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

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

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

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

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

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

	November 30, 2019 (Unaudited)		May 31, 2019		November 30, 2020 (Unaudited)		May 31, 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,031	$	2,319	$	8,339	$	4,881
Receivables, less allowances of $315 and $300		9,709		9,116
Spare parts, supplies and fuel, less allowances of $330 and $335		576		553
Receivables, less allowances of $617 and $390						11,417		10,102
Spare parts, supplies and fuel, less allowances of $341 and $335						587		572
Prepaid expenses and other		882		1,098		922		828
Total current assets		13,198		13,086		21,265		16,383
PROPERTY AND EQUIPMENT, AT COST		62,715		59,511		67,514		65,024
Less accumulated depreciation and amortization		30,307		29,082		32,904		31,416
Net property and equipment		32,408		30,429		34,610		33,608
OTHER LONG-TERM ASSETS
Operating lease right-of-use assets, net		14,097		—		14,845		13,917
Goodwill		6,861		6,884		6,702		6,372
Other assets		3,390		4,004		3,734		3,257
Total other long-term assets		24,348		10,888		25,281		23,546
	$	69,954	$	54,403	$	81,156	$	73,537

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

	November 30, 2019 (Unaudited)			May 31, 2019			November 30, 2020 (Unaudited)			May 31, 2020
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Short-term borrowings	$	150		$	—
Current portion of long-term debt		16			964		$	97		$	51
Accrued salaries and employee benefits		1,632			1,741			2,159			1,569
Accounts payable		3,283			3,030			3,733			3,269
Operating lease liabilities		1,928			—			2,123			1,923
Accrued expenses		3,538			3,278			4,003			3,532
Total current liabilities		10,547			9,013			12,115			10,344
LONG-TERM DEBT, LESS CURRENT PORTION		18,691			16,617			23,221			21,952
OTHER LONG-TERM LIABILITIES
Deferred income taxes		3,072			2,821			3,471			3,162
Pension, postretirement healthcare and other benefit obligations		4,156			5,095			5,088			5,019
Self-insurance accruals		1,921			1,899			2,250			2,104
Operating lease liabilities		12,432			—			13,009			12,195
Deferred lease obligations		—			531
Other liabilities		476			670			963			466
Total other long-term liabilities		22,057			11,016			24,781			22,946
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS’ INVESTMENT
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
Common stock, $0.10 par value; 800 million shares authorized; 318 million shares issued as of November 30, 2020 and May 31, 2020								32			32
Additional paid-in capital		3,287			3,231			3,400			3,356
Retained earnings		25,431			24,648			27,208			25,216
Accumulated other comprehensive loss		(866	)		(865	)		(898	)		(1,147	)
Treasury stock, at cost		(9,225	)		(9,289	)		(8,703	)		(9,162	)
Total common stockholders’ investment		18,659			17,757			21,039			18,295
	$	69,954		$	54,403		$	81,156		$	73,537

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

	Three Months Ended						Six Months Ended						Three Months Ended November 30,						Six Months Ended November 30,
	November 30,						November 30,						2020			2019			2020			2019
	2019			2018			2019			2018
REVENUES	$	17,324		$	17,824		$	34,372		$	34,876
REVENUE													$	20,563		$	17,324		$	39,884		$	34,372
OPERATING EXPENSES:
Salaries and employee benefits		6,235			6,260			12,322			12,520			7,443			6,235			14,295			12,322
Purchased transportation		4,328			4,346			8,356			8,313			5,407			4,328			10,384			8,356
Rentals and landing fees		924			836			1,844			1,659			1,006			924			1,942			1,844
Depreciation and amortization		901			828			1,780			1,636			936			901			1,862			1,780
Fuel		890			1,052			1,760			2,038			625			890			1,190			1,760
Maintenance and repairs		774			751			1,542			1,486			815			774			1,621			1,542
Asset impairment charges		66			—			66			—			—			66			—			66
Other		2,652			2,583			5,171			4,985			2,866			2,652			5,535			5,171
		16,770			16,656			32,841			32,637			19,098			16,770			36,829			32,841
OPERATING INCOME		554			1,168			1,531			2,239			1,465			554			3,055			1,531
OTHER INCOME (EXPENSE):
OTHER (EXPENSE) INCOME:
Interest, net		(151	)		(131	)		(288	)		(258	)		(184	)		(151	)		(368	)		(288	)
Other retirement plans income		168			158			336			316			150			168			351			336
Other, net		1			(18	)		(11	)		(19	)		(25	)		1			(26	)		(11	)
		18			9			37			39			(59	)		18			(43	)		37
INCOME BEFORE INCOME TAXES		572			1,177			1,568			2,278			1,406			572			3,012			1,568
PROVISION FOR INCOME TAXES		12			242			263			508			180			12			541			263
NET INCOME	$	560		$	935		$	1,305		$	1,770		$	1,226		$	560		$	2,471		$	1,305
EARNINGS PER COMMON SHARE:
Basic	$	2.15		$	3.56		$	5.00		$	6.71		$	4.64		$	2.15		$	9.40		$	5.00
Diluted	$	2.13		$	3.51		$	4.97		$	6.60		$	4.55		$	2.13		$	9.26		$	4.97
DIVIDENDS DECLARED PER COMMON SHARE	$	0.65		$	0.65		$	1.95		$	1.95		$	0.65		$	0.65		$	1.95		$	1.95

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

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	November 30,						November 30,						November 30,						November 30,
	2019			2018			2019			2018			2020			2019			2020			2019
NET INCOME	$	560		$	935		$	1,305		$	1,770		$	1,226		$	560		$	2,471		$	1,305
OTHER COMPREHENSIVE INCOME (LOSS):
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	)
Foreign currency translation adjustments, net of tax expense of $6 and $4 in 2020 and $7 and $4 in 2019														124			72			253			(11	)
Amortization of prior service credit, net of tax benefit of $0 and $1 in 2020 and $6 and $12 in 2019														(2	)		(20	)		(4	)		(41	)
		52			(54	)		(52	)		(239	)		122			52			249			(52	)
COMPREHENSIVE INCOME	$	612		$	881		$	1,253		$	1,531		$	1,348		$	612		$	2,720		$	1,253

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

	Six Months Ended
	November 30,						Six Months Ended November 30,
	2019			2018			2020			2019
Operating Activities:
Net income	$	1,305		$	1,770		$	2,471		$	1,305
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		1,780			1,636			1,862			1,780
Asset impairment charges		66			—			—			66
Provision for uncollectible accounts		208			160			291			208
Stock-based compensation		104			108			121			104
Deferred income taxes and other noncash items		1,164			236
Retirement plan mark-to-market adjustment								52			—
Other noncash items and deferred income taxes								1,482			1,164
Changes in assets and liabilities:
Receivables		(684	)		(1,343	)		(1,100	)		(684	)
Other assets		(162	)		(111	)		(56	)		(162	)
Accounts payable and other liabilities		(1,691	)		(227	)		241			(1,691	)
Other, net		(16	)		(50	)		(134	)		(16	)
Cash provided by operating activities		2,074			2,179			5,230			2,074
Investing Activities:
Capital expenditures		(3,266	)		(2,634	)		(2,826	)		(3,266	)
Proceeds from asset dispositions and other		4			53			14			4
Cash used in investing activities		(3,262	)		(2,581	)		(2,812	)		(3,262	)
Financing Activities:
Proceeds from short-term borrowings, net		150			248			—			150
Principal payments on debt		(1,021	)		(785	)		(75	)		(1,021	)
Proceeds from debt issuances		2,093			1,233			970			2,093
Proceeds from stock issuances		26			45			431			26
Dividends paid		(339	)		(173	)		(341	)		(339	)
Purchase of treasury stock		(3	)		(1,271	)		—			(3	)
Other, net		(5	)		1			(12	)		(5	)
Cash provided by (used in) financing activities		901			(702	)
Cash provided by financing activities								973			901
Effect of exchange rate changes on cash		(1	)		(38	)		67			(1	)
Net decrease in cash and cash equivalents		(288	)		(1,142	)
Net increase (decrease) in cash and cash equivalents								3,458			(288	)
Cash and cash equivalents at beginning of period		2,319			3,265			4,881			2,319
Cash and cash equivalents at end of period	$	2,031		$	2,123		$	8,339		$	2,031

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						Six Months Ended						Three Months Ended						Six Months Ended
	November 30,						November 30,						November 30,						November 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Common Stock
Beginning Balance	$	32		$	32		$	32		$	32		$	32		$	32		$	32		$	32
Ending Balance		32			32			32			32			32			32			32			32
Additional Paid-in-Capital
Additional Paid-in Capital
Beginning Balance		3,257			3,154			3,231			3,117			3,375			3,257			3,356			3,231
Employee incentive plans and other		30			31			56			68			25			30			44			56
Ending Balance		3,287			3,185			3,287			3,185			3,400			3,287			3,400			3,287
Retained Earnings
Beginning Balance		25,048			25,315			24,648			24,823			26,108			25,048			25,216			24,648
Net Income		560			935			1,305			1,770			1,226			560			2,471			1,305
Cash dividends declared ($0.65, $0.65, $1.95, and $1.95 per share)		(170	)		(170	)		(509	)		(514	)
Cash dividends declared ($0.65, $0.65, $1.95 and $1.95 per share)														(172	)		(170	)		(513	)		(509	)
Employee incentive plans and other		(7	)		—			(9	)		1			46			(7	)		34			(9	)
Adoption of new accounting standards on June 1, 2019⁽¹⁾		—			—			(4	)		—			—			—			—			(4	)
Ending Balance		25,431			26,080			25,431			26,080			27,208			25,431			27,208			25,431
Accumulated Other Comprehensive Income
Beginning Balance		(918	)		(763	)		(865	)		(578	)		(1,020	)		(918	)		(1,147	)		(865	)
Other comprehensive income, net of tax (expense)/benefit of ($1), $14, $8, and $45		52			(54	)		(52	)		(239	)
Other comprehensive income, net of tax (expense)/benefit of ($6), ($1), ($3) and $8														122			52			249			(52	)
Reclassification to retained earnings due to the adoption of a new accounting standard on June 1, 2019⁽²⁾		—			—			51			—			—			—			—			51
Ending Balance		(866	)		(817	)		(866	)		(817	)		(898	)		(866	)		(898	)		(866	)
Treasury Stock
Beginning Balance		(9,253	)		(8,565	)		(9,289	)		(7,978	)		(9,033	)		(9,253	)		(9,162	)		(9,289	)
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
Purchase of treasury stock (0.02 million shares)														—			—			—			(3	)
Employee incentive plans and other (2.4, 0.2, 3.4 and 0.5 million shares)														330			28			459			67
Ending Balance		(9,225	)		(9,186	)		(9,225	)		(9,186	)		(8,703	)		(9,225	)		(8,703	)		(9,225	)
Total Common Stockholders' Investment Balance	$	18,659		$	19,294		$	18,659		$	19,294
Total Common Stockholders’ Investment Balance													$	21,039		$	18,659		$	21,039		$	18,659

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~~2020 (“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 November 30, ~~2019,~~2020, and the results of our operations for the three- and six-month periods ended November 30, ~~2019~~2020 and ~~2018,~~2019, cash flows for the six-month periods ended November 30, ~~2019~~2020 and ~~2018,~~2019, and changes in common stockholders’ investment for the three- and six-month periods ended November 30, ~~2019~~2020 and ~~2018.~~2019. Operating results for the three- and six-month periods ended November 30, ~~2019~~2020 are not necessarily indicative of the results that may be expected for the year ending May 31, ~~2020.~~2021.

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

Gross contract assets related to in-transit ~~packages~~shipments totaled ~~$513~~$701 million and ~~$533~~$563 million at November 30, ~~2019~~2020 and May 31, ~~2019,~~2020, respectively. Contract assets net of deferred unearned revenue were ~~$385~~$499 million and ~~$364~~$456 million at November 30, ~~2019~~2020 and May 31, ~~2019,~~2020, 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~~$9 million and ~~$11~~$10 million at November 30, ~~2019~~2020 and May 31, ~~2019,~~2020, 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~~(in millions) for the periods ended November 30. This presentation is consistent with how we organize our segments internally for making operating decisions and measuring performance.

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	2019		2018		2019		2018		2020		2019		2020		2019
REVENUE BY SERVICE TYPE
FedEx Express segment:
Package:
U.S. overnight box	$	1,864	$	1,948	$	3,730	$	3,834	$	2,012	$	1,864	$	3,873	$	3,730
U.S. overnight envelope		457		444		936		912		435		457		861		936
U.S. deferred		980		1,060		1,936		2,012		1,204		980		2,300		1,936
Total U.S. domestic package revenue		3,301		3,452		6,602		6,758		3,651		3,301		7,034		6,602
International priority		1,817		1,896		3,634		3,770		2,510		1,817		4,827		3,634
International economy		873		885		1,728		1,735		658		873		1,274		1,728
Total international export package revenue		2,690		2,781		5,362		5,505		3,168		2,690		6,101		5,362
International domestic⁽¹⁾		1,165		1,203		2,241		2,334		1,206		1,165		2,294		2,241
Total package revenue		7,156		7,436		14,205		14,597		8,025		7,156		15,429		14,205
Freight:
U.S.		698		792		1,393		1,522		799		698		1,632		1,393
International priority		473		564		937		1,097		737		473		1,390		937
International economy		541		554		1,057		1,073		408		541		779		1,057
International airfreight		70		83		136		168		65		70		140		136
Total freight revenue		1,782		1,993		3,523		3,860		2,009		1,782		3,941		3,523
Other(2)		146		175		301		369		334		146		645		301
Total FedEx Express segment		9,084		9,604		18,029		18,826		10,368		9,084		20,015		18,029
FedEx Ground segment		5,315		5,142		10,494		9,941		7,344		5,315		14,384		10,494
FedEx Freight segment		1,844		1,918		3,749		3,877		1,936		1,844		3,762		3,749
FedEx Services segment		5		4		9		13		8		5		16		9
Other and eliminations⁽²⁾⁽³⁾		1,076		1,156		2,091		2,219		907		1,076		1,707		2,091
	$	17,324	$	17,824	$	34,372	$	34,876	$	20,563	$	17,324	$	39,884	$	34,372

~~LEASES~~. We lease certain facilities, aircraft, equipment and vehicles under operating and finance 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 5% of our total aircraft fleet as of 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~~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 isare 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~~FedEx Express ~~Corporation (“FedEx Express”)~~ to align with the needs of the U.S. domestic network and modernize its aircraft ~~fleet~~.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~~quarter of ~~these aircraft were temporarily idled.~~2020.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. The pilots of 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 our employees ~~who~~ are members of ~~unions). Additionally, certain FedEx Express non-U.S. employees~~unions.

BUSINESS ACQUISITION. On December 2, 2020, we agreed to acquire ShopRunner, Inc. (“ShopRunner”), an e-commerce platform that directly connects brands and merchants with online shoppers. The cost of the acquisition will not be material and will be funded with cash from operations. This acquisition is expected to be completed in December 2020, subject to customary conditions, including regulatory approval. The financial results of ShopRunner will be included in “Corporate, other and eliminations” from the date of acquisition and are ~~unionized, and a union has been certified~~not expected to ~~represent owner-drivers at a FedEx Freight Canada, Corp. facility.~~be material to our results of operations in 2021.

