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 as we showed last quarter, AA's addbacks just hit an all time high.
We were curious if as a result of this "bathwater" quarter, Alcoa would finally cease this deceptive practice.
The answer: not even close.
Moments ago, Alcoa reported adjusted EPS of $0.07, or $108 million in adjusted net income, beating consensus expectations of $0.02 handily (nevermind that it missed consensus revenues of $5.2 billion by a whopping $250 million, a drop of 15% from a year ago).
There is, alas, a problem with these adjusted "earnings", because on a actual, GAAP basis, Alcoa actually reported its latest GAAP whopper, according to which GAAP EPS was actually... $0.00, thanks to a paltry $16mm in net income.
How did Alcoa "fill the gap?" Simple: with its usual millions in "one-time" charges, in this case $61 million.
But it is on an LTM basis that the company has absolutely outdone itself.
Here, things get downright comical, because whereas Alcoa's GAAP Net Income for the LTM period ended December 31 was a net loss of $501 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 $532 million. The plug? "One-time, non-recurring" addbacks and various other restructuring charges amounting to over $1 billion for the LTM period!
Said otherwise, more than all of Alcoa's earnings in the last 12 months 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 non-GAAP 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"...
And the cherry on top? This:
The business reduced its workforce by 600 positions in the first quarter and plans a further reduction of 400 positions. Additionally, given the current market environment, it is evaluating another reduction of up to 1,000 positions.
What current market environment? Isn't everything recovering now? And are those GAAP or non-GAAP jobs?
Finally, some tangential observations. It appears the company's treasurer is so busy, he can't even check the company's primary excel spreadsheet.
And then remember when Alcoa beat last quarter on non-GAAP EPS of $0.07? Well, that was just quietly revised to $0.04.