The financial numbers game detecting creative accounting practices phần 9 doc

317 CHAPTER TEN Getting Creative with the Income Statement: Pro-Forma Measures of Earnings Pro forma information is a tool that companies have invented to disseminate an idealized version of their performance. It may exclude any cost or expense the company wants, yet it is presented in a form that suggests reliability and soundness. 1 Cash flow, by the way, is not EBITDA. EBITDA is the biggest joke of the 1990s. 2 Are GAAP net earnings on the endangered species list? Pro forma per-share figures in earnings announcements, a number derived after removing an expanding list of items and sometimes real cash expenses, seem to be crowding out traditional net earnings in many industries. 3 Operating income is often more important to investors than net income, and widely regarded as an indicator of how well management is running the shop. 4 The previous chapter laid out the GAAP requirements surrounding the income statement and also outlined how the financial numbers game could be played by creative classifi- cations within the GAAP-basis income statement. Pro-forma creativity develops mea- sures of financial performance that employ GAAP information, but they are decidedly non-GAAP measures. A common justification for one such pro-forma measure (sustain- able or core earnings) is illustrated by this statement from the Corning, Inc. annual report: Corning believes comparing its operating results excluding non-recurring items, a measure that is not in accordance with generally accepted accounting principles (GAAP) and may 318 not be consistent with measures used by other companies, provides a better understanding of the changes in its operating results. 5 Corning’s pro-forma measure is GAAP net income adjusted for the effects of a num- ber of charges and gains that it judged to be nonrecurring. In practice, it is common to dis- cuss results after the exclusion of selected nonrecurring items. Corning simply refers to this pro-forma measure as “operating results excluding non-recurring items.” By adjust- ing only for nonrecurring items, the scope of Corning’s restatement is rather limited. The range of adjustments made to GAAP net income is greater in the case of some of the other pro-forma measures of performance. These measures often adjust GAAP earnings for noncash items as well as selected recurring and nonrecurring items of revenue, gain, expense, and loss. However, they all share a common feature: They employ GAAP-based information in the creation of alternative, non-GAAP measures of performance. The first two of the chapter-opening quotes are clearly critical of pro-forma measures of financial performance. Lynn Turner, chief accountant of the Corporation Finance Division of the SEC, has characterized some of these measures by referring to them as EBBS, or “earnings before the bad stuff.” 6 Such criticisms have led the Financial Exec- utives International (FEI), an organization made up mainly of company financial offi- cers, and The National Investor Relations (NIRI) Institute to release “best practice” guidelines for firms that release pro-forma measures of financial performance in earn- ings press releases. 7 A key feature of these recommendations is found in the following: GAAP results provide a critical framework for pro-forma results, although the pro-forma results may be more analytically useful. The order in which reported or pro-forma results are presented in the release is not as important as their context. Pro-forma results should always be accompanied by a clearly described reconciliation to GAAP results; this recon- ciliation is often provided in tabular form. 8 The FEI/NIRI guidelines do not explicitly criticize pro-forma measures of financial performance. However, the absence of their recommended reconciliation of the pro- forma to GAAP numbers represents a clear weakness in most of the current presentations of pro-forma data. This chapter builds on the discussion in Chapter 9 and presents a review and analysis of pro-forma measures of financial performance. The computation of these pro-forma measures is considered along with their motivation, characterization, and disclosure. Their role in the financial numbers game is also explored. RECASTING THE BOTTOM LINE: PRO-FORMA EARNINGS MEASURES Adaptations of net income are generically referred to as pro-forma earnings. 