“A lie is an abomination unto the Lord and
a very present help in time of trouble.”
– Adlai Stevenson
Exhale, GonzoMongers, I’m not getting religious on you. But ho-ho, Mr. Stevenson, truer words have not been spoken. I’m not about to say that Internet banking vendors are outright lying in their quarterly earnings press releases, but some are damn sure stretching the limits of decency here.
Let’s face it – the Internet crowd is not performing well financially. I will grant you that they’re improving. Revenues are through the roof. They’re starting to move product and run serious transaction volumes through their data centers, but they’re far from profitable and even farther from being the high performers that their press releases suggest. Worst of all, the Internet vendors are distorting their true performance by mischievously and prominently stating earnings (losses) “before non-cash expenses” – the dreaded “cash loss per share” ratio.
A few cases in point:
First mention of “earnings (loss) per share”: ($0.50) for 4Q2000 (excluding “interest, taxes, depreciation, and amortization”)
Actual EPS for shareholders: ($14.45)
Just a matter of negative $13.95 per share hanging in the balance. These guys even take out interest and taxes from their EPS quote!
First mention of EPS: ($0.17) for 4Q2000 (“excludes non-cash charges for stock-based compensation, amortization of goodwill and intangibles, and merger-related charges”)
Actual EPS: ($0.58)
First mention of EPS: ($0.21) for 4Q2000 (“excludes the amortization of deferred stock-based compensation and acquisition-related intangible assets”)
Actual EPS: ($0.27)… More in the ballpark.
(Congrats to Online Resources for telling it like it is up front in its latest release.)
I don’t pretend to be a CFA and I don’t know enough sick jokes to qualify as a stock analyst, but this bottom line dream weaving gives me hives. I understand that there are reasons for analyzing cash flow and overlooking non-cash expenses. But the accountants let businesses amortize certain acquisition- and merger-related expenses over time, rather than take an instant hit to earnings, under the oft-discredited theory that over time earnings will improve due to the synergistic effects of acquiring/merging. If the bottom line isn’t improving, the merger wasn’t successful.
Either way, to conspicuously report earnings in a press release in terms of cash loss per share is just laughable.
“Outside of the killings, Washington has one of the
lowest crime rates in the country.”
– Mayor Marion Barry