pro forma earnings

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Pro forma Earnings

Often used in two ways. First, pro forma earnings refers to projections of earnings. This is often used internally or on a road show for an IPO. Second, it refers to a way of reporting earnings that excludes non-recurring items such as restructuring charges, extraordinary items.

Pro Forma Earnings

A company's earnings that are not calculated according to the Generally Accepted Accounting Principles. For example, a company may exclude non-cash expenses that the GAAP would ordinarily include. Companies often publish pro forma earnings to highlight positive aspects of their earnings. While this may indeed show positive earnings for a company that the GAAP can miss, pro forma earnings can also be manipulated more easily to make a company appear healthier than it is.

pro forma earnings

Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. In general, pro forma earnings are reported in an effort to put a more positive spin on a company's operations.
Case Study Unlike net income reported in audited financial statements according to generally accepted accounting principles, pro forma earnings are calculated in any number of ways because there is no generally accepted definition for this measure of earnings. Companies may inflate pro forma earnings by omitting certain expenses, such as stock compensation, interest payments, and amortization of intangible assets. The result is a hodgepodge of earnings calculations that are not consistent from company to company or, for the same company, from year to year. In early 2001 released quarterly pro forma results that omitted writedowns of impaired assets, interest expense, and losses on equity investments. The latter item had been a particularly important source of income for many Internet and technology-based companies when the stock market was booming rather than swooning. According to officials, the firm's quarterly U.S. pro forma operating loss narrowed to $16 million while its overall pro forma operating loss amounted to $60 million. At the same time the company reported that the net loss calculated according to generally accepted accounting principles was $545 million. Critics contended that companies were emphasizing whichever measure of earnings produced the most favorable result. The controversy over reported earnings caused a group of financial executives to begin work on developing a standard for pro forma earnings. The group was at work at the time the results were released. In late 2001 the Securities and Exchange Commission issued a warning that companies issuing misleading pro forma earnings could face civil fraud suits. On January 16, 2002, the SEC instituted its first enforcement action addressing the abuse of pro forma earnings when it initiated proceedings against Trump Hotels & Casino Resorts, Inc., for making misleading statements in the firm's third-quarter 1999 earnings release. The SEC found that the release cited pro forma figures to tout the firm's purportedly positive results of operations while failing to disclose that the results were primarily attributable to an unusual one-time gain rather than to operations. The SEC also found that the company, through its chief executive officer, chief financial officer, and treasurer, violated the antifraud provisions of the Securities Exchange Act by knowingly or recklessly issuing a materially misleading press release.
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The FASB project will not study management's discussion and analysis or pro-forma earnings reported in press releases or other communications that do not involve financial statements.
Additionally, the Company expects pro-forma earnings per share (EPS) for the quarter, calculated excluding amortization of stock-based compensation, to exceed 16 cents.
Pro-forma earnings were 28 cents per share for the quarter versus the consensus estimate of 27 cents per share.
NASDAQ:MRVL) announced fiscal third-quarter pro-forma earnings of 36 cents per share in mid-November, improving on last year's 22 cents and outpacing the consensus estimate by almost 6%.
As a result of the license suspension, Chiron does not expect to record any sales of Fluvirin for the 2004-05 season, and disaffirms its previous full-year 2004 pro-forma earnings guidance of $1.
Chiron's full-year 2004 pro-forma earnings per share guidance of $0.
Chiron disaffirms its previous full-year 2004 pro-forma earnings guidance of $1.
We expect this acquisition will add approximately $3m in revenues in 2004 and we expect it will be immediately accretive to our pro-forma earnings per share.
Vitesse expects this transaction to be neutral to its pro-forma earnings per share in the first half of calendar 2004 and to be slightly accretive in the second half.
We expect this will be immediately accretive to our pro-forma earnings per share.
It also reiterated its pro-forma earnings guidance for the fourth quarter of 11 cents to 13 cents per share.