9 Other labels include EBITDA (earnings before interest, taxes, depreciation, and amortization), sustainable earnings, core earnings, and operating earnings. 10 The Random House Unabridged Dictionary of the English Language provides an accounting-oriented defi- nition of “pro-forma”: T HE F INANCIAL N UMBERS G AME 319 Indicating hypothetical financial figures based on previous business operations for estimate purposes. 11 Some pro-forma earnings numbers are quite consistent with the Random House def- inition of pro-forma. This is especially true when pro-forma earnings have been devel- oped, at least in part, to provide a better baseline for forecasting earnings. This is often the case when net income is adjusted so as to eliminate the effects of nonrecurring items. It is less true in cases where adjustments to reported net income are designed to derive a joint cash flow and sustainable earnings measure. Pro-forma earnings typically involve adjustments to net income for items that are either noncash or nonrecurring or both. The two most common pro-forma numbers, which fall within the spirit of income statement creativity, are (1) earnings before interest, taxes, depreciation, and amortiza- tion (EBITDA) and (2) adjusted or sustainable earnings. EBITDA is well known and widely used in the business and financial community. It is also common for sustainable earnings to be labeled adjusted earnings. Whether called adjusted or sustainable earn- ings, the exclusion of nonrecurring items is the key feature of these measures. Earnings before Interest, Taxes, Depreciation, and Amortization EBITDA represents part of a movement up the income statement from the bottom line. EBITDA is predated by and probably evolved from earnings before interest and taxes (EBIT). EBIT is positioned farther down the income statement, below the point at which depreciation and amortization would have been deducted. EBIT is one of the early income statement adaptations. It is designed mainly to gauge the extent to which fixed charges are covered by earnings. 12 EBIT has been a common financial covenant in debt and other credit agreements for decades. EBITDA has a shorter history, with its widespread use extending back only into the early 1980s. EBITDA was used early on in leveraged buyouts (LBOs) on the premise that there would be no replacement of fixed assets until later while the LBO company was run and debt was serviced. It has long been common to require firms to maintain a specified minimum EBIT coverage ratio as part of a debt or credit agreement. As inter- est is deductible before the computation of income taxes, it is logical to add back both income taxes as well as interest. In more recent years, it has become even more common for fixed-charge and debt-limit covenants to be based on EBITDA. 13 While the mea- surement of EBITDA would seem to be dictated by the underlying words, in practice the measurement of EBITDA is often more extensive. Frequently a variety of adjustments are made beyond simply those for interest, taxes, depreciation, and amortization. Measurement of EBITDA As noted, it is common for firms to measure EBITDA by including additional adjust- ments. In this sense, most measures of EBITDA should be viewed as adjusted EBITDA, a term that is sometimes used to describe expanded measures of EBITDA. A review of some of the additional adjustments made in arriving at adjusted EBITDA provides addi- tional insight into the character of this alternative measure of financial performance. Getting Creative with the Income Statement: Pro-Forma Measures of Earnings TEAMFLY Team-Fly ® TEAMFLY Team-Fly ® 320 The process of moving up from the bottom line of the income statement and selec- tively jettisoning items of revenue, gain, expense, and loss is an exercise in income statement creativity. Exhibit 10.1 contains examples of some of the additional adjust- ments made to arrive at EBITDA. It is far more common to observe items of loss or T HE F INANCIAL N UMBERS G AME Exhibit 10.1 EBITDA Adjustment Items Company EBITDA Adjustments ACG Holdings, Inc. (1998) EBITDA is defined as earnings before interest expense, income taxes, depreciation, amortization, other special charges related to asset write-offs and write-downs, other income (expense), discontinued operations and extraordinary items. Boca Resorts, Inc. (1998) Adjusted EBITDA represents EBITDA plus