Redrafting Charter

Cabler restates financials, unveils credit plan

Paul Allen’s Charter Communications gave battered investors some comfort Tuesday, reporting and restating financial results, clarifying its accounting and reassuring Wall Street it won’t default on interest payments this month.

Cabler also said Allen, the billionaire Microsoft co-founder and DreamWorks investor, has offered to provide a backup credit facility of up to $300 million to buttress his highly disappointing cable foray.

Charter shares closed up 24% at $1.03 after surging 43% early in the day. Now a penny stock, the shares traded at about $11 a year ago and near $25 in 2001. It’s the nation’s third-largest cable company, with nearly 6.6 million subs.

“They addressed what was a vacuum of information previously and brought the level of uncertainty down a notch,” said cable analyst Gary Farber, of SunTrust Robinson & Humphrey.

Delayed filing

Still, many questions remain. Charter execs didn’t take any queries during a conference call to lay out their numbers. They said they had asked the Securities & Exchange Commission for an extension to file an audited year-end financial report. The 10K, as it’s called, was due Tuesday.

The SEC and the Dept. of Justice are investigating Charter’s accounting. Cleaning up its books, company on Tuesday restated $292 million in revenue and $597 million in cash flow over the past three years. It provided a laundry list of items that it had classed as revenue that shouldn’t have been, as well as costs that it now will expense as they incurred, instead of spreading them over many years. Charter also unveiled what it called a $405 million error in overstated depreciation and amortization expense.

It’s not pretty. But the idea is that by coming clean, company’s auditors will sign off on its numbers, and the company can move forward. “Audited financials are a basic requirement for a public company,” Farber said.

Still, Wall Streeters don’t fully exclude the possibility that the company may be forced to file for Chapter 11 down the road, especially if the SEC and DOJ investigations drag on — and if money runs out and Allen won’t foot the bill. And there have been rumors that corporate raiders are snapping up Charter’s bonds.

Allen has said in the past that he might consider taking the company private.

4Q growth

Charter said revenue for the fourth quarter rose 13% to $1.2 billion, with cash flow up 14% to $457 million. For full-year 2002, revs grew 15% to $4.6 billion and cash flow rose 16% to $1.8 billion. While the company has been losing analog subscribers, largely to satellite, growth came from strong sales of high-speed digital cable. Charter’s systems have been mostly rewired to provide advanced services.

Operating losses swelled to $4.6 billion, due mostly to a $4.3 billion one-time impairment charge. Company also had significant restructuring costs, including severance, as it slashed its workforce by about 1,300 people.

Charter had $450 million in cash as of March 31 and can’t borrow any more until it submits its 10K. Company said it made interest payments that were due Tuesday and will honor another payment due April 15.

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