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.

	August 31, 2019 (Unaudited)		May 31, 2019		November 30, 2019 (Unaudited)		May 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,389	$	2,319	$	2,031	$	2,319
Receivables, less allowances of $304 and $300		9,312		9,116
Spare parts, supplies and fuel, less allowances of $337 and $335		574		553
Receivables, less allowances of $315 and $300						9,709		9,116
Spare parts, supplies and fuel, less allowances of $330 and $335						576		553
Prepaid expenses and other		742		1,098		882		1,098
Total current assets		13,017		13,086		13,198		13,086
PROPERTY AND EQUIPMENT, AT COST		61,436		59,511		62,715		59,511
Less accumulated depreciation and amortization		29,826		29,082		30,307		29,082
Net property and equipment		31,610		30,429		32,408		30,429
OTHER LONG-TERM ASSETS
Operating lease right-of-use assets		13,819		—
Operating lease right-of-use assets, net						14,097		—
Goodwill		6,821		6,884		6,861		6,884
Other assets		3,185		4,004		3,390		4,004
Total other long-term assets		23,825		10,888		24,348		10,888
	$	68,452	$	54,403	$	69,954	$	54,403

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

	August 31, 2019 (Unaudited)			May 31, 2019			November 30, 2019 (Unaudited)			May 31, 2019
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Short-term borrowings							$	150		$	—
Current portion of long-term debt	$	35		$	964			16			964
Accrued salaries and employee benefits		1,522			1,741			1,632			1,741
Accounts payable		3,179			3,030			3,283			3,030
Operating lease liabilities		1,896			—			1,928			—
Accrued expenses		3,303			3,278			3,538			3,278
Total current liabilities		9,935			9,013			10,547			9,013
LONG-TERM DEBT, LESS CURRENT PORTION		18,726			16,617			18,691			16,617
OTHER LONG-TERM LIABILITIES
Deferred income taxes		2,953			2,821			3,072			2,821
Pension, postretirement healthcare and other benefit obligations		4,132			5,095			4,156			5,095
Self-insurance accruals		1,924			1,899			1,921			1,899
Operating lease liabilities		12,137			—			12,432			—
Deferred lease obligations		—			531			—			531
Other liabilities		479			670			476			670
Total other long-term liabilities		21,625			11,016			22,057			11,016
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
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
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of November 30, 2019 and May 31, 2019								32			32
Additional paid-in capital		3,257			3,231			3,287			3,231
Retained earnings		25,048			24,648			25,431			24,648
Accumulated other comprehensive loss		(918	)		(865	)		(866	)		(865	)
Treasury stock, at cost		(9,253	)		(9,289	)		(9,225	)		(9,289	)
Total common stockholders’ investment		18,166			17,757			18,659			17,757
	$	68,452		$	54,403		$	69,954		$	54,403

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

	Three Months Ended						Three Months Ended						Six Months Ended
	August 31,						November 30,						November 30,
	2019			2018			2019			2018			2019			2018
REVENUES	$	17,048		$	17,052		$	17,324		$	17,824		$	34,372		$	34,876
OPERATING EXPENSES:
Salaries and employee benefits		6,087			6,260			6,235			6,260			12,322			12,520
Purchased transportation		4,028			3,967			4,328			4,346			8,356			8,313
Rentals and landing fees		920			823			924			836			1,844			1,659
Depreciation and amortization		879			808			901			828			1,780			1,636
Fuel		870			986			890			1,052			1,760			2,038
Maintenance and repairs		768			735			774			751			1,542			1,486
Asset impairment charges								66			—			66			—
Other		2,519			2,402			2,652			2,583			5,171			4,985
		16,071			15,981			16,770			16,656			32,841			32,637
OPERATING INCOME		977			1,071			554			1,168			1,531			2,239
OTHER INCOME (EXPENSE):
Interest, net		(137	)		(127	)		(151	)		(131	)		(288	)		(258	)
Other retirement plans income		168			158			168			158			336			316
Other, net		(12	)		(1	)		1			(18	)		(11	)		(19	)
		19			30			18			9			37			39
INCOME BEFORE INCOME TAXES		996			1,101			572			1,177			1,568			2,278
PROVISION FOR INCOME TAXES		251			266			12			242			263			508
NET INCOME	$	745		$	835		$	560		$	935		$	1,305		$	1,770
EARNINGS PER COMMON SHARE:
Basic	$	2.86		$	3.15		$	2.15		$	3.56		$	5.00		$	6.71
Diluted	$	2.84		$	3.10		$	2.13		$	3.51		$	4.97		$	6.60
DIVIDENDS DECLARED PER COMMON SHARE	$	1.30		$	1.30		$	0.65		$	0.65		$	1.95		$	1.95

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

	Three Months Ended						Three Months Ended						Six Months Ended
	August 31,						November 30,						November 30,
	2019			2018			2019			2018			2019			2018
NET INCOME	$	745		$	835		$	560		$	935		$	1,305		$	1,770
OTHER COMPREHENSIVE INCOME (LOSS):
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	)
Foreign currency translation adjustments, net of tax expense of $7 and $4 in 2019 and tax benefit of $7 and $31 in 2018								72			(31	)		(11	)		(193	)
Amortization of prior service credit, net of tax benefit of $6 and $12 in 2019 and tax benefit of $7 and $14 in 2018								(20	)		(23	)		(41	)		(46	)
		(104	)		(185	)		52			(54	)		(52	)		(239	)
COMPREHENSIVE INCOME	$	641		$	650		$	612		$	881		$	1,253		$	1,531

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

	Three Months Ended						Six Months Ended
	August 31,						November 30,
	2019			2018			2019			2018
Operating Activities:
Net income	$	745		$	835		$	1,305		$	1,770
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		879			808			1,780			1,636
Asset impairment charges								66			—
Provision for uncollectible accounts		105			82			208			160
Stock-based compensation		67			68			104			108
Deferred income taxes and other noncash items		694			23			1,164			236
Changes in assets and liabilities:
Receivables		(267	)		(380	)		(684	)		(1,343	)
Other assets		(118	)		(120	)		(162	)		(111	)
Accounts payable and other liabilities		(1,537	)		(584	)		(1,691	)		(227	)
Other, net		(3	)		(31	)		(16	)		(50	)
Cash provided by operating activities		565			701			2,074			2,179
Investing Activities:
Capital expenditures		(1,418	)		(1,179	)		(3,266	)		(2,634	)
Proceeds from asset dispositions and other		(1	)		78			4			53
Cash used in investing activities		(1,419	)		(1,101	)		(3,262	)		(2,581	)
Financing Activities:
Proceeds from short-term borrowings, net		—			299			150			248
Principal payments on debt		(985	)		(2	)		(1,021	)		(785	)
Proceeds from debt issuances		2,093			—			2,093			1,233
Proceeds from stock issuances		12			25			26			45
Dividends paid		(170	)		(173	)		(339	)		(173	)
Purchase of treasury stock		(3	)		(625	)		(3	)		(1,271	)
Other, net		(5	)		4			(5	)		1
Cash provided by (used in) financing activities		942			(472	)		901			(702	)
Effect of exchange rate changes on cash		(18	)		(24	)		(1	)		(38	)
Net increase (decrease) in cash and cash equivalents		70			(896	)
Net decrease in cash and cash equivalents								(288	)		(1,142	)
Cash and cash equivalents at beginning of period		2,319			3,265			2,319			3,265
Cash and cash equivalents at end of period	$	2,389		$	2,369		$	2,031		$	2,123

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

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ INVESTMENT

	Three Months Ended						Three Months Ended						Six Months Ended
	August 31,						November 30,						November 30,
	2019			2018			2019			2018			2019			2018
Common Stock
Beginning Balance	$	32		$	32		$	32		$	32		$	32		$	32
Ending Balance		32			32			32			32			32			32
Additional Paid-in-Capital
Beginning Balance		3,231			3,117			3,257			3,154			3,231			3,117
Employee incentive plans and other		26			37			30			31			56			68
Ending Balance		3,257			3,154			3,287			3,185			3,287			3,185
Retained Earnings
Beginning Balance		24,648			24,823			25,048			25,315			24,648			24,823
Net Income		745			835			560			935			1,305			1,770
Cash dividends declared ($1.30 and $1.30 per share)		(339	)		(344	)
Cash dividends declared ($0.65, $0.65, $1.95, and $1.95 per share)								(170	)		(170	)		(509	)		(514	)
Employee incentive plans and other		(2	)		1			(7	)		—			(9	)		1
Adoption of new accounting standards on June 1, 2019⁽¹⁾		(4	)		—			—			—			(4	)		—
Ending Balance		25,048			25,315			25,431			26,080			25,431			26,080
Accumulated Other Comprehensive Income
Beginning Balance		(865	)		(578	)		(918	)		(763	)		(865	)		(578	)
Other comprehensive income, net of tax benefit of $9 and $31		(104	)		(185	)
Other comprehensive income, net of tax (expense)/benefit of ($1), $14, $8, and $45								52			(54	)		(52	)		(239	)
Reclassification to retained earnings due to the adoption of a new accounting standard on June 1, 2019⁽²⁾		51			—			—			—			51			—
Ending Balance		(918	)		(763	)		(866	)		(817	)		(866	)		(817	)
Treasury Stock
Beginning Balance		(9,289	)		(7,978	)		(9,253	)		(8,565	)		(9,289	)		(7,978	)
Purchase of treasury stock (0.02 and 2.6 million shares)		(3	)		(625	)
Employee incentive plans and other (0.3 and 0.3 million shares)		39			38
Purchase of treasury stock (0.0, 2.8, 0.02, and 5.4 million shares)								—			(646	)		(3	)		(1,271	)
Employee incentive plans and other (0.2, 0.2, 0.5, and 0.5 million shares)								28			25			67			63
Ending Balance		(9,253	)		(8,565	)		(9,225	)		(9,186	)		(9,225	)		(9,186	)
Total Common Stockholders' Investment Balance	$	18,166		$	19,173		$	18,659		$	19,294		$	18,659		$	19,294

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, 2019 (“Annual Report”). Significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

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

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

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 ~~$466~~$513 million and $533 million at ~~August 31,~~November 30, 2019 and May 31, 2019, respectively. Contract assets net of deferred unearned revenue were ~~$338~~$385 million and $364 million at ~~August 31,~~November 30, 2019 and May 31, 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 $10 million and $11 million at ~~August 31,~~November 30, 2019 and May 31, 2019, respectively. Contract liabilities are included within current liabilities in the accompanying unaudited condensed consolidated balance sheets.

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

	Three Months Ended				Three Months Ended				Six Months Ended
	2019		2018		2019		2018		2019		2018
REVENUE BY SERVICE TYPE
FedEx Express segment:
Package:
U.S. overnight box	$	1,866	$	1,886	$	1,864	$	1,948	$	3,730	$	3,834
U.S. overnight envelope		479		468		457		444		936		912
U.S. deferred		956		952		980		1,060		1,936		2,012
Total U.S. domestic package revenue		3,301		3,306		3,301		3,452		6,602		6,758
International priority		1,817		1,874		1,817		1,896		3,634		3,770
International economy		855		850		873		885		1,728		1,735
Total international export package revenue		2,672		2,724		2,690		2,781		5,362		5,505
International domestic⁽¹⁾		1,076		1,131		1,165		1,203		2,241		2,334
Total package revenue		7,049		7,161		7,156		7,436		14,205		14,597
Freight:
U.S.		695		730		698		792		1,393		1,522
International priority		464		533		473		564		937		1,097
International economy		516		519		541		554		1,057		1,073
International airfreight		66		85		70		83		136		168
Total freight revenue		1,741		1,867		1,782		1,993		3,523		3,860
Other		155		194		146		175		301		369
Total FedEx Express segment		8,945		9,222		9,084		9,604		18,029		18,826
FedEx Ground segment		5,179		4,799		5,315		5,142		10,494		9,941
FedEx Freight segment		1,905		1,959		1,844		1,918		3,749		3,877
FedEx Services segment		4		9		5		4		9		13
Other and eliminations⁽²⁾		1,015		1,063		1,076		1,156		2,091		2,219
	$	17,048	$	17,052	$	17,324	$	17,824	$	34,372	$	34,876

LEASES. We lease certain facilities, aircraft, equipment and vehicles under operating and finance ~~leases that expire at various dates through 2059.~~leases. 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%5% of our total aircraft fleet as of ~~August 31,~~November 30, 2019 and 6% as of 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.

IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, an impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.

We operate integrated transportation networks, and accordingly, cash flows for most of our operating assets to be held and used are assessed at a network level, not at an individual asset level, for our analysis of impairment.

