Analyzing Business Earnings 45expense or loss are either presented as separate line items within the listing of
revenues or gain and expense or loss, or are included in an “other income (ex-
pense)” line. A sampling of nonrecurring items found in the other-income-and-
expense category of the multistep income statements of a number of
companies is provided in Exhibit 2.7.
A comparison of the items in two exhibits reveals some potential for over-
lap in these two categories. The first, nonrecurring items in operating income,
should be dominated by items closely linked to company operations. The nonre-
curring items in the second category, below operating income, should fall out-
side the operations area of the firm. Notice that there is a litigation charge
included in operating income (Exhibit 2.6, Detection Systems) as well as sev-
eral excluded from operating income (Exhibit 2.7, Advanced Micro Devices,
Cryomedical Sciences, and Trimark Holdings). Gains on the sale of invest-
ments are found far less frequently within operating income. Firms may avoid
EXHIBIT 2.7 Nonrecurring items of revenue or gain and expense or
loss excluded from operating income.
Company Nonrecurring Item
Expenses or Losses
Advanced Micro Devices Inc. (1999) Litigation settlement charge
Baltek Corporation (1997) Foreign currency loss
Champion Enterprises (1995) Environmental reserve
Cryomedical Sciences Inc. (1995) Settlement of shareholder class action suit
Galey & Lord Inc. (1998) Loss on foreign-currency hedges
Global Industries (1993) Fire loss on marine vessel
Holly wood Casino Corporation (1992) Write-off of deferred preacquisition costs
Imperial Holly Corporation (1994) Workforce reduction charge
Trimark Holdings Inc. (1995) Litigation settlement
Revenues or GainsArtistic Greetings Inc. (1995) Unrealized gains on trading securities
Avado Brands Inc. (1999) Gain on asset disposals
Colonial Commercial Corporation (1999) Gain on land sale
Delta Air Lines Inc. (2000) Gains from the sale of investments
The Fairchild Corporation (2000) Gains on the sale of subsidiaries and affiliates
Freeport-McMoRan Inc. (1991) Insurance settlement (tanker grounding)
Gerber Scientific Inc. (2000) Litigation award
Imperial Sugar Company (1999) Realized securities gains
Meredith Corporation (1994) Sale of broadcast stations
National Steel Corporation (1999) Gain on disposal of noncore assets
New England Business Service Inc. (1996) Gain on sale of product line
Noble Drilling (1991) Insurance on rig abandoned in Somalia
Pollo Tropical Inc. (1995) Business-interruption insurance recovery
Raven Industries Inc. (2000) Gain on sale of investment in affiliate
Saucony Inc. (1999) Foreign currency gains
SOURCES: Companies’ annual reports. The year following each company name designates the annual re-
port from which each example was drawn.