(10) Condensed Consolidating Financial Statements

We are required to present condensed consolidating financial information in order for the subsidiary guarantors of our public debt to continue to be exempt from reporting under the Securities Exchange Act of 1934, as amended.

The guarantor subsidiaries, which are 100% owned by FedEx, guarantee $15.0 billion of our long-term debt. The guarantees are full and unconditional and joint and several. Our guarantor subsidiaries were not determined using geographic, service line or other similar criteria, and as a result, the “Guarantor Subsidiaries” and “Non-guarantor Subsidiaries” columns each include portions of our domestic and international operations. Accordingly, this basis of presentation is not intended to present our financial condition, results of operations or cash flows for any purpose other than to comply with the specific requirements for subsidiary guarantor reporting.

Condensed consolidating financial statements for our guarantor subsidiaries and non-guarantor subsidiaries are presented in the following tables (in millions):

CONDENSED CONSOLIDATING BALANCE SHEETS

(UNAUDITED)

November 30, 2017

			Guarantor		Non-guarantor
	Parent		Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	959	$	342	$	1,495	$	(28	)	$	2,768
Receivables, less allowances		2		5,340		3,441		(128	)		8,655
Spare parts, supplies, fuel, prepaid expenses and other, less allowances		286		931		241		—			1,458
Total current assets		1,247		6,613		5,177		(156	)		12,881
PROPERTY AND EQUIPMENT, AT COST		22		49,585		3,633		—			53,240
Less accumulated depreciation and amortization		18		24,349		1,583		—			25,950
Net property and equipment		4		25,236		2,050		—			27,290
INTERCOMPANY RECEIVABLE		1,175		3,184		—		(4,359	)		—
GOODWILL		—		1,571		5,754		—			7,325
INVESTMENT IN SUBSIDIARIES		29,116		2,903		—		(32,019	)		—
OTHER ASSETS		3,501		1,197		1,297		(3,210	)		2,785
	$	35,043	$	40,704	$	14,278	$	(39,744	)	$	50,281
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Short-term borrowings	$	250	$	—	$	—	$	—		$	250
Current portion of long-term debt		—		1		10		—			11
Accrued salaries and employee benefits		59		1,325		528		—			1,912
Accounts payable		153		1,636		1,514		(156	)		3,147
Accrued expenses		451		1,621		835		—			2,907
Total current liabilities		913		4,583		2,887		(156	)		8,227
LONG-TERM DEBT, LESS CURRENT PORTION		14,872		289		19		—			15,180
INTERCOMPANY PAYABLE		—		—		4,359		(4,359	)		—
OTHER LONG-TERM LIABILITIES
Deferred income taxes		—		6,102		196		(3,210	)		3,088
Other liabilities		2,203		3,642		886		—			6,731
Total other long-term liabilities		2,203		9,744		1,082		(3,210	)		9,819
STOCKHOLDERS’ INVESTMENT		17,055		26,088		5,931		(32,019	)		17,055
	$	35,043	$	40,704	$	14,278	$	(39,744	)	$	50,281

CONDENSED CONSOLIDATING BALANCE SHEETS

May 31, 2017

			Guarantor		Non-guarantor
	Parent		Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,884	$	325	$	1,807	$	(47	)	$	3,969
Receivables, less allowances		3		4,729		2,928		(61	)		7,599
Spare parts, supplies, fuel, prepaid expenses and other, less allowances		25		787		248		—			1,060
Total current assets		1,912		5,841		4,983		(108	)		12,628
PROPERTY AND EQUIPMENT, AT COST		22		47,201		3,403		—			50,626
Less accumulated depreciation and amortization		18		23,211		1,416		—			24,645
Net property and equipment		4		23,990		1,987		—			25,981
INTERCOMPANY RECEIVABLE		1,521		2,607		—		(4,128	)		—
GOODWILL		—		1,571		5,583		—			7,154
INVESTMENT IN SUBSIDIARIES		27,712		2,636		—		(30,348	)		—
OTHER ASSETS		3,494		1,271		1,249		(3,225	)		2,789
	$	34,643	$	37,916	$	13,802	$	(37,809	)	$	48,552
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt	$	—	$	9	$	13	$	—		$	22
Accrued salaries and employee benefits		72		1,335		507		—			1,914
Accounts payable		10		1,411		1,439		(108	)		2,752
Accrued expenses		991		1,522		717		—			3,230
Total current liabilities		1,073		4,277		2,676		(108	)		7,918
LONG-TERM DEBT, LESS CURRENT PORTION		14,641		244		24		—			14,909
INTERCOMPANY PAYABLE		—		—		4,128		(4,128	)		—
OTHER LONG-TERM LIABILITIES
Deferred income taxes		—		5,472		238		(3,225	)		2,485
Other liabilities		2,856		3,448		863		—			7,167
Total other long-term liabilities		2,856		8,920		1,101		(3,225	)		9,652
STOCKHOLDERS’ INVESTMENT		16,073		24,475		5,873		(30,348	)		16,073
	$	34,643	$	37,916	$	13,802	$	(37,809	)	$	48,552

