How Should I Interpret the Pro Forma Number?
Worthington Company and Millward Company both reported pro forma earnings numbers in conjunction with their release of results for the most recent quarter. Both announcements included a reconciliation to GAAP earnings. These reconciliations are reproduced here.
|
Worthington Company |
|
|
Pro Forma Earnings |
|
|
(in thousands) |
|
|
GAAP earnings |
$ 50,000 |
|
Add back amount expensed for the purchase of in process R&D |
35,000 |
|
Subtract a one time gain from the sale of a building |
(17,000) |
|
Pro forma earnings |
$ 68,000 |
|
Millward Company |
|
|
Pro Forma Earnings |
|
|
(in thousands) |
|
|
GAAP earnings |
$ 50,000 |
|
Add back expenses associated with a strategic realignment initiative |
10,000 |
|
Add back employee training expenses |
8,000 |
|
Pro forma earnings |
$ 68,000 |
Which of the two pro forma earnings disclosures do you find to be the more informative?
Explain.