During the second quarter of 2020, we made the decision to permanently retire from service 10 Airbus A310-300 aircraft and 12 related engines at Federal Express Corporation (“FedEx Express”) to align with the needs of the U.S. domestic network and modernize its aircraft fleet. As a consequence of this decision, noncash impairment charges of $66 million ($50 million, net of tax, or $0.19 per diluted share) were recorded in the FedEx Express segment in the second quarter. NaN of these aircraft were temporarily idled.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots of ~~Federal~~FedEx 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. in 2015, which already had a small number of employees who are members of unions). Additionally, certain FedEx Express non-U.S. employees are 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 ~~$67~~$37 million for the three-month period ended ~~August 31,~~November 30, 2019 and ~~$68~~$104 million for the six-month period ended November 30, 2019. Our stock-based compensation expense was $40 million for the three-month period ended ~~August 31,~~November 30, 2018 and $108 million for the six-month period ended November 30, 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 quarterly report. On August 13, 2019, we designated €294 million of debt and on November 8, 2019, we designated an additional €98 million of debt, for a total of €392 million, as a net investment hedge to reduce the volatility of the U.S. dollar value of a portion of our net investment in a euro-denominated ~~net investment.~~consolidated subsidiary. As of ~~August 31,~~November 30, 2019, the ~~designated net investment’s net equity balance exceeds~~requirements for the ~~balance outstanding on the euro-denominated debt and all other critical terms~~application of ~~the hedging instrument and hedged net investment~~hedge accounting continue to ~~match. Therefore,~~be met and the ~~hedging relationship is considered~~hedge remains 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 2016, the Financial Accounting Standards Board (“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. 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 are recognized on a straight-line basis, while those determined to be finance leases are recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement.

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 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 an operating right-of-use asset of $14.1 billion, with an immaterial impact on our income statement compared to the previous lease accounting model. Existing prepaid asset and net deferred rent liability balances of $154 million and $309 million, respectively, were recorded to the right-of-use asset. The cumulative effect of the adoption 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 our lease arrangements are operating leases under the new standard. The new standard had a material impact on our balance sheet, but did not materially impact consolidated operating results and had no impact on operating cash flows.

In February 2018, the FASB issued ASU 2018-02 that permits companies to reclassify the income tax effect of the Tax Cuts and Jobs Act (“TCJA”) on items within 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, 2020 (fiscal 2021). We are assessing the impact of this new standard on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15 that reduces the complexity 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. 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 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.

We did 0t repurchase any shares of FedEx common stock during the second quarter of 2020. During the first ~~quarter~~half of 2020, we repurchased 0.02 million shares of FedEx common stock at an average price of $156.90 per share for a total of $3 million. As of ~~August 31,~~November 30, 2019, 5.1 million shares remained under the stock repurchase authorization.

DIVIDENDS DECLARED PER COMMON SHARE. On ~~August 16,~~November 15, 2019, our Board of Directors declared a quarterly dividend of $0.65 per share of common stock. The dividend will be paid on ~~October 1, 2019~~January 2, 2020 to stockholders of record as of the close of business on ~~September~~December 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 ~~August 31~~November 30 (in millions; amounts in parentheses indicate debits to AOCI):

							Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2019			2018
Foreign currency translation loss:
Balance at beginning of period	$	(954	)	$	(759	)	$	(1,036	)	$	(921	)	$	(954	)	$	(759	)
Translation adjustments		(83	)		(162	)		72			(31	)		(11	)		(193	)
Reclassification to retained earnings due to the adoption of ASU 2018-02		1			—			—			—			1			—
Balance at end of period		(1,036	)		(921	)		(964	)		(952	)		(964	)		(952	)
Retirement plans adjustments:
Balance at beginning of period		89			181			118			158			89			181
Reclassifications from AOCI		(21	)		(23	)		(20	)		(23	)		(41	)		(46	)
Reclassification to retained earnings due to the adoption of ASU 2018-02		50			—			—			—			50			—
Balance at end of period		118			158			98			135			98			135
Accumulated other comprehensive (loss) at end of period	$	(918	)	$	(763	)	$	(866	)	$	(817	)	$	(866	)	$	(817	)

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

								Amount Reclassified from AOCI												Affected Line Item in the Income Statement
	Amount Reclassified from AOCI						Affected Line Item in the Income Statement	Three Months Ended						Six Months Ended
	2019			2018				2019			2018			2019			2018
Amortization of retirement plans prior service credits, before tax	$	27		$	30		Salaries and employee benefits	$	26		$	30		$	53		$	60		Salaries and employee benefits
Income tax benefit		(6	)		(7	)	Provision for income taxes		(6	)		(7	)		(12	)		(14	)	Provision for income taxes
AOCI reclassifications, net of tax	$	21		$	23		Net income	$	20		$	23		$	41		$	46		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 first quarter of 2020, we issued $2.1 billion of senior unsecured debt under our current shelf registration 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 $400 million aggregate principal amount of 2.30% notes due 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 $2.0 billion five-year credit 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 March 2024 and includes a $250 million letter of credit 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 Credit Agreements contain a financial covenant requiring us to maintain a ratio of debt to consolidated earnings (excluding noncash retirement plans mark-to-market adjustments and 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 ~~2.41~~2.6 to 1.0 at ~~August 31,~~November 30, 2019. We believe this covenant is the only significant restrictive covenant in the Credit Agreements. The Credit Agreements contain other customary covenants that do not, individually or in the aggregate, materially restrict the conduct of our business. We are in compliance with the financial covenant and all other covenants in the Credit Agreements and do not expect the covenants to affect our operations, including our liquidity or expected funding needs. If we failed to comply with the financial covenant or any other covenants in the Credit Agreements, our access to financing could become limited.

During the second quarter of 2020, we issued commercial paper to provide us with additional short-term liquidity. The maximum amount outstanding during the quarter was $150 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 ~~August 31,~~November 30, 2019, 0$150 million of commercial paper ~~was outstanding. However,~~and $53 million in letters of credit were outstanding, leaving ~~$3.447~~$3.297 billion available under the Credit Agreements for future borrowings.

Long-term debt, including current maturities and exclusive of finance leases, had carrying values of $18.6 billion at ~~August 31,~~November 30, 2019 and $17.5 billion at May 31, 2019, compared with estimated fair values of ~~$20.1~~$19.6 billion at ~~August 31,~~November 30, 2019 and $17.8 billion at May 31, 2019. The annualized weighted-average interest rate on long-term debt was ~~3.4%~~3.5% at ~~August 31,~~November 30, 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 ~~August 31~~November 30 was as follows (in millions, except per share amounts):

					Three Months Ended				Six Months Ended
	2019		2018		2019		2018		2019		2018
Basic earnings per common share:
Net earnings allocable to common shares⁽¹⁾	$	744	$	834	$	559	$	933	$	1,303	$	1,768
Weighted-average common shares		260		265		261		262		261		263
Basic earnings per common share	$	2.86	$	3.15	$	2.15	$	3.56	$	5.00	$	6.71
Diluted earnings per common share:
Net earnings allocable to common shares⁽¹⁾	$	744	$	834	$	559	$	933	$	1,303	$	1,768
Weighted-average common shares		260		265		261		262		261		263
Dilutive effect of share-based awards		2		4		1		4		1		5
Weighted-average diluted shares		262		269		262		266		262		268
Diluted earnings per common share	$	2.84	$	3.10	$	2.13	$	3.51	$	4.97	$	6.60
Anti-dilutive options excluded from diluted earnings per common share		10.9		3.7		11.2		4.0		11.0		3.8

Our effective tax rate was 2.1% for the second quarter and 16.8% for the first half of 2020, compared with 20.6% for the second quarter and 22.3% for the first half of 2019. The 2020 tax rates were favorably impacted by $133 million from the reduction of a valuation allowance on certain foreign tax loss carryforwards due to operational changes which impacted the determination of the realizability of the deferred tax asset in that jurisdiction. The 2020 tax rates were negatively impacted by decreased earnings in certain non-U.S. jurisdictions. The 2019 tax rates were favorably impacted by the TCJA, which resulted in an approximate $60 million tax benefit from accelerated deductions claimed on our 2018 tax return filed in 2019.

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

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

					Three Months Ended				Six Months Ended
	2019		2018		2019		2018		2019		2018
Defined benefit pension plans, net	$	37	$	28	$	37	$	29	$	74	$	57
Defined contribution plans		142		144		136		133		278		277
Postretirement healthcare plans		22		19		21		18		43		37
	$	201	$	191	$	194	$	180	$	395	$	371

Net periodic benefit cost of the pension and postretirement healthcare plans for the ~~three-month~~ periods ended ~~August 31~~November 30 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
	2019			2018			2019			2018			2019		2018		2019			2018			2019			2018			2019		2018
Service cost	$	192		$	172		$	24		$	24		$	11	$	9	$	192		$	172		$	24		$	25		$	10	$	8
Other retirement plans (income) expense:
Interest cost		250			238			11			13			11		10		250			238			11			12			11		10
Expected return on plan assets		(400	)		(377	)		(13	)		(12	)		—		—		(401	)		(376	)		(13	)		(12	)		—		—
Amortization of prior service credit and other		(27	)		(29	)		—			(1	)		—		—		(25	)		(30	)		(1	)		—			—		—
		(177	)		(168	)		(2	)		—			11		10		(176	)		(168	)		(3	)		—			11		10
	$	15		$	4		$	22		$	24		$	22	$	19	$	16		$	4		$	21		$	25		$	21	$	18

																	Six Months Ended
																	U.S. Pension Plans						International Pension Plans						Postretirement Healthcare Plans
																	2019			2018			2019			2018			2019		2018
Service cost																	$	384		$	344		$	48		$	49		$	21	$	17
Other retirement plans (income) expense:
Interest cost																		500			476			22			25			22		20
Expected return on plan assets																		(801	)		(753	)		(26	)		(24	)		—		—
Amortization of prior service credit and other																		(52	)		(59	)		(1	)		(1	)		—		—
																		(353	)		(336	)		(5	)		—			22		20
																	$	31		$	8		$	43		$	49		$	43	$	37

We made voluntary contributions to our U.S. Pension Plans of $1.0 billion during the first ~~quarter~~half of 2020 and ~~$250~~$500 million during the first ~~quarter~~half of 2019.

During the second quarter of 2020, we announced the closing of our U.S.-based defined benefit pension plans to new non-union employees hired on or after January 1, 2020. We will introduce an all 401(k) plan retirement benefit structure for eligible employees with a higher company match of up to 8% across all U.S.-based operating companies. During 2020, current eligible employees under the Portable Pension Account (PPA) pension formula will be given a one-time option to continue to be eligible for pension compensation credits under the existing PPA formula and remain in the existing 401(k) plan with its match of up to 3.5%, or to cease receiving compensation credits under the pension plan and move to the new 401(k) plan with the higher match of up to 8%. Changes to the new 401(k) plan structure become effective beginning January 1, 2021. While this new program will provide employees greater flexibility and reduce our long-term pension costs, it will not have a material impact on current or near-term financial 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 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 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 for U.S. customers of our major business units and certain back-office support to our operating segments which allows us to obtain synergies from the combination of these functions. For the international regions of FedEx Express, some of these functions are performed on a regional basis and reported by FedEx Express in their natural expense line items.

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

Operating expenses for each of our transportation segments include the allocations from the FedEx Services segment to the respective transportation segments. These allocations also include charges and credits for administrative services provided between operating companies. The allocations of net operating costs are based on metrics such as relative 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 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.

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 ~~August 31~~November 30 (in millions):

							Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2019			2018
Revenues:
FedEx Express segment	$	8,945		$	9,222		$	9,084		$	9,604		$	18,029		$	18,826
FedEx Ground segment		5,179			4,799			5,315			5,142			10,494			9,941
FedEx Freight segment		1,905			1,959			1,844			1,918			3,749			3,877
FedEx Services segment		4			9			5			4			9			13
Other and eliminations		1,015			1,063			1,076			1,156			2,091			2,219
	$	17,048		$	17,052		$	17,324		$	17,824		$	34,372		$	34,876
Operating income (loss):
FedEx Express segment	$	285		$	388		$	236		$	630		$	521		$	1,018
FedEx Ground segment		644			676			342			590			986			1,266
FedEx Freight segment		194			176			141			148			335			324
Corporate, other and eliminations		(146	)		(169	)		(165	)		(200	)		(311	)		(369	)
	$	977		$	1,071		$	554		$	1,168		$	1,531		$	2,239

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~~periods ended ~~August 31~~November 30 (in millions):

			Three Months Ended		Six Months Ended
	2019		2019		2019
Operating lease cost⁽¹⁾	$	674	$	676	$	1,350
Finance lease cost:
Amortization of right-of-use assets		3		3		6
Interest on lease liabilities		1		1		2
Total finance lease cost		4		4		8
Short-term lease cost		35		46		81
Variable lease cost⁽¹⁾		267		282		549
Net lease cost	$	980	$	1,008	$	1,988

⁽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 cash flow information related to leases for the six months ended November 30 is as follows (in millions):

Supplemental balance sheet information related to leases as of ~~August 31~~November 30 is as follows (in millions, except lease term and discount rate):

	2019			2019
Operating leases:
Operating lease right-of-use assets	$	13,819
Operating lease right-of-use assets, net				$	14,097

Current portion of operating lease liabilities		1,896			1,928
Operating lease liabilities		12,137			12,432
Total operating lease liabilities	$	14,033		$	14,360

Finance leases:
Net property and equipment	$	124		$	99

Current portion of long-term debt		35			16
Long-term debt, less current portion		94			92
Total finance lease liabilities	$	129		$	108

Weighted-average remaining lease term
Operating leases		10.2			10.0
Finance leases		10.3			11.6

Weighted-average discount rate
Operating leases		3.28	%		3.24	%
Finance leases		4.10	%		3.99	%

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,~~November 30, 2019 is as follows (in millions):

	Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases			Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases
2020 (remainder)	$	234		$	1,523		$	1,757		$	37		$	1,794		$	236		$	1,013		$	1,249		$	13		$	1,262
2021		207			2,039			2,246			14			2,260			253			2,102			2,355			14			2,369
2022		190			1,824			2,014			14			2,028			234			1,871			2,105			14			2,119
2023		154			1,633			1,787			12			1,799			198			1,668			1,866			13			1,879
2024		58			1,432		��	1,490			11			1,501			102			1,457			1,559			11			1,570
Thereafter		85			7,453			7,538			78			7,616			314			7,527			7,841			78			7,919
Total lease payments		928			15,904			16,832			166			16,998			1,337			15,638			16,975			143			17,118
Less imputed interest		(61	)		(2,738	)		(2,799	)		(37	)		(2,836	)		(107	)		(2,508	)		(2,615	)		(35	)		(2,650	)
Present value of lease liability	$	867		$	13,166		$	14,033		$	129		$	14,162		$	1,230		$	13,130		$	14,360		$	108		$	14,468

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

As of November 30, 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 $1.6 billion, and will commence when FedEx gains beneficial access to the leased asset. Commencement dates are expected to be from fiscal 2020 to fiscal 2022.

