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Presenting Alcoa's Recurring, Non One-Time "Non-Recurring, One-Time" Restructuring Charges

Tyler Durden's picture




 

Moments ago Alcoa reported Non-GAAP, adjusted EPS of $0.04, missing already meager and downward adjusted expectations of $0.06 while revenues declined to $5.585 billion from $5.898 billion a year earlier.

Additionally the company's Free Cash Flow (EBITDA less Interest Expense less CapEx) dropped to just $143 million from $199 million a year ago. Which is understandable - after all the global economy is rapidly slowing down, and ultimately resulted in the biggest slap in AA's face: the company's expulsion from the DJIA.

But the one item that caught our attention in the just released earnings was the GAAP EPS: a whopping loss of $2.19/share. Ok so, Alcoa added back a few things to get the Non-GAAP number: about $2.1 billion in goodwill impairment and restructuring charges to be precise - happens all the time. The only problem is that for Alcoa, this indeed happens all the time! The chart below shows just how freely Alcoa abuses the non-GAAP EPS definition, and how adding back charges has become ordinary course of business for the alluminum company. Very much in the same way as adding back litigation charges for JPM is now a quarterly ritual.

In a nutshell: in 2013 alone, the company recorded $782 million in restructuring charges, all added back to non-GAAP earnings. This is more than the company's operating income (excluding the goodwill impairment) for all of 2013... and 2012!

We wonder: at what point will anyone realize just how massive the schism between corporate GAAP and non-GAAP earnings has become?

 

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Thu, 01/09/2014 - 17:28 | 4316961 Flakmeister
Flakmeister's picture

Restructuring your way to prosperity....

But to be fair, there is only one restructuring charge per 10-Q...

Thu, 01/09/2014 - 17:43 | 4317031 Buckaroo Banzai
Buckaroo Banzai's picture

Wow, looking at that chart, it makes you think that Alcoa is actually losing a shitload of money. Or something.

Thu, 01/09/2014 - 17:44 | 4317035 stocktivity
stocktivity's picture

HOLY #@$%!!!  Look at Sears after hours.

Thu, 01/09/2014 - 18:28 | 4317199 aVileRat
aVileRat's picture

It always works, until it don't.

 

Thu, 01/09/2014 - 20:09 | 4317480 Osmium
Osmium's picture

Evidently the 1% don't shop at Sears.  The store close to me is a ghost town.  Always empty.  When their tools were made in the US i bought those, but I'm not buying their cheap ass Chinese tools.

Thu, 01/09/2014 - 22:22 | 4318003 cynicalskeptic
cynicalskeptic's picture

My father's old Craftsman wrenches and sockets were nice and thin and strong - they fit in places I can't go near with the new 3x the thickness/half the strength stuff.  I gave up on Sears tools.

The last time I was in one of their stores (a messy unorganized place with not enough staff - who were pretty much useless) I wanted to buy a freezer (to replace the one in my basement that had failed) but none were available in hte store - one of their largest ones.  I'd have to wait for 3 days to get delivery.  Picked one up at a local appliance chain store an hour later.

All those stopres that worked for the middle class in the 60's - which is now disappearing - are going extinct.  Sears, Penneys, Macys....... The few that manage to do 'better' shop upscale at other stores while those that are sliding down go to WalMart and Target.

Thu, 01/09/2014 - 17:45 | 4317036 NotApplicable
NotApplicable's picture

Hey, it works 'til it doesn't!

Thu, 01/09/2014 - 17:51 | 4317060 Bobbyrib
Bobbyrib's picture

When they break even, they could go as high as Amazon.

Thu, 01/09/2014 - 18:09 | 4317131 TruthInSunshine
TruthInSunshine's picture

Let me expand upon the last sentence, if I may:

"We wonder, at what point will anyone realize what a complete & total fraud & scam the entirety of the racketeering operations that are referred to as "equity markets" are?"

Thu, 01/09/2014 - 18:14 | 4317152 synergize
synergize's picture

But Dennis Gartman likes Aloca...

Thu, 01/09/2014 - 19:24 | 4317354 all-priced-in
all-priced-in's picture

Dennis would want to go long OF Alcoa in YEN.

 

 

 

 

Thu, 01/09/2014 - 22:28 | 4318018 Its Only Rock N Roll
Its Only Rock N Roll's picture

And so does the almighty Cramer himself....what's not to like!!!

http://www.cnbc.com/id/101324961

"Alcoa, destroying shareholder value for decades and decades"

They willl be bk within 2 years.  No doubt.

Thu, 01/09/2014 - 17:30 | 4316970 Cursive
Cursive's picture

GAAP earnings, non-GAAP earnings, no earnings?  No problem!  There's a Fed-induced multiple expansion for that!

Thu, 01/09/2014 - 17:30 | 4316971 NoDebt
NoDebt's picture

I was thinking the same thing- can't remember the last time AA didn't fiddle the EPS numbers.  Now I know why- they've NEVER posted a "straight" number in living memory.

I'm awaiting the dreaded "accounting irregularities" phrase to pop up sometime in the next few years.

Fri, 01/10/2014 - 03:42 | 4318598 Tijuana Donkey Show
Tijuana Donkey Show's picture

They are just covering for GOVT black bag operations. No worries.

Thu, 01/09/2014 - 17:35 | 4316979 Black Forest
Black Forest's picture

a whopping loss of $2.19/share

If you double the share price, that loss will halve in relation. C'mon.

