Alcoa's Non-GAAP Earnings, Or "Loss" On A GAAP Basis, Report Explained In Two Charts

Tyler Durden's picture

Moments before the Alcoa results were reported kicking off Q1 earnings season, we tweeted:

Guess what? We were spot on.

While Q1 GAAP EPS was indeed a disaster, printing at $(0.16), yes, a loss, one naturally has to add back hundreds of millions of "one time, non-recurring" charges to get the non-GAAP number which was, you guessed it, a tiny beat of the consensus Q1 EPS print of $0.05, coming at $0.09. All this happened as the company's revenues not only tumbled from $5.83 billion a year ago to just $5.454 billion this quarter (down from $5.585 billion in Q4), but also missed expectations of $5.55 billion.


Of course, looking at the EPS "beat" over the past year reveals something quite scary - in April of last year the forecast was for a $0.20 EPS number. It ended up being less than half that with all the bells and whistles added back.


By the way the chart above is not among the two we would like to highlight. But before we get there, two more highlights:

in Q1, Alcoa burned through $760 million in negative Free Cash Flow, compared to $498 million in positive FCF quarter ago, and even worse than the $305 million a year ago.

So on to the charts.

Remember what we said about one-time, non-recurring restructuring charges? We dare you to point them out to us in the following table which shows not only recurring, non only non-one time restructuring charges, but constantly increasing ones at that.


A curious fact: in the past 12 months, Alcoa has had $1.236 billion in "one-time" charges. This amount is four times greater than the adjusted, non-GAAP net income during the same period of $333 million! Too bad Alcoa can't pull a JPMorgan and also add back loan loss reserve releases. Here is what Alcoa did add back:

  • a net benefit for a number of small items ($6);
  • a tax benefit representing the difference between Alcoa’s consolidated estimated annual effective tax rate and the statutory rates applied to restructuring and other charges ($72),
  • an unfavorable tax impact related to the interim period treatment of operational losses in certain foreign jurisdictions for which no tax benefit was recognized ($56),
  • the write-off of inventory related to the permanent closure of a smelter and two rolling mills in Australia and a smelter in the United States ($20),
  • an unfavorable impact related to the restart of one potline at the joint venture in Saudi Arabia that was previously shut down due to a period of pot instability ($13),
  • a gain on the sale of a mining interest in Suriname ($11),
  • and a loss on the writedown of an asset to fair value ($2);

Laughing yet?

But saving the best for last, we dare anyone to point the CapEx renaissance that everyone is talking about, on this chart of Alcoa quarterly CapEx. We can wait - we have all day.

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i_call_you_my_base's picture

My non-GAAP assets are $4 billion.

Vampyroteuthis infernalis's picture

Can I use non-GAAP when filing my taxes?

NoDebt's picture

Yes.  They'll even reserve a special 8x10 room for you at a government facility if you do.

Oldwood's picture

Mine are a negative 17 trillion. Thats real assets there guys!

arby63's picture

Janet said I could make up any number I want to so there!

lasvegaspersona's picture

Janet schmanet...HILLARY! said...WHAT DIFFERENCE DOES IT MAKE?... can I file using that approach?

starman's picture

"Negative free cash flow" !? Yah I got that problem to!

mayhem_korner's picture



My wife is my negative free cash flow.

BandGap's picture

I have an ex-wife that handles that.

NoDebt's picture

I used to.  Then I sold my boat.

aVileRat's picture

Boat sank, pirates got the gold. Pirates declined offer to join crew, too much risk diluting their physical asset arb. strategy profits. 

So amusing that Alcoa thinks they can "IBM" their way out of failing to upstream grow via. developing "value added" services to Al fabrication. Yes, because being the worlds consultants when you are the worst developer in the world is a really smooth growth strategy. They should just bypass directly to go and go full retard (eddie lampert).

Fucking unreal. They must have some wicked drugs at those board meetings. It's like the British Aluminum wars all over again.


BandGap's picture

Mine is "Imaginary Free Cash Flow", but I'm taking shots for that.


Stoploss's picture

After that comes AA.


Oh, is this the WTF chart of the day??

NOTaREALmerican's picture

Everybody knows accountants are all introverted worry-warts (who aren't any fun at parties).    That's why GAAP is not used anymore. 

roadlust's picture

UP after hours!  Hits just keep on coming.


