10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED August 31, 2015 OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number: 1-7806

FEDERAL EXPRESS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	71-0427007
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3610 Hacks Cross Road Memphis, Tennessee	38125
(Address of principal executive offices)	(ZIP Code)

(901) 369-3600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of common stock outstanding as of September 16, 2015 was 1,000. The Registrant is a wholly owned subsidiary of FedEx Corporation, and there is no market for the Registrant’s common stock.

The Registrant meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by General Instruction H(2).

FEDERAL EXPRESS CORPORATION

INDEX

	PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets August 31, 2015 and May 31, 2015	3
Condensed Consolidated Statements of Income Three Months Ended August 31, 2015 and 2014	5
Condensed Consolidated Statements of Comprehensive Income Three Months Ended August  31, 2015 and 2014	6
Condensed Consolidated Statements of Cash Flows Three Months Ended August 31, 2015 and 2014	7
Notes to Condensed Consolidated Financial Statements	8
Report of Independent Registered Public Accounting Firm	13
ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition	14
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	22
ITEM 4. Controls and Procedures	22
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings	23
ITEM 1A. Risk Factors	23
ITEM 6. Exhibits	23
Signature	24
Exhibit Index	E-1
Exhibit 12.1
Exhibit 15.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 Instance Document
EX-101 Schema Document
EX-101 Calculation Linkbase Document
EX-101 Presentation Linkbase Document
EX-101 Definition Linkbase Document

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FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

	August 31, 2015 (Unaudited)		May 31, 2015
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	823	$	884
Receivables, less allowances of $84 and $92		1,512		1,549
Spare parts, supplies and fuel, less allowances of $209 and $204		386		394
Deferred income taxes		378		378
Due from parent company and other FedEx subsidiaries		579		501
Prepaid expenses and other		132		108
Total current assets		3,810		3,814
PROPERTY AND EQUIPMENT, AT COST		27,095		26,286
Less accumulated depreciation and amortization		12,674		12,392
Net property and equipment		14,421		13,894
OTHER LONG-TERM ASSETS
Goodwill		1,393		1,448
Other assets		963		1,104
Total other long-term assets		2,356		2,552
	$	20,587	$	20,260

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE DATA)

	August 31, 2015 (Unaudited)			May 31, 2015
LIABILITIES AND OWNER’S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt	$	5		$	7
Accrued salaries and employee benefits		977			1,014
Accounts payable		1,148			1,257
Accrued expenses		981			1,056
Due to other FedEx subsidiaries		2,201			1,932
Total current liabilities		5,312			5,266
LONG-TERM DEBT, LESS CURRENT PORTION		239			239
OTHER LONG-TERM LIABILITIES
Deferred income taxes		1,717			1,712
Pension, postretirement healthcare and other benefit obligations		1,267			1,251
Self-insurance accruals		784			711
Deferred lease obligations		614			572
Deferred gains, principally related to aircraft transactions		171			178
Other liabilities		93			117
Total other long-term liabilities		4,646			4,541
COMMITMENTS AND CONTINGENCIES
OWNER’S EQUITY
Common stock, $0.10 par value; 1,000 shares authorized, issued and outstanding		—			—
Additional paid-in capital		608			608
Retained earnings		10,152			9,839
Accumulated other comprehensive loss		(370	)		(233	)
Total owner’s equity		10,390			10,214
	$	20,587		$	20,260

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(IN MILLIONS)

	Three Months Ended August 31,
	2015			2014
				(As Adjusted)
REVENUES	$	6,312		$	6,584
OPERATING EXPENSES:
Salaries and employee benefits		2,433			2,355
Purchased transportation		419			457
Rentals and landing fees		403			419
Depreciation and amortization		344			371
Fuel		607			970
Maintenance and repairs		343			377
Intercompany charges, net		474			475
Other		788			786
		5,811			6,210
OPERATING INCOME		501			374
OTHER INCOME (EXPENSE):
Interest, net		9			3
Other, net		(36	)		(32	)
		(27	)		(29	)
INCOME BEFORE INCOME TAXES		474			345
PROVISION FOR INCOME TAXES		162			120
NET INCOME	$	312		$	225

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(IN MILLIONS)

	Three Months Ended August 31,
	2015			2014
				(As Adjusted)
NET INCOME	$	312		$	225
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments, net of tax of $10 in 2015 and $8 in 2014		(131	)		(29	)
Amortization of prior service credit and other, net of tax of $3 in 2015 and $0 in 2014		(6	)		(1	)
		(137	)		(30	)
COMPREHENSIVE INCOME	$	175		$	195

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FEDERAL EXPRESS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN MILLIONS)

	Three Months Ended August 31,
	2015			2014
				(As Adjusted)
Operating Activities:
Net income	$	312		$	225
Noncash charges:
Depreciation and amortization		344			371
Other, net		39			(3	)
Changes in assets and liabilities, net		96			(162	)
Cash provided by operating activities		791			431
Investing Activities:
Capital expenditures		(832	)		(466	)
Other		12			2
Cash used in investing activities		(820	)		(464	)
Effect of exchange rate changes on cash		(32	)		(15	)
Net decrease in cash and cash equivalents		(61	)		(48	)
Cash and cash equivalents at beginning of period		884			858
Cash and cash equivalents at end of period	$	823		$	810

The accompanying notes are an integral part of these condensed consolidated financial statements.

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FEDERAL EXPRESS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) General

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of Federal Express Corporation (“FedEx Express”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, 2015 (“Annual Report”). Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of August 31, 2015, and the results of our operations and cash flows for the three-month periods ended August 31, 2015 and 2014. Operating results for the three-month period ended August 31, 2015 are not necessarily indicative of the results that may be expected for the year ending May 31, 2016.

We are a wholly owned subsidiary of FedEx Corporation (“FedEx”) engaged in a single line of business and operate in one business segment – the worldwide express transportation and distribution of goods and documents.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2016 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

PENSION AND POSTRETIREMENT HEALTHCARE PLANS. During the fourth quarter of 2015 we changed our method of accounting for our defined benefit pension and postretirement healthcare plans as discussed in our Annual Report. Prior year amounts have been recast to conform to these accounting changes.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. Our pilots, which represent a small number of our total employees, are employed under a collective bargaining agreement. The contract became amendable in March 2013. After participating in negotiations assisted by the National Mediation Board (“NMB”), the parties reached a Tentative Agreement (“TA”) on August 19, 2015. The TA is currently out for a membership ratification vote which will close in mid-October. If the TA is ratified, it will become effective November 2, 2015 and will become amendable in November 2021. If the TA is not ratified, the parties will reenter NMB mediated negotiations. The NMB is the U.S. governmental agency that oversees labor agreements for entities covered by the Railway Labor Act of 1926, as amended. In addition to our pilots, certain non-U.S. employees are unionized.

STOCK-BASED COMPENSATION. FedEx has two types of equity-based compensation: stock options and restricted stock. The key terms of the stock option and restricted stock awards granted under FedEx’s incentive stock plans are set forth in FedEx’s Annual Report.

Our stock-based compensation expense was $16 million for the three months ended August 31, 2015 and 2014. This amount represents the amount charged to us by FedEx for awards granted to our employees.

LONG-TERM DEBT. Long-term debt, exclusive of capital leases, had a carrying value of $239 million at August 31, 2015 and May 31, 2015, compared with an estimated fair value of $320 million at August 31, 2015 and $345 million at May 31, 2015. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value of our long-term debt is classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

RECENT ACCOUNTING GUIDANCE. New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements. These matters are described in our Annual Report.

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We believe that no other new accounting guidance was adopted or issued during the first three months of 2016 that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting.

