FedEx Corp. (NYSE: FDX) announced that it would take $370 million in noncash goodwill impairment charges primarily related to its 2004 acquisition of Kinko’s, now known as FedEx Office.
In the late Friday filing with the U.S. Securities and Exchange Commission, the Memphis, Tennessee-based transportation and logistics giant reported it would be taking a $348 million charge related to “declining print revenue and temporary store closures at FedEx Office.” COVID-19 was cited as the reason for sagging performance in the operating segment. The charges will be recorded in its fiscal 2020 fourth quarter ended May 31.
The company expects the pandemic to “continue to negatively impact FedEx Office’s near-term operating performance.” The filing said $348 million represents all of the remaining goodwill from the $2.4 billion acquisition of Kinko’s.
The remaining asset impairment charges will be taken in FedEx Supply Chain, mostly stemming from the 2015 acquisition of GENCO Distribution System, and at FedEx Logistics.
The company also announced the annual incentive compensation plan for executive officers was eliminated for fiscal 2021 “given the current economic and business uncertainty resulting from the COVID-19 pandemic.” Other equity awards to executive officers will remain in place.
FedEx has been wrestling with ways to accommodate the increase in residential shipments as a result of pandemic-related stay-at-home orders. The company implemented surcharges on several package types on June 8 to account for the surge in residential demand, which typically has fewer packages delivered per stop compared to B2B deliveries.
FedEx will announce quarterly and full-year financial results on June 30.
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