FedEx Freight Holding Company, Inc.: Form 10-K for the period ended May 31, 2026

Company Overview

Headquartered in Memphis, Tennessee, FedEx Freight is the largest North American less-than-truckload (“LTL”) freight carrier, with industry-leading transit times and service levels, offering choice, simplicity, and reliability to meet the needs of LTL shippers while operating ethically with a commitment to “Safety Above All.” As of June 1, 2026, we had approximately 40,000 employees, over 365 locations, including approximately 355 shipping terminals (over 320 of which are in the United States) and approximately 10 linehaul relay sites, and nearly 30,000 motorized vehicles, of which nearly 17,000 are tractors, across all 50 U.S. states, Canada, and Mexico. We also offer freight delivery service to most points in Puerto Rico and the U.S. Virgin Islands. Our robust network established through almost 60 years of operations and consisting of more than 26,000 service center doors strategically positioned in high-demand regions provides critical services that facilitate the transport of goods in North America and powers the supply chains of our customers. Our services and solutions support companies of all sizes, industries, and specialties, and our proximity to our customers allows us to transport their goods quickly, reliably, and efficiently.

Our LTL portfolio consists of two complementary service offerings designed to address distinct customer shipping requirements, serving both time-critical and cost-sensitive freight across a single integrated network:

• FedEx Freight Priority: A premium, time-definite LTL service designed for shipments requiring the fastest available transit. Priority offers industry-leading published transit times, including next-business-day service for shipments traveling up to 600 miles and second-business-day service for shipments traveling up to 1,600 miles. The service provides broad coverage across the United States, Canada, and Mexico and is backed by a money-back service guarantee if published delivery commitments are not met, providing customers with a high degree of reliability for time-critical freight.
• FedEx Freight Economy: A value-oriented LTL service designed for shipments with more flexible transit requirements. Economy provides broad coverage across the United States and Canada, including service to and from Puerto Rico and service to the U.S. Virgin Islands through strategic alliances. The service offers reliable and cost-effective transportation for customers seeking to optimize shipping costs while maintaining consistent service performance. Shipments moving under FedEx Freight Economy are generally not covered by a money-back service guarantee.

In addition, FedEx Custom Critical provides expedited, time-specific freight solutions, including Surface Expedite and White Glove Services, available 24/7/365, which are discussed further below under “Business Strategy and Operations.”

Customers can also process domestic and cross-border LTL shipments to and from Canada and Mexico, as well as intra-Canada and intra-Mexico shipments, through our digital customer platforms, including LTL Select, a free cloud-based, multi-carrier transportation management system.

We have a number of ongoing initiatives intended to continue optimizing our operating model and financial performance, which are discussed further below under “Business Strategy and Operations.”

Spin-Off from FedEx Corporation

Prior to June 1, 2026, FedEx Freight operated as a group of wholly owned subsidiaries of FedEx. On December 19, 2024, FedEx announced its plan to spin-off FedEx Freight into an independent, publicly traded company. On June 1, 2026, FedEx completed the Spin-Off through its distribution of 80.1% of the outstanding shares of our common stock on a pro-rata basis to the holders of FedEx common stock. Following the Spin-Off, our common stock began trading under the ticker symbol “FDXF” on the New York Stock Exchange (“NYSE”).

See Item 7. “Management’s Discussion and Analysis of Results of Operations and Financial Condition” for information regarding costs and other financial-related items related to the Spin-Off and Item 13. “Certain Relationships and Related Transactions, and Director Independence” for information regarding the agreements FedEx Freight entered into with FedEx in connection with the Spin-Off.

Change in Fiscal Year

Effective for the period beginning June 1, 2026, the Company's fiscal year-end has changed from May 31 to December 31. Except as otherwise specified, any reference to a year in this Annual Report indicates our fiscal year ended May 31, 2026 or ended May 31 of the year referenced, and comparisons are to the corresponding period of the prior year.

Industry Overview

Trucking companies provide two main types of services across industries and end-markets: truckload (“TL”) and LTL services. We are the largest provider of LTL services to customers across North America. The LTL industry is a segment of the freight transportation market that specializes in the consolidation and transport of shipments that do not require the full capacity of a truck trailer. This model allows LTL providers to offer cost-effective solutions for businesses that need to ship goods between various locations but do not have sufficient freight to justify hiring a full TL carrier. LTL carriers utilize network-based production logic to link different shipments into multi-stop routes and benefit from a semi- or fully-scheduled linehaul. This results in LTL carriers typically requiring a more expansive and sophisticated network of local pickup and delivery as freight is picked up from multiple customers and routed through a network of service centers and transferred to other trucks with similar destinations. This sophisticated network structure enables shippers to flexibly manage variable shipment volumes and dispatch freight on demand.

There are certain market dynamics that influence LTL services with respect to pricing, routing, and carrier options that are different from the TL operating models. Customer pricing for TL solutions is typically rigid with one price for the entire trailer, irrespective of the shipment size, while LTL offerings are typically more flexible, with origin, destination, class, and weight being the drivers of price. This makes LTL generally more cost-effective than TL for shipments smaller than a full trailer, due to its hub-and-spoke routing model with cross-docking across terminals. In contrast, TL typically operates point-to-point without consolidation terminals, using customized, on-demand routes that may be non- or semi-scheduled. Historically, there has been more favorable pricing and economics in the North American LTL market, which consists of approximately 10 scaled players, as compared to the more fragmented North American TL market.

Business Strategy and Operations

FedEx Freight’s strategy builds on our expansive scale, diversified and premium service capabilities, and a tech-enabled platform to further differentiate our service offerings and drive profitable growth. Our strengths and strategy to grow our business include the following.

Largest LTL Pure-Player with Exceptional Network Scale and Proximity

We are the largest LTL freight carrier in North America with more than 26,000 service center doors and established infrastructure and coverage across 98% of all ZIP Codes in the United States (exclusive of military and PO ZIP Codes) as of June 1, 2026. Our network is strategically aligned with the densest freight corridors in the United States and we have built our infrastructure to serve these high-demand areas efficiently. The combination of our service center door count and proximity to the customer base enables greater supply chain flexibility and efficiency, specifically cross-docking, which streamlines the loading process. This, combined with our fleet size, accelerates our speed and enhances our quality of service. FedEx Freight’s network proximity generally allows it to maintain consistent service levels even during peak periods, as demonstrated by our ability to flex capacity during peak shipping seasons.

Robust Commercial Value Proposition with Differentiated Dual-Service Offering

We have established a comprehensive dual-service model and set of differentiated offerings to provide customers with flexibility to optimize their supply chains based on shipment urgency and service requirements.

Core Products

• FedEx Freight Priority: A premium, time-definite service offering the fastest published transit times in the industry (typically one to three days). Priority enables customers to meet urgent delivery requirements while maintaining end-to-end shipment visibility and reliability.
• FedEx Freight Economy: A value-oriented LTL service for shipments with more flexible transit requirements (typically three to six days). Economy provides reliable, cost-effective transportation for customers seeking to optimize shipping costs while maintaining consistent service performance.

Differentiated Offerings

• Volume Services: Offers customized pricing solutions for qualifying non-urgent shipments based on network capacity, enabling us to capture overflow demand from sectors prioritizing cost efficiency over speed, such as bulk retail and industrial components. The program fills otherwise empty capacity with profitable freight while still supporting unique customer needs.
• Custom Critical Services: Addresses the needs of customers with highly time-sensitive or high-value shipments. These shipments are delivered via “straight through” routing, with no intermediate stops, ensuring maximum speed and security.
• FedEx Freight Direct: Provides multiple service tiers for residential and commercial deliveries with value-added options such as inside delivery and packaging removal.
• Retail Flex: Provides delivery to large retailers with benefits that support consistent on-time, retailer-compliant deliveries.

Multi-Faceted Commercial Initiatives

We are executing on multi-faceted commercial initiatives to elevate our value proposition, strengthen go-to-market effectiveness, and enhance and simplify the customer experience. These include streamlining online tools, improving customer support channels, reducing cargo claims, and offering more flexible service options to enhance the customer experience. In connection with the Spin-Off, we rapidly scaled a dedicated LTL sales organization, attracting top industry talent that is focused on providing a leading customer value proposition supported through a superior delivery experience and data-driven, personalized service.

In addition to pursuing growth across the full customer base, we are focused on incremental growth from several verticals and end markets such as: small and medium sized businesses (“SMBs”), healthcare, grocery, and data centers and energy. We have undertaken numerous related commercial initiatives, including scaling field sales for SMB growth; grocery channel expansion through preferred carrier status; and healthcare product solutions leveraging FedEx Custom Critical.

Proprietary and Digitally Enabled Technology Platform

We leverage technology extensively to enhance our operational efficiency, improve customer service, and differentiate the Company. A key aspect of this is the integration of advanced technology solutions, such as LTL Select, across our network. This platform provides customers with streamlined online experiences for managing their LTL shipments. This includes functionalities such as:

• Online Quoting: Instant rate quotes based on shipment details (weight, dimensions, destination).
• Shipment Booking: Easy online booking and scheduling of pickups.
• Tracking and Visibility: Real-time tracking of shipments from origin to destination, providing transparency and control.
• Reporting and Analytics: Access to data and reports on shipping activity, enabling customers to optimize their supply chain.

Beyond customer-facing and commercial tools, we employ a range of technologies to optimize our internal operations. We are systematically improving our visibility to movements on the dock through proprietary dock software and real-time tracking systems that reduce handling errors and improve throughput. Other initiatives include:

• Route Optimization: Utilizing sophisticated algorithms to plan the most efficient routes for trucks and minimize fuel consumption and transit times.
• Load Planning: Optimizing how freight is loaded onto trailers to maximize space utilization and minimize damage.
• Electronic Logging Devices: Promoting compliance with regulations regarding driver hours of service and improving safety.
• Radio-Frequency Identification (“RFID”) Tracking: Allowing for real-time analytics and improved network visibility.

We also utilize data analytics and AI to improve decision-making:

• Demand Forecasting: Predicting future demand to optimize resource allocation and capacity planning.
• Risk Management: Identifying and mitigating potential risks to the supply chain, such as weather delays or traffic congestion.

Trademarks and Other Intellectual Property

Generally, our products and services are marketed under trademarks that are owned by Federal Express Corporation, a wholly owned subsidiary of FedEx (“Federal Express”). Federal Express owns numerous trademarks and other intellectual property rights relating to the “FedEx” name and brand, including “FedEx Freight.” Federal Express licenses the use of certain trademarks to support its business and takes active measures to enforce its intellectual property rights where appropriate. The FedEx and FedEx Freight trademarks are important to our business.

In connection with the Spin-Off, we entered into a Trademark License Agreement with Federal Express (the “Trademark License Agreement”) that provides us with a license to continue to use certain names, trademarks, and brands owned by Federal Express or its affiliates, including the “FedEx Freight” name and mark.

Also, in connection with the Spin-Off, on May 31, 2026, we entered into an Intellectual Property Cross-License Agreement with FedEx, Federal Express, and FedEx Dataworks, Inc., a wholly owned subsidiary of FedEx (“FedEx Dataworks”) (the “Intellectual Property Cross-License Agreement”) pursuant to which FedEx Freight and each of FedEx, Federal Express, and FedEx Dataworks have granted and received licenses to and from each other in respect of certain patents, know-how, and copyrights. See Item 1A. “Risk Factors” and Item 13. “Certain Relationships and Related Transactions, and Director Independence” for additional information on the Trademark License Agreement and the Intellectual Property Cross-License Agreement.

Customers and End-Markets

We provide services to approximately 108,000 active customers across a broad range of sizes, end-markets, and geographies. In 2026, our top five and top 25 customers accounted for just 9% and 21% of our revenue, respectively. Our largest customer accounted for approximately 4% of our revenue in 2026.

We are a long-term, critical supply chain partner to a diverse customer base including large, market-leading national players in addition to regional companies and/or SMBs. A large number of our customers operate in sectors that we believe are poised for long-term structural growth, such as e-commerce, advanced manufacturing, and healthcare logistics. Additionally, we believe that our relationship with our customers through a dedicated LTL salesforce allows us to truly understand our customers’ challenges to provide tailored and effective solutions. Our cross-border capabilities in Canada and Mexico, along with partnerships for less-than-container load shipments in Europe and Asia, support efficient international logistics.

Competition

Despite several strategic combinations in our industry in recent years, shippers continue to have a wide range of options for their LTL freight. The strength and size of our network enable us to deliver high-quality service, speed, geographic coverage, responsiveness, and flexibility.

Our competitors include local, regional, and national LTL carriers, as well as a range of other transportation and logistics providers. We compete with publicly listed, national-scale LTL carriers, along with numerous smaller-scale national and regional carriers. In addition, we face competition from truckload carriers, small package carriers, private fleets, final mile and expedited delivery providers, railroads, air freight carriers, third-party logistics providers, and emerging digital freight platforms. Some of these competitors have larger customer bases, greater resources, or longer operating histories in certain markets than we do. We believe our size and scale strategically positions us in our industry.

We believe that our extensive national network, integrated service offerings, advanced technology solutions, and commitment to operational excellence differentiate us in the marketplace. Additionally, we believe we are well positioned to benefit from key industry trends, including the continued growth of e-commerce, increased demand for reliable outsourcing partners, and the rapid adoption of digital solutions by shippers and carriers. We also believe that our ongoing investments in technology, network capacity, and service innovation will enable us to meet the changing needs of our customers and compete effectively in a dynamic industry environment.

See Item 1A. “Risk Factors” for additional information.

Seasonality

Our business is cyclical in nature, as seasonal fluctuations affect volumes, revenues, and earnings. Historically, spring and fall are the busier periods, and the latter part of December through February is the slowest period. Shipment levels, operating costs, earnings, and cash flow can also be affected by timing of merit-based compensation increases, our annual general rate increase, and severe weather.

Human Resources

Our people are at the heart of our success and are the foundation of our strong reputation. As of June 1, 2026, we had approximately 40,000 employees, and our exceptional network shapes our identity, reputation, and the type of business we strive to be. Ultimately, our success depends on the talent, dedication, and well-being of our people — our greatest asset. As we continue to grow, we remain dedicated to continuously recruiting, retaining, nurturing, and providing unwavering support to our team members and making FedEx Freight an inclusive and growth-focused workplace. We also conduct periodic audits of our labor practices to assess compliance with regulatory requirements. We have established the Human Resources and Compensation Committee (the “HRCC”) of our Board of Directors (the “Board”), which reviews and discusses with management our key human resource management strategies and programs.

