Quarterly Report for Quarter Ending August 31, 2024 (Form 10-Q)

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED August 31, 2024

OR

☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO__________

Commission File Number: 1-15829

FedEx Corporation

(Exact name of registrant as specified in its charter)

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)

Registrant's telephone number, including area code:(901) 818-7500

Securities registered pursuant to Section 12(b) of the Act:

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
0.450% Notes due 2025		FDX 25A		New York Stock Exchange
1.625% Notes due 2027		FDX 27		New York Stock Exchange
0.450% Notes due 2029		FDX 29A		New York Stock Exchange
1.300% Notes due 2031		FDX 31		New York Stock Exchange
0.950% Notes due 2033		FDX 33		New York Stock Exchange

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.

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

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.

Common Stock		Outstanding Shares at September 17, 2024
Common Stock, par value $0.10 per share		244,323,464

FEDEX CORPORATION

INDEX

		PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets August 31, 2024 and May 31, 2024		3
Condensed Consolidated Statements of Income Three Months Ended August 31, 2024 and August 31, 2023		5
Condensed Consolidated Statements of Comprehensive Income Three Months Ended August 31, 2024 and August 31, 2023		6
Condensed Consolidated Statements of Cash Flows Three Months Ended August 31, 2024 and August 31, 2023		7
Condensed Consolidated Statements of Changes In Common Stockholders' Investment Three Months Ended August 31, 2024 and August 31, 2023		8
Notes to Condensed Consolidated Financial Statements		9
Report of Independent Registered Public Accounting Firm		19
ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition		20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		38
ITEM 4. Controls and Procedures		38
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings		39
ITEM 1A. Risk Factors		39
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		39
ITEM 5. Other Information		40
ITEM 6. Exhibits		41
Signature		42

FEDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

		August 31, 2024 (Unaudited)			May 31, 2024
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	5,943			$	6,501
Receivables, less allowances of $702and $775			10,312				10,087
Spare parts, supplies, and fuel, less allowances of $290and $288			611				614
Prepaid expenses and other			1,228				1,005
Total current assets			18,094				18,207
PROPERTY AND EQUIPMENT, AT COST			85,158				84,391
Less accumulated depreciation and amortization			43,903				42,900
Net property and equipment			41,255				41,491
OTHER LONG-TERM ASSETS
Operating lease right-of-use assets, net			17,094				17,115
Goodwill			6,512				6,423
Other assets			3,756				3,771
Total other long-term assets			27,362				27,309
		$	86,711			$	87,007

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

FEDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE DATA)

		August 31, 2024 (Unaudited)			May 31, 2024
LIABILITIES AND COMMON STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt		$	622			$	68
Accrued salaries and employee benefits			2,336				2,673
Accounts payable			3,738				3,189
Operating lease liabilities			2,510				2,463
Accrued expenses			4,905				4,962
Total current liabilities			14,111				13,355
LONG-TERM DEBT, LESS CURRENT PORTION			19,664				20,135
OTHER LONG-TERM LIABILITIES
Deferred income taxes			4,485				4,482
Pension, postretirement healthcare, and other benefit obligations			1,780				2,010
Self-insurance accruals			3,833				3,701
Operating lease liabilities			14,969				15,053
Other liabilities			693				689
Total other long-term liabilities			25,760				25,935
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS' INVESTMENT
Common stock, $0.10par value; 800million shares authorized; 318million shares issued as of August 31, 2024 and May 31, 2024			32				32
Additional paid-in capital			4,134				3,988
Retained earnings			38,767				38,649
Accumulated other comprehensive loss			(1,332	)			(1,359	)
Treasury stock, at cost			(14,425	)			(13,728	)
Total common stockholders' investment			27,176				27,582
		$	86,711			$	87,007

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

FEDEX CORPORATION

CONDENSED CONSOLIDATEDSTATEMENTS OF INCOME

(UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

		Three Months Ended
		August 31, 2024			August 31, 2023
REVENUE		$	21,579			$	21,681
OPERATING EXPENSES:
Salaries and employee benefits			7,785				7,785
Purchased transportation			5,275				5,036
Rentals and landing fees			1,161				1,151
Depreciation and amortization			1,078				1,071
Fuel			1,075				1,101
Maintenance and repairs			829				824
Business optimization costs			128				105
Other			3,168				3,123
			20,499				20,196
OPERATING INCOME			1,080				1,485
OTHER (EXPENSE) INCOME:
Interest, net			(84	)			(91	)
Other retirement plans, net			49				39
Other, net			11				(10	)
			(24	)			(62	)
INCOME BEFORE INCOME TAXES			1,056				1,423
PROVISION FOR INCOME TAXES			262				345
NET INCOME		$	794			$	1,078
EARNINGS PER COMMON SHARE:
Basic		$	3.24			$	4.28
Diluted		$	3.21			$	4.23
DIVIDENDS DECLARED PER COMMON SHARE		$	2.76			$	1.26

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

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(IN MILLIONS)

		Three Months Ended
		August 31, 2024			August 31, 2023
NET INCOME		$	794			$	1,078
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of tax (expense)/benefit of ($4) in 2024 and $4in 2023			29				(28	)
Amortization of prior service credit, net of tax benefit of $1in 2024 and $0in 2023			(2	)			(1	)
			27				(29	)
COMPREHENSIVE INCOME		$	821			$	1,049

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

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN MILLIONS)

		Three Months Ended
		August 31, 2024			August 31, 2023
Operating Activities:
Net income		$	794			$	1,078
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			1,078				1,071
Provision for uncollectible accounts			129				103
Other noncash items including leases and deferred income taxes			817				728
Stock-based compensation			48				56
Business optimization costs, net of payments			(69	)			(73	)
Changes in assets and liabilities:
Receivables			(305	)			(126	)
Other assets			(223	)			(131	)
Accounts payable and other liabilities			(1,105	)			(470	)
Other, net			23				(6	)
Cash provided by operating activities			1,187				2,230
Investing Activities:
Capital expenditures			(767	)			(1,290	)
Purchase of investments			(61	)			(2	)
Proceeds from sale of investments			13				-
Proceeds from asset dispositions and other			13				12
Cash used in investing activities			(802	)			(1,280	)
Financing Activities:
Principal payments on debt			(34	)			(66	)
Proceeds from stock issuances			404				157
Dividends paid			(339	)			(318	)
Purchase of treasury stock			(1,000	)			(500	)
Cash used in financing activities			(969	)			(727	)
Effect of exchange rate changes on cash			26				(24	)
Net (decrease) increase in cash and cash equivalents			(558	)			199
Cash and cash equivalents at beginning of period			6,501				6,856
Cash and cash equivalents at end of period		$	5,943			$	7,055

