FedEx 2009 Annual Report, the Thesis

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It simply results in anticipated earnings or savings failing to materialize. The writedown was the result of the extinguishing of the goodwill that FedEx acquired in the Kinko's purchase. The Kinko's brand was eliminated, and this essentially dictated the timing of the writedown. All of the goodwill in the marketplace that came with the Kinko's name no longer exists, therefore FedEx needed to write that amount down.

The result was that in 2009, FedEx took a charge of $891 million, or $2.23 per diluted share, on writing down the Kinko's goodwill. FedEx attributes the writedown primarily to the discontinuing of the Kinko's name, but also to a "decline in the fair value of the FedEx Office reporting unit in light of economic conditions.

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" The writedown had a significant impact on the company's net income. Already faced with an environment marked by stagnating revenues, the writedown resulted in a net income of $98 million, down from $1.125 billion the year before.

It is important to understand the Kinko's writedown in the context of the income statement. The company's profit declined substantially in fiscal 2009. In order to compare operating results for the year, the writedown must be added back to the $98 million net profit. FedEx did have a worse year, but it was not catastrophic. The writedown actually represents six years of failure since the Kinko's purchase. The financial impact of the failure may have been limited to the 2009 income statement,.....

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