From Sherry Smith on the last quarter earnings call:
" Before I discuss our operating results for the quarter, I want to provide some background on the goodwill and impairment charge we recorded. This non-cash charge was related to our market capitalization, which has remained low with the sustained weakness in our share price. Accounting rules require that we reconcile our book value to our market capitalization in assessing recoverable value of goodwill and other intangible assets.
As a result of our analysis, we recorded a third quarter after-tax charge of $800 million. Let me assure you that this non-cash impairment charge does not impact any of our financial covenants, our ability to access our credit facility or any of our business strategies. "
My Cost Basis is probably around 6.00 at the moment and the 5 buck mark is one concern where pensions might have to start selling it. this is where a lot of the hedge funds and shots are hoping for to seal out the cash from the Pension Funds who own it for the Yield to force them to sell down and in effect do a nice big bank job style robbery from everyone 401Ks/Retirees saving and such.
A lot of the Pension Funds and shorts are counting on this and will start banging harder as it gets closer to that 5 buck mark so I would look hard Monday prior to the reporting at buying should it hold 5 bucks the actual report will be the defining moment.
What I see happening as 3 possible outcomes.
We (as I have 1200+ shares myself) will pop to the stops/circuit breakers should a great quarter show up or a good quarter will put it back to 7 or 8 bucks in a week or two as shorts are shaken out.
If quarter is so so or misses then it will hit $3.80's against circuit breakers as Pension funds are shaken out. At that point worst case is they (SVU) management halts the Dividend and possibly drive stock into low 3 buck range over the next 2 weeks.
I dont see Bankruptcy as even a remote possibility with conditions way they are now so I am LONG and probably depending on what happens pre-and just after opening be buying more.
The stock market had/has priced SVU so low that the goodwill carried on the books for Albertsons, etc was previously valued excessively and they had to adjust (decrease) the carried goodwill value. Essentially saying that the Albertsons reputation value and name value had diminished due to poor operating results.
For the most part, goodwill is essentially the excess in purchase price over the hard assets that were purchased at the time.
If Eastman Kodak had zero value as an operating company, it would still have goodwill value do to the Kodak name. Could sell the name to a company that could now slap it on its product.
BTW... anybody doubting the quality of SVU, look here:
5 star bond rating and trading at no discount. The threat of 'bankruptcy' being tossed around by some bashers here, is NON-EXISTENT according to the credit market.
Seems like SVU met the guidance and was brought down by this accounting 'charge', that is otherwise meaningless to the business fundamentals.
Is this likely to repeat due to further declining share price or was this a 'one time' item?
I am about to go 'all in' on Monday, after lowering my average today to $5.50. This looks like the steal of the century, so I want to make sure we don't get blindsided Tuesday with another 'charge'.