Privately owned Pike Electric Corp. completed an initial public offering of stock last July, raising $122 million and beginning life as a publicly traded company. But the Mt. Airy, N.C.-based contractor stumbled recently at an investors conference where it generally had happy news and record revenue.
As a result of the isolated financial reporting error, the company�s chief accounting officer is out of a job.
What happened?
The company inadvertently misstated a non-required financial measure by about $20 million.
During a conference call discussing Pikes� yearend results and following release of the data Sept. 14, Pike officials discussed financial information that is not covered by generally accepted accounting principals (GAAP). The information included what the company described in a statement as �adjusted� earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter and year ended June 30, 2005. The information was not included in the press release.
Adjusted EBITDA, as contrasted with EBITDA, is adjusted for other unusual and/or non-recurring charges. Most of the charges related to Pike�s recent acquisition of Alabama-based contractor Red Simpson or Pike�s 2004 recapitalization.
Adjusted EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, Pike explains, as determined under GAAP.
According to Pike, the company uses EBITDA for performance comparison purposes but always backs out variations in capital structure and depreciation of facilities and equipment. Adjusted EBITDA, the company explains, should not be used �as the primary measure of Pike Electric�s operating performance or as a measure of discretionary cash available to it to invest in the growth of its business.�
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Related Links: So although the adjusted EBITDA is not required information, it was misstated.
During the September 14, 2005 conference call, Pike Electric inadvertently stated that adjusted EBITDA for the year ended June 30, 2005 was $146.9 million. Actual adjusted EBITDA for the year ended June 30, 2005 was $125.2 million. All other financial information discussed during the call was correct.
On September 14, 2005, the company announced that it had ended David J. Mills� employment as its chief accounting officer. Mark Castaneda, chief financial officer, assumed the responsibilities until a new chief accounting officer could be found, Pike reports.
Mills, Castaneda and other company officials could not be reached for comment beyond the statements filed with the Securities and Exchange Commission.