Our approach to managing our front-line workforce is critical to FedEx Freight’s success. Many of our drivers begin their careers working on the dock and are trained as drivers through an internal commercial driver’s license training program. We believe this approach fosters loyalty, and we have maintained a driver turnover rate average of approximately 10% over the last three fiscal years. Further, these drivers are cross-trained to support dock operations, enabling dynamic staffing that enhances flexibility and utilization. This approach drives efficiency and on-time shipments and reduces idle time, reinforcing a culture centered on speed, service, and reliability.

We are also committed to employee retention and emphasize a culture of promotion from within, which provides employees with clear career paths and opportunities for advancement, fostering a sense of loyalty and long-term commitment. FedEx Freight offers extensive training programs and leadership development initiatives to enable employees to advance within the organization. Job-specific learning opportunities include our Driver Development program, which provides hands-on experience for team members to become professional tractor-trailer drivers, and over 500 drivers were employed from this program in 2026.

We provide competitive compensation and benefits packages, which often include health insurance and retirement plans. In addition to financial incentives, we recognize and reward employees for their contributions to motivate them to continue performing at a high level. This recognition can take many forms, including performance-based bonuses, awards, and public acknowledgment of achievements.

Finally, FedEx Freight invests in creating a positive and supportive work environment. This includes promoting open communication, encouraging teamwork, and providing employees with the resources they need to succeed. We also prioritize employee safety and well-being, implementing comprehensive safety programs and providing access to wellness resources in alignment with our commitment to “Safety Above All.” We recently conducted an employee engagement survey with 85% participation to understand our key cultural drivers, strengths, and opportunities. We believe these combined efforts demonstrate FedEx Freight’s commitment to its employees and contribute to our leading position in employee retention within the freight industry.

Corporate Responsibility

At FedEx Freight, we understand that integrating corporate responsibility principles into our strategic focus is essential. These principles are woven into every component of our culture — from efficient resource management to connected support for all our team members to the highest standards of business conduct. We have cultivated a robust and adaptable network designed to minimize operational disruptions, uphold customer trust, and fortify business resilience for ourselves and our clients.

We have integrated evaluation of climate-related physical and transition risk into our enterprise risk management process by leveraging our extensive expertise in proactively navigating complex situations, such as severe weather events. Based on the risks identified, specific contingency plans and strategies are formulated to minimize potential adverse effects on our business.

As we move forward as an independent entity following the Spin-Off, we will define sustainability goals tailored to our unique North American operational footprint. We plan to publish a corporate responsibility report in calendar year 2027.

Fleet Efficiency

We rely heavily on fuel for our day-to-day operations. To reduce our environmental impact, we have adopted fuel-saving measures within our fleet, including fleet replacement and adherence to strict tailpipe emissions standards across jurisdictions, in alignment with U.S. Environmental Protection Agency (“EPA”) and California regulations. We are an industry leader in intermodal transportation utilization, which generally has a significantly lower emissions impact compared to traffic over the road.

Efficiency is central to our business model and the foundation of our sustainability efforts today. Our core strength lies in reducing empty miles and optimizing routes — actions that directly lower fuel consumption and greenhouse gas (“GHG”) emissions. By maximizing trailer utilization and continuously refining our network, we improve both environmental impact and operational performance. While the technologies and infrastructure needed to shift heavy goods vehicles are still developing, we are dedicated to piloting alternative fuels and solutions that can help achieve more immediate reductions in emissions.

Regulation

U.S. Transport

Our operations in interstate commerce are primarily regulated by the U.S. Department of Transportation (“DOT”) and the Federal Motor Carrier Safety Administration (“FMCSA”), which retain limited oversight authority over motor carriers. Federal legislation preempts regulation by the states of rates, routes, and services in interstate freight transportation. Like other interstate motor carriers, our operations are subject to certain DOT safety requirements governing interstate operations. In addition, federal and state regulatory bodies have broad powers relating to vehicle weight and dimensions, authorized motor carrier operations, motor carrier registration, driver hours of service, safety and fitness of transportation equipment and drivers, port security, and transportation of hazardous materials and other types of shipments. We are subject to the costs and potential adverse impact of compliance associated with the FMCSA’s Electronic Logging Device (“ELD”) regulations and guidance, including the operation of our fleet and safety management systems on the ELD hardware and software platform. For example, the FMCSA imposes stringent rules regarding driver hours of service and break time. We employ electronic logging to keep track of our drivers’ driving time to better monitor safety and adherence to these rules. In addition, certain shipments may subject us to compliance with cargo-security and transportation regulations issued by the Transportation Security Administration (“TSA”) and U.S. Customs and Border Protection (“CBP”).

International Transport

We operate in the United States, Canada, and Mexico. We offer service to and from Puerto Rico and to the U.S. Virgin Islands via alliances. The DOT regulates international routes and practices. The right of a U.S. carrier to serve foreign points is subject to the DOT’s approval and generally requires a bilateral agreement between the United States and the foreign government. In addition, the carrier must then be granted the permission of such foreign government to provide specific services.

Our customs clearance activities are subject to regulation by CBP and other partner government agencies, like the Food and Drug Administration, that regulate the importation and exportation of specific products. Our operations outside the United States are subject to similar regulation by the regulatory authorities of the applicable foreign jurisdictions, such as the Canada Border Services Agency. For example, in Canada, carriers must obtain licenses issued by provincial transport boards in order to carry goods inter-provincially or to transport goods within any province.

Environmental

We are subject to various federal, state, local, and international environmental laws and regulations that focus on, among other things, the generation, management, and disposal of hazardous waste, materials, and substances. Various laws and regulations also dictate the management of hazardous materials and substances stored, present, or impacting our properties and vehicles, including as related to fuel storage tanks, transportation of certain materials, and activities impacting storm water discharge.

Significant U.S. and international legislative and regulatory efforts limit GHG emissions, including our vehicle engine emissions. Increasingly, state and local governments are also considering GHG regulatory requirements related to energy usage in facilities and for vehicles and other equipment. Compliance with GHG regulations and the associated potential cost is complicated by the fact that various states, countries, and regions are following different approaches to the regulation of climate change. For example, California has historically set its own vehicle emissions standards via EPA Clean Air Act preemption waivers; however, these waivers have been recently curtailed leaving businesses with questions on enforceability.

Other Regulations

As a transportation and logistics provider, we are subject to a variety of other U.S. and foreign laws and regulations relating to matters including, but not limited to, data protection and AI, bribery and corruption, and trade compliance. Violations or non-compliance could result in significant fines or other penalties and/or negatively impact our reputation, business, or results of operations. See Item 1A. “Risk Factors” for additional information.

Available Information

We file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports, proxy and information statements, and other information electronically with the SEC. All of our reports and financial information filed with, or furnished to, the SEC can be obtained, free of charge, on our website at ir.fedexfreight.com or through the SEC’s website located at www.sec.gov (http://www.sec.gov) as soon as reasonably practical after such material is electronically filed with, or furnished to, the SEC. We also maintain a section on our website as a disclosure channel for providing broad, non-exclusionary distribution of information regarding FedEx Freight to the public, and as one means of disclosing non-public information in compliance with our disclosure obligations under Regulation FD. The information contained on our website, however, is not incorporated by reference in, and does not form a part of, this Annual Report.

In addition to the information set forth in other sections of this Annual Report, including, but not limited to, Item 1. “Business,” Item 1C. “Cybersecurity,” Item 3. “Legal Proceedings,” and Item 7. “Management’s Discussion and Analysis of Results of Operations and Financial Condition,” you should carefully consider the following factors, which could materially adversely affect our business, results of operations, financial condition, and the price of our common stock. Additional risks not currently known to us or that we currently deem to be immaterial or general risks that apply to all companies operating in North America also may materially adversely affect our business, results of operations, financial condition, and the price of our common stock. Although the risks below are organized by headings and each risk is discussed separately, many are interrelated.

Risk Factor Summary

Our business is subject to numerous risks and uncertainties, including, but not limited to:

Risks Relating to Our Business and Industry

• macroeconomic conditions, including inflation, interest rates, supply chain disruptions, geopolitical conflicts, and changes in trade policies (including tariffs);
• customer demand for goods, and shifts in production, inventory, and distribution patterns;
• fuel prices and supply disruptions, together with limitations on our ability to recover such costs through fuel surcharges;
• failure to successfully implement our business strategy and effectively respond to changes in market dynamics and customer preferences;
• adverse publicity relating to our or FedEx’s activities and the FedEx brand generally;
• the cost and availability of insurance;
• our ability to meet our medium-term financial performance targets;
• the high degree of competition in our industry;
• extensive and evolving transportation, environmental, safety, labor, tax, data privacy, and other regulations;
• legal proceedings and claims, litigation, governmental inquiries, notices, and investigations;
• labor market conditions, including availability and cost of drivers and other personnel, workforce relations, and potential unionization or labor disruptions;
• our ability to adapt to and implement new and emerging technologies, including AI;
• data breaches or other disruptions to our technology infrastructure;
• global climate change, environmental regulation, and sustainability expectations, including increased costs, regulatory uncertainty, and potential litigation or reputational harm; and
• severe weather events, natural disasters, public health crises, and other disruptions (including terrorism).

Risks Relating to the Spin-Off

• significant tax liabilities that could result from the Spin-Off or related transactions failing to qualify as tax-free for U.S. federal income tax purposes;
• certain restrictions resulting from the Spin-Off on our operations and strategy; and
• our ability to achieve some or all of the anticipated benefits of the Spin-Off.

Risks Relating to Our Common Stock

• the potential for substantial sales of our common stock following the Spin-Off; and
• the impact of certain anti-takeover provisions in our organizational documents and under Delaware law.

General Risk Factors

• constraints, volatility, or disruption in global capital and credit markets;
• our inability to operate any acquired businesses; and
• the effects of a widespread outbreak of an illness or any other communicable disease or public health crisis.

Risks Relating to Our Business and Industry

Risks Relating to Macroeconomic and Geopolitical Conditions

We are directly affected by the state of the global economy and geopolitical developments, which has affected the demand for our services and could materially adversely affect our business.

While our operations are limited to North America, we are indirectly impacted by broader macroeconomic and international trade policies and risks. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of global trade growth — key macroeconomic measurements influenced by, among other things, inflation and deflation, international trade policies and relations (including tariffs or the imposition of new tariffs, trade wars, barriers, or restrictions or threats of such actions), supply chain disruptions, interest rates, currency exchange rates, labor costs and unemployment levels, fuel and energy prices, inventory levels, spending patterns (including shifts from goods to services and vice versa), disposable income, debt levels, credit availability, public health crises, political uncertainty, geopolitical tensions or conflicts, and changes to social conditions and regulations. When individuals and companies purchase and produce fewer goods, we transport fewer shipments, and as companies move manufacturing closer to consumer markets and expand the number of distribution centers, we transport shipments shorter distances, which adversely affects our revenue per shipment and results of operations. Certain manufacturers and retailers are also making investments to produce and store goods in closer proximity to supply chains and consumers.

The decline in U.S. imports of consumer goods that started in late 2022, along with slowed global industrial production, has contributed to continued weakened business conditions for the transportation industry leading to lower shipment volumes. Additionally, changes in U.S. and international trade policy have in the past and could in the future lead to further weakened business conditions for the transportation industry. We also have experienced, and may continue to experience, a decline in demand for our transportation services as inflation and elevated interest rates negatively affect consumer and business spending. We expect inflation and elevated interest rates to continue to negatively affect our results of operations for the remainder of calendar year 2026.

Additional changes in international relations and trade policies, including with respect to tariffs, could significantly reduce the volume of goods transported and increase our costs, which could materially adversely affect our results of operations and financial condition.

The U.S. government has taken certain actions that have negatively affected U.S. trade, including imposing and threatening to impose tariffs on many goods imported into the United States (including certain goods from Canada and Mexico). Additionally, many foreign governments (including Canada and Mexico) have imposed, and others have threatened to impose, tariffs on certain goods exported from the United States. These actions have contributed to weakness in the global economy and in the transportation industry which has led to lower shipments, adversely affecting our results of operations. These conditions may continue in the future. Increased tariffs may lead to lower levels of trade or heightened political tension. Additional changes to global trade policies could lead to increased tariffs, export controls, quotas, embargoes, or sanctions, which may lead to increased prices or trade limitations for transported goods, potentially reducing customer demand for our services.

In addition, negotiations among the United States, Canada, and Mexico on matters related to the United States-Mexico-Canada Agreement (“USMCA”), which governs trade among such countries, are ongoing. It remains difficult to predict the impact of any change in the USMCA on the economy, including the transportation industry, but given the amount of North American trade that moves by truck, any new or revised restrictions on trade could have a significant impact on supply and demand in the LTL freight transportation industry. Such changes could materially adversely affect our results of operations and financial condition.

Our business and results of operations are affected by the price and availability of fuel, as well as our ability to collect fuel surcharges.

We must purchase large quantities of fuel to operate our vehicles, and the price and availability of fuel is beyond our control and can be highly volatile. In addition, our purchased transportation expense is affected by fuel costs. To date, we have been mostly successful in mitigating over time the effect of higher fuel costs through our indexed fuel surcharges, which help offset the negative effect of increased fuel prices. If we are unable to maintain or increase our fuel surcharges because of competitive pricing pressures or other reasons, fuel costs could adversely affect our operating results. We have no derivative financial instruments to reduce our exposure to fuel price fluctuations, and we currently have no plans to use derivative financial instruments for this purpose in the future.

High fuel surcharges could reduce customer demand for our services. In addition, disruptions in the supply of fuel could have a negative effect on our ability to operate our business. The following factors may affect fuel supply and could result in shortages and price increases in the future: political disruptions or geopolitical conflicts involving oil-producing countries; economic sanctions imposed against oil-producing countries or specific industry participants; changes in governmental policy concerning fuel production; transportation taxes; weather-related events; natural disasters; changes in refining capacity; sustainability concerns or regulations;

cyberattacks; and public and investor sentiment. Fuel shortages and price increases could have a material adverse effect on our business, results of operations, and financial condition.

Risks Relating to Operations and Strategies

Failure to successfully implement our business strategy and effectively respond to changes in market dynamics and customer preferences could materially adversely affect our business, results of operations, and financial condition.

