Calculate the sustainable earnings of Entrust, Inc., for each of the three years. Remember to use negative signs with answers, when appropriate!

Permanent Versus Transitory Earnings Entrust, Inc., is a global provider of security software; it operates in one business segment involving the design, production, and sale of software products for securing digital identities and information. The consolidated statements of operations for a three-year period (all values in thousands) follows. On January 1, Year 1, the Entrust common shares traded at $10.40 per share; by year end Year 3, the shares traded at $3.80 per share. The company's cash flow from operations was $(27,411), $(20,908), and $9,606, for Year 1, Year 2, and Year 3, respectively. Calculate the sustainable earnings of Entrust, Inc., for each of the three years. Compare the company's reported net income (loss) with its sustainable earnings. Does Entrust's share price at year- end Year 3 reflect the firm's apparent turn-around? Why or why not? Year 2 Year 1 ENTRUST, INC. Consolidated Statements of Operations Year Ended December 31 ($ thousands) Year 3 Revenues Product $31,945 Services and maintenance 61,662 Total revenues 93,607 Cost of Revenues $33,624 56,920 90,544 $47,384 58,013 105,397 Product $4,379 $5,571 29,105 29,825 568 $5,511 32,073 1,136 38,720 384 33,868 59,739 35,964 54,580 66,677 26,322 17,266 12,569 34,985 44,128 22,566 24,151 13,143 14,840 1,364 (1,359) 14,178 (1,309) 86,236 80,451 (31,656) (13,774) 56,157 3,582 Services and maintenance Amortization of purchased product rights Total cost of revenues Gross profit Operating expenses Sales and marketing Research and development General and administrative Impairment of purchased product rights Restructuring charges and adjustments Total operating expenses Income (loss) from operations Other income (expense) Interest income Foreign exchange gain (loss) Loss from equity investments Realized loss on investments Write-down of long-term strategic investments Total other income (expense) Income (loss) before income taxes and minority interest Noncontrolling interest in subsidiary Income (loss) before income taxes Provision for income taxes Net income (loss) 1,680 1,281 429 3,346 (72) (431) (1,341) (833) (832) (2,780) (450) (2,780) (1,238) (5,144) 754 (36,800) (13,020) 369 3,951 4 3,955 (36,800) (13,020) 1,542 442 1,055 $ 2,413 $(37,242) $(14,075)