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

FEDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' INVESTMENT

(UNAUDITED)

(IN MILLIONS, EXCEPT SHARE DATA)

		Three Months Ended
		August 31, 2024			August 31, 2023
Common Stock
Beginning Balance		$	32			$	32
Ending Balance			32				32
Additional Paid-in Capital
Beginning Balance			3,988				3,769
Purchase of treasury stock			(9	)			(36	)
Employee incentive plans and other			155				67
Ending Balance			4,134				3,800
Retained Earnings
Beginning Balance			38,649				35,259
Net Income			794				1,078
Cash dividends declared ($2.76and $1.26per share)			(676	)			(316	)
Ending Balance			38,767				36,021
Accumulated Other Comprehensive Loss
Beginning Balance			(1,359	)			(1,327	)
Other comprehensive income/(loss), net of tax (expense)/benefit of ($3) and $4			27				(29	)
Ending Balance			(1,332	)			(1,356	)
Treasury Stock
Beginning Balance			(13,728	)			(11,645	)
Purchase of treasury stock (3.4and 2.0million shares)			(994	)			(464	)
Employee incentive plans and other (2.2and 1.1million shares)			297				146
Ending Balance			(14,425	)			(11,963	)
Total Common Stockholders' Investment Balance		$	27,176			$	26,534

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

FEDEX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

FedEx Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of FedEx Corporation (the Company) as of August 31, 2024, the related condensed consolidated statements of income, comprehensive income, cash flows, and changes in common stockholders' investment for the three-month periods ended August 31, 2024 and 2023, 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, 2024, 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 15, 2024, 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, 2024, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

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

/s/ Ernst & Young LLP

Memphis, Tennessee

September 19, 2024

Item 2. Management's Discussion and Analysis ofResults of Operations and Financial Condition

GENERAL

The following Management's Discussion and Analysis of Results of Operations and Financial Condition ("MD&A") describes the principal factors affecting the results of operations, liquidity, capital resources, and critical accounting estimates of FedEx Corporation ("FedEx"). This discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended May 31, 2024 ("Annual Report"). Our Annual Report includes additional information about our significant accounting policies, practices, and the transactions that underlie our financial results, as well as a detailed discussion of the most significant risks and uncertainties associated with our financial condition and operating results.

We provide a broad portfolio of transportation, e-commerce, and business services, offering integrated business solutions utilizing our flexible, efficient, and intelligent global network. Our primary operating companies are Federal Express Corporation ("Federal Express"), the world's largest express transportation company and a leading North American provider of small-package ground delivery services, and FedEx Freight, Inc. ("FedEx Freight"), a leading North American provider of less-than-truckload ("LTL") freight transportation services. See "Reportable Segments" for further discussion. Additional information on our businesses can be found in our Annual Report.

In connection with our one FedEx consolidation plan, on June 1, 2024, FedEx Ground Package System, Inc. ("FedEx Ground") and FedEx Corporate Services, Inc. ("FedEx Services") were merged into Federal Express, becoming a single company operating a unified, fully integrated air-ground express network under the respected FedEx brand. FedEx Freight continues to provide LTL freight transportation services as a separate subsidiary. Beginning in the first quarter of 2025, Federal Express and FedEx Freight represent our major service lines and constitute our reportable segments. Additionally, the results of FedEx Custom Critical, Inc. ("FedEx Custom Critical") are included in the FedEx Freight segment instead of the Federal Express segment in 2025. Prior-year amounts were revised to reflect this presentation.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2025 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 Federal Express segment and the FedEx Freight segment.

The key indicators necessary to understand our operating results include:

Trends Affecting Our Business

The following trends significantly affect the indicators discussed above, as well as our business and operating results. See the risk factors identified under Part I, Item 1A. "Risk Factors" in our Annual Report, as updated by our quarterly reports on Form 10-Q, for more information. Additionally, see "Results of Operations - Consolidated Results - Business Optimization Costs and - Outlook" and "Financial Condition - Liquidity Outlook" below for additional information on efforts we are taking to mitigate adverse trends.

Macroeconomic Conditions

While macroeconomic risks apply to most companies, we are particularly vulnerable. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of global trade growth. The decline in U.S. imports of consumer goods that started in late 2022, along with slowed global industrial production, has contributed to weakened economic conditions for the transportation industry. Consequently, this environment has led to lower shipments at FedEx Freight and pressured package and freight volumes and yields at Federal Express, negatively affecting our results in the first quarter of 2025.

Inflation and Interest Rates

During the first quarter 2025, global inflation decelerated year-over-year but continues to be above historical levels. Additionally, global interest rates remained elevated in an effort to curb inflation. We are experiencing pressure on demand for our transportation services, particularly our priority services, as elevated inflation and interest rates are negatively affecting consumer and business spending. We expect inflation and high interest rates to continue to negatively affect our results of operations for the remainder of 2025.

Fuel

We must purchase large quantities of fuel to operate our aircraft and vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. The timing and amount of fluctuations in fuel prices and our ability to recover incremental fuel costs through our fuel surcharges can significantly affect our operating results either positively or negatively in the short-term. During the first quarter of 2025, lower fuel prices negatively affected yields through fuel surcharges at our FedEx Freight segment and reduced fuel expense at both of our transportation segments. However, fuel surcharges had a positive effect at Federal Express in the first quarter of 2025.

Geopolitical Conflicts

Given the nature of our business and global operations, geopolitical conflicts may adversely affect our business and results of operations. While we do not expect ongoing geopolitical conflicts between Russia and Ukraine and in the Middle East to have a direct material effect on our business or results of operations, the broader consequences are adversely affecting the global economy and may also have the effect of heightening other risks disclosed in our Annual Report.

RESULTS OF OPERATIONS

Many of our operating expenses are directly affected by revenue and volume levels, and we expect these operating expenses to fluctuate on a year-over-year basis consistent with changes in revenue and volumes. Therefore, the discussion of operating expense captions focuses on the key drivers and trends affecting expenses other than those factors strictly related to changes in revenue and volumes. The line item "Other" includes costs associated with outside service contracts (such as information technology services, temporary labor, security, and facilities services), insurance, professional fees, and operational supplies.