the annual change in Premier Club net deferred income. The Carbide/Graphite Group, Inc. EBITDA is defined as operating income before (1999) depreciation and amortization, early retirement/severance charges, and other expense. Coast Resorts, Inc. (1999) EBITDA means earnings before interest, taxes, depreciation, amortization, deferred (noncash) rent expense and certain nonrecurring items, including preopening expenses. Lifestyle Furnishings International, Adjusted EBITDA for 1998 excludes transition Ltd. (1999) costs related to the restructuring and reengineering initiative costs related to the development and implementation of year 2000 compliance costs related to computer system implementation. News Communications, Inc. (1999) EBITDA, excluding three one-time expenses: hiring costs associated with a new president, an increase in the reserve for uncollected receivables, and an adjustment to the accrual for unpaid commissions. Sunrise Medical, Inc. (1998) EBITDA excludes reengineering expenses, merger costs, and unusual items. Teletouch Communications, Inc. EBITDA for fiscal 1998 excludes the gain on (1998) sale of assets. Sources: Companies’ annual reports. The year following each company name designates the annual report from which each example was drawn. Information obtained from Disclosure, Inc., Compact D/SEC: Corporate Information on Public Companies Filing with the SEC (Bethesda, MD: Disclosure, Inc., June 2000). 321 expense as opposed to revenue or gain being adjusted from net income to arrive at EBITDA. This may simply reflect the fact that the former items tend to be more numer- ous. Beyond this, one or more of three characteristics are typically associated with the additional adjustments: (1) nonrecurring, (2) noncash, and (3) nonoperating. An examination of the entries in the exhibit reveals a mix of adjustments that reflect one or more of the above characteristics. The motivation for adding back depreciation and amortization is usually its noncash character. Alternatively, it sometimes reflects the sentiment that depreciation and the amortization of intangibles are not real expenses. That is, in spite of the traditional GAAP requirement to depreciate fixed assets and to amortize intangibles, many feel that these assets often do not decline in value and that over time they actually may appreciate in value. An example of the rejection of depreciation is found in the measure used to judge the financial performance of real estate firms, especially real estate investment trusts (REITs). Depreciation is added back to net income, along with adjustments for other selected nonrecurring items, to arrive at a pro-forma measure termed funds from opera- tions (FFO). The case for rejecting depreciation in measuring financial performance is illustrated by the next excerpt from a document that supports adding real estate depreci- ation back to the earnings of REITs: GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. For this reason, comparisons of the operating results of REITs that rely on net income have been less than satisfactory. 14 Similar arguments have been made in the case of some intangible assets. Goodwill is a common example. Interestingly, a new standard issued by the Financial Accounting Standards Board no longer requires the routine amortization of goodwill. Rather, good- will will be written down only if it is judged to be impaired. 14a Interest and taxes are the standard add-backs to develop measures for determining the coverage of fixed charges. Additional adjustments for the growth in deferred income by Boca Resorts, Inc., and of deferred rent by Coast Resorts, Inc., reflect the cash-flow dimension of EBITDA. That is, the growth in these balances represents an inflow of cash that has not yet been included in net income (Boca Resorts) and an expense that has not yet required a cash outflow (Coast Resorts). Hence, these increases are added to net income in order to produce a measure that is closer to cash flow. The adjustments for write-offs (ACG Holdings, Inc.), severance charges (The Carbide/ Graphite Group, Inc.), certain nonrecurring items (Coast Resorts), transition costs (Lifestyle Furnishings International, Inc.), adjustments to the accrual for commissions (News Communications, Inc.), and gain on sale of assets (Teletouch Communications, Inc.), are all consistent with developing a measure of sustainable financial