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

Our stock-based compensation expense was $46 million for the three-month period ended November 30, 2020 and $121 million for the six-month period ended November 30, 2020. Our stock-based compensation expense was $37 million for the three-month period ended November 30, 2019 and $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 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~~We have €640 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 ~~consolidated~~ subsidiary. As of November 30, ~~2019, the requirements for the application of hedge accounting continue to be met and~~2020, the 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 June 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~~amends the impairment model for most financial assets and certain other instruments that are not measured at fair value through net ~~income. These changes will be~~income, including trade receivables, to utilize an expected loss methodology in place of the incurred loss methodology. We adopted this standard effective June 1, ~~2020 (fiscal 2021).~~2020. We ~~are assessing~~updated our process for estimating the expected credit loss to include a review of forecast information that may impact expected collectability over the lifetime of the asset. See Note 2 for additional information. The adoption of this ~~new~~ standard did not have a material impact 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~~We adopted this standard effective June 1, 2020 and applied these changes ~~will be~~prospectively. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We early adopted this standard effective June 1, 2020. ~~We are assessing the impact~~The adoption of this ~~new~~ standard did not have a material impact on our consolidated financial statements and related disclosures.

TREASURY SHARES. In January 2016, our Board of Directors ~~authorized~~approved a stock repurchase program of up to 25 million shares. We did 0t repurchase any shares of FedEx common stock during the first half of 2021. As of November 30, 2020, 5.1 million shares remained under the stock repurchase authorization. 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~~During 2020, we amended our amended and restated $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement”) and our $1.5 billion 364-day credit agreement (the “364-Day Credit Agreement” and together with the Five-Year Credit Agreement, the “Credit Agreements”). The amendments to the Credit Agreements, among other things, temporarily restrict us from repurchasing any shares of ~~FedEx~~our common stock ~~during~~between May 27, 2020 and May 31, 2021.

See Note 4 for more information on the ~~second quarter of 2020. During~~amendments to 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.Credit Agreements.

DIVIDENDS DECLARED PER COMMON SHARE. On November ~~15, 2019,~~20, 2020, our Board of Directors declared a quarterly dividend of $0.65 per share of common stock. The dividend will be paid on ~~January 2,~~December 28, 2020 to stockholders of record as of the close of business on December ~~9, 2019.~~14, 2020. 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 amendments to the Credit Agreements discussed above under “Treasury Shares” temporarily restrict us from increasing the amount of our quarterly dividend payable per share of common stock from $0.65 per share between May 27, 2020 and May 31, 2021. There are no other material restrictions on our ability to declare dividends, nor are there any material restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances.

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

Credit losses were $148 million for the three-month period ended November 30, 2020 and $291 million for the six-month period ended November 30, 2020. Credit losses were $102 million for the three-month period ended November 30, 2019 and $208 million for the six-month period ended November 30, 2019. Our allowance for credit losses was $296 million as of November 30, 2020 and $175 million at May 31, 2020.

The following table provides changes in ~~AOCI,~~accumulated other comprehensive income (“AOCI”), net of tax, reported in our unaudited condensed consolidated financial statements for the periods ended November 30 (in millions; amounts in parentheses indicate debits to AOCI):

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2020			2019			2020			2019
Foreign currency translation loss:
Balance at beginning of period	$	(1,036	)	$	(921	)	$	(954	)	$	(759	)	$	(1,078	)	$	(1,036	)	$	(1,207	)	$	(954	)
Translation adjustments		72			(31	)		(11	)		(193	)		124			72			253			(11	)
Reclassification to retained earnings due to the adoption of ASU 2018-02		—			—			1			—			—			—			—			1
Balance at end of period		(964	)		(952	)		(964	)		(952	)		(954	)		(964	)		(954	)		(964	)
Retirement plans adjustments:
Balance at beginning of period		118			158			89			181			58			118			60			89
Reclassifications from AOCI		(20	)		(23	)		(41	)		(46	)		(2	)		(20	)		(4	)		(41	)
Reclassification to retained earnings due to the adoption of ASU 2018-02		—			—			50			—			—			—			—			50
Balance at end of period		98			135			98			135			56			98			56			98
Accumulated other comprehensive (loss) at end of period	$	(866	)	$	(817	)	$	(866	)	$	(817	)	$	(898	)	$	(866	)	$	(898	)	$	(866	)

The following table presents details of the reclassifications from AOCI for the periods ended 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							Three Months Ended					Six Months Ended
	2019			2018			2019			2018				2020		2019			2020			2019
Amortization of retirement plans prior service credits, before tax	$	26		$	30		$	53		$	60		Salaries and employee benefits	$	2	$	26		$	5		$	53		Other retirement plans income
Income tax benefit		(6	)		(7	)		(12	)		(14	)	Provision for income taxes		—		(6	)		(1	)		(12	)	Provision for income taxes
AOCI reclassifications, net of tax	$	20		$	23		$	41		$	46		Net income	$	2	$	20		$	4		$	41		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.~~

~~(UNAUDITED)~~
stock and allows pass through trusts formed by FedEx Express to sell, in one or more future offerings, pass through certificates.

During ~~the first quarter~~August 2020, FedEx Express issued $970 million of ~~2020, we issued $2.1 billion~~Pass Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of ~~senior unsecured debt under our current shelf registration statement, comprised of $1.0 billion of 3.10% fixed-rate notes~~1.875% due in ~~August 2029, €500 million~~February 2034 utilizing pass through trusts (the “Trusts”). The Certificates are secured by 19 Boeing aircraft with a net book value 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,$1.9 billion at November 30, 2020. The ~~remaining net~~payment obligations of FedEx Express in respect of the Certificates are fully and unconditionally guaranteed by FedEx. FedEx Express is using the proceeds ~~are being used~~from the issuance for general corporate purposes.

Each Trust meets the definition of a variable interest entity, or VIE, as defined in the Consolidations topic of the Codification (ASC 810), and must be considered for consolidation in our financial statements. Our assessment of the Trusts considers both quantitative and qualitative factors, including the purpose for which the Trust was established and the nature of the risks related to the Trusts. Neither FedEx nor FedEx Express invests in or possesses a financial interest in the Trusts. Rather, FedEx Express has an obligation to make interest and principal payments, which are fully and unconditionally guaranteed by FedEx, and is not the primary beneficiary of the Trusts. Based on this analysis, we determined that we are not required to consolidate the Trusts.

We have a $2.0 billion ~~five-year~~Five-Year ~~credit agreement (the “Five-Year~~ Credit ~~Agreement”)~~Agreement and a $1.5 billion ~~364-day credit agreement (the “364-Day~~364-Day Credit ~~Agreement” and, together with the Five-Year Credit Agreement, the “Credit Agreements”).~~Agreement. The Five-Year Credit Agreement expires in March ~~2024~~2025 and includes a $250 million letter of credit sublimit. The 364-Day Credit Agreement expires in March ~~2020.~~2021. 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, noncash pension service costs and noncash asset impairment charges) before interest, taxes, depreciation and amortization (“adjusted EBITDA”) of not more than ~~3.5~~4.9 to 1.0, calculated as of ~~the end of the applicable quarter~~November 30, 2020 on a rolling four-quarters basis. The ratio of our debt to adjusted EBITDA was 2.6 to 1.0 at November 30, ~~2019.~~2020. The Credit Agreements also contain the temporary covenants discussed in Note 1. We believe ~~this covenant is~~these covenants are the only significant restrictive ~~covenant~~covenants 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~~Information regarding changes to the ~~second~~ratio of debt to adjusted EBITDA required to be maintained under the Credit Agreements through the fourth quarter of ~~2020, we issued~~2021 is provided in our Annual Report.

Outstanding 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 reducereduces the amount available to borrow under the ~~credit facility.~~Credit Agreements. As of November 30, ~~2019, $150 million of~~2020, 0 commercial paper was outstanding and ~~$53~~$0.3 million in letters of credit were outstanding, leaving ~~$3.297~~$3.5 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~~$22.8 billion at November 30, ~~2019~~2020 and ~~$17.5~~$21.5 billion at May 31, ~~2019,~~2020, compared with estimated fair values of ~~$19.6~~$27.2 billion at November 30, ~~2019~~2020 and ~~$17.8~~$22.8 billion at May 31, ~~2019.~~2020. The annualized weighted-average interest rate on long-term debt was 3.5% at November 30, ~~2019.~~2020. 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 periods ended November 30 was as follows (in millions, except per share amounts):

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	2019		2018		2019		2018		2020		2019		2020		2019
Basic earnings per common share:
Net earnings allocable to common shares⁽¹⁾	$	559	$	933	$	1,303	$	1,768	$	1,224	$	559	$	2,466	$	1,303
Weighted-average common shares		261		262		261		263		264		261		263		261
Basic earnings per common share	$	2.15	$	3.56	$	5.00	$	6.71	$	4.64	$	2.15	$	9.40	$	5.00
Diluted earnings per common share:
Net earnings allocable to common shares⁽¹⁾	$	559	$	933	$	1,303	$	1,768	$	1,224	$	559	$	2,466	$	1,303
Weighted-average common shares		261		262		261		263		264		261		263		261
Dilutive effect of share-based awards		1		4		1		5		5		1		3		1
Weighted-average diluted shares		262		266		262		268		269		262		266		262
Diluted earnings per common share	$	2.13	$	3.51	$	4.97	$	6.60	$	4.55	$	2.13	$	9.26	$	4.97
Anti-dilutive options excluded from diluted earnings per common share		11.2		4.0		11.0		3.8		1.3		11.2		5.1		11.0

Our effective tax rate was 12.8% for the second quarter and 18.0% for the first half of 2021, compared to 2.1% for the second quarter and 16.8% for the first half of 2020. The 2021 tax rates include a benefit of $191 million from an increase in our 2020 ~~compared~~tax loss that the Coronavirus Aid, Relief, and Economic Security Act will allow to be carried back to 2015, when the U.S. federal income tax rate was 35%. The increase in our estimated 2020 tax loss is attributable to our Application for Change in Accounting Method filed with ~~20.6%~~the Internal Revenue Service (“IRS”) during the fourth quarter of 2020 discussed below and other accelerated deductions to be claimed on the 2020 tax return. The 2020 tax rates included a $133 million benefit from a valuation allowance reduction which, when combined with substantially lower consolidated earnings, produced a significantly lower rate for the second quarter of 2020 compared to the second quarter of 2021.

During the second quarter of ~~2019. The 2020 tax rates were favorably impacted by $133 million from~~2021, we filed suit in U.S. District Court for the ~~reduction~~Western District of Tennessee challenging the validity of a ~~valuation allowance~~tax regulation related to the one-time transition tax on ~~certain~~unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit seeks to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax ~~loss carryforwards due~~credits under the regulation. We have recorded a cumulative benefit of $233 million through 2019 attributable to ~~operational changes which impacted the determination~~our interpretation of the ~~realizability of~~TCJA and the ~~deferred tax asset~~Internal Revenue Code. If we are ultimately unsuccessful 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~~defending our position, we may be required to reverse the ~~TCJA, which resulted in an approximate $60 million tax~~ benefit ~~from accelerated deductions claimed on our 2018 tax return filed in 2019.~~previously recorded.

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 periods ended November 30 were as follows (in millions):

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	2019		2018		2019		2018		2020		2019		2020		2019
Defined benefit pension plans, net	$	37	$	29	$	74	$	57	$	27	$	37	$	52	$	74
Defined contribution plans		136		133		278		277		153		136		311		278
Postretirement healthcare plans		21		18		43		37		20		21		41		43
Retirement plan mark-to-market (“MTM”) net loss										52		—		52		—
	$	194	$	180	$	395	$	371	$	252	$	194	$	456	$	395

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

	Three Months Ended																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		2020			2019			2020			2019			2020		2019
Service cost	$	192		$	172		$	24		$	25		$	10	$	8	$	212		$	192		$	26		$	24		$	11	$	10
Other retirement plans (income) expense:
Interest cost		250			238			11			12			11		10		239			250			11			11			9		11
Expected return on plan assets		(401	)		(376	)		(13	)		(12	)		—		—		(446	)		(401	)		(13	)		(13	)		—		—
Amortization of prior service credit and other		(25	)		(30	)		(1	)		—			—		—		(2	)		(25	)		—			(1	)		—		—
MTM net loss																		—			—			52			—			—		—
		(176	)		(168	)		(3	)		—			11		10		(209	)		(176	)		50			(3	)		9		11
	$	16		$	4		$	21		$	25		$	21	$	18	$	3		$	16		$	76		$	21		$	20	$	21

	Six Months Ended																Six 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		2020			2019			2020			2019			2020		2019
Service cost	$	384		$	344		$	48		$	49		$	21	$	17	$	425		$	384		$	49		$	48		$	22	$	21
Other retirement plans (income) expense:
Interest cost		500			476			22			25			22		20		479			500			21			22			19		22
Expected return on plan assets		(801	)		(753	)		(26	)		(24	)		—		—		(892	)		(801	)		(25	)		(26	)		—		—
Amortization of prior service credit and other		(52	)		(59	)		(1	)		(1	)		—		—		(4	)		(52	)		(1	)		(1	)		—		—
MTM net loss																		—			—			52			—			—		—
		(353	)		(336	)		(5	)		—			22		20		(417	)		(353	)		47			(5	)		19		22
	$	31		$	8		$	43		$	49		$	43	$	37	$	8		$	31		$	96		$	43		$	41	$	43

For 2021, 0 pension contributions are required for our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) as they are fully funded under the Employee Retirement Income Security Act. We made voluntary contributions to our U.S. Pension Plans of $1.0 billion during the first half of ~~2020~~2020.

We incurred a pre-tax, noncash MTM net loss of $52 million in the second quarter of 2021 related to amendments to the TNT Express Netherlands Pension Plan. Benefits for approximately 2,100 employees will be frozen effective December 31, 2020. Effective January 1, 2021, these employees will begin earning pension benefits under a separate, multi-employer pension plan. This $52 million net loss consists of a $106 million MTM loss due to a lower discount rate and ~~$500~~a $54 million ~~during the first half of 2019.~~curtailment gain.

~~During the second quarter of~~In 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~~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.~~companies in 2022. During ~~2020,~~calendar 2021, current eligible employees under the Portable Pension Account ~~(PPA)~~(“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.~~2022. 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~~collaboratively and ~~managed collaboratively,~~innovating digitally, 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 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.

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~~revenue or estimated services provided. We believe these allocations approximate the net cost of providing these functions. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses.

Corporate 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~~revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment ~~revenues~~revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

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

~~The following table is a summary of the components of net lease cost for the periods ended November 30 (in millions):~~

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

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

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

~~A summary of future minimum lease payments under noncancelable operating and finance leases with an initial or remaining term in excess of one year at November 30, 2019 is as follows (in millions):~~

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

As 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):

Operating Leases

Aircraft
and Related
Equipment

Facilities
and Other

Total
Operating
Leases

2020

$
288

$
2,209

$
2,497

2021

230

2,033

2,263

2022

212

1,816

2,028

2023

154

1,625

1,779

2024

58

1,428

1,486

Thereafter

85

7,977

8,062

Total

$
1,027

$
17,088

$
18,115

	Three Months Ended						Six Months Ended
	2020			2019			2020			2019
Revenue:
FedEx Express segment	$	10,368		$	9,084		$	20,015		$	18,029
FedEx Ground segment		7,344			5,315			14,384			10,494
FedEx Freight segment		1,936			1,844			3,762			3,749
FedEx Services segment		8			5			16			9
Other and eliminations		907			1,076			1,707			2,091
	$	20,563		$	17,324		$	39,884		$	34,372
Operating income (loss):
FedEx Express segment	$	900		$	236		$	1,610		$	521
FedEx Ground segment		552			342			1,386			986
FedEx Freight segment		252			141			526			335
Corporate, other and eliminations		(239	)		(165	)		(467	)		(311	)
	$	1,465		$	554		$	3,055		$	1,531

As of November 30, ~~2019,~~2020, our purchase commitments under various contracts for the remainder of ~~2020~~2021 and annually thereafter were as follows (in millions):

	Aircraft and Related			Other⁽¹⁾		Total		Aircraft and Related		Other⁽¹⁾		Total
2020 (remainder)	$	556		$	511	$	1,067
2021		2,592			749		3,341
2021 (remainder)								$	771	$	550	$	1,321
2022		2,596			529		3,125		2,203		678		2,881
2023		1,789			377		2,166		2,389		461		2,850
2024		701			228		929		1,000		302		1,302
2025									602		226		828
Thereafter		3,408	��		586		3,994		2,679		397		3,076
Total	$	11,642		$	2,980	$	14,622	$	9,644	$	2,614	$	12,258

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. As of November 30, ~~2019,~~2020, our obligation to purchase 6 Boeing 777 Freighter (“B777F”~~) aircraft and 4 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.

