MrFrom: Ray, Sheldon [sheldon.ray@ubspw.com]
Sent: Friday, December 13, 2002 1:41 PM
To: 'rule-comments@sec.gov'
Subject: S7-43-02, MS word

 

 

Mr. Jonathan G. Katz, Secretary
U.S. Securities & Exchange Commission
450 Fifth St., NW
Washington, DC  20549-0609

13 December 2002

Subject file:  S7-43-02

Dear Mr. Katz:

It is imperative that the Commission at least severely limit the 
use of pro-forma earnings reporting, and prohibit the usage in most 
cases, unless the reporting company discloses valid reasons for 
doing so.  I applaud the agency’s issuance of cautionary advice 
on the subject a year ago.  Thanks solely to that effort, the public 
is now aware of GAAP earnings per share (eps) figures, as well as 
pro-forma.  However, certain major companies are still reporting 
pro-forma figures with no legitimate reasoning, that vary dramatically 
from their disclosed, but buried, GAAP numbers.  Moreover, some 
analysts continue to use unreliable pro-forma figures in calculating 
eps, thereby perpetuating the misleading of the public.  Should the 
average individual investor not know that his or her favorite stock 
should be sporting a p/e ratio of 45 under GAAP vs. 23 under 
meaningless pro-forma data?

I am sure that you are aware of the horrific impact that pro-forma 
abuses had on the creation of worst market bubble in decades, one 
that many innocent people are still paying for.  In last February’s 
piece in The Economist, a study cited a $100 billion pro-forma 
misrepresentation by companies in the Nasdaq 100.  The article stated 
that those corporations announced $19.1 billion in pro-forma profits 
in the first three quarters of 2001, and $82.3 billion in losses to 
the SEC for the same period.  I note that within the piece, 
Harvey Goldschmid, prior to his appointment, stated “The SEC ought 
to look rigorously at whether pro-forma reporting is misleading.”.

Congratulations in advance for addressing this pivotal issue.

Sincerely,


Sheldon L. Ray, Jr.
Washington, DC  20008




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