RECENT POSTS
Monday, January 21, 2019
Differences in Earnings Releases and 10-Ks

Wednesday, January 16, 2019
The Importance of Textual Analysis

Tuesday, January 8, 2019
A Look at Climate Change Disclosures

Wednesday, January 2, 2019
Quants: Point-in-Time Data for Backtesting

Friday, December 28, 2018
Now Showing: Controls & Procedures

Thursday, December 27, 2018
A Reminder on Non-GAAP Reporting Rules

Monday, December 17, 2018
Researching PG&E’s Wildfire Risk

Wednesday, December 12, 2018
Tracking Brexit Disclosures

Thursday, December 6, 2018
Campbell Soup: Looking Behind the Label

Sunday, December 2, 2018
SEC Comment Letters: The Amazon Example

Wednesday, November 28, 2018
Measuring Big Pharma’s Chemical Dependency

Monday, November 26, 2018
Analysts, Can You Relate? A True Story

Monday, November 19, 2018
Digging Up Historical Trend Data: Quest Example

Sunday, November 11, 2018
Cost of Revenue, SG&A: Q3 Update

Monday, November 5, 2018
Lease Accounting: FedEx vs. UPS

Saturday, November 3, 2018
New Email Alerting Powers

Wednesday, October 31, 2018
PTC and Two Tales of Revenue

Tuesday, October 30, 2018
10-K/Q Section Text Change Detection

Sunday, October 28, 2018
Finding Purchase Price Allocation

Sunday, October 21, 2018
Charting Netflix Growth in Three Ways

Archive  |  Search:

When in doubt, announce a restructuring plan—so goes one bit of wisdom in executive offices across Corporate America. And apparently we have had lots of doubt in recent years.

Calcbench recently looked at restructuring charges disclosed by the S&P 500 since 2008, the year of the financial crisis. Total damage was $148.55 billion, or an average of $18.57 billion annually. We also found the 10 largest restructurers in that period, and they are…

  • Merck: $8.9 billion
  • HP: $8.6 billion
  • Pfizer: $5.5 billion
  • Alcoa: $5.3 billion
  • Citigroup: $4.6 billion
  • General Motors: $4.4 billion
  • Honeywell International: $4.3 billion
  • Procter & Gamble: $3.9 billion
  • Hewlett-Packard Enterprise: $3.4 billion
  • Dow Chemical: $3.3 billion

Restructurings are not always a sign of tough times or management desperation; a company might announce a restructuring as part of a large merger, for example. On the other hand, several of the above top 10 restructurers (HP, General Motors, Citigroup, to name some names) were no strangers to pain, suffering, and missed financial targets in recent years.

Restructuring programs can also take on a life of their own. Back in April we did a quick peek at restructuring charges and found that in 2012, HP announced a restructuring that was supposed to last three years, cut 29,000 jobs, and cost $3.7 billion. By the time that effort wrapped up, the numbers were 55,000 job cuts and $5.5 billion in costs. (Our database lets you scan numerous years of filings at a glance so you can see how predictions announced in one fiscal year actually pan out in later years. #HumbleBrag.)

The other nagging financial reporting concern here is whether a company can report restructuring charges so regularly that they distort its true Earnings Per Share numbers. Don’t forget, restructuring charges do count as a one-time item you can subtract from profits, and then report an “adjusted” EPS number to investors. Is that adjusted EPS number street legal under GAAP? Technically no, but one-time items can happen for legitimate reasons, and investors can read, so disclosing a restructuring charge is normal enough that the analyst community tolerates it even as a non-GAAP metric.

The question is how many times a one-time item can happen before Wall Street starts to roll its eyes. Twenty-four members of the S&P 500, for example, have reported restructuring charges in eight of the last eight years; another 41 have reported restructuring charges in seven of the last eight years. Taken together, that’s 65 companies, or 13 percent of the S&P 500.


FREE Calcbench Premium
Two Week Trial

Research Financial & Accounting Data Like Never Before. More features and try our Excel add-in. Sign up now to try the Premium Suite.