The death of pro forma results has been greatly exaggerated.

Despite the stern mandates of Sarbanes-Oxley Act, and the widespread use of generally accepted accounting principles (GAAP), the use of pro-forma reporting practices are not fading, as many experts predicted. Indeed, the practice of removing certain items to make corporate results look better is still in vogue for a handful of companies, says a report in USA Today.

More than two dozen major companies continue to serve up pro forma versions of their financials when they report financial results, says the report, including old tech/Internet favorites, such as Cisco, eBay, and Qualcomm.

Certainly, the practice is not illegal, it’s just more opaque than transparency advocates hoped for. To be sure, companies that use pro-forma reporting practices must simultaneously report results using GAAP, and then explain the difference between the two sets of financials. What’s more, in some cases, pro forma reporting makes sense. For instance, when a CFO wants to show what earnings would look like if a one-time charged was removed.

Nevertheless, with good corporate governance and financial transparency a corporate priority, it’s still a bit shocking to learn that a number of companies are offering pro forma results.

The trend is far from an epidemic, however. According to Thomson First Call research, just 28 of the 444 companies in the Standard & Poor’s 500 that have reported second-quarter results subtracted anything other than benign one-time items. This is down from 43 in the second quarter of 2001, and about 70 in 2000 at the height of the tech and Internet bubble.

“A majority of companies get it, but there are still a few that haven’t changed a bit,” Joe Cooper, research analyst at First Call, told USA Today.

The paper points out that eBay’s pro forma earnings, for example, were 10 percent higher than the official earnings; while Cisco’s profits were 12 percent better than the official results.

Most Top Executives Still See Recession

Is there light at the end of the recession tunnel? Some corporate profits are climbing, one measure of the unemployment rate recently fell, and the stock market indices are up way above their lows.

But, a recent survey found that most executives at the largest companies are still pessimistic about economic prospects. According to global search firm Christian & Timbers, 235 executives at Fortune 1000 companies, or 82 percent, do not feel that the recession is over.

Participants were asked to respond to the following: “The National Bureau of Economic Research said that the US economic recession that began in March 2001 ended eight months later. To you, does it feel like the recession is over?”

According to Jeff Christian, chairman and CEO of the search firm, “Our interviews with CEOs and senior executives show that they are still reeling from the effects of layoffs, downsizing, sluggish sales and increased shareholder pressure. Even with positive market indicators and some encouraging profit gains in the hard-hit technology sector, they remain cautious.”

Another reason for the uncertainty is the very different economic structure that American business faces as it comes out of this recession, he added. “Many industries have been forced to move manufacturing out of the country to cut costs,” he said. “But offshore manufacturing and outsourcing do not produce new jobs for Americans, or increase the buying power of the workforce.”

Trust Busters

Given the rash of accounting and other corporate scandals over the past two years, it’s not surprising that investors have lost faith in the ability of executives and board members to look after stockholder interests.

What is surprising, however, is that a full year after the passage of the Sarbanes-Oxley Act — the law passed to curb corporate malfeasance — most executives don’t place more confidence in their boards to do the right thing.

To be sure, 40 percent of 133 public company executives and employees polled by Clark Consulting said that the trust level of board members to protect shareholders’ interests has not changed compared with two years ago. What’s more, another 24 percent reported that board member trust has declined as well.

Just about a third of the executives — 34 percent — claim they do have more trust in board members than two years ago.

“Trust is a hard thing to win back,” said Tom Wamberg, chairman and CEO of Clark Consulting. “Public trust of boards is tied to corporate performance. In the past quarter we are starting to see improving results, which will help regain trust.”

MetLife Restates Results

Officials at MetLife Inc. say the company will restate second quarter earnings by $31 million after-tax. The announcement comes one week after the top brass reported company results.

Executives at the insurance giant noted that the adjustment results from certain improperly deferred expenses at its affiliate, New England Financial, which is part of MetLife’s Individual Business segment. The $31 million charge resulted in a reduction to net income and operating earnings in the Traditional Life and Variable & Universal Life product lines within the Individual Business segment.

“We are disappointed by the need for this adjustment and by the timing of it, one week after the release of our second quarter results,” said Robert H. Benmosche, chairman of the board and chief executive officer.

As part of the same announcement, officials noted that Thom Faria, president of New England Financial, has left the company and will be replaced by Eileen McDonnell, currently senior vice president, Individual Insurance Business Development for MetLife.

Merrill Lynch and Standard & Poor’s subsequently downgraded MetLife’s stock.

In other accounting-related missteps, two more companies were called on to the carpet by government officials. Executives from the embattled French-based engineering company Alstom SA said the Securities and Exchange Commission is formally investigating Alstom Transportation Inc., a US subsidiary where Alstom discovered accounting errors.

On June 30, company officials confirmed that the SEC was conducting an informal inquiry into accounting problems that would require the company to take a $171 million charge in 2003.

In addition, Ohio’s attorney general sued Freddie Mac on Friday over what he called the company’s “deliberately misleading accounting practices,” according to a report from the Associated Press.

Attorney General Jim Petro hopes to recover funds lost by state retirement systems.

Lawsuits were filed in federal courts in Columbus, Ohio, Virginia and New York, said the wire service, citing Kim Norris, a spokeswoman for Petro.

Meanwhile, the Justice Department and the SEC are also investigating Freddie Mac.

As CFO.com reported in June, probes of alleged accounting misdeeds and document tampering at Freddie Mac led the federal home loan packager’s board to sack its president and switch CFOs.

Short Takes

• Executives at Oakley Inc. announce that the company will pay its first dividend ever, citing, in part, “the recent tax law changes” that lowered the tax on dividends.
• Defense contractor General Dynamics Corp. raised $1.1 billion in a two-part global debt deal, led by Banc of America Securities and Bear Stearns & Co. It issued $700 million in seven-year notes, priced to yield 4.558 percent, or 74 basis points over Treasurys maturing in 2010. General Dynamics also issued $400 million in 12-year notes, priced at 104 points over 10-year Treasurys. The paper was rated A2 by Moody’s and A by Standard & Poor’s.

• Credit Suisse First Boston (USA) Inc., a unit of Credit Suisse First Boston Corp., issued $1 billion in 10-year global notes in a self-led deal. They were priced to yield 120 basis points over comparable Treasurys, and were rated Aa3 by Moody’s and A-plus by S&P.

• Delta Air Lines, currently seeking wage concessions from its unionized pilots, will stop contributing to a pension plan aimed at retaining nearly three dozen executives, according to the The Wall Street Journal. Delta has so far paid $45 million into the executive trusts, which are bankruptcy-proof, the paper said.

• The Federal Reserve held the benchmark US interest rate unchanged at 1 percent and officials say rates will stay low “for a considerable period” to help the economy grow faster.

• Officials at Charles Schwab & Co. said the company is laying off 250 employees and closing 20 branch offices.

• Kemet, maker of passive electronic technologies, named David Gable vice president and CFO, succeeding D. Ray Cash, who is retiring.

• Timothy Stone was named CFO of Impco Technologies. He had been interim finance chief for a year since his predecessor, Brian Olson, became CFO at Quantum Technologies, a former Impco unit.

• Direct General Corp., a provider of “non-standard” car insurance, surged $4 — or 19 percent — to $25 in its first day of trading. Direct General and shareholders sold about 6.9 million shares at $21 each, raising about $145.6 million.