Tuesday, January 12, 2021

Earnings Before Civil Unrest

Here at Calcbench we’re constantly on patrol for unusual disclosure items, but occasionally one slips by unnoticed for a quarter or two. So you can imagine our surprise when we were reading Albertson Cos. ($ACI) latest quarterly report, filed today, and noticed that last year the company included a non-GAAP adjustment to earnings for “civil disruption costs.”


The disclosure came in a reconciliation table Albertsons included in its press release, showing how the grocery business was adjusting its GAAP-approved net income of $1.06 billion over the last four quarters to a non-GAAP adjusted EBITDA of $4.36 billion. Near the bottom was a $13 million adjustment for “civil disruption related costs.” See Figure 1, below; relevant line item shaded blue.

One would assume those costs came from the social justice protests that wracked the United States last summer. Sure enough, the explanation in Footnote No. 5 for that line item goes on to say: “Primarily includes costs related to store damage, inventory losses and community support as a result of civil disruption during late May and early June in certain markets.”

Intrigued, we then looked at Albertsons’ quarterly report for the relevant period, which ended June 20. In that filing, however, Albertsons reported its civil unrest costs as $14.9 million. See Figure 2, below.

Why the $1.9 million discrepancy? We’re not quite sure, except that Albertsons adjusted $1.9 million back to earnings in the subsequent quarter. That only explains the numerical difference, however, not what prompted the change.

Nor does Albertson ever elaborate on the specific damages related to its civil unrest adjustment, beyond that one-sentence description we noted above. Then again, even the whole $14.9 million is barely material (equal to 2.5 percent of $586.2 million in net income for the period), and the item seems to be reported only in that specific quarter.

We did wonder whether any other firms reported similar adjustments last summer. Using our non-XBRL Data Query Tool, we tried to find other firms that disclosed a spending item related to “disruptions” or “unrest.” Several insurance firms such as AIG ($AIG), Travelers ($TRV), and Hartford Financial Services ($HIG) all reported costs related to “civil unrest” in 2020, although that’s to be expected from property & casualty insurers.

We found no businesses like Albertsons, reporting costs related to physical damages they incurred. So Albertsons may stand alone with this oddball entry in the Earnings Adjustment Hall of Fame.

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