During the first quarter of ~~2020,~~2021, FedEx Express ~~exercised options to purchase an additional 6 B767F~~executed a contract amendment rescheduling Boeing 767-300 Freighter (“B767F”) aircraft ~~for delivery in 2022.~~

~~(UNAUDITED)~~
deliveries as follows: 2021 – 18 aircraft; 2022 – 11 aircraft; 2023 – 13 aircraft; and 2024 – 4 aircraft.

As of November 30, ~~2019,~~2020, we had ~~$735~~$830 million in deposits and progress payments on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our accompanying unaudited condensed consolidated balance sheets. Aircraft and related contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of November 30, ~~2019~~2020 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)		-		-		10		-		10
2021		12		5		18		2		37
2021 (remainder)												—		3		11		—		14
2022		12		6		18		3		39		9		8		11		5		33
2023		12		6		6		4		28		12		6		13		2		33
2024		14		6		-		4		24		12		6		4		4		26
2025												12		6		—		2		20
Thereafter		-		7		-		2		9		5		1		—		—		6
Total		50		30		52		15		147		50		30		39		13		132

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 November 30, 2020 is as follows (in millions):

As of November 30, 2020, 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 2021 to 2022.

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

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.

Derivative Lawsuit Related to New York Cigarette Litigation. On ~~September 17, 2019 and November 6,~~October 3, 2019, FedEx ~~its Board of Directors~~ and certain present and former FedEx directors and officers were named as defendants in ~~two~~a stockholder derivative ~~lawsuits~~lawsuit filed in the ~~U.S. District~~Delaware Court of Chancery. The complaint alleges the defendants breached their fiduciary duties in connection with the activities alleged in lawsuits filed by the City of New York and the State of New York against FedEx Ground in December 2013 and November 2014 and against FedEx Ground and FedEx Freight in July 2017. The underlying lawsuits related to the alleged shipment of cigarettes to New York residents in contravention of several statutes, as well as common law nuisance claims, and were dismissed by the court in December 2018 following entry into a final settlement agreement for approximately $35 million. The settlement did not include any admission of liability by FedEx Ground or FedEx Freight. In addition to the ~~District of Delaware. The complaints repeat~~settlement amount, we recognized approximately $10 million for certain attorney’s fees in connection with 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.underlying lawsuits. 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.~~lawsuit.

~~Environmental~~Other 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. In October 2019, the settlement agreement 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.~~benefits, as well as lawsuits containing allegations that FedEx and its subsidiaries are responsible for third-party losses related to vehicle accidents that could exceed our insurance coverage for such losses. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not have a material adverse effect on our financial position, results of operations or cash flows.

~~(UNAUDITED)~~
Environmental Matters. SEC regulations require us to disclose certain information about proceedings arising under federal, state, or local environmental provisions if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to the SEC regulations, FedEx uses a threshold of $1million or more for purposes of determining whether disclosure of any such proceedings is required. Applying this threshold, there are no environmental matters required to be disclosed for this period.

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

	2019			2018			2020			2019
Cash payments for:
Interest (net of capitalized interest)	$	279		$	308		$	377		$	279
Income taxes	$	162		$	220		$	526		$	162
Income tax refunds received		(23	)		(6	)		(22	)		(23	)
Cash tax payments, net	$	139		$	214		$	504		$	139

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

Parent

Subsidiaries

Subsidiaries

Eliminations

Consolidated

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$
394

$
236

$
1,410

$
(9
)

$
2,031

Receivables, less allowances

348

5,698

3,762

(99
)

9,709

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

128

932

398

—

1,458

Total current assets

870

6,866

5,570

(108
)

13,198

PROPERTY AND EQUIPMENT, AT COST

27

58,286

4,402

—

62,715

Less accumulated depreciation and amortization

17

28,139

2,151

—

30,307

Net property and equipment

10

30,147

2,251

—

32,408

INTERCOMPANY RECEIVABLE

3,181

—

—

(3,181
)

—

OPERATING LEASE RIGHT-OF-USE ASSETS, NET

39

11,844

2,214

—

14,097

GOODWILL

—

1,587

5,274

—

6,861

INVESTMENT IN SUBSIDIARIES

35,086

4,982

—

(40,068
)

—

OTHER ASSETS

953

1,141

1,820

(524
)

3,390

$
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

—

5

11

—

16

Accrued salaries and employee benefits

87

1,058

487

—

1,632

Accounts payable

192

1,505

1,692

(106
)

3,283

Operating lease liabilities

4

1,476

448

—

1,928

Accrued expenses

509

2,023

1,008

(2
)

3,538

Total current liabilities

942

6,067

3,646

(108
)

10,547

LONG-TERM DEBT, LESS CURRENT PORTION

18,362

286

43

—

18,691

INTERCOMPANY PAYABLE

—

58

3,123

(3,181
)

—

OTHER LONG-TERM LIABILITIES

Deferred income taxes

—

3,013

583

(524
)

3,072

Operating lease liabilities

37

10,577

1,818

—

12,432

Other liabilities

2,139

3,439

975

—

6,553

Total other long-term liabilities

2,176

17,029

3,376

(524
)

22,057

COMMON STOCKHOLDERS’ INVESTMENT

18,659

33,127

6,941

(40,068
)

18,659

$
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

REVENUES

$
—

$
12,307

$
5,110

$
(93
)

$
17,324

OPERATING EXPENSES:

Salaries and employee benefits

22

4,823

1,390

—

6,235

Purchased transportation

—

2,865

1,505

(42
)

4,328

Rentals and landing fees

2

715

209

(2
)

924

Depreciation and amortization

—

785

116

—

901

Fuel

—

846

44

—

890

Maintenance and repairs

—

685

89

—

774

Asset impairment charges

—

66

—

—

66

Intercompany charges, net

(77
)

(622
)

699

—

—

Other

53

1,752

896

(49
)

2,652

—

11,915

4,948

(93
)

16,770

OPERATING INCOME

—

392

162

—

554

OTHER (EXPENSE) INCOME:

Equity in earnings of subsidiaries

560

26

—

(586
)

—

Interest, net

(164
)

8

5

—

(151
)
Other retirement plans income

—

163

5

—

168

Intercompany charges, net

161

(117
)

(44
)

—

—

Other, net

3

12

(14
)

—

1

INCOME (LOSS) BEFORE INCOME TAXES

560

484

114

(586
)

572

Provision for income taxes (benefit)

—

81

(69
)

—

12

NET INCOME (LOSS)

$
560

$
403

$
183

$
(586
)

$
560

COMPREHENSIVE INCOME (LOSS)

$
540

$
380

$
278

$
(586
)

$
612

Parent

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

REVENUES

$
—

$
12,874

$
5,050

$
(100
)

$
17,824

OPERATING EXPENSES:

Salaries and employee benefits

34

4,797

1,429

—

6,260

Purchased transportation

—

2,650

1,731

(35
)

4,346

Rentals and landing fees

1

640

196

(1
)

836

Depreciation and amortization

—

709

119

—

828

Fuel

—

968

84

��
—

1,052

Maintenance and repairs

—

655

96

—

751

Intercompany charges, net

(152
)

(149
)

301

—

—

Other

117

1,675

863

(72
)

2,583

—

11,945

4,819

(108
)

16,656

OPERATING INCOME

—

929

231

8

1,168

OTHER (EXPENSE) INCOME:

Equity in earnings of subsidiaries

935

48

—

(983
)

—

Interest, net

(169
)

50

(12
)

—

(131
)
Other retirement plans income

—

155

3

—

158

Intercompany charges, net

162

(124
)

(38
)

—

—

Other, net

7

(9
)

(7
)

(9
)

(18
)
INCOME (LOSS) BEFORE INCOME TAXES

935

1,049

177

(984
)

1,177

Provision for income taxes

—

217

25

—

242

NET INCOME (LOSS)

$
935

$
832

$
152

$
(984
)

$
935

COMPREHENSIVE INCOME (LOSS)

$
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

CASH PROVIDED BY (USED IN) OPERATING
   ACTIVITIES

$
(1,759
)

$
3,595

$
201

$
37

$
2,074

INVESTING ACTIVITIES

Capital expenditures

(2
)

(3,007
)

(257
)

—

(3,266
)
Proceeds from asset dispositions and other

(12
)

9

7

4

CASH USED IN INVESTING
   ACTIVITIES

(14
)

(2,998
)

(250
)

—

(3,262
)
FINANCING ACTIVITIES

Proceeds from short-term borrowings, net

150

—

—

—

150

Net transfers from (to) Parent

700

(853
)

153

—

—

Payment on loan between subsidiaries

(326
)

—

326

—

—

Intercompany dividends

—

398

(398
)

—

—

Proceeds from debt issuances

2,093

—

—

—

2,093

Principal payments on debt

(956
)

(62
)

(3
)

—

(1,021
)
Proceeds from stock issuances

26

—

—

—

26

Dividends paid

(339
)

—

—

—

(339
)
Purchase of treasury stock

(3
)

—

—

—

(3
)
Other, net

(4
)

—

(1
)

—

(5
)
CASH (USED IN) PROVIDED BY FINANCING
   ACTIVITIES

1,341

(517
)

77

—

901

Effect of exchange rate changes on cash

—

(2
)

1

—

(1
)
Net (decrease) increase in cash and cash equivalents

(432
)

78

29

37

(288
)
Cash and cash equivalents at beginning of period

826

158

1,381

(46
)

2,319

Cash and cash equivalents at end of period

$
394

$
236

$
1,410

$
(9
)

$
2,031

Parent

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES

$
262

$
1,631

$
333

$
(47
)

$
2,179

INVESTING ACTIVITIES

Capital expenditures

(2
)

(2,337
)

(295
)

—

(2,634
)
Proceeds from asset dispositions and other

(45
)

83

15

—

53

CASH USED IN INVESTING ACTIVITIES

(47
)

(2,254
)

(280
)

—

(2,581
)
FINANCING ACTIVITIES

Proceeds from short-term borrowings, net

248

—

—

—

248

Net transfers from (to) Parent

(344
)

350

(6
)

—

—

Intercompany dividends

—

113

(113
)

—

—

Proceeds from debt issuances

1,233

—

—

—

1,233

Principal payments on debt

(750
)

(29
)

(6
)

—

(785
)
Proceeds from stock issuances

45

—

—

—

45

Dividends paid

(173
)

—

—

—

(173
)
Purchase of treasury stock

(1,271
)

—

—

—

(1,271
)
Other, net

—

128

(127
)

—

1

CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES

(1,012
)

562

(252
)

—

(702
)
Effect of exchange rate changes on cash

—

(9
)

(29
)

—

(38
)
Net decrease in cash and cash equivalents

(797
)

(70
)

(228
)

(47
)

(1,142
)
Cash and cash equivalents at beginning of period

1,485

257

1,538

(15
)

3,265

Cash and cash equivalents at end of period

$
688

$
187

$
1,310

$
(62
)

$
2,123

We have reviewed the accompanying condensed consolidated balance sheet of FedEx Corporation (the Company) as of November 30, ~~2019,~~2020, the related condensed consolidated statements of income, comprehensive income and changes in common stockholders’ investment for the ~~three-month~~three- and six-month periods ended November 30, 2020 and 2019, ~~and 2018,~~ the ~~related~~ condensed consolidated statements of cash flows for the six-month periods ended November 30, ~~2019~~2020 and ~~2018,~~2019, 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,~~2020, 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,~~20, 2020, 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,~~2020, 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~~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~~2020 (“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~~collaboratively and ~~managed collaboratively,~~innovating digitally, 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 the “Reportable Segments” section of this MD&A 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~~revenue 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~~revenue and volumes. The line item “Other operating expense” includes costs associated with outside service contracts (such as facility services and cargo handling, temporary labor and security), insurance, uniforms and professional ~~fees and uniforms.~~fees.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, ~~2020~~2021 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 (loss) (dollars in millions, except per share amounts) for the periods ended November 30:

	Three Months Ended						Percent				Six Months Ended						Percent				Three Months Ended						Percent				Six Months Ended						Percent
	2019			2018			Change				2019			2018			Change				2020			2019			Change				2020			2019			Change
Revenues	$	17,324		$	17,824			(3	)		$	34,372		$	34,876			(1	)
Revenue																					$	20,563		$	17,324			19			$	39,884		$	34,372			16
Operating income (loss):
FedEx Express segment		236			630			(63	)			521			1,018			(49	)			900			236			281				1,610			521			209
FedEx Ground segment		342			590			(42	)			986			1,266			(22	)			552			342			61				1,386			986			41
FedEx Freight segment		141			148			(5	)			335			324			3				252			141			79				526			335			57
Corporate, other and eliminations		(165	)		(200	)		18				(311	)		(369	)		16				(239	)		(165	)		(45	)			(467	)		(311	)		(50	)
Consolidated operating income		554			1,168			(53	)			1,531			2,239			(32	)			1,465			554			164				3,055			1,531			100
Operating margin:
FedEx Express segment		2.6	%		6.6	%		(400	)	bp		2.9	%		5.4	%		(250	)	bp		8.7	%		2.6	%		610		bp		8.0	%		2.9	%		510		bp
FedEx Ground segment		6.4	%		11.5	%		(510	)	bp		9.4	%		12.7	%		(330	)	bp		7.5	%		6.4	%		110		bp		9.6	%		9.4	%		20		bp
FedEx Freight segment		7.6	%		7.7	%		(10	)	bp		8.9	%		8.4	%		50		bp		13.0	%		7.6	%		540		bp		14.0	%		8.9	%		510		bp
Consolidated operating margin		3.2	%		6.6	%		(340	)	bp		4.5	%		6.4	%		(190	)	bp		7.1	%		3.2	%		390		bp		7.7	%		4.5	%		320		bp
Consolidated net income	$	560		$	935			(40	)		$	1,305		$	1,770			(26	)		$	1,226		$	560			119			$	2,471		$	1,305			89
Diluted earnings per share	$	2.13		$	3.51			(39	)		$	4.97		$	6.60			(25	)		$	4.55		$	2.13			114			$	9.26		$	4.97			86

	Change in Revenue						Change in Operating Income (Loss)						Change in Revenue						Change in Operating Income (Loss)
	Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended
FedEx Express segment	$	(520	)	$	(797	)	$	(394	)	$	(497	)	$	1,284		$	1,986		$	664		$	1,089
FedEx Ground segment		173			553			(248	)		(280	)		2,029			3,890			210			400
FedEx Freight segment		(74	)		(128	)		(7	)		11			92			13			111			191
FedEx Services segment		1			(4	)		—			—			3			7			—			—
Corporate, other and eliminations		(80	)		(128	)		35			58			(169	)		(384	)		(74	)		(156	)
	$	(500	)	$	(504	)	$	(614	)	$	(708	)	$	3,239		$	5,512		$	911		$	1,524

~~Consolidated~~Elevated demand for our residential delivery services, resulting from the ongoing impact of the coronavirus (“COVID-19”) pandemic, continued during the second quarter of 2021. In addition, demand for our business-to-business delivery services strengthened relative to the first quarter of 2021 as COVID-19-related restrictions moderated globally during the second quarter. As a result, our revenue and operating income ~~declined~~improved during the second quarter and first half of 2021. We continued to incur increased operating expenses to support elevated levels of demand for our services in the COVID-19 pandemic environment, including additional labor expenses, costs of operating our seven-day network at FedEx Ground and costs of operating our air network to support higher demand in key international supply chains impacted by constrained commercial air capacity. We also incurred increased operating expenses related to personal protective equipment and medical/safety supplies, as well as additional security and cleaning services, in order to protect our team members and customers during the COVID-19 pandemic, of approximately $50 million in the second quarter and $150 million in the first half of 2021. In addition, we incurred costs associated with network contingencies, including additional personnel to support operations through the peak season during the pandemic.

