From time to time, I've zeroed in on various public companies who erroneously calculate a non-GAAP financial measure called EBITDA (earnings before interest, taxes, depreciation, and amortization) in violation of SEC Regulation G. According to the SEC Compliance & Disclosure Interpretations, EBITDA is defined as net income (not operating income) before interest, taxes, depreciation, and amortization. In other words, the only way for a public company to properly calculate EBITDA is by starting with net income and adding back interest, taxes, depreciation and amortization. Any different calculation cannot be called EBITDA, but can be called "Adjusted EBITDA.”
Today, I am pleased to report that Comtech Telecommunications (NASDAQ: CMTL) released its Q4 financial results and properly revised its previous erroneous EBITDA calculation to call it an alternative "Adjusted EBITDA" in compliance with SEC rules.
Last July, I reported that Comtech erroneously added back "amortization of stock-based compensation" to net income to compute EBITDA. See below (Click to enlarge):
In its Q4 2010 financial report released Thursday, Comtech added back "amortization of stock-based compensation" and "impairment of goodwill" (two items not properly included in an EBITDA calculation) to properly compute an alternative non-GAAP "Adjusted EBITDA" in compliance with SEC Regulation G. See below (Click to enlarge):
In the recent past, Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne orchestrated a smear campaign against me and hired internet stalker Judd Bagley to pretext my children and relatives after I pointed out various violations of Generally Accepted Accounting Principles (GAAP) and SEC rules governing non-GAAP financial measures such as EBITDA. The company's pretexting operation targeted dozens of other journalists, bloggers, critics, and their children, too. Barry Rithholtz called Judd Bagley a "possible pedarast." Overstock.com is under SEC investigation.
Unlike Overstock.com, Comtech took the high road and corrected its errors without attacking a critic. My only suggestion is for the company to file amended form 8-Ks with the SEC to correct previous erroneous EBITDA calculations in its filings.
Other companies still on my radar for erroneous EBITDA calculations include: Penson Worldwide (NASDAQ: PNSN), A. H. Belo Corporation (NYSE: AHC), FirstService Corporation (NASDAQ: FSRV), Animal Health International, Inc. (NASDAQ: AHII), Schawk Inc. (NYSE: SGK), and Penn National Gaming Inc. (NASDAQ: PENN). Hopefully, they will do the right thing, too.
As an award, I am sending Comtech President and CEO Fred Kornberg a personally autographed Crazy Eddie Antar wanted poster. However, he will have to settle for my autograph since Eddie and I are not on speaking terms.
Disclosure: I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped my cousin Eddie Antar and other members of our family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could.
If it weren't for the efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.
There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals.
I do not seek or want forgiveness for my vicious crimes from my victims. I plan on frying in hell with other white-collar criminals for a very long time.
Recently, I exposed GAAP violations by Overstock.com (NASDAQ: OSTK) which caused the company to restate its financial reports for the third time in three years. The SEC is now investigating Overstock.com and its CEO Patrick Byrne for securities law violations
(Details here, here, and here).
In addition, the SEC is now investigating possible GAAP violations by Bidz.com (NASDAQ: BIDZ) after I alerted them about the company's inventory accounting practices.
I do not own any securities in the companies cited in this blog post, long or short. My investigation of these companies is a freebie for securities regulators to get me into heaven, though I doubt I will ever get there.