Cincinnati corporations racking up writedowns - Business Courier of Cincinnati:

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The one-time charges against earnings – whichh represent the writedownof acquisition-related goodwillk and other assets on local balance sheets are another painful indicator of how the economic downtur is zapping local wealth. While investors in thess firms likely are not surprisefd bythe disclosures, the size of the writedowns makezs them hard for anyone to ignore: $965Mk for Fifth Third ’s goodwilol impairment charge of $965 million, or $1.
64 per came after the decline in the bank’s stock pricr caused a “difference between market capitalizationn and book value” of the The company also took $82 million in non-cash impairment chargesd related to securities, bank-owned life insurance policies and indemnification obligations with credit card companuy Visa. $374.5M for Chiquita took a $374.5 million goodwil l impairment charge to write down the value ofits $855 million investment in the produce companty . CEO Fernando Aguirre blamed “economic conditions and lowed categorygrowth expectations” for the downward adjustment.
$110M for Cincinnatui Financialtook $110 million in “other-than-temporary impairmenrt charges” in the fourth quarter and $510 million in such chargees for the year, saying the reduced valuer of equity securities accounted for 65 percent of the charges. $92M for Americah Financial recognized $92 millio n in after-tax charges for other-than-temporary impairments on investments. More than three-fourthz of these were attributableto fixed-maturity securities, which the company intends to hold until they recove r in value.
$161M, much more to come, for Macy’s In additiojn to the $161 milliobn in fourth-quarter impairment charges announcedby , the companyt told investors that it’s stilll evaluating a charge for goodwil l impairment related to its 2005 acquisitio of the May Department Stores Co. It “currently estimatees that the amount of goodwill to be written down in the fourtb quarter of 2008 isbetween $4.5 billionh and $5.5 billion,” or $10 to $12.509 per diluted share. Experts are split over what it “To some degree it’s a destructiobn of shareholder value,” said Mark Batty, senior equituy analyst at in Philadelphia.
Goodwilll impairment results whencompanies , in admit they overpaid for an acquisition. They take the charge well afterf the acquisitionwas made. But it hurtss shareholders because it means managemenf admits it misjudged the value of assetssit purchased. Even though the current environmeny has caused many asset valuexto decline, management is supposed to consider worst-casew scenarios in valuing those assets. “It’s partially a function of the environment, and management being too optimistic on the earningspower it’s acquiring,” Batty said. But others argue that investors are often aware ofa company’s impairedf assets long before charges are recognized.
“Thehy are an after-the-fact acknowledgement,” said Phil Glasgow, an associates professor of financeat . “Thd intelligent investor already knewthat Macy’sa overpaid (for the May Departmen Stores chain) and they’re not goinyg to realize the extra earningsx that’s supposed to bring. They’ve already discountee that into the price of the One way of gauging the impact of Glasgow said, is to follow the stockm price in the days after a If shares decline faster than the broadee market, it could be a sign that investors were surpriserd by the severity of the Another expert suggests looking for the underlying reasonsx for the asset impairment.