Westinghouse Earnings Hurt by Phar-Mor
Westinghouse Electric Corp. reported no earnings per share in the third quarter as it posted $155 million in charges, primarily to cover losses on its holdings in troubled Phar-Mor Inc.
The company, in a statement released after the stock market closed, said net income was $14 million, contrasted with a loss of $1.5 billion, or $4.86 a share, last year. The year-ago loss reflected a $1.7-billion charge at its financial services unit and a $160-million restructuring that included the layoffs of 4,000 people.
Revenue fell to $3.04 billion from $3.4 billion a year ago.
Most analysts had expected at least a few cents a share in earnings after the charge.
“These results are not what I would call encouraging,” said Nicholas Heymann of County NatWest USA, who expected Westinghouse to report earnings of 8 cents to 9 cents a share after the charge.
More importantly, analysts said, is that the industrial conglomerate didn’t announce a further restructuring to address inefficiencies that have plagued the company for years.
Westinghouse said $100 million of the charge covered losses by its Westinghouse Financial Services Inc. unit on investments in Phar-Mor. The Youngstown, Ohio-based discount retailer filed for Chapter 11 bankruptcy protection in August after management discovered an alleged $350-million scheme to hide losses and cover overstated income.
The remaining $55 million in charges were used to increase reserves of Westinghouse Financial, whose portfolio is fraught with bad real estate loans.
Operating profit for the quarter was $89 million, with a profit margin of 2.9%, contrasted with a loss of $1.6 billion a year ago.
“Order rates were down substantially in most operations for the quarter and nine months because of continued weak economic conditions in most of our markets,” Chairman Paul E. Lego said in a statement.
Operating profit was up in the conglomerate’s broadcasting, electronic systems, environmental systems and industries groups, primarily from cost-cutting plans initiated last year, the company said. Revenue at Westinghouse’s Knoll products group and power systems segments were down for the quarter, as was profit at its financial services unit, the company said.