CONSOLIDATED RESULTS

The following tables compare summary operating results and changes in revenue and operating income (loss) (dollars in millions, except per share amounts) for the three-month periods ended August 31:

								Percent
		2024			2023			Change
Revenue		$	21,579			$	21,681				-
Operating income (loss):
Federal Express segment			953				1,306				(27	)
FedEx Freight segment			439				482				(9	)
Corporate, other, and eliminations			(312	)			(303	)			(3	)
Consolidated operating income			1,080				1,485				(27	)
Operating margin:
Federal Express segment			5.2	%			7.1	%			(190	)	bp
FedEx Freight segment			18.8	%			20.2	%			(140	)	bp
Consolidated operating margin			5.0	%			6.8	%			(180	)	bp
Consolidated net income		$	794			$	1,078				(26	)
Diluted earnings per share		$	3.21			$	4.23				(24	)

		Year-over-Year Changes
		Revenue			Operating Income (Loss)
Federal Express segment		$	(121	)		$	(353	)
FedEx Freight segment			(56	)			(43	)
Corporate, other, and eliminations			75				(9	)
		$	(102	)		$	(405	)

Overview

First quarter 2025 results were negatively affected by a mix shift toward deferred services, which reduced demand for U.S. domestic priority services and constrained yield growth. In addition, higher operating expenses driven by higher wage and purchased transportation rates, as well as one fewer operating day, negatively affected the quarter's results, partially offset by lower structural costs from our DRIVE initiatives. These initiatives included transforming our structural network, optimizing station processes in Europe, and improving the efficiency of our linehaul network and information technology function.

Operating income in the first quarter of 2025 includes expenses of $128 million ($98 million, net of tax, or $0.39 per diluted share) associated with our business optimization strategy to drive efficiency and lower our overhead and support costs. We recognized $105 million ($81 million, net of tax, or $0.32 per diluted share) of expenses in the first quarter of 2024 under this program. See the "Business Optimization Costs" section of this MD&A for more information.

We completed accelerated share repurchase ("ASR") transactions with two banks during the first quarter of 2025 to repurchase an aggregate of $1 billion of FedEx common stock. Share repurchases had a benefit of $0.03 per diluted share for the first quarter of 2025. As of August 31, 2024, $4.1 billion remained available to be used for repurchases under the 2024 stock repurchase program. See Note 1 of the accompanying unaudited condensed consolidated financial statements, "Financial Condition - Liquidity and - Liquidity Outlook" below, and Part II, Item 2. "Unregistered Sales of Equity Securities and Use of Proceeds" of this Form 10-Q for additional information.

Prior year statistical information has been revised to conform to the current year presentation. The following graphs for Federal Express and FedEx Freight show selected volume trends (in thousands) calculated on a 5-day-per-week basis over the five most recent quarters:

Prior year statistical information has been revised to conform to the current year presentation. The following graphs for Federal Express and FedEx Freight show selected yield trends over the five most recent quarters:

Revenue

Revenue decreased slightly in the first quarter primarily due to one fewer operating day at both of our transportation segments and reduced demand surcharges at Federal Express, partially offset by base yield improvement at both our transportation segments and higher fuel surcharges at Federal Express.

Federal Express revenue decreased 1% in the first quarter primarily due to one fewer operating day, lower priority package volume, and reduced demand surcharges, partially offset by increased deferred package volume, base yields, and fuel surcharges. FedEx Freight revenue decreased 2% in the first quarter primarily due to lower shipments and one fewer operating day, partially offset by yield improvement. Revenue at Corporate, other, and eliminations increased in the first quarter primarily due to higher yields and volume at FedEx Logistics, Inc. ("FedEx Logistics").

Operating Expenses

The following table compares operating expenses expressed as dollar amounts (in millions) and as a percent of revenue for the three-month periods ended August 31:

								Percent
		2024			2023			Change
Operating expenses:
Salaries and employee benefits		$	7,785			$	7,785				-
Purchased transportation			5,275				5,036				5
Rentals and landing fees			1,161				1,151				1
Depreciation and amortization			1,078				1,071				1
Fuel			1,075				1,101				(2	)
Maintenance and repairs			829				824				1
Business optimization costs			128				105				22
Other			3,168				3,123				1
Total operating expenses			20,499				20,196				2
Operating income		$	1,080			$	1,485				(27	)

		Percent of Revenue
		2024			2023
Operating expenses:
Salaries and employee benefits			36.1	%			35.9	%
Purchased transportation			24.4				23.2
Rentals and landing fees			5.4				5.3
Depreciation and amortization			5.0				5.0
Fuel			5.0				5.1
Maintenance and repairs			3.8				3.8
Business optimization costs			0.6				0.5
Other			14.7				14.4
Total operating expenses			95.0				93.2
Operating margin			5.0	%			6.8	%

Operating income declined 27% in the first quarter and was negatively affected by a mix shift toward deferred services, which reduced demand for U.S. domestic priority services and constrained yield growth. In addition, higher operating expenses and one fewer operating day negatively affected the quarter's results, partially offset by lower structural costs from our DRIVE initiatives.

Purchased transportation expense increased 5% in the first quarter primarily due to higher rates and an increase in commercial linehaul to support network changes and international economy volume growth. Salaries and employee benefits expense was flat primarily due to savings from our DRIVE initiatives and lower variable incentive compensation, partially offset by an increase in wage rates as well as an increase in retirement benefits due to changes in our defined contribution plan that increased the number of eligible employees at Federal Express.

Business Optimization Costs

In the second quarter of 2023, we announced DRIVE, a comprehensive program to improve long-term profitability. This program includes a business optimization plan to drive efficiency within and among our transportation segments, lower our overhead and support costs, and transform our digital capabilities. We have commenced our plan to consolidate our sortation facilities and equipment, reduce pickup-and-delivery routes, and optimize our enterprise linehaul network by moving beyond discrete collaboration

to an end-to-end optimized network through Network 2.0, the multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada.

We have implemented Network 2.0 optimization in more than 150 locations in the U.S. and Canada. Contracted service providers will handle the pickup and delivery of Federal Express packages in some locations while employee couriers will handle others.

