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The Oldest Trick In The Accounting Book: The Reason For Intel's Massive EPS Beat In One Chart
Moments ago, INTC reported EPS of $0.55 which solidly beat expectations $0.50, with revenue of $13.2 billion printing just above consensus, if a substantial 5% drop compared to the $13.8 billion one year ago.
This has sent the stock soaring in the after hours by about 6%. This is also despite the company lowering it full year revenue guidance from flat to -1%, with the bulls saying just look at that massive EPS beat.
So for all those wondering just how INTC did it, here's the reason for Intel's beat in one simple chart:
In other words, it is only thanks to the oldest trick in the accounting book, an artificially low tax rate, that INTC was able to make its plunging operating income, which was down 25% from a year ago, better than expected and make its EPS of $0.55 equal to the $0.55 reported one year ago.
Crashing Operating Income:
And yet, flat EPS:
If INTC had used a 29% tax rate - the same as last year - EPS would have been $0.43, a 7 cent loss and that's even using a more modern trick in the accounting book, some $700 million in stock buybacks!
And that is how you use report unchanged EPS from a year ago despit sliding revenues and plunging earnings.
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How were they able to use the lower tax rate?
Pull my finger
will I have to buy carbon credits?
Accounting plugs ftw!
They are pumping the stock, before it dumps next quarter when INTC misses it's # because everybody upgrades to a new OS for free.
bullish... er, i mean, bullshittish
Hey didn't intel chips all have NSA backdoors built into them?
Tax reform anyone?
Tax reform anyone?
The Double Irish strikes again. But with US Corporate Tax rates by far the highest in OECD (The UK plans to get their rate down to 18%) I suppose the logic is compelling, It's just that everyone in the US loses otherr than the 1%, which is, of course, the whole point....
Big bonus for the CEO in 3, 2, 1....
Their new i7 Quad Core has a vastly improved Math Co-Processor to figure that shit out.
I actually laughed out loud. Not something I do reading ZH comments too often...
From the release.....
"The effective tax rate for the second quarter was 9.3%, down 16.2 points from the first quarter driven by a one-time refund claim and our decision to indefinitely reinvest certain prior years' non-U.S. earnings."
Complete fucking shenanegans!
"...our decision to indefinitely reinvest certain prior years' non-U.S. earnings."
I've been doing this a long time, and I have no idea what those words mean.
It means that their previous overseas profits and current offshore cash will be reinvested.....overseas, rather than pay US taxes to bring that cash back here.
Their sell-side analysts better call bullshit on that (making earnings by reducing the effective tax rate) tomorrow on their earnings call.
INDEFINITELY....means they are NEVER bringing the money back to the US!
Thanks Obama!
Fucking idiots, thinking you can get 39% of something, and now youre getting 100% of ZERO.
Thanks Obama!
Fucking idiots, thinking you can get 39% of something, and now youre getting 100% of ZERO.
lol, gist of the above article go over your head a bit?
http://i.imgur.com/G062H.gif
No... but it must have gone over yours.
Intel will indefinitely keep their profits overseas and thus not pay US tax. Therefore, they took the one-time tax benefit to "beat" the EPS today.
Got it knucklehead! Thats why you have a bunch of negative responses.
DONT BE THAT GUY!!
The tax rates did not change, the 'new' effective rate is artifical. Only reason the trick works is because of the tax arbitrage, OBVIOUSLY - i.e. THE POINT OF THE ARTICLE. Obamas proposed solutions to overseas cash.. do not apply in any sense.
As many have pointed out, keeping the EPS flat through this one neat trick seems a nice side affect of the altera deal. Intel has cash ~14B and ~8.2B invested...one can wonder how this cash is being moved around in purchasing altera all cash for 17B$
http://33.media.tumblr.com/124b42fb095abcae9c2175d194c2aae0/tumblr_inlin...
And what? Never get on an earnings conference call again? They know who to butter up.
Thanks for the info.
" A one-time refund claim." A refund claim on what? Every quarter, when earnings are released, multinationals take these "one time " write-downs.
You want to talk about pulling forward future earnings? This shit has gone full retard! What happens when/if these companies start ACTUALLY becoming profitable again?
At some point these deferred taxes and "one time" refund claims have to be settled.
They include the benefit of a 1-time refund and reduced effective tax rate in their reported EPS, but if it were the other way around, they would be reporting an EPS result without both of those items deducted.
Figures lie and liars figure.
so, does that mean the adjustments will be post facto in the final GAAP figures?
In other words, will actual earnings figures be posted without the writedowns factored in, with line item adjustments below on the earnings statement?
Bermuda, Caymans and Bahamas have a corporate tax rate of zero.
in b school way back when they taught us to buy accelllerating revenues and earnin gs--accellerating. as in growing . Add in those accellerating rev and earnings have to be quality and repeating.
when I got out of school, I was actually buying companies.In a presentation to get approval I had the CEO ask, where is the fuckin growth? Then said we do not buy companies unless we are on the right side of growth and earnings and what we pay.
Kid, he said, we cannot afford to overpay. I'd rather pass on a tight deal. There will be another good one in the future.
The US growth story seems dead. If it returns it could be a long time in waiting. There are only so many years in a career.
Pencil fuckin"
Are the bar plots necessary to compare 2 numbers? I get it, one number is bigger than the other. Sheesh.
INTC up after hours because square-goes-into-circle investors are autistic and are unable to notice when they're being easily deceived. So, you tell us if a simple bar chart is required or not?
They need to do it comic style ala Pepsi...
But what Tax Rate does the Intel Secretary pay ????
73.2% all in federal, state and local after adjustments for self-funded medical ObieCare contributions, 401k reversions to taxable income after taxes and penalties needing money for her cancerous mother's uncovered conditions, automobile and alcohol* allowances.
