Applying Community Intelligence to Find the Missing Gold
Ok, Fools, time to pool our collective skills to make sense of a mystifying earnings release.
Although I am a self-taught Fool, and not a CPA, my readers know that I am fully capable of dissecting an earnings report and interpreting results effectively. I have poured through thousands of earnings releases over the years, and reported on companies within a wide range of sectors. Furthermore, my particular focus upon precious metal miners has yielded a comprehensive understanding of this sector and the characteristic elements (from non-hedge currency derivatives to variations in by-product accounting methods) affecting income for the miners.
For the second time in a row, Kinross Gold (KGC) has left me rather stumped in my attempts to reconcile robust revenue and operating margins with paltry net earnings. When Yamana Gold (AUY) reported paltry earnings of its own despite similarly strong operating metrics, at least the release contained all the data I needed to recognize the culprits and break the issues down for Fools to consider. I may not be happy with Yamana's backfiring derivatives or currency exposures, but at least their release was transparent enough to make sense of it all.
Not so in the case of Kinross. Unless I'm missing something, I am unable to account for tens of millions of dollars within the giant moat between revenue of $598.1 million and adjusted net earnings of just $84.3 million. I had similar difficulty last quarter, and kicked myself for skirting the issue (alluding to the unimpressive net result without breaking down the culprits). From my write-up last quarter:
Although gold prices were lower in the first quarter compared with last year, Kinross enjoyed a 61% increase in revenue, costs declined 11% to $419 per gold equivalent ounce (GEO), and operating earnings increased 72%. Net earnings, unfortunately, were up an unremarkable 8%, to $76.5 million.
I'm not willing to skirt the issue any longer. I e-mailed investor relations after the prior quarter, and received no response (nice investor relations ... don't you hate that?) I'm calling out Kinross Gold for failing to provide adequate data with which to reconcile revenue to operating earnings, and/or operating earnings to adjusted net [Reconciliation of adjusted net to net is a-ok]. I call upon the collective skills of this Foolish community to see if together we can make sense of the results ... I'm perfectly willing (indeed, hoping) to admit that I've missed something that is indeed provided within the data. Whether the deficiency lies in the provision of data or my interpretation of it, I think we'll all agree that Kinross could do a much more effective job of reconciling the data in a format that shareholders will have a reasonable chance of decoding.
Here is the earnings release:
I find a discrepency of 10s of millions of $ that I can not account for within the data provided. Let's see if you have better luck. :)
Come on you CPAs and math geeks ... we need you now. ;)
Whatever the result, I'm sure the exercise will be a helpful one for many Fools that may not feel as comfortable navigating their way through an income statement.
Disclosure: long KGC and AUY.