NON-GAAP FINANCIAL MEASURES

Adjusted Net Earnings

In addition to reporting net earnings as defined under generally accepted accounting principles (GAAP), Forest also presents adjusted net earnings, which is a non-GAAP performance measure. Adjusted net earnings consists of net earnings after adjustment for those items shown in the table below. Adjusted net earnings does not represent, and should not be considered an alternative to GAAP measurements, such as net earnings, (its most comparable GAAP financial measure), and Forest’s calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items shown below, Forest believes that the measure is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies in similar industries. Forest’s management does not view adjusted net earnings in isolation and also uses other measurements, such as net earnings and revenues to measure operating performance. The following table provides a reconciliation of net earnings, the most directly comparable GAAP measure, to adjusted net earnings for the periods presented (in thousands):
        Forest Remainco               Total Company
Three Months Ended June 30,
  2011                   2010     2011                   2010  
 
Net earnings attributable to Forest Oil Corporation $ 33,385 $ 36,131 $ 38,910 $ 33,254
Unrealized (gains) losses on derivative instruments, net of tax (22,860 ) 5,984 (26,631 ) 5,984
Unrealized foreign currency exchange losses, net of tax - - 30,964 8,924
Realized foreign currency exchange gains incurred on the repayment of intercompany indebtedness, net of tax - - (28,837 ) -
Legal proceeding settlement, net of tax 4,149 - 4,149 -
Canadian dividend tax, net of tax 18,460 - 18,460 -
Change in valuation allowance on deferred tax assets associated with Lone Pine, net of tax   -     -     4,116     -  
 
Adjusted net earnings attributable to Forest Oil Corporation $ 33,134   $ 42,115   $ 41,131   $ 48,162  
 
Earnings attributable to participating securities and other adjustments   (617 )   (830 )   (911 )   (799 )
 
Adjusted net earnings attributable to Forest Oil Corporation for diluted earnings per share $ 32,517   $ 41,285   $ 40,220   $ 47,363  
 
Weighted average number of diluted shares outstanding   112,028     111,314     112,176     111,456  
 
Adjusted diluted earnings per common share attributable to Forest Oil Corporation $ 0.29   $ 0.37   $ 0.36   $ 0.42  
 

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