Behold Accounting Magic 101: This Is How Alcoa Just "Beat" Consensus EPS
Some companies are notorious for buying back billions in stock in order to mask the decline in their earnings by reducing the number of shares outstanding. Alcoa, which still has a major debt overhang from the last financial crisis, is unable to do that as it simply does not have the free cash flow to dedicate to shareholder friendly activities. Instead, Klaus Kleinfeld's company is forced to resort to an even more primitive form of EPS fudging: massive quarterly EPS addbacks.
And while we noted recently that companies are running out of accounting gimmicks with pro-forma EPS addbacks in recent quarters rising to the highest since Lehman, Alcoa still is still not done.
Not even close.
Moments ago, Alcoa reported adjusted EPS of $0.04, or $65 million in adjusted net income, beating consensus expectations of $0.02 handily (nevermind that it missed consensus revenues of $5.3 billion by $50 million, an 18% decline from the $64 billion a year ago).
There is, alas, a problem with these adjusted "earnings", because on a actual, GAAP basis, Alcoa actually reported a whopping $500 million loss.
How did Alcoa "fill the gap?" Simple: with an unprecedented $534 million in "one-time" charges. We put one time in brackets, because the chart below shows that for Alcoa, charges are anything but one time, although in Q4 the company quite literally has outdone itself.
In other words, more than 100% of Alcoa's "EPS" in the quarter was due to what management thought was another quarter of recurring "non-recurring", non-one time "one-time" charges.
What about for the full 2015 year?
Here, things get downright comincal, because whereas Alcoa's GAAP Net Income for the LTM period ended December 31 was a net loss of $121 million, when one adds back all the charges incurred over the past 12 months, the "net income", on a non-GAAP Basis of course, soars to a ridiculous $787 million... which still is down 30% from a year ago!
Said otherwise, more than all of Alcoa's earnings in 2015 were the result of "non-recurring" addbacks, "one-time" charges, and other proforma changes to the non-GAAP net income number.
And that, ladies and gentlemtn, is accounting magic 101.
Oh, we almost forgot: here is the history of Alcoa's $0.02 EPS "consensus" which the company had to take a record addback in order to "beat"...
Chart courtesy of @not_jim_cramer
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Dystopia
https://www.youtube.com/watch?v=QrV61ATP3Ec
What you don't know can hurt you
If you only want to live and die in fear
They tell us to believe, what we see
And absolutely nothing that we hear
Resist the twist the truth no matter what the cost
Supplied the rights for bombs inside our heads
Allowing on the questions to the answers
That noone lies it someone else's dead
What you don't know the (?) can hurt you
If you only want to live and die in a cage
There's panic and there's chaos, raping in the streets
When useless thoughts are peace (?) with rage
Demoralize the know for master people think
The quickest way to end the war is loose
Dictatorship and starting with to run aside
You must destroy the castle and it's rules
Some would say that today the market reacted to being OVERSOLD...OVERSOLD my A$$, the market is 8 years OVERBOUGHT!!
Back when I learned accounting, they didn't teach you Creative Accounting until 4th year! I guess its a sign of the times that its now included in Accounting 101!
Back in the day, we called it cookie jar accounting - reach in the jar and whoa look what I found !
Then Dodd Frank after crisis was supposed to fix the GAP rules.
Guess we need another crisis to more better accounting rules -
Nova
Alcoa is always the best example of "kicking the can down the road".
Well, a lot of cans are made out of aluminum
You seriously can't make this @#% up...oh wait, that's exactly what they did.
Ohh LOOK...
it's recurring "non-recurring", non-one time "one-time" GREEN SHOOTS!
from 32 to 2 cents in 2 years.... looks like they can't afford the cans anymore.
And the funny part is that afterhours is up 2% :)
If they are making the kicking cans, then business should be booming.
Waiting for the Ford investment to pay dividends.
http://www.freep.com/story/money/cars/ford/2015/09/14/ford-alcoa-partner...
I see that the 3:30 ramp continues. And silver's back below $14.
Get out the Patriot Act ....systemically vital industries of the USSA don't need no steenking GAAP
if you can afford PWC,Deloitte or KPMG and good solicitors you can more or less conjure up whatever you want and pay no taxes
And they are closing shit left and right...
Alumina-production company Alcoa announced Thursday it will end production and lay off the majority of its estimated 730 employees at its Point Comfort plant (Calhoun County Texas).
Citing an approximate 40 percent downturn in the Alumina Price Index for 2015, the international metal producer will employ only about 60 people for maintenance by July.
Although the plant will not close, production will cease, and the plant will enter into "care and maintenance mode," said Josh Wilund, communications director for Alcoa.
The decision to end production in Point Comfort coincides with the permanent closing of an Alcoa smelting operation in Evansville, Ind.
https://www.victoriaadvocate.com/news/2016/jan/07/alcoa-to-cut-most-point-comfort-plant-workers/
The country isn't entering a recession, we are just entering the "care and maintenance mode". Yeah, that works.
Thanks for the bonus chart; "falling down the mountain" comes to mind.
The FED can solve this problem by buying all of us an Airstream for retirement.
http://www.airstream.com/travel-trailers/land-yacht/
That and $3 Million tax free, stimulus!
America! Yeah! Where is my flag? Those colors don't run!
Greatest Country in the World!TM
Since Lehman.
Getting change out of the couch.
Alcoa be BOEING's Bitch.... or Inbev's
Bullshit is crap and money is gold alcoa beat the estimate now who did the estimate. I watched a really sad movie last night called margin call. This explains it all. Suckers........
Addbacks
Buybacks
Clawbacks
Haircuts....
The seemingly never ending use of etymologically creative marketing terms for obfuscation, deception and increasingly outright fraud in a fictitious marketplace.
Some of you may be amused to know I have been blocked from attending a number of annual shareholder meetings and executive level financial conference calls with shareholders over the years.
They fear my questions and they fear that you can't handle the truth. There's an awful lot of fear and loathing of people finding out the truth about what goes on with corporate finances and decisions in the board room. Which in turn all effect Wall Street.
If they didn't have anything to hide they wouldn't be afraid to answer questions. Isn't that how the meme goes inside the police state?
Yeah. Like my pension costs are one-time charges because any day now the market is going to turn and I'm going to be fully funded on my pension. WEEEEEEE.....
Anything other than straight-up cash-basis accounting is fraud. The entire profession of accounting exists to enable fraud and to hide the real health of a business behind impenetrable and manipulated reports.
Hi Tyler
David ...when do you sleep. Wow ...your like a speaking Library.
That last chart is a joke. Right?
It's a 1 time charge because the dustcap on the bomb and/or drone cannot be retrieved or recycled. War has to be a writeoff, no?
How could Alcoa ever compete against the Banks? They actually make stuff, with factories and shit.
Alcoa leader on Nightly Busines Report (their reporting is a lot different than Zerohedge for some reason) very upbeat, lots of "aerospace' contracts. Fighter jets and missles use aluminum alloys, yes??