Tutor Perini (TPC) Prelim. Q3 Results Miss Views

October 24, 2016 7:26 AM EDT
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Tutor Perini (NYSE: TPC) disclosed the following on Monday morning:

Item 2.02Results of Operations and Financial Condition.

Preliminary Third Quarter 2016 Results

The management team of Tutor Perini Corporation (the “Company”) currently estimates the following financial results for the third quarter ended September 30, 2016:

· Revenue. Management estimates revenue for the three months ended September 30, 2016 to be approximately $1.33 billion, consistent with revenue of $1.34 billion for the third quarter of 2015. (The Street sees revenue of $1.47 billion.)
· Net Income. Management estimates net income for the three months ended September 30, 2016 to be approximately $28.8 million, an increase of 46.2% compared to net income of $19.7 million for the third quarter of 2015. Net income for the third quarter of 2015 was impacted by a non-cash, pre-tax charge of $23.9 million ($13.8 million after tax), which the Company recorded for an adverse legal decision related to a long-standing litigation matter.
· EBITDA. Management estimates EBITDA for the three months ended September 30, 2016 to be approximately $80.3 million, an increase of 44.2% compared to $55.7 million for the third quarter of 2015. EBITDA for the third quarter of 2015 was impacted by the non-cash, pre-tax charge of $23.9 million described above. Adjusting for this pre-tax charge, Adjusted EBITDA for the third quarter of 2015 was $79.6 million. See the table provided on the following page for a reconciliation of EBITDA and Adjusted EBITDA to net income, the closest comparable measure presented in accordance with generally accepted accounting principles in the United States (“GAAP”).
· Diluted Earnings per Share (EPS). Management estimates diluted EPS for the three months ended September 30, 2016 to be approximately $0.57, an increase of 42.5% compared to $0.40 for the third quarter of 2015. (The Street sees EPS of $0.67.)
· Cash Flow from Operating Activities. Management estimates net cash provided by operating activities for the three months ended September 30, 2016 to be approximately $89.6 million, an increase of 71.0% compared to net cash provided by operating activities of $52.4 million for the third quarter of 2015. The Company has made favorable progress to date on its initiative to improve cash generation and reduce unbilled costs and also had strong collections in the third quarter of 2016 associated with the timing of project billing cycles.

The Company’s actual results could differ materially from these estimates based on the Company’s completion of the financial results reporting review process and other developments that may arise between now and the time the financial results for the Company’s third fiscal quarter of 2016 are finalized. As a result of the foregoing, while this information is presented with numerical specificity and considered reasonable by the Company, it is subject to change pending finalization and is not a comprehensive statement of the Company’s financial results for the three months ended September 30, 2016. During the course of the Company’s financial statement closing process, events may occur or the Company may identify items that would require it to make adjustments to the estimated financial information described above, and these adjustments could be material.

EBITDA and Adjusted EBITDA Description and Reconciliation

EBITDA and Adjusted EBITDA are supplemental measures of the Company’s performance. These measures are not required by, or presented in accordance with, GAAP.

EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA adjusted to exclude certain items that management believes are not representative of the Company’s core business.

Management presents EBITDA and Adjusted EBITDA because management believes the measures provide investors with important additional information to evaluate the Company’s operating performance. Management believes these measures are useful to investors because they are frequently used by securities analysts, investors and other interested persons in evaluating operating performance in comparison to other companies in the Company’s industry.

EBITDA and Adjusted EBITDA, however, are not measures of financial performance under GAAP, have not been audited and should not be considered an alternative to, or more meaningful than, net income as measures of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. Since EBITDA and Adjusted EBITDA are not measures determined in accordance with GAAP and thus are susceptible to varying interpretations and calculations, EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. EBITDA and Adjusted EBITDA have limitations as an analytical tool, and you should not consider them in isolation from, or as a substitute for analysis of, the Company’s financial information prepared in accordance with GAAP. Some of these limitations are:

· they do not reflect cash outlays for capital expenditures or future contractual commitments;
· they do not reflect changes in, or cash requirements for, working capital;
· they do not reflect interest expense or the cash requirements necessary to service interest, or principal payments, on indebtedness;
· they do not reflect income tax expense or the cash necessary to pay income taxes;
· they do not reflect available liquidity to the Company; and
· they are calculated differently, if at all, by other companies, including companies in the Company’s industry, thus limiting their usefulness as comparative measures.

The following table reconciles EBITDA and Adjusted EBITDA to net income for the periods presented:









Three Months Ended



September 30, 2016

September 30, 2015



(estimates)

(actual)



(in thousands of dollars, unaudited)

Net Income

$

28,801

$

19,677

Interest Expense

15,041

11,214

Income Tax Expense

19,125

14,278

Depreciation and Amortization

17,339

10,570

EBITDA

$

80,306

$

55,739

Legacy Litigation-Related Charge(a)

-

23,860

Adjusted EBITDA

$

80,306

$

79,599

(a)

In the third quarter of 2015, the Company recorded a non-cash, pre-tax charge of $23.9 million ($13.8 million after tax) for an adverse legal decision related to a long-standing litigation matter, for which the Company assumed liability for a minority interest in a joint venture as part of an acquisition in 2011.



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