NOTE 21: CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

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

The guarantor subsidiaries, which are 100% owned by FedEx, guarantee $14.8 billion of our public debt. The guarantees are full and unconditional and joint and several. Our guarantor subsidiaries were not determined using geographic, service line or other similar criteria, and as a result, the “Guarantor Subsidiaries” and “Non-guarantor Subsidiaries” columns each include portions of our domestic and international operations. Accordingly, this basis of presentation is not intended to present our financial condition, results of operations or cash flows for any purpose other than to comply with the specific requirements for subsidiary guarantor reporting.

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

CONDENSED CONSOLIDATING BALANCE SHEETS

May 31, 2017

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

CONDENSED CONSOLIDATING BALANCE SHEETS

May 31, 2016

	Parent		Guarantor Subsidiaries		Non- guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,974	$	326	$	1,277	$	(43	)	$	3,534
Receivables, less allowances		1		4,461		2,831		(41	)		7,252
Spare parts, supplies, fuel, prepaid expenses and other, less allowances		233		724		246		—			1,203
Total current assets		2,208		5,511		4,354		(84	)		11,989
PROPERTY AND EQUIPMENT, AT COST		22		43,760		3,236		—			47,018
Less accumulated depreciation and amortization		17		21,566		1,151		—			22,734
Net property and equipment		5		22,194		2,085		—			24,284
INTERCOMPANY RECEIVABLE		2,437		1,284		—		(3,721	)		—
GOODWILL		—		1,571		5,176		—			6,747
INVESTMENT IN SUBSIDIARIES		24,766		3,697		—		(28,463	)		—
OTHER ASSETS		3,359		967		1,851		(3,238	)		2,939
	$	32,775	$	35,224	$	13,466	$	(35,506	)	$	45,959
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Current portion of long-term debt	$	—	$	13	$	16	$	—		$	29
Accrued salaries and employee benefits		54		1,377		541		—			1,972
Accounts payable		8		1,501		1,519		(84	)		2,944
Accrued expenses		883		1,411		769		—			3,063
Total current liabilities		945		4,302		2,845		(84	)		8,008
LONG-TERM DEBT, LESS CURRENT PORTION		13,451		245		37		—			13,733
INTERCOMPANY PAYABLE		—		—		3,721		(3,721	)		—
OTHER LONG-TERM LIABILITIES
Deferred income taxes		—		4,436		369		(3,238	)		1,567
Other liabilities		4,595		3,375		897		—			8,867
Total other long-term liabilities		4,595		7,811		1,266		(3,238	)		10,434
STOCKHOLDERS’ INVESTMENT		13,784		22,866		5,597		(28,463	)		13,784
	$	32,775	$	35,224	$	13,466	$	(35,506	)	$	45,959

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

Year Ended May 31, 2017

	Parent			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	44,823		$	15,798		$	(302	)	$	60,319
OPERATING EXPENSES:
Salaries and employee benefits		123			16,696			4,723			—			21,542
Purchased transportation		—			8,260			5,495			(125	)		13,630
Rentals and landing fees		5			2,517			724			(6	)		3,240
Depreciation and amortization		1			2,538			456			—			2,995
Fuel		—			2,476			297			—			2,773
Maintenance and repairs		1			2,086			287			—			2,374
Retirement plans mark-to-market adjustment		—			(75	)		51			—			(24	)
Intercompany charges, net		(434	)		182			252			—			—
Other		304			5,734			2,885			(171	)		8,752
		—			40,414			15,170			(302	)		55,282
OPERATING INCOME		—			4,409			628			—			5,037
OTHER INCOME (EXPENSE):
Equity in earnings of subsidiaries		2,997			68			—			(3,065	)		—
Interest, net		(507	)		27			1			—			(479	)
Intercompany charges, net		508			(296	)		(212	)		—			—
Other, net		(1	)		(134	)		156			—			21
INCOME BEFORE INCOME TAXES		2,997			4,074			573			(3,065	)		4,579
Provision for income taxes		—			1,439			143			—			1,582
NET INCOME	$	2,997		$	2,635		$	430		$	(3,065	)	$	2,997
COMPREHENSIVE INCOME	$	2,922		$	2,580		$	314		$	(3,065	)	$	2,751