(2) Accumulated Other Comprehensive (Loss) Income

The following table provides changes in accumulated other comprehensive (loss) income (“AOCI”), net of tax, reported in our condensed consolidated financial statements for the three-month periods ended August 31 (in millions; amounts in parentheses indicate debits to AOCI) and amounts have been recast to conform to pension accounting changes further discussed in our Annual Report:

	2015			2014
Foreign currency translation gain (loss):
Balance at beginning of period	$	(250	)	$	71
Translation adjustments		(131	)		(29	)
Balance at end of period		(381	)		42
Retirement plans adjustments:
Balance at beginning of period		17			22
Reclassifications from AOCI		(6	)		(1	)
Balance at end of period		11			21
Accumulated other comprehensive (loss) income at end of period	$	(370	)	$	63

Due to its immateriality, the table presenting details of reclassifications from AOCI has been excluded from this quarterly report.

(3) Retirement Plans

We sponsor or participate in programs that provide retirement benefits to most of our employees. These programs include defined benefit pension plans, defined contribution plans and postretirement healthcare plans. A majority of our employees are covered by the FedEx Corporation Employees’ Pension Plan, a defined benefit pension plan sponsored by FedEx. Defined contribution plans are in place covering a majority of U.S. employees and certain international employees. We also sponsor or participate in nonqualified benefit plans covering certain of our U.S. employee groups and other pension plans covering certain of our international employees. Prior year amounts have been recast to conform to pension accounting changes. For more information, refer to the financial statements of FedEx included in its Form 10-Q for the quarter ended August 31, 2015 and in our Annual Report.

Our retirement plans costs for the three-month periods ended August 31 were as follows (in millions):

	2015		2014
Pension plans sponsored by FedEx	$	16	$	19
Defined benefit pension plans		11		11
Defined contribution plans		64		61
Postretirement healthcare plans		16		16
	$	107	$	107

The components of the net periodic benefit cost of the pension and postretirement healthcare plans currently sponsored by us were individually immaterial for all periods presented. No material contributions were made during the first quarter of 2016 or 2015 to pension plans sponsored by us, and we do not expect to make material contributions in 2016.

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(4) Commitments

As of August 31, 2015, our purchase commitments under various contracts for the remainder of 2016 and annually thereafter were as follows (in millions):

	Aircraft and Aircraft Related		Other(1)		Total
2016 (remainder)	$	657	$	60	$	717
2017		1,240		43		1,283
2018		1,739		38		1,777
2019		1,584		10		1,594
2020		1,638		9		1,647
Thereafter		5,962		72		6,034
Total	$	12,820	$	232	$	13,052

⁽¹⁾  Primarily advertising and promotions contracts.

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. As of August 31, 2015, our obligation to purchase six Boeing 767-300 Freighter (“B767F”) aircraft and nine Boeing 777 Freighter (“B777F”) aircraft is conditioned upon there being no event that causes us or our employees not to be covered by the Railway Labor Act of 1926, as amended. Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above.

On July 21, 2015, we entered into a supplemental agreement to purchase 50 additional B767F aircraft from Boeing. Four of the 50 additional B767F aircraft purchases are conditioned upon there being no event that causes FedEx Express or its employees not to be covered by the Railway Labor Act of 1926, as amended. The 50 additional B767F aircraft are expected to be delivered from fiscal 2018 through fiscal 2023 and will enable us to continue to improve the efficiency and reliability of our aircraft fleet.

We had $411 million in deposits and progress payments as of August 31, 2015 on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our consolidated balance sheets. Aircraft and aircraft-related contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of August 31, 2015 with the year of expected delivery:

	B767F		B777F		Total
2016 (remainder)		6		1		7
2017		12		—		12
2018		16		2		18
2019		13		2		15
2020		12		3		15
Thereafter		26		9		35
Total		85		17		102

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A summary of future minimum lease payments under noncancelable operating leases with an initial or remaining term in excess of one year at August 31, 2015 is as follows (in millions):

	Operating Leases
	Aircraft   and Related   Equipment		Facilities   and Other		Total   Operating   Leases
2016 (remainder)	$	430	$	502	$	932
2017		403		860		1,263
2018		332		545		877
2019		274		467		741
2020		190		402		592
Thereafter		360		3,241		3,601
Total	$	1,989	$	6,017	$	8,006

Future minimum lease payments under capital leases were immaterial at August 31, 2015. While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations.

(5) Contingencies

Environmental Matters. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that management reasonably believes could exceed $100,000.

On January 14, 2014, the U.S. Department of Justice (“DOJ”) issued a Grand Jury Subpoena to FedEx Express relating to an asbestos matter previously investigated by the U.S. Environmental Protection Agency. On May 1, 2014, the DOJ informed us that it had determined to continue to pursue the matter as a criminal case, citing seven asbestos-related regulatory violations associated with removal of roof materials from a hangar in Puerto Rico during cleaning and repair activity, as well as violation of waste disposal requirements. Loss is reasonably possible; however, the amount of any loss is expected to be immaterial.

Department of Justice Indictment – Internet Pharmacy Shipments. In the past, we received requests for information from the DOJ in the Northern District of California in connection with a criminal investigation relating to the transportation of packages for online pharmacies that may have shipped pharmaceuticals in violation of federal law. In July 2014, the DOJ filed a criminal indictment in the United States District Court for the Northern District of California in connection with the matter. A superseding indictment was filed in August 2014. The indictment alleges that FedEx Corporation, FedEx Express and FedEx Services, together with certain pharmacies, conspired to unlawfully distribute controlled substances, unlawfully distributed controlled substances and conspired to unlawfully distribute misbranded drugs. The superseding indictment adds conspiracy to launder money counts related to services provided to and payments from online pharmacies. We continue to believe that our employees have acted in good faith at all times and that we have not engaged in any illegal activities.

Accordingly, we will vigorously defend ourselves in this matter. If we are convicted, remedies could include fines, penalties, forfeiture and compliance conditions. Given the early stage of this proceeding, we cannot estimate the amount or range of loss, if any; however, it is reasonably possible that it could be material if we are convicted.

Other Matters. On June 30, 2014, we received a Statement of Objections from the French Competition Authority (“FCA”) addressed to FedEx Express France, formerly known as TATEX, regarding an investigation by the FCA into anticompetitive behavior that is alleged to have occurred primarily in the framework of trade association meetings that included the former general managers of TATEX prior to our acquisition of that company in July 2012. In September 2014, FedEx Express France submitted its observations

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in response to the Statement of Objections to the FCA. In April 2015, the FCA issued a report responding to the observations submitted by all companies involved in the investigation. We submitted an answer to the FCA’s report in early July. A hearing in this matter before the Board of the FCA has been set for September 30, 2015. Loss in this matter is probable, and in the fourth quarter of 2015 we established an accrual for the estimated probable loss. This amount was immaterial.

FedEx Express and its subsidiaries are subject to other legal proceedings that arise in the ordinary course of their business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not have a material adverse effect on our financial position, results of operations or cash flows.

(6) Parent/Affiliate Transactions

Affiliate company balances that are currently receivable or payable relate to charges for services provided to or by other FedEx affiliates, which are settled on a monthly basis, or the net activity from participation in FedEx’s consolidated cash management program. In addition, we are allocated net interest on these amounts at market rates.

We maintain an accounts receivable arrangement with FedEx TechConnect, Inc. (“FedEx TechConnect”), a wholly owned subsidiary of FedEx Corporate Services, Inc. (“FedEx Services”). FedEx Services is a wholly owned subsidiary of FedEx. Under this arrangement, we recognize revenue for the transportation services provided to our U.S. customers and factor the related receivables to FedEx TechConnect for collection. We have no continuing involvement with the receivables transferred to FedEx TechConnect. Our net receivables recorded by FedEx TechConnect totaled $1.6 billion at August 31, 2015 and $1.7 billion at May 31, 2015.

The costs of FedEx Services, FedEx TechConnect and FedEx Office and Print Services, Inc., as well as charges for management fees from our parent, are allocated to us and are included in the expense line item “Intercompany charges, net” based on metrics such as relative revenues or estimated services provided. We believe these allocations approximate the net cost of providing the functions. FedEx allocation methodologies are refined as necessary to reflect changes in our business.

