Posted on 04/30/2003 2:28:47 PM PDT by MeneMeneTekelUpharsin
ATLANTA (AP) - Energy supplier Mirant Corp., in a long-awaited audit, said Wednesday it overstated earnings by $188 million over a two-year period, and cited hefty restructuring charges as it reported a $2.4 billion loss for 2002. Atlanta-based Mirant had delayed the release of its 2002 earnings until completing the audit, which showed it overstated income by $159 million in 2001 and $29 million in 2000. Mirant announced in November that it overstated net income by $41 million from 1999 to 2002.
Accounting firm KPMG performed an independent audit of those years, and Mirant filed the findings with the Securities and Exchange Commission on Wednesday. Mirant said it's still preparing revised quarterly earnings for 2001 and 2002, and hopes to release its now-delayed first quarter earnings for 2003 as soon as possible. Chief executive Marce Fuller said the audit did not find any fraud. The company attributed the misstatements to accounting errors and errors in its gas inventory. It recently appointed a new chief financial officer.
"With the completion of the 2002 audit and reaudits of 2001 and 2000, we end a period that has been very frustrating for our stakeholders, employees and management," Fuller said. "This is a critical step in restoring confidence in Mirant." Shares of Mirant fell 15 cents, or 4.3 percent, to close Wednesday at $3.31 on the New York Stock Exchange. Mirant's stock has tripled in the last month and a half on news that it has received temporary waivers from its banks related to its debt. On Wednesday, however, it cautioned that there is a "going concern" related to its financing of its $8.9 billion in debt because of uncertainty related to those efforts. The stock is still down 90 percent from a peak of $47 on May 21, 2001.
In a proxy filing with the SEC, Mirant said it can give no assurances that the waiver will be extended beyond May 29. If it is not, or the company cannot find additional financing, it may be forced into bankruptcy, the filing says. Mirant's 2002 loss of $2.4 billion is equivalent to $6.06 a share, compared to a restated profit of $409 million, or $1.19 a share, for the prior year. The company did not provide a reconciliation of its earnings excluding one-time items. On that basis, analysts surveyed by Thomson First Call predicted a profit of $1.05 a share for 2002. Revenue for 2002 was $6.4 billion, a sharp decline from the $8.5 billion in revenue for the prior year. Mirant cited the adoption of new accounting provisions. "Despite a very challenging year, Mirant accomplished key objectives," Fuller said. "We significantly restructured our operations, exited several markets around the world, sold assets, closed offices and terminated power plant developments."
The changes resulted in hefty charges, including a restructuring charge and a non-cash impairment loss of $1.4 billion. Mirant also took writedowns and charges of $468 million for income tax on accumulated foreign earnings, $697 million for investments in Asia and $1.1 billion for deferred income tax valuation. The accounting issues were not Mirant's only problems in the past year. In December, it denied allegations that it intentionally purged potentially damaging data from its computers. The allegation was included in a shareholder lawsuit.
Around the same time, Mirant and several other companies were subpoenaed by a federal grand jury looking into allegations that they manipulated energy prices that led to California's energy crisis three years ago. Mirant has said repeatedly that it acted ethically and within California regulations during 2000 and 2001. In its proxy filing, Mirant said lawsuits and investigations of the company by the SEC and Justice Department related to the California situation could impact its future results.
The filing also notes that chief executive Fuller earned $800,000 in 2002 and was not given a raise this year. Fuller was eligible for an incentive for 2002 performance, but she recommended to the company that she receive no short-term incentive payout. Mirant, a spinoff of Southern Co., and its subsidiaries employ 7,000 people.
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