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

	Aircraft and Related		Other⁽¹⁾		Total		Aircraft and Related			Other⁽¹⁾		Total
2020 (remainder)	$	1,043	$	789	$	1,832	$	556		$	511	$	1,067
2021		2,436		691		3,127		2,592			749		3,341
2022		2,392		470		2,862		2,596			529		3,125
2023		1,587		340		1,927		1,789			377		2,166
2024		503		192		695		701			228		929
Thereafter		2,449		541		2,990		3,408	��		586		3,994
Total	$	10,410	$	3,023	$	13,433	$	11,642		$	2,980	$	14,622

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. As of ~~August 31,~~November 30, 2019, our obligation to purchase 6 Boeing 777 Freighter (“B777F”) aircraft and 54 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,~~During the first quarter of 2020, FedEx Express exercised options to purchase an additional 6 B767F aircraft for delivery in 2022.

As of ~~August 31,~~November 30, 2019, we had ~~$611~~$735 million in deposits and ~~and~~ progress payments on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our accompanying unaudited condensed consolidated balance sheets. Aircraft and related contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of ~~August 31,~~November 30, 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
2020 (remainder)		-		-		13		1		14		-		-		10		-		10
2021		12		5		18		2		37		12		5		18		2		37
2022		12		6		18		3		39		12		6		18		3		39
2023		12		6		6		4		28		12		6		6		4		28
2024		14		6		-		4		24		14		6		-		4		24
Thereafter		-		7		-		2		9		-		7		-		2		9
Total		50		30		55		16		151		50		30		52		15		147

~~Independent Contractor — Lawsuits and Administrative Proceedings.~~Service Provider Lawsuits. FedEx Ground is ~~involved~~defending lawsuits 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 wherewhich it is alleged that FedEx Ground should be treated as an employer of ~~the~~ drivers employed by service providers engaged by FedEx Ground. These cases are in varying stages of litigation, and we are not currently able to estimate an amount or range of potential loss in all of these matters. However, we do not expect to incur, individually or in the aggregate, a material loss in these matters. Nevertheless, adverse determinations in these matters ~~related to owner-operators or service providers engaged by FedEx Ground~~ could, among other things, entitle ~~former owner-operators to the reimbursement of certain expenses, and~~ service providers’ drivers to certain wage payments from the service providers and FedEx Ground, and result in employment and withholding tax and benefit liability for FedEx Ground. We continue to believe that ~~owner-operators engaged by FedEx Ground were properly classified as independent contractors and that~~ FedEx Ground is not an employer or joint employer of the ~~service providers’ drivers.~~drivers of these independent businesses.

Federal Securities Litigation and Derivative Lawsuits. On June 26, 2019 and 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. The complaints, which have been consolidated, allege violations of 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.

On September 17, 2019 and November 6, 2019, FedEx, its Board of Directors and certain present and former directors and officers were named as defendants in two stockholder derivative lawsuits filed in the U.S. District Court for the District of Delaware. The complaints repeat the allegations in the federal securities litigation complaints discussed above, and assert new claims against the FedEx Board of Directors and certain present and former directors and officers for breach of fiduciary duty, waste of corporate assets, unjust enrichment, insider selling and violations of the federal proxy rules. 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 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 Freight for alleged violations of the state’s environmental and hazardous waste regulations. Specifically, the District Attorney alleged that between 2015 and 2018, FedEx Freight illegally transported and stored hazardous waste, failed to report releases of hazardous materials or substances, and unlawfully released oil into a storm drain. In September 2019, we reached an agreement to settle this matter for an immaterial amount. ~~The~~In October 2019, the settlement agreement ~~is subject to court approval.~~was approved by the court.

Other Matters. FedEx and its subsidiaries are subject to other legal proceedings that arise in the ordinary course of business, including certain lawsuits containing various class-action allegations of wage-and-hour violations in which plaintiffs claim, among other things, that they were forced to work “off the clock,” were not paid overtime or were not provided work breaks or other benefits. 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 ~~three-month~~six-month periods ended ~~August 31~~November 30 was as follows (in millions):

	2019			2018			2019			2018
Cash payments for:
Interest (net of capitalized interest)	$	164		$	203		$	279		$	308
Income taxes	$	55		$	93		$	162		$	220
Income tax refunds received		(12	)		(3	)		(23	)		(6	)
Cash tax payments, net	$	43		$	90		$	139		$	214

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 $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	$	684	$	176	$	1,598	$	(69	)	$	2,389	$	394	$	236	$	1,410	$	(9	)	$	2,031
Receivables, less allowances		335		5,575		3,541		(139	)		9,312		348		5,698		3,762		(99	)		9,709
Spare parts, supplies, fuel, prepaid expenses and other, less allowances		40		949		327		—			1,316		128		932		398		—			1,458
Total current assets		1,059		6,700		5,466		(208	)		13,017		870		6,866		5,570		(108	)		13,198
PROPERTY AND EQUIPMENT, AT COST		26		57,131		4,279		—			61,436		27		58,286		4,402		—			62,715
Less accumulated depreciation and amortization		17		27,715		2,094		—			29,826		17		28,139		2,151		—			30,307
Net property and equipment		9		29,416		2,185		—			31,610		10		30,147		2,251		—			32,408
INTERCOMPANY RECEIVABLE		3,003		72		—		(3,075	)		—		3,181		—		—		(3,181	)		—
OPERATING LEASE RIGHT-OF-USE ASSETS		32		11,538		2,249		—			13,819
OPERATING LEASE RIGHT-OF-USE ASSETS, NET													39		11,844		2,214		—			14,097
GOODWILL		—		1,582		5,239		—			6,821		—		1,587		5,274		—			6,861
INVESTMENT IN SUBSIDIARIES		34,439		4,970		—		(39,409	)		—		35,086		4,982		—		(40,068	)		—
OTHER ASSETS		984		1,019		1,734		(552	)		3,185		953		1,141		1,820		(524	)		3,390
	$	39,526	$	55,297	$	16,873	$	(43,244	)	$	68,452	$	40,139	$	56,567	$	17,129	$	(43,881	)	$	69,954
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Short-term borrowings												$	150	$	—	$	—	$	—		$	150
Current portion of long-term debt	$	—	$	26	$	9	$	—		$	35		—		5		11		—			16
Accrued salaries and employee benefits		91		985		446		—			1,522		87		1,058		487		—			1,632
Accounts payable		191		1,444		1,747		(203	)		3,179		192		1,505		1,692		(106	)		3,283
Operating lease liabilities		4		1,445		447		—			1,896		4		1,476		448		—			1,928
Accrued expenses		512		1,895		902		(6	)		3,303		509		2,023		1,008		(2	)		3,538
Total current liabilities		798		5,795		3,551		(209	)		9,935		942		6,067		3,646		(108	)		10,547
LONG-TERM DEBT, LESS CURRENT PORTION		18,395		286		45		—			18,726		18,362		286		43		—			18,691
INTERCOMPANY PAYABLE		—		—		3,074		(3,074	)		—		—		58		3,123		(3,181	)		—
OTHER LONG-TERM LIABILITIES
Deferred income taxes		—		2,929		576		(552	)		2,953		—		3,013		583		(524	)		3,072
Operating lease liabilities		30		10,257		1,850		—			12,137		37		10,577		1,818		—			12,432
Other liabilities		2,137		3,390		1,008		—			6,535		2,139		3,439		975		—			6,553
Total other long-term liabilities		2,167		16,576		3,434		(552	)		21,625		2,176		17,029		3,376		(524	)		22,057
COMMON STOCKHOLDERS’ INVESTMENT		18,166		32,640		6,769		(39,409	)		18,166		18,659		33,127		6,941		(40,068	)		18,659
	$	39,526	$	55,297	$	16,873	$	(43,244	)	$	68,452	$	40,139	$	56,567	$	17,129	$	(43,881	)	$	69,954

			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	$	—		$	12,241		$	4,893		$	(86	)	$	17,048		$	—		$	12,307		$	5,110		$	(93	)	$	17,324
OPERATING EXPENSES:
Salaries and employee benefits		20			4,685			1,382			—			6,087			22			4,823			1,390			—			6,235
Purchased transportation		—			2,543			1,519			(34	)		4,028			—			2,865			1,505			(42	)		4,328
Rentals and landing fees		2			712			208			(2	)		920			2			715			209			(2	)		924
Depreciation and amortization		—			761			118			—			879			—			785			116			—			901
Fuel		—			812			58			—			870			—			846			44			—			890
Maintenance and repairs		—			684			84			—			768			—			685			89			—			774
Asset impairment charges																	—			66			—			—			66
Intercompany charges, net		(78	)		(481	)		559			—			—			(77	)		(622	)		699			—			—
Other		56			1,668			845			(50	)		2,519			53			1,752			896			(49	)		2,652
		—			11,384			4,773			(86	)		16,071			—			11,915			4,948			(93	)		16,770
OPERATING INCOME		—			857			120			—			977			—			392			162			—			554
OTHER (EXPENSE) INCOME:
Equity in earnings of subsidiaries		745			18			—			(763	)		—			560			26			—			(586	)		—
Interest, net		(151	)		12			2			—			(137	)		(164	)		8			5			—			(151	)
Other retirement plans income		—			163			5			—			168			—			163			5			—			168
Intercompany charges, net		164			(120	)		(44	)		—			—			161			(117	)		(44	)		—			—
Other, net		(13	)		16			(15	)		—			(12	)		3			12			(14	)		—			1
INCOME BEFORE INCOME TAXES		745			946			68			(763	)		996
Provision for income taxes		—			225			26			—			251
INCOME (LOSS) BEFORE INCOME TAXES																	560			484			114			(586	)		572
Provision for income taxes (benefit)																	—			81			(69	)		—			12
NET INCOME (LOSS)	$	745		$	721		$	42		$	(763	)	$	745		$	560		$	403		$	183		$	(586	)	$	560
COMPREHENSIVE INCOME (LOSS)	$	731		$	705		$	(32	)	$	(763	)	$	641		$	540		$	380		$	278		$	(586	)	$	612

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated			Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	12,367		$	4,787		$	(102	)	$	17,052		$	—		$	12,874		$	5,050		$	(100	)	$	17,824
OPERATING EXPENSES:
Salaries and employee benefits		48			4,783			1,429			—			6,260			34			4,797			1,429			—			6,260
Purchased transportation		—			2,380			1,634			(47	)		3,967			—			2,650			1,731			(35	)		4,346
Rentals and landing fees		1			631			192			(1	)		823			1			640			196			(1	)		836
Depreciation and amortization		—			693			115			—			808			—			709			119			—			828
Fuel		—			902			84			—			986			—			968			84		��	—			1,052
Maintenance and repairs		—			646			89			—			735			—			655			96			—			751
Intercompany charges, net		(111	)		(226	)		337			—			—			(152	)		(149	)		301			—			—
Other		62			1,546			848			(54	)		2,402			117			1,675			863			(72	)		2,583
		—			11,355			4,728			(102	)		15,981			—			11,945			4,819			(108	)		16,656
OPERATING INCOME		—			1,012			59			—			1,071			—			929			231			8			1,168
OTHER (EXPENSE) INCOME:
Equity in earnings of subsidiaries		835			81			—			(916	)		—			935			48			—			(983	)		—
Interest, net		(143	)		15			1			—			(127	)		(169	)		50			(12	)		—			(131	)
Other retirement plans (expense) income		—			155			3			—			158
Other retirement plans income																	—			155			3			—			158
Intercompany charges, net		143			(122	)		(21	)		—			—			162			(124	)		(38	)		—			—
Other, net		—			(10	)		9			—			(1	)		7			(9	)		(7	)		(9	)		(18	)
INCOME (LOSS) BEFORE INCOME TAXES		835			1,131			51			(916	)		1,101			935			1,049			177			(984	)		1,177
Provision for income taxes		—			215			51			—			266			—			217			25			—			242
NET INCOME (LOSS)	$	835		$	916		$	—		$	(916	)	$	835		$	935		$	832		$	152		$	(984	)	$	935
COMPREHENSIVE INCOME (LOSS)	$	817		$	1,014		$	(265	)	$	(916	)	$	650		$	912		$	819		$	133		$	(983	)	$	881

