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Alcoa "Beats" With 80% Of "Earnings" Due To Restructuring Add Backs

Submitted by Tyler Durden on 10/08/2013 16:39 -0400

Until its humiliating elimination from the Dow Jones Non-Industrial Average, Alcoa was the traditionally first company to usher in earnings season and the first company to set the mood for the DJIA. That is no longer the case. Still, on the surface, Alcoa's numbers were modestly good: after all it beats (heavily lowered) revenue estimates printing $5.77 billion in revenue on expectations of $5.63 billion, even if this was lower than both the $5.85 billion in Q2 and $5.83 billion from Q3 2012. The (heavily lowered) EPS likewise "beat", printing at $0.11 on expectations of $0.05.

And while we have discussed that the only reason Alcoa keeps on "beating" its earnings is due to the chronis, and simply ridiculous earnings estimate reduction that happens quarter after quarter, year after year as can be seen below...

... what happened in Q3 was something different. See if you can spot it from the EPS breakdown below:

Still don't see it? Let us help. The chart below shows the company's restructuring charges by quarter.

Hopefully it is now clearer: what happened is that for the second consecutive quarter AA took out massive restructuring charges from EPS, this time amounting to $151 million for Income Statement purposes, or about $108 million for Non-GAAP EPS purposes.

Which means that of the $0.11 beat in Q3, a whopping 9 cents is due entirely to ongoing "non-recurring" restructuring addbacks. Very much the same way AA "beat" last quarter, when it reported $0.07 cents, of which however $0.18 cents was due to the addition of restructuring charges.

Said otherwise, of the $0.18 cents in non-GAAP earnings in the past two quarters, $0.27 cents has been due entirely to add backs of restructuring charges.

Finally, for those who care about real numbers:

Q3 Free Cash Flow ($36) MM, down sharply from the positive $228 MM in Q2, and as bad as the ($39) MM a year ago.
Cash on hand declines from $1.2 billion to $1.0 billion
Net debt up from $7.16BN to $7.32Bn
CapEx: $250MM, lower than the $286MM in Q2 and well lower than the $302MM a year ago

But, hey. At least "it beat"

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Tue, 10/08/2013 - 16:46 | 4035462 pragmatic hobo

judging by the looks of it, ... YUM didn't beat the consensus?

Tue, 10/08/2013 - 16:48 | 4035470 King_of_simpletons

Yay ! Alcoa beats. That is all that matters. To the moon, I say. To the moon. Ecanamy is growing.

Tue, 10/08/2013 - 16:50 | 4035486 spastic_colon

ZH you're starting to sound like CNBS / s

How about a report on YUM? Different story.

Tue, 10/08/2013 - 16:56 | 4035528 Tyler Durden

YUM 3Q ADJ. EPS $0.85, EST. $0.92
YUM 3Q CHINA COMP SALES FELL 11%
YUM BRANDS SAYS IT IS NOW UNLIKELY CHINA DIVISION SAME-STORE SALES WILL BE POSITIVE FOR THE FOURTH QUARTER
YUM! BRANDS REPORTS THIRD-QUARTER 2013 EPS DECLINED 15%, EXCLUDING
SPECIAL ITEMS; SOFT KFC CHINA SALES AND HIGHER TAX RATE REDUCE FULL-YEAR
EPS EXPECTATIONS
YUM BRANDS-ESTIMATED SEPT COMP SALES DECLINE OF 13% AT KFC, WHERE SALES HAVE NOT FULLY RECOVERED FROM ADVERSE PUBLICITY OF POULTRY SUPPLY INCIDENT
YUM STOCK DOWN 7% AFTER HOURS

Tue, 10/08/2013 - 17:30 | 4035655 jcaz

Wow- not so different then....

BUWAHAHAHAHAHAHHAHH!!!!!!!!!!!

Tue, 10/08/2013 - 17:37 | 4035693 NOTaREALmerican

Re: POULTRY SUPPLY INCIDENT

Yum!

Tue, 10/08/2013 - 16:48 | 4035463 kaiserhoff

Alcoholics Anonymous beat who, what, where, when?

Oh..., please consider your audience, Tylers;)

(Original headline was AA which can only mean... never mind.)

Tue, 10/08/2013 - 16:49 | 4035482 TeamDepends

*You didn't see nuthin'.

Tue, 10/08/2013 - 16:50 | 4035500 Tsar Pointless

Alcoa can't wait...to fudge its earnings statements.

Tue, 10/08/2013 - 16:56 | 4035533 Winston Churchill

-$200 m in current assets in one quarter.Ouch.So they lost $80m somewhere.

Thats bullish right ?

Love Enron accounting.

Tue, 10/08/2013 - 17:00 | 4035549 yogibear

Always lower expectations and beat. What's the problem? Flash the headline on CNBC and the fund mamagers go into a buying frenzy. The bots like it as well. Their looking for "beats".

Tue, 10/08/2013 - 16:59 | 4035550 Dadburnitpa

Earnings = alchemy.

Tue, 10/08/2013 - 17:31 | 4035664 walküre

lots of tin sitting on the docks....

Tue, 10/08/2013 - 17:32 | 4035666 magne13

You would think with all the Aluminium they are selling to the government for geoengineering and chemtrailing that they would make more money, perhaps we should look into their SIVs

Tue, 10/08/2013 - 20:30 | 4036413 mvsjcl