our international operations. Additionally, we ~~are not able to successfully implement these cost-reduction initiatives~~may face new regulations regarding trade, aviation, tax, security and ~~our ongoing productivity enhancements~~employees, among others, in the ~~face~~United Kingdom. Compliance with such regulations could be costly, negatively impacting our business, results of ~~challenging~~operations and financial condition. Brexit could also adversely affect European and worldwide economic and ~~business~~market conditions ~~our future~~and could contribute to instability in global financial ~~results may suffer.~~and foreign exchange markets, including volatility in the value of the euro and the British pound.

The following table provides information on FedEx’s repurchases of our common stock during the ~~second~~first quarter of ~~2019:~~2020:

The repurchases were made under the stock repurchase program approved by our Board of Directors and announced on January 26, 2016 and through which we are authorized to purchase, in the open market or in privately negotiated transactions, up to an aggregate of 25 million shares of our common stock. As of ~~December 17, 2018, 6.3~~September 13, 2019, 5.1 million shares remained authorized for purchase under the January 2016 stock repurchase program, which is the only such program that currently exists. The program does not have an expiration date.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware	62-1721435
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

942 South Shady Grove Road, Memphis, Tennessee	38120
(Address of principal executive offices)	(ZIP Code)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.10 per share	FDX	New York Stock Exchange
0.700% Notes due 2022	FDX 22B	New York Stock Exchange
1.000% Notes due 2023	FDX 23A	New York Stock Exchange
0.450% Notes due 2025	FDX 25A	New York Stock Exchange
1.625% Notes due 2027	FDX 27	New York Stock Exchange
1.300% Notes due 2031	FDX 31	New York Stock Exchange

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

Common Stock		Outstanding Shares at ~~December 14, 2018~~September 13, 2019
Common Stock, par value $0.10 per share		~~261,043,625~~260,910,309

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets ~~November 30, 2018~~ August 31, 2019 and May 31, ~~2018~~2019		3
Condensed Consolidated Statements of Income Three ~~and Six~~ Months Ended ~~November 30,~~August 31, 2019 and 2018 ~~and 2017~~		5
Condensed Consolidated Statements of Comprehensive Income Three ~~and Six~~ Months Ended ~~November 30,~~August 31, 2019 and 2018 ~~and 2017~~		6
Condensed Consolidated Statements of Cash Flows ~~Six~~Three Months Ended ~~November 30,~~August 31, 2019 and 2018 ~~and 2017~~		7
Condensed Consolidated Statements of Changes In Common Stockholders’ Investment Three Months Ended August 31, 2019 and 2018		8
Notes to Condensed Consolidated Financial Statements		89
Report of Independent Registered Public Accounting Firm		28
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		29
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		5351
ITEM 4. Controls and Procedures		5351

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		5452
ITEM 1A. Risk Factors		5452
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		5553
ITEM 6. Exhibits		5654
Signature		5856

~~Exhibit 4.1~~ ~~Exhibit 4.2~~ ~~Exhibit 4.3~~ ~~Exhibit 4.4~~ Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 10.6
Exhibit 10.7 ~~Exhibit 10.8~~
~~Exhibit 10.9~~ ~~Exhibit 10.10~~ ~~Exhibit 10.11~~ ~~Exhibit 10.12~~ ~~Exhibit 10.13~~
Exhibit 15.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101.1 Interactive Data Files Exhibit 104.1 Cover Page Interactive Data File

	Three Months Ended November 30, 2017								Six Months Ended November 30, 2017
	Reported			Effect of Adoption of ASU 2017-07			As Adjusted		Reported			Effect of Adoption of ASU 2017-07			As Adjusted
Revenue	$	16,313		$	—		$	16,313	$	31,610		$	—		$	31,610
Operating Income		1,262			(147	)		1,115		2,379			(293	)		2,086
Other Income (Expense), net		(123	)		147			24		(258	)		293			35
Net Income		775			—			775		1,371			—			1,371


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

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

FedEx Freight Segment	FedEx Freight (LTL freight transportation)

