Charter Communications Inc. missed the March 31 deadline to file its 10-K
annual report with the Securities and Exchange Commission, but it released
unaudited 2002 financial results early Tuesday that were better than many
Charter asked the SEC Tuesday afternoon for a 15-day extension to
file the 10-K, stating that it needed the extra time to complete the reaudit of its financial statements for the years 2000 and 2001 and the ongoing audit of its 2002 financials.
Although missing the deadline technically puts Charter in default on about
$17 billion in bank and bond debt, the St. Louis-based MSO has a 30-day grace
period to make the appropriate financial filings. But until then, the company is
unable to draw down on its bank facilities.
In the interim, chairman Paul Allen has offered to provide Charter with a
$300 million backup credit facility. Charter said it has appointed a special
committee of its board of directors to evaluate the proposal.
According to UBS Warburg LLC cable-debt and equity analyst Aryeh Bourkoff,
Allen's offer is seen mainly as a negotiating tool in Charter's discussions with
its bank lenders.
In a prepared statement, Charter said fourth-quarter revenue was up 13
percent to $1.2 billion, with cash flow increasing 14 percent to $457
For the year, revenue rose 15 percent to $4.6 billion and cash flow was up 16
percent to $1.8 billion.
Charter also restated operating results for 2000 and 2001 to comply with
Generally Accepted Accounting Principals.
In addition, the MSO said it made adjustments "for transactions that lacked
appropriate or necessary supporting documentation or in instances where mistakes
were made in computations or applications of approved policies."
As a result, Charter reduced its reported 2000 revenue by about 3 percent, or
$108 million, and lowered reported cash flow by $195 million, or 12 percent. In
2001, reported revenue was adjusted downward by 4 percent, or $146 million, and
reported cash flow declined 16 percent, or $292 million.
For the first three quarters of 2002, Charter said, revenue was reduced by 1
percent, or about $38 million.
The 2002 restatement was much better than many Wall Street observers
expected. "Those are manageable numbers," said one member of the financial
community who asked not to be named.
Investors also appeared relieved by the news, driving the stock up about 29
percent (24 cents per share) to $1.07 in morning trading. It is the first day in
nearly one month that Charter stock has traded at over $1 per share.
Charter stock ended up closing Tuesday at $1.03 apiece, up 20 cents, or more than 24 percent.
"With these restatements essentially complete, we have a baseline from which
to measure Charter's business and results of operations going forward," Charter
CEO Carl Vogel said in a prepared statement.
Charter also said it laid off about 1,300 employees between Dec. 31 and March
31, reducing its work force to 17,300 from 18,600, and the company added that
more layoffs were expected in 2003.
Charter lost a total of 357,000 subscribers in 2002. In a conference call
with analysts, Vogel said Charter would redouble its efforts to win back