(7) Supplemental Cash Flow Information

Cash paid for interest expense and income taxes for the three-month periods ended August 31 was as follows (in millions):

	2015			2014
Cash payments for:
Interest (net of capitalized interest)	$	—		$	4
Income taxes	$	169		$	131
Income tax refunds received		(2	)		(1	)
Cash tax payments, net	$	167		$	130

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REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder

Federal Express Corporation

We have reviewed the condensed consolidated balance sheet of Federal Express Corporation as of August 31, 2015, and the related condensed consolidated statements of income, comprehensive income and cash flows for the three-month periods ended August 31, 2015 and 2014. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Federal Express Corporation as of May 31, 2015, and the related consolidated statements of income, comprehensive income, changes in owner’s equity, and cash flows for the year then ended not presented herein, and in our report dated July 14, 2015, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2015, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Memphis, Tennessee

September 17, 2015

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Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

GENERAL

The following Management’s Discussion and Analysis of Results of Operations and Financial Condition, which describes the principal factors affecting the results of operations and financial condition of Federal Express Corporation (“FedEx Express”), is abbreviated pursuant to General Instruction H(2)(a) of Form 10-Q. This discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended May 31, 2015 (“Annual Report”). Our Annual Report includes additional information about our significant accounting policies, practices and the transactions that underlie our financial results. For additional information, including a discussion of outlook, liquidity, capital resources, contractual cash obligations and critical accounting estimates, see the Quarterly Report on Form 10-Q of our parent, FedEx Corporation (“FedEx”), for the quarter ended August 31, 2015.

We are the world’s largest express transportation company. Our sister company FedEx Corporate Services, Inc. (“FedEx Services”) provides us and our other sister companies, including FedEx Ground Package System, Inc. (“FedEx Ground”), with sales, marketing, information technology, communications and certain back-office support, as well as retail access for our customers through FedEx Office and Print Services, Inc. (“FedEx Office”) and customer service, technical support and billing and collection services through FedEx TechConnect, Inc.

The operating expenses line item “Intercompany charges” on the financial summary represents an allocation that primarily includes salaries and benefits, depreciation and other costs for the sales, marketing, information technology and customer service support provided to us by FedEx Services and FedEx Office’s net operating costs. These costs are allocated based on metrics such as relative revenues or estimated services provided. For the international regions of FedEx Express, similar functions are performed on a regional basis by FedEx Express and reported in expense line items outside of intercompany charges. “Intercompany charges” also includes allocated charges from our parent for management fees related to services received for general corporate oversight, including executive officers and certain legal and finance functions. We believe the total amounts allocated approximate the net cost of providing these functions. FedEx allocation methodologies are refined as necessary to reflect changes in our business.

The key indicators necessary to understand our operating results include:

• the overall customer demand for our various services based on macro-economic factors and the global economy;

• the volume of shipments transported through our network, as measured by our average daily volume and shipment weight;

• the mix of services purchased by our customers;

• the prices we obtain for our services, as measured by yield (revenue per package or pound);

• our ability to manage our cost structure (capital expenditures and operating expenses) to match shifting volume levels; and

• the timing and amount of fluctuations in fuel prices and our ability to offset these fluctuations through our fuel surcharges.

The majority of our operating expenses are directly impacted by revenue and volume levels. Accordingly, we expect these operating expenses to fluctuate on a year-over-year basis consistent with the change in revenues and volumes. Therefore, the discussion of operating expense captions focuses on the key drivers and trends impacting expenses other than changes in revenues and volume. The line item “Other operating expenses” predominantly includes costs associated with outside service contracts (such as security, facility services and cargo handling), uniforms, insurance, utilities and professional fees.

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Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2016 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

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RESULTS OF OPERATIONS

FedEx Express offers a wide range of U.S. domestic and international shipping services for delivery of packages and freight including priority services, which provide time-definite delivery within one, two or three business days worldwide, and deferred or economy services, which provide time-definite delivery within five business days worldwide. The following table compares revenues, operating expenses, operating expenses as a percent of revenue, operating income (dollars in millions) and operating margin for the three-month periods ended August 31 and amounts have been recast to conform to pension accounting changes further discussed in our Annual Report:

	2015			2014			Percent Change
Revenues:
Package:
U.S. overnight box	$	1,658		$	1,682			(1	)
U.S. overnight envelope		422			415			2
U.S. deferred		816			795			3
Total U.S. domestic package revenue		2,896			2,892			—
International priority		1,464			1,630			(10	)
International economy		574			571			1
Total international export package revenue		2,038			2,201			(7	)
International domestic(1)		327			371			(12	)
Total package revenue		5,261			5,464			(4	)
Freight:
U.S.		573			579			(1	)
International priority		350			395			(11	)
International airfreight		36			46			(22	)
Total freight revenue		959			1,020			(6	)	Percent of Revenue
Other		92			100			(8	)	2015		2014
Total revenues		6,312			6,584			(4	)	100.0	%	100.0	%
Operating expenses:
Salaries and employee benefits		2,433			2,355			3		38.6		35.8
Purchased transportation		419			457			(8	)	6.6		7.0
Rentals and landing fees		403			419			(4	)	6.4		6.4
Depreciation and amortization		344			371			(7	)	5.5		5.6
Fuel		607			970			(37	)	9.6		14.7
Maintenance and repairs		343			377			(9	)	5.4		5.7
Intercompany charges		474			475			—		7.5		7.2
Other		788			786			—		12.5		11.9
Total operating expenses		5,811			6,210			(6	)	92.1	%	94.3	%
Operating income	$	501		$	374			34
Operating margin		7.9	%		5.7	%		220	bp
Other income (expense):
Interest, net		9			3			NM
Other, net		(36	)		(32	)		NM
		(27	)		(29	)		NM
Income before income taxes		474			345			37
Provision for income taxes		162			120			35
Net income	$	312		$	225			39

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

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The following table compares selected statistics (in thousands, except yield amounts) for the three-month periods ended August 31:

	2015		2014		Percent Change
Package Statistics
Average daily package volume (ADV):
U.S. overnight box		1,210		1,211		—
U.S. overnight envelope		541		527		3
U.S. deferred		865		846		2
Total U.S. domestic ADV		2,616		2,584		1
International priority		389		409		(5	)
International economy		176		170		4
Total international export ADV		565		579		(2	)
International domestic(1)		855		816		5
Total ADV		4,036		3,979		1
Revenue per package (yield):
U.S. overnight box	$	21.08	$	21.69		(3	)
U.S. overnight envelope		11.99		12.32		(3	)
U.S. deferred		14.52		14.68		(1	)
U.S. domestic composite		17.03		17.49		(3	)
International priority		57.86		62.19		(7	)
International economy		50.18		52.60		(5	)
International export composite		55.47		59.38		(7	)
International domestic(1)		5.88		7.10		(17	)
Composite package yield		20.05		21.46		(7	)
Freight Statistics
Average daily freight pounds:
U.S.		7,278		7,318		(1	)
International priority		2,491		2,792		(11	)
International airfreight		609		670		(9	)
Total average daily freight pounds		10,378		10,780		(4	)
Revenue per pound (yield):
U.S.	$	1.21	$	1.24		(2	)
International priority		2.16		2.21		(2	)
International airfreight		0.92		1.07		(14	)
Composite freight yield		1.42		1.48		(4	)

⁽¹⁾  International domestic statistics represent our international intra-country express operations.

Revenues

Our revenues decreased 4% in the first quarter of 2016 due to the negative impact of lower fuel surcharges and unfavorable exchange rates, which were partially offset by U.S. domestic base yield and volume growth and international export base yield growth. U.S. domestic average daily volumes increased 1% in the first quarter of 2016 driven by both our deferred and overnight service offerings. U.S. domestic yields decreased 3% in the first quarter of 2016 due to the negative impact of lower fuel surcharges, which were partially offset by higher base rates. International export yields decreased 7% in the first quarter of 2016 due to the negative impact of lower fuel surcharges and unfavorable exchange rates and were partially offset by higher base rates and higher weights. International domestic revenues declined 12% in the first quarter of 2016 due to the negative impact of unfavorable exchange rates, which were partially offset by a 5% volume increase. One additional operating day benefited revenues in the first quarter of 2016.

