PROFIT REPORTS A NUMBERS GAME.

Byline: Gregory J. Wilcox Staff Writer

When El Segundo-based toy maker Mattel Inc. released fourth-quarter earnings last week, one business news agency reported that the company's profits nearly doubled while another pegged the increase at 21 percent.

Who was right? Everybody.

Who was wrong? Nobody.

The report, and dozens like it streaming out this earnings season, illustrates how complex corporate earnings statements are and how companies like to put the best spin on the results. And though there is nothing illegal about it, the Securities and Exchange Commission is wading into the situation.

These days investors are facing different sets of numbers that now commonly show up in quarterly financials for public companies.

In the case of Mattel, The Associated Press said the El Segundo-based company earned $138 million in the year's final quarter while Reuters said the company earned $146 million.

AP and the Daily News, as a rule, used as-reported numbers, figures set forth by generally accepted accounting principles.

Reuters focused on what is known as the ``pro forma'' numbers, which generally factor out one-time costs associated with developments like mergers and restructurings.

In its company release, Mattel focused on the pro forma numbers first and the as-reported second.

``We actually show both and I think we do a very good job. Both are relative and help people make decisions about the company,'' said Mattel spokeswoman Lisa Marie Bongiovanni.

The pro forma results excluded the impact of $11.2 million in charges taken in relation to the planned closure of the North American distribution and manufacturing facilities and the closure of international offices.

The company said it was simply responding to the requests of Wall Street analysts. And they're not alone.

The National Investor Relations Institute surveyed more than 200 companies recently and found more than half gave pro forma numbers equal to slightly better billing than they did generally accepted accounting principles, or GAAP.

``If that many companies want investors to pay more attention to adjusted numbers instead of standard accounting, then you have to conclude something is wrong,'' said Gary Lutin, a New York investment banker and vocal critic of pro-forma abuses.

While the SEC hasn't issued any edicts about pro forma vs. as-reported numbers, they have issued two statements on the practice in just the past month.

``We believe it is appropriate to sound a warning about the presentation of company earnings and company operating results on the basis of methodologies other than generally accepted accounting principals,'' the agency wrote in its first memo Dec. 4.

It also said that pro forma results should be viewed with ``appropriate and healthy skepticism.''

Regulators note that reporting in this fashion departs from traditional accounting conventions and can make it hard for investors to compare financial information with other reporting periods and other companies.

``This really came into vogue in the late '90s and people used it aggressively,'' said an SEC official.

Formal guidelines might follow, he said.

In the interim, the investor institute, a national association of corporate officers and investor relations consultants, issued its own guidelines last spring that say companies should reconcile the pro forma numbers with the GAAP numbers.

Companies like this method because they can exclude nonreoccuring items and show investors and analysts how the core business performed on a year-to-year basis.

Knight Ridder Newspapers contributed to this report.