pro forma earnings

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 Amazon.com 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 Amazon.com 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 Amazon.com 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 acquisition is valued at 8.3 times pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) (2016 estimate).
In response to fears that companies could use non-GAAP earnings disclosures to mislead investors, the SEC issued a warning to investors about the potential dangers of relying on pro forma earnings figures in December 2001.
Backing out special items in both years, Diplomat--which completed an initial public offering in October--posted adjusted pro forma earnings of $18.7 million for fiscal 2014, in contrast to a loss of $29 million in 2013.
Terms used to identify non-GAAP financial measures may include "pro forma earnings", "cash earnings", "free cash flow", "distributable cash", "EBITDA", "adjusted earnings", and "earnings before non-recurring items." These terms generally lack standard meanings.
However, because regulators had provided very little guidance and because there was no clear definition of the term "pro forma," one company's pro forma earnings could not be consistently measured against another's.
Adjustments to the income statement and changes in operations under someone else's ownership should also be few in number and logical so as to clearly demonstrate and create a sustainable pro forma earnings base.
Pro forma earnings per share ("EPS") were $0.72, compared to $0.57 last year, an increase of 26.3%.
"The strength of our portfolio, leaner cost structure and accelerating market momentum give us the confidence to raise our full-year outlook." <p>Excluding one-time items, HP reported pro forma earnings of $1.10 per share, up from 93 cents per share a year earlier.
The company said that the acquisition of the French provider of business travel and expense management solutions is expected to be accretive to fiscal 2010 pro forma earnings. The acquisition closed on 1 August.
Qualcomm expects the acquisition to be approximately dilutive to pro forma earnings per share by USD0.02 in fiscal 2009 and accretive to earnings by the second half of calendar year 2010.
Pro forma earnings before interest, tax, depreciation and amortisation came to pounds 2.6 million against pounds 1.9 million in 2006 - an increase of 37 per cent.
The Jetrion products are currently anticipated to show top line growth of 30-40 percent in 2007 and again have an immaterial impact to pro forma earnings as EFI makes investments to expand the Jetrion product line and distribution.