In June 2024, Federal Express announced a workforce reduction plan in Europe as part of its ongoing measures to reduce structural costs. The plan will impact between 1,700 and 2,000 employees in Europe across back-office and commercial functions. The execution of the plan is subject to a consultation process that is expected to occur over an 18-month period in accordance with local country processes and regulations. We expect savings from the plan to be between $125 million and $175 million on an annualized basis beginning in 2027.

We incurred business optimization costs of $128 million ($98 million, net of tax, or $0.39 per diluted share) in the first quarter of 2025. These costs were primarily related to professional services and severance and are included in Corporate, other, and eliminations and Federal Express. We incurred business optimization costs of $105 million ($81 million, net of tax, or $0.32 per diluted share) in the first quarter of 2024. These costs were primarily related to professional services and severance and are included in Corporate, other, and eliminations and Federal Express.

We expect the pre-tax cost of the severance benefits and legal and professional fees to be provided under and related to our workforce reduction plan in Europe to range from $250 million to $375 million in cash expenditures through 2026.We expect the aggregate pre-tax cost of our other business optimization activities to be approximately $1.5 billion through 2025. The timing and amount of our business optimization expenses and the related cost savings from the workforce reduction plan may change as we revise and implement our plans. The identification of costs as business optimization-related expenditures is subject to our disclosure controls and procedures.

Income Taxes

Our effective tax rate was 24.8% for the first quarter of 2025 and 24.2% for the first quarter of 2024. The 2025 tax rate was unfavorably impacted by an increase in uncertain tax positions.

We are subject to taxation in the U.S. and various U.S. state, local, and foreign jurisdictions. We are currently under examination by the Internal Revenue Service for the 2016 through 2021 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. However, we believe we have recorded adequate amounts of tax, including interest and penalties, for any adjustments expected to occur.

During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on foreign earnings not repatriated, 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 $226 million attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. We continue to work towards obtaining a final judgment for the applicable refund amounts due to the regulation being invalid. Once the District Court enters a final judgment, the U.S. government could file an appeal with the U.S. Court of Appeals for the Sixth Circuit. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

Outlook

During 2025, we expect revenue to modestly increase driven primarily by deferred service offerings, as the macroeconomic environment remains challenging and customer demand remains constrained. We will continue to execute on our DRIVE program initiatives focused on reducing our permanent cost structure, aligning our cost base with demand, and increasing the flexibility of our network. We will also continue to execute on our revenue quality strategy to mitigate the impact of the service mix shift on our yield as well as base yield pressures through surcharge management and optimizing our customer mix. We expect the benefits from DRIVE and revenue quality initiatives to be partially offset by expense headwinds related to higher global inflation, the unfavorable effect of the expiration in September 2024 of the contract for Federal Express to provide the U.S. Postal Service ("USPS") U.S. domestic transportation services, and two fewer operating days.

See the "Business Optimization Costs" section of this MD&A for additional information on our DRIVE program, workforce reduction plan in Europe, and other cost savings initiatives.

Our capital expenditures for 2025 are expected to be approximately $5.2 billion, in line with 2024, as we continue to reduce our capital intensity relative to revenue. Aircraft spend is expected to decline, partially offset by increased investments in network optimization and modernization of our facilities.

We will continue to evaluate our investments in critical long-term strategic projects to ensure our capital expenditures are expected to generate high returns on investment and are balanced with our outlook for global economic conditions. For additional details on key 2025 capital projects, refer to the "Financial Condition - Capital Resources" and "Financial Condition - Liquidity Outlook" sections of this MD&A.

In June 2024, we announced that FedEx's management and Board of Directors are conducting an assessment of the role of FedEx Freight in the company's portfolio structure.

The uncertainty of a slowdown in the global economy, global inflation, geopolitical challenges, and the effects these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for the remainder of 2025 inherently less certain. See "Item 1A. Risk Factors" for more information.

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

RECENT ACCOUNTING GUIDANCE

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

REPORTABLE SEGMENTS

Federal Express and FedEx Freight represent our major service lines and constitute our reportable segments. Our reportable segments include the following businesses:

Federal Express Segment	Federal Express (express transportation, small-package ground delivery, and freight transportation)
FedEx Freight Segment	FedEx Freight (LTL freight transportation) FedEx Custom Critical (time-critical transportation)

The Federal Express segment operates combined sales, marketing, administrative, and information-technology functions in shared service operations for U.S. customers of our major business units and certain back-office support to FedEx Freight and our other operating segments which allows us to obtain synergies from the combination of these functions. We allocate the net operating costs of these services to reflect the full cost of operating our businesses in the results of those segments. We review and evaluate the performance of FedEx Freight and our other operating segments based on operating income inclusive of these allocations.

Operating expenses for our FedEx Freight segment include allocations of these services from the Federal Express segment. 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 revenue or estimated services provided. We believe these allocations approximate the net cost of providing these functions. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses.

CORPORATE, OTHER, AND ELIMINATIONS

Corporate and other includes corporate headquarters costs for executive officers and certain legal and finance functions, certain other costs and credits not attributed to our core business, and certain costs associated with developing integrated business solutions through our FedEx Dataworks, Inc. ("FedEx Dataworks") operating segment. FedEx Dataworks is focused on creating solutions to transform the digital and physical experiences of our customers and team members.

Also included in Corporate and other are the FedEx Office and Print Services, Inc. ("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, customs brokerage, and global ocean and air freight forwarding.

The results of Corporate, other, and eliminations are not allocated to the other business segments.

Operating results in Corporate, other, and eliminations declined in the first quarter of 2025 primarily due to a decrease in operating results at FedEx Dataworks, partially offset by improved operating results at FedEx Office. The decline in operating results at FedEx Dataworks was primarily due to increased business optimization costs and salaries and employee benefits expense. The improved

operating results at FedEx Office were primarily due to a decline in volume-related operating expenses, partially offset by reduced revenue.

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. For example, during the first quarter of 2025 FedEx Freight provided road and intermodal support for Federal Express. In addition, Federal Express works with FedEx Logistics to secure air charters and other cargo space for U.S. customers. Billings for such services are based on negotiated rates and are reflected as revenue of the billing segment. These rates are adjusted from time to time based on market conditions. Such intersegment revenue and expenses are eliminated in our consolidated results and are not separately identified in the following segment information because the amounts are not material.

