Until its humiliating elimination from the Dow Jones Non-Industrial Average, Alcoa was the traditionally first company to usher in earnings season and the first company to set the mood for the DJIA. That is no longer the case. Still, on the surface, Alcoa's numbers were modestly good: after all it beats (heavily lowered) revenue estimates printing $5.77 billion in revenue on expectations of $5.63 billion, even if this was lower than both the $5.85 billion in Q2 and $5.83 billion from Q3 2012. The (heavily lowered) EPS likewise "beat", printing at $0.11 on expectations of $0.05.
And while we have discussed that the only reason Alcoa keeps on "beating" its earnings is due to the chronis, and simply ridiculous earnings estimate reduction that happens quarter after quarter, year after year as can be seen below...
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... what happened in Q3 was something different. See if you can spot it from the EPS breakdown below:
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Still don't see it? Let us help. The chart below shows the company's restructuring charges by quarter.
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Hopefully it is now clearer: what happened is that for the second consecutive quarter AA took out massive restructuring charges from EPS, this time amounting to $151 million for Income Statement purposes, or about $108 million for Non-GAAP EPS purposes.
Which means that of the $0.11 beat in Q3, a whopping 9 cents is due entirely to ongoing "non-recurring" restructuring addbacks. Very much the same way AA "beat" last quarter, [5]when it reported $0.07 cents, of which however $0.18 cents was due to the addition of restructuring charges.
Said otherwise, of the $0.18 cents in non-GAAP earnings in the past two quarters, $0.27 cents has been due entirely to add backs of restructuring charges.
Finally, for those who care about real numbers:
- Q3 Free Cash Flow ($36) MM, down sharply from the positive $228 MM in Q2, and as bad as the ($39) MM a year ago.
- Cash on hand declines from $1.2 billion to $1.0 billion
- Net debt up from $7.16BN to $7.32Bn
- CapEx: $250MM, lower than the $286MM in Q2 and well lower than the $302MM a year ago
But, hey. At least "it beat"