performance. The adjustments for some of the nonrecurring items, for example, other income and other expenses, reflects the effort to develop a measure that is based on operating items. The determination of what items should be adjusted out of EBITDA, where the key consideration is their nonrecurring character, is difficult. Nonrecurring items are not specifically defined under GAAP. Getting Creative with the Income Statement: Pro-Forma Measures of Earnings 322 It is common for EBITDA measures to be developed with additional adjustments for nonrecurring and nonoperating revenue, gains, expenses, and losses. These all entail the exercise of considerable judgment. A strict version of EBITDA requires the exercise of little or no judgment. However, the dominance of adjusted EBITDA measures means that there is abundant room for the exercise of creativity. This also means that it is very difficult to compare EBITDA performance among different firms. Doing so is somewhat akin to trying to compare the weights of different people when they all make a number of unique adjustments to their scales. There is a clear problem with the comparability of EBITDA measures among firms. Comparability of EBITDA among Firms EBITDA combines adjustments for noncash, nonrecurring, and nonoperating items in an effort to create a revised measure that is a combined operating cash flow and sustainable earnings statistic. The adjustments that are prompted by the noncash feature are reason- ably nonjudgmental. 15 However, the specification of nonrecurring items for adjustment introduces the potential for the creation of EBITDA measures that are not comparable between different firms. This potential for a lack of comparability among firms is cited frequently in discussions of EBITDA disclosures. The following commentary is typical: All companies do not calculate EBITDA in the same manner. As a result, EBITDA as pre- sented here may not be comparable to the similarly titled measure presented by other com- panies. 16 Our calculation of EBITDA may be different from the calculation used by other com- panies and, therefore, comparability may be limited. 17 It is worth noting that the lack of comparability introduced by adjusted EBITDA measures simply adds to the lack of comparability that already exists due to differences among firms in accounting policies followed as well as variations in accounting esti- mates. Also, the judgments that go into the computation of EBITDA affect both interyear and interfirm comparability. That is, EBITDA may be measured differently among firms as well as differently by individual firms across different years. Company Characterizations of EBITDA The characterizations of EBITDA provided by companies help to clarify some of the motivations for the creation of this measure. Some examples of EBITDA characteriza- tions are provided in Exhibit 10.2. The information in the exhibit as well as the results of a review of about 200 companies was used to identify a number of recurring themes in these EBITDA characterizations. EBITDA is held to be: • Useful in evaluating operating performance • Helpful in judging the ability to meet future cash requirements • Useful as a measure of operating cash flow • Helpful in evaluating financial condition, results of operations, and cash flow T HE F INANCIAL N UMBERS G AME 323 Getting Creative with the Income Statement: Pro-Forma Measures of Earnings Exhibit 10.2 Characterizations of EBITDA Company Characterization of EBITDA Ameriking, Inc. (1999) EBITDA is included to provide additional information with respect to the ability of the Company to meet its future debt service, capital expenditure and working capital requirements. The Carbide/Graphite Group, Inc. Management believes that EBITDA is an (1999) appropriate measure of the Company’s ability to service its cash requirements. EBITDA is an important measure in assessing the performance of the business segments. Lightbridge, Inc. (1999) Lightbridge considers EBITDA to be meaningful given the impact on operating income from non- cash expenses. Metro Goldwyn Mayer, Inc. (1999) Management considers EBITDA to be an important measure of comparative operating performance. It should be considered in addition to, but not as a substitute for or superior to, operating income, net earnings, cash flow and other GAAP measures. The items excluded from EBITDA are significant