I had gotten all excited about ELLI’s adjusted earnings in the last quarter of 38 cents, up more than 100% from 18 cents. I’ve taken a small position back. Then I read through the earnings release, with the details of the Reconciliation.
I discovered that they paid $6.8 million in taxes for the year, but they didn’t figure any taxes for the 4th quarter (having allowed too much in the first three quarters). In fact, they took a tax CREDIT for the quarter of about $0.2 million. As their revenues in the 4th quarter were about 29% of their revenue for the year, the normalized taxes should have been at least 29% of $6.8 million. That is about $1.97 million (say $2.0 million for simplicity). If you subtract off the tax credit they took, and the $2 million they should have allowed, we get 31 cents in earnings not 38 cents. Still quite good, but the company sure should have pointed this out.
Note that this doesn’t affect the full year earnings, just the 4th quarter, which looked so extraordinary. On the other hand, 31 cents is pretty flat with the previous two quarters of 31 cents and 27 cents. In fact, since more taxes than necessary were taken in those quarters, they should be up 2 cents apiece, making them 33 cents and 29 cents, and putting the “extraordinary” 4th quarter right in the middle with 31 cents.
Sorry to rain on the parade, but that’s the way it really is.