Business Segment Information

12 Months Ended

May 31, 2011

Business Segment Information Abstract

NOTE 13: BUSINESS SEGMENT INFORMATION

FedEx Express, FedEx Ground and FedEx Freight represent our major service lines and, along with FedEx Services, form the core of our reportable segments. Our reportable segments include the following businesses:

FedEx Express Segment	FedEx Express (express transportation)
	FedEx Trade Networks (global trade services)
	FedEx SupplyChain Systems (logistics services)

FedEx Ground Segment	FedEx Ground (small-package ground delivery)
	FedEx SmartPost (small-parcel consolidator)

FedEx Freight Segment	FedEx Freight (LTL freight transportation)
	FedEx Custom Critical (time-critical transportation)

FedEx Services Segment	FedEx Services (sales, marketing and information technology
		functions)
	FedEx TechConnect (customer service, technical support, billings
		and collections)
	FedEx Office (document and business services and package
		acceptance)

Effective January 30, 2011, our FedEx Freight and FedEx National LTL businesses were merged into a single operation. FedEx Freight now offers two standard services: FedEx Freight Priority, a faster transit service with a price premium; and FedEx Freight Economy, an economical service.

FedEx Services Segment

The FedEx Services segment operates combined sales, marketing, administrative and information technology functions in shared services operations that support our transportation businesses and allow us to obtain synergies from the combination of these functions. The FedEx Services segment includes: FedEx Services, which provides sales, marketing and information technology support to our other companies; FedEx TechConnect, which is responsible for customer service, technical support, billings and collections for U.S. customers of our major business units; and FedEx Office, which provides an array of document and business services and retail access to our customers for our package transportation businesses. Effective September 1, 2009, FedEx SupplyChain Systems, formerly included in the FedEx Services reporting segment, was realigned to become part of the FedEx Express reporting segment. Prior year amounts have not been reclassified to conform to the current year segment presentation because these reclassifications are immaterial.

The FedEx Services segment provides direct and indirect support to our transportation businesses, and we allocate all of the net operating costs of the FedEx Services segment (including the net operating results of FedEx Office) to reflect the full cost of operating our transportation businesses in the results of those segments. Within the FedEx Services segment allocation, the net operating results of FedEx Office are allocated to FedEx Express and FedEx Ground. The allocations of net operating costs are based on metrics such as relative revenues or estimated services provided. We believe these allocations approximate the net cost of providing these functions. We review and evaluate the performance of our transportation segments based on operating income (inclusive of FedEx Services segment allocations). For the FedEx Services segment, performance is evaluated based on the impact of its total allocated net operating costs on our transportation segments.

The operating expenses line item “Intercompany charges” on the accompanying unaudited financial summaries of our transportation segments in MD&A reflects the allocations from the FedEx Services segment to the respective transportation segments. The “Intercompany charges” caption also includes charges and credits for administrative services provided between operating companies and certain other costs such as corporate management fees related to services received for general corporate oversight, including executive officers and certain legal and finance functions. We believe these allocations approximate the net cost of providing these functions.

Effective August 1, 2009, approximately 3,600 employees (predominantly from the FedEx Freight segment) were transferred to entities within the FedEx Services segment. This internal reorganization further centralized most customer support functions, such as sales, customer service and information technology, into our shared services organizations. While the reorganization had no impact on the net operating results of any of our transportation segments, the net intercompany charges to our FedEx Freight segment increased significantly with corresponding decreases to other expense captions, such as salaries and employee benefits. The impact of this internal reorganization to the expense captions in our other segments was immaterial.

Other Intersegment Transactions

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

The following table provides a reconciliation of reportable segment revenues, depreciation and amortization, operating income (loss) and segment assets to consolidated financial statement totals for the years ended or as of May 31 (in millions):

		FedEx Express Segment⁽¹⁾		FedEx Ground Segment		FedEx Freight Segment⁽²⁾		FedEx Services Segment⁽³⁾		Other and Eliminations		Consolidated Total