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended November 30, 2017

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	12,044		$	4,362		$	(93	)	$	16,313
OPERATING EXPENSES:
Salaries and employee benefits		35			4,439			1,268			—			5,742
Purchased transportation		—			2,314			1,576			(50	)		3,840
Rentals and landing fees		1			640			197			(3	)		835
Depreciation and amortization		—			649			107			—			756
Fuel		—			746			72			—			818
Maintenance and repairs		—			584			81			—			665
Intercompany charges, net		(95	)		—			95			—			—
Other		59			1,592			784			(40	)		2,395
		—			10,964			4,180			(93	)		15,051
OPERATING INCOME		—			1,080			182			—			1,262
OTHER INCOME (EXPENSE):
Equity in earnings of subsidiaries		775			40			—			(815	)		—
Interest, net		(130	)		11			(5	)		—			(124	)
Intercompany charges, net		132			(71	)		(61	)		—			—
Other, net		(2	)		(8	)		11			—			1
INCOME BEFORE INCOME TAXES		775			1,052			127			(815	)		1,139
Provision for income taxes		—			225			139			—			364
NET INCOME	$	775		$	827		$	(12	)	$	(815	)	$	775
COMPREHENSIVE INCOME	$	756		$	817		$	(92	)	$	(815	)	$	666

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended November 30, 2016

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	10,997		$	4,004		$	(70	)	$	14,931
OPERATING EXPENSES:
Salaries and employee benefits		29			4,161			1,163			—			5,353
Purchased transportation		—			2,074			1,383			(26	)		3,431
Rentals and landing fees		2			625			177			(2	)		802
Depreciation and amortization		—			634			106			—			740
Fuel		—			584			74			—			658
Maintenance and repairs		—			504			75			—			579
Intercompany charges, net		(89	)		38			51			—			—
Other		58			1,429			756			(42	)		2,201
		—			10,049			3,785			(70	)		13,764
OPERATING INCOME		—			948			219			—			1,167
OTHER INCOME (EXPENSE):
Equity in earnings of subsidiaries		700			54			—			(754	)		—
Interest, net		(123	)		4			—			—			(119	)
Intercompany charges, net		124			(64	)		(60	)		—			—
Other, net		(1	)		(5	)		36			—			30
INCOME BEFORE INCOME TAXES		700			937			195			(754	)		1,078
Provision for income taxes		—			291			87			—			378
NET INCOME	$	700		$	646		$	108		$	(754	)	$	700
COMPREHENSIVE INCOME	$	682		$	635		$	(112	)	$	(754	)	$	451

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Six Months Ended November 30, 2017

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	23,611		$	8,216		$	(217	)	$	31,610
OPERATING EXPENSES:
Salaries and employee benefits		73			8,666			2,521			—			11,260
Purchased transportation		—			4,377			3,040			(132	)		7,285
Rentals and landing fees		2			1,267			388			(4	)		1,653
Depreciation and amortization		—			1,288			219			—			1,507
Fuel		—			1,383			138			—			1,521
Maintenance and repairs		—			1,186			154			—			1,340
Intercompany charges, net		(211	)		113			98			—			—
Other		136			3,068			1,542			(81	)		4,665
		—			21,348			8,100			(217	)		29,231
OPERATING INCOME		—			2,263			116			—			2,379
OTHER INCOME (EXPENSE):
Equity in earnings of subsidiaries		1,371			37			—			(1,408	)		—
Interest, net		(259	)		24			(3	)		—			(238	)
Intercompany charges, net		263			(142	)		(121	)		—			—
Other, net		(4	)		(16	)		—			—			(20	)
INCOME BEFORE INCOME TAXES		1,371			2,166			(8	)		(1,408	)		2,121
Provision for income taxes		—			624			126			—			750
NET INCOME	$	1,371		$	1,542		$	(134	)	$	(1,408	)	$	1,371
COMPREHENSIVE INCOME	$	1,334		$	1,536		$	(110	)	$	(1,408	)	$	1,352