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

Year Ended May 31, 2016

	Parent			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Consolidated
REVENUES	$	—		$	42,143		$	8,547		$	(325	)	$	50,365
OPERATING EXPENSES:
Salaries and employee benefits		119			15,880			2,582			—			18,581
Purchased transportation		—			7,380			2,720			(134	)		9,966
Rentals and landing fees		5			2,484			371			(6	)		2,854
Depreciation and amortization		1			2,399			231			—			2,631
Fuel		—			2,324			75			—			2,399
Maintenance and repairs		1			1,954			153			—			2,108
Retirement plans mark-to-market adjustment		—			1,414			84			—			1,498
Intercompany charges, net		(645	)		425			220			—			—
Other		519			5,274			1,643			(185	)		7,251
		—			39,534			8,079			(325	)		47,288
OPERATING INCOME		—			2,609			468			—			3,077
OTHER INCOME (EXPENSE):
Equity in earnings of subsidiaries		1,820			279			—			(2,099	)		—
Interest, net		(355	)		27			13			—			(315	)
Intercompany charges, net		369			(354	)		(15	)		—			—
Other, net		(14	)		(14	)		6			—			(22	)
INCOME BEFORE INCOME TAXES		1,820			2,547			472			(2,099	)		2,740
Provision for income taxes		—			818			102			—			920
NET INCOME	$	1,820		$	1,729		$	370		$	(2,099	)	$	1,820
COMPREHENSIVE INCOME	$	1,746		$	1,704		$	128		$	(2,099	)	$	1,479

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

Year Ended May 31, 2015

	Parent			Guarantor Subsidiaries			Non- guarantor Subsidiaries		Eliminations			Consolidated
REVENUES	$	—		$	39,420		$	8,414	$	(381	)	$	47,453
OPERATING EXPENSES:
Salaries and employee benefits		106			14,626			2,378		—			17,110
Purchased transportation		—			5,802			2,878		(197	)		8,483
Rentals and landing fees		5			2,322			360		(5	)		2,682
Depreciation and amortization		1			2,370			240		—			2,611
Fuel		—			3,632			88		—			3,720
Maintenance and repairs		1			1,949			149		—			2,099
Impairment and other charges		—			276			—		—			276
Retirement plans mark-to-market adjustment		—			2,075			115		—			2,190
Intercompany charges, net		(450	)		117			333		—			—
Other		337			4,946			1,311		(179	)		6,415
		—			38,115			7,852		(381	)		45,586
OPERATING INCOME		—			1,305			562		—			1,867
OTHER INCOME (EXPENSE):
Equity in earnings of subsidiaries		1,050			337			—		(1,387	)		—
Interest, net		(247	)		23			3		—			(221	)
Intercompany charges, net		253			(265	)		12		—			—
Other, net		(6	)		(32	)		19		—			(19	)
INCOME BEFORE INCOME TAXES		1,050			1,368			596		(1,387	)		1,627
Provision for income taxes		—			390			187		—			577
NET INCOME	$	1,050		$	978		$	409	$	(1,387	)	$	1,050
COMPREHENSIVE INCOME	$	1,053		$	929		$	121	$	(1,387	)	$	716

