Mirant Thickens Haze With New Guidance
Mirant
(MIR)
has thrown some new and complicated figures at investors long deprived of any numbers at all.
A week after filing three years' worth of financial statements, Mirant followed up on Wednesday by providing financial guidance for the future. But by using an unfamiliar metric, the company left information-starved investors in the dark again.
The company said it expects to earn $800 million in "adjusted EBITDA," a nonstandard measure of earnings before interest, taxes, depreciation and amortization, this year. But Mirant offered no traditional guidance for earnings per share, as it has in the past.
"The company believes adjusted EBITDA provides a more meaningful measure of the company's underlying operating performance," Mirant stated in a prepared release Wednesday.
The market seemed hesitant to embrace the new figure. The stock dropped more than 5% to $2.99 before it bounced back to within a nickel of Tuesday's $3.17 closing price on Wednesday.
Translation
Even analysts found themselves grappling with Mirant's guidance. As soon as the company began taking questions during a conference call that followed Wednesday's announcement, a UBS Warburg analyst asked Mirant to translate adjusted EBIDTA into some kind of operating cash flow estimate. The company instead offered a complicated formula that might approximate that figure. In essence, Mirant told investors to subtract a number of factors -- including deferred purchase costs, restructuring charges, equity income from affiliates and interest expenses -- to determine what might be left as operating cash flow.
"We purposely stopped above the line," CEO Marce Fuller said, explaining that Mirant is waiting to finalize a refinancing package -- the biggest assumption in its current guidance -- before it fine-tunes its projections.
Without that financing, Mirant warned in its long-awaited annual report last week, the company could be forced to seek bankruptcy protection. For now, the company is relying on bank waivers -- excusing a high debt ratio triggered by huge charges last year -- to provide a few more weeks to hammer out a final $5.3 billion financing deal. The waivers expire May 29 but can be extended through the middle of July.
"In the next 60 days, we're going to get a lot of clarity in terms of what this restructuring is going to look like," Fuller assured analysts. "I am optimistic about our refinancing efforts."
In its statement Wednesday, Mirant said it plans to offer security in "substantially all of its unencumbered assets, as well as more favorable terms" to snag the financing it needs to operate until market conditions improve.
Night Falls
But Mirant admits that things will probably get worse before they get better. The company -- which lost $2.4 billion, or $6.06 a share, last year because of massive charges -- said it expects EBITDA to marginally decline in 2003 and remain depressed through 2004. So the company plans to cut costs and sell assets to help fund operations until an expected recovery in 2005.
Despite the looming battles, Mirant remains decidedly upbeat.
"Certainly, we have a lot of work ahead of us," Fuller admitted. "But I think our people are up for the challenge."
The stock clearly reflects that enthusiasm. While down sharply from its $47 peak two years ago, it has nearly tripled in the past two months alone.