 

Thu, 01/09/2014 - 17:36 | 4316995 Major Major Major
Major Major Major's picture

Not the price, the shares.

Split that shit.

Thu, 01/09/2014 - 17:34 | 4316987 666
666's picture

I bought some clothes once at the GAAP.

Oh, wait...

Thu, 01/09/2014 - 17:34 | 4316989 CrashisOptimistic
CrashisOptimistic's picture

Hey guys, don't forget, you can make EPS losses look bigger if you do share buybacks, so if they do a share buyback they can remove that buyback from their GAAP report and declare lower EPS losses non GAAP.

Thu, 01/09/2014 - 17:35 | 4316992 Colonel Klink
Colonel Klink's picture

Seems to be a canned response from Alcoa.

Thu, 01/09/2014 - 17:35 | 4316993 Hindenburg...Oh Man
Hindenburg...Oh Man's picture

Sears missed big too. I thought that the economy was booming, because I watch CNBC!!!  Seriously, though, I love NON-GAAP data. TESLA is the king of Non-GAAP data. We have a non-GAAP economy. 

Thu, 01/09/2014 - 17:56 | 4317071 Rainman
Rainman's picture

Sears and Penney called " walking cadavers " by Davidowitz yesterday

http://www.bloomberg.com/news/2014-01-08/davidowitz-says-j-c-penney-and-sears-won-t-survive-audio-.html

Thu, 01/09/2014 - 18:52 | 4317261 TruthInSunshine
TruthInSunshine's picture

I commented on dismal sales/revenue leading to large scale store/restaurant closings two days ago after having the privilege of reviewing very credible real time data.

Check out what's just begun to be reported regarding Sears, Macy's, JCP, RS, Ruby Tuesday's, Rite-Aid, etc.

'Tis the tip of the iceberg. The Walking Dead zombie retailers & restaurants are going to be making announcements of en masse cullings in the days/weeks/months ahead.

The banking/financial services sector is on deck. Bernanke stayed their execution with 5 years of insane, radical monetary interventionism - the tab for which is coming due and no one will be left at the table to pay the bill.

Thu, 01/09/2014 - 17:39 | 4317002 ptoemmes
ptoemmes's picture

GAAP: Generally Accepted Accounting PRINCIPLES.

I think I see the problem.

I assume the non negates the P?

Thu, 01/09/2014 - 17:42 | 4317024 101 years and c...
101 years and counting's picture

non gaap is all the shit stock piled onto corp balance sheets, just waiting for a recession so they can unload all the shit at once in "1 time charges".  its why earnings typically drop 40% during recessions....

 

oops, i forgot.  the fed fixed the naturally occuring business/economic cycle so there are no more recessions.  just expansion. 

 

Thu, 01/09/2014 - 17:43 | 4317025 EuropeanBankster
EuropeanBankster's picture

AA and SHLD .. and many more to come!!!

Thu, 01/09/2014 - 17:48 | 4317050 HUGE_Gamma
HUGE_Gamma's picture

This is great.. the entire earnings season can be blamed on Alcoas one time non recurring charge

Thu, 01/09/2014 - 17:51 | 4317057 NOTaREALmerican
NOTaREALmerican's picture

I'm sure each one-time-charge is different in some way which makes the reoccurance non-recurring.

Thu, 01/09/2014 - 17:52 | 4317064 Spungo
Spungo's picture

The last 3 months of 2013 had terrible earnings because there was that 1 really cold week in December. God damn winter!

Thu, 01/09/2014 - 18:03 | 4317105 Spungo
Spungo's picture

"We wonder: at what point will anyone realize just how massive the schism between corporate GAAP and non-GAAP earnings has become?"

Does anyone care what the non GAAP earnings were? My non GAAP income is $9,673,000 per year. That number drops dramatically when I factor in things like reality and how much I actually get paid. What kind of idiot makes investment decicions based on random shit a company makes up?
I'm surprised they didn't get a Festivus ralley. Aluminum demand should be high in Q4. 

Thu, 01/09/2014 - 18:26 | 4317193 smartstrike
smartstrike's picture

This is a company that likes to sell assets and book it as operating income. They couldn't make money during crack up boom years of 2006-2008 either.

Thu, 01/09/2014 - 18:33 | 4317216 SillySalesmanQu...
SillySalesmanQuestion's picture

I am restructurig my business....why can't I declare 2 billion a quarter against my income like Alcoa & GE?

Thu, 01/09/2014 - 18:45 | 4317250 LawsofPhysics
LawsofPhysics's picture

I like the way you think, better get my accountant on this ASAP.  April isn't that far away.

Thu, 01/09/2014 - 19:01 | 4317300 I Write Code
I Write Code's picture

But Ford just announced an all-aluminum F-150.

And one of Alcoa's major expenses is electricity, which may be getting cheaper over the next five years due to fracking.

The stock is up 5% over the last month or so, even after a 5% after-market letdown today.

It may be a buy - just waiting for the Chinese to purchase the whole thing, of course.

Thu, 01/09/2014 - 19:10 | 4317321 yogibear
yogibear's picture

Alcoa needs to create a social media company, load it with debt and IPO it.

The fund managers go  bonkers over IPOs. Especially if it's a social media company.

Thu, 01/09/2014 - 19:58 | 4317451 ebworthen
ebworthen's picture

"Beat up old Ladies for their jewelry and S.S. money and give the Po-Po's 2%" is clearly the modus operandi.

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