8-KEarnings & ResultsOther EventsExhibits & Filings

FEDEX CORP 8-K Report, Financial Results (Sep 11, 2009)

Filed September 11, 2009For Securities:FDX

Summary

FedEx Corporation (FDX) filed an 8-K on September 11, 2009, primarily to disclose information regarding an IRS audit of FedEx Ground's independent contractor classification. The IRS audit team has proposed a federal employment tax assessment of $14 million plus interest for the 2002 calendar year related to independent contractors providing FedEx Home Delivery services. FedEx intends to contest these findings vigorously, believing its contractors are legitimately independent. The company also noted that similar IRS audits are ongoing for calendar years 2004 through 2008, but the potential financial impact for those periods cannot yet be determined. While the press release regarding expected earnings for the fiscal quarter ended August 31, 2009, was also filed as an exhibit, the core focus of this 8-K filing is the IRS audit. Investors should monitor the progress of this audit, as a final resolution could have material financial implications, although FedEx currently believes a loss is not probable for any period.

Key Highlights

  • 1IRS proposes $14 million assessment plus interest for 2002 employment taxes related to FedEx Home Delivery independent contractors.
  • 2FedEx Corporation intends to contest the IRS findings regarding independent contractor classification for FedEx Ground.
  • 3The IRS is conducting ongoing audits for employment taxes for calendar years 2004-2008.
  • 4FedEx believes its contractors, including those for Home Delivery, are independent contractors.
  • 5The company does not believe a loss is probable for the 2002 assessment or subsequent periods.
  • 6A press release regarding Q1 fiscal 2010 earnings was also filed as an exhibit.

Frequently Asked Questions

The main financial risk disclosed is a proposed $14 million assessment (plus interest) by the IRS for employment taxes and penalties related to the classification of independent contractors for FedEx Home Delivery services in 2002. This is part of a larger audit into FedEx Ground's contractor classification.

FedEx Corporation plans to vigorously contest the IRS's findings, stating they believe the proposed assessment is erroneous. The company maintains that all its independent contractors, including those for FedEx Home Delivery, are properly classified as independent contractors.

The filing states that the IRS is still conducting audit work for calendar years 2004 through 2008. Therefore, FedEx cannot yet determine the amount or a reasonable range of potential loss for these subsequent periods.

No, FedEx states in the filing that they do not believe a loss is probable for either the 2002 calendar year or any subsequent period. They believe they have strong defenses to the proposed assessment.