FEDERAL EXPRESS SEGMENT

Federal Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight including priority, deferred, and economy services, which provide delivery on a time-definite or day-definite basis. The following table compares revenue, operating expenses, operating income (dollars in millions), operating margin, and operating expenses as a percent of revenue for the three-month periods ended August 31:

								Percent
		2024			2023			Change
Revenue:
Package:
U.S. priority		$	2,591			$	2,673				(3	)
U.S. deferred			1,151				1,187				(3	)
U.S. ground			8,056				8,133				(1	)
Total U.S. domestic package revenue			11,798				11,993				(2	)
International priority			2,206				2,327				(5	)
International economy			1,360				1,117				22
Total international export package revenue			3,566				3,444				4
International domestic(1)			1,112				1,140				(2	)
Total package revenue			16,476				16,577				(1	)
Freight:
U.S.			569				577				(1	)
International priority			526				553				(5	)
International economy			463				472				(2	)
Total freight revenue			1,558				1,602				(3	)		Percent of Revenue
Other			271				247				10			2024			2023
Total revenue			18,305				18,426				(1	)			100.0		%		100.0		%
Operating expenses:
Salaries and employee benefits			6,201				6,171				-				33.9				33.5
Purchased transportation			4,801				4,677				3				26.2				25.4
Rentals and landing fees			986				975				1				5.4				5.3
Depreciation and amortization			935				929				1				5.1				5.0
Fuel			954				961				(1	)			5.2				5.2
Maintenance and repairs			719				722				-				3.9				3.9
Business optimization costs			43				27				59				0.2				0.1
Intercompany allocations			(187	)			(175	)			7				(1.0	)			(0.9	)
Other			2,900				2,833				2				15.9				15.4
Total operating expenses			17,352				17,120				1				94.8		%		92.9		%
Operating income		$	953			$	1,306				(27	)
Operating margin			5.2	%			7.1	%			(190	)	bp

Prior year statistical information has been revised to conform to the current year presentation. The following table compares selected statistics (in thousands, except yield amounts) for the three-month periods ended August 31:

								Percent
		2024			2023			Change
Package Statistics
Average daily package volume (ADV)(1):
U.S. priority			1,600				1,680				(5	)
U.S. deferred			968				970				-
U.S. ground commercial			4,289				4,287				-
U.S. ground home delivery/economy			6,438				6,411				-
Total U.S. domestic ADV			13,295				13,348				-
International priority			622				658				(5	)
International economy			491				365				35
Total international export ADV			1,113				1,023				9
International domestic(2)			1,823				1,896				(4	)
Total ADV			16,231				16,267				-
Revenue per package (yield):
U.S. priority		$	25.30			$	24.49				3
U.S. deferred			18.59				18.81				(1	)
U.S. ground			11.73				11.70				-
U.S. domestic composite			13.87				13.82				-
International priority			55.37				54.37				2
International economy			43.33				47.15				(8	)
International export composite			50.06				51.80				(3	)
International domestic(2)			9.53				9.25				3
Composite package yield			15.86				15.68				1
Freight Statistics
Average daily freight pounds:
U.S.			5,319				5,305				-
International priority			4,465				4,390				2
International economy			10,706				11,001				(3	)
Total average daily freight pounds			20,490				20,696				(1	)
Revenue per pound (yield):
U.S.		$	1.67			$	1.67				-
International priority			1.84				1.94				(5	)
International economy			0.68				0.66				3
Composite freight yield			1.19				1.19				-

Federal Express Segment Revenue

Federal Express segment revenue decreased 1% in the first quarter primarily due to one fewer operating day, lower priority package volume, and reduced demand surcharges, partially offset by increased deferred package volume, base yields, and fuel surcharges.

Volume:

U.S. priority package volume decreased 5% in the first quarter primarily due to economic softness and lower consumer spending. International priority package volume decreased 5% in the first quarter primarily due to a continued shift toward our deferred service offerings. These declines were partially offset by a 35% increase in international economy package volume in the first quarter driven by a continued shift toward our deferred service offerings as a result of global macroeconomic conditions.

Yield:

Higher fuel surcharges had a significant positive effect on yields across all package and freight services in the first quarter. U.S. priority package yield increased 3% in the first quarter primarily due to modest rate increases and higher weight per package, partially offset by a decline in revenue quality. These improvements were partially offset by a 3% decrease in international export package yield in the first quarter primarily due to reduced demand surcharges and unfavorable service mix.

Federal Express Segment Operating Income

Federal Express segment operating income decreased 27% in the first quarter due to higher operating expenses and reduced revenue. The increase in operating expenses in the first quarter of 2025 was driven by increased wage and purchased transportation rates, partially offset by continued benefits from DRIVE initiatives that drove a reduction in our permanent cost structure. These initiatives included transforming our structural network, optimizing station processes in Europe, and improving the efficiency of our linehaul network and information technology function. Currency exchange rates had a negative effect on revenue and a positive effect on expenses and operating income in the first quarter. Operating income was negatively affected by one fewer operating day in the first quarter of 2025 compared to the first quarter of 2024.

Purchased transportation expense increased 3% in the first quarter primarily due to higher rates as well as an increase in commercial linehaul to support network changes and international economy volume growth, partially offset by one fewer operating day. Other operating expenses increased 2% primarily due to higher outside service contracts expense resulting from increased information technology spending and higher self-insurance accruals. Salaries and employee benefits expense increased slightly in the first quarter primarily due to an increase in wage rates as well as an increase in retirement benefits due to changes to our defined contribution plan which increased the number of eligible employees, partially offset by savings from our DRIVE initiatives and lower variable incentive compensation.

Federal Express segment results include business optimization costs of $43 million and $27 million in the first quarters of 2025 and 2024, respectively. See the "Business Optimization Costs" section of this MD&A for more information.

In July 2023, Federal Express's pilots failed to ratify the tentative successor agreement that was approved by the Air Line Pilots Association, International's FedEx Master Executive Council in the prior month. The ongoing bargaining process has no effect on our operations. See Note 1 of the accompanying unaudited condensed consolidated financial statements for additional information.