Our consolidated operating income improved during both the second quarter and first half of ~~2020 primarily~~2021 due to ~~weaker global economic conditions,~~international export and U.S. domestic package volume growth at FedEx Express, residential volume growth at FedEx Ground and pricing initiatives across all of our transportation segments. Higher purchased transportation expenses at FedEx Ground are also driven by increased ~~costs to expand services,~~residential product mix in both the second quarter and first half of 2021. Additionally, higher variable incentive compensation expense negatively impacted year-over-year second quarter comparisons by approximately $215 million and first half comparisons by approximately $410 million.

The loss of business from a large customer ~~and the later timing of the Thanksgiving holiday, which shifted Cyber Week into December.~~ ~~Continued mix shift to lower-yielding services and an increased competitive pricing environment~~ negatively impacted ~~our results~~earnings in 2020. In addition, 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~~Express. See Note 1 of the accompanying unaudited condensed consolidated financial statements for ~~more information).~~additional 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 the second quarter and $365 million in the first half of 2020. Our first half 2020 results were negatively impacted by approximately $100 million due to one fewer operating day.

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 carryforwards. See the “Income Taxes” section below for more information.

We incurred ~~TNT Express~~ integration expenses totaling ~~$64~~$48 million ($5036 million, net of tax, or ~~$0.19~~$0.13 per diluted share) in the second quarter and ~~$135~~$97 million ($~~105~~74 million, net of tax, or ~~$0.40~~$0.28 per diluted share) in the first half of ~~2020,~~2021, a ~~$50~~$16 million decrease from the second quarter and a ~~$100~~$38 million decrease from the first half of ~~2019.~~2020. 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.~~expenses. 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.

Consolidated net income in the second quarter and first half of 2021 includes a pre-tax, noncash mark-to-market (“MTM”) net loss of $52 million ($41 million, net of tax, or $0.15 per diluted share) associated with freezing our TNT Express Netherlands Pension Plan. See the “Retirement Plan MTM Adjustment” section of this MD&A and Note 7 of the accompanying unaudited condensed consolidated financial statements for additional information.

The comparison of net income between 2021 and 2020 is affected by a tax benefit of $191 million ($0.71 per diluted share) recognized during the second quarter of 2021, primarily attributable to guidance issued by the Internal Revenue Service (“IRS”) during the quarter, and a tax benefit of $133 million ($0.51 per diluted share) from the reduction of a valuation allowance recognized during the second quarter and first half of 2020. See the “Income Taxes” section of this MD&A for further information.

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 decreased 3%~~Revenue increased 19% in the second quarter and 1%16% in the first half of ~~2020~~2021 primarily due to volume growth in residential delivery services at FedEx Ground and U.S. domestic package volume growth at FedEx Express, both reflecting increased e-commerce demand resulting from the ~~loss~~ongoing impact of ~~business from a large customer, macroeconomic weakness~~the COVID-19 pandemic. In addition, demand for our business-to-business delivery services strengthened relative to the first quarter of 2021 as COVID-19-related restrictions moderated globally during the second quarter. International export package volume growth at FedEx Express and pricing initiatives across all of our transportation segments also contributed to the increase in revenue during the second quarter and first half of 2021. Additionally, one additional operating day at all of our transportation segments positively impacted revenue in the first half of 2021. These positive factors were partially offset by lower fuel surcharges at all of our transportation segments partially offset by residential delivery volume growth at FedEx 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, negatively impacted revenue comparisons during both the second quarter and first half of ~~2020.~~2021.

At FedEx ~~Freight revenues decreased 4%~~Ground, revenue increased 38% in the second quarter and 3%37% in the first half of ~~2020~~2021 primarily due to residential delivery volume growth. This sharp increase in demand is the result of a shift in consumer shopping patterns accelerated by the COVID-19 pandemic. Revenue at FedEx Express increased 14% in the second quarter and 11% in the first half of 2021 due to international export and U.S. domestic package volume growth. FedEx Freight revenue increased 5% in the second quarter of 2021 primarily due to higher revenue per shipment. Revenue at FedEx Freight remained flat in the first half of 2021 due to higher revenue per shipment, partially offset by decreased average daily ~~shipments, partially offset by higher revenue per shipment.~~shipments.

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

	Three Months Ended				Percent			Six Months Ended				Percent			Three Months Ended				Percent			Six Months Ended				Percent
	2019		2018		Change			2019		2018		Change			2020		2019		Change			2020		2019		Change
Operating expenses:
Salaries and employee benefits	$	6,235	$	6,260		—		$	12,322	$	12,520		(2	)	$	7,443	$	6,235		19		$	14,295	$	12,322		16
Purchased transportation		4,328		4,346		—			8,356		8,313		1			5,407		4,328		25			10,384		8,356		24
Rentals and landing fees		924		836		11			1,844		1,659		11			1,006		924		9			1,942		1,844		5
Depreciation and amortization		901		828		9			1,780		1,636		9			936		901		4			1,862		1,780		5
Fuel		890		1,052		(15	)		1,760		2,038		(14	)		625		890		(30	)		1,190		1,760		(32	)
Maintenance and repairs		774		751		3			1,542		1,486		4			815		774		5			1,621		1,542		5
Asset impairment charges		66		—	NM				66		—	NM				—		66	NM				—		66	NM
Other		2,652		2,583		3			5,171		4,985		4			2,866		2,652		8			5,535		5,171		7
Total operating expenses		16,770		16,656		1			32,841		32,637		1			19,098		16,770		14			36,829		32,841		12
Operating income	$	554	$	1,168		(53	)	$	1,531	$	2,239		(32	)	$	1,465	$	554		164		$	3,055	$	1,531		100

	Percent of Revenue												Percent of Revenue
	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2020			2019			2020			2019
Operating expenses:
Salaries and employee benefits		36.0	%		35.1	%		35.8	%		35.9	%		36.2	%		36.0	%		35.8	%		35.8	%
Purchased transportation		25.0			24.4			24.3			23.8			26.3			25.0			26.0			24.3
Rentals and landing fees		5.3			4.7			5.4			4.8			4.9			5.3			4.9			5.4
Depreciation and amortization		5.2			4.6			5.2			4.7			4.6			5.2			4.7			5.2
Fuel		5.1			5.9			5.1			5.8			3.0			5.1			3.0			5.1
Maintenance and repairs		4.5			4.2			4.5			4.3			4.0			4.5			4.0			4.5
Asset impairment charges		0.4			—			0.2			—			—			0.4			—			0.2
Other		15.3			14.5			15.0			14.3			13.9			15.3			13.9			15.0
Total operating expenses		96.8			93.4			95.5			93.6			92.9			96.8			92.3			95.5
Operating margin		3.2	%		6.6	%		4.5	%		6.4	%		7.1	%		3.2	%		7.7	%		4.5	%

~~Our results declined~~Volume growth, as discussed in the “Revenue” section of this MD&A, contributed to a 25% increase in purchased transportation costs in the second quarter and ~~first half of 2020 primarily due to 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~~ 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 one fewer operating day at all of our transportation segments24% increase in the first half of ~~2020. These items were partially offset by lower variable incentive compensation expenses~~2021, as well as an increase in salaries and increased yields at FedEx 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 related engines at FedEx Express (see “Asset Impairment Charges” below for more information).

~~The adoption of the new lease accounting standard during the second quarter and first half of 2020 resulted in a reclassification from other operating expense to rentals and landing fees~~employee benefits expense of ~~$44 million~~19% in the second quarter and ~~$91 million~~16% in the first half of ~~2020 and maintenance and repairs expense to rentals and landing fees expense of $10 million in the second quarter and $22 million in the first half of 2020. These amounts~~2021. Purchased transportation costs 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.

~~Other operating expense increased 3% in the second quarter and 4% in the first half of 2020 primarily due to~~also higher self-insurance accruals at FedEx Ground and higher outside service 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 half of ~~2020 primarily due to continued strategic investment programs~~2021 driven by increased residential product mix at ~~all of our transportation segments. Maintenance~~FedEx Ground. In addition, salaries and ~~repairs~~employee benefits expense increased 4% in both the second quarter and first half of ~~2020 primarily~~2021 due to higher ~~aircraft maintenance~~variable incentive compensation 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 1% in the first half of 2020 primarily due to increased contractor settlement rates and higher volumes at FedEx Ground, including expanding to six-day-per-week operations year-round in January 2019. These items were partially offset by favorable exchange rates at FedEx Express, lower utilization of third-party transportation providers at FedEx Freight and FedEx Express and decreased fuel costs at FedEx Ground and FedEx Freight.merit increases.

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 ~~15%~~30% in the second quarter and ~~14%~~32% in the first half of ~~2020 primarily~~2021 due to ~~decreased~~lower fuel prices. ~~However, fuel~~Fuel prices represent only one component of the factors we consider meaningful in understanding the impact of fuel on our business. Consideration must also be given to the fuel surcharge revenue we collect. Accordingly, we believe discussion of the net impact of fuel on our results, which is a comparison of the year-over-year change in these two factors, is important to understand the impact of fuel on our business. In order to provide information about the impact of fuel surcharges on the trend in revenue and yield growth, we have included the comparative weighted-average fuel surcharge percentages in effect for the second quarters of ~~2020~~2021 and ~~2019~~2020 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 slightly negative impact to operating income in the second quarter and first half of 2020 as lower fuel surcharges more than offset decreased fuel 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~~below and for each segment below excludes the impact from these table changes.

The net impact of fuel ~~on our~~had a slight benefit to operating ~~results does not consider the effects that fuel surcharge levels may have on our business, including changes in demand and shifts~~income in the ~~mix~~second quarter and first half of ~~services purchased by our customers. In addition, our purchased transportation expense may be impacted by~~2021 as decreased fuel ~~costs. While fluctuations in~~prices outpaced lower 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.surcharges.

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~~quarter of 2020.

We incurred a pre-tax, noncash MTM net loss of $52 million ($41 million, net of tax, or $0.15 per diluted share) in the second quarter of 2021 related to amendments to the TNT Express Netherlands Pension Plan. Benefits for approximately 2,100 employees will be frozen effective December 31, 2020. Effective January 1, 2021, these ~~aircraft were temporarily idled.~~employees will begin earning pension benefits under a separate, multi-employer pension plan. See Note 7 of the accompanying unaudited condensed consolidated financial statements for additional information.

Our effective tax rate was 12.8% for the second quarter and 18.0% for the first half of 2021, compared to 2.1% for the second quarter and 16.8% for the first half of 2020. The 2021 tax rates include a benefit of $191 million from an increase in our 2020 ~~compared~~tax loss that the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) will allow to be carried back to 2015, when the U.S. federal income tax rate was 35%. The increase in our estimated 2020 tax loss is attributable to our Application for Change in Accounting Method filed with ~~20.6%~~the IRS during the fourth quarter of 2020 discussed below and other accelerated deductions to be claimed on the 2020 tax return. The 2020 tax rates included a $133 million benefit from a valuation allowance reduction which, when combined with substantially lower consolidated earnings, produced a significantly lower rate for the second quarter of 2020 compared to the second quarter of 2021.

We filed an application with the IRS in 2020 requesting approval to change our accounting method for depreciation to allow retroactive application of tax regulations issued during 2020 on certain assets placed in service during 2018 and ~~22.3%~~2019. During the second quarter of 2021, the IRS issued guidance granting automatic approval to change the method of accounting for these assets resulting in an income tax benefit of $130 million 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 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.second quarter.

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”)~~IRS for the 2016 and 2017 tax years. In addition, during the second quarter of 2020, we reached an agreement in principle with the 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.

During the second quarter of 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit seeks to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $233 million through 2019 attributable to our interpretation of the TCJA and the Internal Revenue Code. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

On December 2, 2020, we agreed to acquire ShopRunner, Inc. (“ShopRunner”), an e-commerce platform that directly connects brands and merchants with online shoppers. The cost of the acquisition will not be material and will be funded with cash from operations. This acquisition is expected to be completed in December 2020, subject to customary conditions, including regulatory approval. The financial results of ShopRunner will be included in “Corporate, other and eliminations” from the date of acquisition and are not expected to be material to our results of operations in 2021.

We ~~expect continued weak macroeconomic conditions to result~~anticipate the continuing impacts of the COVID-19 pandemic will drive increased demand for our FedEx Ground and FedEx Express services in ~~lower~~the second half of the fiscal year resulting in improved year-over-year revenue ~~growth~~and operating income at those two segments for the remainder of ~~2020 at our transportation segments.~~2021. In addition, ~~a more competitive pricing environment~~yield management and ~~higher operating costs at FedEx Ground are~~improved productivity is anticipated to contribute to revenue and operating income ~~declines~~growth at the FedEx Freight segment in 2021. However, the uncertainty concerning the COVID-19 pandemic, as well as the potential for additional government-related restrictions, continues to make any expectations for the second half of 2021 inherently less certain. If our current trends continue, we expect certain expenses, including higher variable incentive compensation accruals, rising labor costs and increased supply and other costs related to the COVID-19 pandemic, to continue to be incurred during the remainder of 2021. We also expect headwinds related to the December 31, 2020 expiration of the aviation excise tax holiday created by the CARES Act and a higher effective income tax rate for the second half of 2021.

Government travel warnings as well as existing restrictions related to the COVID-19 pandemic are expected to continue to impact the demand for commercial air travel, thereby reducing available air freight capacity. As a result of these ongoing capacity constraints, we expect continued strong demand for international priority shipments for the remainder of ~~2020.~~2021 to necessitate increased usage of our assets to support demand in key international supply chains. In addition, we anticipate a modest increase in volumes from the delivery of COVID-19 vaccines. We will continue managing network capacity, flexing our network and making adjustments as needed to align with volumes and operating conditions.

In response to current business conditions, we are extending certain surcharges beyond the peak shipping period, although at a reduced rate. These surcharges will begin on January 18, 2021 and may be adjusted in future periods as business or market conditions evolve.

We ~~anticipate that continued trade tensions, softness in European~~have expanded FedEx Ground seven-day residential delivery coverage to nearly 95 percent of the U.S. population and ~~Asia Pacific markets and declines in industrial production~~ will continue to ~~negatively impact~~optimize our ~~results for~~network capacity to meet evolving customer needs. During the remainder of ~~2020. Our international operations are much more sensitive to changes in global trade than our~~2021, we will focus on last-mile residential delivery optimization, including by directing certain 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. 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~~day-definite residential FedEx Express ~~network and permanently expanding our~~shipments into the FedEx Ground network ~~operations~~ to seven days per week year-round, combined with 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 pressuringincrease efficiency and lower 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 have made adjustments to our FedEx Express U.S. domestic air network to better match capacity with demand, as discussed in the “Asset Impairment Charges” section above. Throughout the remainder of 2020, we will make further network capacity changes at FedEx Express by reducing international flight hours. If global economic conditions deteriorate further, we may take additional actions to reduce the size of our FedEx Express network.

~~At FedEx Ground, we~~cost-to-serve. We also are focused on improving revenue quality and lowering costs through ~~rate increases that will go into effect in January and through surcharges on oversized and additional handling shipments. We are also making investments in~~advanced technology aimed at improving productivity and ~~lowering costs.~~safety.

