Call me a cynic, but I wonder: If FedEx (NYSE:FDX) had suddenly discovered $1 billion in windfall profits -- from, I dunno, finding an unclaimed cargo-hold full of gold bullion in one of its airplanes -- would it have kept the news to itself, or shouted it from the rooftops?
And if it's the latter -- as I strongly suspect it would be -- then I also wonder: When FedEx actually discovered that it was going to have to write down its assets by $1.2 billion this quarter, why did I find out about it in a quietly tucked-away SEC filing rather than in a press release?
Extra, extra, you didn't yet read about it!
I'm speaking, of course, about the 8-K filing that FedEx made yesterday evening, in which the freight shipper quietly announced about $810 million in goodwill impairment charges related to its ill-considered acquisition of Kinko's.
I can understand why FedEx wouldn't want to trumpet the news, considering that FedEx once called Kinko's "the most recognized brand name in the quick print industry." But last year, FedEx decided to bury this "most recognized brand name" in favor of the oh-so-catchy moniker "FedEx Office." Grand news for copy-competitors like Staples (NASDAQ:SPLS), Office Depot (NYSE:ODP), and Office Max (NYSE:OMX).
But not-so-great news for FedEx shareholders. FedEx already took a $891 million impairment charge last year that stemmed mostly from Kinko's, causing the firm to report its first quarterly loss in more than a decade.
History repeats itself
Even worse, FedEx is once again tossing everything but the kitchen sink into this quarter's bad news parade. In addition to the $810 million written off for further degradation of the Kinko's business "as a result of weak economic conditions," FedEx is tacking on:
- $90 million in charges for worsening performance at FedEx National LTL, formerly known as Watkins Motor Lines, which it acquired in 2006.
- $300 million more in "previously disclosed aircraft-related asset impairments ... additional aircraft-related charges and other charges primarily associated with employee severance and facility reduction costs."
Total cost: $1.2 billion in pre-tax charges. About the only good news here is that most of this is "non-cash," which presumably limits FedEx's actual cash payouts to about $100 million in cash, primarily as severance payments to its laid-off employees.
Foolish takeaway
You can't blame the recession for everything, FedEx. It's time to own up to your mistakes. And until it does, I've got to say: Advantage, UPS (NYSE:UPS).
How else is FedEx helping its archrival? Find out in:
