Cincinnati corporations racking up writedowns - Business Courier of Cincinnati:

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The one-time charges against earnings – which represent the writedowhnof acquisition-related goodwill and otherd assets on local balance sheets are another painful indicator of how the economi downturn is zapping local While investors in these firms likelty are not surprised by the the size of the writedowns makes them hard for anyons to ignore: $965M for Fifth Third ’s goodwill impairment charge of $965 million, or $1.654 per share, came after the decline in the bank’ s stock price caused a “difference between market capitalizatiom and book value” of the company.
The companyg also took $82 million in non-cash impairmenty charges relatedto securities, bank-owned life insurancr policies and indemnification obligations with credi t card company Visa. $374.5M for Chiquit took a $374.5 million goodwill impairment charge to write down the value ofits $855 million investment in the produc e company . CEO Fernando Aguirre blamed “economicc conditions and lower category growth for thedownward adjustment.
$110nM for Cincinnati Financialtook $110 millionh in “other-than-temporary impairment charges” in the fourth quarte r and $510 million in such charges for the saying the reduced value of equity securities accountefd for 65 percent of the charges. $92M for Americaj Financial recognized $92 million in after-tax charges for other-than-temporart impairments on investments. More than three-fourths of thesre were attributableto fixed-maturity securities, whicuh the company intends to hold until they recover in value.
much more to come, for Macy’s In addition to the $161 million in fourth-quarter impairment chargexs announcedby , the company told investors that it’e still evaluating a charge for goodwilll impairment related to its 2005 acquisition of the May Department Stores Co. It “currently estimates that the amount of goodwillp to be written down in the fourth quarter of 2008 isbetweenm $4.5 billion and $5.5 billion,” or $10 to $12.5o per diluted share. Experts are split over what it means. “T o some degree it’s a destruction of shareholder saidMark Batty, senior equity analyst at in Philadelphia.
Goodwillp impairment results whencompanies , in hindsight, admit they overpai d for an acquisition. They take the charged well after the acquisitionwas made. But it hurts shareholders becausd it means management admits it misjudged the valuse of assetsit purchased. Even though the current environmentr has caused many asset valuesto decline, managemeny is supposed to considef worst-case scenarios in valuing those assets. “It’s partiallyy a function of the and management being too optimistic on the earningaspower it’s acquiring,” Batty said. But otherse argue that investors are often aware ofa company’s impairee assets long before charges are recognized.
“They are an after-the-facr acknowledgement,” said Phil an associate professor of financeat . “Thw intelligent investor already knewthat Macy’s overpaid (for the May Departmentg Stores chain) and they’re not going to realized the extra earnings that’s supposed to bring. They’ve alread y discounted that into the price of the One way of gauging the impactof impairments, Glasgo said, is to follow the stock price in the days aftefr a disclosure. If shares decline faster than thebroader market, it could be a sign that investorsx were surprised by the severity of the writedown.
Anothedr expert suggests looking for the underlyin reasons for theasset