~~For the remainder of 2020, we will continue~~We are continuing 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. In addition, we continuescheduled to focus on integrating the 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. By the end of 2020, we expect European ground network interoperability to be substantially completed. The next key integration milestones include completingcomplete the integration of the FedEx Express and TNT Express linehaul and pickup-and-delivery operations and ~~completing a single~~begin offering an enhanced portfolio of international services ~~during~~in 2021. We will leverage the capabilities that TNT Express adds to our portfolio, which are expected to improve our European revenue and profitability, which continue to underperform our expectations for that market. We expect to complete the final phase of international air network interoperability ~~during the first half of~~in early calendar 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 ~~$200~~$80 million of integration expenses in the remainder of ~~2020~~2021 in the form of professional fees, outside service contracts, salaries and wages and other operating ~~expense.~~expenses. We expect the aggregate integration program expenses ~~including restructuring charges at TNT Express,~~ to be ~~approximately~~ $1.7 billion through ~~2021,~~the completion of the physical network integration of TNT Express into FedEx Express in 2022.

As we approach the completion of the physical network integration of TNT Express in 2022, we are evaluating opportunities and ~~we may incur additional costs, including investments that will further~~pursuing initiatives in addition to the integration to continue to transform and optimize the ~~combined businesses. The timing~~FedEx Express international business, particularly in Europe. These actions are focused on reducing the complexity and ~~amount~~fragmentation of ~~integration expenses~~our international business, improving efficiency to meet changing customer expectations and business dynamics, lowering costs, increasing profitability and improving service levels. We expect to incur additional costs, over multiple years, which may be material, including transformation costs and capital investments ~~in any future period may change as we revise and implement our plans.~~related to these actions.

Our expectations for the remainder of ~~2020~~2021 are dependent on key external factors, including ~~moderate U.S.~~no further weakening of global economic ~~growth,~~conditions or additional shut-downs related to the COVID-19 pandemic, 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~~2021 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~~revenue or estimated services provided.

Also, the results of the FedEx Logistics, Inc. (“FedEx Logistics”) and FedEx Office and Print Services, Inc. (“FedEx Office”) operating segments are included in corporate and ~~other is the~~other. 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~~businesses. 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.

In the second quarter and first half of 2021, the decrease in revenue in “Corporate, other and eliminations” was due to a significant decline in non-shipping revenue at FedEx Office resulting from the COVID-19 pandemic. The transfer of FedEx Custom Critical and FedEx Cross Border into the FedEx Express segment contributed to the decrease in revenue in the second quarter and first half of 2021.

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable ~~segment.~~segment in order to optimize our resources. For example, during the second quarter and first half of 2021, FedEx Freight provided road and intermodal support for both FedEx Ground and FedEx Express and FedEx Ground provided delivery support for certain FedEx Express packages as part of our last-mile optimization efforts. Billings for such services are based on negotiated rates, which we believe approximate fair value, and are reflected as ~~revenues~~revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment ~~revenues~~revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

FedEx Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight including priority, deferred and economy services, which provide delivery on a time-definite or day-definite basis. The following tables compare ~~revenues,~~revenue, operating expenses, operating income (dollars in millions), operating margin and operating expenses as a percent of revenue for the periods ended November 30:

	Three Months Ended						Percent				Six Months Ended						Percent				Three Months Ended						Percent				Six Months Ended						Percent
	2019			2018			Change				2019			2018			Change				2020			2019			Change				2020			2019			Change
Revenues:
Revenue:
Package:
U.S. overnight box	$	1,864		$	1,948			(4	)		$	3,730		$	3,834			(3	)		$	2,012		$	1,864			8			$	3,873		$	3,730			4
U.S. overnight envelope		457			444			3				936			912			3				435			457			(5	)			861			936			(8	)
U.S. deferred		980			1,060			(8	)			1,936			2,012			(4	)			1,204			980			23				2,300			1,936			19
Total U.S. domestic package revenue		3,301			3,452			(4	)			6,602			6,758			(2	)			3,651			3,301			11				7,034			6,602			7
International priority		1,817			1,896			(4	)			3,634			3,770			(4	)			2,510			1,817			38				4,827			3,634			33
International economy		873			885			(1	)			1,728			1,735			—				658			873			(25	)			1,274			1,728			(26	)
Total international export package revenue		2,690			2,781			(3	)			5,362			5,505			(3	)			3,168			2,690			18				6,101			5,362			14
International domestic⁽¹⁾		1,165			1,203			(3	)			2,241			2,334			(4	)			1,206			1,165			4				2,294			2,241			2
Total package revenue		7,156			7,436			(4	)			14,205			14,597			(3	)			8,025			7,156			12				15,429			14,205			9
Freight:
U.S.		698			792			(12	)			1,393			1,522			(8	)			799			698			14				1,632			1,393			17
International priority		473			564			(16	)			937			1,097			(15	)			737			473			56				1,390			937			48
International economy		541			554			(2	)			1,057			1,073			(1	)			408			541			(25	)			779			1,057			(26	)
International airfreight		70			83			(16	)			136			168			(19	)			65			70			(7	)			140			136			3
Total freight revenue		1,782			1,993			(11	)			3,523			3,860			(9	)			2,009			1,782			13				3,941			3,523			12
Other(2)		146			175			(17	)			301			369			(18	)			334			146			129				645			301			114
Total revenues		9,084			9,604			(5	)			18,029			18,826			(4	)
Total revenue																						10,368			9,084			14				20,015			18,029			11
Operating expenses:
Salaries and employee benefits		3,405			3,441			(1	)			6,777			6,914			(2	)			3,922			3,405			15				7,664			6,777			13
Purchased transportation		1,267			1,354			(6	)			2,499			2,661			(6	)			1,449			1,267			14				2,753			2,499			10
Rentals and landing fees		505			474			7				1,018			944			8				542			505			7				1,046			1,018			3
Depreciation and amortization		469			449			4				931			885			5				482			469			3				959			931			3
Fuel		754			899			(16	)			1,497			1,744			(14	)			529			754			(30	)			1,025			1,497			(32	)
Maintenance and repairs		514			514			—				1,031			1,016			1				542			514			5				1,093			1,031			6
Asset impairment charges		66			—		NM					66			—		NM					—			66		NM					—			66		NM
Intercompany charges		500			517			(3	)			969			1,035			(6	)			486			500			(3	)			947			969			(2	)
Other		1,368			1,326			3				2,720			2,609			4				1,516			1,368			11				2,918			2,720			7
Total operating expenses		8,848			8,974			(1	)			17,508			17,808			(2	)			9,468			8,848			7				18,405			17,508			5
Operating income	$	236		$	630			(63	)		$	521		$	1,018			(49	)		$	900		$	236			281			$	1,610		$	521			209
Operating margin		2.6	%		6.6	%		(400	)	bp		2.9	%		5.4	%		(250	)	bp		8.7	%		2.6	%		610		bp		8.0	%		2.9	%		510		bp

	Percent of Revenue												Percent of Revenue
	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2020			2019			2020			2019
Operating expenses:
Salaries and employee benefits		37.5	%		35.8	%		37.6	%		36.7	%		37.8	%		37.5	%		38.3	%		37.6	%
Purchased transportation		13.9			14.1			13.9			14.1			14.0			13.9			13.8			13.9
Rentals and landing fees		5.6			4.9			5.6			5.0			5.2			5.6			5.2			5.6
Depreciation and amortization		5.2			4.7			5.1			4.7			4.7			5.2			4.8			5.1
Fuel		8.3			9.4			8.3			9.3			5.1			8.3			5.1			8.3
Maintenance and repairs		5.6			5.3			5.7			5.4			5.2			5.6			5.5			5.7
Asset impairment charges		0.7			—			0.4			—			—			0.7			—			0.4
Intercompany charges		5.5			5.4			5.4			5.5			4.7			5.5			4.7			5.4
Other		15.1			13.8			15.1			13.9			14.6			15.1			14.6			15.1
Total operating expenses		97.4			93.4			97.1			94.6			91.3			97.4			92.0			97.1
Operating margin		2.6	%		6.6	%		2.9	%		5.4	%		8.7	%		2.6	%		8.0	%		2.9	%

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

	Three Months Ended				Percent				Six Months Ended				Percent			Three Months Ended				Percent			Six Months Ended				Percent
	2019		2018		Change				2019		2018		Change			2020		2019		Change			2020		2019		Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box		1,244		1,308		(5	)			1,231		1,269		(3	)		1,453		1,244		17			1,369		1,231		11
U.S. overnight envelope		547		532		3				554		541		2			512		547		(6	)		497		554		(10	)
U.S. deferred		1,012		1,082		(6	)			994		998		—			1,339		1,012		32			1,272		994		28
Total U.S. domestic ADV		2,803		2,922		(4	)			2,779		2,808		(1	)		3,304		2,803		18			3,138		2,779		13
International priority		565		555		2				548		540		1			748		565		32			722		548		32
International economy		315		302		4				304		289		5			296		315		(6	)		277		304		(9	)
Total international export ADV		880		857		3				852		829		3			1,044		880		19			999		852		17
International domestic⁽¹⁾		2,669		2,670		—				2,509		2,530		(1	)		2,635		2,669		(1	)		2,464		2,509		(2	)
Total ADV		6,352		6,449		(2	)			6,140		6,167		—			6,983		6,352		10			6,601		6,140		8
Revenue per package (yield):
U.S. overnight box	$	23.78	$	23.63		1			$	23.86	$	23.60		1		$	21.98	$	23.78		(8	)	$	22.10	$	23.86		(7	)
U.S. overnight envelope		13.26		13.24		—				13.29		13.16		1			13.50		13.26		2			13.53		13.29		2
U.S. deferred		15.39		15.54		(1	)			15.34		15.75		(3	)		14.27		15.39		(7	)		14.12		15.34		(8	)
U.S. domestic composite		18.70		18.75		—				18.71		18.80		—			17.54		18.70		(6	)		17.51		18.71		(6	)
International priority		51.03		54.25		(6	)			52.25		54.52		(4	)		53.26		51.03		4			52.24		52.25		—
International economy		43.94		46.45		(5	)			44.71		46.92		(5	)		35.29		43.94		(20	)		35.84		44.71		(20	)
International export composite		48.49		51.50		(6	)			49.55		51.87		(4	)		48.17		48.49		(1	)		47.69		49.55		(4	)
International domestic⁽¹⁾		6.92		7.15		(3	)			7.03		7.21		(2	)		7.27		6.92		5			7.27		7.03		3
Composite package yield	$	17.88	$	18.30		(2	)		$	18.21	$	18.49		(2	)	$	18.24	$	17.88		2		$	18.26	$	18.21		—
Freight Statistics
Average daily freight pounds:
U.S.		8,364		8,917		(6	)			8,188		8,608		(5	)		9,511		8,364		14			9,175		8,188		12
International priority		5,230		5,684		(8	)			5,010		5,469		(8	)		6,234		5,230		19			5,862		5,010		17
International economy		15,241		15,373		(1	)			14,473		14,401		—			13,560		15,241		(11	)		12,581		14,473		(13	)
International airfreight		1,726		1,759		(2	)			1,640		1,738		(6	)		1,605		1,726		(7	)		1,590		1,640		(3	)
Total average daily freight pounds		30,561		31,733		(4	)	��		29,311		30,216		(3	)		30,910		30,561		1			29,208		29,311		—
Revenue per pound (yield):
U.S.	$	1.32	$	1.41		(6	)		$	1.34	$	1.38		(3	)	$	1.33	$	1.32		1		$	1.39	$	1.34		4
International priority		1.43		1.57		(9	)			1.47		1.57		(6	)		1.88		1.43		31			1.85		1.47		26
International economy		0.56		0.57		(2	)			0.57		0.58		(2	)		0.48		0.56		(14	)		0.48		0.57		(16	)
International airfreight		0.65		0.75		(13	)			0.65		0.75		(13	)		0.64		0.65		(2	)		0.69		0.65		6
Composite freight yield	$	0.93	$	1.00		(7	)		$	0.95	$	1.00		(5	)	$	1.03	$	0.93		11		$	1.05	$	0.95		11

FedEx Express segment ~~revenues decreased 5%~~revenue increased 14% in the second quarter and 11% in the first half of 2021 due to international export and U.S. domestic package volume growth, partially offset by lower fuel surcharges. The demand for our U.S. domestic residential service offerings continued to accelerate during the second quarter of 2021 due to the COVID-19 pandemic. Revenue was also positively impacted by pricing initiatives resulting from global air freight capacity constraints in the second quarter and first half of 2021 and one additional operating day in the first half of 2021. FedEx Express segment revenue includes a benefit from a reduction in aviation excise taxes on cargo provided by the CARES Act in the second quarter and first half of 2021.

International export package average daily volumes increased 19% in the second quarter and 17% in the first half of 2021 led by volume growth from Asia-Pacific and Europe. International export package yields decreased 4% in the first half of ~~2020~~2021 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~~base yield declines driven by lower weight per package, partially offset by favorable exchange ~~rates. In addition, one fewer operating day contributed to~~rates and pricing initiatives resulting from global air freight capacity constraints. U.S. domestic package average daily volumes increased 18% in the ~~decline~~second quarter and 13% in the first half of ~~2020.~~

~~Freight yields decreased 7%~~2021 driven by growth in deferred service offerings, reflecting increased e-commerce demand resulting from the second quarter and 5% in the first half of 2020 primarily due to base yield declines, lower fuel surcharges and unfavorable exchange rates. Average daily freight pounds decreased 4% in the second quarter and 3% in the first half of 2020 primarily due to lower volume in freight services as a result of macroeconomic weakness and trade uncertainty.COVID-19 pandemic. U.S. domestic package yields ~~remained flat~~decreased 6% in both the second quarter and first half of ~~2020 as~~2021 due to decreased base ~~rate improvement was offset~~yields driven by lower weight per package, ~~weights and~~as well as lower fuel surcharges. U.S. domestic package average daily volumes decreased 4% in the second quarter and 1% in the first half of 2020 driven by the loss of business from a large customer, partially offset by growth in overnight and deferred volume from other customers. International export packageComposite freight yields decreased 6% in the second quarter and 4% in the first half of 2020 driven by base yield declines, lower fuel surcharges and unfavorable exchange rates. International export package average daily volumes increased 3%11% in both the second quarter and first half of ~~2020 led~~2021 primarily due to improved base yields, partially offset by volume growth in Europe. However, international package volume growth has slowed across most regions as a result of macroeconomic weakness and trade uncertainty. International domestic package yields decreased 3%lower fuel surcharges. Other revenue increased 129% in the second quarter and 2%114% in the first half of 2020 as base yield improvement was more than offset by unfavorable exchange rates. International domestic package average daily volumes remained flat in the second quarter and decreased 1% in the first half of 2020 primarily2021 due to ~~targeted yield management actions.~~the transfer of FedEx Custom Critical and FedEx Cross Border into the FedEx Express segment.

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

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2020			2019			2020			2019
U.S. Domestic and Outbound Fuel Surcharge:
Low		7.21	%		7.90	%		7.21	%		7.02	%		3.50	%		7.21	%		2.73	%		7.21	%
High		8.45			10.80			8.45			10.80			3.83			8.45			4.12			8.45
Weighted-average		7.53			8.60			7.54			7.87			3.64			7.53			3.54			7.54
International Export and Freight Fuel Surcharge:
Low		6.74			8.32			6.74			8.12			1.17			6.74			0.28			6.74
High		18.56			17.81			18.56			18.09			16.52			18.56			17.00			18.56
Weighted-average		15.64			14.87			15.59			14.74			10.67			15.64			10.49			15.59
International Domestic Fuel Surcharge:
Low		3.20			2.57			3.20			2.25			2.62			3.20			2.62			3.20
High		19.40			19.40			19.47			19.40			19.21			19.40			20.33			19.47
Weighted-average		7.29			6.07			7.39			5.88			5.91			7.29			5.92			7.39

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 63%~~increased 281% in the second quarter and ~~49%~~209% in the first half of ~~2020 primarily~~2021 due to ~~weaker global economic conditions~~international export and U.S. domestic package volume growth. FedEx Express segment operating results include approximately $70 million in the ~~loss~~second quarter and $135 million in the first half of ~~business~~2021 related to a benefit from a ~~large customer. In addition, continued mix shift to lower-yielding services and an increased competitive pricing environment negatively impacted our results during~~reduction in aviation excise taxes provided by the CARES Act. Results for the second quarter and first half of ~~2020. Operating income and operating margin~~2020 were negatively impacted by ~~one fewer operating day in the first half~~$66 million of ~~2020. During the second quarter of 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~~at FedEx Express. These factors were partially offset by higher variable incentive compensation ~~expenses benefited operating income comparisons by~~expense of approximately ~~$35~~$120 million in the second quarter and ~~$200~~$230 million in the first half of ~~2020.~~2021. In addition, we continued to incur increased operating expenses to support elevated levels of demand for our services in the COVID-19 pandemic environment in the second quarter and first half of 2021, including costs of operating our global network to support higher demand, which is partially impacted by constrained commercial air capacity.