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Operating Income

Our operating income increased 34% and operating margin grew 220 basis points in the first quarter of 2016, despite a 4% revenue decline. This increase was primarily driven by higher international export and U.S. domestic base yield growth, the benefit from one additional operating day and lower international expenses due to currency exchange rates. These factors were partially offset by higher incentive compensation accruals. Profit improvement program initiatives continued to improve revenue quality and constrain expenses for the first quarter of 2016.

Salaries and employee benefits increased 3% in the first quarter of 2016 due to merit increases and higher incentive compensation accruals. Maintenance and repairs expense decreased 9% in the first quarter of 2016 due to the timing of prior year aircraft maintenance events. Aircraft retirements during 2015 drove a 7% decrease in depreciation and amortization expense in the first quarter of 2016. Purchased transportation expenses decreased 8% in the first quarter of 2016 driven by a favorable exchange rate impact.

Fuel

Fuel expense decreased 37% in the first quarter 2016 due to lower aircraft fuel prices. However, fuel prices represent only one component of the two factors we consider meaningful in understanding the impact of fuel on our business. Consideration must also be given to the fuel surcharge revenue we collect. Accordingly, we believe discussion of the net impact of fuel on our results, which is a comparison of the year-over-year change in these two factors, is important to understand the impact of fuel on our business. In order to provide information about the impact of fuel surcharges on the trend in revenue and yield growth, we have included the comparative weighted-average fuel surcharge percentages in effect for the first quarter of 2016 and 2015 below.

The index used to determine our fuel surcharges incorporates a timing lag of approximately six to eight weeks before they are adjusted for changes in fuel prices. For example, the fuel surcharge index in effect in August 2015 was set based on June 2015 fuel prices. In addition, the structure of the table that is used to determine our fuel surcharge does not adjust immediately for changes in fuel price, but allows for the fuel surcharge revenue charged to our customers to remain unchanged as long as fuel prices remain within certain ranges.

Beyond these factors, the manner in which we purchase fuel also influences the net impact of fuel on our results. For example, our contracts for jet fuel purchases are tied to various indices, including the U.S. Gulf Coast index. While many of these indices are aligned, each index may fluctuate at a different pace, driving variability in the prices paid for jet fuel. Furthermore, under these contractual arrangements, approximately 75% of our jet fuel is purchased based on the index price for the preceding week, with the remainder of our purchases tied to the index price for the preceding month, rather than based on daily spot rates. These contractual provisions mitigate the impact of rapidly changing daily spot rates on our jet fuel purchases.

Because of the factors described above, our operating results may be affected should the market price of fuel suddenly change by a significant amount or change by amounts that do not result in an adjustment in our fuel surcharges, which can significantly affect our earnings either positively or negatively in the short-term.

We routinely review our fuel surcharges and our fuel surcharge methodology. On November 2, 2015, we will update certain tables used to determine our fuel surcharges.

The net impact of fuel had a minimal impact in the first quarter of 2016 on operating income. This was driven by decreased fuel prices during the first quarter of 2016 versus prior year, which was partially offset by the year-over-year decrease in fuel surcharge revenue during these periods.

-18-

The net impact of fuel on our operating results does not consider the effects that fuel surcharge levels may have on our business, including changes in demand and shifts in the mix of services purchased by our customers. While fluctuations in fuel surcharge percentages can be significant from period to period, fuel surcharges represent one of the many individual components of our pricing structure that impact our overall revenue and yield. Additional components include the mix of services sold, the base price and extra service charges we obtain for these services and the level of pricing discounts offered. Our U.S. domestic and outbound fuel surcharge and the international fuel surcharges ranged as follows for the periods ended August 31:

	2015			2014
U.S. Domestic and Outbound Fuel Surcharge:
Low		3.00	%		9.50	%
High		4.00			9.50
Weighted-average		3.34			9.50
International Fuel Surcharges:
Low		3.00			13.50
High		12.00			18.00
Weighted-average		8.82			16.26

On September 15, 2015, FedEx Express announced a 4.9% average list price increase for FedEx Express U.S. domestic, U.S. export and U.S. import services effective January 4, 2016. In addition, effective November 2, 2015, FedEx Express will update certain tables used to determine its fuel surcharges. On February 2, 2015, FedEx Express updated the tables used to determine fuel surcharges. On September 16, 2014, FedEx Express announced a 4.9% average list price increase for FedEx Express U.S. domestic, U.S. export and U.S. import services effective January 5, 2015. In January 2014, we implemented a 3.9% average list price increase for FedEx Express U.S. domestic, U.S. export and U.S. import services.

Income Taxes

Our effective tax rate was 34.1% for the first quarter of 2016 and 34.8% for the first quarter of 2015. For 2016, we expect an effective tax rate between 35.0% and 36.0% prior to any year-end mark-to-market accounting adjustment for defined benefit pension and postretirement healthcare plans (“MTM Adjustment”). The actual rate, however, will depend on a number of factors, including the amount and source of operating income and the impact of the MTM adjustment.

We are subject to taxation in the United States and various U.S. state, local and foreign jurisdictions. We are currently under examination by the Internal Revenue Service for the 2012 and 2013 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. The expected impact of any changes would not be material to our consolidated financial statements. As of August 31, 2015, there were no material changes to our liabilities for unrecognized tax benefits from May 31, 2015.

RECENT ACCOUNTING GUIDANCE

New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements. These matters are described in our Annual Report.

We believe that no other new accounting guidance was adopted or issued during the first three months of 2016 that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting.

FORWARD-LOOKING STATEMENTS

Certain statements in this report are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, cash flows, plans, objectives, future performance and business. Forward-looking statements include those preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “plans,” “estimates,” “targets,” “projects,” “intends” or similar expressions. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking statements, because of, among other things, potential risks and uncertainties, such as:

• economic conditions in the global markets in which we operate;

-19-

• significant changes in the volumes of shipments transported through our networks, customer demand for our various services or the prices we obtain for our services;

• damage to our reputation or loss of brand equity;

• cybersecurity incidents or disruptions to the Internet or our technology infrastructure, including those impacting our computer systems and website, which can adversely affect our operations and reputation among customers;

• the price and availability of jet and vehicle fuel;

• our ability to manage our cost structure for capital expenditures and operating expenses, and match it to shifting and future customer volume levels;

• the impact of intense competition on our ability to maintain or increase our prices (including our fuel surcharges in response to fluctuating fuel price) or to maintain or grow our market share;

• our ability to effectively operate, integrate, leverage and grow acquired businesses, and to continue to support the value we allocate to these acquired businesses, including their goodwill;

• FedEx’s ability to successfully execute the TNT Express N.V. acquisition on favorable terms, on a timely basis or at all;

• our ability to maintain good relationships with our employees and prevent attempts by labor organizations to organize groups of our employees, which could significantly increase our operating costs and reduce our operational flexibility;

• our ability to execute on our profit improvement programs;

• the impact of any international conflicts or terrorist activities on the United States and global economies in general, the transportation industry or us in particular, and what effects these events will have on our costs or the demand for our services;

• any impacts on our businesses resulting from new domestic or international government laws and regulation, including regulatory actions affecting global aviation or other transportation rights, increased air cargo and other security or safety requirements, and tax, accounting, trade (such as protectionist measures enacted in response to weak economic conditions), labor (such as card-check legislation or changes to the Railway Labor Act of 1926, as amended, affecting our employees), environmental (such as global climate change legislation) or postal rules;

• adverse weather conditions or localized natural disasters in key geographic areas, such as earthquakes, volcanoes, and hurricanes, which can disrupt our electrical service, damage our property, disrupt our operations, increase our fuel costs and adversely affect our shipment levels;

• any impact on our business from disruptions or modifications in service by the United States Postal Service (“USPS”), which is a significant customer and vendor of ours;

