Business Segment Information

12 Months Ended

May. 31, 2015

Business Segment Information [Abstract]

Business Segment Information

NOTE 14: 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 (air and ocean freight forwarding and customs
		brokerage)
	FedEx SupplyChain Systems (logistics services)
	Bongo (cross-border enablement technology and solutions)
FedEx Ground Segment	FedEx Ground (small-package ground delivery)
	FedEx SmartPost (small-parcel consolidator)
	GENCO (third-party logistics)
FedEx Freight Segment	FedEx Freight (LTL freight transportation)
	FedEx Custom Critical (time-critical transportation)
FedEx Services Segment	FedEx Services (sales, marketing, information technology,
		communications and back-office functions)
	FedEx TechConnect (customer service, technical support, billings
		and collections)
	FedEx Office (document and business services and package
		acceptance)

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. For the international regions of FedEx Express, some of these functions are performed on a regional basis by FedEx Express and reported in the FedEx Express segment in their natural expense line items. The FedEx Services segment includes: FedEx Services, which provides sales, marketing, information technology, communications and certain back-office 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.

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, which are an immaterial component of our allocations, are allocated to FedEx Express and FedEx Ground. 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.

Operating expenses for each of our transportation segments include the allocations from the FedEx Services segment to the respective transportation segments. These allocations also include charges and credits for administrative services provided between operating companies. The allocations of net operating costs are based on metrics such as relative revenues or estimated services provided. We believe these allocations approximate the net cost of providing these functions and our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses.

During the fourth quarter of 2015, we changed our method of accounting for our defined benefit pension and postretirement healthcare plans to immediately recognize actuarial gains and losses resulting from the remeasurement of these plans in earnings in the fourth quarter of each fiscal year. In addition, for purposes of calculating the EROA, we will no longer use an averaging technique for the market-related value of plan assets but instead will use actual fair value of plan assets. This method of accounting is referred to as MTM accountingas described in Note 1. Our segment operating results follow internal management reporting, which is used for making operating decisions and assessing performance. Historically, net total benefit cost was allocated to each segment. We continue to record service cost, interest cost and EROA at the business segments. Annual recognition of actuarial gains and losses will be reflected in our segment results only at the corporate level. Additionally, although the actual asset returns are recognized in each fiscal year through a MTM adjustment, we continue to recognize an EROA in the determination of net pension cost. At the segment level, we have set our EROA at 6.5% for all periods presented, which willequal our consolidated EROA assumption for 2016. In fiscal years where the consolidated EROA is greater than 6.5%, that difference is reflected as a credit in “Corporate, eliminations and other.”We have adjusted prior-period segment information to conform to the current period's presentation to ensure comparability of the segment results across all periods, including comparisons going forward in 2016.

In addition, in 2015, we ceased allocating to our transportation segments the costs associated with our corporate headquarters division. These costs included services related to general oversight functions, including executive officers and certain legal and finance functions. This change allows for additional transparency and improved management of our corporate oversight costs. These costs are included in “Corporate, eliminations and other” in our segment reporting and reconciliations. Prior year amounts have been revised to conform to the current year segment presentation. This change did not impact our condensed consolidated financial statements included in Note 21.

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, because the amounts are not material.