Our long-term business strategy depends on several key initiatives including, but not limited to, our ability to grow our key customer verticals, improve the experience of our customers, and effectively implement new technologies. We are making significant investments and incurring operating expenses in connection with these initiatives, and may not be able to derive the expected benefits from them.

In developing our business strategy, we make certain assumptions including, but not limited to, those related to customer demand and freight volume growth, competition, and the North American and global economies, and actual market, economic, and other conditions may be different from our assumptions. As technology, customer behavior, and market conditions continue to evolve, it is important that we maintain the relevance of our brand and service offerings to our customers. If we are not able to successfully implement our business strategy and effectively respond to changes in technology, customer preferences, and market dynamics, our business, results of operations, and financial condition will suffer.

Adverse publicity relating to our own activities or FedEx’s activities could materially adversely affect our reputation and reduce the value of our goodwill and brand.

We and FedEx have a strong reputation among our respective customers and team members and the general public for high standards of corporate responsibility, governance, and ethics. We expect that our license to use the FedEx brand name pursuant to the Trademark License Agreement and our corporate reputation will be powerful tools for sales, marketing, and recruitment. See Item 13. “Certain Relationships and Related Transactions, and Director Independence” for additional details regarding the Trademark License Agreement and “We do not own the FedEx trademark or logo or associated purple and orange trade dress and certain intellectual property retained by FedEx, the protection of which is largely out of our control, and any elimination of our rights to use specified trademarks and intellectual property granted to us under the Trademark License Agreement and the Intellectual Property Cross-License Agreement could materially adversely affect our reputation, business, and results of operations” below.

Adverse publicity or sensationalism across media channels (whether or not justified) relating to activities including, but not limited to, those by our or FedEx’s team members or others with whom we or FedEx do business, could tarnish our reputation and reduce the value of our brand and goodwill, such as: labor relations, legal matters, cybersecurity incidents, incidents involving vehicles or facilities, cargo theft, sustainability issues, and similar matters. Further, we may have little or no control over some of these activities, such as the activities that are carried out by FedEx or others with which we or FedEx do business.

With the increase in the use of AI and social media outlets, adverse publicity, whether warranted or not, can be disseminated quickly and broadly without context, making it increasingly difficult for us to effectively respond. Damage to our reputation and loss of brand equity could reduce demand for our services and/or create difficulties in retaining and recruiting employee talent, and may require additional resources to rebuild our reputation and restore the value of our brand and goodwill.

We are self-insured for certain costs associated with our operations, and insurance and claims expenses may increase, which could materially adversely affect our profitability and financial condition.

We maintain insurance coverage for covered losses that entitle us, subject to policy terms and limits, to coverage above our retention amount for workers’ compensation claims, vehicle accidents, property and cargo loss, and general business liabilities for occurrences on or after June 1, 2026. Occurrences prior to the Spin-Off are already covered by FedEx policies under which we may make claims pursuant to the Separation and Distribution Agreement between us and FedEx entered into in connection with the Spin-Off (the “Separation and Distribution Agreement”). See Item 13. “Certain Relationships and Related Transactions, and Director Independence” for additional details regarding the Separation and Distribution Agreement. Our accruals are primarily based on estimated costs determined by actuarial methods. Estimated costs include consideration of a variety of factors and related assumptions, some or all of which may prove to be incorrect. Material increases in the magnitude of claims due to recent litigation outcomes, changes to healthcare costs, accident frequency and severity, insurance retention levels, judgment and settlement amounts, associated legal expenses, and other factors could result in unfavorable differences between actual costs and our reserve estimates. As a result, our insurance and claims costs could increase materially in the future.

As a supplement to our insurance coverage, we maintain coverage with excess insurance carriers in certain instances for potential losses related to occurrences following the Spin-Off that exceed the amounts of our foundational insurance coverage. However, we can provide no assurance that such coverage will be adequate to protect us from costs incurred with certain events. For example, the commercial trucking industry has experienced a wave of blockbuster or so-called “nuclear” verdicts, including some instances in which juries have awarded hundreds of millions of dollars to those injured in accidents and their families. As a result, several insurance companies have completely stopped offering coverage to trucking companies for automobile liability claims, significantly reduced the amount of coverage they offer, or significantly raised premiums. This trend could adversely affect our ability to obtain suitable insurance coverage, significantly increase our cost of obtaining such coverage, or subject us to significant liabilities for which no insurance is in place.

Given the current claims environment, the amount of coverage available from excess insurance carriers is decreasing, the premiums for this excess coverage are increasing significantly, and excess insurance carriers are challenging insurance claims more frequently, which could further exacerbate our ability to obtain adequate coverage. Our results of operations and financial condition could be adversely affected if our costs or losses significantly exceed our aggregate coverage limits, we are unable to obtain excess insurance coverage in amounts we deem sufficient, our insurance carriers fail to pay on our insurance claims, or we experience a claim for which coverage is not provided.

We may not be able to achieve our medium-term financial performance targets.

On April 8, 2026, we announced a comprehensive multi-year financial framework with medium-term financial performance targets. Our ability to achieve these goals is dependent on a number of factors, including the other risk factors described in this Annual Report. We may fail to achieve our medium-term financial performance targets if we are unsuccessful in implementing our strategies, our estimates or assumptions change, or for any other reason. If we are not able to achieve these targets, there could be an adverse effect on our results of operations and financial condition, and the price of our common stock may be negatively affected.

Failure of third-party service providers to perform as expected, or disruptions in our relationships with those third parties or their provision of services to us, could materially adversely affect our business.

We engage third-party service providers to perform certain functions that are integral to our business, including the provision of information technology infrastructure, application development, maintenance and support, and end-user support services. In addition, we have entered into go-forward arm’s-length agreements with FedEx pursuant to which FedEx will provide certain services to us and vice versa following the Spin-Off. See Item 13. “Certain Relationships and Related Transactions, and Director Independence” for additional details regarding such agreements with FedEx. There can be no assurance that such third parties will adhere to contractual service performance or compliance requirements, perform their assignments in a satisfactory manner, or comply with our safety rules in an appropriate manner, and such third parties may suffer disruptions to their systems, labor groups, or supply chains that could adversely affect their services. Such failures could compromise our ability to fulfill our commitments to our customers, comply with applicable regulations, or otherwise meet our customers’ expectations. We may also have disagreements with such third parties, and related contracts may be terminated or may not be extended or renewed. Additionally, from time to time certain service providers have engaged, and some may in the future engage, in fraudulent activities in the course of their business relationships with us. Any of the foregoing could materially adversely affect our business, results of operations, and financial condition.

We operate in a rapidly evolving and highly competitive industry and we may be affected by downward pricing pressures and other competitive factors, along with a decrease in our customers’ use of our services, which could materially adversely affect our results of operations and financial condition.

The freight transportation market is highly competitive and sensitive to price and service levels. Continued transportation industry consolidation may further increase competition. We also face competition from outside the LTL freight transportation industry, including from regional transportation providers that operate smaller and less capital-intensive transportation networks and startup companies. Some smaller competitors may not be fully compliant with applicable regulations, which may allow such competitors to achieve additional driver productivity or other advantages. Capacity levels in the broader freight transportation industry also influence demand and pricing for our services. In addition, some retailers are developing and implementing in-house transportation capabilities. For example, Amazon has announced the offering of its internal freight and other transportation and logistics capabilities more broadly to third parties.

Customers may shift to other LTL providers or modes of transportation for a variety of reasons, including in response to capacity, service, and pricing issues. Some of our competitors may have actual or perceived competitive advantages. Our current competitors or potential future competitors could offer a broader range of services or better service levels, more effectively bundle their services, offer services at lower prices, or take greater advantage of emerging technologies such as AI and autonomous transportation. Certain competitors may also be willing to operate at little or no margin to gain market share. The existence of such a pricing environment could limit our ability to maintain or increase our prices. Advancements in technology may also necessitate that we increase investments in order to remain competitive, and our customers may not be willing to accept higher rates to cover the cost of these investments.

Risks Relating to Regulatory and Legal Matters

We have been and may be subject to new and revised regulations related to the transportation industry, which could increase our compliance costs and materially adversely affect our business.

We are subject to laws, regulations, and requirements promulgated by the DOT, the FMCSA, the U.S. Department of Homeland Security, CBP, Canada Border Services Agency, and various other international, domestic, state, and local agencies and port authorities. These authorities have broad powers over matters relating to authorized motor carrier operations, as well as motor carrier registration, driver hours of service, safety and fitness of transportation equipment and drivers, transportation of hazardous materials, and other matters. The trucking industry is also subject to regulatory and legislative changes from a variety of other governmental authorities, which address matters such as increasingly stringent environmental regulations, occupational safety and health regulations, limits or restrictions on vehicle weight and size and types of shipments transported, port security, driver hours of service, driver meal and rest breaks, and drug and alcohol testing. We are subject to the costs and potential adverse effect of compliance with ELD regulations and guidance, including the operation of our fleet and safety management systems on the ELD hardware and software platform. In addition, certain shipments may subject us to compliance with cargo-security and transportation regulations issued by the TSA and CBP. Legal and regulatory requirements and changes in these requirements or guidance, together with the growing compliance risks presented by increased differences between applicable federal and state laws and regulations, may adversely affect our business or the economics of the industry by requiring changes in operating practices that could influence the demand for and increase the costs of providing transportation services. See Item 1. “Business — Regulation” for additional discussion regarding certain applicable regulations.

Our right to serve foreign points is subject to the approval of the DOT and generally requires a bilateral agreement between the U.S. and foreign governments. In addition, we must obtain the permission of foreign governments to provide specific services. For example, in Canada, carriers must obtain licenses issued by provincial transport boards in order to carry goods inter-provincially or to transport goods within any province. Our operations outside of the United States are also subject to regulations that restrict, make difficult, and sometimes prohibit the ability of foreign-owned companies such as us to compete effectively in parts of the international domestic transportation and logistics market. If we are unable to maintain our Free and Secure Trade (“FAST”), U.S. Customs Trade Partnership Against Terrorism (“C-TPAT”), and Partners in Protection (“PIP”) certification statuses, we may have significant border delays, which could cause our cross-border operations to be less efficient than those of competitor carriers that obtain or continue to maintain FAST, C-TPAT, and PIP certifications. Regulatory or executive actions affecting global transportation rights or a failure to obtain or maintain transportation rights in important international markets could impair our ability to operate our business. Further, our ability to obtain or maintain transportation rights internationally may be adversely affected by changes in international trade policies and relations, and any lapses in government operations may result in, among other things, disruptions in the ability of government agencies to grant required regulatory approvals.

We may also become subject to new or more restrictive regulations. Compliance with these laws and regulations can be onerous and expensive and new and changing laws and regulations can require changes that adversely affect our business. New and changing laws and regulations can also create uncertainty about how such laws and regulations will be interpreted and applied. There can be no assurance that our employees, contractors, or agents will not violate such laws and regulations. If we are found to have violated laws and regulations, it could increase our compliance costs and materially adversely affect our business.

Our business is subject to complex data privacy, data security, cybersecurity, and AI laws and regulations that may significantly increase our costs and adversely affect our business.

Laws and regulations regarding data privacy, data security, cybersecurity, and AI in North America continue to be updated and expanded. Enforcement actions relating to these areas continue to increase and be an area of focus. The failure to comply with applicable data protection laws, regulations, or cybersecurity or AI regulations may expose us or our third-party service providers to litigation, fines, sanctions, or other penalties. Compliance with applicable regulations in the various states and international jurisdictions in which we do business may present material obligations and risks to our business, including significantly expanded compliance burdens, costs, and enforcement risks; extensive system or operational changes; or increased cost and/or reduced attractiveness of the services we offer. All of these evolving compliance and operational requirements, as well as the uncertain interpretation and enforcement of laws, impose significant costs and regulatory risks that are likely to increase over time.

We are subject to legal proceedings and claims, litigation, governmental inquiries, notices, and investigations, which could result in significant expense and materially adversely affect our business, results of operations, and financial condition.

The nature of our business exposes us to the potential for various legal proceedings and claims regarding a variety of issues, including accidents involving our trucks and employees and the trucks and employees of third-party contractors, workers’ compensation, federal and state labor and employment law claims, securities claims, privacy claims, contract claims, personal injury, property damage, cargo claims, safety and contract compliance, environmental liability, and other matters. These proceedings may be time-consuming, expensive, and disruptive to normal business operations, and may include collective and/or class action allegations. Additionally, we may from time to time be subject to potential governmental inquiries, notices, or investigations. The defense, settlement, or resolution of such matters could result in significant expense that may not be covered in whole or in part by insurance.

The FMCSA’s Compliance, Safety, Accountability initiative could adversely affect our ability to hire qualified drivers, meet our growth projections, and maintain our customer relationships, any of which could materially adversely affect our business and results of operations.

The FMCSA’s Compliance, Safety, Accountability initiative (“CSA”) is a data-driven safety compliance and enforcement program designed to improve safety and prevent commercial motor vehicle crashes, injuries, and fatalities. CSA consists of three core components: the Safety Measurement System (“SMS”); interventions; and a Safety Fitness Determination rating system to determine the safety fitness of motor carriers. The SMS uses data from roadside inspections and crash reports from the last two years and data from investigations to identify carriers with safety performance and compliance problems for interventions. The data is updated once a month and organized into seven Behavior Analysis and Safety Improvement Categories (“BASIC”). The SMS groups carriers by BASIC with other carriers that have a similar number of safety events (e.g., crashes, inspections, or violations) and then ranks carriers and assigns a percentile to prioritize them for interventions. Our SMS/BASIC and other safety-related information are dependent upon our safety and compliance experience, which could change at any time. Certain safety performance information, including information derived from SMS, is publicly available. Adverse safety performance metrics, regulatory findings, safety ratings, or other unfavorable safety-related information could negatively affect our reputation and customer relationships, reduce demand for our services, and adversely affect our business and results of operations.

Risks Relating to Employee Matters and Human Resource Management

Labor-related disruptions and potential changes in labor laws could disrupt our operations and materially adversely affect our business and results of operations.