components in assessing financial performance. News Communications, Inc. (1999) EBITDA is used in this report because management believes that it is an effective way of monitoring our operating performance and is widely used among media related businesses. Niagara Mohawk, Inc. (1999) EBITDA is a non-GAAP measure of cash flows and is presented to provide additional information about Niagara Mohawks’ ability to meet its future requirements for debt service. Stimsonite Corp. (1998) EBITDA, a measure of operating cash flow, increased to $16.1 million from $14.3 million in 1997. Note: The above entries are abridgements of the actual language used by the listed companies. Sources: Companies’ annual reports. The year following each company name designates the annual report from which each example was drawn. Information obtained from Disclosure, Inc., Compact D/SEC: Corporate Information on Public Companies Filing with the SEC (Bethesda, MD: Disclosure, Inc., June 2000). 324 • Widely accepted as an indicator of funds available to service debt • Useful in measuring operating performance, liquidity, and leverage EBITDA as a measure of cash flow is one of the more common themes. It is obviously not a GAAP measure of cash flow, and companies often make this point as part of an effort to distinguish EBITDA from GAAP cash-flow measures. Yet, companies repeat- edly refer to EBITDA as a measure of cash flow, often presenting any qualifying lan- guage at some other location in the financial statements or notes. The evaluation of operating performance is another common EBITDA application. This is clearly facilitated by the adjustments that remove nonrecurring or nonoperating revenue, gains, expenses, and losses. These adjustments provide better indicators of sus- tainable performance and better predictors of future results. 18 Because of its prevalence and its representation as a measure of cash flow and oper- ating performance, it is not surprising to observe EBITDA being employed in financial covenants found in debit and credit agreements. The problem of comparability can be dealt with in this setting because the credit agreement can include the specific definition of EBITDA to be used in measuring compliance with the EBITDA covenant. Use of EBITDA in Financial Covenants Financial covenants are used so that lenders and other creditors will have more control over the likelihood of their ultimate repayment. Financial covenants provide some capacity to monitor and influence the behavior of the debtor. Exhibit 10.3 provides some representative uses of EBITDA in financial covenants. The EBITDA-based covenants are of three types: 1. Coverage covenant: requires a minimum ratio of EBITDA to fixed charges 2. Leverage covenant: permits a maximum ratio of debt to EBITDA 3. Level covenant: requires maintenance of a minimum level of EBITDA The common use of EBITDA by lenders in financial covenants is evidence that they find it to be a useful device in helping to monitor their borrowers and to ensure the even- tual repayment of their funds. 19 While based on GAAP-based income statement data, EBITDA rearranges and removes certain income statement data in the creative effort to develop alternative mea- sures of financial performance and cash flows. As a cautionary measure, and with a nudge from the Securities and Exchange Commission, some companies that include EBITDA information in their annual reports highlight its non-GAAP character. Cautionary Comments about Non-GAAP EBITDA Information EBITDA incorporates only information that is present in the GAAP-basis income state- ment. Providing cautionary or qualifying commentary in conjunction with EBITDA data is consistent with SEC guidance. 20 Examples of cautionary or qualifying language are found in Exhibit 10.4. T HE F INANCIAL N UMBERS G AME 325 Despite the many cautionary notes provided about EBITDA, the manner in which it is presented and characterized implies, contrary to SEC guidance, its superiority to GAAP-based earnings and cash-flow data. EBITDA as Income Statement Creativity EBITDA involves a creative rearrangement of selected income statement data. While the EBITDA acronym suggests a simple alternative measure developed in a quite mechani- cal manner, this is usually not the case. Rather, most measures of EBITDA go beyond the acronym and involve the selective exclusion of GAAP-basis income statement data. Terms