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	24,549		$	10,002		$	(179	)	$	34,372
OPERATING EXPENSES:
Salaries and employee benefits		42			9,507			2,773			—			12,322
Purchased transportation		—			5,408			3,025			(77	)		8,356
Rentals and landing fees		4			1,426			417			(3	)		1,844
Depreciation and amortization		—			1,547			233			—			1,780
Fuel		—			1,658			102			—			1,760
Maintenance and repairs		1			1,368			173			—			1,542
Asset impairment charges		—			66			—			—			66
Intercompany charges, net		(156	)		(1,103	)		1,259			—			—
Other		109			3,419			1,742			(99	)		5,171
		—			23,296			9,724			(179	)		32,841
OPERATING INCOME		—			1,253			278			—			1,531
OTHER INCOME (EXPENSE):
Equity in earnings of subsidiaries		1,305			43			—			(1,348	)		—
Interest, net		(315	)		20			7			—			(288	)
Other retirement plans income		—			325			11			—			336
Intercompany charges, net		325			(237	)		(88	)		—			—
Other, net		(10	)		28			(29	)		—			(11	)
INCOME (LOSS) BEFORE INCOME TAXES		1,305			1,432			179			(1,348	)		1,568
Provision for income taxes (benefit)		—			306			(43	)		—			263
NET INCOME (LOSS)	$	1,305		$	1,126		$	222		$	(1,348	)	$	1,305
COMPREHENSIVE INCOME (LOSS)	$	1,270		$	1,085		$	246		$	(1,348	)	$	1,253

	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		(330	)		97			(25	)		—			(258	)
Other retirement plans income		—			311			5			—			316
Intercompany charges, net		304			(246	)		(58	)		—			—
Other, net		26			(51	)		16			(10	)		(19	)
INCOME (LOSS) BEFORE INCOME TAXES		1,770			2,177			230			(1,899	)		2,278
Provision for income taxes		—			432			76			—			508
NET INCOME (LOSS)	$	1,770		$	1,745		$	154		$	(1,899	)	$	1,770
COMPREHENSIVE INCOME (LOSS)	$	1,730		$	1,833		$	(133	)	$	(1,899	)	$	1,531

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated			Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(1,671	)	$	2,111		$	148		$	(23	)	$	565		$	(1,759	)	$	3,595		$	201		$	37		$	2,074
INVESTING ACTIVITIES
Capital expenditures		(2	)		(1,317	)		(99	)		—			(1,418	)		(2	)		(3,007	)		(257	)		—			(3,266	)
Proceeds from asset dispositions and other		(10	)		5			4			—			(1	)		(12	)		9			7						4
CASH USED IN INVESTING ACTIVITIES		(12	)		(1,312	)		(95	)		—			(1,419	)		(14	)		(2,998	)		(250	)		—			(3,262	)
FINANCING ACTIVITIES
Proceeds from short-term borrowings, net																	150			—			—			—			150
Net transfers from (to) Parent		1,002			(1,059	)		57			—			—			700			(853	)		153			—			—
Payment on loan between subsidiaries		(434	)		—			434			—			—			(326	)		—			326			—			—
Intercompany dividends		—			304			(304	)		—			—			—			398			(398	)		—			—
Proceeds from debt issuances		2,093			—			—			—			2,093			2,093			—			—			—			2,093
Principal payments on debt		(956	)		(27	)		(2	)		—			(985	)		(956	)		(62	)		(3	)		—			(1,021	)
Proceeds from stock issuances		12			—			—			—			12			26			—			—			—			26
Dividends paid		(170	)		—			—			—			(170	)		(339	)		—			—			—			(339	)
Purchase of treasury stock		(3	)		—			—			—			(3	)		(3	)		—			—			—			(3	)
Other, net		(3	)		—			(2	)		—			(5	)		(4	)		—			(1	)		—			(5	)
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		1,541			(782	)		183			—			942			1,341			(517	)		77			—			901
Effect of exchange rate changes on cash		—			1			(19	)		—			(18	)		—			(2	)		1			—			(1	)
Net (decrease) increase in cash and cash equivalents		(142	)		18			217			(23	)		70			(432	)		78			29			37			(288	)
Cash and cash equivalents at beginning of period		826			158			1,381			(46	)		2,319			826			158			1,381			(46	)		2,319
Cash and cash equivalents at end of period	$	684		$	176		$	1,598		$	(69	)	$	2,389		$	394		$	236		$	1,410		$	(9	)	$	2,031

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated			Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	785		$	(159	)	$	102		$	(27	)	$	701		$	262		$	1,631		$	333		$	(47	)	$	2,179
INVESTING ACTIVITIES
Capital expenditures		—			(983	)		(196	)		—			(1,179	)		(2	)		(2,337	)		(295	)		—			(2,634	)
Proceeds from asset dispositions and other		(5	)		78			5			—			78			(45	)		83			15			—			53
CASH USED IN INVESTING ACTIVITIES		(5	)		(905	)		(191	)		—			(1,101	)		(47	)		(2,254	)		(280	)		—			(2,581	)
FINANCING ACTIVITIES
Proceeds from short-term borrowings, net		299			—			—			—			299			248			—			—			—			248
Net transfers from (to) Parent		(853	)		763			90			—			—			(344	)		350			(6	)		—			—
Intercompany dividends		—			81			(81	)		—			—			—			113			(113	)		—			—
Proceeds from debt issuances																	1,233			—			—			—			1,233
Principal payments on debt		—			—			(2	)		—			(2	)		(750	)		(29	)		(6	)		—			(785	)
Proceeds from stock issuances		25			—			—			—			25			45			—			—			—			45
Dividends paid		(173	)		—			—			—			(173	)		(173	)		—			—			—			(173	)
Purchase of treasury stock		(625	)		—			—			—			(625	)		(1,271	)		—			—			—			(1,271	)
Other, net		—			148			(144	)		—			4			—			128			(127	)		—			1
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(1,327	)		992			(137	)		—			(472	)		(1,012	)		562			(252	)		—			(702	)
Effect of exchange rate changes on cash		—			(5	)		(19	)		—			(24	)		—			(9	)		(29	)		—			(38	)
Net decrease in cash and cash equivalents		(547	)		(77	)		(245	)		(27	)		(896	)		(797	)		(70	)		(228	)		(47	)		(1,142	)
Cash and cash equivalents at beginning of period		1,485			257			1,538			(15	)		3,265			1,485			257			1,538			(15	)		3,265
Cash and cash equivalents at end of period	$	938		$	180		$	1,293		$	(42	)	$	2,369		$	688		$	187		$	1,310		$	(62	)	$	2,123

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

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of May 31, 2019, the related consolidated statements of income, comprehensive income, cash flows and changes in common stockholders’ investment for the year then ended, and the related notes (not presented herein); and in our report dated July 16, 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, 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, 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 North American provider of less-than-truckload (“LTL”) freight transportation services. These companies represent our major service lines and, along with FedEx Corporate Services, Inc. (“FedEx Services”), constitute our reportable segments.

Our FedEx Services segment provides sales, marketing, information technology, communications, customer service, technical support, billing and collection services, and certain back-office functions that support our operating segments. 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 Office and Print Services, Inc. (“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 conform to the current year presentation.

Many of our operating expenses are directly impacted by revenue and volume 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 expense” includes costs associated with outside service contracts (such as facility services and cargo handling, temporary labor and security), insurance, professional fees ~~uniforms~~ and ~~advertising.~~uniforms.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 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 ~~August 31:~~November 30:

	Three Months Ended						Percent				Three Months Ended						Percent				Six Months Ended						Percent
	2019			2018			Change				2019			2018			Change				2019			2018			Change
Revenues	$	17,048		$	17,052			—			$	17,324		$	17,824			(3	)		$	34,372		$	34,876			(1	)
Operating income (loss):
FedEx Express segment		285			388			(27	)			236			630			(63	)			521			1,018			(49	)
FedEx Ground segment		644			676			(5	)			342			590			(42	)			986			1,266			(22	)
FedEx Freight segment		194			176			10				141			148			(5	)			335			324			3
Corporate, other and eliminations		(146	)		(169	)		14				(165	)		(200	)		18				(311	)		(369	)		16
Consolidated operating income		977			1,071			(9	)			554			1,168			(53	)			1,531			2,239			(32	)
Operating margin:
FedEx Express segment		3.2	%		4.2	%		(100	)	bp		2.6	%		6.6	%		(400	)	bp		2.9	%		5.4	%		(250	)	bp
FedEx Ground segment		12.4	%		14.1	%		(170	)	bp		6.4	%		11.5	%		(510	)	bp		9.4	%		12.7	%		(330	)	bp
FedEx Freight segment		10.2	%		9.0	%		120		bp		7.6	%		7.7	%		(10	)	bp		8.9	%		8.4	%		50		bp
Consolidated operating margin		5.7	%		6.3	%		(60	)	bp		3.2	%		6.6	%		(340	)	bp		4.5	%		6.4	%		(190	)	bp
Consolidated net income	$	745		$	835			(11	)		$	560		$	935			(40	)		$	1,305		$	1,770			(26	)
Diluted earnings per share	$	2.84		$	3.10			(8	)		$	2.13		$	3.51			(39	)		$	4.97		$	6.60			(25	)

	Year-over-Year Changes						Change in Revenue						Change in Operating Income (Loss)
	Revenue			Operating Income (Loss)			Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended
FedEx Express segment	$	(277	)	$	(103	)	$	(520	)	$	(797	)	$	(394	)	$	(497	)
FedEx Ground segment		380			(32	)		173			553			(248	)		(280	)
FedEx Freight segment		(54	)		18			(74	)		(128	)		(7	)		11
FedEx Services segment		(5	)		—			1			(4	)		—			—
Corporate, other and eliminations		(48	)		23			(80	)		(128	)		35			58
	$	(4	)	$	(94	)	$	(500	)	$	(504	)	$	(614	)	$	(708	)

Consolidated operating income declined during both the second quarter and first ~~quarter~~half of 2020 primarily due to ~~weakening~~weaker global economic conditions, increased costs to ~~accommodate expanding~~expand services, the loss of business from a large customer and ~~continued~~the later timing of the Thanksgiving holiday, which shifted Cyber Week into December. Continued mix shift to lower-yielding services ~~including growth~~and an increased competitive pricing environment negatively impacted our results during the second quarter and first half of 2020. During the second quarter of 2020, we recorded asset impairment charges of $66 million ($50 million, net of tax, or $0.19 per diluted share) associated with the decision to permanently retire certain aircraft and related engines at FedEx Express (see “Asset Impairment Charges” below for more information).These factors were partially offset by lower variable incentive compensation expenses and increased yields at FedEx Freight. Lower variable incentive compensation expenses benefited the comparison of our results by approximately $65 million in ~~e-commerce volumes.~~the second quarter and $365 million in the first half of 2020. Our first ~~quarter~~half 2020 results were negatively impacted by approximately $100 million due to one fewer operating day. ~~In addition,~~

Consolidated net income for the second quarter and first half of 2020 includes a tax benefit of $133 million ($0.51 per diluted share) from the reduction of a valuation allowance on certain foreign tax loss ~~of business from a large customer at FedEx Express and FedEx Ground negatively impacted our results during~~carryforwards. See the first quarter of 2020. These factors were partially offset by lower variable incentive compensation expenses, increased yields at FedEx Freight and FedEx Ground and higher volume at FedEx Ground. Lower variable incentive compensation expenses benefited the comparison of our results by approximately $300 million in the first quarter of 2020.“Income Taxes” section below for more information.

We incurred TNT Express integration expenses totaling ~~$71~~$64 million ($5550 million, net of tax, or ~~$0.21~~$0.19 per diluted share) in the second quarter and $135 million ($105 million, net of tax, or $0.40 per diluted share) in the first ~~quarter~~half of 2020, a $50 million decrease from the second quarter and a $100 million decrease from the first ~~quarter~~half of 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 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.