*Yes, one of my good buds (who doesn't drink, BTW) is in a sales position and though he can entertain clients and prospects till the cows come home on a corporate credit card, gets a Personal Alcohol Allowance from his employer. Is that fucked up?!?!?!?!?! I keep trying to explain "Arbitrage By the Case" to him.
Write-offs/pulling forward future expenses.
And the share buyback added another 5% to Earnings per...."Share".... on top of the 9% tax rate.
I guess the algos arent programed to see a tax rate
ok, so what? the shorts still need to cover their ass and re-short at high lol.
Either that or wake up the next morning and forget it ever happened.
Worked with computer architectures most of my life... Intel/AMD is possibly the worse design, followed only by ARM 64 implementations...
Intel is a dinosaur. (Just look at their offspring - AMD)
Standard Disclaimer: Why is it society always embraces/adores/salivates over the absolute crap produced in society?
so have i. intel's recent implementation is actually pretty good, as all instructions are translated into risc-style micro ops behind the scenes. and the transition to 64-bit gave AMD an opportunity to get rid of a lot of the legacy instruction set and features (plus increase GPRs)
and i don't know what you're on about in regards to ARM - the ARM instruction set is pretty damn clean, it's only really the recent SIMD architecture additions which raises questions...
Yeah! I was gonna point all that out but you beat me to it. Whatever it means. All I know is I gotta turn my computer all the way off, run around the block once, and turn it all back on to get it to stop the glitches.
I've been developing embedded controls on ARM7 w/ bare assy & no RTOS for years, lately struggling with the Coretex-M4 devices. Not sure that ditching full ARM instructions in favor of THUMB was a good idea, but I'm afraid that I'm alone in the wilderness here..... Progress is not always good. Everyone sells bloat now.
Not exactly on topic, but what's with the ridiculous Adobe Flash updates? Seems like every fucking few days now, and it doesn't work without 'em.
What crap.
Flash is a minefield of security problems and a lot of exploits have recently been found, hence the numerous updates. Lots of folks are hoping that Flash just goes away and gets replaced by more secure software such as HTML5.
One and one half stacks in a machine is ALWAYS a stupid design.
Processor architecture design: so easy, a cheech wizard can do it.
Mind telling us which processors you use in your desktop/laptop computers?
And everything is non-GAAP of course.
It's interim.
It can be reversed next quarter.
Estimated bullshit.
Partner at the CPA firm got balls.
Can I use 9.3%??? plz plz plz
Was this just a figure they used or did they actually get a tax break?
If they have to actually pay at the higher rate then next years figures will be horrid....if there is a next year....
no harm, no foul -- they're just following the play book.
If taxes are LOW and benfit your bottom line, hide that fact in the notes somewhere.
If taxes are HIGH and hurt your bottom line, scream it from the roof tops and get Cramer to go on TV and say "the governement knows NOTHING!!"
Golden parachutes anyone?
It's called FIN 18.
Interim estimated effective tax rate for the quarter.
A discrete item that goes away as fast as it came.
A short term fix to a long term problem.
They pay Provision Tax Directors big money for this magic trick.
I'm sure he/she is a graduate of one of the Big 4 criminally liable accounting firms.
Release all the valuation allowances next time.
LOLOLOLOL..................................
That's fundamentally sound.
Yes, the Partner at the CPA firm just placed his nuts/her tits on the chopping block.
He/she may become Intel's next VP of Tax.
Welcome to fantasy island...
Intel is probably laundering drug money too.
All 4 will go down in the next collapse.
Make room in CPA hell Arthur Andersen.
So you're saying I should I sell my INTC?
The market knows what INTC did and the market knew what was coming before it happened.
This is just another event where that fucking cunt yellen and its aligned bank algo buy - profits are irrelevant for these fucks - control and growth (through fraud) is what they do.
Yellen, you are a satanic cunt and it will be a grand day when you die!!!
Is this the chapter in the movie where earnings beat going into the 6 month holiday season and the excuse of rate increases this fall?
Dam this is easy money
Ya, but don't leave it on the table.
We have a lawless market.
Now that the gatekeepers are in on the scams.
bashing on Intel? The ones that actually have good paying jobs and factories in the states?
Why don't you look in the mirror and look at how well gold and silver are doing? Oh thats right, it doesn't count because it is all manipulated. LMAO!
Piss poor example really... But it made you laugh so it's all good .
Gold has never reported earnings, never missed a loan payment, never requested financing, and never defaulted on it's obligations.
Just got of the phone with brokerage account holder. Ask if there was anywhere I could find GAAP earnings for any stocks, since all their "earnings" and estimates are based on pro forma non-GAAP accounting. Not a chance. "Hypothetical" earnings supplied by the company, not accounting for one time charges. Unofficial estimates.
Wow, that about sums up our entire fraudulent financial world. "You see if we didn't have these 5 years of ONE TIME expenses we would be making a lot more money."
Since GAAP accounting was fraudulent enough.
You have that right.
These are not actual tax numbers.
All an estimate for the year.
Six months actual and six months of hope.
If they change their mind in a few years and decide to bring the off shore earning back to the USA - the increase in taxes will be classified as a "extraordinary event - a one time charge" and not be included in EST earnings in the current quarter.
When it is good you include it in current earnings - when it is bad you exclude it from earnings.
So what are they supposed to do, give it back?
If it's actually a loss without the tax trick then, well, that's not too good, but they are in the middle of some huge technology switchovers and this quarter and the next were forecast to be weak, plus or minus one percent is great. And 2016 might be outstanding, if they make good on promises at all.
Wait doesn't processor speed increase to the inverse of the Fractional Reserve coefficient of the US Private FED?
Isn't Sarbanes Oxley supposed to prevent these shenanigans?