Our business is labor intensive in nature, employing numerous workers across multiple job classifications. Labor-related disputes and disruptions, such as strikes and work stoppages by our employees, employees of our service providers, or employees of our customers could depress volumes or our ability to service customers. Labor unions have in the past attempted to organize employees at FedEx Freight and could attempt to do so again. In June 2026, the U.S. House of Representatives passed the Faster Labor Contracts Act which, if enacted, would alter the process for negotiating initial collective bargaining agreements following union organization efforts. More broadly, Congress may consider additional labor legislation that could strengthen employee organizing rights, facilitate union representation, or otherwise increase labor-related costs and operational risks. In addition, the National Labor Relations Board could take actions that make it easier for our employees, as well as vendors, service providers, and supplier workforces, to organize. In the event of reclassification of our FedEx Custom Critical independent service providers or their drivers as employees, we could be exposed to various liabilities and additional costs under federal, state, and local tax laws.

Our failure to attract and retain employee talent, meet our purchased transportation needs, or maintain our company culture, as well as increases in labor and purchased transportation costs, could materially adversely affect our business, service levels, and results of operations.

Our success depends upon the efforts and abilities of our high-quality management team and employees, many of whom are longstanding FedEx Freight team members. Difficulties in motivating, rewarding, recruiting, and retaining employee talent, including members of senior management and successors to senior management; failure to protect members of senior management from security threats; the unexpected loss of long-term senior management resulting in the depletion of our institutional knowledge; and/or our inability to successfully transition key management roles could materially adversely affect our business and results of operations.

Increased turnover rates could lead to heightened recruiting, training, and retention costs. Additionally, our company culture is important to providing high-quality customer service and having a productive workforce and could be adversely affected by our evolving operations and other factors. If we fail to maintain the strength of our company culture, our competitive ability and our business may be harmed.

There is significant competition for qualified drivers and other operational positions within the trucking industry and attracting and retaining qualified employees for such positions has become more challenging due to a decreasing pool of qualified candidates and/or high turnover rates. Changing workforce demographics, hours of service rules, competition from other transportation companies and industries for employees, the availability and affordability of driver training schools and other required education, changing industry regulations, and demand in the labor market have contributed to the reduction in the number of eligible candidates for these positions, and may continue to do so in the future.

Our business is labor intensive, and our ability to meet our labor and purchased transportation needs while controlling related costs is generally subject to numerous external factors, including the availability of qualified persons in the markets where we operate, wage rates and other benefits, adoption of new or revised employment and labor laws and regulations or government programs, and interest in working for FedEx Freight.

Our inability to effectively meet our labor and purchased transportation needs can increase our costs, hinder our ability to execute our business strategy, negatively affect service levels, and adversely affect our business and results of operations.

We may experience an increase in costs, the volatility of costs and funding requirements, and new legal mandates for employee benefits, especially pension and healthcare benefits, which could materially adversely affect our results of operations.

We provide retirement benefits for most of our employees through FedEx Freight-sponsored programs. We assumed certain liabilities from FedEx in connection with the Spin-Off, including certain liabilities for pension, healthcare, and life insurance benefits previously provided to our current employees unrelated to our core business. These programs include defined benefit pension and defined contribution plans. The costs of providing pension plans are dependent on numerous assumptions, such as discount rates, expected long-term investment returns on plan assets, future salary increases, employee turnover, mortality, and retirement ages. Changes in actuarial assumptions and differences between the assumptions and actual values, as well as significant declines in the value of investments that fund our pension plans, increases in healthcare costs, or other adverse developments, could increase benefits-related expenses and liabilities. We may rely on estimates and assumptions which are difficult to make. Actual developments may differ from estimates and assumptions, thereby resulting in an increase or decrease in our actual obligations for these liabilities.

Risks Relating to Technology, Data, and Intellectual Property

We may fail to adapt to and implement new technologies, including technologies implemented by our competitors, which could impair our competitive position and materially adversely affect our business and results of operations.

In recent years, our industry has been characterized by rapid changes in technology. AI and other emerging technologies, including autonomous transportation, have the potential to alter the delivery of services and business operations across our industry. Our use of AI or other emerging technologies may be, or may be alleged to be, deficient, inaccurate, biased, or in violation of intellectual property rights or privacy-related rights of third parties. AI also presents emerging ethical issues and if our use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability. The rapid evolution of AI, including potential government regulation of AI, may require us to dedicate significant resources to develop, test, implement, and maintain our AI solutions. We also rely heavily on information technology systems. Our information technology systems are complex and require ongoing investments and enhancements to meet both internal requirements and the requirements of our customers.

The process of continuous enhancement may lead to significant ongoing software development costs. We will also continue using certain FedEx systems for a limited time. For example, pursuant to the Transition Services Agreement, FedEx Freight will utilize, for up to two years following the Spin-Off, applications provided by FedEx that support functions including order creation, as well as the network technology operations and support technologies required for those applications. Furthermore, while we may further integrate digital technologies into our operations, these integration efforts and the engagement of additional technology service providers and systems in our operations could increase our exposure to the aforementioned risks. If we are unable to invest in and enhance or modernize our technology systems in a timely manner or at a reasonable cost; if we fail to accurately determine the needs of our customers or trends in the transportation industry; if we are unable to train our employees to operate the new, enhanced, or modernized systems; if we are unable to access FedEx systems we plan to utilize following the Spin-Off; if we fail to effectively implement our new information technology infrastructure in a timely manner; or if we fail to achieve the benefits that we anticipate from any new technology or new or modernized system, our business and results of operations could be materially adversely affected.

In addition, the timing of when we have to adopt new technologies may be affected by changes in the political or regulatory environment, which could further increase our investment costs and operating complexity and limit our ability to offer such technologies to our customers in the jurisdictions in which we operate. Moreover, the success of our approach to technology innovation also depends on market acceptance of our solutions and other factors, including our ability to deploy funds and resources, achieve the right balance of strategic investments in existing or developing technology and innovation, detect and remedy defects in enhanced or new technology, and adequately anticipate and respond to challenges.

A significant data breach or other disruption to our technology infrastructure could materially adversely affect our business and result in the loss of critical, sensitive, or confidential information.

Our ability to attract and retain customers, efficiently operate our business, and compete effectively depends in part on the sophistication, security, and reliability of our technology infrastructure, including our ability to provide features of service that are important to our customers, to protect our confidential business information and the information provided by our customers (including personal information), and to maintain customer confidence in our ability to protect our systems and to provide services consistent with their expectations. We face significant and evolving risks from cyberattacks, data breaches, and operational disruptions, which may be random or targeted and can originate from a variety of sources, including external actors, malicious insiders, and third-party service providers. These risks are heightened by the increasing number, intensity, and sophistication of attempted attacks globally, as well as the growing reliance on connected information technology systems to store and transmit sensitive data. FedEx and our third-party service providers have experienced, and we and our third-party service providers may experience in the future, breaches or disruptions of our technology infrastructure, which could result in unauthorized access to, or loss of, sensitive or confidential information regarding our operations, customers, employees, or suppliers, including personal information. We have also faced, and may continue to face, attempts to gain access to customer accounts. We also maintain integrations with customers and key business partners and have faced, and may continue to face, attempts to gain access to our systems and environments through such entry points. Additionally, risks such as code anomalies, “Acts of God,” transitional challenges in migrating operating company functionality to our enterprise automation platforms, data leakage, cyber-fraud, and human error pose a direct threat to our products, services, systems, and data, and could result in unauthorized access to, or block legitimate access to, sensitive or confidential data. Any incidents involving the foregoing or similar matters could materially adversely affect our business and result in significant costs.

We depend on and interact with technology and systems of third parties, including customers, cloud service providers, Software as a Service providers, and other vendors. Certain third parties are involved in critical technology services and data processing. These third parties are subject to similar cybersecurity and operational risks, and their failures, breaches, or human errors could compromise our data or disrupt our operations, despite having security processes, protocols, and standards in place. The security measures we and our third-party service providers have in place may not be sufficient to prevent all breaches or disruptions.

Detecting, investigating, and remediating cybersecurity incidents is complex and may be delayed by incomplete or insufficiently detailed logging, the sophistication of threat actors, and the size and complexity of our information systems. The full scope and impact of an incident may not be immediately apparent, and remediation efforts may be prolonged or repeated before the incident is fully contained. In some cases, breaches may not be discovered for a significant period of time after they occur, and harm may spread internally or to customers, vendors, or other third parties before containment. Patches for certain vulnerabilities may not exist and, even where patches or other risk-mitigating activities are available, the development of patches or execution of risk-mitigating actions may not occur before an underlying vulnerability is exploited and results in the disruption of our operations or compromise of our information systems or data. A significant number of our employees as well as customers and others with whom we do business work remotely or in hybrid models, which may heighten these risks. Our investments in technology security initiatives, information technology risk management, business continuity, and disaster recovery plans, including the retirement and replacement of end-of-life systems, are costly, require ongoing monitoring and updating, and may not be sufficient to prevent all incidents, particularly as threats evolve and new technologies such as AI and machine learning introduce additional challenges. A significant cybersecurity incident could materially adversely affect our business, results of operations, and financial condition.

We do not own the FedEx trademark or logo or associated purple and orange trade dress and certain intellectual property retained by FedEx, the protection of which is largely out of our control, and any elimination of our rights to use specified trademarks and intellectual property granted to us under the Trademark License Agreement and the Intellectual Property Cross-License Agreement could materially adversely affect our reputation, business, and results of operations.

We do not own the FedEx trademark or logo or associated purple and orange trade dress and have entered into the Trademark License Agreement with Federal Express, pursuant to which Federal Express granted us a license to use the FedEx Freight trademark and logo in connection with certain of our products, solutions, and services, as well as the right to use the FedEx Freight global brand in connection with certain legal entity names within our corporate structure and trade names. Federal Express owns and controls the FedEx brand, and the integrity and strength of the FedEx brand will depend in large part on the efforts and businesses of Federal Express and FedEx and other licensees of the FedEx brand and how the brand is used, promoted, and protected by them, which will be largely outside of our control. We may be dependent to a certain extent on Federal Express to prosecute, maintain, defend, and enforce the trademarks licensed under the Trademark License Agreement.

Termination of the Trademark License Agreement would eliminate our rights to use the specified trademarks granted to us under the Trademark License Agreement and may result in our having to negotiate a new or reinstated agreement with less favorable terms or cause us to lose our rights under the Trademark License Agreement, which would require us to change our corporate name and undergo significant rebranding efforts. These rebranding efforts may require significant resources and expenses and may compromise our ability to attract and retain customers and employees and/or negatively affect our reputation, any of which could materially adversely affect our business and results of operations.

Our rights to use certain intellectual property retained by FedEx were granted to us under the Intellectual Property Cross-License Agreement. We may be dependent to a certain extent on FedEx to prosecute, maintain, defend, and enforce certain of the intellectual property licensed to us by FedEx. If FedEx chooses not to enforce the intellectual property licensed to us, we may not be able to prevent competitors from making, using, and selling products, solutions, and services that potentially infringe on such intellectual property.

See Item 13. “Certain Relationships and Related Transactions, and Director Independence” for additional details regarding the Trademark License Agreement and the Intellectual Property Cross-License Agreement.

Risks Relating to the Environment, Climate, and Weather and Other Disasters

We may be affected by global climate change or by legal, regulatory, or market scrutiny and changes with respect to sustainability and environmental matters, which could increase our costs and materially adversely affect our business and results of operations.

Concern over sustainability and the environment, and particularly climate change, including the effects of global warming, has led to significant U.S. and international governmental efforts to enact sustainability- and environmental-related regulatory and reporting requirements and limitations on GHG emissions, including those associated with our vehicle engines and facilities. Increased regulation and reporting obligations regarding GHG emissions, especially vehicle engine emissions, could impose substantial taxes, fees, and other costs on us. These include an increase in the cost of the fuel and other energy we purchase, investments required to obtain electricity capacity and capital, and impairment costs associated with updating or replacing our vehicles or infrastructure prematurely. Compliance with such regulations and the associated potential costs are complicated by the fact that various countries and states are following different and continuously evolving approaches to the regulation and reporting of such matters. For example, in February 2026, the EPA rescinded its 2009 Endangerment Finding, which provided the regulatory predicate for the EPA to issue GHG emission standards. At the same time, the EPA repealed federal GHG emission standards for new light-, medium-, and heavy-duty vehicles and engines. Additionally, while California has historically set its own vehicle emissions standards via EPA Clean Air Act preemption waivers, these waivers have been recently challenged and curtailed by industry and the federal government, which introduces long-term compliance uncertainty due to continued legal changes.

Until the timing, scope, extent, and enforceability of these and other regulations becomes known, we cannot predict their effect on our cost structure or our operating results, but such regulations could materially adversely affect our business and results of operations. See Item 1. “Business — Regulation — Environmental” for additional discussion regarding these regulations.

Further, to the extent we share information about our sustainability practices, we could be criticized for the accuracy, adequacy, or completeness of such disclosures. There is no assurance that we will achieve any of the goals or that our initiatives described in such disclosures will achieve their intended outcome, and our ability to implement such sustainability-related initiatives or achieve sustainability-related goals will be dependent on external factors outside our control.

We also may experience backlash from customers, government entities, advocacy groups, employees, or other stakeholders who disagree with our actual or perceived positions or with our lack of position on social, environmental, governance, political, public policy, economic, geopolitical, or other sensitive issues, as well as increased awareness and adverse publicity in the marketplace about the sustainability practices of companies in the transportation industry generally. Certain perceptions about these matters could harm our brand and reputation, our employees’ engagement and retention, and the willingness of our customers and partners to do business with us. Advocates (as well as opponents) to sustainability-related matters are increasingly engaging in a range of activism, including media campaigns and litigation, to advance their perspectives. For example, we could be subject to climate litigation or regulatory enforcement actions as groups, individuals, and governmental authorities affected by climate change seek to recover climate-related damages from entities they perceive as being partially responsible for climate change. To the extent we are subject to such activism, it may require us to incur costs or otherwise adversely affect our reputation.

We have in the past and may in the future be affected by harsh weather conditions and other disasters (including terrorist activities), and we may not be able to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance, which could materially adversely affect our business and results of operations.

Our operations are exposed to adverse weather conditions and localized risks from natural or man-made disasters such as earthquakes, volcanoes, wildfires, hurricanes, tornadoes, wind gusts, floods, severe winter weather, heat waves, extended droughts, conflicts or unrest, terrorist or other physical attacks, or other disturbances, actual or threatened. These conditions can adversely affect the business or financial condition of our Company and our customers. Additionally, shifts in weather patterns caused by climate change could increase the frequency, severity, or duration of certain adverse weather conditions. Prolonged interruptions or disruptions have and in the future could materially adversely affect our business and results of operations. Moreover, resulting economic dislocations, including supply chain and fuel disruptions, could materially adversely affect the demand for our services and our ability to timely deliver goods.

