Adelphia dismisses Deloitte as its accountant
PHILADELPHIA (AP) – Struggling Adelphia Communications, under investigation for questionable accounting practices between the company and partnerships controlled by the family of founder John J. Rigas, said Monday it had dismissed Deloitte & Touche as its accountant. The nation’s sixth-largest cable television company also said in a Securities and Exchange Commission filing that it was lowering its revenue figures for 2000 and 2001 and lowered its subscriber count by more than 47,000 to 5.76 million.
Adelphia revised its 2001 revenue figures to $3.51 billion from the $3.58 billion stated in its earnings report, and to $2.55 billion in 2000 from $2.6 billion.
One way revenue figures were inflated, the company said, was through agreements with vendors of digital converter boxes to raise the price the company paid by $26 per set-top box. The company then received $26 per box from the vendors for “marketing support,” though the SEC filing said it “did not provide a material amount of marketing support.”
The company improperly treated the “marketing support” payments as a reduction in operating expenses, and treated its payments for the boxes as capital expenditures, increasing its earnings before income taxes, depreciation and amortization by about $54 million in 2001 and $37 million in 2000, the document said. The company has been under investigation by the Securities and Exchange Commission and two federal grand juries since disclosing off-the-books lending now estimated at more than $3 billion to the Rigases and Rigas-controlled companies.
Company officials said in the SEC filing that as a special committee of the newly constituted board investigates, “additional facts not now known to the company may be discovered.”
Officials at Deloitte & Touche didn’t immediately return calls for comment on its dismissal, which Adelphia said occurred Sunday. Adelphia said it was hiring a new accounting firm, but did not say who the new accountant would be. Adelphia spokesman Eric Andrus declined to elaborate or to comment on speculation that Adelphia may seek protection from creditors under the federal bankruptcy laws.
“We believe that a bankruptcy filing by Adelphia Communications is likely an imminent event,” UBS Warburg analyst Aryeh Bourkoff said in a note to clients.
Bourkoff noted that the company faces the expiration Saturday of a 30-day grace period on $44.7 million worth of debt payments it missed in mid-May.
Adelphia revealed the off-the-books borrowing in March and has since missed deadlines for filing reports, including its annual 10-K financial statement, has been delinquent on debt payments and has defaulted on agreements with creditors. The company announced May 15 that an audit Deloitte & Touche had been conducting in an effort to complete the 10-K report had been suspended.
A three-member special committee of independent board members has been investigating questions the audit raised, appointing lawyers, forensic accountants and financial advisers to review the books and interview employees at Adelphia’s headquarters in rural Coudersport in northern Pennsylvania.
Adelphia said Monday the committee was continuing to investigate a broad range of questions including the relationships and transactions between the company, the Rigases, and the Rigas-controlled partnerships. John Rigas and his three sons stepped down in May from executive positions and board seats at company Rigas founded in 1952.
Adelphia’s stock, delisted from the Nasdaq Stock Market on June 3, had fallen 3 cents to 27 cents a share in over-the-counter trading Monday. It was trading at $20.39 a share before the off-the-books debt was disclosed in March.
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