Where Do You Draw The Bottom Line?

Minus pension-plan earnings, corporate profits dip

Last year was a bad one for corporate earnings. Largely because of deflationary pressures triggered by Asia's financial crisis, the companies in the Standard & Poor's 500-stock index expanded their operating profits by a mere 3.7%, on average. But the collective bottom line would have been even lower--by 3 percentage points, in fact--without the fat investment gains these companies earned on their pension-plan assets. "When a company promises employees a pension, you would expect the company to have to put money into the plan, not that the plan would give it money back," says Janet Pegg, one of a team of Bear Stearns accounting analysts that recently issued a report on the topic.

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