• increasing costs, the volatility of costs and funding requirements and other legal mandates for employee benefits, especially pension and healthcare benefits;

-20-

• the increasing costs of compliance with federal, state and foreign governmental agency mandates (including the Foreign Corrupt Practices Act and the U.K. Bribery Act) and defending against inappropriate or unjustified enforcement or other actions by such agencies;

• changes in foreign currency exchange rates, especially in the Chinese yuan, euro, British pound, Brazilian real and the Canadian dollar, which can affect our sales levels and foreign currency sales prices;

• market acceptance of our new service and growth initiatives;

• any liability resulting from and the costs of defending against class-action litigation, such as wage-and-hour and discrimination and retaliation claims, and any other legal or governmental proceedings;

• the outcome of future negotiations to reach new collective bargaining agreements — including with the union that represents our pilots;

• the impact of technology developments on our operations and on demand for our services, and our ability to continue to identify and eliminate unnecessary information technology redundancy and complexity throughout the organization;

• governmental underinvestment in transportation infrastructure, which could increase our costs and adversely impact our service levels due to traffic congestion or sub-optimal routing of our vehicles and aircraft;

• widespread outbreak of an illness or any other communicable disease, or any other public health crisis;

• availability of financing on terms acceptable to FedEx and FedEx’s ability to maintain its current credit ratings, especially given the capital intensity of our operations; and

• other risks and uncertainties you can find in FedEx’s press releases and Securities and Exchange Commission filings, including the risk factors identified under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in our Annual Report, as updated by our quarterly reports on Form 10-Q.

As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

-21-

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Omitted under the reduced disclosure format permitted by General Instruction H(2)(c) of Form 10-Q.

Item 4. Controls and Procedures

Our management, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of August 31, 2015 (the end of the period covered by this Quarterly Report on Form 10-Q).

During our fiscal quarter ended August 31, 2015, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

-22-

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of all material pending legal proceedings, see Note 5 of the accompanying unaudited condensed consolidated financial statements.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in our Annual Report (under the heading “Risk Factors” in “Management’s Discussion and Analysis of Results of Operations and Financial Condition”) in response to Part I, Item 1A of Form 10-K.

Item 6. Exhibits

Exhibit Number	Description of Exhibit
10.1	Amendment dated June 12, 2015 (but effective as of January 5, 2015), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.1 to FedEx Corporation’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.2	Amendment dated June 16, 2015 (but effective as of February 2, 2015), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.2 to FedEx Corporation’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.3	Amendment dated June 23, 2015 (but effective as of March 2, 2015), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.3 to FedEx Corporation’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.4	Amendment dated August 31, 2015 (but effective as of January 4, 2016), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.4 to FedEx Corporation’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.5	Supplemental Agreement No. 6 (and related side letters) dated as of July 21, 2015, amending the Boeing 767-3S2 Freighter Purchase Agreement dated as of December 14, 2011, between The Boeing Company and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as amended. (Filed as Exhibit 10.5 to FedEx Corporation’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
12.1	Computation of Ratio of Earnings to Fixed Charges.
15.1	Letter re: Unaudited Interim Financial Statements.
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	Interactive Data Files.

-23-

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FEDERAL EXPRESS CORPORATION
Date: September 17, 2015	/s/ ELISE L. JORDAN
	ELISE L. JORDAN
	SENIOR VICE PRESIDENT AND
	CHIEF FINANCIAL OFFICER

-24-

EXHIBIT INDEX

Exhibit         Number	Description of Exhibit
10.1	Amendment dated June 12, 2015 (but effective as of January 5, 2015), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.1 to FedEx Corporation’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.2	Amendment dated June 16, 2015 (but effective as of February 2, 2015), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.2 to FedEx Corporation’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.3	Amendment dated June 23, 2015 (but effective as of March 2, 2015), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.3 to FedEx Corporation’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.4	Amendment dated August 31, 2015 (but effective as of January 4, 2016), amending the Transportation Agreement dated April 23, 2013 between the United States Postal Service and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.4 to FedEx Corporation’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.5	Supplemental Agreement No. 6 (and related side letters) dated as of July 21, 2015, amending the Boeing 767-3S2 Freighter Purchase Agreement dated as of December 14, 2011, between The Boeing Company and Federal Express Corporation. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as amended. (Filed as Exhibit 10.5 to FedEx Corporation’s FY16 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
12.1	Computation of Ratio of Earnings to Fixed Charges.
15.1	Letter re: Unaudited Interim Financial Statements.
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	Interactive Data Files.

E-1

EX-12.1

EXHIBIT 12.1

FEDERAL EXPRESS CORPORATION

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(UNAUDITED)

(IN MILLIONS, EXCEPT RATIOS)

	Three Months Ended August 31,				Year Ended May 31,
	2015		2014		2015		2014		2013		2012(1)			2011
			(As Adjusted)
Earnings:
Income before income taxes	$	474	$	345	$	179	$	1,314	$	1,708	$	(1,005	)	$	1,019
Add back:
Portion of rent expense representative of interest factor		138		143		574		577		598		566			611
Earnings as adjusted	$	612	$	488	$	753	$	1,891	$	2,306	$	(439	)	$	1,630
Fixed Charges:
Capitalized interest	$	7	$	6	$	28	$	25	$	43	$	80		$	61
Portion of rent expense representative of interest factor		138		143		574		577		598		566			611
	$	145	$	149	$	602	$	602	$	641	$	646		$	672
Ratio of Earnings to Fixed Charges		4.2		3.3		1.3		3.1		3.6		—			2.4

⁽¹⁾  The loss in 2012 was inadequate to cover fixed charges. Additional earnings of $1,085 million would have been necessary to bring the ratio for this period to 1.0.

EX-15.1

EXHIBIT 15.1

The Board of Directors and Stockholder

Federal Express Corporation

We are aware of the incorporation by reference in the Registration Statement (Form S-3 No. 333-183989-10) of Federal Express Corporation and in the related Prospectus of our report dated September 17, 2015, relating to the unaudited condensed consolidated interim financial statements of Federal Express Corporation that are included in its Form 10-Q for the quarter ended August 31, 2015.

/s/ Ernst & Young LLP

Memphis, Tennessee

September 17, 2015

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David J. Bronczek, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Federal Express Corporation (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 17, 2015

/s/ David J. Bronczek

David J. Bronczek

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Elise L. Jordan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Federal Express Corporation (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 17, 2015

/s/ Elise L. Jordan

Elise L. Jordan

Senior Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Federal Express Corporation (“FedEx Express”) on Form 10-Q for the period ended August 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Bronczek, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of FedEx Express.

Date: September 17, 2015

/s/ David J. Bronczek

David J. Bronczek

President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Federal Express Corporation (“FedEx Express”) on Form 10-Q for the period ended August 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elise L. Jordan, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of FedEx Express.

Date: September 17, 2015

/s/ Elise L. Jordan

Elise L. Jordan

Senior Vice President and Chief Financial Officer

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Commitments (Details 3) $ in Millions	Aug. 31, 2015 USD ($)
Schedule of Future Minimum Operating Lease Payments [Line Items]
2016 (remainder)	$ 932
2017	1,263
2018	877
2019	741
2020	592
Thereafter	3,601
Total	8,006
Aircraft and Related Equipment [Member]
Schedule of Future Minimum Operating Lease Payments [Line Items]
2016 (remainder)	430
2017	403
2018	332
2019	274
2020	190
Thereafter	360
Total	1,989
Facilities and Other [Member]
Schedule of Future Minimum Operating Lease Payments [Line Items]
2016 (remainder)	502
2017	860
2018	545
2019	467
2020	402
Thereafter	3,241
Total	$ 6,017

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Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Aug. 31, 2015

Accumulated Other Comprehensive Income Loss Net Of Tax Abstract

Accumulated Other Comprehensive Income (Loss)

(2) Accumulated Other Comprehensive (Loss) Income

The following table provides changes in accumulated other comprehensive (loss) income (“AOCI”), net of tax, reported in our condensed consolidated financial statements for the three-month periods ended August 31 (in millions; amounts in parentheses indicate debits to AOCI) andamounts have been recast to conform to pension accounting changes further discussed in our Annual Report:

		2015		2014
Foreign currency translation gain (loss):
	Balance at beginning of period	$	(250)	$	71
	Translation adjustments		(131)		(29)
	Balance at end of period		(381)		42
Retirement plans adjustments:
	Balance at beginning of period		17		22
	Reclassifications from AOCI		(6)		(1)
	Balance at end of period		11		21
Accumulated other comprehensive (loss) income at end of period		$	(370)	$	63

Due to its immateriality, the table presenting details of reclassifications from AOCI has been excluded from this quarterly report.