FEDEX FREIGHT SEGMENT

FedEx Freight LTL service offerings include priority services when speed is critical and economy services when time can be traded for savings. The following table compares revenue, operating expenses, operating income (dollars in millions), operating margin, selected statistics, and operating expenses as a percent of revenue for the three-month periods ended August 31:

								Percent			Percent of Revenue
		2024			2023			Change			2024			2023
Revenue		$	2,329			$	2,385				(2	)			100.0		%		100.0		%
Operating expenses:
Salaries and employee benefits			984				985				-				42.3				41.3
Purchased transportation			203				219				(7	)			8.7				9.2
Rentals			71				69				3				3.1				2.9
Depreciation and amortization			110				108				2				4.7				4.5
Fuel			121				139				(13	)			5.2				5.8
Maintenance and repairs			82				75				9				3.5				3.2
Intercompany charges			148				139				6				6.4				5.8
Other			171				169				1				7.3				7.1
Total operating expenses			1,890				1,903				(1	)			81.2		%		79.8		%
Operating income		$	439			$	482				(9	)
Operating margin			18.8	%			20.2	%			(140	)	bp
Average daily shipments (in thousands):
Priority			62.9				66.1				(5	)
Economy			29.1				28.5				2
Total average daily shipments			92.0				94.6				(3	)
Weight per shipment (lbs):
Priority			956				989				(3	)
Economy			868				876				(1	)
Composite weight per shipment			928				955				(3	)
Revenue per shipment:
Priority		$	363.97			$	353.01				3
Economy			408.60				407.99				-
Composite revenue per shipment		$	378.09			$	369.56				2
Revenue per hundredweight:
Priority		$	38.06			$	35.71				7
Economy			47.09				46.59				1
Composite revenue per hundredweight		$	40.73			$	38.71				5

FedEx Freight Segment Revenue

FedEx Freight segment revenue decreased 2% in the first quarter primarily due to lower shipments and one fewer operating day, partially offset by yield improvement.

Average daily shipments decreased 3% in the first quarter due to reduced demand for our priority services, partially offset by an increase in demand for our economy services, primarily resulting from macroeconomic conditions. Revenue per shipment increased 2% in the first quarter primarily due to base yield improvement resulting from our continued focus on revenue quality, partially offset by lower weight per shipment and fuel surcharges.

FedEx Freight Segment Operating Income

FedEx Freight segment operating income decreased 9% in the first quarter primarily due to decreased revenue, including one fewer operating day in the first quarter of 2025.

Maintenance and repairs expense increased 9% in the first quarter due to higher costs associated with outside vendor labor and vehicle parts. Fuel expense decreased 13% in the first quarter due to decreased shipments and lower fuel prices. Purchased transportation expense decreased 7% in the first quarter primarily due to decreased shipments.

FINANCIAL CONDITION

LIQUIDITY

Cash and cash equivalents totaled $5.9 billion at August 31, 2024, compared to $6.5 billion at May 31, 2024. The following table provides a summary of our cash flows for the three-month periods ended August 31, 2024 and August 31, 2023 (in millions):

		2024			2023
Operating activities:
Net income		$	794			$	1,078
Business optimization costs, net of payments			(69	)			(73	)
Other noncash charges and credits			2,072				1,958
Changes in assets and liabilities			(1,610	)			(733	)
Cash provided by operating activities			1,187				2,230
Investing activities:
Capital expenditures			(767	)			(1,290	)
Purchase of investments			(61	)			(2	)
Proceeds from sale of investments			13				-
Proceeds from asset dispositions and other			13				12
Cash used in investing activities			(802	)			(1,280	)
Financing activities:
Principal payments on debt			(34	)			(66	)
Proceeds from stock issuances			404				157
Dividends paid			(339	)			(318	)
Purchase of treasury stock			(1,000	)			(500	)
Cash used in financing activities			(969	)			(727	)
Effect of exchange rate changes on cash			26				(24	)
Net (decrease) increase in cash and cash equivalents		$	(558	)		$	199
Cash and cash equivalents at the end of period		$	5,943			$	7,055

Cash Provided by Operating Activities. Cash flows from operating activities decreased $1.0 billion in the first quarter of 2025 primarily due to working capital changes driven by a decrease in accrued incentive compensation and other liabilities and an increase in accounts receivable, partially offset by an increase in accounts payable from the first quarter of 2024.

Cash Used in Investing Activities. Capital expenditures decreased during the first quarter of 2025 primarily due to decreased spending on aircraft and related equipment and vehicles and trailers. See "Capital Resources" for a discussion of capital expenditures during 2025.

Financing Activities. We completed ASR transactions during the first quarter of 2025 with two banks to repurchase an aggregate of $1 billion of our common stock. See Note 1 of the accompanying unaudited condensed consolidated financial statements, "Liquidity Outlook" below, and Part II, Item 2. "Unregistered Sales of Equity Securities and Use of Proceeds" for additional information.

CAPITAL RESOURCES

Our operations are capital intensive, characterized by significant investments in aircraft, package handling and sort equipment, vehicles and trailers, technology, and facilities. The amount and timing of capital investments depend on various factors, including pre-existing contractual commitments, anticipated volume growth, domestic and international economic conditions, new or enhanced services, geographical expansion of services, availability of satisfactory financing, and actions of regulatory authorities.

The following table compares capital expenditures by asset category and reportable segment for the three-month periods ended August 31 (in millions):

		2024			2023			Percent Change
Aircraft and related equipment		$	181			$	554				(67	)
Package handling and ground support equipment			197				218				(10	)
Vehicles and trailers			90				167				(46	)
Information technology			153				153				-
Facilities and other			146				198				(26	)
Total capital expenditures		$	767			$	1,290				(41	)
Federal Express segment		$	703			$	1,172				(40	)
FedEx Freight segment			35				91				(62	)
Other			29				27				7
Total capital expenditures		$	767			$	1,290				(41	)

Capital expenditures decreased in the first quarter primarily due to decreased spending on aircraft and related equipment at Federal Express and decreased spending on vehicles and trailers at FedEx Freight and Federal Express.

GUARANTOR FINANCIAL INFORMATION

We are providing the following information in compliance with Rule 13-01 of Regulation S-X, "Financial Disclosures about Guarantors and Issuers of Guaranteed Securities" with respect to our senior unsecured debt securities and Pass-Through Certificates, Series 2020-1AA (the "Certificates").

