Toshiba Warns Solvency In Jeopardy After Massive Nuclear Unit Writedown; Chairman Resigns

Tyler Durden's picture

The last time the market was especially concerned about used to be one of the core pillars of "Japan, Inc.", Toshiba, was in late December when in its second major accounting scandal announcement in as many years, Toshiba said cost overruns at U.S. nuclear reactors it is building were likely to force a write-down of as much as several billion dollars, crushing its turnaround plan after a previous accounting scandal revealed in 2015, and claiming the jobs of the company's then CEO. The company said it may have to book several billion dollars in charges related to a U.S. nuclear power plant construction company acquisition, rekindling "concerns about its accounting acumen."

At the time, Toshiba's new CEO, Satoshi Tsunakawa, who only took the helm in June, also took the "apologetic" way out, and became the latest boss of the company to bow before the cameras after the 2015 scandal, which led to a clean sweep of top management after the company acknowledged it had padded its financial results for years. “I apologize to shareholders, business partners and all stakeholders for the trouble we have caused,” Mr. Tsunakawa said in a news conference at the company Tokyo headquarters.

Tsunakawa: "Sorry we couldn't do math"

Fast forward to Tuesday, when Toshiba confirmed that it wasn't kidding, and said that a 712.5 billion yen ($6.3 billion) impairment charge on its nuclear operations will lead to a 499.9 billion yen net loss for the nine months through December. The company also downgraded its earnings projection for the full year through March to a 390 billion yen loss, from the previous estimate of a 145 billion yen profit.

The numbers are not officially audited earnings as the company postponed the official announcement earlier in the day, requesting a one month extension.  

And, in keeping with tradition, Toshiba also announced the resignation of Chairman Shigenori Shiga, effective on Wednesday.

The impairment loss came from a U.S. nuclear plant construction company, which Toshiba subsidiary Westinghouse Electric acquired in 2015. The company earlier explained that the labor and material costs for planned U.S. plant projects will be higher than expected, resulting in a downgrade of its entire nuclear business value.

As a result, shareholders' equity stood at negative 191.2 billion yen as of the end of December. Which means that to avoid technical insolvency at the end of this fiscal year, Toshiba needs to repay debts by selling assets, or add equity through financing or turning a profit by the end of March. It has already decided to spin off its core chip business and said today it is considering selling a majority stake, for which multiple potential investors have made offers.

Speaking at a press conference at the company's Tokyo headquarters, President Satoshi Tsunakawa said that a complete sell-off of its chip business "is a possibility."

The company's shares fell 8% as Toshiba sought a one-month extension of its earnings deadline to complete an auditor review of its results, after failing to publish the financial figures at noon in Tokyo as originally planned.

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Giant Meteor's picture

We're going live !

Tsunakawa: "Sorry we couldn't do math"

Back to you, Jim ..

BabaLooey's picture

Fucking...............Bansai~

 

Wile-E-Coyote's picture

Ummm my first thought was how many other corps are doing the exact same thing? All of them?

Creative accounting works right up to when the Bailiffs knock on the door.

 

Off the subject this year so far I'm noticing real downward pressure on supplier prices in the HVAC service sector, I'm getting offered contracts that are insanely bad, but there will always be some dumb fuck who will do it................ talk about a fucking race to the bottom. I mean who the fuck takes a job on for less than breakeven FFS. This world has gone fucking mad!

MalteseFalcon's picture

"Creative accounting works right up to when the Bailiffs knock on the door."

Wait until the free money is gone.

Giant Meteor's picture

On the HVAC , sonny boy put in bid, big job for us, a few headaches involved (aren't they all). The consensus was, do not go too low on this one. He got beat out by a bigger, local competitor, low balled.. My comment to him was, don't even sweat that one. Someone did you a yuge favor. Looks like the owner needed to keep his guys workin, a few extra months this winter. Tough times for folks. More and more I am seeing one man bands, all sorts of small operations with truck, signage and business card.

Haven't seen any, "will install HVAC equipment for food" signs yet, but hell who knows, maybe thats comin .

Custom, quality work, attention to detail, knowing design concept, old fashioned service, (not just lip service), at a fair job price, not to be confused with low balling. Stay small. There is a lot of "cleanup" in that line of work, fixing other peoples mistakes. Word gets out pretty fast. No advertising needed.

I woke up's picture

Shouldn't their super awesome quality systems have picked up on this?

Mustafa Kemal's picture

Does this mean that Japan is still going to support infrastructure development in the USA?

Are they just going to print up the funds?

Giant Meteor's picture

Nah, no need, we've got the printin covered ...

zippy_uk's picture

"'ello Tosh, got a Toshiba?"

To Hell In A Handbasket's picture

Get ya ears round that "Wallop!"

 

Colonel's picture

Shorting opportunity?

Giant Meteor's picture

Nah, my reading on this is by todays standard, "bullish." Heavy buy signals here. Shits probably gonna take off like a nuclear powered rocket ship!