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Supplemental Cash Flow Information (Details) - USD ($) $ in Millions	3 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Supplemental Cash Flow Information [Abstract]
Interest (net of capitalized interest)		$ 4
Income taxes	$ 169	131
Income tax refunds received	(2)	(1)
Cash tax payments, net	$ 167	$ 130

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General

3 Months Ended

Aug. 31, 2015

General [Abstract]

General

(1) General

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of Federal Express Corporation (“FedEx Express”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31,2015 (“Annual Report”). Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of August 31, 2015, and the results of our operations and cash flows for the three-month periods ended August 31,2015 and 2014. Operating results for the three-month period ended August 31, 2015are not necessarily indicative of the results that may be expected for the year ending May 31, 2016.

We are a wholly owned subsidiary of FedEx Corporation (“FedEx”) engaged in a single line of business and operate in one business segment – the worldwide express transportation and distribution of goods and documents.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2016 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

PENSION AND POSTRETIREMENT HEALTHCARE PLANS. During the fourth quarter of 2015 we changed our method of accounting for our defined benefit pension and postretirement healthcare plans as discussed in our Annual Report. Prior year amounts have been recast to conform to these accounting changes.

EMPLOYEES UNDER COLLECTIVE BARGAINING ARRANGEMENTS. Our pilots, which represent a small number of our total employees, are employed under a collective bargaining agreement. The contract became amendable in March 2013.  After participating in negotiations assisted by the National Mediation Board (“NMB”), the parties reached a Tentative Agreement (“TA”) on August 19, 2015.  The TA is currently out for a membership ratification vote which will close in mid-October.  If the TA is ratified, it will become effective November 2, 2015 and will become amendable in November 2021.  If the TA is not ratified, the parties will reenter NMB mediated negotiations.   The NMB is the U.S. governmental agency that oversees labor agreements for entities covered by the Railway Labor Act of 1926, as amended. In addition to our pilots, certain non-U.S. employees are unionized.

STOCK-BASED COMPENSATION. FedEx has two types of equity-based compensation: stock options and restricted stock. The key terms of the stock option and restricted stock awards granted under FedEx's incentive stock plans are set forth in FedEx's Annual Report.

Our stock-based compensation expense was$16 million for the three months endedAugust 31,2015 and 2014. This amount represents the amount charged to us by FedEx for awards granted to our employees.

LONG-TERM DEBT.Long-term debt, exclusive of capital leases, had a carrying value of $239 million at August 31, 2015and May 31, 2015,compared with an estimated fair value of $320 million at August 31, 2015 and $345 million at May 31, 2015. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities.The fair value of our long-term debt is classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

RECENT ACCOUNTING GUIDANCE.New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements. These matters are described in our Annual Report.

We believe that no other new accounting guidance was adopted or issued during the first three months of 2016 that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting.

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Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Aug. 31, 2015	May. 31, 2015
CURRENT ASSETS
Cash and cash equivalents	$ 823	$ 884
Receivables, less allowances of $84 and $92	1,512	1,549
Spare parts, supplies and fuel, less allowances of $209 and $204	386	394
Deferred income taxes	378	378
Due from parent company and other FedEx subsidiaries	579	501
Prepaid expenses and other	132	108
Total current assets	3,810	3,814
PROPERTY AND EQUIPMENT, AT COST	27,095	26,286
Less accumulated depreciation and amortization	12,674	12,392
Net property and equipment	14,421	13,894
OTHER LONG-TERM ASSETS
Goodwill	1,393	1,448
Other assets	963	1,104
Total other long-term assets	2,356	2,552
ASSETS	20,587	20,260
CURRENT LIABILITIES
Current portion of long-term debt	5	7
Accrued salaries and employee benefits	977	1,014
Accounts payable	1,148	1,257
Accrued expenses	981	1,056
Due to other FedEx subsidiaries	2,201	1,932
Total current liabilities	5,312	5,266
LONG-TERM DEBT, LESS CURRENT PORTION	239	239
OTHER LONG-TERM LIABILITIES
Deferred income taxes	1,717	1,712
Pension, postretirement healthcare and other benefit obligations	1,267	1,251
Self insurance accruals	784	711
Deferred lease obligations	614	572
Deferred gains, principally related to aircraft transactions	171	178
Other liabilities	93	117
Total other long-term liabilities	$ 4,646	$ 4,541
COMMITMENTS AND CONTINGENCIES
OWNER'S EQUTIY
Common stock, $0.10 par value; 1,000 shares authorized, issued and outstanding	$ 0	$ 0
Additional paid-in capital	608	608
Retained earnings	10,152	9,839
Accumulated other comprehensive loss	(370)	(233)
Total owner's equity	10,390	10,214
LIABILITIES AND OWNER'S EQUITY	$ 20,587	$ 20,260

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Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Other Comprehensive Income, Tax Amounts
Foreign currency translation adjustments, tax	$ 10	$ 8
Amortization of prior service credit and other, net of tax	$ 3

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Retirement Plans (Details 1) - USD ($) $ in Millions	3 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Pension and Other Postretirement Benefit Expense [Abstract]
Pension plans sponsored by FedEx	$ 16	$ 19
Defined pension plans	11	11
Defined contribution plans	64	61
Postretirement healthcare plans	16	16
Retirement plans costs	$ 107	$ 107

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Commitments (Details 2) - Aug. 31, 2015	USD ($)
Schedule of Aircraft Commitments [Line Items]
2016 (remainder)	7
2017	12
2018	18
2019	15
2020	15
Thereafter	35
Total	102
Boeing 777 Freighter [Member]
Schedule of Aircraft Commitments [Line Items]
2016 (remainder)	1
2018	2
2019	2
2020	3
Thereafter	9
Total	17
Boeing 767 Freighter [Member]
Schedule of Aircraft Commitments [Line Items]
2016 (remainder)	6
2017	12
2018	16
2019	13
2020	12
Thereafter	26
Total	85

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Operating Activities:
Net income	$ 312	$ 225
Noncash charges:
Depreciation and amortization	344	371
Other, net	39	(3)
Changes in assets and liabilities. net	96	(162)
Cash provided by operating activities	791	431
Investing Activities:
Capital expenditures	(832)	(466)
Other	12	2
Cash used in investing activities	(820)	(464)
Financing Activities:
Effect of exchange rate changes on cash	(32)	(15)
Net decrease in cash and cash equivalents	(61)	(48)
Cash and cash equivalents at beginning of period	884	858
Cash and cash equivalents at end of period	$ 823	$ 810

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Aug. 31, 2015	May. 31, 2015
CURRENT ASSETS
Allowances for receivables	$ 84	$ 92
Allowances for spare parts, supplies and fuel	$ 209	$ 204
COMMON STOCKHOLDERS' INVESTMENT
Common stock, par value	$ 0.10	$ 0.10
Common stock, shares authorized	1,000	1,000
Common stock, shares issued	1,000	1,000
Common Stock, Shares, Outstanding	1,000	1,000

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Retirement Plans (Tables)

3 Months Ended

Aug. 31, 2015

Retirement Plan (Tables) [Abstract]

Schedule of Retirement Plan Costs

Our retirement plans costs for the three-month periods ended August 31 were as follows (in millions):
	2015		2014
Pension plans sponsored by FedEx	$	16	$	19
Defined benefit pension plans		11		11
Defined contribution plans		64		61
Postretirement healthcare plans		16		16
	$	107	$	107

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Document and Entity Information - shares	3 Months Ended
	Aug. 31, 2015	Sep. 16, 2015
Document and Entity Information [Abstract]
Document Type	10-Q
Document Period End Date	Aug. 31, 2015
Amendment Flag	false
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Entity Registrant Name	Federal Express Corporation
Entity Central Index Key	0000230211
Current Fiscal Year End Date	--05-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		1,000

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Commitments (Tables)

3 Months Ended

Aug. 31, 2015

Commitments (Tables) [Abstract]

Schedule of Purchase Commitments

		Aircraft and
		Aircraft Related		Other(1)		Total
2016 (remainder)		$	657	$	60	$	717
2017			1,240		43		1,283
2018			1,739		38		1,777
2019			1,584		10		1,594
2020			1,638		9		1,647
Thereafter			5,962		72		6,034
Total		$	12,820	$	232	$	13,052
(1)	Primarily advertising and promotions contracts.