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 ~~were flat~~decreased 3% in the second quarter and 1% in the first ~~quarter~~half of 2020 ~~as higher volumes~~primarily due to the loss of business from a large customer, macroeconomic weakness and ~~yields~~lower fuel surcharges at all of our transportation segments, partially offset by residential delivery volume growth at FedEx ~~Ground were offset by~~Ground. In addition, one fewer operating day at all of our transportation segments negatively impacted revenue in the first half of 2020. Revenues at FedEx Express decreased 5% in the second quarter and 4% in the first half of 2020 primarily due to the loss of business from a large customer, macroeconomic weakness and trade uncertainty driving lower freight revenue and unfavorable exchange rates. At FedEx Ground, revenues increased 3% in the second quarter of 2020 due to residential delivery volume growth. Revenues at FedEx Ground increased 6% in the first half of 2020 due to residential delivery volume growth and increased yields. Additionally, the timing of peak-related revenue shifting to the third quarter this year, as well as the loss of business from a large customer, atnegatively impacted revenue comparisons during the second quarter and first half of 2020. FedEx ~~Express and FedEx Ground. At FedEx Ground,~~Freight revenues ~~increased 8%~~decreased 4% in the ~~first~~second quarter ~~of 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 decreased 3% in the first quarter~~half of 2020 due to decreased average daily shipments, partially offset by higher revenue per shipment.

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

	Three Months Ended				Percent			Six Months Ended				Percent
	2019		2018		Change			2019		2018		Change
Operating expenses:
Salaries and employee benefits	$	6,235	$	6,260		—		$	12,322	$	12,520		(2	)
Purchased transportation		4,328		4,346		—			8,356		8,313		1
Rentals and landing fees		924		836		11			1,844		1,659		11
Depreciation and amortization		901		828		9			1,780		1,636		9
Fuel		890		1,052		(15	)		1,760		2,038		(14	)
Maintenance and repairs		774		751		3			1,542		1,486		4
Asset impairment charges		66		—	NM				66		—	NM
Other		2,652		2,583		3			5,171		4,985		4
Total operating expenses		16,770		16,656		1			32,841		32,637		1
Operating income	$	554	$	1,168		(53	)	$	1,531	$	2,239		(32	)

														Percent of Revenue
	Three Months Ended				Percent			Percent of Revenue						Three Months Ended						Six Months Ended
	2019		2018		Change			2019			2018			2019			2018			2019			2018
Operating expenses:
Salaries and employee benefits	$	6,087	$	6,260		(3	)		35.7	%		36.7	%		36.0	%		35.1	%		35.8	%		35.9	%
Purchased transportation		4,028		3,967		2			23.6			23.3			25.0			24.4			24.3			23.8
Rentals and landing fees		920		823		12			5.4			4.8			5.3			4.7			5.4			4.8
Depreciation and amortization		879		808		9			5.2			4.7			5.2			4.6			5.2			4.7
Fuel		870		986		(12	)		5.1			5.8			5.1			5.9			5.1			5.8
Maintenance and repairs		768		735		4			4.5			4.3			4.5			4.2			4.5			4.3
Asset impairment charges															0.4			—			0.2			—
Other		2,519		2,402		5			14.8			14.1			15.3			14.5			15.0			14.3
Total operating expenses		16,071		15,981		1			94.3			93.7			96.8			93.4			95.5			93.6
Operating income	$	977	$	1,071		(9	)		5.7	%		6.3	%
Operating margin															3.2	%		6.6	%		4.5	%		6.4	%

Our results declined in the second quarter and first ~~quarter~~half of 2020 primarily due to ~~weakening~~weaker global economic conditions, increased costs to expand services, the loss of business from a large customer and the later timing of the Thanksgiving holiday, which shifted Cyber Week into December. In addition, continued mix shift to lower-yielding services ~~including growth in deferred services driven~~ and an increased competitive pricing environment negatively impacted our results during the second quarter and first half of 2020. Our results were also negatively impacted by ~~e-commerce. In addition,~~ one fewer operating day at all of our transportation segments the loss of business from a large customer at FedEx Express and FedEx Ground and higher purchased transportation costs, including higher rates and increased capacity for six-day-per-week operations year-round at FedEx Ground, negatively impacted our results duringin the first ~~quarter~~half of 2020. These items were partially offset by lower variable incentive compensation expenses and increased yields at FedEx ~~Freight~~Freight. During the second quarter of 2020, we recorded asset impairment charges of $66 million ($50 million, net of tax, or $0.19 per diluted share) associated with the decision to permanently retire certain aircraft and ~~FedEx Ground and higher volume~~related engines at FedEx ~~Ground.~~Express (see “Asset Impairment Charges” below for more information).

The adoption of the new lease accounting standard during the second quarter and first ~~quarter~~half of 2020 resulted in a reclassification from other operating expense to rentals and landing fees expense of ~~approximately $50~~$44 million in the second quarter and $91 million in the first half of 2020 and maintenance and repairs expense to rentals and landing fees expense of ~~approximately~~ $10 ~~million.~~million in the second quarter and $22 million in the first half of 2020. 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 decreased 3% in the first quarter of 2020 primarily due to lower variable incentive compensation expenses, partially offset by higher staffing to support volume growth at FedEx Express and FedEx Ground. Other operating expense increased 5%3% in the second quarter and 4% in the first ~~quarter~~half of 2020 primarily due to higher self-insurance accruals at FedEx Ground and higher outside service ~~contracts~~contract expense, including technology upgrades and regulatory and clearance cost increases at FedEx Express. Salaries and employee benefits expense decreased 2% in the first half of 2020 primarily due to lower variable incentive compensation expenses, partially offset by merit increases. Depreciation and amortization expense increased 9% in both the second quarter and first ~~quarter~~half of 2020 primarily due to continued strategic investment programs at all of our transportation segments. Maintenance and repairs expense increased 4% in the first half of 2020 primarily due to higher aircraft maintenance expense at FedEx Express. Rentals and landing fees increased 11% in the first half of 2020 primarily due to facility expansion at all of our transportation segments. Purchased transportation costs increased 2%1% in the first ~~quarter~~half of 2020 primarily due to increased contractor settlement rates and ~~expansion of the~~higher volumes at FedEx Ground, ~~network~~including expanding to six-day-per-week operations year-round in January ~~2019, as well as higher volumes~~2019. These items were partially offset by favorable exchange rates at FedEx ~~Ground. Maintenance and repairs expense increased 4% in the first quarter~~Express, lower utilization of ~~2020 primarily due to higher aircraft engine maintenance expense~~third-party transportation providers at FedEx ~~Express.~~

Freight and FedEx Express and decreased fuel costs at FedEx Ground and FedEx Freight.

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 decreased ~~12%~~15% in the second quarter and 14% in the first ~~quarter~~half of 2020 primarily due to 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 ~~first~~second quarters of 2020 and 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~~slightly negative impact to operating income in the second quarter and first ~~quarter~~half of 2020 as ~~decreased~~lower fuel ~~prices~~surcharges more than offset ~~lower~~decreased fuel ~~surcharges.~~prices.

We routinely review our fuel surcharges. On March 18, 2019, we updated the tables used to determine our fuel 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 on operating income described above and for each segment below excludes the 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.

During the second quarter of 2020, we made the decision to permanently retire from service 10 Airbus A310-300 aircraft and 12 related engines at FedEx Express to align with the needs of the U.S. domestic network and modernize its aircraft fleet. As a consequence of this decision, noncash impairment charges of $66 million ($50 million, net of tax, or $0.19 per diluted share) were recorded in the FedEx Express segment in the second quarter. Seven of these aircraft were temporarily idled.

Our effective tax rate was ~~25.2%~~2.1% for the second quarter and 16.8% for the first ~~quarter~~half of 2020, compared with ~~24.2%~~20.6% for the second quarter and 22.3% for the first ~~quarter~~half of 2019. The 2020 tax ~~rate was~~rates were favorably impacted by $133 million from the reduction of a valuation allowance on certain foreign tax loss carryforwards due to operational changes which impacted the determination of the realizability of the deferred tax asset in that jurisdiction. The 2020 tax rates were negatively impacted by decreased earnings in certain non-U.S. jurisdictions. The 2019 tax rates were favorably impacted by the Tax Cuts and Jobs Act (“TCJA”), which resulted in an approximate $60 million tax benefit from accelerated deductions claimed on our 2018 tax return filed in 2019.

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, during the second quarter of 2020, we ~~are currently under appeals proceedings~~reached an agreement in principle with ~~respect to~~ the ~~IRS’s proposed audit adjustment~~IRS Office of Appeals for the 2014 and 2015 tax years. As a result, we recorded an immaterial reduction to our liabilities for uncertain tax positions during the quarter. 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 impact of any changes is not expected to be material to our consolidated financial statements. ~~As of August 31, 2019, there were no material changes to our liabilities for unrecognized tax benefits subsequent to May 31, 2019.~~

We expect continued weak macroeconomic conditions to result in lower revenue growth for the remainder of 2020 at our transportation segments. In addition, a more competitive pricing environment and higher operating costs at FedEx Ground are anticipated to contribute to operating income declines for the remainder of ~~2020 resulting from lower revenue at FedEx Express and higher operating costs at FedEx Ground.~~2020.

~~Our outlook on global trade has weakened since the previous quarter due to escalating~~We anticipate that continued trade tensions, ~~including increased tariffs on Chinese goods, increasing~~ softness in European and Asia Pacific markets and declines in industrial ~~production.~~production will continue to negatively impact our results for the remainder of 2020. 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 Pacific. ~~The~~Furthermore, the cost of maintaining two separate networks in Europe while we execute the TNT Express integration is expected to compound the impact of the revenue shortfall on our near-term results.

In the U.S. domestic package market, incremental costs associated with modernizing our FedEx Express 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 a large customer, has created a near-term cost-to-volume disparity. In addition, an increasingly competitive pricing environment is expected to continue pressuring our margins. However, we are confident that our investments in our U.S. domestic package operations will ultimately result in higher revenue that more than offsets the implementation costs associated with these programs.

In response to the current economic conditions, we ~~are making~~have made adjustments to our ~~global~~ FedEx Express U.S. domestic air network to better match capacity with ~~demand. These~~demand, as discussed in the “Asset Impairment Charges” section above. Throughout the remainder of 2020, we will make further network capacity ~~adjustments will result in accelerating planned aircraft retirements over~~changes at FedEx Express by reducing international flight hours. If global economic conditions deteriorate further, we may take additional actions to reduce the ~~current and next fiscal years, and~~size of our FedEx Express network.

At FedEx Ground, we are ~~parking additional aircraft after the 2020 peak season. These actions could result in higher depreciation expense and/or immaterial asset impairments in future periods. In addition, we continue to be~~ focused on ~~cost reductions by limiting discretionary spending~~improving revenue quality through rate increases that will go into effect in January and ~~deferring non-critical hiring.~~through surcharges on oversized and additional handling shipments. We are also making investments in technology aimed at improving productivity and lowering costs.

For the remainder of 2020, we will continue to execute our TNT Express integration plans and are focused on completing projects across our European hub and station locations that will allow interoperability between the ground networks for both FedEx Express and TNT Express ~~packages, which will further lower costs as the related FedEx Express linehaul operations are optimized.~~packages. In addition, we continue to focus on integrating the ~~operational network integration process~~FedEx Express and TNT Express linehaul and pickup-and-delivery operations for the key countries in Europe, which 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~~By the end of 2020, we expect European ground network interoperability to ~~make significant progress on integration activities in 2020, particularly in Europe, integration work will continue thereafter. After 2020, the~~be substantially completed. The next key integration milestones include completing the integration of the FedEx Express and TNT Express linehaul and pickup-and-delivery operations and completing a single portfolio of services ~~and~~during 2021. We expect to complete international air network ~~integration.~~ interoperability during the first half of 2022. We expect to begin realizing synergies from the combined FedEx Express/TNT Express network during 2021 once the linehaul and pickup-and-delivery networks are optimized, and expect synergy realization to increase significantly after international air network interoperability is completed.

We expect to incur approximately ~~$280~~$200 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 expenses, including restructuring charges at TNT Express, to be approximately $1.7 billion through 2021, and we may incur additional costs, 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 revise and implement our plans.

Our expectations for the remainder of 2020 are 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 no additional adverse developments in international trade policies and relations.