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

		FedEx Express Segment(1)		FedEx Ground Segment(2)		FedEx Freight Segment(3)		FedEx Services Segment		Corporate, eliminations and other(5)		Consolidated Total
Revenues
2015		$	27,239	$	12,984	$	6,191	$	1,545	$	(506)	$	47,453
2014			27,121		11,617		5,757		1,536		(464)		45,567
2013			27,171		10,578		5,401		1,580		(443)		44,287
Depreciation and amortization
2015		$	1,460	$	530	$	230	$	390	$	1	$	2,611
2014			1,488		468		231		399		1		2,587
2013			1,350		434		217		384		1		2,386
Operating income
2015		$	1,584	$	2,172	$	484	$	-	$	(2,373)	$	1,867
2014			1,428		2,021		351		-		15		3,815
2013			929		1,859		246		-		1,400		4,434
Segment assets(4)
2015		$	20,759	$	11,764	$	3,530	$	5,357	$	(4,341)	$	37,069
2014			19,901		8,466		3,216		5,186		(3,699)		33,070
2013			18,935		7,353		2,953		4,879		(553)		33,567
(1)	FedEx Express segment 2015 operating income includes $276 million of impairment and related charges resulting from the decision to permanently retire and adjust the retirement schedule of certain aircraft and related engines. FedEx Express segment 2013 operating income includes $405 million of direct and allocated business realignment costs and an impairment charge of $100 million resulting from the decision to retire 10 aircraft and related engines.
(2)	FedEx Ground segment 2013 operating income includes $105 million of allocated business realignment costs.
(3)	FedEx Freight segment 2013 operating income includes $50 million in direct and allocated business realignment costs.
(4)	Segment assets include intercompany receivables.
(5)	Operating income includes a loss of $2.2 billion in 2015, a loss of $15 million in 2014 and a gain of $1.4 billion in 2013 associated with our mark-to-market pension accounting. Operating income in 2015 also includes a $197 million charge in the fourth quarter to increase the legal reserve associated with the settlement of a legal matter at FedEx Ground to the amount of the settlement.

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
2015	$	2,380	$	1,248	$	337	$	381	$	1	$	4,347
2014		1,994		850		325		363		1		3,533
2013		2,067		555		326		424		3		3,375

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
				2015		2014		2013
FedEx Express segment:
	Package:
		U.S. overnight box		$	6,704	$	6,555	$	6,513
		U.S. overnight envelope			1,629		1,636		1,705
		U.S. deferred			3,342		3,188		3,020
			Total U.S. domestic package revenue		11,675		11,379		11,238
		International priority			6,251		6,451		6,586
		International economy			2,301		2,229		2,046
			Total international export package revenue		8,552		8,680		8,632
		International domestic(1)			1,406		1,446		1,398
			Total package revenue		21,633		21,505		21,268
	Freight:
		U.S.			2,300		2,355		2,562
		International priority			1,588		1,594		1,678
		International airfreight			180		205		276
			Total freight revenue		4,068		4,154		4,516
	Other(2)				1,538		1,462		1,387
			Total FedEx Express segment		27,239		27,121		27,171
FedEx Ground segment:
	FedEx Ground				11,563		10,634		9,652
	FedEx SmartPost				1,005		983		926
	GENCO				416		-		-
		Total FedEx Ground segment			12,984		11,617		10,578
FedEx Freight segment					6,191		5,757		5,401
FedEx Services segment					1,545		1,536		1,580
Other and eliminations					(506)		(464)		(443)
				$	47,453	$	45,567	$	44,287
GEOGRAPHICAL INFORMATION(3)
Revenues:
	U.S.			$	34,216	$	32,259	$	30,948
	International:
		FedEx Express segment			12,772		12,916		12,959
		FedEx Ground segment			311		248		234
		FedEx Freight segment			142		130		112
		FedEx Services segment			12		14		34
			Total international revenue		13,237		13,308		13,339
				$	47,453	$	45,567	$	44,287
Noncurrent assets:
	U.S.			$	23,514	$	20,658	$	19,637
	International				2,614		2,729		2,656
				$	26,128	$	23,387	$	22,293
(1)		International domestic revenues represent our international intra-country express operations.
(2)		Includes FedEx Trade Networks, FedEx SupplyChain Systems and Bongo.
(3)		International revenue includes shipments that either originate in or are destined to locations outside the United States which could include U.S. payors. Noncurrent assets include property and equipment, goodwill and other long-term assets. Our flight equipment is registered in the U.S. and is included as U.S. assets; however, many of our aircraft operate internationally.