FEDEX CORP

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NOTE 2: DISCONTINUED OPERATIONS

On May 13, 2026, the FedEx Board of Directors declared a pro rata dividend of 80.1% of the outstanding shares of common stock of FedEx Freight to FedEx’s stockholders of record as of the close of business on the Record Date to effect the Spin-Off. On June 1, 2026, FedEx stockholders received one share of FedEx Freight common stock for every two shares of FedEx common stock held as of the Record Date. As further discussed in Note 4, FedEx retained a 19.9% ownership interest in FedEx Freight common stock.

The Spin-Off was structured as a tax-free transaction for U.S. federal income tax purposes. In connection with the Spin-Off, we entered into various agreements with FedEx Freight to effect the separation and provide a framework for our post-separation relationship. These arrangements, together with our temporary retained ownership interest, do not constitute significant continuing involvement in FedEx Freight. We did not recognize a gain or loss upon completion of the Spin-Off because the transaction was achieved through a pro rata distribution to our shareholders and no consideration was received.

Following the Spin-Off, the results, assets and liabilities of FedEx Freight are reported as discontinued operations and excluded from both continuing operations and segment results for all reporting periods, including comparable historical periods. The statement of cash flows has not been recast to reflect discontinued operations for any periods presented. Supplemental disclosure of operating and investing cash flows from discontinued operations is included below.

Results of Discontinued Operations

The following table presents the major classes of income and expense comprising income from discontinued operations (in millions):

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Assets and Liabilities of Discontinued Operations

The following table presents the carrying amounts of the major classes of assets and liabilities of FedEx Freight included as part of discontinued operations (in millions):

Cash Flows of Discontinued Operations

The operating, investing, and financing cash flows of FedEx Freight's discontinued operations are not separately presented on the face of the Condensed Consolidated Statements of Cash Flows. The following table presents the operating and investing cash flows attributable to discontinued operations (in millions):

NOTE 3: CREDIT LOSSES

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 current underlying economic expectations. During the year, changes in economic conditions, including the impact of tariffs, contributed to higher bad‑debt write‑offs compared to the prior year.

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These factors were considered in our assessment of expected credit losses and the determination of the allowance. We update our estimate of credit loss reserves monthly.

Changes in the allowance for credit losses during the four months ended September 30, 2026 were as follows:

NOTE 4: INVESTMENTS

Equity Method Investment

On September 24, 2026, FedEx acquired a 37% ownership interest in Lux TopCo S.á. r.l. (“TopCo”) for cash consideration of €2.2 billion in connection with its investment in InPost S.A. (“InPost”). InPost will continue to operate as a standalone company. We account for our investment under the equity method of accounting because we have the ability to exercise significant influence over the operating and financial policies of TopCo. The investment is included within "Equity method investment" in the accompanying condensed consolidated balance sheets. We recognized no equity method earnings during the three and four-month periods ended September 30, 2026.

Equity Securities

Equity securities totaled $576 million and $564 million at September 30, 2026 and May 31, 2026, respectively. Equity securities are recorded within “Goodwill and other assets” in the accompanying unaudited condensed consolidated balance sheets.

Following the Spin-Off, we retained an ownership interest of 19.9% in FedEx Freight, which is accounted for as an equity security with a readily determinable fair value. We recognized cumulative unrealized gain of $3.3 billion during the four-month period ended September 30, 2026 within “Gain (loss) on short-term investment” in the accompanying unaudited condensed consolidated statements of income. During the three-month period ended September 30, 2026, we recognized a $1.2 billion unrealized loss due to a decline in the fair value of the retained interest. The carrying value of this equity security totaled $3.3 billion at September 30, 2026 and is recorded within “Short-term investment” in the accompanying unaudited condensed consolidated balance sheets. We expect to fully monetize our remaining stake in FedEx Freight within 12 months from the balance sheet date, subject to market conditions.

Debt Securities

Debt securities totaled $266 million and $236 million at September 30, 2026 and May 31, 2026, respectively. Debt securities are recorded within the “Prepaid expenses and other” caption in the accompanying unaudited condensed consolidated balance sheets. This increase primarily reflects strategic purchases of corporate debt and U.S. Treasury securities to enhance returns on cash balances.

NOTE 5: FINANCING ARRANGEMENTS

Long-Term Debt

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 and allows pass-through trusts formed by Federal Express to sell, in one or more future offerings, pass-through certificates.

