(11) 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 $16.4 billion of our public 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)

August 31, 2018

			Guarantor		Non-guarantor
	Parent		Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	938	$	180	$	1,293	$	(42	)	$	2,369
Receivables, less allowances		41		5,233		3,550		(108	)		8,716
Spare parts, supplies, fuel, prepaid expenses and other, less allowances		285		993		278		—			1,556
Total current assets		1,264		6,406		5,121		(150	)		12,641
PROPERTY AND EQUIPMENT, AT COST		21		52,339		3,966		—			56,326
Less accumulated depreciation and amortization		17		25,670		1,860		—			27,547
Net property and equipment		4		26,669		2,106		—			28,779
INTERCOMPANY RECEIVABLE		1,385		1,240		—		(2,625	)		—
GOODWILL		—		1,589		5,280		—			6,869
INVESTMENT IN SUBSIDIARIES		34,038		4,867		—		(38,905	)		—
OTHER ASSETS		241		1,591		1,780		—			3,612
	$	36,932	$	42,362	$	14,287	$	(41,680	)	$	51,901
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Short-term borrowings	$	299	$	—	$	—	$	—		$	299
Current portion of long-term debt		1,332		65		7		—			1,404
Accrued salaries and employee benefits		43		1,102		541		—			1,686
Accounts payable		187		1,252		1,778		(151	)		3,066
Accrued expenses		466		1,786		899		—			3,151
Total current liabilities		2,327		4,205		3,225		(151	)		9,606
LONG-TERM DEBT, LESS CURRENT PORTION		14,942		288		11		—			15,241
INTERCOMPANY PAYABLE		—		—		2,624		(2,624	)		—
OTHER LONG-TERM LIABILITIES
Deferred income taxes		101		2,730		117		—			2,948
Other liabilities		389		3,613		931		—			4,933
Total other long-term liabilities		490		6,343		1,048		—			7,881
STOCKHOLDERS’ INVESTMENT		19,173		31,526		7,379		(38,905	)		19,173
	$	36,932	$	42,362	$	14,287	$	(41,680	)	$	51,901

CONDENSED CONSOLIDATING BALANCE SHEETS

May 31, 2018

			Guarantor		Non-guarantor
	Parent		Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,485	$	257	$	1,538	$	(15	)	$	3,265
Receivables, less allowances		3		4,970		3,586		(78	)		8,481
Spare parts, supplies, fuel, prepaid expenses and other, less allowances		425		878		292		—			1,595
Total current assets		1,913		6,105		5,416		(93	)		13,341
PROPERTY AND EQUIPMENT, AT COST		21		51,232		3,868		—			55,121
Less accumulated depreciation and amortization		17		25,111		1,839		—			26,967
Net property and equipment		4		26,121		2,029		—			28,154
INTERCOMPANY RECEIVABLE		1,487		924		—		(2,411	)		—
GOODWILL		—		1,709		5,264		—			6,973
INVESTMENT IN SUBSIDIARIES		33,370		4,082		—		(37,452	)		—
OTHER ASSETS		75		1,854		1,829		104			3,862
	$	36,849	$	40,795	$	14,538	$	(39,852	)	$	52,330
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt	$	1,332	$	1	$	9	$	—		$	1,342
Accrued salaries and employee benefits		65		1,506		606		—			2,177
Accounts payable		16		1,332		1,719		(90	)		2,977
Accrued expenses		460		1,778		896		(3	)		3,131
Total current liabilities		1,873		4,617		3,230		(93	)		9,627
LONG-TERM DEBT, LESS CURRENT PORTION		14,942		288		13		—			15,243
INTERCOMPANY PAYABLE		—		—		2,411		(2,411	)		—
OTHER LONG-TERM LIABILITIES
Deferred income taxes		—		2,626		137		104			2,867
Other liabilities		619		3,432		1,126		—			5,177
Total other long-term liabilities		619		6,058		1,263		104			8,044
STOCKHOLDERS’ INVESTMENT		19,415		29,832		7,621		(37,452	)		19,416
	$	36,849	$	40,795	$	14,538	$	(39,852	)	$	52,330

