News

Charter Stock Dips Below 80 Cents

3/16/2003 7:00 PM Eastern

Charter Communications Inc.'s stock came close to hitting a new 52-week low last week, amid continued pressure stemming from uncertainty surrounding its ability to file required financial statements with the federal government.

Charter closed at 79 cents on March 12, up a penny. During the day, it was as low as 77 cents per share, just one cent off its 52-week low of 76 cents.

Charter's market capitalization also took a big hit, dropping to $232.7 million on March 12, or about one-quarter of its market cap from three months ago (Sept. 12) of $892.8 million. Two years ago, Charter's market cap was about $6.7 billion.

Report to SEC due

Driving the decline in the stock, according to most analysts, are questions surrounding Charter's ability or inability to file fourth-quarter and annual financial statements with the U.S. Securities and Exchange Commission on time.

Charter has until March 31 to release fourth-quarter financial results, but could get another 30-day grace period to file the necessary documents with the SEC.

Other publicly traded MSOs filed annual "10-K" reports with the SEC in January and February, but Charter has been tight-lipped about when it will file.

Charter spokesman Dave Andersen said he has been fielding daily calls from investors about the St. Louis-based MSO's filing status.

"All I can say is that I have no indication that we won't file by the deadline," Andersen said.

Failure to file on time could also trigger debt covenants, shortening the time Charter has to pay those obligations.

As of Sept. 30, Charter had outstanding debt of about $18.5 billion — $9.4 billion of high-yield debt, $7.7 billion in bank credit facilities and $1.4 billion in convertible senior notes.

Charter apparently is waiting for an extensive audit of its 2002 books by new independent auditor KPMG LLP.

Some observers said last week that the longer the audit takes — KPMG also is looking into the years 2000 and 2001 — the more they believe something could be seriously wrong.

Average daily volume for Charter stock, normally in the 2 million-to-3 million-share range, spiked to almost 9 million shares on March 6 and 5.6 million shares on March 7.

In a research note late last month, UBS Warburg cable debt and equity analyst Aryeh Bourkoff said Charter has more to contend with than a potentially tardy 10-K filing.

Looks 'volatile'

Aside from a restructuring of its debt, which Bourkoff expects to take place some time this year, the MSO has to find a new chief financial officer and deal with ongoing grand jury and SEC investigations.

"We expect the securities to continue to be volatile, reacting to speculation and news related to potential restructuring options and scenarios," Bourkoff wrote in a report.

Charter has been under the gun since August, when it was announced that a federal grand jury in Missouri was investigating certain accounting practices, including the way Charter counts subscribers.

In December, Charter said it had terminated CFO Kent Kalkwarf and chief operating officer Dave Barford, in part because of the grand jury investigation. To date, no charges have been filed against Charter or any of its officers or directors.

Last month, vice president of programming Patty McCaskill and senior vice president of operations for the Southeast region David McCall resigned, with McCaskill joining former Charter CEO Jerry Kent's St. Louis investment company, Cequel III.

Also in December, Charter hired former Cox Communications Inc. COO Maggie Bellville as its executive vice president and COO. Charter has been looking for a CFO, but to date has not hired anyone to fill that slot.

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