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

	2019
Operating lease cost⁽¹⁾	$	674
Finance lease cost:
Amortization of right-of-use assets		3
Interest on lease liabilities		1
Total finance lease cost		4
Short-term lease cost		35
Variable lease cost⁽¹⁾		267
Net lease cost	$	980

	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	635
Operating cash flows paid for interest portion of finance leases		1
Financing cash flows paid for principal portion of finance leases		27
Right-of-use assets obtained in exchange for new operating lease liabilities	$	235
Right-of-use assets obtained in exchange for new finance lease liabilities	$	76

	2019
Operating leases:
Operating lease right-of-use assets	$	13,819

Current portion of operating lease liabilities		1,896
Operating lease liabilities		12,137
Total operating lease liabilities	$	14,033

Finance leases:
Net property and equipment	$	124

Current portion of long-term debt		35
Long-term debt, less current portion		94
Total finance lease liabilities	$	129

Weighted-average remaining lease term
Operating leases		10.2
Finance leases		10.3

Weighted-average discount rate
Operating leases		3.28	%
Finance leases		4.10	%

	Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases
2020 (remainder)	$	234		$	1,523		$	1,757		$	37		$	1,794
2021		207			2,039			2,246			14			2,260
2022		190			1,824			2,014			14			2,028
2023		154			1,633			1,787			12			1,799
2024		58			1,432		��	1,490			11			1,501
Thereafter		85			7,453			7,538			78			7,616
Total lease payments		928			15,904			16,832			166			16,998
Less imputed interest		(61	)		(2,738	)		(2,799	)		(37	)		(2,836	)
Present value of lease liability	$	867		$	13,166		$	14,033		$	129		$	14,162

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Maximum Number of Shares That May Yet Be Purchased Under the Program
Sep. 1-30, 2018		600,000	$	245.93		600,000		8,522,200
Oct. 1-31, 2018		1,730,000		223.48		1,730,000		6,792,200
Nov. 1-30, 2018		500,000		224.09		500,000		6,292,200
Total		2,830,000	$	228.35		2,830,000

Exhibit Number		Description of Exhibit

4.1		Indenture, dated as of October 23, 2015, between FedEx, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee. (Filed as Exhibit 4.1 to FedEx’s Current Report on Form 8-K dated and filed October 23, 2015, and incorporated herein by reference.)

4.2		Supplemental Indenture No. 6,9, dated as of ~~October 17, 2018,~~July 24, 2019, between FedEx, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee. (Filed as Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed ~~October 17, 2018,~~July 24, 2019, and incorporated herein by reference.)

4.3		Form of ~~4.200%~~3.100% Note due ~~2028.~~2029. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed ~~October 17, 2018,~~July 24, 2019, and incorporated herein by reference.)

4.4		~~Form~~Supplemental Indenture No. 10, dated as of ~~4.950% Note due 2048. (Included in~~August 5, 2019, between FedEx, the Guarantors named therein, Wells Fargo Bank, National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent. (Filed as Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed ~~October 17, 2018,~~August 5, 2019, and incorporated herein by reference.)

4.5		Form of 0.450% Note due 2025. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed August 5, 2019, and incorporated herein by reference.)

4.6		Form of 1.300% Note due 2031. (Included in Exhibit 4.2 to FedEx’s Current Report on Form 8-K dated and filed August 5, 2019, and incorporated herein by reference.)

*10.1		Amendment dated ~~September 11, 2018~~June 7, 2019 (but effective as of May ~~30, 2018)~~24, 2019), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and FedEx Express (the “USPS Transportation Agreement”). ~~Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).~~

*10.2		Amendment dated ~~September~~June 11, ~~2018~~2019 (but effective as of April ~~30, 2018)~~1, 2019), amending the USPS Transportation Agreement. ~~Confidential treatment~~An attachment to this exhibit has been ~~requested for confidential commercial and financial information,~~omitted pursuant to ~~Rule 24b-2 under~~Item 601(a)(5) of Regulation S-K because the ~~Exchange Act.~~information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish supplementally a copy of the attachment to the SEC or its staff upon request.