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

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

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 ~~August 31:~~November 30:

	Three Months Ended						Percent										Three Months Ended						Percent				Six Months Ended						Percent
	2019			2018			Change										2019			2018			Change				2019			2018			Change
Revenues:
Package:
U.S. overnight box	$	1,866		$	1,886			(1	)								$	1,864		$	1,948			(4	)		$	3,730		$	3,834			(3	)
U.S. overnight envelope		479			468			2										457			444			3				936			912			3
U.S. deferred		956			952			—										980			1,060			(8	)			1,936			2,012			(4	)
Total U.S. domestic package revenue		3,301			3,306			—										3,301			3,452			(4	)			6,602			6,758			(2	)
International priority		1,817			1,874			(3	)									1,817			1,896			(4	)			3,634			3,770			(4	)
International economy		855			850			1										873			885			(1	)			1,728			1,735			—
Total international export package revenue		2,672			2,724			(2	)									2,690			2,781			(3	)			5,362			5,505			(3	)
International domestic⁽¹⁾		1,076			1,131			(5	)									1,165			1,203			(3	)			2,241			2,334			(4	)
Total package revenue		7,049			7,161			(2	)									7,156			7,436			(4	)			14,205			14,597			(3	)
Freight:
U.S.		695			730			(5	)									698			792			(12	)			1,393			1,522			(8	)
International priority		464			533			(13	)									473			564			(16	)			937			1,097			(15	)
International economy		516			519			(1	)									541			554			(2	)			1,057			1,073			(1	)
International airfreight		66			85			(22	)									70			83			(16	)			136			168			(19	)
Total freight revenue		1,741			1,867			(7	)		Percent of Revenue							1,782			1,993			(11	)			3,523			3,860			(9	)
Other		155			194			(20	)		2019			2018				146			175			(17	)			301			369			(18	)
Total revenues		8,945			9,222			(3	)			100.0	%		100.0	%		9,084			9,604			(5	)			18,029			18,826			(4	)
Operating expenses:
Salaries and employee benefits		3,372			3,473			(3	)			37.7			37.7			3,405			3,441			(1	)			6,777			6,914			(2	)
Purchased transportation		1,232			1,307			(6	)			13.8			14.2			1,267			1,354			(6	)			2,499			2,661			(6	)
Rentals and landing fees		513			470			9				5.7			5.1			505			474			7				1,018			944			8
Depreciation and amortization		462			436			6				5.2			4.7			469			449			4				931			885			5
Fuel		743			845			(12	)			8.3			9.2			754			899			(16	)			1,497			1,744			(14	)
Maintenance and repairs		517			502			3				5.8			5.4			514			514			—				1,031			1,016			1
Asset impairment charges																		66			—		NM					66			—		NM
Intercompany charges		469			518			(9	)			5.2			5.6			500			517			(3	)			969			1,035			(6	)
Other		1,352			1,283			5				15.1			13.9			1,368			1,326			3				2,720			2,609			4
Total operating expenses		8,660			8,834			(2	)			96.8	%		95.8	%		8,848			8,974			(1	)			17,508			17,808			(2	)
Operating income	$	285		$	388			(27	)								$	236		$	630			(63	)		$	521		$	1,018			(49	)
Operating margin		3.2	%		4.2	%		(100	)	bp								2.6	%		6.6	%		(400	)	bp		2.9	%		5.4	%		(250	)	bp

The following table compares selected statistics (in thousands, except yield amounts) for the periods ended ~~August 31:~~November 30:

	Three Months Ended				Percent			Three Months Ended				Percent				Six Months Ended				Percent
	2019		2018		Change			2019		2018		Change				2019		2018		Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box		1,218		1,231		(1	)		1,244		1,308		(5	)			1,231		1,269		(3	)
U.S. overnight envelope		562		551		2			547		532		3				554		541		2
U.S. deferred		976		916		7			1,012		1,082		(6	)			994		998		—
Total U.S. domestic ADV		2,756		2,698		2			2,803		2,922		(4	)			2,779		2,808		(1	)
International priority		530		526		1			565		555		2				548		540		1
International economy		294		276		7			315		302		4				304		289		5
Total international export ADV		824		802		3			880		857		3				852		829		3
International domestic⁽¹⁾		2,352		2,396		(2	)		2,669		2,670		—				2,509		2,530		(1	)
Total ADV		5,932		5,896		1			6,352		6,449		(2	)			6,140		6,167		—
Revenue per package (yield):
U.S. overnight box	$	23.94	$	23.57		2		$	23.78	$	23.63		1			$	23.86	$	23.60		1
U.S. overnight envelope		13.32		13.09		2			13.26		13.24		—				13.29		13.16		1
U.S. deferred		15.29		15.98		(4	)		15.39		15.54		(1	)			15.34		15.75		(3	)
U.S. domestic composite		18.71		18.85		(1	)		18.70		18.75		—				18.71		18.80		—
International priority		53.52		54.80		(2	)		51.03		54.25		(6	)			52.25		54.52		(4	)
International economy		45.52		47.43		(4	)		43.94		46.45		(5	)			44.71		46.92		(5	)
International export composite		50.67		52.26		(3	)		48.49		51.50		(6	)			49.55		51.87		(4	)
International domestic⁽¹⁾		7.15		7.26		(2	)		6.92		7.15		(3	)			7.03		7.21		(2	)
Composite package yield	$	18.57	$	18.69		(1	)	$	17.88	$	18.30		(2	)		$	18.21	$	18.49		(2	)
Freight Statistics
Average daily freight pounds:
U.S.		8,015		8,309		(4	)		8,364		8,917		(6	)			8,188		8,608		(5	)
International priority		4,792		5,260		(9	)		5,230		5,684		(8	)			5,010		5,469		(8	)
International economy		13,717		13,459		2			15,241		15,373		(1	)			14,473		14,401		—
International airfreight		1,555		1,717		(9	)		1,726		1,759		(2	)			1,640		1,738		(6	)
Total average daily freight pounds		28,079		28,745		(2	)		30,561		31,733		(4	)	��		29,311		30,216		(3	)
Revenue per pound (yield):
U.S.	$	1.36	$	1.35		1		$	1.32	$	1.41		(6	)		$	1.34	$	1.38		(3	)
International priority		1.51		1.56		(3	)		1.43		1.57		(9	)			1.47		1.57		(6	)
International economy		0.59		0.59		—			0.56		0.57		(2	)			0.57		0.58		(2	)
International airfreight		0.66		0.76		(13	)		0.65		0.75		(13	)			0.65		0.75		(13	)
Composite freight yield	$	0.97	$	1.00		(3	)	$	0.93	$	1.00		(7	)		$	0.95	$	1.00		(5	)

FedEx Express segment revenues decreased 3%5% in the second quarter and 4% in the first ~~quarter~~half of 2020 primarily due to the loss of business from a large customer, macroeconomic weakness and trade uncertainty resulting in lower freight revenue, lower fuel surcharges and unfavorable exchange rates. In addition, one fewer operating day contributed to the decline in the first half of 2020.

Freight yields decreased 7% in the second quarter and 5% in the first half of 2020 primarily due to base yield declines, lower fuel surcharges and unfavorable exchange ~~rates and lower freight pounds reflecting macroeconomic weakness and trade uncertainty.~~

rates. Average daily freight pounds decreased 2%4% in the second quarter and 3% in the first ~~quarter~~half of 2020 primarily due to lower volume in ~~international~~ freight ~~services. Freight~~services as a result of macroeconomic weakness and trade uncertainty. U.S. domestic package yields ~~decreased 3%~~remained flat in both the second quarter and first ~~quarter~~half of 2020 ~~primarily due to unfavorable exchange rates,~~as base ~~yield declines~~rate improvement was offset by lower package weights and lower fuel surcharges. ~~International~~U.S. domestic package average daily volumes decreased 2%4% in the second quarter and 1% in the first ~~quarter~~half of 2020 ~~primarily due to yield management actions.~~driven by the loss of business from a large customer, partially offset by growth in overnight and deferred volume from other customers. International ~~domestic~~export package yields decreased 2%6% in the second quarter and 4% in the first ~~quarter~~half of 2020 asdriven by base yield ~~improvement was more than offset by~~declines, lower fuel surcharges and unfavorable exchange rates. International export package average daily volumes increased 3% in both the second quarter and first ~~quarter~~half of 2020 ~~primarily due to~~led by volume growth in ~~our international economy service offering.~~Europe. However, international package volume growth has slowed across most regions as a result of macroeconomic weakness and trade uncertainty. International ~~export~~domestic package yields decreased 3% in the second quarter and 2% in the first ~~quarter~~half of 2020 ~~driven~~as base yield improvement was more than offset by unfavorable exchange ~~rates, lower package weights, base yield declines and lower fuel surcharges. U.S.~~rates. International domestic package average daily volumes ~~increased 2%~~remained flat in the ~~first~~second 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~~and decreased 1% in the first ~~quarter~~half of 2020 ~~driven by lower package weights.~~primarily due to targeted yield management actions.

FedEx Express’s U.S. domestic and outbound fuel surcharge and international fuel surcharge ranged as follows for the periods ended ~~August 31:~~November 30:

	Three Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2019			2018
U.S. Domestic and Outbound Fuel Surcharge:
Low		7.27	%		7.02	%		7.21	%		7.90	%		7.21	%		7.02	%
High		8.45			7.27			8.45			10.80			8.45			10.80
Weighted-average		7.55			7.11			7.53			8.60			7.54			7.87
International Export and Freight Fuel Surcharge:
Low		6.87			8.12			6.74			8.32			6.74			8.12
High		18.22			18.09			18.56			17.81			18.56			18.09
Weighted-average		15.55			14.60			15.64			14.87			15.59			14.74
International Domestic Fuel Surcharge:
Low		3.27			2.25			3.20			2.57			3.20			2.25
High		19.47			18.24			19.40			19.40			19.47			19.40
Weighted-average		7.50			5.68			7.29			6.07			7.39			5.88

On 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 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 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 decreased ~~27%~~63% in the second quarter and 49% in the first ~~quarter~~half of 2020 primarily due to ~~weakening~~weaker 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 loss of business from a large ~~customer~~customer. In addition, continued mix shift to lower-yielding services and ~~decreased yields~~an increased competitive pricing environment negatively impacted ~~operating~~our results during the second quarter and first half of 2020. Operating income and operating margin were negatively impacted by one fewer operating day in the first half of 2020. During the second quarter of ~~2020.~~ 2020, we recorded asset impairment charges of $66 million associated with the decision to permanently retire certain aircraft and related engines (see “Asset Impairment Charges” above for more information).Lower variable incentive compensation expenses benefited operating income comparisons by approximately ~~$160~~$35 million in the second quarter and $200 million in the first ~~quarter~~half of 2020.

FedEx Express segment results included ~~approximately $57~~$49 million of TNT Express integration expenses in the second quarter and $106 million of such expenses in the first ~~quarter~~half of 2020, a ~~$45~~$50 million decrease from the second quarter and a $95 million decrease from the first ~~quarter~~half of 2019.

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 6% in both the second quarter and first half of 2020 primarily due to favorable exchange rates and lower international freight volumes, resulting in lower utilization of third-party transportation providers. Other operating expense increased 3% in the second quarter and 4% in the first half of 2020 primarily due to higher outside service contract expense, including technology upgrades and regulatory and clearance cost increases. Salaries and employee benefits expense decreased 3%2% in the first ~~quarter~~half of 2020 primarily due to lower variable incentive compensation expenses, favorable exchange rates and 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 quarter of 2020 primarily due to favorable exchange rates and one fewer operating day.merit increases.

Fuel expense decreased ~~12%~~16% in the second quarter and 14% in the first ~~quarter~~half of 2020 due to decreased fuel prices. The net impact of fuel had a ~~slight benefit~~slightly negative impact to operating income in the second quarter and first ~~quarter~~half of 2020 as ~~decreased~~lower fuel ~~prices~~surcharges more than offset ~~lower~~decreased fuel ~~surcharges.~~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.

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 ~~August 31:~~November 30:

	Three Months Ended						Percent				Percent of Revenue						Three Months Ended						Percent				Six Months Ended						Percent
	2019			2018			Change				2019			2018			2019			2018			Change				2019			2018			Change
Revenues	$	5,179		$	4,799			8				100.0	%		100.0	%	$	5,315		$	5,142			3			$	10,494		$	9,941			6
Operating expenses:
Salaries and employee benefits		871			805			8				16.8			16.8			971			891			9				1,842			1,696			9
Purchased transportation		2,303			2,062			12				44.5			43.0			2,561			2,342			9				4,864			4,404			10
Rentals		239			191			25				4.6			4.0			249			200			25				488			391			25
Depreciation and amortization		193			173			12				3.7			3.6			195			180			8				388			353			10
Fuel		3			3			—				—			—			4			4			—				7			7			—
Maintenance and repairs		87			77			13				1.7			1.6			98			84			17				185			161			15
Intercompany charges		375			388			(3	)			7.3			8.1			394			390			1				769			778			(1	)
Other		464			424			9				9.0			8.8			501			461			9				965			885			9
Total operating expenses		4,535			4,123			10				87.6	%		85.9	%		4,973			4,552			9				9,508			8,675			10
Operating income	$	644		$	676			(5	)								$	342		$	590			(42	)		$	986		$	1,266			(22	)
Operating margin		12.4	%		14.1	%		(170	)	bp								6.4	%		11.5	%		(510	)	bp		9.4	%		12.7	%		(330	)	bp
Average daily package volume		8,834			8,221			7										9,556			9,237			3				9,192			8,721			5
Revenue per package (yield)	$	9.13		$	8.96			2									$	8.80		$	8.81			—			$	8.96		$	8.88			1

FedEx Ground segment revenues increased 8%3% in the ~~first~~second quarter of 2020 due to residential delivery volume growth. Revenues increased 6% in the first half of 2020 due to residential delivery volume growth and increased yields, ~~despite~~partially offset by one fewer operating ~~day and~~day. In addition, the later timing of the Thanksgiving holiday, which shifted Cyber Week into December, as well as the loss of business from a large ~~customer.~~customer, negatively impacted revenue comparisons during the second quarter and first half of 2020.