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Six Months Ended November 30, 2016

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	21,900		$	7,834		$	(140	)	$	29,594
OPERATING EXPENSES:
Salaries and employee benefits		65			8,267			2,332			—			10,664
Purchased transportation		—			3,991			2,734			(54	)		6,671
Rentals and landing fees		3			1,245			347			(3	)		1,592
Depreciation and amortization		—			1,245			234			—			1,479
Fuel		—			1,162			146			—			1,308
Maintenance and repairs		—			1,030			147			—			1,177
Intercompany charges, net		(179	)		100			79			—			—
Other		111			2,802			1,442			(83	)		4,272
		—			19,842			7,461			(140	)		27,163
OPERATING INCOME		—			2,058			373			—			2,431
OTHER INCOME (EXPENSE):
Equity in earnings of subsidiaries		1,415			110			—			(1,525	)		—
Interest, net		(245	)		13			—			—			(232	)
Intercompany charges, net		246			(145	)		(101	)		—			—
Other, net		(1	)		(10	)		32			—			21
INCOME BEFORE INCOME TAXES		1,415			2,026			304			(1,525	)		2,220
Provision for income taxes		—			671			134			—			805
NET INCOME	$	1,415		$	1,355		$	170		$	(1,525	)	$	1,415
COMPREHENSIVE INCOME	$	1,378		$	1,337		$	(31	)	$	(1,525	)	$	1,159

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(UNAUDITED)

Six Months Ended November 30, 2017

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(1,959	)	$	3,504		$	(66	)	$	19		$	1,498
INVESTING ACTIVITIES
Capital expenditures		—			(2,474	)		(147	)		—			(2,621	)
Business acquisitions, net of cash acquired		—			(44	)		—			—			(44	)
Proceeds from asset dispositions and other		—			12			—			—			12
CASH USED IN INVESTING ACTIVITIES		—			(2,506	)		(147	)		—			(2,653	)
FINANCING ACTIVITIES
Net transfers from (to) Parent		947			(1,019	)		72			—			—
Payment on loan between subsidiaries		167			—			(167	)		—			—
Proceeds from short-term borrowings		250			—			—			—			250
Principal payments on debt		—			(18	)		(10	)		—			(28	)
Proceeds from stock issuances		205			—			—			—			205
Dividends paid		(268	)		—			—			—			(268	)
Purchase of treasury stock		(270	)		—			—			—			(270	)
Other, net		3			—			—			—			3
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		1,034			(1,037	)		(105	)		—			(108	)
Effect of exchange rate changes on cash		—			56			6			—			62
Net (decrease) increase in cash and cash equivalents		(925	)		17			(312	)		19			(1,201	)
Cash and cash equivalents at beginning of period		1,884			325			1,807			(47	)		3,969
Cash and cash equivalents at end of period	$	959		$	342		$	1,495		$	(28	)	$	2,768

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(UNAUDITED)

Six Months Ended November 30, 2016

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(376	)	$	2,550		$	473		$	(12	)	$	2,635
INVESTING ACTIVITIES
Capital expenditures		—			(2,455	)		(226	)		—			(2,681	)
Proceeds from asset dispositions and other		84			13			3			—			100
CASH USED IN INVESTING ACTIVITIES		84			(2,442	)		(223	)		—			(2,581	)
FINANCING ACTIVITIES
Net transfers from (to) Parent		24			(94	)		70			—			—
Payment on loan between subsidiaries		8			(15	)		7			—			—
Intercompany dividends		—			1			(1	)		—			—
Principal payments on debt		—			(31	)		(12	)		—			(43	)
Proceeds from stock issuances		164			—			—			—			164
Dividends paid		(213	)		—			—			—			(213	)
Purchase of treasury stock		(334	)		—			—			—			(334	)
Other, net		4			(2	)		(7	)		—			(5	)
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(347	)		(141	)		57			—			(431	)
Effect of exchange rate changes on cash		(5	)		1			(94	)		—			(98	)
Net (decrease) increase in cash and cash equivalents		(644	)		(32	)		213			(12	)		(475	)
Cash and cash equivalents at beginning of period		1,974			326			1,277			(43	)		3,534
Cash and cash equivalents at end of period	$	1,330		$	294		$	1,490		$	(55	)	$	3,059