FedEx Express segment results included ~~$49~~$43 million of ~~TNT Express~~ integration expenses in the second quarter and ~~$106~~$80 million of such expenses in the first half of ~~2020,~~2021, a ~~$50~~$6 million decrease from the second quarter and a ~~$95~~$26 million decrease from the first half of ~~2019.~~2020.

~~The lease standard reclassification discussed~~Salaries and employee benefits expense increased 15% in the ~~“Overview” section above is excluded from~~second quarter and 13% in the ~~following year-over-year~~first half of 2021 primarily due to staffing to support volume growth and higher variable incentive compensation expense. In addition, increased costs associated with network contingencies as a result of the COVID-19 pandemic contributed to the increase in salaries and employee benefits 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~~2021. Purchased transportation ~~providers. Other operating~~ expense increased 3%14% in the second quarter and 4%10% in the first half of ~~2020~~2021 primarily due to the transfer of FedEx Custom Critical and FedEx Cross Border into the FedEx Express segment. Other operating expense increased 11% in the second quarter and 7% in the first half of 2021 primarily due to higher outside service contract expense ~~including technology upgrades~~ and ~~regulatory~~bad debt expense. Additionally, higher operating supplies, partially offset by decreased travel, both driven by the COVID-19 pandemic, negatively impacted other operating expense in both the second quarter and ~~clearance cost increases. Salaries and employee benefits~~first half of 2021.

Fuel expense decreased 2%30% in the second quarter and 32% in the first half of ~~2020 primarily~~2021 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, partially offset by merit increases.~~

~~Fuel expense decreased 16% in the second quarter and 14% in the first half of 2020 due to decreased~~ fuel prices. The net impact of fuel had a slightly negative impact to operating income in the second quarter and first half of ~~2020~~2021 as lower fuel surcharges ~~more than offset~~outpaced 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.

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,~~revenue, operating expenses, operating income (dollars in millions), operating margin, selected package statistics (in thousands, except yield amounts) and operating expenses as a percent of revenue for the periods ended November 30:

	Three Months Ended						Percent				Six Months Ended						Percent				Three Months Ended						Percent			Six Months Ended						Percent
	2019			2018			Change				2019			2018			Change				2020			2019			Change			2020			2019			Change
Revenues	$	5,315		$	5,142			3			$	10,494		$	9,941			6
Revenue																					$	7,344		$	5,315			38		$	14,384		$	10,494			37
Operating expenses:
Salaries and employee benefits		971			891			9				1,842			1,696			9				1,557			971			60			2,831			1,842			54
Purchased transportation		2,561			2,342			9				4,864			4,404			10				3,488			2,561			36			6,779			4,864			39
Rentals		249			200			25				488			391			25				289			249			16			553			488			13
Depreciation and amortization		195			180			8				388			353			10				205			195			5			409			388			5
Fuel		4			4			—				7			7			—				5			4			25			9			7			29
Maintenance and repairs		98			84			17				185			161			15				124			98			27			231			185			25
Intercompany charges		394			390			1				769			778			(1	)			446			394			13			878			769			14
Other		501			461			9				965			885			9				678			501			35			1,308			965			36
Total operating expenses		4,973			4,552			9				9,508			8,675			10				6,792			4,973			37			12,998			9,508			37
Operating income	$	342		$	590			(42	)		$	986		$	1,266			(22	)		$	552		$	342			61		$	1,386		$	986			41
Operating margin		6.4	%		11.5	%		(510	)	bp		9.4	%		12.7	%		(330	)	bp		7.5	%		6.4	%		110	bp		9.6	%		9.4	%		20	bp
Average daily package volume		9,556			9,237			3				9,192			8,721			5				12,315			9,556			29			11,931			9,192			30
Revenue per package (yield)	$	8.80		$	8.81			—			$	8.96		$	8.88			1			$	9.42		$	8.80			7		$	9.38		$	8.96			5

	Percent of Revenue												Percent of Revenue
	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2020			2019			2020			2019
Operating expenses:
Salaries and employee benefits		18.3	%		17.3	%		17.6	%		17.1	%		21.2	%		18.3	%		19.7	%		17.6	%
Purchased transportation		48.2			45.5			46.3			44.3			47.5			48.2			47.1			46.3
Rentals		4.7			3.9			4.6			3.9			3.9			4.7			3.9			4.6
Depreciation and amortization		3.7			3.5			3.7			3.6			2.8			3.7			2.8			3.7
Fuel		0.1			0.1			0.1			0.1			0.1			0.1			0.1			0.1
Maintenance and repairs		1.8			1.6			1.8			1.6			1.7			1.8			1.6			1.8
Intercompany charges		7.4			7.6			7.3			7.8			6.1			7.4			6.1			7.3
Other		9.4			9.0			9.2			8.9			9.2			9.4			9.1			9.2
Total operating expenses		93.6			88.5			90.6			87.3			92.5			93.6			90.4			90.6
Operating margin		6.4	%		11.5	%		9.4	%		12.7	%		7.5	%		6.4	%		9.6	%		9.4	%

FedEx Ground segment ~~revenues~~revenue increased 3%38% in the second quarter and 37% in the first half of ~~2020~~2021 primarily due to residential delivery volume growth. ~~Revenues~~This sharp increase in demand resulted from a shift in consumer shopping patterns accelerated by the COVID-19 pandemic. In addition, we experienced increased ~~6% in~~demand for our business-to-business delivery services relative to the first ~~half~~quarter of ~~2020 due to residential delivery volume growth and increased yields, partially offset~~2021 as COVID-19-related restrictions moderated during the second quarter. Additionally, revenue was positively impacted by one fewer operating 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, negatively impacted revenue comparisons duringyield management in the second quarter and first half of ~~2020.~~2021 and one additional operating day in the first half of 2021.

Average daily volume increased 3%29% in the second quarter and 5%30% in the first half of ~~2020~~2021 primarily due to continued growth in residential services driven by e-commerce. FedEx Ground yields ~~remained flat~~increased 7% in the second quarter and 5% in the first half of ~~2020 as higher base yields were~~2021 primarily due to yield improvement actions, partially offset by lower fuel surcharges. ~~FedEx Ground yields increased 1% in the first half of 2020 primarily due to higher base 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 November 30:

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2020			2019			2020			2019
Low		6.75	%		6.25	%		6.75	%		6.25	%		5.50	%		6.75	%		5.50	%		6.75	%
High		7.00			7.75			7.25			7.75			5.75			7.00			5.75			7.25
Weighted-average		6.92			7.40			6.98			6.87			5.73			6.92			5.74			6.98

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 42%~~increased 61% in the second quarter and ~~22%~~41% in the first half of ~~2020~~2021 primarily due to ~~increased costs to expand services,~~residential delivery volume growth and yield improvement. These factors were partially offset by higher purchased transportation contractor settlement rates resulting from residential product mix, as well as additional labor expenses and 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 duringin the second quarter and first half of ~~2020. These items were partially offset by~~2021.

Purchased transportation expense increased 36% in the second quarter and 39% in the first half of 2021 due to higher volume and increased residential ~~delivery~~product mix. Salaries and employee benefits expense increased 60% in the second quarter and 54% in the first half of 2021 due to additional staffing to support volume growth, including costs associated with operating our seven-day network, merit increases and higher variable incentive compensation expense. In addition, increased costs associated with network contingencies as a result of the COVID-19 pandemic contributed to the increase in salaries and employee benefits expense in both the second quarter and first half of ~~2020, as well as~~2021. Other operating expense increased ~~base yields~~35% in the second quarter and 36% in the first half of ~~2020. Additionally, lower variable incentive compensation expenses benefited operating income comparisons by approximately $10 million in the second quarter and $60 million in the first 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 9% in the second quarter and 10% in the first 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 half of 20202021 primarily due to higher self-insurance accruals and ~~increased bad debt expense. Salaries and employee benefits expense increased 9% in both~~higher operating supplies driven by the second quarter and first half of 2020 due to additional staffing to support volume growth, including current and anticipated expansion of year-round operations, network expansion and merit increases, partially offset by lower variable incentive compensation expenses.COVID-19 pandemic.

The net impact of fuel had a ~~slightly negative impact~~moderate benefit 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~~and first half of ~~2020~~2021 as decreased fuel prices ~~more than offset~~outpaced 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.

~~During the second quarter of 2020, FedEx Ground completed the previously announced transition to the Independent Service Provider agreement throughout its entire U.S. pickup-and-delivery network.~~

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

	Three Months Ended						Percent				Six Months Ended						Percent				Three Months Ended						Percent				Six Months Ended						Percent
	2019			2018			Change				2019			2018			Change				2020			2019			Change				2020			2019			Change
Revenues	$	1,844		$	1,918			(4	)		$	3,749		$	3,877			(3	)
Revenue																					$	1,936		$	1,844			5			$	3,762		$	3,749			—
Operating expenses:
Salaries and employee benefits		900			919			(2	)			1,819			1,847			(2	)			915			900			2				1,773			1,819			(3	)
Purchased transportation		187			250			(25	)			374			509			(27	)			209			187			12				379			374			1
Rentals		52			42			24				104			84			24				59			52			13				115			104			11
Depreciation and amortization		97			76			28				191			154			24				105			97			8				211			191			10
Fuel		132			150			(12	)			255			287			(11	)			90			132			(32	)			155			255			(39	)
Maintenance and repairs		68			63			8				133			125			6				57			68			(16	)			110			133			(17	)
Intercompany charges		130			137			(5	)			256			275			(7	)			122			130			(6	)			241			256			(6	)
Other		137			133			3				282			272			4				127			137			(7	)			252			282			(11	)
Total operating expenses		1,703			1,770			(4	)			3,414			3,553			(4	)			1,684			1,703			(1	)			3,236			3,414			(5	)
Operating income	$	141		$	148			(5	)		$	335		$	324			3			$	252		$	141			79			$	526		$	335			57
Operating margin		7.6	%		7.7	%		(10	)	bp		8.9	%		8.4	%		50		bp		13.0	%		7.6	%		540		bp		14.0	%		8.9	%		510		bp
Average daily shipments (in thousands):
Priority		77.4			81.7			(5	)			78.0			81.4			(4	)			78.1			77.4			1				74.6			78.0			(4	)
Economy		32.6			35.4			(8	)			32.7			35.0			(7	)			32.9			32.6			1				31.5			32.7			(4	)
Total average daily shipments		110.0			117.1			(6	)			110.7			116.4			(5	)			111.0			110.0			1				106.1			110.7			(4	)
Weight per shipment (lbs):
Priority		1,139			1,203			(5	)			1,147			1,211			(5	)			1,106			1,139			(3	)			1,101			1,147			(4	)
Economy		983			1,043			(6	)			971			1,026			(5	)			1,015			983			3				1,006			971			4
Composite weight per shipment		1,092			1,155			(5	)			1,095			1,155			(5	)			1,079			1,092			(1	)			1,073			1,095			(2	)
Revenue per shipment:
Priority	$	258.90		$	249.76			4			$	257.14		$	248.24			4			$	264.05		$	258.90			2			$	262.02		$	257.14			2
Economy		295.29			297.73			(1	)			295.53			295.00			—				313.35			295.29			6				308.15			295.53			4
Composite revenue per shipment	$	270.38		$	264.27			2			$	268.83		$	262.29			2			$	278.66		$	270.38			3			$	275.71		$	268.83			3
Revenue per hundredweight:
Priority	$	22.74		$	20.76			10			$	22.41		$	20.50			9			$	23.86		$	22.74			5			$	23.79		$	22.41			6
Economy		30.05			28.55			5				30.43			28.76			6				30.88			30.05			3				30.62			30.43			1
Composite revenue per hundredweight	$	24.75		$	22.89			8			$	24.54		$	22.71			8			$	25.82		$	24.75			4			$	25.69		$	24.54			5

	Percent of Revenue												Percent of Revenue
	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2020			2019			2020			2019
Operating expenses:
Salaries and employee benefits		48.8	%		47.9	%		48.5	%		47.6	%		47.3	%		48.8	%		47.1	%		48.5	%
Purchased transportation		10.1			13.0			10.0			13.1			10.8			10.1			10.1			10.0
Rentals		2.8			2.2			2.8			2.2			3.0			2.8			3.1			2.8
Depreciation and amortization		5.3			4.0			5.1			4.0			5.4			5.3			5.6			5.1
Fuel		7.2			7.8			6.8			7.4			4.7			7.2			4.1			6.8
Maintenance and repairs		3.7			3.3			3.6			3.2			2.9			3.7			2.9			3.6
Intercompany charges		7.1			7.2			6.8			7.1			6.3			7.1			6.4			6.8
Other		7.4			6.9			7.5			7.0			6.6			7.4			6.7			7.5
Total operating expenses		92.4			92.3			91.1			91.6			87.0			92.4			86.0			91.1
Operating margin		7.6	%		7.7	%		8.9	%		8.4	%		13.0	%		7.6	%		14.0	%		8.9	%

FedEx Freight segment ~~revenues decreased 4%~~revenue increased 5% in the second quarter ~~and 3%~~of 2021 primarily due to higher revenue per shipment. FedEx Freight segment revenue remained flat in the first half of ~~2020~~2021 due to higher revenue per shipment, partially offset by decreased average daily ~~shipments, partially offset by higher revenue per shipment. In addition, one fewer operating day contributed to the decline in the first half of 2020.~~shipments.

~~Average daily shipments decreased 6% in the second quarter and 5% in the first half of 2020 due to lower demand for our service offerings as a result of softening economic conditions.~~ Revenue per shipment increased 2%3% in both the second quarter and first half of ~~2020~~2021 primarily due to higher base rates reflecting our ongoing ~~yield management~~revenue quality initiatives, partially offset by lower fuel surcharges and lower weight per ~~shipment~~shipment. Average daily shipments increased 1% in the second quarter of 2021 due to volumes returning to pre-COVID-19 levels. Despite the increased demand in the second quarter of 2021, demand for our service offerings in the first half of 2021 was negatively impacted by the COVID-19 pandemic and ~~lower fuel surcharges.~~related supply chain disruptions, resulting in a 4% decrease in average daily shipments.

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

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	2019			2018			2019			2018			2020			2019			2020			2019
Low		23.50	%		24.90	%		23.50	%		24.60	%		21.00	%		23.50	%		21.00	%		23.50	%
High		24.00			25.60			24.40			25.60			21.40			24.00			21.40			24.40
Weighted-average		23.80			25.19			23.80			24.97			21.10			23.80			21.20			23.80

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%~~increased 79% in the second quarter and 57% in the first half of 2021 driven by continued focus on revenue quality initiatives, aligning our cost structure with current business levels and improving operational efficiencies. These positive factors more than offset the negative impact on volumes from the COVID-19 pandemic and weaker economic conditions for the first half of 2021.

Salaries and employee benefits expense increased only 2% in the second quarter of ~~2020, driven by~~2021 primarily due to improved operational productivity, in spite of higher variable incentive compensation expense, merit increases and higher volumes. Salaries and employee benefits expense 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 3% in the first half of ~~2020~~2021 primarily due to improved operational productivity and lower volumes, partially offset by higher variable incentive compensation expense and merit increases. Purchased transportation expense increased 12% in the second quarter of 2021 primarily due to higher ~~revenue per shipment, despite moderating volumes. In addition, lower variable incentive compensation expenses benefited operating income comparisons by approximately $5 million~~utilization of third-party rail providers and increased rates from third-party motor providers.