SPY new highs tomorrow?

mayhem_korner's picture



#losing is the new #winning

NoDebt's picture

It's like that Seinfeld episode where George just starts doing the opposite of what he thinks he should do... and becomes wildly successful.

Rainman's picture

Any kind of Tiny Beat read is good enough for the machines ... bullish !

AbelCatalyst's picture

After hours (@ 5:34PM): +2.23%


Bam_Man's picture

in Q1, Alcoa burned through $760 million in negative Free Cash Flow

Well, I guess they will just have to do some moar borrowing.

ejmoosa's picture

When one time losses occur every time, then they are not one time losses.


They are, however, the cost of doing business.  And if that business cannot be profitable, so be it.



HaroldWang's picture

Come on now! All the people on CNBC said it was a good report and because of that AA is kind of a bellwether, sorta. So they must know - up we go!

mtndds's picture

Thats ok.  Somehow I think the media will twist this report tomorrow and Alcoa will explode higher.  Tomorrow we will hit all time highs in the market.

ebworthen's picture

I bought a six-pack of Olympia ("It's the water") yesterday; isn't that bullish?

Six aluminum cans that fit in my "Always be sincere.  Even when you don't mean it." can cooler.

OpenThePodBayDoorHAL's picture

"what's the difference between ignorance and apathy?"

"I don't know and I don't care"

QQQBall's picture

AA shits the bed every quarter. Only losing 16 cents a share might be the best they report for awhile.

Sudden Debt's picture

Thank god nobody looks at Alcoa who kicks off earning season as a indicator...

CrashisOptimistic's picture

They were booted from the DJIA because . . . they were.


Or maybe because the others booted at the same time, BAC and HPQ were not deemed to be representative of . . . something.

SokPOTUS's picture

They bring out their earnings too soon.  They need to leave them in the oven longer.

Those books are undercooked.

Cangaroo.TNT's picture

Since no one other than small business actually adheres to GAAP, can we please, finally, change it to some other, more appropriate acronym?  I'll leave it to the people here that are much smarter than I to figure out exactly what it should be.

walküre's picture

What's good for the goose is definitely not good for the gooslings

Fuck GAAP. Just another policy tool to keep the 99% in check.

Oldwood's picture

GAAP should be replaced with Skittle Shitting Unicorns Accounting Principles (SSUAP)

AlaricBalth's picture

This may be more apropos in relation to the upcoming earnings season:

CRAP - Conveniently Rationalized Accounting Principles

As in the following sentence: Alcoa GAAP earnings to be a disaster. CRAP to be a tiny beat.

Winston Churchill's picture

Preceded by a FART. Fractionally Adjusted Revised Profitability.

economessed's picture

Making aluminum thingies is so old school.  Financialization is the new hotness.  When they can turn your empty Moutain Dew can into someone else's 401K asset, accounting standards don't matter.

Yen Cross's picture

    I guess the G-20s aluminum helmet order was a little light this time around.

Soul Glow's picture

Yen, trader extrordinaire, what do you use to short the market?  I'm looking at shorting for the first time since the Spring of '09.

Yen Cross's picture

      I trade mostly FX Soul Glow, so I watch things like bonds, macro news, equity indexes and flows alot. I also trade shorter time frames intraday-midterm, so if you're looking to get short equities, I'm probably the wrong person to ask. I do think you are coming up on a good shorting opportunity though. (based on what I see in FX.)

UggSmash's picture

Soul Glow: I'm personally using SQQQ, if you're looking to short equities :)

BandGap's picture

Chapeaux d'aluminum pour tout le monde!

NEOSERF's picture

Perhaps when they file for bankruptcy the stock will hit $10 again....sort of like Fannie Freddie because any chance to shed those pesky obligations is a good thing.  This has past embarrassing to fraudulent; when does a management be held accountable ANY time you have 2 quarters of one-time charges...silly "investors" are hoping the HFT momo algorithms will read "beat" and push this up so they can piggyback the 10% gain and get out...this isn't investing, this is a rodeo.

Everybodys All American's picture

Non Gaap the new normal. When all of this gets exposed eventually everyone will wonder why the regulators let this occur. Same as it ever was. Unreal.