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended August 31, 2018

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	12,367		$	4,787		$	(102	)	$	17,052
OPERATING EXPENSES:
Salaries and employee benefits		48			4,783			1,429			—			6,260
Purchased transportation		—			2,380			1,634			(47	)		3,967
Rentals and landing fees		1			631			192			(1	)		823
Depreciation and amortization		—			693			115			—			808
Fuel		—			902			84			—			986
Maintenance and repairs		—			646			89			—			735
Intercompany charges, net		(111	)		(226	)		337			—			—
Other		62			1,546			848			(54	)		2,402
		—			11,355			4,728			(102	)		15,981
OPERATING INCOME		—			1,012			59			—			1,071
OTHER INCOME (EXPENSE):
Equity in earnings of subsidiaries		835			81			—			(916	)		—
Interest, net		(158	)		59			(13	)		—			(112	)
Other retirement plans income		—			193			13			(48	)		158
Intercompany charges, net		143			(154	)		(21	)		32			—
Other, net		(3	)		327			(340	)		—			(16	)
INCOME BEFORE INCOME TAXES		817			1,518			(302	)		(932	)		1,101
Provision for income taxes		—			215			51			—			266
NET INCOME	$	817		$	1,303		$	(353	)	$	(932	)	$	835
COMPREHENSIVE INCOME	$	800		$	1,401		$	(618	)	$	(933	)	$	650

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended August 31, 2017

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	11,567		$	3,854		$	(124	)	$	15,297
OPERATING EXPENSES:
Salaries and employee benefits		38			4,368			1,258			—			5,664
Purchased transportation		—			2,063			1,464			(82	)		3,445
Rentals and landing fees		1			627			191			(1	)		818
Depreciation and amortization		—			639			112			—			751
Fuel		—			637			66			—			703
Maintenance and repairs		—			602			73			—			675
Intercompany charges, net		(116	)		114			2			—			—
Other		77			1,476			758			(41	)		2,270
		—			10,526			3,924			(124	)		14,326
OPERATING INCOME		—			1,041			(70	)		—			971
OTHER INCOME (EXPENSE):
Equity in earnings of subsidiaries		596			(3	)		—			(593	)		—
Interest, net		(129	)		13			2			—			(114	)
Other retirement plans income		—			141			5			—			146
Intercompany charges, net		131			(70	)		(61	)		—			—
Other, net		(2	)		(8	)		(11	)		—			(21	)
INCOME BEFORE INCOME TAXES		596			1,114			(135	)		(593	)		982
Provision for income taxes		—			399			(13	)		—			386
NET INCOME	$	596		$	715		$	(122	)	$	(593	)	$	596
COMPREHENSIVE INCOME	$	578		$	719		$	(18	)	$	(593	)	$	686

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three Months Ended August 31, 2018

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	785		$	(159	)	$	102		$	(27	)	$	701
INVESTING ACTIVITIES
Capital expenditures		—			(983	)		(196	)		—			(1,179	)
Proceeds from asset dispositions and other		(5	)		78			5			—			78
CASH USED IN INVESTING ACTIVITIES		(5	)		(905	)		(191	)		—			(1,101	)
FINANCING ACTIVITIES
Proceeds from short-term borrowings		299			—			—			—			299
Net transfers from (to) Parent		(853	)		763			90			—			—
Payment on loan between subsidiaries		—			—			—			—			—
Intercompany dividends		—			81			(81	)		—			—
Principal payments on debt		—			—			(2	)		—			(2	)
Proceeds from stock issuances		25			—			—			—			25
Dividends paid		(173	)		—			—			—			(173	)
Purchase of treasury stock		(625	)		—			—			—			(625	)
Other, net		—			148			(144	)		—			4
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(1,327	)		992			(137	)		—			(472	)
Effect of exchange rate changes on cash		—			(5	)		(19	)		—			(24	)
Net (decrease) increase in cash and cash equivalents		(547	)		(77	)		(245	)		(27	)		(896	)
Cash and cash equivalents at beginning of period		1,485			257			1,538			(15	)		3,265
Cash and cash equivalents at end of period	$	938		$	180		$	1,293		$	(42	)	$	2,369

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(UNAUDITED)

Three Months Ended August 31, 2017

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(878	)	$	1,717		$	(256	)	$	7		$	590
INVESTING ACTIVITIES
Capital expenditures		—			(985	)		(59	)		—			(1,044	)
Proceeds from asset dispositions and other		—			6			—			—			6
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		—			(979	)		(59	)		—			(1,038	)
FINANCING ACTIVITIES
Net transfers from (to) Parent		744			(735	)		(9	)		—			—
Principal payments on debt		—			(8	)		(4	)		—			(12	)
Proceeds from stock issuances		150			—			—			—			150
Dividends paid		(134	)		—			—			—			(134	)
Purchase of treasury stock		(86	)		—			—			—			(86	)
Other, net		3			—			(9	)		—			(6	)
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		677			(743	)		(22	)		—			(88	)
Effect of exchange rate changes on cash		(2	)		23			49			—			70
Net (decrease) increase in cash and cash equivalents		(203	)		18			(288	)		7			(466	)
Cash and cash equivalents at beginning of period		1,884			325			1,807			(47	)		3,969
Cash and cash equivalents at end of period	$	1,681		$	343		$	1,519		$	(40	)	$	3,503