Fuel expense decreased 32% in the second quarter and ~~$35 million~~39% in the first 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 25% in the second quarter and 27% in the first half of 20202021 primarily due to lower utilization of third-party transportation providers. Depreciation and amortization expense increased 28% in the second quarter and 24% in the first half of 2020 due to investments in vehicles and trailers, as well as facility expansion.

~~Fuel expense decreased 12% in the second quarter and 11% in the first half of 2020 primarily due to decreased~~ fuel prices. The net impact of fuel had a ~~moderately~~slightly negative impact to operating income in the second quarter and first half of ~~2020~~2021 as lower fuel surcharges ~~more than offset~~outpaced 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 ~~$2.0~~$8.3 billion at November 30, ~~2019,~~2020, compared to ~~$2.3~~$4.9 billion at May 31, ~~2019.~~2020. The following table provides a summary of our cash flows for the six-month periods ended November 30 (in millions):

	2019			2018			2020			2019
Operating activities:
Net income	$	1,305		$	1,770		$	2,471		$	1,305
Noncash charges and credits		3,322			2,140			3,808			3,322
Changes in assets and liabilities		(2,553	)		(1,731	)		(1,049	)		(2,553	)
Cash provided by operating activities		2,074			2,179			5,230			2,074
Investing activities:
Capital expenditures		(3,266	)		(2,634	)		(2,826	)		(3,266	)
Proceeds from asset dispositions and other		4			53			14			4
Cash used in investing activities		(3,262	)		(2,581	)		(2,812	)		(3,262	)
Financing activities:
Proceeds from short-term borrowings, net		150			248			—			150
Principal payments on debt								(75	)		(1,021	)
Proceeds from debt issuances		2,093			1,233			970			2,093
Principal payments on debt		(1,021	)		(785	)
Proceeds from stock issuances		26			45			431			26
Dividends paid		(339	)		(173	)		(341	)		(339	)
Purchase of treasury stock		(3	)		(1,271	)		—			(3	)
Other, net		(5	)		1			(12	)		(5	)
Cash provided by (used in) financing activities		901			(702	)
Cash provided by financing activities								973			901
Effect of exchange rate changes on cash		(1	)		(38	)		67			(1	)
Net decrease in cash and cash equivalents	$	(288	)	$	(1,142	)
Net increase (decrease) in cash and cash equivalents							$	3,458		$	(288	)
Cash and cash equivalents at the end of period	$	2,031		$	2,123		$	8,339		$	2,031

Cash flows from operating activities ~~decreased $105 million~~increased $3.2 billion in the first half of ~~2020~~2021 primarily due to higher ~~pension contributions~~net income and lower ~~net income, partially offset by lower variable incentive compensation payments.~~pension contributions. Capital expenditures ~~increased~~decreased during the first half of ~~2020~~2021 primarily due to ~~higher~~lower spending related to ~~facilities and aircraft at FedEx Express, increased spending on~~ vehicles and ~~trailers at~~facilities across all of our transportation ~~segments and increased spending on information technology at FedEx Services, FedEx Express and FedEx Freight.~~segments. See the “Capital Resources” section of this MD&A for a discussion of capital expenditures during ~~2020~~2021 and ~~2019.~~2020.

During ~~the first quarter~~August 2020, FedEx Express issued $970 million of ~~2020, we issued $2.1 billion~~Pass Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of ~~senior unsecured debt under our current shelf registration statement, comprised of $1.0 billion of 3.10% fixed-rate notes~~1.875% due in ~~August 2029, €500 million~~February 2034 utilizing pass through trusts. The Certificates are secured by 19 Boeing aircraft. The payment obligations of ~~0.45% fixed-rate notes due~~FedEx Express in ~~August 2025~~respect of the Certificates are fully and ~~€500 million of 1.30% fixed-rate notes due in August 2031. We used~~unconditionally guaranteed by FedEx. FedEx Express is using the ~~net~~ proceeds ~~to make voluntary contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) during~~from 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 usedissuance for general corporate purposes.

~~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 34 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. Shares under this repurchase program may be repurchased from time to time in~~additional information regarding 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~~terms 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.Certificates.

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 November 30 (in millions):

									Percent Change														Percent Change
									2019/2018														2020/2019
	Three Months Ended				Six Months Ended				Three Months			Six Months			Three Months Ended				Six Months Ended				Three Months			Six Months
	2019		2018		2019		2018		Ended			Ended			2020		2019		2020		2019		Ended			Ended
Aircraft and related equipment	$	587	$	604	$	1,128	$	1,075		(3	)		5		$	500	$	587	$	1,273	$	1,128		(15	)		13
Package handling and ground support equipment		267		223		408		417		20			(2	)		344		267		561		408		29			38
Vehicles and trailers		399		275		660		435		45			52			104		399		141		660		(74	)		(79	)
Information technology		243		157		465		332		55			40			177		243		371		465		(27	)		(20	)
Facilities and other		352		196		605		375		80			61			277		352		480		605		(21	)		(21	)
Total capital expenditures	$	1,848	$	1,455	$	3,266	$	2,634		27			24		$	1,402	$	1,848	$	2,826	$	3,266		(24	)		(13	)

FedEx Express segment	$	1,061	$	932	$	2,012	$	1,692		14			19		$	804	$	1,061	$	1,832	$	2,012		(24	)		(9	)
FedEx Ground segment		447		253		543		429		77			27			387		447		591		543		(13	)		9
FedEx Freight segment		131		137		317		227		(4	)		40			59		131		98		317		(55	)		(69	)
FedEx Services segment		154		99		305		224		56			36			129		154		247		305		(16	)		(19	)
Other		55		34		89		62		62			44			23		55		58		89		(58	)		(35	)
Total capital expenditures	$	1,848	$	1,455	$	3,266	$	2,634		27			24		$	1,402	$	1,848	$	2,826	$	3,266		(24	)		(13	)

Capital expenditures ~~increased~~decreased during the first half of ~~2020~~2021 primarily due to ~~higher~~lower spending related to ~~facilities and aircraft at FedEx Express, which included the delivery of seven Boeing 767-300 Freighter (“B767F”) aircraft and five Boeing 777 Freighter aircraft, increased spending on~~ vehicles and ~~trailers at~~facilities across all of our transportation segments, ~~and increased~~as well as decreased spending on information technology at FedEx Services and FedEx Freight, partially offset by increased spending on package handling equipment at FedEx Ground and higher spending related to aircraft at FedEx Express.

We are providing the following information in compliance with Rule 13-01 of Regulation S-X, “Financial Disclosures aboutGuarantors and Issuers of Guaranteed Securities” with respect to our senior unsecured debt securities and the Certificates. As of November 30, 2020, we had outstanding $21.9 billion of senior unsecured debt securities and $970 million of Certificates.

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

Additionally, FedEx fully and unconditionally guarantees the payment obligations of FedEx Express in respect of the Certificates. See Note 6 to the financial statements included in our Annual Report for additional information regarding the terms of the senior unsecured debt securities and Note 4 of the accompanying consolidated financial statements for additional information regarding the terms of the Certificates.

The following tables present summarized financial information for FedEx (as Parent) and the Guarantor Subsidiaries on a combined basis after transactions and balances within the combined entities have been eliminated.

The following table presents the summarized balance sheet information as of November 30, 2020 and May 31, 2020 (in millions):

The following table presents the summarized statement of income information for the six-month period ended November 30, 2020 (in millions):

The following tables present summarized financial information for FedEx (as Parent Guarantor) and FedEx ~~Freight.~~Express (as Subsidiary Issuer) on a combined basis after transactions and balances within the combined entities have been eliminated.

The following table presents the summarized balance sheet information as of November 30, 2020 and May 31, 2020 (in millions):

The following table presents the summarized statement of income information for the six-month period ended November 30, 2020 (in millions):

WeIn response to current business and economic conditions as referenced above in the “Outlook” section of this MD&A, we have and will continue to actively manage our cash flow, defer certain expenditures and seek to protect capital for unforeseen challenges from the ongoing pandemic. With over $8.3 billion in cash and $3.5 billion in available liquidity under our $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement”) and $1.5 billion 364-day credit agreement (“the 364-Day Credit Agreement” and together with the Five-Year Credit Agreement, the “Credit Agreements”), we believe that our cash and cash equivalents, cash flow from operations and available financing sources will be adequate to meet internal and external liquidity needs. As business and economic conditions improve, we will be evaluating our ~~liquidity needs, including working~~ capital ~~capital expenditure requirements, debt payment obligations, pension contributions and TNT Express integration expenses.~~ allocation strategy with a priority on strengthening our balance sheet.

Our cash and cash equivalents balance at November 30, ~~2019~~2020 includes ~~$1.1~~$1.9 billion of cash in foreign jurisdictions associated with our permanent reinvestment strategy. We are able to access the majority of this cash without a material tax cost, as the enactment of the TCJA 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~~$5.1 billion in ~~2020, and~~2021, a $0.8 billion decrease from 2020. The slight increase in our expected capital expenditures from the estimate in our Annual Report is due to capital investment for additional capacity initiatives in support of increased volumes. Total capital expenditures will include ~~spending for~~ aircraft ~~and hub~~ modernization at FedEx Express and strategic investments ~~that increase our efficiency in handling large packages at FedEx Ground~~to improve productivity and ~~investments in technology across all transportation segments that will further optimize our networks and enhance our capabilities.~~safety. We invested ~~$1.1~~$1.3 billion in aircraft and related equipment in the first half of ~~2020~~2021 and expect to invest an additional ~~$0.4 billion~~$450 million for aircraft and related equipment during the remainder of ~~2020.~~2021. 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,~~We expect these investments in hubs will provide productivity ~~gains in a competitive labor environment.~~gains. We anticipate that our cash flow from operations will be sufficient to fund our capital expenditures ~~in 2020.~~for the remainder of 2021. 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,~~2021, FedEx Express ~~exercised options to purchase an additional six B767F~~executed a contract amendment rescheduling Boeing 767-300 Freighter aircraft ~~for delivery in 2022.~~deliveries as follows: 2021 – 18 aircraft; 2022 – 11 aircraft; 2023 – 13 aircraft; and 2024 – 4 aircraft.

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.~~stock and allows pass through trusts formed by FedEx Express to sell, in one or more future offerings, pass through certificates.

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~~2025 and includes a $250 million letter of credit sublimit. The 364-Day Credit Agreement expires in March ~~2020.~~2021. The Credit Agreements are available to finance our operations and other cash flow needs. See Note 31 and Note 4 of the accompanying unaudited condensed consolidated financial statements for a description of the terms and significant covenants of the Credit Agreements.

~~During~~Contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”) are not required during 2021; however, we may make voluntary contributions in the ~~first~~second 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.~~2021. 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.~~“negative.” 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 “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~~There have been no material changes to the contractual ~~cash obligations as of November 30, 2019.~~

Payments Due by Fiscal Year (Undiscounted)
(in millions)

2020 ⁽¹⁾

2021

2022

2023

2024

Thereafter

Total

Operating activities:

Operating leases

$
1,249

$
2,355

$
2,105

$
1,866

$
1,559

$
7,841

$
16,975

Non-capital purchase obligations and other

697

979

777

593

460

3,761

7,267

Interest on long-term debt

338

649

649

620

598

10,183

13,037

Investing activities:

Aircraft and related capital
commitments

449

2,337

2,324

1,550

468

228

7,356

Other capital purchase obligations

20

25

24

23

1

5

98

Financing activities:

Debt

—

—

1,205

1,577

750

15,271

18,803

Finance leases

13

14

14

13

11

78

143

Total

$
2,766

$
6,359

$
7,098

$
6,242

$
3,847

$
37,367

$
63,679

~~Included~~commitments described in the table above within the caption entitled “Non-capital purchase obligations and other” is our estimate of the current portion of the liability ($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.

~~We had $735 million in deposits and progress payments as of November 30, 2019 on aircraft purchases and other planned aircraft-related transactions.~~

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 November 30, 2019.

~~Additional information on amounts included within the operating, investing and financing activities captions in the table above can be found~~Part II, Item 7 in our Annual Report.

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

See Note 9 of the accompanying unaudited condensed consolidated financial statements for additional information on our purchase commitments.

~~During the first quarter of 2020,~~On June 24, 2019, FedEx filed suit in U.S. District Court in the District of Columbia seeking to enjoin the U.S. Department of Commerce (the “DOC”) from enforcing prohibitions contained in the Export Administration Regulations ~~(the “EARs”)~~ against FedEx. ~~FedEx believes that~~On September 11, 2020, the ~~EARs violate common carriers’ rights~~court granted the DOC’s motion to ~~due process under~~dismiss 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.lawsuit. On November 5, 2020, we appealed this decision.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the financial statements of a complex, global corporation. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and new or better information.

GOODWILL. Goodwill is tested for impairment between annual tests whenever events or circumstances make it more likely than not that the fair value of a reporting unit has fallen below its carrying value. We do not believe there has been any other change of events or circumstances that would indicate that a reevaluation of the goodwill of our reporting units is required as of November 30, ~~2019,~~2020, 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,” “Business Acquisitions,” “Outlook” and “Liquidity Outlook” and the “General,” “Financing Arrangements,” “Income Taxes,” ~~“Outlook,” “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~~our unaudited condensed consolidated financial statements, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, cash flows, plans, objectives, future performance and ~~business.~~business and the assumptions underlying such statements. Forward-looking statements include those preceded by, followed by or that include the words “will,” “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “plans,” “estimates,” “targets,” “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 November 30, ~~2019,~~2020, 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~~revenue than our expenses, as a significant portion of our expenses are denominated in U.S. dollars, such as aircraft and fuel expenses. During the first half of ~~2020,~~2021, the U.S. dollar ~~strengthened~~weakened relative to the currencies of the foreign countries in which we operate, as compared to ~~May 31, 2019,~~the first six months of 2020, and this ~~strengthening~~weakening had a slightly positive impact on our results.

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

The management of FedEx, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, ~~(the “Exchange Act”),~~ is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to FedEx management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of November 30, ~~2019~~2020 (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 began implementing new systems and internal controls in conjunction with the new lease standard. The implementation of such systems and internal controls continued in the second quarter of 2020. In addition, we have begun the process of migrating to an enterprise resource planning cloud-based financial 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 November 30, ~~2019,~~2020, 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. Due to the COVID-19 pandemic, the majority of our accounting, finance and legal employees continued working remotely. We continue to monitor the COVID-19 pandemic and its effects on the design and operating effectiveness of our internal control over financial reporting.

For a description of all material pending legal proceedings, see Note 10 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~~COVID-19 pandemic has ~~made significant changes in U.S. trade policy and has taken~~had 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 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~~effects on our business, results of operations and financial condition, ~~as well as on~~and we expect such adverse effects will continue. The COVID-19 pandemic has negatively impacted the ~~price~~global economy, disrupted global supply chains and created significant volatility and disruption of ~~our common stock.~~financial markets.

