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Mirant Corp. met Wall Street expectations with fourth-quarter earnings Wednesday, but announced another round of cost cutting that's expected to include layoffs at the company's Atlanta headquarters.
Struggling to regain its footing from industry turmoil triggered by Enron Corp.'s bankruptcy, Mirant will pare $3 billion from 2002 and 2003 spending, cut annual expenses by $150 million and suspend construction at two U.S. power plants.
A "significant" restructuring charge is expected in the first quarter. "We will have to downsize here in Atlanta," Mirant Chief Executive Marce Fuller said in an interview. "Yes, there will be people implications."
Mirant reported earnings from operations of $93 million, or 27 cents per diluted share, for the quarter ended Dec. 31. That met the expectation of analysts surveyed by First Call/Thomson Financial. Earnings for the fourth quarter a year ago, when Mirant was operating as a Southern Co. subsidiary, were $66 million, or 20 cents per share. Net income for the most recent quarter was $30 million, or 9 cents per diluted share. That included $66 million in one-time charges related to Mirant's bad debt from Enron's bankruptcy and a $3 million gain from the sale of Mirant's Chilean utility. For the full year, Mirant reported earnings from operations of $683 million, or $1.95 per diluted share, compared with $366 million, or $1.06, for 2000.
The company announced its second round of restructuring since Mirant had its credit rating marked down to "junk" status by Moody's Investor Service last month in the wake of Enron's bankruptcy. The failure of the Texas company has wracked the entire independent energy sector. Mirant's stock price has plummeted by more than half since Enron's collapse. Fuller said the restructuring will shrink the company's capital spending to $5 billion through 2006, or by more than half. The company had already reduced the five-year budget from $23 billion to $12 billion, she said. In addition, expenses will be reduced by $75 million this year and $150 million in 2003. That includes an annual savings of $50 million from the sale of Mirant's European energy trading business and as-yet-unspecified reductions in spending and payroll expenses.
Construction will also be suspended at plants in the San Francisco Bay area and suburban Detroit. Another $90 million in annual expenses will be cut from the company's corporate and Americas budget, most of it at the company's sprawling headquarters at Perimeter Center. Mirant employs 10,000 people worldwide, including about 1,500 at the Atlanta headquarters.
"We will lose some very good people," Fuller said in a memo to employees outlining the spending cuts Wednesday.
The company had no further details on how many jobs will be lost. Fuller said she anticipates "for bad market conditions to continue" and that the company can cut spending further if it needs to. But Fuller hopes the company has seen the worst. "What we have done is faced an ugly reality in the face and said, `What do we need to do to operate this company?"' she said. "There will be brighter days ahead." Mirant also reduced its earnings guidance for 2002, from between $1.90 and $2 per share to between $1.60 and $1.70. It expects earnings will be flat in 2003, but expects growth of 10 percent to 15 percent annually, on average, over the next five years. Mirant shares closed Wednesday at $10.05, up 4 cents. The company announced its earnings after the market closed.
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