Average daily volume increased 7%3% in the second quarter and 5% in the first ~~quarter~~half of 2020 primarily due to continued growth in residential services driven by e-commerce. FedEx Ground yields remained flat in the second quarter of 2020 as higher base yields were offset by lower fuel surcharges. FedEx Ground yields increased 2%1% in the first ~~quarter~~half of 2020 primarily due to higher base ~~yields, extra service charges and higher fuel surcharges.~~yields.

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 ~~August 31:~~November 30:

	Three Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2019			2018
Low		6.75	%		6.30	%		6.75	%		6.25	%		6.75	%		6.25	%
High		7.25			6.50			7.00			7.75			7.25			7.75
Weighted-average		7.04			6.30			6.92			7.40			6.98			6.87

On September 16, 2019, FedEx Ground announced a 4.9% average list price increase effective January 6, 2020. On March 18, 2019, we updated the tables used to determine our fuel surcharges at FedEx Ground. On January 7, 2019, FedEx Ground implemented a 4.9% average list price increase. On September 10, 2018, we updated the tables used to determine our fuel surcharges at FedEx Ground.

FedEx Ground segment operating income decreased 5%42% in the second quarter and 22% in the first ~~quarter~~half of 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.~~expand services, higher self-insurance accruals and the later timing of the Thanksgiving holiday, which shifted Cyber Week into December. In addition, the loss of business from a large customer, as well as continued mix shift to lower-yielding services and an increased competitive pricing environment, negatively impacted our results during the second quarter and first ~~quarter~~half of 2020. These items were partially offset by residential delivery volume growth in both the second quarter and first half of 2020, as well as increased ~~yields.~~base yields in the first half of 2020. Additionally, lower variable incentive compensation expenses benefited operating income comparisons by approximately ~~$50~~$10 million in the second quarter and $60 million in the first ~~quarter~~half of 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 increased ~~12%~~9% in the second quarter and 10% in the first ~~quarter~~half 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 both the second quarter and first ~~quarter~~half of 2020 primarily due to higher self-insurance accruals and increased bad debt expense. Salaries and employee benefits expense increased 8%9% in both the second quarter and first ~~quarter~~half of 2020 ~~primarily~~ due to additional staffing to support volume growth, including ~~expanding to six-day-per-week~~current and anticipated expansion of year-round operations, ~~year-round,~~network expansion and merit increases, partially offset by lower variable incentive compensation expenses.

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

~~Independent Contractor and Independent~~ Service Provider ~~Models~~Transition

During the second quarter of 2020, 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 ofcompleted 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.

~~FedEx Ground~~ previously announced ~~plans~~transition to ~~implement~~ the Independent Service Provider ~~(“ISP”) model~~agreement 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 August 31, 2019, approximately 80% of standard FedEx Ground volume (excluding FedEx SmartPost 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.

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 ~~August 31:~~November 30:

	Three Months Ended						Percent				Percent of Revenue						Three Months Ended						Percent				Six Months Ended						Percent
	2019			2018			Change				2019			2018			2019			2018			Change				2019			2018			Change
Revenues	$	1,905		$	1,959			(3	)			100.0	%		100.0	%	$	1,844		$	1,918			(4	)		$	3,749		$	3,877			(3	)
Operating expenses:
Salaries and employee benefits		919			928			(1	)			48.3			47.4			900			919			(2	)			1,819			1,847			(2	)
Purchased transportation		187			259			(28	)			9.8			13.2			187			250			(25	)			374			509			(27	)
Rentals		52			42			24				2.7			2.1			52			42			24				104			84			24
Depreciation and amortization		94			78			21				4.9			4.0			97			76			28				191			154			24
Fuel		123			137			(10	)			6.5			7.0			132			150			(12	)			255			287			(11	)
Maintenance and repairs		65			62			5				3.4			3.2			68			63			8				133			125			6
Intercompany charges		126			138			(9	)			6.6			7.0			130			137			(5	)			256			275			(7	)
Other		145			139			4				7.6			7.1			137			133			3				282			272			4
Total operating expenses		1,711			1,783			(4	)			89.8	%		91.0	%		1,703			1,770			(4	)			3,414			3,553			(4	)
Operating income	$	194		$	176			10									$	141		$	148			(5	)		$	335		$	324			3
Operating margin		10.2	%		9.0	%		120		bp								7.6	%		7.7	%		(10	)	bp		8.9	%		8.4	%		50		bp
Average daily shipments (in thousands)
Average daily shipments (in thousands):
Priority		78.5			81.2			(3	)									77.4			81.7			(5	)			78.0			81.4			(4	)
Economy		32.8			34.6			(5	)									32.6			35.4			(8	)			32.7			35.0			(7	)
Total average daily shipments		111.3			115.8			(4	)									110.0			117.1			(6	)			110.7			116.4			(5	)
Weight per shipment (lbs)
Weight per shipment (lbs):
Priority		1,156			1,218			(5	)									1,139			1,203			(5	)			1,147			1,211			(5	)
Economy		960			1,009			(5	)									983			1,043			(6	)			971			1,026			(5	)
Composite weight per shipment		1,098			1,156			(5	)									1,092			1,155			(5	)			1,095			1,155			(5	)
Revenue per shipment
Revenue per shipment:
Priority	$	255.45		$	246.77			4									$	258.90		$	249.76			4			$	257.14		$	248.24			4
Economy		295.75			292.33			1										295.29			297.73			(1	)			295.53			295.00			—
Composite revenue per shipment	$	267.34		$	260.39			3									$	270.38		$	264.27			2			$	268.83		$	262.29			2
Revenue per hundredweight
Revenue per hundredweight:
Priority	$	22.10		$	20.26			9									$	22.74		$	20.76			10			$	22.41		$	20.50			9
Economy		30.81			28.97			6										30.05			28.55			5				30.43			28.76			6
Composite revenue per hundredweight	$	24.35		$	22.53			8									$	24.75		$	22.89			8			$	24.54		$	22.71			8

FedEx Freight segment revenues decreased 4% in the second quarter and 3% in the first ~~quarter~~half of 2020 due to decreased average daily shipments, ~~and one fewer operating day,~~ partially offset by higher revenue per shipment. In addition, one fewer operating day contributed to the decline in the first half of 2020.

Average daily shipments decreased 4%6% in the second quarter and 5% in the first ~~quarter~~half of 2020 due to lower demand for our service offerings as a result of softening economic conditions. Revenue per shipment increased 3%2% in both the second quarter and first ~~quarter~~half of 2020 primarily due to higher base rates reflecting our ongoing yield management initiatives, partially offset by lower weight per ~~shipment.~~shipment and lower fuel surcharges.

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 ~~August 31:~~November 30:

	Three Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2019			2018
Low		23.50	%		24.60	%		23.50	%		24.90	%		23.50	%		24.60	%
High		24.40			25.00			24.00			25.60			24.40			25.60
Weighted-average		23.90			24.77			23.80			25.19			23.80			24.97

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

FedEx Freight segment operating income decreased 5% in the second quarter of 2020, driven by decreased volumes resulting from softening economic conditions. FedEx Freight continues to focus on yield management, improving profit and aligning its cost structure with current and anticipated business levels, enabling FedEx Freight to significantly offset the impact of lower volumes from softening economic conditions. FedEx Freight segment operating income increased ~~10%~~3% in the first ~~quarter~~half of 2020 primarily due to higher revenue per shipment, ~~partially offset by decreased average daily shipments.~~despite moderating volumes. In addition, lower variable incentive compensation expenses benefited operating income comparisons by approximately ~~$30~~$5 million in the second quarter and $35 million in the first ~~quarter~~half of 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%~~25% in the second quarter and 27% in the first ~~quarter~~half of 2020 primarily due to lower utilization of third-party transportation providers. Depreciation and amortization expense increased ~~21%~~28% in the second quarter and 24% in the first ~~quarter~~half of 2020 due to investments in vehicles and ~~trailers.~~trailers, as well as facility expansion.

Fuel expense decreased ~~10%~~12% in the second quarter and 11% in the first ~~quarter~~half of 2020 primarily due to decreased fuel prices. The net impact of fuel had a ~~slightly~~moderately negative impact to operating income in the second quarter and first ~~quarter~~half of 2020 as lower fuel surcharges more than offset 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 ~~$2.4~~$2.0 billion at ~~August 31,~~November 30, 2019, compared to $2.3 billion at May 31, 2019. The following table provides a summary of our cash flows for the ~~three-month~~six-month periods ended ~~August 31~~November 30 (in millions):

	2019			2018			2019			2018
Operating activities:
Net income	$	745		$	835		$	1,305		$	1,770
Noncash charges and credits		1,745			981			3,322			2,140
Changes in assets and liabilities		(1,925	)		(1,115	)		(2,553	)		(1,731	)
Cash provided by operating activities		565			701			2,074			2,179
Investing activities:
Capital expenditures		(1,418	)		(1,179	)		(3,266	)		(2,634	)
Proceeds from asset dispositions and other		(1	)		78			4			53
Cash used in investing activities		(1,419	)		(1,101	)		(3,262	)		(2,581	)
Financing activities:
Proceeds from short-term borrowings, net		—			299			150			248
Proceeds from debt issuances		2,093			—			2,093			1,233
Principal payments on debt		(985	)		(2	)		(1,021	)		(785	)
Proceeds from stock issuances		12			25			26			45
Dividends paid		(170	)		(173	)		(339	)		(173	)
Purchase of treasury stock		(3	)		(625	)		(3	)		(1,271	)
Other		(5	)		4
Other, net								(5	)		1
Cash provided by (used in) financing activities		942			(472	)		901			(702	)
Effect of exchange rate changes on cash		(18	)		(24	)		(1	)		(38	)
Net increase (decrease) in cash and cash equivalents	$	70		$	(896	)
Net decrease in cash and cash equivalents							$	(288	)	$	(1,142	)
Cash and cash equivalents at the end of period	$	2,389		$	2,369		$	2,031		$	2,123

Cash flows from operating activities decreased ~~$136~~$105 million in the first ~~quarter~~half of 2020 primarily due to higher pension contributions and lower net income, partially offset by 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.lower variable incentive compensation payments. Capital expenditures increased during the first ~~quarter~~half of 2020 primarily due to ~~increased spending on vehicles and trailers at FedEx Freight,~~ higher spending related to facilities and aircraft at FedEx Express, increased spending on vehicles and trailers at our transportation segments and increased spending on information technology at FedEx Services, FedEx Express and FedEx Freight. ~~These items were partially offset by lower spending across all asset categories at FedEx Ground.~~ See “Capital Resources” for a discussion of capital expenditures during 2020 and 2019.

During the second quarter of 2020, we issued commercial paper to provide us with additional short-term liquidity. As of November 30, 2019, we had $150 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 stock repurchase program of up to 25 million shares. During the first quarter of 2020, we repurchased 0.02 million shares of FedEx common stock at an average price of $156.90 per share for a total of $3 million. As of August 31, 2019, 5.1 million shares remained under the 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. We did not repurchase any shares of FedEx common stock during the second quarter of 2020. During the first half of 2020, we repurchased 0.02 million shares of FedEx common stock at an average price of $156.90 per share for a total of $3 million. As of November 30, 2019, 5.1 million shares remained under the stock repurchase authorization.