The $19.3 billion principal amount of the senior unsecured notes were issued by FedEx under a shelf registration statement and are guaranteed by certain direct and indirect subsidiaries of FedEx ("Guarantor Subsidiaries"). FedEx owns, directly or indirectly, 100% of each Guarantor Subsidiary. The guarantees are (1) unsecured obligations of the respective Guarantor Subsidiary, (2) rank equally with all of their other unsecured and unsubordinated indebtedness, and (3) are full and unconditional and joint and several. If we sell, transfer, or otherwise dispose of all of the capital stock or all or substantially all of the assets of a Guarantor Subsidiary to any person that is not an affiliate of FedEx, the guarantee of that Guarantor Subsidiary will terminate, and holders of debt securities will no longer have a direct claim against such subsidiary under the guarantee.

Additionally, FedEx fully and unconditionally guarantees the payment obligation of Federal Express in respect of the $763 million principal amount of the Certificates. See Note 4 of the accompanying unaudited condensed consolidated financial statements and Note 6 to the financial statements included in our Annual Report for additional information regarding the terms of the Certificates.

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

Parent and Guarantor Subsidiaries

The following table presents the summarized balance sheet information as of August 31, 2024 and May 31, 2024 (in millions):

		August 31, 2024			May 31, 2024
Current Assets		$	10,652			$	10,618
Intercompany Receivable			4,381				4,625
Total Assets			83,693				83,880
Current Liabilities			10,446				9,658
Intercompany Payable			-				-
Total Liabilities			52,552				52,551

The following table presents the summarized statement of income information for the three-month period ended August 31, 2024 (in millions):

Revenue		$	15,960
Intercompany Charges, net			(1,007	)
Operating Income			1,006
Intercompany Charges, net			57
Income Before Income Taxes			830
Net Income		$	580

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

Parent Guarantor and Subsidiary Issuer

The following table presents the summarized balance sheet information as of August 31, 2024 and May 31, 2024 (in millions):

		August 31, 2024			May 31, 2024
Current Assets		$	10,614			$	4,473
Intercompany Receivable			1,181				7,399
Total Assets			72,815				62,900
Current Liabilities			9,695				5,958
Intercompany Payable			-				-
Total Liabilities			49,357				38,962

The following table presents the summarized statement of income information for the three-month period ended August 31, 2024 (in millions):

Revenue		$	13,575
Intercompany Charges, net			(1,201	)
Operating Income			654
Intercompany Charges, net			(14	)
Income Before Income Taxes			839
Net Income		$	641

LIQUIDITY OUTLOOK

In response to current business and economic conditions as referenced above in the "Outlook" section of this MD&A, we are continuing to actively manage and optimize our capital allocation in response to the slowdown in the economy, inflationary pressures, changing fuel prices, and geopolitical conflicts. We held $5.9 billion in cash and cash equivalents at August 31, 2024 and $3.5 billion in available liquidity under our $1.75 billion three-year credit agreement (the "Three-Year Credit Agreement") and $1.75 billion five-year credit agreement (the "Five-Year Credit Agreement" and together with the Three-Year Credit Agreement, the "Credit Agreements"), and we believe that our cash and cash equivalents, cash from operations, and available financing sources will be adequate to meet our liquidity needs, which include operational requirements, expected capital expenditures, voluntary pension contributions, dividend payments, and stock repurchases.

We executed ASR agreements with two banks in June 2024 to repurchase an aggregate of $1 billion of our common stock that were completed in August 2024. We expect to repurchase an additional $1.5 billion of our common stock in 2025. See Note 1 of the accompanying unaudited condensed consolidated financial statements and "Item 2. Unregistered Sales of Equity Securities and Use of Proceeds" for more information.

Our cash and cash equivalents balance at August 31, 2024 includes $2.3 billion of cash in foreign jurisdictions associated with our permanent reinvestment strategy. We are able to access the majority of this cash without a material tax cost and do not believe that the indefinite reinvestment of these funds impairs our ability to meet our U.S. domestic debt or working capital obligations.

Our capital expenditures for 2025 are expected to be approximately $5.2 billion, in line with 2024, as we continue to reduce our capital intensity relative to revenue. Aircraft spend is expected to decline, partially offset by increased investments in network optimization and modernization of our facilities.

There have been no material changes to the contractual commitments described in Part II, Item 7 in our Annual Report. We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material effect on our financial condition or liquidity.

We have several aircraft modernization programs under way that are supported by the purchase of Boeing 777 Freighter and Boeing 767-300 Freighter aircraft. These aircraft are significantly more fuel-efficient per unit than the aircraft types previously utilized, and these expenditures are necessary to achieve significant long-term operating savings and to replace older aircraft. Our ability to delay the timing of these aircraft-related expenditures is limited without incurring significant costs to modify existing purchase agreements.

The Three-Year Credit Agreement and the Five-Year Credit Agreement expire in March 2027 and March 2029, respectively. Each of the Credit Agreements has a $125 million letter of credit sublimit. The Credit Agreements are available to finance our operations and other cash flow needs. See Note 4 of the accompanying unaudited condensed consolidated financial statements for more information.

We have a shelf registration statement filed with the Securities and Exchange Commission ("SEC") that allows us to sell, in one or more future offerings, any combination of our unsecured debt securities and common stock and allows pass-through trusts formed by Federal Express to sell, in one or more future offerings, pass-through certificates.

During the first quarter of 2025, we made voluntary contributions of $300 million to our tax-qualified U.S. domestic pension plan ("U.S. Pension Plan"). We anticipate making $500 million of additional voluntary contributions during the remainder of 2025. There are currently no required minimum contributions to our U.S. Pension Plan, and we maintain a credit balance related to our cumulative excess voluntary pension contributions over those required that exceeds $3.0 billion. The credit balance is subtracted from plan assets to determine the minimum funding requirements. Therefore, we have the flexibility to eliminate all required contributions to our principal U.S. Pension Plan for several years. Our U.S. Pension Plan has ample funds to meet expected benefit payments.

On August 16, 2024, our Board of Directors declared a quarterly cash dividend of $1.38 per share of common stock. The dividend will be paid on October 1, 2024 to stockholders of record as of the close of business on September 9, 2024. 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.

Standard & Poor's has assigned us a senior unsecured debt credit rating of BBB, a Certificates rating of AA-, a commercial paper rating of A-2, and a ratings outlook of "stable." Moody's Investors Service has assigned us an unsecured debt credit rating of Baa2, a Certificates rating of Aa3, a commercial paper rating of P-2, and a ratings outlook of "stable." Our interest expense may increase in the event of a reduction in our credit rating. If our unsecured debt or commercial paper ratings are reduced to below investment grade, our access to the capital markets may become limited.

