Business Segment Information

12 Months Ended

May 31, 2016

Business Segment Information [Abstract]

Business Segment Information

NOTE 14: BUSINESS SEGMENT INFORMATION

FedEx Express, TNT 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 Group:

FedEx Express Segment       FedEx Express (express transportation)

FedEx Trade Networks (air and ocean freight forwarding, customs brokerage andcross-border enablement technology and solutions)

       FedEx SupplyChain Systems (logistics services)

TNT Express Segment       TNT Express (international express transportation, small-

package ground delivery and freight transportation)

FedEx Ground SegmentFedEx Ground (small-package ground delivery)

GENCO (third-party logistics)

FedEx Freight SegmentFedEx Freight (LTL freight transportation)

FedEx Custom Critical (time-critical transportation)

FedEx Services SegmentFedEx Services (sales, marketing, information technology,

communications, customer service, technical support, billing and collection services andback-office functions)

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, customer service, technical support, billing and collection services for U.S. customers of our major business unitsand certain back-office support to our other companies; 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. Our allocation methodologies are refined periodically, as necessary, to reflect changes in our businesses.

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.

Corporate and other includes corporate headquarters costs for executive officers and certain legal and financial functions, as well as certain other costs and creditsnot attributed to our core business. These costs are not allocated to the business segments.In 2016, these costs include our annual mark-to-market benefit plans adjustment, transaction and integration planning expenses related to our TNT Express acquisition, provisions for the settlement of and expected losses related to independent contractor litigation matters at FedEx Ground and the settlement of a U.S. Customs and Border Protection (“CBP”)notice of action(both legal matters are net of recognized immaterial insurance recovery).

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		FedEx Freight Segment		FedEx Services Segment		Eliminations, corporate and other(2) (3)		Consolidated Total
Revenues
2016		$	26,451	$	16,574	$	6,200	$	1,593	$	(453)	$	50,365
2015			27,239		12,984		6,191		1,545		(506)		47,453
2014			27,121		11,617		5,757		1,536		(464)		45,567
Depreciation and amortization
2016		$	1,385	$	608	$	248	$	384	$	6	$	2,631
2015			1,460		530		230		390		1		2,611
2014			1,488		468		231		399		1		2,587
Operating income
2016		$	2,519	$	2,276	$	426	$	-	$	(2,144)	$	3,077
2015			1,584		2,172		484		-		(2,373)		1,867
2014			1,428		2,021		351		-		15		3,815
Segment assets(4)
2016		$	21,207	$	13,098	$	3,749	$	5,390	$	2,620	$	46,064
2015			20,382		11,691		3,471		5,356		(4,369)		36,531
2014			19,901		8,466		3,216		5,186		(3,699)		33,070
(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.
(2)	Operating income includes a loss of $1.5 billion in 2016, $2.2 billion in 2015 and $15 million in 2014 associated with our mark-to-market pension accounting. Operating income in 2016 includes provisions for the settlement of and expected losses related to independent contractor litigation matters at FedEx Ground for $256 million and expenses related to the settlement of a CBP notice of action in the amount of $69 million, in each case net of recognized immaterial insurance recovery. 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.
(3)	Includes TNT Express’s assets and immaterial financial results from the time of acquisition (May 25, 2016).
(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
2016	$	2,356	$	1,597	$	433	$	432	$	-	$	4,818
2015		2,380		1,248		337		381		1		4,347
2014		1,994		850		325		363		1		3,533

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
				2016		2015		2014
FedEx Express segment:
	Package:
		U.S. overnight box		$	6,763	$	6,704	$	6,555
		U.S. overnight envelope			1,662		1,629		1,636
		U.S. deferred			3,379		3,342		3,188
			Total U.S. domestic package revenue		11,804		11,675		11,379
		International priority			5,697		6,251		6,451
		International economy			2,282		2,301		2,229
			Total international export package revenue		7,979		8,552		8,680
		International domestic(1)			1,285		1,406		1,446
			Total package revenue		21,068		21,633		21,505
	Freight:
		U.S.			2,481		2,300		2,355
		International priority			1,384		1,588		1,594
		International airfreight			126		180		205
			Total freight revenue		3,991		4,068		4,154
	Other(2)				1,392		1,538		1,462
			Total FedEx Express segment		26,451		27,239		27,121
FedEx Ground segment:
	FedEx Ground				15,050		12,568		11,617
	GENCO				1,524		416		-
		Total FedEx Ground segment			16,574		12,984		11,617
FedEx Freight segment					6,200		6,191		5,757
FedEx Services segment					1,593		1,545		1,536
Other and eliminations(3)					(453)		(506)		(464)
				$	50,365	$	47,453	$	45,567
GEOGRAPHICAL INFORMATION(4)
Revenues:
	U.S.			$	38,070	$	34,216	$	32,259
	International:
		FedEx Express segment			11,672		12,772		12,916
		FedEx Ground segment			383		311		248
		FedEx Freight segment			137		142		130
		FedEx Services segment			10		12		14
		Other(3)			93		-		-
			Total international revenue		12,295		13,237		13,308
				$	50,365	$	47,453	$	45,567
Noncurrent assets:
	U.S.			$	26,047	$	23,582	$	20,658
	International				8,028		2,614		2,729
				$	34,075	$	26,196	$	23,387
(1)		International domestic revenues represent our intra-country operations.
(2)		Includes FedEx Trade Networks and FedEx SupplyChain Systems.
(3)		Includes TNT Express’s revenue from the time of acquisition (May 25, 2016).
(4)		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.