Cabler audit details troubles
NEW YORK — Just in time for Christmas, Adelphia Communications has turned in audited financial reports for the last three years to the Securities & Exchange Commission, a filing that brings the troubled cabler one step closer to emerging from bankruptcy and a potential sale to the likes of Time Warner and Comcast.
Filing marks the first time that the country’s fifth-largest cabler — and the largest in Los Angeles — has reported audited financial statements since 2000, and showed that Adelphia lost billions of dollars in 2001 and 2002, as well as nearly a billion last year.
Company logged the restated financial data with the SEC just after the markets closed Thursday and Wall Street headed home for the long holiday weekend.
According to the document, Adelphia was able to narrow its net losses in 2003 to $832.6 million against revenues of $3.61 billion.
Net losses in 2002 were $7.19 billion against revenues of $3.27 billion. In 2001, net losses were $6.12 billion against revenues of $3.31 billion.
SEC filing also revealed that Adelphia, which has been cooperating with the feds in their case against the founding Rigas family, has offered the SEC a $300 million settlement to resolve a civil action and has set aside a $175 million reserve.
“The filing is a major milestone for Adelphia,” said Adelphia chair-CEO Bill Schleyer, part of the management team brought in to take the cabler through the bankruptcy process.
“While the 10-K (filing) presents mostly historic data, it provides the clearest picture yet of the challenges that the company faced and the incredible amount of work that has been done over the last two years to transform Adelphia’s business, competitive position, financial reporting and corporate governance,” Schleyer continued.
Schleyer touted the fact that the company has continued to provide service to more than 5 million basic cable subscribers, as well as increasing its digital subs and high-speed Internet customers.
Despite Adelphia’s struggles, it is a coveted property for an array of potential suitors, with an estimated sale price of anywhere from $17 million-$20 million, according to Wall Street analysts. Time Warner and Comcast, which have submitted a joint bid, are believed to top the list.
For those suitors, the filing provides a critical view of the company’s health and financial history.
Schleyer told investors earlier this month that Adelphia has set a late January deadline for final bids, but the process could spill over to February. He also said the company could opt to emerge intact from Chapter 11 bankruptcy proceedings. Either way, he said a decision would be made in the first quarter of 2005.
The intensive audit took 20 months, requiring teams of accountants to restore order to the books and set financial statements right.
Company was plunged into turmoil when members of the Rigas family were arrested on charges of fraud and conspiracy for allegedly bilking their company out of $3.2 billion.
John Rigas, 80, and Timothy Rigas, 48, were convicted in July on the charges and await sentencing. Michael Rigas, 51, faces a retrial after the jury deadlocked.
Adelphia, which itself has filed a $3.2 billion lawsuit against the Rigases, filed for bankruptcy in 2002.
“The magnitude of the accounting challenge was stunning,” Adelphia chief financial officer Vanessa Whittman said.
Among other things, audit attributed the losses of the past several years to annual operating and programming costs nearing $2.5 billion, along with sizeable depreciation costs.
According to audit, operating losses in 2003 were $255.6 million; in 2002, $4.75 billion; and in 2001, $5.31 billion.
Company said it couldn’t restate results for 1999 and 2000 because it lacked the documentation for amounts appearing on the balance sheet.
In a separate SEC filing, Adelphia said it has been granted an extension to Jan. 31 to deliver an audited balance sheet and statement of income and cash flows for 2002 and 2003 for its debtor-in-possession lenders.
Adelphia shares were up 28% to close at 32¢ in trading Thursday.
(Wire services contributed to this report.)