like special charges and nonrecurring items are common labels applied to these exclusions. However, as noted earlier, these terms are not well defined in practice or in GAAP. Their identification entails a good deal of judgment, and this results in much flexibility in developing EBITDA measures. EBITDA is truly a creative income state- ment-based measure. However, this effort to develop an alternative measure of cash flow and financial performance brings with it some new problems and continues some old. Getting Creative with the Income Statement: Pro-Forma Measures of Earnings Exhibit 10.3 EBITDA-Based Financial Covenants Company Financial Covenant ABR Information Services, Inc. (1998) Requires a funded debt-to-EBITDA ratio maximum of 2.5 to 1 Abercrombie & Fitch Co. (1999) A financial covenant requires a minimum EBITDAR to interest expense and minimum rent Foodarama Supermarkets, Inc. (1999) Requires the maintenance of certain levels of EBITDA Marine Drilling Companies, Inc. (1999) Calls for a maximum ratio of debt to EBITDA of 4 to 1 Packaging Corp. of America (1999) Must not exceed a leverage ratio (indebtedness divided by EBITDA) of 6.75 at December 31, 1999, decreasing per the guidelines set forth in the Credit Agreement to 4.00 as of March 31, 2006 Roanoke Electric Steel (1999) Funded debt cannot be greater than 3 times consolidated EBITDA, and the ratio of EBITDA to the sum of current maturities of long-term debt and consolidated interest expense must equal at least 1.5. Sources: Companies’ annual reports. The year following each company name designates the annual report from which each example was drawn. Information obtained from Disclosure, Inc., Compact D/SEC: Corporate Information on Public Companies Filing with the SEC (Bethesda, MD: Disclosure, Inc., June 2000). 326 Interfirm Comparability The flexibility associated with the development of EBITDA results in a lack of interfirm comparability. It is common for EBITDA firms to point out the comparability issue as part of their EBITDA disclosures. 21 For example, Lightbridge, Inc., takes the position that EBITDA enhances comparability because it eliminates the T HE F INANCIAL N UMBERS G AME Exhibit 10.4 Qualifying EBITDA Company Qualifying Language Browning Ferris Industries, Inc. (1997) EBITDA, which is not a measure of financial performance under generally accepted accounting principles, is included because the company understands that such information is used by certain investors when analyzing the company’s financial condition and performance. Lifestyle Furnishings, Ltd. (1997) Adjusted EBITDA should not be considered as an alternative to net income, cash flow from operations or operating profit as determined by generally accepted accounting principles, and does not necessarily indicate that cash flow will be sufficient to meet cash requirements. St. Mary Land & Exploration EBITDA is a financial measure commonly Co. (2000) used for St. Mary’s industry and should not be considered in isolation or as a substitute for net income, cash flow provided by operating activities or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company’s profitability or liquidity. Because EBITDA excludes some, but not all, items that affect net income and may vary among companies, the EBITDA presented above may not be comparable to similarly titled measures of other companies. Unidigital, Inc. (1999) EBITDA does not represent and should not be considered as an alternative to net income or operating income as determined by generally accepted accounting principles. Sources: Companies’ annual reports. The year following each company name designates the annual report from which each example was drawn. Information obtained from Disclosure, Inc., Compact D/SEC: Corporate Information on Public Companies Filing with the SEC (Bethesda, MD: Disclosure, Inc., June 2000). Information on St. Mary Land and Exploration Co. is from its annual report, December 2000, p. 26. [...]