Mirant Reports $2.4 Billion LossMay 1, 2003 | AP
Mirant Corp. reported a $2.4 billion loss last year amid a sharp revenue drop and hefty restructuring charges as it released an audit that found nearly $190 million in income overstatements since 2000.
Atlanta-based Mirant said 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.
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. In November, the company said 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.
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.
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.
Mirant said it's still preparing revised quarterly earnings for 2001 and 2002, and would issue its first quarter earnings for 2003 as soon as possible.
Chief executive Marce Fuller said the audit did not uncover fraud. The company attributed the misstatements to accounting errors and errors in its gas inventory. It has replaced its chief financial officer.
Mirant shares have risen above $3 in recent weeks on news that it has received temporary waivers from its banks related to its debt. But Wednesday it cautioned there is a "going concern" related to its financing of $8.9 billion in debt because of uncertainty related to those efforts.
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.
Mike Worms, an analyst with Gerard Klauer Mattison & Co. in New York, said Mirant needs better demand and prices to fully restore its fiscal health.
"Long term, I think Mirant and the other companies in this space need to see pricing improve over a sustainable period of time," Worms said. "We need to see the energy supply situation and the demand come back into a more normal relationship than it is now."
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 it acted ethically and within California regulations during 2000 and 2001.