Our operations are capital intensive, characterized by significant investments in aircraft, vehicles and trailers, technology, facilities, and 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 ~~August 31~~November 30 (in millions):

																Percent Change
																2019/2018
	Three Months Ended				Percent			Three Months Ended				Six Months Ended				Three Months			Six Months
	2019		2018		Change			2019		2018		2019		2018		Ended			Ended
Aircraft and related equipment	$	541	$	472		15		$	587	$	604	$	1,128	$	1,075		(3	)		5
Package handling and ground support equipment		141		193		(27	)		267		223		408		417		20			(2	)
Vehicles and trailers		261		160		63			399		275		660		435		45			52
Information technology		222		175		27			243		157		465		332		55			40
Facilities and other		253		179		41			352		196		605		375		80			61
Total capital expenditures	$	1,418	$	1,179		20		$	1,848	$	1,455	$	3,266	$	2,634		27			24

FedEx Express segment	$	951	$	760		25		$	1,061	$	932	$	2,012	$	1,692		14			19
FedEx Ground segment		96		176		(45	)		447		253		543		429		77			27
FedEx Freight segment		186		90		107			131		137		317		227		(4	)		40
FedEx Services segment		151		125		21			154		99		305		224		56			36
Other		34		28		21			55		34		89		62		62			44
Total capital expenditures	$	1,418	$	1,179		20		$	1,848	$	1,455	$	3,266	$	2,634		27			24

Capital expenditures increased during the first ~~quarter~~half of 2020 primarily due to ~~increased spending on vehicles and trailers at FedEx Freight,~~ higher spending related to facilities and aircraft at FedEx Express, which included the delivery of ~~four~~seven Boeing 767-300 Freighter (“B767F”) aircraft and ~~four~~five Boeing 777 Freighter aircraft, increased spending on vehicles and trailers at our transportation segments and increased spending on information technology at FedEx Services, FedEx Express and FedEx Freight. ~~These items were partially offset by lower spending 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 ~~August 31,~~November 30, 2019 includes ~~$1.3~~$1.1 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 ~~Tax Cuts and Jobs Act (“TCJA”)~~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 $5.9 billion in 2020, and include spending for aircraft and hub modernization at FedEx Express, investments that increase our efficiency in handling large packages at FedEx Ground and investments in technology across all transportation segments that will further optimize our networks and enhance our capabilities. We invested ~~$0.5~~$1.1 billion in aircraft and related equipment in the first ~~quarter~~half of 2020 and expect to invest an additional ~~$1.0~~$0.4 billion for aircraft and related equipment during the remainder of 2020. In addition, we are making investments over multiple years in our facilities of approximately $1.5 billion to significantly expand the FedEx Express Indianapolis hub and approximately $1.5 billion to modernize the FedEx Express Memphis World Hub. Despite our declining capacity needs, these investments in hubs will provide productivity gains in a competitive labor environment. We anticipate that our cash flow from operations will be sufficient to fund our capital expenditures in 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.

During the first ~~quarter~~half of 2020, we made voluntary contributions totaling $1.0 billion to our U.S. Pension Plans. We do not expect to make any additional contributions to our U.S. Pension Plans for the remainder of 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.~~“negative.” 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 ~~August 31,~~November 30, 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. 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)
	2020 ⁽¹⁾		2021		2022		2023		2024		Thereafter		Total		2020 ⁽¹⁾		2021		2022		2023		2024		Thereafter		Total
Operating activities:
Operating leases	$	1,757	$	2,246	$	2,014	$	1,787	$	1,490	$	7,538	$	16,832	$	1,249	$	2,355	$	2,105	$	1,866	$	1,559	$	7,841	$	16,975
Non-capital purchase obligations and other		909		765		518		362		226		2,757		5,537		697		979		777		593		460		3,761		7,267
Interest on long-term debt		459		649		649		621		599		10,184		13,161		338		649		649		620		598		10,183		13,037
Investing activities:
Aircraft and related capital commitments		989		2,337		2,321		1,542		468		228		7,885		449		2,337		2,324		1,550		468		228		7,356
Other capital purchase obligations		59		25		23		23		1		5		136		20		25		24		23		1		5		98
Financing activities:
Debt		—		—		1,212		1,584		750		15,292		18,838		—		—		1,205		1,577		750		15,271		18,803
Finance leases		37		14		14		12		11		78		166		13		14		14		13		11		78		143
Total	$	4,210	$	6,036	$	6,751	$	5,931	$	3,545	$	36,082	$	62,555	$	2,766	$	6,359	$	7,098	$	6,242	$	3,847	$	37,367	$	63,679

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 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 ($~~125~~99 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 ($36 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 ~~$611~~$735 million in deposits and progress payments as of ~~August 31,~~November 30, 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,~~November 30, 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.

We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity.

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 ~~August 31,~~November 30, 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 “Fuel,” “Income Taxes,” “Outlook,” ~~“Independent Contractor and Independent Service Provider Models,”~~ “Liquidity Outlook,” “Contractual Cash Obligations and Off-Balance Sheet Arrangements” and “Critical Accounting Estimates,” and the “Financing Arrangements,” “Retirement Plans,” “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.

As of ~~August 31,~~November 30, 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, 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 ~~three months~~half of 2020, the U.S. dollar strengthened relative to the currencies of the foreign countries in which we operate, as compared to May 31, 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 ~~August 31,~~November 30, 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~~began implementing new systems and internal controls in conjunction with the new lease standard. ~~These changes have not materially affected,~~The implementation of such systems and ~~are not reasonably likely to materially affect, our~~ internal controls ~~over~~continued in the second quarter of 2020. In addition, we have begun the process of migrating to an enterprise resource planning cloud-based financial ~~reporting.~~system, and during the second quarter of 2020 began the implementation of new internal controls in conjunction with this migration. During our fiscal quarter ended ~~August 31,~~November 30, 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 910 of the accompanying unaudited condensed consolidated financial statements.

Other than the risk 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 weakness in the global economy that adversely affected our results of operations during fiscal 2019 and the first ~~quarter~~half 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 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 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 regarding its handling of certain packages while attempting to comply with the Export Administration Regulations.

The United Kingdom’s ~~vote to leave~~expected withdrawal from the EU could adversely impact our business, results of operations and financial condition. ~~There is substantial uncertainty surrounding~~Following recent European Parliament elections and the general election in the United ~~Kingdom’s 2016 vote~~Kingdom, it is expected that the United Kingdom and EU will enter into a withdrawal agreement pursuant to which the United Kingdom will leave the EU (“Brexit”)~~, which is scheduled for October~~ on January 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 which the United Kingdom leaves the EU without a withdrawal agreement and associated transition period in 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~~2020, but maintain access to the EU single EU market and to the global trade deals negotiated by the EU on behalf of its members, ~~depressing trade between~~and remain subject to EU law, for a transition period ending on December 31, 2020. The suspension or further delay of Brexit beyond January 31, 2020 requires the unanimous agreement of all remaining EU member states.

The ongoing uncertainty within the United Kingdom’s government and Parliament on the status of Brexit has negatively impacted the United Kingdom’s economy, and will likely continue to have a negative impact until the United Kingdom and ~~other countries, which~~EU reach a definitive resolution on the outstanding trade and legal matters. Any additional impact of Brexit will depend on the terms of such resolution. Even if the United Kingdom maintains access to the EU single market and trade deals following the transition period, Brexit could result in further economic downturn globally. If the United Kingdom ultimately loses access to the EU single market and trade deals, significant market and economic disruption would likely occur, our customer experience, service quality and international operations would likely be negatively ~~impact~~impacted, and the demand for our ~~international operations.~~ services could be depressed.

Additionally, we may face new regulations regarding trade, aviation, tax, security and employees, among others, in the United Kingdom. Compliance with such regulations could be costly, negatively impacting our business, results of operations and financial condition. Brexit could also adversely affect European and worldwide economic and market conditions and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the euro and the British pound.

Proposed pilot flight and duty time regulations could impair our operations and impose substantial costs on us. In September 2010, the Federal Aviation Administration (“FAA”) proposed regulations that would change the flight and duty time rules applicable to all-cargo air carriers. When the FAA issued final regulations in December 2011 (the “2011 regulations”), all-cargo carriers, including FedEx Express, were exempt from these new requirements. Instead, all-cargo carriers were required to continue complying with previously enacted flight and duty time rules and allowed to pursue the development of fatigue risk management systems to develop fatigue mitigations unique to each operation. In December 2012, the FAA reaffirmed the exclusion of all-cargo carriers from the 2011 regulations, and litigation in the U.S. Court of Appeals for the District of Columbia affirmed the FAA’s decision. However, legislation has recently been introduced in the U.S. Senate and U.S. House of Representatives that, if adopted, would require all-cargo carriers to comply with the 2011 regulations. Required compliance with the 2011 regulations would make it more difficult to avoid pilot fatigue and could impose substantial costs on us in order to maintain operational reliability.

~~The following table provides information on FedEx’s repurchases~~We did not repurchase any shares of ~~our~~FedEx common stock during the ~~first~~second quarter of ~~2020:~~2020.

~~The repurchases were made under the~~On January 26, 2016, we announced a 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 ~~September~~December 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. See Note 1 of the accompanying unaudited condensed consolidated financial statements for further discussion.

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 ~~September~~December 13, 2019
Common Stock, par value $0.10 per share		~~260,910,309~~261,119,074

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets ~~August 31,~~November 30, 2019 and May 31, 2019		3
Condensed Consolidated Statements of Income Three and Six Months Ended ~~August 31,~~November 30, 2019 and 2018		5
Condensed Consolidated Statements of Comprehensive Income Three and Six Months Ended ~~August 31,~~November 30, 2019 and 2018		6
Condensed Consolidated Statements of Cash Flows ~~Three~~Six Months Ended ~~August 31,~~November 30, 2019 and 2018		7
Condensed Consolidated Statements of Changes In Common Stockholders’ Investment Three and Six Months Ended ~~August 31,~~November 30, 2019 and 2018		8
Notes to Condensed Consolidated Financial Statements		9
Report of Independent Registered Public Accounting Firm		2831
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		2932
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		5156
ITEM 4. Controls and Procedures		5156

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		5257
ITEM 1A. Risk Factors		5257
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		5359
ITEM 6. Exhibits		5460
Signature		5662

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 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


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)

	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

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
June 1-30, 2019		20,000	$	156.90		20,000		5,077,200
July 1-31, 2019		—		—		—		5,077,200
Aug. 1-31, 2019		—		—		—		5,077,200
Total		20,000	$	156.90		20,000

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. 9, dated as of 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 July 24, 2019, and incorporated herein by reference.)

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

~~4.4~~		Supplemental Indenture No. 10, dated as of 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 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 ~~June 7,~~September 19, 2019 (but effective as of ~~May 24,~~April 1, 2019), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and FedEx Express (the “USPS Transportation Agreement”). An attachment to this exhibit has 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 the attachment to the SEC or its staff upon request.

*10.2		Amendment dated ~~June 11,~~October 8, 2019 (but effective as of ~~April 1,~~June 3, 2019), amending the USPS Transportation Agreement. An attachment to this exhibit has 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 the attachment to the SEC or its staff upon request.

*10.3		Amendment dated ~~July 16,~~October 22, 2019 (but effective as of ~~March 4,~~April 29, 2019), amending the USPS Transportation Agreement. An attachment to this exhibit has 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 the attachment to the SEC or its staff upon request.

*10.4		Amendment dated ~~July 16,~~November 5, 2019 (but effective as of ~~April 29,~~July 1, 2019), amending the USPS Transportation Agreement. An attachment to this exhibit has 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 the attachment to the SEC or its staff upon request.

*10.5		~~Letter Agreement~~Amendment dated November 18, 2019 (but effective as of ~~July 9, 2019,~~June 3, 2019), amending the ~~Boeing 777 Freighter Purchase Agreement dated as of November 7, 2006 between The Boeing Company and FedEx Express.~~USPS Transportation Agreement. An attachment to this exhibit has 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 the attachment to the SEC or its staff upon request.

*10.6		Supplemental Agreement No. ~~12 (and related side letters)~~13 dated as of ~~June 24,~~September 4, 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”).~~Express. 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		FedEx Corporation 2019 Omnibus Stock Incentive Plan (Filed as Exhibit 99.1 to FedEx’s Registration Statement No. 333-234010 on Form S-8, and incorporated herein by reference).

*10.710.8		~~Letter Agreement dated as~~Form of ~~July 9, 2019, amending the Boeing 767-3S2 Freighter Purchase Agreement. An attachment to this exhibit has been omitted~~Terms and Conditions of Stock Option Grant for U.S. Employees pursuant to ~~Item 601(a)(5)~~FedEx Corporation 2019 Omnibus Stock Incentive Plan (Filed as Exhibit 99.2 to FedEx’s Registration Statement No. 333-234010 on Form S-8, and incorporated herein by reference).

10.9		Form of ~~Regulation S-K because the information contained therein is not material~~Stock Option Agreement for Non-U.S. Participants pursuant to FedEx Corporation 2019 Omnibus Stock Incentive Plan (Filed as Exhibit 99.3 to FedEx’s Registration Statement No. 333-234010 on Form S-8, and ~~is not otherwise publicly disclosed. FedEx will furnish supplementally a copy~~incorporated herein by reference).

10.10		Form of Stock Option Agreement for Non-Management Members of the ~~attachment~~Board of Directors pursuant to ~~the SEC or its staff upon request.~~FedEx Corporation 2019 Omnibus Stock Incentive Plan (Filed as Exhibit 99.4 to FedEx’s Registration Statement No. 333-234010 on Form S-8, and incorporated herein by reference).

10.11		Form of Restricted Stock Agreement for U.S. Participants pursuant to FedEx Corporation 2019 Omnibus Stock Incentive Plan (Filed as Exhibit 99.5 to FedEx’s Registration Statement No. 333-234010 on Form S-8, and incorporated herein by reference).

10.12		Form of Restricted Stock Agreement for Non-U.S. Participants pursuant to FedEx Corporation 2019 Omnibus Stock Incentive Plan (Filed as Exhibit 99.6 to FedEx’s Registration Statement No. 333-234010 on Form S-8, and incorporated herein by reference).

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 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).

			FEDEX CORPORATION

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