CRITICAL ACCOUNTING ESTIMATES

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

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. In connection with our one FedEx consolidation plan, we reevaluated the conclusion of our 2024 goodwill impairment tests as of June 1, 2024, and concluded that the estimated fair values of our reporting units with significant goodwill continued to exceed their carrying values. We do not believe there has been any additional change of events or circumstances that would indicate that additional reevaluation of the goodwill of our reporting units is required as of August 31, 2024, nor do we believe the goodwill of our reporting units is at risk of failing impairment testing. For additional details on goodwill impairment testing, refer to Note 1 to the financial statements included in our Annual Report.

Information regarding our critical accounting estimates can be found in our Annual Report, including Note 1 to the financial statements therein. Management has discussed the development and selection of these critical accounting estimates with the Audit and Finance Committee of our Board of Directors and with our independent registered public accounting firm.

FORWARD-LOOKING STATEMENTS

Certain statements in this report, including (but not limited to) those contained in "Trends Affecting Our Business," "Business Optimization Costs," "Income Taxes," "Outlook," "Liquidity Outlook," "Critical Accounting Estimates," "Legal Proceedings," and "Risk Factors" and the "Description of Business Segments and Summary of Significant Accounting Policies," "Financing Arrangements," "Retirement Plans," "Commitments," and "Contingencies" notes to our unaudited condensed consolidated financial statements, are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, cash flows, plans, objectives, future performance, and business and the assumptions underlying such statements. Forward-looking statements include those preceded by, followed by, or that include the words "will," "may," "could," "would," "should," "believes," "expects," "anticipates," "plans," "estimates," "targets," "forecasts," "projects," "intends," or similar expressions. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking statements because of, among other things, potential risks and uncertainties, such as:

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of August 31, 2024, 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, Mexican peso, Hong Kong dollar, and Japanese yen. Historically, our exposure to foreign currency fluctuations is more significant with respect to our 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 quarter of 2025, the U.S. dollar weakened relative to the currencies of the foreign countries in which we operate, and this weakening had a slightly positive effect on our results.

While we have market risk for changes in the price of vehicle and jet fuel, this risk is largely mitigated by our indexed fuel surcharges. For additional discussion of our indexed fuel surcharges, see the "Results of Operations and Outlook - Consolidated Results -Fuel" section of "Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition" included in our Annual Report.

Item 4. Controlsand Procedures

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, is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, including ensuring that such information is accumulated and communicated to FedEx management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of August 31, 2024 (the end of the period covered by this Quarterly Report on Form 10-Q).

During our fiscal quarter ended August 31, 2024, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHERINFORMATION

Item 1. LegalProceedings

For a description of all material pending legal proceedings, see Note 9 of the accompanying unaudited condensed consolidated financial statements, which is incorporated by reference herein. In connection with the one FedEx consolidation, effective June 1, 2024, Federal Express assumed liability for all pending litigation to which FedEx Ground and FedEx Services were previously party.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in our Annual Report in response to Part I, Item 1A of Form 10-K. Additional risks not currently known to us or that we currently deem to be immaterial also may materially affect our business, results of operations, financial condition, and the price of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information on FedEx's repurchases of our common stock during the first quarter of 2025:

ISSUER PURCHASES OF EQUITY SECURITIES

Period		Total Number of Shares Purchased			Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Program				Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program ($ in millions)
Jun. 1-30, 2024			-				-				-				$	4,064
Jul. 1-31, 2024			2,707,550			$	295.99				2,707,550				$	4,064
Aug. 1-31, 2024			670,975			$	295.99				670,975				$	4,064
Total			3,378,525							3,378,525				$	4,064

In December 2021, our Board of Directors approved a stock repurchase program of up to $5 billion of FedEx common stock. In March 2024, our Board of Directors authorized a new stock repurchase program for additional repurchases of up to $5 billion of FedEx common stock. As of May 31, 2024, $64 million remained available to be used for repurchases under the 2021 program.

As part of the 2021 and 2024 repurchase programs, we entered into accelerated share repurchase ("ASR") transactions with two banks in June 2024 to repurchase an aggregate of $1 billion of our common stock. During the first quarter of 2025, the ASR transactions were completed, and 3.4 million shares were delivered under the ASR agreements. The shares delivered under the ASR agreements were the only shares of FedEx common stock we repurchased during the first quarter of 2025.

As of September 19, 2024, approximately $4.1 billion remained available to be used for repurchases under the 2024 stock repurchase program (no shares remain available to be used for repurchases under the 2021 stock repurchase program). Shares under the program may be repurchased from time to time in the open market or in privately negotiated transactions. No time limits were set for completion of the program; however, we may decide to suspend or discontinue the program.

See Note 1 of the accompanying unaudited condensed consolidated financial statements for additional information regarding the ASR transactions and "Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition - Financial Condition - Liquidity Outlook" for information regarding our expected stock repurchases during the remainder of 2025.

Item 5. Other Information

During the quarter ended August 31, 2024, nodirector or officer of FedEx adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as such terms are defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

Exhibit Number		Description of Exhibit
*^10.1		Aircraft Dry Lease Agreement, dated August 1, 2024, between Aircraft Owner and Federal Express.
*^10.2		Aircraft Flight Support and Flight Crew Services Agreement, dated August 1, 2024, between Frederick W. Smith and Federal Express.
†10.3		Amended and Restated FedEx Retirement Parity Pension Plan, effective June 1, 2024. (Filed as Exhibit 10.60 to FedEx's FY24 Annual Report on Form 10-K, and incorporated herein by reference).
15.1		Letter re: Unaudited Interim Financial Statements.
22		List of 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).

* 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 copies of such attachments to the SEC or its staff upon request.

^ Certain information in this document has been redacted pursuant to Item 606(a)(6) of Regulation S-K because the disclosure of such information would constitute a clearly unwarranted invasion of personal privacy.

† Management contracts/compensatory plans or arrangements.

SIGNATURE

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.

			FedEx Corporation
Date: September 19, 2024			/s/ Guy M. Erwin II
			Guy M. Erwin II
			Corporate Vice President and
			Chief Accounting Officer