~~Additionally,~~Due to the crucial role we play in moving supply chains and delivering critical relief, we are considered an essential business and we continue to operate under and respond to evolving governmental and other restrictions issued in the U.S. ~~government~~and globally. The disruption of global supply chains and the global economy 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 onmaterially affected our business, results of operations and financial condition. We expect the full impact of the COVID-19 pandemic, including the extent of its effect on our financial condition and results of operations, to be dictated by future developments which remain uncertain and cannot be predicted, such as ~~well as~~its duration and spread, the success of efforts to contain it and treat its impact, the possibility of additional subsequent widespread outbreaks, and the impact of actions taken in response. The COVID-19 pandemic has had, and we expect will continue to have, certain negative impacts on our business, including, but not limited to, the ~~price~~following:

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many other risks described under the heading “Risk Factors” in our ~~common stock. For example,~~Annual Report, any of which could materially and adversely affect our business, results of operations and financial condition. Such risks include, but are not limited to, additional changes in international trade policies and relations; our ability to successfully integrate the ~~China State Post Bureau is currently conducting an investigation into the~~businesses and operations of FedEx Express ~~regarding its handling~~and TNT Express in the expected time frame and at the expected cost; our strong reputation and the value of ~~certain packages while attempting~~the FedEx brand; our ability to ~~comply with~~manage our capital intensive businesses; changes to the ~~Export Administration Regulations.~~business and financial soundness of the U.S. Postal Service; workforce availability; employee healthcare benefit costs; constraints, volatility or disruption in the capital markets and our ability to access sources of financing and liquidity; and the impact of litigation or claims from customers, team members, suppliers, regulators or other third parties relating to the COVID-19 pandemic or our actions in response to the pandemic.

The United Kingdom’s ~~expected~~ withdrawal from the EUEuropean Union (“EU”) could adversely impact our business, results of operations and financial condition. ~~Following recent European Parliament elections and the general election in~~On January 31, 2020, the United Kingdom ~~it is expected that~~left the EU (“Brexit”). The United Kingdom and EU ~~will enter into~~are now in a ~~withdrawal agreement pursuant to~~transitional period during which the United Kingdom will ~~leave the EU (“Brexit”) on January 31, 2020, but~~ maintain access to the EU single market and to the global trade deals negotiated by the EU on behalf of its members, and remain subject to EU law, ~~for a transition period ending on~~until 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~~regarding ~~the United Kingdom’s government and Parliament on~~ the status of Brexit has negatively impacted the United Kingdom’s ~~economy,~~ and the EU’s economies. This negative impact will likely continue ~~to have a negative impact~~ until the United Kingdom and EU reach and implement a definitive resolution on ~~the outstanding trade and legal matters.~~their future trading relationship. Any additional impact of Brexit will depend on the terms of such ~~resolution.~~resolution, if one is ultimately reached. 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 impacted, and the demand for our services could be depressed. As of December 17, 2020, the United Kingdom and EU have not reached a resolution regarding their future trading relationship beyond December 31, 2020.

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.

We did not repurchase any shares of FedEx common stock during the second quarter of ~~2020.~~2021.

On January 26, 2016, we announced a stock repurchase program approved by our Board, ~~of Directors,~~ through which we are authorized to purchase, in the open market or in privately negotiated transactions, up to an aggregate of 25 million shares of our common stock. As of December ~~13, 2019,~~15, 2020, 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.

In June 2020, we announced that given then-current economic and business uncertainty resulting from the COVID-19 pandemic, there would not be an annual incentive compensation plan for executive officers for fiscal 2021. In September 2020, based on strong financial results for the first quarter of fiscal 2021, FedEx’s Board, upon the recommendation of its Compensation Committee, approved an annual incentive plan for FedEx’s employees, excluding executive officers (the “fiscal 2021 AIC Plan”). On December 14, 2020, the Board, upon the recommendation of its Compensation Committee, approved including FedEx’s executive officers in the fiscal 2021 AIC Plan. The decision to include executive officers in the plan was based on FedEx’s strong financial results for the first half of fiscal 2021 due in part to the leadership provided by the executive officers and successful execution of FedEx’s strategies during the COVID-19 pandemic.

In order to continue motivating management to improve FedEx’s overall financial performance, the performance measure selected for the fiscal 2021 AIC Plan is consolidated operating income. The consolidated operating income threshold, target, and maximum objectives under the fiscal 2021 AIC plan are specified levels of fiscal 2021 consolidated operating income. Actual consolidated operating income performance that exceeds the fiscal 2021 target objective for consolidated operating income under the fiscal 2021 AIC plan will result in an above-target payout opportunity, up to the maximum payout amount.

The maximum payout opportunity under the plan for each executive officer is 150% of the target amount. However, the actual payout for plan participants, including all executive officers other than FedEx’s Chairman of the Board and Chief Executive Officer (“Chairman and CEO”), may be adjusted downward depending on the achievement level of their respective individual performance objectives, as determined by the Chairman and CEO or President and Chief Operating Officer, as applicable. The AIC payout amount for the Chairman and CEO may be adjusted upward or downward by the independent Board members based on their annual evaluation of his performance, which will consider factors including (but not limited to) FedEx’s stock price performance, market share, analyst ratings, and performance versus competitors. In addition, the independent directors will consider the achievement of the Chairman and CEO’s individual objectives for fiscal 2021.

The fiscal 2021 AIC target payouts for FedEx’s named executive officers, as a percentage of their respective base salary actually paid during fiscal 2021, are as follows:

* Mr. Graf served as FedEx’s Executive Vice President and Chief Financial Officer until September 21, 2020 and will retire effective December 31, 2020. He is eligible to receive a pro rata payout under the fiscal 2021 AIC plan based on the portion of the plan period during which he is employed.

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

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

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

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


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

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

Common Stock		Outstanding Shares at December ~~13, 2019~~15, 2020
Common Stock, par value $0.10 per share		~~261,119,074~~ 265,070,592

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets November 30, ~~2019~~2020 and May 31, ~~2019~~2020		3
Condensed Consolidated Statements of Income Three and Six Months Ended November 30, ~~2019~~2020 and ~~2018~~2019		5
Condensed Consolidated Statements of Comprehensive Income Three and Six Months Ended November 30, ~~2019~~2020 and ~~2018~~2019		6
Condensed Consolidated Statements of Cash Flows Six Months Ended November 30, ~~2019~~2020 and ~~2018~~2019		7
Condensed Consolidated Statements of Changes In Common Stockholders’ Investment Three and Six Months Ended November 30, ~~2019~~2020 and ~~2018~~2019		8
Notes to Condensed Consolidated Financial Statements		9
Report of Independent Registered Public Accounting Firm		3120
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		3221
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		5646
ITEM 4. Controls and Procedures		5646

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings		5747
ITEM 1A. Risk Factors		5747
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		5949
ITEM 5. Other Information		49
ITEM 6. Exhibits		6051
Signature		6252

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 22
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101.1 Interactive Data Files Exhibit 104.1 Cover Page Interactive Data File


FedEx Express Segment	FedEx Express (express transportation, small-package ground delivery and freight transportation)
	~~TNT Express (international express~~FedEx Custom Critical (time-critical transportation) FedEx Cross Border (cross-border e-commerce technology and e-commerce transportation ~~small-package ground delivery and freight~~solutions) ~~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	$	1,247
Operating cash flows paid for interest portion of finance leases		2
Financing cash flows paid for principal portion of finance leases		64
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,049
Right-of-use assets obtained in exchange for new finance lease liabilities	$	93

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

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

Finance leases:
Net property and equipment	$	99

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

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

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

	Aircraft and Related Equipment			Facilities and Other			Total Operating Leases			Finance Leases			Total Leases
2020 (remainder)	$	236		$	1,013		$	1,249		$	13		$	1,262
2021		253			2,102			2,355			14			2,369
2022		234			1,871			2,105			14			2,119
2023		198			1,668			1,866			13			1,879
2024		102			1,457			1,559			11			1,570
Thereafter		314			7,527			7,841			78			7,919
Total lease payments		1,337			15,638			16,975			143			17,118
Less imputed interest		(107	)		(2,508	)		(2,615	)		(35	)		(2,650	)
Present value of lease liability	$	1,230		$	13,130		$	14,360		$	108		$	14,468

			Guarantor		Non-guarantor
	Parent		Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	394	$	236	$	1,410	$	(9	)	$	2,031
Receivables, less allowances		348		5,698		3,762		(99	)		9,709
Spare parts, supplies, fuel, prepaid expenses and other, less allowances		128		932		398		—			1,458
Total current assets		870		6,866		5,570		(108	)		13,198
PROPERTY AND EQUIPMENT, AT COST		27		58,286		4,402		—			62,715
Less accumulated depreciation and amortization		17		28,139		2,151		—			30,307
Net property and equipment		10		30,147		2,251		—			32,408
INTERCOMPANY RECEIVABLE		3,181		—		—		(3,181	)		—
OPERATING LEASE RIGHT-OF-USE ASSETS, NET		39		11,844		2,214		—			14,097
GOODWILL		—		1,587		5,274		—			6,861
INVESTMENT IN SUBSIDIARIES		35,086		4,982		—		(40,068	)		—
OTHER ASSETS		953		1,141		1,820		(524	)		3,390
	$	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		—		5		11		—			16
Accrued salaries and employee benefits		87		1,058		487		—			1,632
Accounts payable		192		1,505		1,692		(106	)		3,283
Operating lease liabilities		4		1,476		448		—			1,928
Accrued expenses		509		2,023		1,008		(2	)		3,538
Total current liabilities		942		6,067		3,646		(108	)		10,547
LONG-TERM DEBT, LESS CURRENT PORTION		18,362		286		43		—			18,691
INTERCOMPANY PAYABLE		—		58		3,123		(3,181	)		—
OTHER LONG-TERM LIABILITIES
Deferred income taxes		—		3,013		583		(524	)		3,072
Operating lease liabilities		37		10,577		1,818		—			12,432
Other liabilities		2,139		3,439		975		—			6,553
Total other long-term liabilities		2,176		17,029		3,376		(524	)		22,057
COMMON STOCKHOLDERS’ INVESTMENT		18,659		33,127		6,941		(40,068	)		18,659
	$	40,139	$	56,567	$	17,129	$	(43,881	)	$	69,954

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	12,307		$	5,110		$	(93	)	$	17,324
OPERATING EXPENSES:
Salaries and employee benefits		22			4,823			1,390			—			6,235
Purchased transportation		—			2,865			1,505			(42	)		4,328
Rentals and landing fees		2			715			209			(2	)		924
Depreciation and amortization		—			785			116			—			901
Fuel		—			846			44			—			890
Maintenance and repairs		—			685			89			—			774
Asset impairment charges		—			66			—			—			66
Intercompany charges, net		(77	)		(622	)		699			—			—
Other		53			1,752			896			(49	)		2,652
		—			11,915			4,948			(93	)		16,770
OPERATING INCOME		—			392			162			—			554
OTHER (EXPENSE) INCOME:
Equity in earnings of subsidiaries		560			26			—			(586	)		—
Interest, net		(164	)		8			5			—			(151	)
Other retirement plans income		—			163			5			—			168
Intercompany charges, net		161			(117	)		(44	)		—			—
Other, net		3			12			(14	)		—			1
INCOME (LOSS) BEFORE INCOME TAXES		560			484			114			(586	)		572
Provision for income taxes (benefit)		—			81			(69	)		—			12
NET INCOME (LOSS)	$	560		$	403		$	183		$	(586	)	$	560
COMPREHENSIVE INCOME (LOSS)	$	540		$	380		$	278		$	(586	)	$	612

FedEx Express Segment	FedEx Express (express ~~transportation)~~
	~~TNT Express (international express~~ transportation, small-package ground delivery and freight transportation)
	FedEx Custom Critical, Inc. (“FedEx Custom Critical”) (time-critical transportation) FedEx Cross Border Holdings, Inc. (“FedEx Cross Border”) (cross-border e-commerce technology and e-commerce transportation solutions)

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)

	November 30, 2020		May 31, 2020
Current Assets	$	14,448	$	11,014
Intercompany Receivable		3,866		3,985
Total Assets		81,975		62,089
Current Liabilities		8,392		7,030
Intercompany Payable		—		519
Total Liabilities		53,505		49,844

Revenue	$	29,141
Intercompany Charges, net		(1,434	)
Operating Income		2,206
Intercompany Charges, net		71
Income Before Income Taxes		2,354
Net Income	$	2,028

Revenue	$	10,988
Intercompany Charges, net		(575	)
Operating Income		667
Intercompany Charges, net		274
Income Before Income Taxes		1,773
Net Income	$	1,727

	Payments Due by Fiscal Year (Undiscounted) (in millions)
	2020 ⁽¹⁾		2021		2022		2023		2024		Thereafter		Total
Operating activities:
Operating leases	$	1,249	$	2,355	$	2,105	$	1,866	$	1,559	$	7,841	$	16,975
Non-capital purchase obligations and other		697		979		777		593		460		3,761		7,267
Interest on long-term debt		338		649		649		620		598		10,183		13,037
Investing activities:
Aircraft and related capital commitments		449		2,337		2,324		1,550		468		228		7,356
Other capital purchase obligations		20		25		24		23		1		5		98
Financing activities:
Debt		—		—		1,205		1,577		750		15,271		18,803
Finance leases		13		14		14		13		11		78		143
Total	$	2,766	$	6,359	$	7,098	$	6,242	$	3,847	$	37,367	$	63,679

Name	Target Payout (as a percentage of base salary)
Frederick W. Smith Chairman of the Board and Chief Executive Officer	165	%
Michael C. Lenz Executive Vice President and Chief Financial Officer	120	%
Rajesh Subramaniam President and Chief Operating Officer	140	%
Donald F. Colleran President and Chief Executive Officer Federal Express Corporation	120	%
Robert B. Carter Executive Vice President, FedEx Information Services and Chief Information Officer	120	%
Alan B. Graf, Jr.* Former Chief Financial Officer	120	%

Exhibit Number		Description of Exhibit

*˄10.1		Amendment dated September ~~19, 2019~~4, 2020 (but effective as of ~~April 1, 2019)~~January 6, 2020), 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)~~

*˄10.2		Amendment dated September 4, 2020 (but effective as of ~~Regulation S-K because~~February 3, 2020), amending the ~~information contained therein is not material and is not otherwise publicly disclosed. FedEx will furnish supplementally a copy~~USPS Transportation Agreement.

*˄10.3		Amendment dated September 30, 2020 (but effective as of March 2, 2020), amending the ~~attachment to~~USPS Transportation Agreement.

*˄10.4		Amendment dated October 22, 2020 (but effective as of June 29, 2020), amending the ~~SEC or its staff upon request.~~USPS TransportationAgreement.

*˄10.5		Amendment dated October 22, 2020 (but effective as of August 3, 2020), amending the USPS Transportation Agreement.

*~~10.2~~˄10.6		Amendment dated October ~~8, 2019~~22, 2020 (but effective as of ~~June 3, 2019)~~August 31, 2020), 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.Agreement.

*~~10.3~~˄10.7		Amendment dated October 22, ~~2019~~2020 (but effective as of ~~April 29, 2019)~~March 30, 2020), amending the USPS Transportation ~~Agreement. An attachment to this exhibit has been omitted pursuant to Item 601(a)(5)~~Agreement.

10.8		Amendment dated October 30, 2020 (but effective as of ~~Regulation S-K because~~October 23, 2020), amending 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.~~USPS Transportation Agreement.

*~~10.4~~˄10.9		Amendment dated November 5, ~~2019~~2020 (but effective as of ~~July 1, 2019)~~May 4, 2020), 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. Agreement.

*10.5		Amendment dated November 18, 2019 (but effective as of 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.

*10.6		Supplemental Agreement No. 13 dated as of September 4, 2019, amending the Boeing 767-3S2 Freighter Purchase Agreement dated as of December 14, 2011 between The Boeing Company and FedEx 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).~~

~~10.8~~		Form of Terms and Conditions of Stock Option Grant for U.S. Employees pursuant to 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 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 incorporated herein by reference).

~~10.10~~		Form of Stock Option Agreement for Non-Management Members of the Board of Directors pursuant to 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~~22		~~Description~~List of ~~Exhibit~~Guarantor Subsidiaries and Subsidiary Issuers of Guaranteed Securities.

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

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

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

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

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

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

			FEDEX CORPORATION

Date: December 17, ~~2019~~2020			/s/ JOHN L. MERINO
			JOHN L. MERINO
			CORPORATE VICE PRESIDENT AND
			PRINCIPAL ACCOUNTING OFFICER