/s

BorisTheBlade's picture

Just a flesh wound. Move on, nothing to see here: nuclear unit writedown is not a nuclear unit meltdown.

pparalegal's picture

That and incompetent bureaucrats is why the retrofit San Onofre nuke plant in Southern California went off line permanently.  Sounds like California politicians and their regulator pet children, but without apologies and resignations. Just higher utility rates and requests for reelection contributions.

Doctor Faustus's picture

Yes and no. SONGS Unit One was deemed too expensive to upgrade to current safety standards especially with the advent of much cheaper gas-fired fossil plants. Also, being a GE-designed BWR (Boiling Water Reactor), it's not as "safe" as a PWR (Pressurized Water Reactor), a Westinghouse design. Ironically, Westinghouse was acquired by Toshiba. 

I visited SONGS several times before it shut down (they used some of our ultrapure water quality analytical instrumentation). Prior to that, I was stationed at Camp Pendleton and we used to go body-surfing at The Trestles near the plant during lunch. Good times.

BandGap's picture

Hey, there's a job a guy should look at. Totally ignore reality, say "I'm sorry" and head for the Geisha house for comfort.

How the fuck do these guys get to do this over and over and over. Aren't they supposed to off themselves when they have shamed their honor?

Black Swan started by an earthquake. Nice.

Giant Meteor's picture

I know right? My understanding is that whole seppuku thing got replaced with poorly designed nuclear power plants and Toshiba laptops. Takes a bit longer but not near as much cleanup needed. Jesus H, can't believe I just typed that ...

Need more coffee, stat ..

SmedleyButlersGhost's picture

Sorry - and which Wall Street guy has resigned? Don't get me wrong, fuck this guy but our guys are actually worse which is quite an accomplishment.

Wile-E-Coyote's picture

This year so far has been like an episode of X-files, next instalment Trump turns out to be a lizard and we are the lunch.

Catullus's picture

The Vogel nuke plant is the biggest fucking boondoggle ever. $14bn for 2500 MW. Paying 10x what a brownfield gas turbine install costs. But who cares, right? They're regulated utilities.

Giant Meteor's picture

lol, yes .. Enron comes immediately to mind .. regulated, thats a good one!

Oops, sorry about the meltdown!

booboo's picture

You can only hide a sausage in your pants for so long. Many more to follow.

ipso_facto's picture

Would a US Chairman resign?

Giant Meteor's picture

Hell no, they just go back into government work ..

Last of the Middle Class's picture

Let me get this straight. Made a billion dollar company on electronics. Bought Westinghouse nuclear unit, lost their ass and now will sell assets, electronics unit to return to profitability. FUBAR is what you call that situation. I remember when Japanese were considered smart, not dumb-asses of the world. Jeez.

MalteseFalcon's picture

Corporate acquisitions are big ass opportunities for management to make big ass bonuses.

They are also pretty good for the investment bankers that arrange the acquisition.

shizzledizzle's picture

Are writedowns what happens when even your non GAAP numbers suck?

Giant Meteor's picture

Thats an excellent point. I mean holy hell, when your fake numbers start lookin bad, really, there is no hope.

yogibear's picture

They'll do the manipiulative central bankster thing and buy all shares of stock. 

Pretty soon the the central banks, thanks to the Bernanke philosphy, will all own all stocks and bonds.

Welcome to the North Korean economic plan.

Central Banks no way out of this centrally planned economy once they start down this path.

Think about Central Bank buying of debt and stocks......

Another form of nationalization. Country that has done this already?

Valenzuela. Eventually leading to famine. 

SillySalesmanQuestion's picture

Satoshi. We've been telling you for years now, Bitcoin can't be used like money...

S/

Seasmoke's picture

There is never just one Japanese Beetle. 

Stud Duck's picture

The least time I loooked Mistibutsi owned Westinghouse, looks like they spun that off to Toshiba when I was not paying attention. i have a friend that is working on one of those nukes. He said the whole engineer crew were over 60 as nothing hasbeen builtin 30 years and they were the only experienced engineers available. He siad it wasquite strange, management coming to the old guys for instructions.

My question was, why are we building more nukes??? History has indicated that most all were not profitable and the customers are still paying for that boondoggle!

orangegeek's picture

Long failure and bankruptcy.

deerhunter's picture

To Giant Meteor and Wiley E Coyote. I have been in the replacement window and door business was for 25 years. The illegal labor and the biggest companies have combined to now be selling and installing product at early to mid 90s pricing. All we hear as business people is it's the economy. That's not all of it. If you can get men that show up everyday and pay them cash at half the prevailing rate you cut all the medium and small operators out of the loop.
If a contracting company really does employ W-2 carpenters they simply cannot compete regardless of product supplier or product quality. I could write a book. Now even some long time mom and pop retail store type window and door companies are closing up shop. Workers comp alone on men that work with glass, power tools and go up three stories high is a killer. Customers always want all insurances and comps for workers on their properties but are utterly clueless when it comes to realistic expectations .
I have no problem saying no to low ball comparisons to my quotes. Younger sales guys get frustrated because rational adult homeowners always want to compare our pricing to lowest quote.
I carry an 8/11 print of a horses rear end. In print it simply says "If you want to debate my prices and are willing to settle for oats oats that have through the horse once, we can talk." I don't use that in ever situation but residential in home sales of any product is tough enough without having to compete with illegal un or under insured labor being paid in cash.