Long-term debt, including current maturities and exclusive of finance leases, had carrying values of $17.6 billion at September 30, 2026 and $19.2 billion at May 31, 2026, with estimated fair values of $16.0 billion at September 30, 2026 and $17.3 billion at May 31, 2026. The annualized weighted-average interest rate on long-term debt was 3.75% at September 30, 2026. The estimated fair values were determined based on quoted market prices and the

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On September 14, 2026, we issued additional senior unsecured debt securities pursuant to our current shelf registration statement, comprised of $1.1 billion of 5.750% notes due 2036, €1.1 billion of 4.000% notes due 2030, and €900 million of 4.625% notes due 2034. The net proceeds from these offerings will be used for general corporate purposes, which may include the redemption or repayment of outstanding indebtedness. Pending such use, we may invest the net proceeds in short-term investments, including cash, cash equivalents and/or marketable securities.

On July 14, 2026, we completed cash tender offers for certain series of our outstanding debt securities, resulting in the repurchase of approximately $4.9 billion aggregate principal amount of such securities. The securities repurchased consisted of (in millions):

We utilized cash proceeds from the approximately $4.1 billion dividend received from FedEx Freight in connection with the Spin-Off, as well as cash on hand, to fund the cash tender offers. We recognized an approximately $627 million gain on partial extinguishment of debt during the three months ended September 30, 2026, which is included in “Other non-operating, net” in the accompanying unaudited condensed consolidated statements of income. In determining the value of the gain, we expensed the proportional amount of the related unamortized discount, premium and debt issuance costs attributable to the repurchased securities.

In connection with the Spin-Off, FedEx Freight issued $3.7 billion of senior unsecured debt and borrowed $600 million under athree-year delayed draw term loan facility. FedEx Freight used the net proceeds from these debt issuances to make a dividend of $4.1 billion to FedEx upon completion of the Spin-Off on June 1, 2026. As a result, these borrowings are reported in “Non-current liabilities of discontinued operations” within the condensed consolidated balance sheet for the period ended May 31, 2026 and were no longer an obligation of FedEx as of June 1, 2026.

Credit Agreements

We have a $1.75 billion three-year credit agreement (the “Three-Year Credit Agreement”) with an expiration of March 2028 and a $1.75 billion five-year credit agreement with an expiration of March 2030 (the “Five-Year Credit Agreement” and together with the Three-Year Credit Agreement, the “Credit Agreements”). 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. As of September 30, 2026, no amounts were outstanding under the Credit Agreements, no commercial paper was outstanding under our commercial paper program, and approximately $3.5 billion of borrowing capacity remained available under the Credit Agreements. Our commercial paper program is supported by unused commitments under the Credit Agreements, and borrowings under the program reduce the amount available under the Credit Agreements.

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The Credit Agreements contain a financial covenant that requires FedEx to maintain a ratio of debt to consolidated adjusted earnings before interest, tax, depreciation, and amortization (“adjusted EBITDA”) not exceeding 3.5 to 1.0, subject to specified adjustments and definitions contained in the agreements, as of the last day of each fiscal quarter on a rolling four quarters basis. FedEx was in compliance with all financial covenants and other restrictive provisions as of September 30, 2026. Management monitors available liquidity, debt maturities, covenant compliance, capital markets access, and refinancing opportunities as part of its ongoing treasury activities. The ratio of our debt to adjusted EBITDA was 1.9 at September 30, 2026. Additional information on the financial covenant can be found in our Annual Report.

The financial covenant discussed above is the only significant restrictive covenant in the Credit Agreements. The Credit Agreements contain other customary covenants that do not, individually or in the aggregate, materially restrict the conduct of our business. We are in compliance with the financial covenant and all other covenants in the Credit Agreements and do not expect the covenants to affect our operations, including our liquidity or expected funding needs. If we failed to comply with the financial covenant or any other covenants in the Credit Agreements, our access to financing could become limited.

NOTE 6: RETIREMENT PLANS

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.

As discussed in Note 1, our pilots are employed under a newly ratified CBA that took effect on June 29, 2026, which included an amendment to our Employees’ Pension Plan (“EPP”), resulting in an increase to the projected benefit obligation (“PBO”) of $596 million and a pre-tax, noncash mark-to-market gain of $141 million resulting from the interim remeasurement primarily due to a higher discount rate.

