FedEx Corp.’s decision to dispense with the Kinko’s brand — changing store names to FedEx Office — involved the company taking a $515-million noncash impairment charge for the acquired trade name, and $367 million for goodwill.
In its 8-k filing with the Securities and Exchange Commission, the document and business services company attributed another $9 million of the charge to “other,” for a pretax total of about $891 million. It said that the total fourth-quarter, one-time charge after tax would be $696 million.
FedEx explained that the goodwill impairment charge reflects a decline in the current fair value of the FedEx Office unit in light of current economic conditions, the unit’s recent and forecasted performance and the decision to reduce the rate of store expansion.
“Kinko’s was primarily a copy and print-service provider when it was acquired in 2004,” Brian D. Philips, president and CEO of FedEx Office, said in a press release. “The name FedEx Office more accurately represents our broader role of providing superior information and services through our company-owned, digitally connected locations around the world. We are a back office for small businesses and a branch office for medium to large businesses and mobile professionals.” The company added that will rebrand the centers during the next several years.
The charge, approved by the board after recommendation of the audit committee, was made in connection with annual impairment testing of goodwill and other intangible assets conducted in the fourth quarter under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”
FedEx previously had decided to reduce the rate of long-term expansion of FedEx Kinko’s retail network. The unit’s senior management team also was reduced and restructured to reflect the new plan and cost-control efforts, with future capital commitments slowing the expansion rate from about 300 locations a year to 70. FedEx’s filing added that it does not expect to be required to make any current or future cash expenditures as a result of the impairment.