Capital Allocation: Principles, Strategies, and Processes for Creating Long-Term Shareholder Value

CHAPTER 24

Restructuring

I disapprove of companies that abuse the practice of excluding extraordinary, nonrecurring restructuring charges from their adjusted earnings. If a firm takes charges every year and in some cases, multiple times per year, are the charges truly extraordinary or nonrecurring? Unfortunately, there are no standards for such charges. As long as a firm can create a footnote in an earnings release that shows how the company got from GAAP to non-GAAP earnings, it can usually exclude whatever it wants.

Newell Brands (NWL) excluded nonrecurring restructuring costs from adjusted EPS every year from 2006–2018.¹ Non-GAAP cumulative EPS during this period were a healthy $25.37, but GAAP earnings were just $3.16, as shown in Figure ...