In advance of the Spin-Off, a legally separate FedEx Freight defined benefit pension plan was established to transfer both pension liabilities and qualified pension assets for active pension participants who transitioned to FedEx Freight. Effective June 1, 2026, the FedEx defined benefit pension plan and the FedEx Freight defined benefit pension plan were legally separated. The FedEx defined benefit pension plan completed the transfer of an immaterial amount of net liabilities to the FedEx Freight defined benefit pension plan.

Net periodic benefit cost of the pension and postretirement healthcare plans for the periods ended September 30, 2026 and 2025 included the following components (in millions):

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The non-service components of net periodic benefit cost are included in ‘Other non-operating, net’ in the accompanying unaudited condensed consolidated statements of income. We made voluntary contributions of $300 million to our U.S. Pension Plan during the four-month period ended September 30, 2026. We anticipate making additional voluntary contributions of $100 million to the U.S. Pension Plan during the remainder of calendar year 2026.

NOTE 7: ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table provides changes in AOCL, net of tax, reported in our unaudited condensed consolidated financial statements for the periods ended September 30, 2026 and 2025(in millions; amounts in parentheses indicate debits to AOCL):

NOTE 8: COMPUTATION OF EARNINGS PER SHARE

Basic earnings per share is calculated using the two-class method, which allocates all earnings (distributed and undistributed) to common stock and participating securities. Prior to June 2026, FedEx granted restricted stock under its stock-based compensation programs; these shares receive nonforfeitable dividends during vesting, making them participating securities and a separate class in basic earnings per share.

Diluted earnings per share reflects the potential impact of contingently issuable shares, including awards requiring future service. It is computed under both the two-class and treasury stock methods, with the more dilutive amount reported. For all periods shown, the two-class method produced the more dilutive result.

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The following table sets forth the computation of basic and diluted earnings per common share for the periods ended September 30, 2026 and 2025 (in millions, except per share amounts):

(1)Net earnings available to participating securities relating to continuing operations were immaterial and $1 million for the three-month periods ended September 30, 2026 and 2025, respectively, and $8 million and $1 million for the four-month periods ended September 30, 2026 and 2025, respectively. Net earnings available to participating securities relating to discontinued operations were $1 million for each of the three- and four-month periods ended September 30, 2025.

NOTE 9: BUSINESS SEGMENTS AND DISAGGREGATED REVENUE

FedEx hastwo reportable segments: Express U.S. Domestic and Express International, which together operate under Federal Express Corporation, the world’s largest express transportation company and a leading North American provider of small-package ground delivery services. Our remaining businesses are reported as Corporate, other, and eliminations.

Our Chief Executive Officer is our chief operating decision maker (“CODM”). The CODM is responsible for the company’s operating strategy, growth, and profitability and reviews financial information for ourtwo reportable segments. The CODM uses operating income as the primary measure of segment performance because it reflects the underlying business performance and provides the CODM with a basis for making resource allocation decisions. Operating income is defined as income before other (expense) income, interest, net, and provision for income taxes. Our CODM also utilizes operating income in the annual budget and monthly forecasting processes and considers forecast-to-actual variances on a monthly basis when making resource allocation decisions. Our CODM evaluates assets and capital expenditures at a global network level. As such, these are not reviewed by segment when evaluating performance or making resource allocation decisions and are therefore not disclosed below.

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Other segment items are primarily comprised of salaries and employee benefits, purchased transportation, rentals and landing fees, fuel, depreciation and amortization, maintenance and repairs, and other expenses. These items are managed on a consolidated basis and are not regularly provided to the CODM.

The U.S. Domestic 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 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 our other operating segments based on operating income inclusive of these allocations.

Certain FedEx operating companies provide transportation and related services for other FedEx companies outside their reportable segment in order to optimize our resources. 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.

The following tables present segment information for the periods ended September 30, 2026 and 2025 (in millions):

(1)Revenue and operating income (loss) from segments below the quantitative thresholds are attributable to operating segments contained within “Corporate, other, and eliminations.” These operating segments include FedEx Corporate, FedEx Office, FedEx Supply Chain and FedEx Dataworks.

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(1)Depreciation and amortization from segments below the quantitative thresholds are attributable to operating segments contained within “Corporate, other, and eliminations.” These operating segments include FedEx Corporate, FedEx Office, FedEx Supply Chain and FedEx Dataworks.

The following table presents revenue by service type for the periods ended September 30, 2026 and 2025 (in millions):

(1)International domestic revenue relates to our intra-country operations.

(2)Includes FedEx Office, FedEx Supply Chain, and FedEx Dataworks operating segments.

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