Schedule of Aircraft Purchase Commitments

	B767F	B777F	Total
2016 (remainder)	6	1	7
2017	12	-	12
2018	16	2	18
2019	13	2	15
2020	12	3	15
Thereafter	26	9	35
Total	85	17	102

Schedule of Future Minimum Rental Payments for Operating Leases

	Operating Leases
	Aircraft				Total
	and Related		Facilities		Operating
	Equipment		and Other		Leases
2016 (remainder)	$	430	$	502	$	932
2017		403		860		1,263
2018		332		545		877
2019		274		467		741
2020		190		402		592
Thereafter		360		3,241		3,601
Total	$	1,989	$	6,017	$	8,006

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Condensed Consolidated Statements of Income - USD ($) $ in Millions	3 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Condensed Consolidated Statements of Income
REVENUES	$ 6,312	$ 6,584
OPERATING EXPENSES:
Salaries and employee benefits	2,433	2,355
Purchased transportation	419	457
Rentals and landing fees	403	419
Depreciation and amortization	344	371
Fuel	607	970
Maintenance and repairs	343	377
Intercompany charges, net	474	475
Other	788	786
OPERATING EXPENSES	5,811	6,210
OPERATING INCOME	501	374
OTHER INCOME (EXPENSE):
Interest, net	9	3
Other, net	(36)	(32)
OTHER INCOME (EXPENSE)	(27)	(29)
INCOME BEFORE INCOME TAXES	474	345
PROVISION FOR INCOME TAXES	162	120
NET INCOME	$ 312	$ 225

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Contingencies

3 Months Ended

Aug. 31, 2015

Loss Contingency [Abstract]

Contingencies

(5) Contingencies

Environmental Matters. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions that management reasonably believes could exceed $100,000.

On January 14, 2014, the U.S. Department of Justice (“DOJ”) issued a Grand Jury Subpoena to FedEx Express relating to an asbestos matter previously investigated by the U.S. Environmental Protection Agency. On May 1, 2014, the DOJ informed us that it had determined to continue to pursue the matter as a criminal case, citing seven asbestos-related regulatory violations associated with removal of roof materials from a hangar in Puerto Rico during cleaning and repair activity, as well as violation of waste disposal requirements. Loss is reasonably possible; however, the amount of any loss is expected to be immaterial.

Department of Justice Indictment — Internet Pharmacy Shipments. In the past, we received requests for information from the DOJ in the Northern District of California in connection with a criminal investigation relating to the transportation of packages for online pharmacies that may have shipped pharmaceuticals in violation of federal law. In July 2014, the DOJ filed a criminal indictment in the United States District Court for the Northern District of California in connection with the matter. A superseding indictment was filed in August 2014. The indictment alleges that FedEx Corporation, FedEx Express and FedEx Services, together with certain pharmacies, conspired to unlawfully distribute controlled substances, unlawfully distributed controlled substances and conspired to unlawfully distribute misbranded drugs. The superseding indictment adds conspiracy to launder money counts related to services provided to and payments from online pharmacies. We continue to believe that our employees have acted in good faith at all times and that we have not engaged in any illegal activities.

Accordingly, we will vigorously defend ourselves in this matter. If we are convicted, remedies could include fines, penalties, forfeiture and compliance conditions. Given the early stage of this proceeding, we cannot estimate the amount or range of loss, if any; however, it is reasonably possible that it could be material if we are convicted.

Other Matters.On June 30, 2014, we received a Statement of Objections from the French Competition Authority (“FCA”) addressed to FedEx Express France, formerly known as TATEX, regarding an investigation by the FCA into anticompetitive behavior that is alleged to have occurred primarily in the framework of trade association meetings that included the former general managers of TATEX prior to our acquisition of that company in July 2012. In September 2014, FedEx Express France submitted its observations in response to the Statement of Objections to the FCA. In April 2015, the FCA issued a report responding to the observations submitted by all companies involved in the investigation. We submitted an answer to the FCA's report in early July. A hearing in this matter before the Board of the FCA has been set for September 30, 2015. Loss in this matter is probable, and in the fourth quarter of 2015 we established an accrual for the estimated probable loss. This amount was immaterial.

FedEx Express and its subsidiaries are subject to other legal proceedings that arise in the ordinary course of their business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not have a material adverse effect on our financial position, results of operations or cash flows.

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Commitments

3 Months Ended

Aug. 31, 2015

Commitments [Abstract]

Commitments

(4) Commitments

As of August 31, 2015, our purchase commitments under various contracts for the remainder of 2016 and annually thereafter were as follows (in millions):

		Aircraft and
		Aircraft Related		Other(1)		Total
2016 (remainder)		$	657	$	60	$	717
2017			1,240		43		1,283
2018			1,739		38		1,777
2019			1,584		10		1,594
2020			1,638		9		1,647
Thereafter			5,962		72		6,034
Total		$	12,820	$	232	$	13,052
(1)	Primarily advertising and promotions contracts.

The amounts reflected in the table above for purchase commitments represent noncancelable agreements to purchase goods or services. As of August 31, 2015,our obligation to purchase six Boeing 767-300 Freighter (“B767F”) aircraft and nine Boeing 777 Freighter (“B777F”) aircraft is conditioned upon there being no event that causes us or our employees not to be covered by the Railway Labor Act of 1926, as amended. Open purchase orders that are cancelable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above.

On July 21, 2015, we entered into a supplemental agreement to purchase 50 additional B767F aircraft from Boeing. Four of the 50 additional B767F aircraft purchases are conditioned upon there being no event that causes FedEx Express or its employees not to be covered by the Railway Labor Act of 1926, as amended. The 50 additional B767F aircraft are expected to be delivered from fiscal 2018 through fiscal 2023 and will enable us to continue to improve the efficiency and reliability of our aircraft fleet.

We had $411 million in deposits and progress payments as of August 31,2015 on aircraft purchases and other planned aircraft-related transactions. These deposits are classified in the “Other assets” caption of our consolidated balance sheets. Aircraft and aircraft-related contracts are subject to price escalations. The following table is a summary of the key aircraft we are committed to purchase as of August 31, 2015 with the year of expected delivery:

	B767F	B777F	Total
2016 (remainder)	6	1	7
2017	12	-	12
2018	16	2	18
2019	13	2	15
2020	12	3	15
Thereafter	26	9	35
Total	85	17	102

A summary of future minimum lease payments under noncancelable operating leases with an initial or remaining term in excess of one year at August 31, 2015 is as follows (in millions):

	Operating Leases
	Aircraft				Total
	and Related		Facilities		Operating
	Equipment		and Other		Leases
2016 (remainder)	$	430	$	502	$	932
2017		403		860		1,263
2018		332		545		877
2019		274		467		741
2020		190		402		592
Thereafter		360		3,241		3,601
Total	$	1,989	$	6,017	$	8,006

Future minimum lease payments under capital leases were immaterial at August 31, 2015.While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations.

