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Williams subsidiary triggers big loss Company takes steps to strengthen finances by cutting capital expenditures, laying off 450 employees Allen Baker PNA Contributing Writer
Williams Cos. Inc. has taken some painful steps to improve its balance sheet after the company’s stock took a big hit in the wake of the Enron scandal. After delaying its earnings report in January, Williams released its annual results earlier this month, posting a $477.7 million loss.
Williams, which owns a refinery in North Pole and a fuel distribution system in Alaska, spun off its telecommunications unit a year ago, but guaranteed some debt of that unit when it was distributed to shareholders. When Williams Communications ran into trouble, investors pushed the stock price down 40 percent in late January.
The fact that Williams — like Enron — has profitable and complex energy trading operations didn’t help. Williams had to write off $91 million for credit exposure related to Enron. Then came the bankruptcy filing by Global Crossing, whose business is similar to that of Williams Communications.
Williams said it was moving to strengthen its finances by cutting a planned $4 billion budget for capital expenditures to $2.3 billion. It announced 450 job cuts to reduce operating expense by $50 million. The company also made deals with Williams Communications lenders to take over payments on $1.4 billion in debt it had guaranteed, and agreed to sell a pipeline from Wyoming to California for $450 million, with buyer Berkshire Hathaway Inc, also assuming $510 million in debt. More conservative ratings “Williams has made a productive start to 2002,” said Steve Malcolm, the president and CEO, in a statement. “Williams has a history of adapting to new realities and remaking itself as a stronger company. That’s what we’re doing.
“In less than three months, we have met the challenge to conform to more conservative ratings standards and further strengthen our balance sheet,” Malcolm said. “Once we complete all of the steps we’ve announced, we expect to reduce our fully loaded debt-to-capital ratio from approximately 71 percent at year-end 2001 to approximately 57 percent by the end of this year — no small feat for an asset-rich company like Williams.”
When the accounting dust cleared for 2001, Williams said it took a total of $2.05 billion in charges against 2001 earnings related to the communications company, or $1.31 billion after taxes. That triggered the $477.7 million loss, compared with a profit of $524.3 million in 2000.
Overall, Williams had operating income from continuing operations of $835.4 million for the year, down 13 percent from 2000’s $965.4 million. That came on revenues of $11.0 billion, up 15 percent from 2000’s $9.6 billion.
Results for the fourth quarter were still a bit cloudy, but in January the company estimated it would show $67.1 million in profit from continuing operations, compared with $412.8 million in the 2000 quarter. The 2001 quarter’s results include a $170 million write off involving the company’s investment in a soda ash business.
Malcolm predicted Williams would show a 15 percent year-over-year increase in earnings per share beginning in 2003.
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