*10.3		Amendment dated ~~September 11, 2018~~July 16, 2019 (but effective as of ~~July 2, 2018)~~March 4, 2019), amending the USPS Transportation Agreement. ~~Confidential treatment~~An attachment to this exhibit has been ~~requested for confidential commercial and financial information,~~omitted pursuant to ~~Rule 24b-2 under~~Item 601(a)(5) of Regulation S-K because the ~~Exchange Act.~~information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish supplementally a copy of the attachment to the SEC or its staff upon request.

*10.4		Amendment dated ~~September 11, 2018~~July 16, 2019 (but effective as of ~~June 4, 2018)~~April 29, 2019), amending the USPS Transportation Agreement. ~~Confidential treatment~~An attachment to this exhibit has been ~~requested for confidential commercial and financial information,~~omitted pursuant to ~~Rule 24b-2 under~~Item 601(a)(5) of Regulation S-K because the ~~Exchange Act.~~information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish supplementally a copy of the attachment to the SEC or its staff upon request.

*10.5		~~Amendment~~Letter Agreement dated ~~September 11, 2018 (but effective~~ as of July ~~2, 2018), amending the USPS Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act.~~

~~10.6~~		Amendment dated September 11, 2018 (but effective as of July 30, 2018), amending the USPS Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act.

~~10.7~~		Amendment dated September 27, 2018 (but effective as of August 27, 2018), amending the USPS Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act.

~~10.8~~		Amendment dated October 18, 2018 (but effective as of September 3, 2018), amending the USPS Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act.

~~10.9~~		Amendment dated October 16, 2018 (but effective as of November 24, 2018), amending the USPS Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act.

~~10.10~~		Amendment dated October 26, 2018 (but effective as of July 30, 2018), amending the USPS Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act.

~~10.11~~		Amendment dated November 20, 2018 (but effective as of October 1, 2018), amending the USPS Transportation Agreement. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act.

~~Exhibit~~ ~~Number~~		~~Description of Exhibit~~
~~10.12~~		~~Supplemental Agreement No. 31 dated as of September 14, 2018,~~9, 2019, amending the Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between The Boeing Company and FedEx ~~Express (the “Boeing 777 Freighter Purchase Agreement”). Confidential treatment~~Express. An attachment to this exhibit has been ~~requested for confidential commercial and financial information,~~omitted pursuant to ~~Rule 24b-2 under~~Item 601(a)(5) of Regulation S-K because the ~~Exchange Act.~~information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish supplementally a copy of the attachment to the SEC or its staff upon request.

~~10.13~~*10.6		Supplemental Agreement No. 12 (and related side letters) dated as of June 24, 2019, amending the Boeing 767-3S2 Freighter Purchase Agreement dated as of December 14, 2011 between The Boeing Company and FedEx Express (the “Boeing 767-3S2 Freighter Purchase Agreement”). Certain attachments to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K because the information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish supplementally a copy of such attachments to the SEC or its staff upon request.

*10.7		Letter Agreement dated as of ~~September 14, 2018,~~July 9, 2019, amending the Boeing ~~777~~767-3S2 Freighter Purchase Agreement. ~~Confidential treatment~~An attachment to this exhibit has been ~~requested for confidential commercial and financial information,~~omitted pursuant to ~~Rule 24b-2 under~~Item 601(a)(5) of Regulation S-K because the ~~Exchange Act.~~information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish supplementally a copy of the attachment to the SEC or its staff upon request.

15.1		Letter re: Unaudited Interim Financial Statements.

Exhibit Number		Description of Exhibit
31.1		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.1		Interactive Data ~~Files.~~Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”).

104.1		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101.1).

	2018		2017
Required	$	—	$	268
Voluntary		500		482
	$	500	$	750

			FEDEX CORPORATION

Date: ~~December 18, 2018~~September 17, 2019			/s/ JOHN L. MERINO
			JOHN L. MERINO
			CORPORATE VICE PRESIDENT AND
			PRINCIPAL ACCOUNTING OFFICER