... Expenses Air Canada ( 199 8) American Standard Cos., Inc ( 199 9) ATI Technologies, Inc ( 199 9) BEA Systems, Inc (2000) Beringer Wine Estates, Inc ( 199 9) Compaq Computer Corp ( 199 9) Cone Mills Corp ( 199 9) Crown Cork & Seal Co., Inc ( 199 9) Federal Mogul Corp ( 199 9) Johns Manville Corp ( 199 9) Micron Electronics, Inc (2000) Nova Chemicals Corp ( 199 9) Pall Corp (2000) Phillip Morris Cos, Inc ( 199 9) Schnitzer Steel... Inc (2000) Stewart & Stevenson Services, Inc ( 199 9) Toys “R” Us, Inc ( 199 9) Nonrecurring Gains or Revenues Air Canada ( 199 8) Airtran Holdings, Inc ( 199 9) Area Bancshares Corp ( 199 9) C R Bard, Inc ( 199 9) Cameco Corp ( 199 9) Cisco Systems, Inc (2000) Curtiss-Wright Corp ( 199 9) Federal Mogul, Inc ( 199 9) Phillips Petroleum Co ( 199 9) Quaker Chemical Corp ( 199 9) Supervalue, Inc (2000) Nonrecurring Items Estimated... was $6 09 million in 199 9, up 157 percent from net income of $237 million in 199 8 Special items benefited 199 9 net income by $61 million, while reducing net income in 199 8 by $138 million After excluding these items, net operating income for 199 9 was $548 million, a 46 percent increase over $375 million in 199 8 Net earnings, before special charges, for the year ended December 31, 199 9 were $97 , 799 ,000... income.7 347 THE FINANCIAL NUMBERS GAME Exhibit 11.1 Consolidated Statements of Cash Flows: Orthodontic Centers of America, Inc., Years Ending December 31, 199 8–2000 (thousands of dollars) 199 8 199 9 2000 $33,813 $45,836 $(2,854) 2, 295 9, 124 (2,767) 2,0 79 12,238 1,273 373 15,175 (7, 792 ) — 678 50,576 (22,733) (2,663) 228 (27, 491 ) (2,305) (1,342) (13,5 49) 8 89 (2,3 09) (1,756) 6,568 (2,420) (5, 199 ) (8,233)... with the Income Statement: Pro-Forma Measures of Earnings Exhibit 10.6 Adjusting Earnings for the Effects of Nonrecurring Items Company C R Bard, Inc ( 199 9) Cisco Systems, Inc ( 199 9) Phillips Petroleum Co ( 199 9) Vishay Intertechnology, Inc ( 199 9) Disclosures In 199 9, Bard reported net income of $118.1 million, or diluted earnings per share of $2.28 Excluding the impact of the after-tax gain on the sale... Firms frequently make this point in their EBITDA disclosures The following is a typical disclosure of the non-GAAP character of EBITDA as a cash-flow measure: Exhibit 10.5 EBITDA as a Cash Flow Measure Company Aztar Corp ( 199 9) Brown-Forman Corp (2000) Dole Foods Company, Inc ( 199 9) Mandalay Resort Group ( 199 9) SI Technologies, Inc ( 199 9) Cash Flow Language In 199 9, our consolidated operating cash flow,... operations, net of income taxes Net Income 199 8 2000 $3,651.2 2,447.1 616.4 43.8 ———— 543 .9 (135.2) 53.6 ———— 625.5 101 .9 ———— 523.6 187.7 ———— 335 .9 $3,868 .9 2,603.4 640 .9 47.1 ———— 577.5 — 3.7 ———— 573.8 55.2 ———— 518.6 186.7 ———— 331 .9 $4,4 59. 9 3,018.3 732 .9 58.5 ———— 650.2 — — ———— 650.2 100.3 ———— 5 49. 9 192 .5 ———— 357.4 87.1 ———— $ 423.0 ———— ———— — ———— $ 331 .9 ———— ———— — ———— $ 357.4 ———— ———— Note:... Adjustments $ 700,356 517,7 59 ————– 182, 597 — — ————– — $700,356 517,7 59 ————– 182, 597 98 ,248 36,638 70,284 26,028 2 ,91 6 — — — — (2 ,91 6) 98 ,248 36,638 70,284 26,028 — 50,831 114,260 ————– 399 ,205 ————– (216,608) 9, 950 (33,748) (3,884) 33,857 ————– 6,175 ————– (50,831) (114,260) ————– (168,007) ————– 168,007 — — — (33,857) ————– (33,857) ————– — — ————– 231, 198 ————– (48,601) 9, 950 (33,748) (3,884) — ————–... annual report states: Fiscal 199 8 revenue grew 24 percent to $282.8 million, exceeding our goal of 20 percent revenue growth EBITDA, before non-recurring items for fiscal 199 8, totaled $ 19. 1 million, compared with $17.6 million in 199 7 Net income was $21.5 million, or $0 .98 per share, an increase over $ 19. 0 million, or $ .97 per share, last year.27 327 THE FINANCIAL NUMBERS GAME The Mindspring Enterprises,... Interview with Robert Olstein, of New York–based Olstein & Associates, Barrons, October 5, 199 8 3 George Donnelly, “Pro Forma Performances,” CFO Magazine, November 27, 2000, p 1 4 The Wall Street Journal, November 24, 199 9, p C1 341 THE FINANCIAL NUMBERS GAME 5 6 7 Corning, Inc., annual report, December 199 9, p 41 The Wall Street Journal, April 27, 2002, p C16 FEI/NIRI, “Earnings Press Release Guidelines,” . 46 percent increase over $375 million in 199 8. Vishay Intertechnology, Inc. ( 199 9) Net earnings, before special charges, for the year ended December 31, 199 9 were $97 , 799 ,000 or $1.14 per share. After. Holdings, Inc. ( 199 9) Gain on litigation settlement Area Bancshares Corp. ( 199 9) Securities gains C. R. Bard, Inc. ( 199 9) Gain on settlement of patent infringement claims Cameco Corp. ( 199 9) Sale of. Corp. ( 199 9) Environmental insurance settlements Federal Mogul, Inc. ( 199 9) Gain on currency option Phillips Petroleum Co. ( 199 9) Kenai tax settlement benefit Quaker Chemical Corp. ( 199 9) Reversal