Charter Says It Overstated Sales

Troubled cable giant Charter Communications Inc. said Tuesday that it overstated its sales and cash flow figures back to 2000, and the company lost $1.87 billion in the fourth quarter in conforming with new accounting rules.

The St. Louis-based company, controlled by billionaire and Microsoft Corp. co-founder Paul Allen, remains under criminal investigation for the way it counted subscriptions and capital expenditures.

Still, investors were heartened because Allen has offered to lend the debt-laden company $300 million so it could meet its credit payments. Charter shares closed up 24% to $1.03 on Nasdaq. A year ago, Charter stock traded at $11.53 a share.

“We view this as a positive release overall for Charter bondholders,” UBS Warburg analyst Aryeh Bourkoff wrote Tuesday in a research report. “It substantially clarifies results and operating progress as well as validates our expectation that the company would make its upcoming coupon payments.”

Charter is the nation’s third-largest cable company, with 6.7 million subscribers nationwide and about 500,000 in Southern California. It said it would request an extension for filing its annual report to the Securities and Exchange Commission.

Chief Executive Carl Vogel would not take questions from analysts during the call. However, Vogel did say that the company “does not anticipate there will be further adjustments” stemming from inquiries into its accounting practices.

The company booked several items in the latest quarter, including a $31-million charge for severance and related costs to reduce its workforce as well as $4 million in legal costs. The company has slashed more than 1,300 jobs during the last three months. Charter said it now has 17,300 workers. More cuts, however, are expected.

Charter, hobbled by about $21 billion in debt, is the second major cable company to face questions over its accounting. Adelphia Communications Corp. revealed last year that it had inflated its earnings, leading to the company’s bankruptcy filing and indictment of its founder John Rigas and several others.

Charter’s fourth-quarter earnings reflected an impairment charge of $4.64 billion because of new accounting rules governing intangible assets and goodwill. Operating losses increased to $4.59 billion from $333 million the previous year.

Charter’s fourth-quarter loss, on revenue of $1.19 billion, was $6.36 a share. Analysts surveyed by Thomson First Call had anticipated a loss of 63 cents. During the fourth quarter of 2001, Charter lost $302 million, or $1.03, on revenue of $1.05 billion.

Reuters was used in compiling this report.