In addition, transportation infrastructure has been in the past, and could in the future be, the target of terrorist activities. Governments in countries in which we operate have adopted, and could in the future adopt, stricter security requirements that increase operating costs and adversely affect our operations. Moreover, a terrorist attack directed at us or on transportation infrastructure on which we rely could disrupt our operations, adversely affect demand for our services, and materially adversely affect our business, results of operations, and financial condition.

Risks Relating to the Spin-Off

If there is a determination that the Spin-Off, together with certain related transactions, was taxable for U.S. federal income tax purposes, then FedEx and its stockholders could incur significant U.S. federal income tax liabilities, and we could also incur significant liabilities.

FedEx received a legal opinion and a private letter ruling (the “Private Letter Ruling”) from the Internal Revenue Service (“IRS”) that the Spin-Off, together with certain related transactions, qualified for the non-recognition of income, gain, and loss under Section 355 and related provisions of the Internal Revenue Code (the “Code”). The IRS could determine on audit that the Spin-Off or certain related transactions were taxable for U.S. federal income tax purposes if it determines that any of the facts, assumptions, representations, statements, and undertakings upon which the Private Letter Ruling or the legal opinion were based are incorrect or have been violated or if it disagrees with the conclusions in the legal opinion. Accordingly, notwithstanding FedEx’s receipt of the Private Letter Ruling and the legal opinion, there can be no assurance that the IRS will not assert that the Spin-Off or certain related transactions did not qualify for non-recognition treatment for U.S. federal income tax purposes, or that a court would not sustain such a challenge.

If the Spin-Off is determined to be taxable for U.S. federal income tax purposes, FedEx and/or its stockholders could incur significant U.S. federal income tax liabilities, and FedEx Freight could also incur significant liabilities.

In addition, under the Tax Matters Agreement entered into between FedEx Freight and FedEx on May 31, 2026 (the “Tax Matters Agreement”), FedEx Freight is generally responsible for any taxes on FedEx that arise from the failure of the Spin-Off, together with certain related transactions, to qualify for tax-free treatment under Section 355 and certain other relevant provisions of the Code to the extent that the failure to so qualify is attributable to actions, events, or transactions relating to FedEx Freight’s stock, assets, or business, or a breach of the relevant representations or covenants made by FedEx Freight under the Tax Matters Agreement, including in each case those provided in connection with the Private Letter Ruling or the legal opinion.

We have agreed to numerous restrictions to preserve the non-recognition tax treatment of the Spin-Off and certain related transactions, which may reduce our strategic and operating flexibility.

We have agreed in the Tax Matters Agreement to certain covenants and indemnification obligations that address compliance with Section 355 and related provisions of the Code, as well as state, local, and foreign tax law. These covenants include certain restrictions on our activity for a period of two years following the Spin-Off. Specifically, we are subject to certain restrictions that are intended to preserve the generally tax-free status of the Spin-Off and certain related transactions for U.S. federal income tax purposes, including restrictions on our ability to enter into acquisition, merger, liquidation, sale, and stock redemption transactions with respect to our stock or assets. Furthermore, we are subject to specific restrictions on discontinuing the active conduct of our trade or business, the issuance or sale of stock or other securities, certain internal restructurings, and sales of assets outside the ordinary course of business. These covenants and indemnification obligations may limit our ability to pursue strategic transactions or engage in new businesses or other transactions that might otherwise be advantageous for our business, and might discourage or delay a strategic transaction that we or our stockholders may consider favorable.

The non-recurring and recurring costs of the Spin-Off, including those related to FedEx’s provision of transition services, may be greater than we expected and continue to be incurred for longer than we expect.

Following the Spin-Off we expect to incur non-recurring costs associated with the continued establishment of FedEx Freight as a standalone public company, including transaction costs related to rebranding, employee-related costs such as recruitment and relocation expenses, and costs to establish certain standalone functions and other transitional costs, including the implementation of information technology applications and infrastructure to support certain business functions. As a standalone public company, we also expect to incur recurring costs required to operate new functions as a public company, including executive leadership compensation, accounting and financial reporting, compliance and regulatory, human resources, information technology, marketing and communications, insurance, and other operating costs. The costs of the separation incurred after the Spin-Off may be significantly greater than anticipated. Additionally, if we are dependent on FedEx for transition services for a longer period of time than is currently expected our results of operations could be materially adversely affected.

We may be unable to achieve some or all of the anticipated benefits of the Spin-Off, or those benefits may be delayed.

We may be unable to achieve the full strategic and financial benefits (which are based on a number of assumptions, some or all of which may prove to be incorrect) expected to result from the Spin-Off, or such benefits may be delayed or not realized at all. Such expected benefits include, among others: providing greater flexibility to pursue innovation, capture profitable growth opportunities, adapt to changing customer needs, and permitting us to deploy capital in a manner that is optimized for our own strategy and business needs. We may be unable to achieve some or all of the anticipated benefits as an independent company in the time we expect, if at all, for a variety of reasons, including: (i) compliance with the requirements of being an independent, publicly traded company, which will require significant amounts of our management’s time and effort, and may divert management’s attention from operating and growing our business; (ii) costs and expenses related to the Spin-Off, which may be higher than currently expected; (iii) failure to retain existing business and operational relationships, including with customers, suppliers, employees, and other counterparties; (iv) failure to address employee issues so as to promote retention and motivation and maintain efficient and effective labor and employee relations; (v) increased susceptibility to market fluctuations, actions by activist stockholders, and other adverse events than if we were still a part of FedEx; (vi) less diversification of our business than FedEx’s prior to the Spin-Off; and (vii) potential negative reactions from investors and other external stakeholders. If we fail to achieve some or all of the anticipated benefits as an independent company, or do not achieve them in the expected timeframe, our business and results of operations could be materially adversely affected.

The terms we received in our agreements with FedEx in connection with the Spin-Off could be less beneficial than the terms we may have otherwise received from unaffiliated third parties.

The agreements we entered into with FedEx in connection with the Spin-Off were negotiated prior to the Spin-Off, at a time when our business was still operated by FedEx, and we did not have an independent board of directors or a management team independent of FedEx representing our interests. As a result of these factors, it is possible that we might have been able to achieve more favorable terms if the circumstances differed. See Item 13. “Certain Relationships and Related Transactions, and Director Independence” for additional details regarding these agreements.

We could experience temporary business interruptions, and we may not be adequately prepared to meet the requirements of an independent, publicly traded company on a timely or cost-effective basis.

The services that FedEx is providing to us pursuant to the agreements we entered into in connection with the Spin-Off do not include every service that we have received from FedEx in the past and may not fully capture the benefits that we previously enjoyed as a result of being integrated with FedEx. Following the termination of the Transition Services Agreement, we will need to provide internally or obtain from unaffiliated third parties the services we no longer receive from FedEx. If we do not replace these services successfully, we may not be able to operate our business effectively, which could materially adversely affect our results of operations. These services may also be more expensive to implement, or less efficient or effective, than the services FedEx is providing during the term of the Transition Services Agreement.

In addition, following the Spin-Off, we are directly subject to reporting and other obligations under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), and face additional costs and demands on management’s time associated with being an independent, publicly traded company. If we are not able to comply with the requirements of the Exchange Act, the Sarbanes-Oxley Act, and other rules and regulations applicable to publicly traded companies, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of shares of our common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

As an independent, publicly traded company, we may not enjoy the same benefits that we did as a part of FedEx.

There is a risk that, following the Spin-Off, we may become more susceptible to market fluctuations and other adverse events than we would have been if we were still a part of the FedEx organizational structure. Additionally, as part of FedEx, we were able to leverage FedEx’s historical reputation, performance, and brand identity to recruit and retain key personnel to run and operate our business. As an independent, publicly traded company, we will need to develop new strategies, and it may be more difficult for us to recruit or retain such key personnel.

We have limited operating history as an independent, publicly traded company, and our historical audited consolidated financial information is not necessarily representative of the results we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.

We derived the historical audited consolidated financial information included in this Annual Report from FedEx’s consolidated financial statements, and this information does not necessarily reflect the results of operations, cash flows, and financial position we would have achieved as an independent, publicly traded company during the periods presented, or those that we will achieve in the future. This is primarily because of the following factors:

• Prior to the Spin-Off, we operated as part of FedEx, and FedEx performed various corporate functions for us. Our historical audited consolidated financial information reflects allocations of corporate expenses from FedEx for these functions. These allocations may not reflect the costs we will incur for similar services in the future as an independent, publicly traded company.
• We entered into certain transactions with FedEx in connection with the Spin-Off, such as FedEx’s provision of transition and other services, and agreed to certain indemnification obligations, which may cause us to incur new costs.

Our historical audited consolidated financial information does not reflect changes that we expect to experience in the future as a result of the Spin-Off, including changes in the financing, cash management, operations, cost structure, and personnel needs of our business. As part of FedEx, we enjoyed certain benefits from FedEx’s operating diversity, reputation, size, purchasing power, ability to borrow, and available capital for investments. As an independent entity, we may be unable to purchase goods, services, and technologies, or access capital markets, on terms as favorable to us as those we obtained as part of FedEx prior to the Spin-Off, and our results of operations may be materially adversely affected as a result.

Certain of our directors and employees may have actual or potential conflicts of interest because of their financial interests in FedEx or because of their previous or continuing positions with FedEx.

Because of their current or former positions with FedEx, certain of our executive officers and directors own equity interests in both us and FedEx. Continuing ownership of FedEx shares and/or equity-based awards, or concurrently holding positions at FedEx and with us, could create, or appear to create, potential conflicts of interest if we and FedEx face decisions that could have implications for both us and FedEx. See Item 10. “Directors, Executive Officers, and Corporate Governance” for additional information regarding positions previously and/or currently held at FedEx by certain of our executive officers and directors.

Messrs. Martin, J. Smith, King, Rodgers, Klank, Lyons, McCoy, Witt, and Gorman and Ms. S. Smith have an economic interest in FedEx through their ownership of its shares and/or equity-based awards.

Potential conflicts of interest could arise in connection with the resolution of any dispute between FedEx Freight and FedEx regarding the terms of the agreements entered into in connection with the Spin-Off and our relationship with FedEx, or with respect to any determinations that potentially have different implications for FedEx Freight and FedEx. A dispute regarding a potential or actual conflict of interest involving FedEx Freight and FedEx could materially adversely affect our business and results of operations. See Item 13. “Certain Relationships and Related Transactions, and Director Independence” for more information about these agreements with FedEx.

Moreover, our certificate of incorporation includes a limited waiver of the doctrine of corporate opportunity. Our certificate of incorporation provides that, to the fullest extent permitted by law, and unless otherwise explicitly agreed in writing, the doctrine of corporate opportunity will not apply with respect to, and we renounce any expectancy to, any corporate opportunity that may relate to one or both of FedEx’s and our businesses from (i) FedEx or (ii) any of our directors or officers (for purposes of this clause (ii)), (x) in circumstances where the application of such doctrine to a corporate opportunity may reasonably conflict with any fiduciary duties or contractual obligations any such person may have to FedEx, and (y) insofar as such corporate opportunity is not offered to such person expressly and solely in such person’s capacity as a director or officer of FedEx Freight and such opportunity is one that we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue and such person is permitted to refer that opportunity to FedEx Freight without violating any legal obligation. Neither FedEx nor any of our directors or officers would have any duty to communicate or present any such corporate opportunity to us or be liable to us or our stockholders for breach of fiduciary duty in any capacity by reason of the fact that FedEx pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to FedEx, or does not present such corporate opportunity to us. As a result, we may not become aware of certain corporate opportunities absent such waiver.

In connection with the Spin-Off, FedEx agreed to indemnify us, and we agreed to assume and indemnify FedEx, for certain liabilities.

Under certain of the agreements we entered into with FedEx in connection with the Spin-Off, FedEx agreed to indemnify us, and we agreed to assume and indemnify FedEx, for certain liabilities. Third parties could also seek to hold us responsible for liabilities that FedEx has agreed to retain, and there can be no assurance that the indemnity from FedEx, if any, will be sufficient to protect us against the full amount of such liabilities, or that FedEx will be able to fully satisfy its indemnification obligations, or at all. Any payments to FedEx that we may be liable for pursuant to our indemnification obligations for liabilities that we agreed to assume may be significant.

In connection with the Spin-Off, we incurred significant debt obligations that could limit our financial and operating flexibility.

Prior to the completion of the Spin-Off, we incurred $4.3 billion of indebtedness, net of debt issuance costs and discounts of $36 million, consisting of $3.7 billion in our senior notes and a $0.6 billion term loan under our delayed draw term loan facility. See Item 7. “Management’s Discussion and Analysis of Results of Operations and Financial Condition — Financial Condition” and Note 5, Long-Term Debt of the accompanying consolidated financial statements for additional information. We also entered into a revolving credit facility which provides for borrowings of up to $1.2 billion. These financing arrangements could have important consequences, including:

• requiring a substantial portion of our cash flow from operations to make interest payments on debt;
• making it more difficult for us to satisfy debt and other obligations;
• increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing;
• increasing our vulnerability to general adverse economic and industry conditions;
• reducing the cash flow available to fund capital expenditures and grow our business;
• limiting our flexibility in planning for, or reacting to, changes in our business and industry;
• placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and
• limiting our ability to pay cash dividends or repurchase our common stock.

To the extent that we incur additional indebtedness, the foregoing risks could increase. In addition, our actual cash requirements in the future may be greater than expected.

Our cash flow from operations may not be sufficient to repay all of our outstanding debt as it becomes due, and we may not be able to borrow money, sell assets, or otherwise raise funds on acceptable terms, or at all, to refinance our debt. These factors could jeopardize our investment-grade credit rating, which would harm our ability to reinvest in organic growth opportunities, fund strategic initiatives, and provide overall financial flexibility with respect to prevailing capital allocation priorities.

Risks Relating to Our Common Stock

Substantial sales of our common stock may occur following the Spin-Off, which could cause our stock price to decline or be volatile.