Giant Meteor's picture

All, bar none, excellent, excellent points .. meaning, "truth."

Sad that it got to this point, really it is .. all kidding and joking aside.

edit; I'll even go one better. I recently "heard" about a guy, that keeps his "guys" plyed with "pain killers" you know, at a nominal additional cost. I shit you not, you can't make this shit up if you tried .. 

Bloody Hell

 

Nobodys Home's picture

I owe my soul to the company....dealer

What a World. What a WOrld

Sick Underbelly's picture

I think most of us could write a book about the illegal and underhanded shit we've seen.

Frontline, retail banking (the tellers, account managers, branch managers and operational folk) are overridden in their denying cashing a check for illegals with noticeably fake documentation, for example.   Lawn maintenance, house builders, flooring companies, and even drywall installers.  All of this in the name of, "We don't want to disturb their relationship," or "They've been with us for X years, and that would hurt the relationship."

Right.  Encourage the support of illegals at the expense of Americans?   Just so your banking center doesn't suffer a "loss"?

The shit runs deep when you get to the frontline, trench-level workers.

CRM114's picture

The cause is failure of Government enforcement, isn't it?

And a secondary point, certainly in some business areas, is that if they did enforce properly, no one can afford the product. I'm thinking diesel autos here.

90% of regulations have to go. And those approving regulations in future have to have some responsibility for the health of the industry too.

Sick Underbelly's picture

I almost stopped reading for the near-incomprehensible drivel of the first paragraph.

Basically, it appears that when they removed people in 2015, they didn't go deep enough.  As well, if you have such systemic problems with accounting, maybe it's time to pay external people to overhaul your accounting, and seriously consider a business analyst team's suggestion on what to sell/do/trade/finance etc. to get out and not have these problems.

I just look at Toshiba as a visible example of the rot generated by creative accounting, "the canary in the coal mine" if you will.

gregga777's picture

A Japanese CCC (Criminal crony capitalists) CONporation goes down in flames after buying an American CCC (Criminal crony capitalists) CONporation practicing US SEC (US Swindler Enabling Commissars) approved fictitious non-GAAP revenues and earnings reporting.

ROTFLMAO (rolling on the floor laughing my a** off).

deerhunter's picture

So we have to do our part . My firewood guy always wanted me to make out a check to his name and bit the name on the truck of his company. Not being the sharpest knife in the drawer it finally hit me. He doesn't have a business account and doesn't pay.a dime in taxes so last delivery I told him I would be writing the check to the name on the truck. He told me he couldn't do that and drove off. I guess I did my small part lol. I had been buying firewood from him for 7 years. Like I said, sharpest knife. Good day all.

silverer's picture

That's correct. He can accept up to $600 a year from a payer. After that, you are supposed to 1099 him. If he's just a vendor and not an employee or contract worker, then he is trying to hide income. If you were writing checks to his company, the bank is at the service of the IRS in tracking his deposits, as they watch and monitor corporate checking accounts. If he's depositing checks on a regular basis under his own personal name and not declaring the income, the IRS would like to speak with him. If you turn him in anonymously to the IRS, I think you are entitled to a reward based on the amount of tax recovered. The state might also have an issue with him not collecting and paying sales tax. He should know it's illegal to practice pure capitalism in the US.

silverer's picture

Toshiba just got hit by the reality of mathematics. Next big wake-up to the reality of mathematics will be the Japanese government itself, after falling asleep under the spell of Paul Krugman. "When numbers speak, they speak with eloquence".

Paracelsus's picture

    The nuclear power industry in America and elsewhere is directly funded

by the taxpayer. Subsidy,tax breaks,help with waste storage, and voila!

Reprocessed weapons grade uranium (MOX load at Fukushima reactors?).

The taxpayer subsidized the Wall Street industry and look what happened...

This industry has never been clean, cheap, or competitive.

Were it not for the Gov't backstop, there would be no Chernobyl, Fukushima, etc.

I would describe the US nuclear industry as on par with the Chicago political

establishment for honesty and integrity.

  Several commenters here have mentioned what will happen if a world financial

crisis occurs, and the reactors and fuel rod cooling pools are not maintained.

 Imagine 10,000 Fukushimas happening at once. Not too good....

Spungo's picture

Yikes! In my opinion, the two ultimate indicators of a company are retained earnings and total equity. When a company is completely fucked, you'll see negative retained earnings over the life of the company, and a company will often have negative equity when going into bankruptcy.

Toshiba USA:
$5.4B assets
$0.3B equity
($77M) retained earnings

At least it's still not as bad as Barrick Gold. Barrick's retained earnings are ($13.5B) 

Don Sunset's picture

Toshiba often cheated.  Back in the 80s they sold technology to build submarine screws that could make it harder for the USA to detect boats.  They appologized with a full page ad in the SF newspapaer.

These days they can't add and their financial reports are full of lies.

Toshiba once had the best leptops on the planet but failed to keep that going.

Bye bye.