Arkansas Best removes $64 million in ‘goodwill’

While it sounds like a lot of money to lose, a $64 million write-off for the “impairment of the value of goodwill” by Fort Smith-based Arkansas Best Corp. is an accounting entry and does not reflect a true cash loss on the company’s earnings.

ABC, the parent company of ABF Freight System, said Friday (Jan. 22) the $64 million noncash charge would be recorded in the company’s fourth quarter 2009 report and “ is a result of extremely challenging freight conditions resulting from a deep and prolonged recessionary period.”

The goodwill would have been booked as a result of a previous significant acquisition in which the market value of the purchase was less than the price paid. The difference is typically booked as goodwill. However, when market conditions change and the fair value of an asset declines, accounting rules often require the goodwill charge to be reduced or eliminated.

The charge does not alter any credit covenants or liquidity positions, the company noted in its filing with the U.S. Securities and Exchange Commission.

“Because of the length and depth of the recession, the less-than-truckload industry has been severely impacted and that impact is reflected in historically low daily tonnage levels and an aggressive pricing environment. These factors have adversely affected the recoverability of goodwill,” ABC reported in its federal filing.

Arkansas Best announced Oct. 21 a third quarter 2009 net loss of $5.6 million, compared to net income of $15.4 million in the third quarter of 2008. The Fort Smith-based transportation holding company has lost $50.17 million in the past four quarters.

The company is scheduled to report fourth quarter and full year earnings Jan. 28.