FedEx stockholders who received shares of our common stock in connection with the Spin-Off, including some of its larger stockholders, may sell some or all of their shares of our common stock they received in the Spin-Off if we do not fit their investment objectives. In addition, FedEx retained 19.9% of the outstanding shares of our common stock following the Spin-Off. In order to preserve the tax-free status of the Spin-Off and certain related transactions for U.S. federal income tax purposes, FedEx must generally dispose of such shares of our common stock within 24 months of the completion of the Spin-Off. The disposition of a significant number of shares of our common stock by FedEx or other holders, or the perception in the market that such disposition might occur, may decrease the market price of our common stock.

Provisions of Delaware law, our certificate of incorporation, and our bylaws, particularly the provisions that will remain in place until the fifth annual meeting of our stockholders following the Spin-Off, may prevent or delay an acquisition of FedEx Freight, which could decrease the market price of our common stock.

Delaware law and our certificate of incorporation and bylaws each have provisions that could discourage, delay, or prevent a merger, acquisition, or other change in control that FedEx Freight’s stockholders may consider favorable. Stockholders who might desire to participate in these types of transactions may not have an opportunity to do so, even if the transaction is considered favorable to stockholders. These anti-takeover provisions could substantially impede the ability of our stockholders to benefit from a change in control or a change in our management and the Board and, as a result, may adversely affect the market price of our common stock and stockholders’ ability to realize any potential change of control premium. These provisions include, among others:

• the division of the Board into three classes of directors until the fifth annual meeting of our stockholders following the Spin-Off, with each class serving a staggered three-year term;
• requiring all stockholder action be taken at a duly called meeting of the stockholders and action cannot be taken by written consent of stockholders;
• no cumulative voting;
• removal of directors only with cause until the fifth annual meeting of our stockholders following the Spin-Off by the affirmative vote of the stockholders then entitled to vote at an election of directors having a majority of the voting power of FedEx Freight; and
• the requirement, until the fifth annual meeting of our stockholders following the Spin-Off, of approval by not less than 66 2/3% of the total voting power of all of our outstanding voting stock then entitled to vote in the election of directors to amend, alter, or repeal certain provisions of our certificate of incorporation, including those relating to the classified board, removal of directors, ability to call special stockholder meetings, ability for stockholders to act by written consent, and amendment of our certificate of incorporation.

In addition, we are subject to Section 203 of the Delaware General Corporation Law, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a prescribed period of time following the date on which that person or its affiliate becomes the holder of 15% or more of our outstanding voting stock.

These provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that the Board determines is not in the best interests of us and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

General Risk Factors

We are also subject to other risks and uncertainties, which in some instances have had in the past and may in the future have a material adverse effect on our business, results of operations, financial condition, and the price of our common stock, including:

• Constraints, volatility, or disruption in the global capital and credit markets, our ability to maintain our current credit ratings and senior unsecured debt credit ratings, and our ability to meet our credit agreement financial covenants.
• Our inability to execute and effectively operate, integrate, leverage and grow any acquired businesses and realize the anticipated benefits of acquisitions, joint ventures, strategic alliances, and investments.
• The effects of a widespread outbreak of an illness or any other communicable disease or public health crisis.
• Inflation and supply chain impacts on the cost and availability of vehicles and service centers.
• Future material impairments in the value of our long-lived assets.
• Our inability to make capital decisions based upon projected volume levels, which may be lower or higher than expected.
• The exclusive forum provisions included in our bylaws, which could limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable.
• Loss or delay in the collection of accounts receivable, including as a result of the terminations of our factoring agreement with FedEx.
• Adverse changes in tax laws or tax rates and adverse positions taken by taxing authorities.

Our ability to attract and retain customers, efficiently operate our businesses, and compete effectively increasingly depends in part upon the sophistication, security, and reliability of our technology network, including our ability to provide features of service that are important to our customers, to protect our confidential business information and the information provided by our customers, and to maintain customer confidence in our ability to protect our systems and to provide services consistent with their expectations.

Cybersecurity Risk Management and Strategy

FedEx Freight has an information technology (“IT”) risk management process designed to identify and manage risk within its IT environment, including cybersecurity. The IT risk management process is based on an established framework for identification, measurement, and monitoring of cybersecurity and other risk areas and supplements our Enterprise Risk Management (“ERM”) process and framework. Our IT risk management, ERM, and compliance teams collaborate to regularly evaluate and manage cybersecurity-related risks using various tools and services. Leveraging components from multiple industry frameworks and best practices such as the International Organization for Standardization (“ISO”) 27001 and National Institute of Standards and Technology (“NIST”) standards, including the NIST Cybersecurity Framework, our cybersecurity program prioritizes governance, identification, protection, detection, response, and remediation measures.

As we move forward following the Spin-Off, we will regularly assess our cybersecurity program’s capabilities and tools to help us enhance reliability and evaluate our environment for vulnerabilities. Our IT risk management team, including our Vice President — Chief Information Security Officer (“CISO”), communicates with senior management on the cybersecurity risk posture of our IT assets and strives to ensure consistent risk remediation activities. In addition, our internal audit team monitors the effectiveness of our IT-related controls and performs reviews of our information security organization to help ensure controls are operating effectively and as designed.

Company-wide information security training (including with respect to cybersecurity), supplemented by awareness programs, is crucial for risk reduction and safeguarding customer, employee, and Company information. We provide training to employees based on access to our network, risk, roles, policies, standards, and behaviors, which is updated to address emerging technology and security issues.

We will periodically engage with assessors, consultants, auditors, and other third parties to review and improve our cybersecurity program. In connection with the Spin-Off, we have also entered into the Transition Services Agreement and related agreements with FedEx under which FedEx provides, and we rely on FedEx for, certain IT and cybersecurity functions during the transition period. Compliance with regulatory requirements involves regular third-party assessments. Our processes are also designed to address cybersecurity risks associated with third-party service providers, including risk assessment and due diligence during selection and oversight. Key third parties will undergo regular assessments to gauge cybersecurity control effectiveness, with heightened review of those with access to non-public data.

We will regularly conduct table-top simulation exercises to test our cybersecurity incident response processes with the aim of enhancing effectiveness against evolving threats. Our incident response procedures guide our preparedness, detection, response, and recovery actions.

While we have significant security processes and initiatives in place, we may be unable to detect or prevent a breach or disruption in the future. For more information about cybersecurity-related risks, please see Item 1A. “Risk Factors” of this Annual Report.

Since the Spin-Off and as of the date of this Annual Report, we have not identified any risks from cybersecurity threats or become aware of any cybersecurity incidents, including any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.

Cybersecurity Governance

The Board has delegated to its Risk Oversight Committee (the “ROC”) responsibility for overseeing the Company’s cyber and technology-related risks, including network security, information and digital security, data privacy and protection, and risks related to emerging technologies such as AI and machine learning; the technologies, policies, processes, and practices for managing and mitigating such risks; and the Company’s cyber incident response and recovery plan. The ROC also oversees the cybersecurity, cyber-resiliency, and technology aspects of the Company’s business continuity and disaster recovery capabilities and contingency plans.

Following the Spin-Off, the ROC will receive regular updates from our CISO and other members of management on risks related to these matters. Specific topics may include updates to FedEx Freight’s cyber risks and threats, the status of existing or new strategies and associated projects intended to strengthen FedEx Freight’s information security systems, assessments of FedEx Freight’s cybersecurity program, risks associated with third-party service providers, and the emerging threat landscape. The ROC also will receive regular updates on key metrics related to our cybersecurity-related risks. The results of the IT risk management process will also be presented at least annually to the ROC. Additionally, members of the ROC will participate in certain of the future simulation exercises conducted by management. The Chair of the ROC will brief the full Board on certain of these matters. Separately, through our ERM program, key enterprise risks, including with respect to cybersecurity, will be communicated to the Board and its Audit Committee (the “Audit Committee”) at least annually, and any significant changes to these risks will be reported to the Board and its Audit Committee.

Our CISO, who reports to the Executive Vice President — Chief Technology Officer, leads our information security team and has management responsibility for overseeing FedEx Freight’s cybersecurity program, including assessing and managing material risks from cybersecurity threats. Our CISO has more than 25 years of experience in information security, governance, risk management, compliance, and cybersecurity operations. Prior to his current role, he held leadership positions across the transportation, consulting, telecommunications, retail, and energy industries, where he was responsible for enterprise technology, security, and risk management functions. The CISO oversees an information security organization of more than 50 security, risk, and compliance professionals across FedEx Freight. The leadership team of our information security organization has extensive experience in IT and cybersecurity and possesses certifications in cybersecurity and related fields.

Our CISO oversees the execution of our comprehensive IT risk management program. In this capacity, the CISO receives periodic updates on FedEx Freight’s IT risk profile and is responsible for assessing the overall risk framework, evaluating risk prioritization efforts and associated risk mitigation activities, as well as monitoring the evolving risk landscape and posture. FedEx Freight is in the process of formalizing an IT Risk Management Committee, which is expected to be established by the end of the year to further enhance governance and oversight.

Our Executive Leadership Team, of which our Executive Vice President — Chief Technology Officer is a member, oversees our business risk, with cybersecurity threat risks being a regular topic of discussion. Our cybersecurity incident response plan includes processes for communicating cybersecurity incidents to relevant levels of management, including the Executive Leadership Team, the ROC, and the full Board of Directors, as appropriate, and consideration of external reporting and disclosure requirements.

FedEx Freight’s corporate headquarters are located in Memphis, Tennessee, with some administrative offices in Harrison, Arkansas. As of June 1, 2026, FedEx Freight operated nearly 30,000 motorized vehicles and over 365 locations (of which approximately 115 are owned and approximately 250 are leased), including approximately 355 shipping terminals (over 320 of which are in the United States) and approximately 10 linehaul relay sites, which are strategically located to provide service throughout North America. These facilities range in size from approximately 2,000 to 280,000 square feet of office and dock space.

FedEx Freight has focused on optimizing its network footprint while maintaining strong door count and improving lane efficiency. As of June 1, 2026, we remain the LTL industry leader with over 26,000 doors across our network. We believe this design allows us to operate at high capacity while maintaining the flexibility to accommodate new business, promoting service quality as customer needs evolve.

FedEx Freight and its subsidiaries are subject to legal proceedings and claims that arise in the ordinary course of business. See Note 13, Contingencies, of the accompanying consolidated financial statements, which is incorporated herein by reference, for additional information.

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with the consolidated financial statements and corresponding notes included elsewhere in this Annual Report. The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of FedEx Freight for the years ended May 31, 2026, and 2025. For additional information on the year ended May 31, 2024, and year-over-year comparisons to May 31, 2025, refer to “Management's Discussion and Analysis of Results of Operations and Financial Condition” in our final information statement dated May 13, 2026, attached as Exhibit 99.1 to our Current Report on Form 8-K filed with the SEC on May 13, 2026. This discussion contains forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed below and elsewhere in this Annual Report. See Item 1A. “Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks, and assumptions associated with these statements.

The following tables are presented in millions of U.S. dollars unless otherwise stated except for per-share amounts, which are presented in U.S. dollars.

Except as otherwise specified, references to years indicate our fiscal year ended May 31, 2026, or ended May 31 of the year referenced. The “Company,” “FedEx Freight,” “we,” “us,” and “our” refer to FedEx Freight Holding Company, Inc. and its direct and indirect subsidiaries after giving effect to the reorganization completed on May 29, 2026 in preparation for the Spin-Off or, when referencing the time period prior to the reorganization, FedEx Freight, Inc.

Description of Business

FedEx Freight is a leading North American provider of LTL freight transportation services. We offer a range of services designed to meet the diverse needs of LTL shippers including time-critical transportation needs leveraging our advanced tracking capabilities and a comprehensive network of service centers and hubs that facilitate efficient delivery and pickup. FedEx Freight’s service offerings include priority services when speed is critical and economy services when time can be traded for savings. FedEx Freight is our sole reportable segment.

FedEx Freight, Inc. was created through several acquisitions by FedEx Corporation (“FedEx”), including Viking Freight, Inc. in January 1998, American Freightways, Inc. in February 2001, and Watkins Motor Lines in May 2006. In April 2002, American Freightways, Inc. was renamed FedEx Freight East, Inc. and Viking Freight, Inc. was renamed FedEx Freight West, Inc. In May 2006, the Watkins Motor Lines business was renamed FedEx National LTL, Inc. In December 2008, FedEx Freight East, Inc. and FedEx Freight West, Inc. merged and became FedEx Freight, Inc., which was wholly owned by FedEx Freight Corporation. In January 2011, FedEx National LTL, Inc. merged into FedEx Freight, Inc. On June 1, 2024, FedEx Freight Corporation merged into FedEx Freight, Inc., and ownership of FedEx Custom Critical, Inc. (“FedEx Custom Critical”) was transferred from another FedEx subsidiary to FedEx Freight, Inc. On September 1, 2024, FedEx Freight Canada Holding Company, Inc., formerly a subsidiary of FedEx Freight Corporation, merged into FedEx Freight, Inc. and its subsidiary, FedEx Freight Canada Corp. (“FedEx Freight Canada”), became a subsidiary of FedEx Freight, Inc.

On July 14, 2025, FedEx Freight Holding Company, Inc. was incorporated to serve as the ultimate parent company of FedEx Freight, Inc. in connection with the planned Spin-Off. Subsequently, on February 11, 2026, FDXF Holding Corporation was formed as an intermediate holding company to become a direct subsidiary of FedEx Freight Holding Company, Inc. On May 29, 2026, ownership of FedEx Freight, Inc. and its subsidiaries was transferred from another FedEx subsidiary to FDXF Holding Corporation. Immediately thereafter, ownership of FDXF Holding Corporation and its subsidiaries was transferred to FedEx Freight Holding Company, Inc.

The consolidated financial statements include the consolidated results of operations, financial position, and cash flows of FedEx Freight Holding Company, Inc. and its subsidiaries for all periods presented since the reorganizations were transactions under common control. See “Summary of Results” below and Item 1. “Business” elsewhere in this Annual Report for additional information.

The key indicators necessary to understand our operating results include:

• the overall customer demand for our various services based on macroeconomic factors and the North American and global economies;
• the volumes of transportation services provided through our network, primarily measured by our average daily shipments and shipment weight and size;
• the mix of services purchased by our customers;
• the prices we obtain for our services, primarily measured by yield (revenue per shipment or hundredweight);
• 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 recover incremental fuel costs through our fuel surcharges.