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Year Ended May 31, 2017

	Parent			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(1,155	)	$	5,254		$	835		$	(4	)	$	4,930
INVESTING ACTIVITIES
Capital expenditures		—			(4,694	)		(422	)		—			(5,116	)
Proceeds from asset dispositions and other		34			25			76			—			135
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		34			(4,669	)		(346	)		—			(4,981	)
FINANCING ACTIVITIES
Net transfers from (to) Parent		421			(518	)		97			—			—
Payment on loan between subsidiaries		41			(15	)		(26	)		—			—
Intercompany dividends		—			1			(1	)		—			—
Principal payments on debt		—			(55	)		(27	)		—			(82	)
Proceeds from debt issuance		1,190			—			—			—			1,190
Proceeds from stock issuances		337			—			—			—			337
Dividends paid		(426	)		—			—			—			(426	)
Purchase of treasury stock		(509	)		—			—			—			(509	)
Other, net		(12	)		(13	)		43			—			18
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		1,042			(600	)		86			—			528
Effect of exchange rate changes on cash		(11	)		14			(45	)		—			(42	)
Net increase (decrease) in cash and cash equivalents		(90	)		(1	)		530			(4	)		435
Cash and cash equivalents at beginning of period		1,974			326			1,277			(43	)		3,534
Cash and cash equivalents at end of period	$	1,884		$	325		$	1,807		$	(47	)	$	3,969

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Year Ended May 31, 2016

	Parent			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(831	)	$	5,932		$	572		$	35		$	5,708
INVESTING ACTIVITIES
Capital expenditures		—			(4,617	)		(201	)		—			(4,818	)
Business acquisitions, net of cash acquired		—			—			(4,618	)		—			(4,618	)
Proceeds from asset dispositions and other		(55	)		33			12			—			(10	)
CASH USED IN INVESTING ACTIVITIES		(55	)		(4,584	)		(4,807	)		—			(9,446	)
FINANCING ACTIVITIES
Net transfers from (to) Parent		1,629			(1,549	)		(80	)		—			—
Payment on loan between subsidiaries		(4,805	)		109			4,696			—			—
Intercompany dividends		—			20			(20	)		—			—
Principal payments on debt		—			(19	)		(22	)		—			(41	)
Proceeds from debt issuances		6,519			—			—			—			6,519
Proceeds from stock issuances		183			—			—			—			183
Dividends paid		(277	)		—			—			—			(277	)
Purchase of treasury stock		(2,722	)		—			—			—			(2,722	)
Other, net		(51	)		(48	)		48			—			(51	)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		476			(1,487	)		4,622			—			3,611
Effect of exchange rate changes on cash		1			(22	)		(81	)		—			(102	)
Net (decrease) increase in cash and cash equivalents		(409	)		(161	)		306			35			(229	)
Cash and cash equivalents at beginning of period		2,383			487			971			(78	)		3,763
Cash and cash equivalents at end of period	$	1,974		$	326		$	1,277		$	(43	)	$	3,534

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Year Ended May 31, 2015

	Parent			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Consolidated
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(727	)	$	5,446		$	575		$	72		$	5,366
INVESTING ACTIVITIES
Capital expenditures		(1	)		(4,139	)		(207	)		—			(4,347	)
Business acquisitions, net of cash acquired		(1,429	)		—			—			—			(1,429	)
Proceeds from asset dispositions and other		—			42			(18	)		—			24
CASH USED IN INVESTING ACTIVITIES		(1,430	)		(4,097	)		(225	)		—			(5,752	)
FINANCING ACTIVITIES
Net transfers from (to) Parent		1,431			(1,502	)		71			—			—
Payment on loan between subsidiaries		—			267			(267	)		—			—
Intercompany dividends		—			68			(68	)		—			—
Principal payments on debt		—			(1	)		(4	)		—			(5	)
Proceeds from debt issuance		2,491			—			—			—			2,491
Proceeds from stock issuances		320			—			—			—			320
Dividends paid		(227	)		—			—			—			(227	)
Purchase of treasury stock		(1,254	)		—			—			—			(1,254	)
Other, net		24			(105	)		105			—			24
CASH PROVIDED (USED IN) FINANCING ACTIVITIES		2,785			(1,273	)		(163	)		—			1,349
Effect of exchange rate changes on cash		(1	)		(30	)		(77	)		—			(108	)
Net increase in cash and cash equivalents		627			46			110			72			855
Cash and cash equivalents at beginning of period		1,756			441			861			(150	)		2,908
Cash and cash equivalents at end of period	$	2,383		$	487		$	971		$	(78	)	$	3,763