Revenues
2011		$	24,581	$	8,485	$	4,911	$	1,684	$	(357)	$	39,304
2010			21,555		7,439		4,321		1,770		(351)		34,734
2009			22,364		7,047		4,415		1,977		(306)		35,497
Depreciation and amortization
2011		$	1,059	$	337	$	205	$	371	$	1	$	1,973
2010			1,016		334		198		408		2		1,958
2009			961		337		224		451		2		1,975
Operating income (loss)
2011		$	1,228	$	1,325	$	(175)	$	-	$	-	$	2,378
2010			1,127		1,024		(153)		-		-		1,998
2009			794		807		(44)		(810)		-		747
Segment assets⁽⁴⁾
2011		$	16,463	$	5,048	$	2,664	$	4,278	$	(1,068)	$	27,385
2010			14,819		4,118		2,786		4,079		(900)		24,902
2009			13,483		3,291		3,044		3,240		1,186		24,244

⁽¹⁾	FedEx Express segment 2011 operating expenses include a $66 million legal reserve associated with the ATA Airlines lawsuit, and 2009 operating expenses include a charge of $260 million primarily for aircraft-related asset impairments.

⁽²⁾	FedEx Freight segment 2011 operating expenses include $133 million in costs associated with the combination of our FedEx Freight and FedEx National LTL operations, effective January 30, 2011, and 2009 operating expenses include a charge of $100 million primarily for impairment charges associated with goodwill related to the FedEx National LTL acquisition.

⁽³⁾	FedEx Services segment 2009 operating expenses include a charge of $810 million for impairment of goodwill related to the Kinko's (now known as FedEx Office) acquisition. The normal, ongoing net operating costs of the FedEx Services segment are allocated back to the transportation segments.

⁽⁴⁾	Segment assets include intercompany receivables.

The following table provides a reconciliation of reportable segment capital expenditures to consolidated totals for the years ended May 31 (in millions):

	FedEx Express Segment		FedEx Ground Segment		FedEx Freight Segment		FedEx Services Segment		Other		Consolidated Total

2011	$	2,467	$	426	$	153	$	387	$	1	$	3,434
2010		1,864		400		212		340		-		2,816
2009		1,348		636		240		235		-		2,459

The following table presents revenue by service type and geographic information for the years ended or as of May 31 (in millions):

REVENUE BY SERVICE TYPE
				2011		2010		2009

FedEx Express segment:
	Package:
		U.S. overnight box		$	6,128	$	5,602	$	6,074
		U.S. overnight envelope			1,736		1,640		1,855
		U.S. deferred			2,805		2,589		2,789
			Total domestic package revenue		10,669		9,831		10,718
		International Priority (IP)			8,228		7,087		6,978
		International domestic⁽¹⁾			653		578		565
			Total package revenue		19,550		17,496		18,261

	Freight:
		U.S.			2,188		1,980		2,165
		International priority			1,722		1,303		1,104
		International airfreight			283		251		369
			Total freight revenue		4,193		3,534		3,638

	Other⁽²⁾				838		525		465
			Total FedEx Express segment		24,581		21,555		22,364

FedEx Ground segment					8,485		7,439		7,047
FedEx Freight segment					4,911		4,321		4,415
FedEx Services segment					1,684		1,770		1,977
Other and eliminations					(357)		(351)		(306)
				$	39,304	$	34,734	$	35,497

GEOGRAPHICAL INFORMATION⁽³⁾

Revenues:
	U.S.			$	27,461	$	24,852	$	25,819
	International:
		FedEx Express segment			11,437		9,547		9,363
		FedEx Ground segment			177		140		124
		FedEx Freight segment			84		60		39
		FedEx Services segment			145		135		152
			Total international revenue		11,843		9,882		9,678

				$	39,304	$	34,734	$	35,497

Noncurrent assets:
	U.S.			$	17,235	$	16,089	$	15,615
	International				1,865		1,529		1,513
				$	19,100	$	17,618	$	17,128

⁽¹⁾		International domestic revenues include our international intra-country domestic express operations.

⁽²⁾		Other revenues includes FedEx Trade Networks and, beginning in the second quarter of 2010, FedEx SupplyChain Systems.

⁽³⁾		International revenue includes shipments that either originate in or are destined to locations outside the United States. Noncurrent assets include property and equipment, goodwill and other long-term assets. Our flight equipment registered in the U.S. is included as U.S. assets; however, many of our aircraft operate internationally.