In analyzing the components of our revenue, we monitor changes and trends in our LTL volumes and LTL revenue per hundredweight. While LTL revenue per hundredweight is a yield measurement, it is also a commonly used indicator for general pricing trends in the LTL industry. This yield metric is not a true measure of price, however, as it can be influenced by many other factors, such as changes in fuel surcharges and weight per shipment. As a result, changes in revenue per hundredweight do not necessarily indicate actual changes in underlying base rates. LTL revenue per hundredweight and the key factors that can impact this metric are described in more detail below:

• Revenue Per Hundredweight — Our LTL transportation services are generally priced based on weight, commodity, and distance. This measurement reflects the application of our pricing policies to the services we provide, which are influenced by competitive market conditions and our growth objectives. Generally, freight is rated by a class system, which is established by the National Motor Freight Traffic Association (“NMFTA”). Light, bulky freight typically has a higher class and is priced higher than dense, heavy freight. Fuel surcharges, accessorial charges, and revenue adjustments reflected in the “Revenue” line item in the accompanying consolidated statements of income are included in this measurement.
• Weight Per Shipment — Fluctuations in weight per shipment can indicate changes in the mix of freight we receive from our customers, as well as changes in the number of units included in a shipment. Generally, increases in weight per shipment indicate higher demand for our customers’ products and overall increased economic activity. Changes in weight per shipment can also be influenced by shifts between LTL and other modes of transportation, such as truckload and intermodal, in response to capacity, service, and pricing conditions. Fluctuations in weight per shipment generally have an inverse effect on our revenue per hundredweight, as a decrease in weight per shipment will typically cause an increase in revenue per hundredweight.
• Revenue Per Shipment — This measurement is primarily determined by the two metrics listed above and is used in conjunction with the number of LTL shipments we receive to evaluate LTL revenue.

Transition to Stand-Alone Company

FedEx Freight Holding Company, Inc. was incorporated in Delaware on July 14, 2025, for the purpose of receiving, pursuant to a reorganization, all of the outstanding equity interests of FedEx Freight, Inc. On June 1, 2026, FedEx distributed shares representing approximately 80.1% of FedEx Freight Holding Company, Inc.'s outstanding common stock to holders of record of FedEx's common stock as of the close of business on May 15, 2026 (the "Distribution"), in a Spin-Off that was tax-free for U.S. federal income tax purposes. Following the Distribution, FedEx Freight became an independent, publicly traded company. For additional information, see Note 1, Description of Business and Basis of Presentation, and Note 14, Subsequent Events, of the accompanying consolidated financial statements.

Effective for the period beginning June 1, 2026, the Company's fiscal year-end has changed from May 31 to December 31.

Relationship with FedEx

As a wholly owned subsidiary of FedEx prior to the Spin-Off, we relied on FedEx to manage certain of our operations and provide certain services, the costs of which were either allocated or directly billed to us. Historical costs for such services may not necessarily reflect the actual expenses we would have incurred, or will incur, as an independent company. In connection with the Spin-Off, we entered into the Separation and Distribution Agreement and certain other agreements with FedEx, including the Transition Services Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Intellectual Property Cross-License Agreement, the Trademark License Agreement, and the Stockholder and Registration Rights Agreement, as described in Item 13. “Certain Relationships and Related Transactions, and Director Independence,” which provides a framework for our relationship with FedEx after the separation. We will utilize certain FedEx services for a transitional period following the Spin-Off, but generally not longer than 24 months after the Spin-Off before we replace these services over time with services supplied either internally or by third parties. The costs for the services we receive from FedEx initially, and then internally or from third parties, may vary from the historical costs directly billed and allocated to us for the same services. Addressing the needs that arise from becoming a stand-alone company will require significant resources, including time and attention from our senior management and others throughout the Company. We will continue to monitor potential separation dis-synergies and we have incurred, and anticipate we will further incur, certain one-time costs associated with creating our own capabilities to manage operations and provide certain services we previously received as part of FedEx.

Stand-Alone Company Expenses

As a result of the Spin-Off, we have become subject to federal and state securities law and stock exchange requirements and have begun to establish additional procedures and practices as a stand-alone public company. As a result, subsequent to the Spin-Off, we have started to and will continue to incur additional expenditures consisting primarily of employee-related costs, costs to establish certain stand-alone functions and information technology systems, and other transaction-related costs. Additionally, we will continue to incur incremental costs that arise from becoming a stand-alone public company, including costs related to external reporting, internal audit, treasury, investor relations, board of directors and officers, and stock administration, as well as costs from expanding the services of existing functions, such as information technology, finance, human resources, legal, tax, facilities, branding, security, government relations, community outreach, and insurance. In line with our long-term cost strategy, we will continue to look for operational cost improvement opportunities as a stand-alone company by utilizing our lean culture and innovative technologies to drive lower costs and increased productivity levels across our business and corporate functions.

Results of Operations

Many of our operating expenses are directly affected by revenue and volume levels, and we expect these operating expenses to fluctuate on a year-over-year basis consistent with changes in revenue and volumes. Therefore, the discussion of operating expense below focuses on the key drivers and trends affecting expenses other than those factors strictly related to changes in revenue and volumes. The line item “Other operating expenses” includes shared services and general corporate costs, finance charges for factored trade receivables, self-insurance claims, and costs associated with professional fees and outside service contracts (such as information technology services, facility services, temporary labor, and security).

Seasonality

Our business is cyclical in nature, as seasonal fluctuations affect volumes, revenues, and earnings. The spring and fall are the busiest periods, while the latter part of December through February is the slowest period. Shipment levels, operating costs, earnings, and cash flow can also be affected by timing of merit-based compensation increases, our annual general rate increase, and severe weather.

Trends Affecting our Business

The following trends significantly affect the indicators discussed above, as well as our business and operating results. See the risk factors identified under Item 1A. “Risk Factors” for more information.

The FedEx Board oversaw and monitored the risks related to FedEx Freight prior to the Spin-Off. Our Board has assumed oversight of these risks upon completion of the Spin-Off and, with management and through our Risk Oversight Committee, will continue to assess whether developments related to these risks have had, or are reasonably likely to have, a material impact on the Company.

Macroeconomic Conditions

While our operations are limited to the United States, Canada, and Mexico, we are indirectly impacted by, and particularly vulnerable to, broader macroeconomic activity. The transportation industry is highly cyclical and especially susceptible to trends in economic activity. Our primary business is to transport goods, so our business levels are directly tied to the purchase and production of goods and the rate of global trade growth. The decline in U.S. imports of consumer goods that started in late 2022, along with slowed global industrial production, has contributed to continued weakened business conditions for the transportation industry leading to lower shipment volumes. Additionally, changes in U.S. and international trade policy have in the past, and could in the future, lead to further weakened business conditions for the transportation industry. We also have experienced, and may continue to experience, a decline in demand for our transportation services as inflation and elevated interest rates are negatively affecting consumer and business spending. We expect inflation and elevated interest rates to continue to negatively affect our results for the remainder of calendar year 2026.

Based on the current trends, we expect the softness in the industrial economy to continue to put pressure on demand for LTL services for the remainder of calendar year 2026. In addition, we expect to continue to experience elevated expense levels in support of our separation from FedEx. We will continue to execute our revenue quality strategy and focus on cost management to align expenses to lower demand levels.

The uncertainty of slowing North American and global economies, global inflation, geopolitical challenges, and the effects these factors will have on the rate of growth of North American and global trade, supply chains, fuel prices, and our business in particular, make any expectations for the remainder of calendar year 2026 inherently less certain. See Item 1A. “Risk Factors,” “Forward-Looking Statements,” and “— Critical Accounting Estimates” for a discussion of these and other potential risks and uncertainties that could materially affect our future performance.

Global Trade Policies

The United States government has taken certain actions that have negatively affected U.S. trade, including imposing and threatening to impose tariffs on many goods imported into the United States (including certain goods from Canada and Mexico). Additionally, many foreign governments (including Canada and Mexico) have imposed, and others have threatened to impose, tariffs on certain goods exported from the United States. These actions have contributed to weakness in the global economy and in the transportation industry, which has led to lower shipments, adversely affecting our results of operations.

These or additional changes in U.S. or international trade policy could lead to further weakened business conditions for the transportation industry.

Fuel

We apply fuel surcharges on our services, most of which are adjusted on a weekly basis. The fuel surcharge is based on a weekly fuel price from ten days prior to the week in which it is assessed. We routinely review our fuel surcharges and periodically update the tables used to determine our fuel surcharges.

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, extra service charges, and the level of discounts offered.

In addition to variability in usage and market prices, the manner in which we purchase fuel (whether through retail or bulk suppliers) also influences our results. We must purchase large quantities of fuel to operate our vehicles, and the price and availability of fuel are beyond our control and can be highly volatile. For example, recent disruptions to shipping have contributed to a significant increase in fuel prices, and global volatility in fuel prices may persist due to ongoing regional and global tensions and conflicts in the Middle East and elsewhere. In addition, our purchased transportation expense is affected by fuel costs.

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. During 2026, higher fuel prices positively affected yields through increased fuel surcharges and negatively affected fuel expenses.

To date, we have been mostly successful in mitigating over time the expense effect of higher fuel costs through our indexed fuel surcharges, as the amount of the surcharges is closely linked to the market prices for fuel. If we are unable to maintain or increase our fuel surcharges because of competitive pricing pressures or some other reason, fuel costs could materially and adversely affect our operating results. For more information, see Item 1A. “Risk Factors.”

Summary of Results

The following table compares summary operating results (dollars in millions, except per share amounts):

(1) Immediately prior to the Spin-Off, the Company effected a recapitalization whereby its 100 issued and outstanding shares of common stock were reclassified and converted into 149,505,248 shares of common stock. All historical share and per-share amounts presented herein have been retrospectively adjusted to reflect this recapitalization.

Overview

Operating income in 2026 was negatively affected by higher costs related to the Spin-Off — including increased salaries and employee benefits, outside service contracts and professional fees — as well as by reduced demand, partially offset by increased yield.

We incurred costs related to the Spin-Off of $492 million in 2026. These costs consisted of fees for professional services, as well as employee incentive plan amounts, all of which are included in the "Separation and other costs" line item in the accompanying consolidated statements of income. All separation costs in 2025 were recognized by FedEx and, therefore, we did not incur any Spin-Off costs in 2025.

The following table compares revenue, operating expenses, operating income, operating margin, selected statistics, and operating expenses as a percent of revenue (dollars in millions):

Revenue

Revenue decreased 1% in 2026 primarily due to lower volume resulting from macroeconomic conditions, partially offset by higher fuel surcharges and base yield improvement.

Average daily shipments decreased 4% in 2026 due to reduced demand for our services, primarily resulting from macroeconomic conditions, including continued weak industrial production, global trade policy uncertainty, and excess capacity in the LTL industry. Revenue per shipment increased 4% in 2026 primarily driven by higher fuel surcharges and weight per shipment.

Operating Income

Operating income decreased 62% in 2026 primarily due to higher costs related to the Spin-Off, including higher salaries and employee benefits expense, outside service contracts and professional fees, as well as reduced demand. These impacts were partially offset by increased revenue per shipment driven by higher fuel surcharges and weight per shipment.

Fuel expense increased 6% in 2026 primarily due to higher diesel fuel price-per-gallon, partially offset by lower mileage and higher miles-per-gallon. Salaries and employee benefits increased 3% in 2026 largely reflecting Spin-Off-related personnel activity, including the transfer to us of over 1,500 employees from FedEx, as well as higher wage rates, partially offset by lower volume. Other operating expenses increased 10% in 2026 due to increased outside service contracts related to the Spin-Off, including incremental software license costs and other technology-related activities, and higher bad debt expense due to the termination of our participation in the factoring agreement with FedEx. For additional information regarding our prior factoring agreement with FedEx, see “— Financial

Condition — Liquidity Outlook,” and Note 2, Summary of Significant Accounting Policies and Note 10, Related Party Transactions, of the accompanying consolidated financial statements.

Separation and other costs of $492 million in 2026 are primarily related to legal, consulting, and advisory fees for professional services and an employee incentive plan associated with the Spin-Off. FedEx Freight did not incur any costs associated with the Spin-Off in 2025.

Income Taxes

Our effective tax rates were 25.9% and 25.3% for 2026 and 2025, respectively, and varied from the statutory tax rate due to a jurisdictional mix of earnings, revisions of prior-year tax estimates for actual tax return results, and tax credits.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. Certain provisions within the OBBBA are interdependent and have implications for both the effective tax rate and cash taxes. The provisions within the OBBBA did not have a material impact to the Company’s overall effective tax rate. Cash taxes were not materially impacted as the consolidated financial statements reflect cash taxes paid where the Company does not file a consolidated tax return with FedEx.

The foreign countries in which FedEx Freight operates have adopted the Organization for Economic Cooperation and Development’s global framework implementing a 15% corporate minimum tax, commonly referred to as Pillar Two. Based on currently issued guidance, FedEx Freight qualifies for the Transitional Country by Country Safe Harbor based on the simplified effective tax rate test, thus our financial results were not impacted by Pillar Two.

For more information on income taxes, see “— Critical Accounting Estimates” and Note 8, Income Taxes, of the accompanying consolidated financial statements.

Recent Accounting Guidance

See Note 3, Recent Accounting Guidance, of the accompanying consolidated financial statements for a discussion of recent accounting guidance.

Financial Condition

Liquidity

Cash totaled $251 million as of May 31, 2026, compared to $109 million as of May 31, 2025. The following table provides a summary of our cash flows (in millions):

Cash Provided by Operating Activities. Cash flows from operating activities decreased $1.4 billion in 2026 primarily due to lower net income and working capital changes, driven by an increase in accounts receivable related to approximately $1.0 billion of reacquired outstanding U.S. trade receivables, partially offset by a decrease in intercompany amounts due to Parent. Both the reacquired receivables and decrease in intercompany amounts were related to the termination of the Company's factoring agreement with FedEx in preparation for the Spin-off. For additional information regarding our prior factoring agreement with FedEx, see Note 2, Summary of Significant Accounting Policies, and Note 10, Related Party Transactions, of the accompanying consolidated financial statements.

Cash Used in Investing Activities. Capital expenditures were 13% lower in 2026 primarily due to decreased spending on vehicles and trailers and ground support and dock equipment, partially offset by increased spending on facilities and other and information technology.

See “— Capital Resources” for a more detailed discussion of capital expenditures during 2026.

