Texaco Posts Loss of $4.76 Billion in Fourth Quarter : Charges Related to Legal Costs Wipe Out Any Profit for 1987

Times Staff Writer

Texaco Inc., apparently nearing the end of its bankruptcy, reported a fourth-quarter loss of $4.76 billion Friday. The huge loss, which was expected, is thought to be the second largest on record.

The deficit, slightly smaller than AT&T;'s loss of $4.87 billion in the final quarter of 1983, reflected almost $5 billion in special one-time charges related to the bankruptcy and settlement of its long legal fight with Pennzoil.

When those matters are discounted, Texaco was profitable and showed signs of financial improvement as a result of last year's rebound in crude oil prices compared to the price collapse of 1986.

As Texaco was announcing its year-end financial results, U.S. Bankruptcy Judge Howard Schwartzberg approved the oil company's financial disclosure statement, setting the stage for shareholders to vote on the firm's reorganization plan.

Texaco said it will send the bulky document to its more than 500,000 shareholders in the next few days. Shareholder ballots are due March 21, and Schwartzberg set a confirmation hearing for the next day.

'No Surprises'

Texaco filed for bankruptcy protection in April, 1987, while it pursued appeals of a $10.3-billion damage award to Pennzoil. The award stems from a Texas jury's finding that Texaco wrongly interfered with a deal for Pennzoil to take control of Getty Oil. Texaco acquired Getty for itself.

An out-of-court settlement calling for Texaco to pay Pennzoil $3 billion triggered Texaco's effort to emerge from bankruptcy with a reorganization plan that calls for selling 60 million barrels of oil and selling interests in refining operations to joint-venture partners.

That plan, in turn, necessitated the charges against earnings that were reflected in Friday's dismal financial results. As previously announced, the charges include a writedown of $2.1 billion in assets and a charge of $2.8 billion to reflect its settlement with Pennzoil.

"I didn't see any surprises" in the financial results, said oil analyst Thomas Lewis of Duff & Phelps in Chicago. Lewis said Texaco's operating earnings of $514 million were about what he expected.

No Mention of IRS Notice

"Texaco's operating earnings . . . improved steadily through the year, with the fourth quarter of 1987 reflecting a substantial increase over the depressed earnings for the same quarter in 1986," Chief Executive James W. Kinnear said.

The October-December loss, equal to $19.61 per share, contrasted with a year-earlier profit of $50 million, or 21 cents a share. Revenue rose to $9.4 billion from $7.8 billion.

Texaco's loss for the year came to $4.4 billion as the fourth-quarter charges wiped out the earnings accumulated over the first nine months. In 1986, the company earned $725 million. Revenues in 1987 rose to $35.3 billion versus $32.6 billion the previous year.

The company made no mention of its recent notification by the Internal Revenue Service that it could be subject to back taxes of $6.5 billion. As Texaco had signaled earlier, part of its fourth-quarter writedown reflects the setting aside of money to pay back taxes. But the company didn't expect the tax bill to be so big.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World
68°