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Commitments (Details 1) $ in Millions		Aug. 31, 2015 USD ($)
Schedule of Purchase Commitments [Line Items]
2016 (remainder)		$ 717
2017		1,283
2018		1,777
2019		1,594
2020		1,647
Thereafter		6,034
Total		13,052
Aircraft And Related Equipment Commitments [Member]
Schedule of Purchase Commitments [Line Items]
2016 (remainder)		657
2017		1,240
2018		1,739
2019		1,584
2020		1,638
Thereafter		5,962
Total		12,820
Other Commitments [Member]
Schedule of Purchase Commitments [Line Items]
2016 (remainder)	[1]	60
2017	[1]	43
2018	[1]	38
2019	[1]	10
2020	[1]	9
Thereafter	[1]	72
Total	[1]	$ 232

[1] Primarily advertising and promotions contracts.

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Supplemental Cash Flow Information (Tables)

3 Months Ended

Aug. 31, 2015

Supplemental Cash Flow (Tables) [Abstract]

Supplemental Cash Flow Table

		2015		2014
Cash payments for:
	Interest (net of capitalized interest)	$	-	$	4
	Income taxes	$	169	$	131
	Income tax refunds received		(2)		(1)
	Cash tax payments, net	$	167	$	130

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General (Policies)

3 Months Ended

Aug. 31, 2015

General (Policies) [Abstract]

Summary of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. These interim financial statements of Federal Express Corporation (“FedEx Express”) have been prepared in accordance with accounting principles generally accepted in the United States and Securities and Exchange Commission instructions for interim financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31,2015 (“Annual Report”). Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed in our Annual Report.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly our financial position as of August 31, 2015, and the results of our operations and cash flows for the three-month periods ended August 31,2015 and 2014. Operating results for the three-month period ended August 31, 2015are not necessarily indicative of the results that may be expected for the year ending May 31, 2016.

We are a wholly owned subsidiary of FedEx Corporation (“FedEx”) engaged in a single line of business and operate in one business segment – the worldwide express transportation and distribution of goods and documents.

Except as otherwise specified, references to years indicate our fiscal year ending May 31, 2016 or ended May 31 of the year referenced and comparisons are to the corresponding period of the prior year.

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Parent/Affiliate Transactions

3 Months Ended

Aug. 31, 2015

Parent/Affiliate Transactions [Abstract]

Parent/Affiliate Transactions Disclosure

(6) Parent/Affiliate Transactions

Affiliate company balances that are currently receivable or payable relate to charges for services provided to or by other FedEx affiliates, which are settled on a monthly basis, or the net activity from participation in FedEx's consolidated cash management program. In addition, we are allocated net interest on these amounts at market rates.

We maintain an accounts receivable arrangement with FedEx TechConnect, Inc. (“FedEx TechConnect”), a wholly owned subsidiary ofFedEx Corporate Services, Inc. (“FedEx Services”). FedEx Services is a wholly owned subsidiary of FedEx. Under this arrangement, we recognize revenue for the transportation services provided to our U.S. customers and factor the related receivables to FedEx TechConnect for collection. We have no continuing involvement with the receivables transferred to FedEx TechConnect. Our net receivables recorded by FedEx TechConnecttotaled $1.6 billion at August 31, 2015 and$1.7 billion at May 31, 2015.

The costs of FedEx Services, FedEx TechConnect and FedEx Office and Print Services, Inc., as well as charges for management fees from our parent, are allocated to us and are included in the expense line item “Intercompany charges, net” based on metrics such as relative revenues or estimated services provided. We believe these allocations approximate the net cost of providing the functions. FedEx allocation methodologies are refined as necessary to reflect changes in our business.

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Supplemental Cash Flow Information

3 Months Ended

Aug. 31, 2015

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

(7) Supplemental Cash Flow Information

Cash paid for interest expense and income taxes for the three-month periods ended August 31 was as follows (in millions):

		2015		2014
Cash payments for:
	Interest (net of capitalized interest)	$	-	$	4
	Income taxes	$	169	$	131
	Income tax refunds received		(2)		(1)
	Cash tax payments, net	$	167	$	130

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Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Aug. 31, 2015

Accumulated Other Comprehensive Income (Loss) (Tables) [Abstract]

Schedule Of Accumulated Other Comprehensive Income (Loss)

		2015		2014
Foreign currency translation gain (loss):
	Balance at beginning of period	$	(250)	$	71
	Translation adjustments		(131)		(29)
	Balance at end of period		(381)		42
Retirement plans adjustments:
	Balance at beginning of period		17		22
	Reclassifications from AOCI		(6)		(1)
	Balance at end of period		11		21
Accumulated other comprehensive (loss) income at end of period		$	(370)	$	63

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Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	3 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	$ (233)
Translation adjustment	(131)	$ (29)
Amortization of prior service credit and other, net of tax of $3 in 2015 and $0 in 2014	(6)	(1)
Ending balance	(370)	63
Foreign currency translation gain (loss) [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	(250)	71
Translation adjustment	(131)	(29)
Ending balance	(381)	42
Retirement plans adjustments [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	17	22
Reclassification from AOCI	(6)	(1)
Ending balance	$ 11	$ 21

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Commitments (Details 4) - Aug. 31, 2015 $ in Millions	USD ($)
Other Aircraft Commitments Disclosure [Line Items]
Boeing 777F Conditional Aircraft Commitments	9
Boeing 767F Conditional Aircraft Commitments	6
Additional Boeing 767F Aircraft Purchases	50
Other Commitment Disclosures [Abstract]
Deposit and Progress Payments	$ 411

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Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended
	Aug. 31, 2015	Aug. 31, 2014
Condensed Consolidated Statement of Comprehensive Income
NET INCOME	$ 312	$ 225
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $10 in 2015 and $8 in 2014	(131)	(29)
Amortization of prior service credit and other, net of tax of $3 in 2015 and $0 in 2014	(6)	(1)
Other comprehensive income (loss)	(137)	(30)
COMPREHENSIVE INCOME	$ 175	$ 195

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Retirement Plans

3 Months Ended

Aug. 31, 2015

Retirement Plans [Abstract]

Retirement Plans

(3) Retirement Plans

We sponsor or participate in programs that provide retirement benefits to most of our employees. These programs include defined benefit pension plans, defined contribution plans and postretirement healthcare plans. A majority of our employees are covered by the FedEx Corporation Employees' Pension Plan, a defined benefit pension plan sponsored by FedEx. Defined contribution plans are in place covering a majority of U.S. employees and certain international employees. We also sponsor or participate in nonqualified benefit plans covering certain of our U.S. employee groups and other pension plans covering certain of our international employees. Prior year amounts have been recast to conform to pension accounting changes. For more information, refer to the financial statements of FedEx included in its Form 10-Q for the quarter ended August 31, 2015 and in our Annual Report.

Our retirement plans costs for the three-month periods ended August 31 were as follows (in millions):
	2015		2014
Pension plans sponsored by FedEx	$	16	$	19
Defined benefit pension plans		11		11
Defined contribution plans		64		61
Postretirement healthcare plans		16		16
	$	107	$	107

The components of the net periodic benefit cost of the pension and postretirement healthcare plans currently sponsored by us were individually immaterial for all periods presented. No material contributions were made during the first quarter of 2016 or 2015 to pension plans sponsored by us, and we do not expect to make material contributions in 2016.

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Parent/Affiliate Transactions (Details) - USD ($) $ in Billions	Aug. 31, 2015	May. 31, 2015
Parent/Affiliate Transactions [Abstract]
Net Receivables Recorded by FedEx TechConnect	$ 1.6	$ 1.7

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General (Details) - USD ($) $ in Millions	3 Months Ended
	Aug. 31, 2015	Aug. 31, 2014	May. 31, 2015
Long Term Debt [Abstract]
Long Term Debt Exclusive of Capital Leases Carrying Value	$ 239		$ 239
Long Term Debt Exclusive Of Capital Leases Fair Value	320		$ 345
Stock Based Compensation Details [Abstract]
Stock-based compensation	$ 16	$ 16