Cash Provided by (Used in) Financing Activities. Cash provided by financing activities primarily reflects debt proceeds and net transfers to FedEx. In 2026, cash provided by financing activities increased $1.5 billion, driven by $4.3 billion in proceeds from our debt issuance, partially offset by a $2.8 billion increase in net transfers to FedEx. For additional information related to FedEx’s centralized cash management program see Note 1, Description of Business and Basis of Presentation, and Note 10, Related Party Transactions, to the accompanying consolidated financial statements.

Capital Resources

Our operations are capital intensive, characterized by significant investments in vehicles and trailers, facilities, ground support and dock equipment, and technology. The amount and timing of capital investments depend on various factors, including pre-existing contractual commitments, anticipated volume growth, economic conditions, new or enhanced services, geographical expansion of services, availability of satisfactory financing, and actions of regulatory authorities.

The following table compares capital expenditures by asset category (in millions):

Capital expenditures decreased $58 million in 2026 primarily due to decreased spending on vehicles and trailers and ground support and dock equipment, partially offset by increased investments in facilities and other and information technology. These changes in capital expenditures are a result of continuing to prioritize investments that support increasing efficiency and reducing our cost to serve.

Our capital expenditures for the remainder of calendar year 2026 are expected to range between $320 million and $340 million, funded by cash on hand and available liquidity. Our expected capital expenditures for the remainder of calendar year 2026 include investments in technology required for our exit from the Transition Services Agreement.

We will continue to evaluate our investments in critical long-term strategic projects to ensure our capital expenditures are expected to generate high returns on investment and are balanced with our outlook for North American and global economic conditions. For additional details on key capital projects in the remainder of calendar year 2026, refer to “— Financial Condition — Liquidity Outlook.”

Liquidity Outlook

We continually evaluate our liquidity requirements in light of our operating needs, growth initiatives, and capital resources. We believe our existing cash upon completion of the Spin-Off, cash flows generated from operations, availability under our revolving credit facility, and access to capital markets will provide adequate resources to fund our future cash flow needs. Following the Spin-Off, we are further evaluating our liquidity needs, capital structure, and sources of capital on a stand-alone basis.

In response to current business and economic conditions as referenced in the “— Results of Operations — Trends Affecting our Business,” we are continuing to actively manage and optimize our capital allocation in response to the slowdown in the economy, inflationary pressures, changing fuel prices, geopolitical conflicts, and uncertainty regarding international trade, including the impact of tariffs.

We have historically participated in FedEx’s centralized approach to cash management and financing of its domestic operations. We have historically generated, and expect to continue to generate, positive cash flow from operations. As a result of the Spin-Off, we no longer participate in FedEx cash pooling arrangements, and our cash is held and used solely for our own operations.

We historically factored certain of our U.S. trade receivables through FedEx on a non-recourse basis pursuant to a factoring agreement. We accounted for transfers under the factoring agreement as sales because we sold full title and ownership in the underlying receivables and control of the receivables was considered transferred. These receivables were not recognized on our Consolidated Balance Sheets in the accompanying consolidated financial statements. On November 30, 2025, the Company’s factoring agreement with FedEx was terminated in preparation for the Spin-Off. Additionally, on November 18, 2025, the Company entered into a True Sale and Assignment Agreement with FedEx, effective December 1, 2025, under which we reacquired all outstanding U.S. trade receivables previously sold to FedEx under the Company's factoring arrangement described above. This transaction was structured as a true sale without recourse, resulting in the Company resuming ownership and collection of its outstanding receivable balances. As a result of this transaction, accounts receivable balances presented in the Consolidated Balance Sheets of the accompanying consolidated financial statements have materially increased as of May 31, 2026, compared to May 31, 2025. The Company's decision to reacquire all outstanding U.S. trade receivables previously sold to FedEx could result in a slower cash conversion cycle from sales to cash collection. There is no guarantee we, if desired to enter into a similar financing arrangement, will be able to enter into such an arrangement with a third party or be able to sell similar volumes of U.S. trade receivables compared to the amounts historically sold to FedEx. For additional information regarding our prior factoring agreement with FedEx, see Note 2, Summary of Significant Accounting Policies, and Note 10, Related Party Transactions, of the accompanying consolidated financial statements.

We have additional obligations as part of our ordinary course of business beyond those committed for capital expenditures, which include lease obligations. Refer to Note 6, Leases, of the accompanying consolidated financial statements for more information. In addition, we have certain tax positions that are further discussed in Note 8, Income Taxes, of the accompanying consolidated financial statements. We do not have any guarantees or other off-balance sheet financing arrangements that we believe could have a material impact on our financial condition or liquidity. Refer to Note 13, Contingencies, of the accompanying consolidated financial statements for discussion of guarantees of FedEx debt.

In contemplation of the Spin-Off, we incurred $4.3 billion of indebtedness, net of debt issuance costs and discounts of $36 million, consisting of $3.7 billion in senior notes and a $0.6 billion term loan under a delayed draw term loan facility, all of which is long-term. This indebtedness has an estimated weighted-average interest rate of 4.79%. The actual rates of interest may be different from those assumed. The terms of such indebtedness are described in Note 5, Long-Term Debt, of the accompanying consolidated financial statements. Upon completion of the Spin-Off on June 1, 2026, FedEx was automatically released from its guarantee of these financing arrangements, and FedEx Custom Critical joined FedEx Freight, Inc. as a guarantor. In connection with the Spin-Off, we distributed, from the net proceeds of such borrowings, $4.1 billion of cash to FedEx as part of the consideration for the assets FedEx contributed to us in connection with the Spin-Off. We have also entered into a revolving credit facility that provides for borrowings of up to $1.2 billion; however, the revolving credit facility was not utilized prior to the Spin-Off or to fund the distribution of $4.1 billion to FedEx.

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the financial statements of a complex corporation. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and new or better information.

The estimates discussed below include the financial statement elements that are either the most judgmental or involve the selection or application of alternative accounting policies and are material to our results of operations and financial condition. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee and with our independent registered public accounting firm. See Note 2, Summary of Significant Accounting Policies, to the accompanying consolidated financial statements for further information on our significant accounting policies.

Shared Services and Corporate Allocations

FedEx allocated certain shared services and general corporate costs to us that are reflected as expenses in the accompanying consolidated financial statements including, but not limited to, information technology, marketing, sales, financial services, support services, customer experience, and corporate executives’ salaries and employee benefits. These expenses have been allocated to FedEx Freight based on direct usage or benefit where specifically identifiable, with the remainder allocated pro rata based on an applicable measure of total revenue, headcount, specific revenue by function, transaction volume, or other relevant measures. Management considers these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided, to us. These allocated amounts, however, are not necessarily indicative of the actual amounts that might have been incurred or realized had we operated as an independent, stand-alone entity, during the periods presented, nor are they indicative of our future operations.

Income Taxes

We are subject to income taxes in the United States, Canada, and Mexico. Our income taxes are a function of our income, tax planning opportunities available to us, statutory tax rates, and the income tax laws in the various jurisdictions in which we operate. These tax laws are complex and subject to different interpretations by us and the respective governmental taxing authorities. As a result, significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties. Our intercompany transactions are based on globally accepted transfer pricing principles, which align profits with the business operations and functions of the various legal entities in our international business.

We evaluate our tax positions quarterly and adjust the balances as new information becomes available. These evaluations are based on factors including, but not limited to, changes in facts or circumstances, changes in tax laws or their interpretations, audit activity, and changes in our business. In addition, management considers the advice of third parties in making conclusions regarding tax consequences.

Tax contingencies arise from uncertainty in the application of tax rules throughout the jurisdictions in which we operate. Despite our belief that our tax return positions are consistent with applicable tax laws, taxing authorities could challenge certain positions. We record tax benefits for uncertain tax positions based upon management’s evaluation of the information available at the reporting date. To be recognized in the financial statements, a tax benefit must be at least more likely than not of being sustained based on the technical merits. The benefit for positions meeting the recognition threshold is measured as the largest benefit more likely than not of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Significant judgment is required in making these determinations and adjustments to unrecognized tax benefits may be necessary to reflect actual taxes payable upon settlement.

Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss, capital loss, and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies. These sources of income rely heavily on estimates to make this determination, and as a result there is a risk that these estimates will have to be revised as new information is received. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. We record the taxes for global intangible low-taxed income as a period cost.

Our income tax positions are based on currently enacted tax laws. As further guidance is issued by the U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies, any resulting changes to our estimates will be made in accordance with the relevant accounting guidance.

For more information, see “— Summary of Results — Income Taxes” and Note 8, Income Taxes, of the accompanying consolidated financial statements.

Self-Insurance Accruals

Our self-insurance reserves are established for estimates of ultimate loss on all claims incurred, including incurred-but-not-reported claims. Components of our self-insurance reserves included in this critical accounting estimate are workers’ compensation claims, vehicle accidents, property and cargo loss, general business liabilities, and benefits paid under employee disability programs. These reserves are primarily based on the actuarially estimated cost of claims incurred as of the balance sheet date. These estimates include judgment about severity of claims, frequency and volume of claims, healthcare inflation, seasonality, and plan designs. The use of any estimation technique in this area is inherently sensitive given the magnitude of claims involved and the length of time until the ultimate cost is known, which may be several years.

We believe our recorded obligations for these expenses are consistently measured and appropriate. Nevertheless, changes in accident frequency and severity, healthcare costs, insurance retention levels, and other factors can materially affect the estimates for these liabilities and affect our results of operations. As of May 31, 2026, FedEx assumed substantially all of the self-insurance reserves related to workers’ compensation claims, vehicle accidents, and property and general business liabilities attributable to FedEx Freight, amounting to $330 million. This amount is included in “Net transfers from (to) Parent” in the accompanying Consolidated Statements of Changes in Equity. See Note 2, Summary of Significant Accounting Policies, for more information.

Self-insurance accruals reflected in our balance sheet are as follows (in millions):

A five-percent increase or decrease in the assumed claim severity used to estimate our self-insurance accruals would result in a corresponding increase or decrease of approximately $3 million in our reserves and expenses as of and for the year ended May 31, 2026. For more information, see Item 1A. “Risk Factors."

Long-Lived Assets

Useful Lives and Salvage Values. Our business is capital intensive, with approximately 58% of our owned assets invested in our property and equipment at May 31, 2026.

The depreciation or amortization of our capital assets over their estimated useful lives, and the determination of any salvage values, requires management to make judgments about future events. Because we utilize many of our capital assets over relatively long periods, we periodically evaluate whether adjustments to our estimated service lives or salvage values are necessary to ensure these estimates properly match the economic use of the asset. These evaluations consider usage, maintenance costs, and economic factors that affect the useful life of an asset. This evaluation may result in changes in the estimated lives and residual values used to depreciate our equipment.

Impairment. We evaluate our long-lived assets used in operations for impairment when events and circumstances indicate that the undiscounted cash flows to be generated by that asset group are less than the carrying amounts of the asset group and may not be recoverable. If the cash flows do not exceed the carrying value, the asset must be adjusted to its current fair value. We operate an integrated transportation network, and accordingly, cash flows for most of our operating assets are assessed at the network level, not at an individual asset level for our analysis of impairment. Further, decisions about capital investments are evaluated based on the effect on the overall network rather than the return on an individual asset.

Leases. We utilize operating leases to finance certain of our facilities and vehicles. Such arrangements typically shift the risk of loss on the residual value of the assets at the end of the lease period to the lessor.

The determination of whether a lease is accounted for as a finance lease or an operating lease requires management to make estimates primarily about the fair value of the asset and its estimated economic useful life. In addition, our evaluation includes ensuring we properly account for build-to-suit lease arrangements and making judgments about whether various forms of lessee involvement allow the lessee to control the underlying leased asset during the construction period. We believe we have well-defined and controlled processes for making these evaluations, including obtaining third-party appraisals for material transactions to assist us in making these evaluations.

For more information, see Note 2, Summary of Significant Accounting Policies, of the accompanying consolidated financial statements.

Goodwill. We had $602 million of recorded goodwill as of May 31, 2026 and 2025 from our business acquisitions, representing the excess of the purchase price over the fair value of the net assets acquired. Goodwill is reviewed at least annually for impairment. In our evaluation of goodwill impairment, we perform a qualitative assessment that requires management judgment and the use of estimates to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. As part of our qualitative assessments, we consider changes in the macroeconomic environment such as the general economic conditions, limitations on accessing capital, and other developments in equity and credit markets.

We evaluated goodwill during the fourth quarters of 2026 and 2025 and the estimated fair value of each reporting unit exceeded its carrying value as of the end of each respective fiscal year; therefore, we do not believe that goodwill was impaired as of the balance sheet dates.

Interest Rates. Our consolidated financial statements do not include an attribution of FedEx’s third-party debt or interest expense from FedEx because we are not the legal obligor of the debt and the borrowings were not directly attributable to our business. We incurred indebtedness in contemplation of the Spin-Off, creating interest rate risk on the balance sheet. As discussed in Note 5, Long-Term Debt, to the accompanying consolidated financial statements, we have outstanding long-term debt (exclusive of finance leases) with an estimated fair value of $4.2 billion. Market risk for long-term debt is estimated as the potential decrease in fair value resulting from a hypothetical 10% increase in interest rates and amounts to approximately $91 million. The underlying fair value of our long-term debt was estimated based on quoted market prices or on the current rates offered for debt with similar terms and maturities.

Foreign Currency. While we are a provider of transportation services within North America, the majority of our transactions during the periods presented in this Annual Report are denominated in U.S. dollars. The only foreign currency exchange rate risks to which we are exposed are the Canadian dollar and Mexican peso. The result of a hypothetical 10% adverse movement in the value of the dollar relative to the currencies in which our transactions are denominated would not be material to our financial position, results of operations, or cash flows, in all periods presented. In addition to the direct effects of changes in exchange rates, fluctuations in exchange rates also affect the volume of sales or the foreign currency sales price as competitors’ services become more or less attractive. The sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices.

Commodity. While we have market risk for changes in the price of vehicle fuel, this risk is largely mitigated by our indexed fuel surcharges. For additional discussion of our indexed fuel surcharges, see “— Results of Operations — Fuel.”

Management’s Evaluation of Disclosure Controls and Procedures

The management of FedEx Freight, 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 SEC’s rules and forms, including ensuring that such information is accumulated and communicated to FedEx Freight 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 May 31, 2026 (the end of the period covered by this Annual Report).

Assessment of Internal Control Over Financial Reporting

This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended May 31, 2026 that materially affected or are reasonably likely to materially affect our internal control over financial reporting.