Williams Paying $290 Million to Settle Suit
Tuesday, June 13th 2006, 10:56 am
By: News On 6
TULSA, Okla. (AP) _ Williams Cos. Inc. will pay $290 million to settle a class-action shareholder lawsuit, but company officials say the settlement is not expected to slow its continuing recovery from accounting and liability woes.
Williams announced the settlement early Tuesday. The settlement covers investors who purchased Williams securities between July 24, 2000, and July 22, 2002.
The lawsuit stemmed from accounting practices related to energy trading and potential liability associated with Williams Communications Group Inc., a former unit of Williams. Williams guaranteed more than $2 billion of that company's debt. Williams Communications later went bankrupt.
``This is just a part of resolving some of the issues that were part of the hardest time for our company,'' Williams spokesman Kelly Swan said.
Williams shed operations, employees and business units to survive when the energy trading unit went from producing more than half of the company's profits in 2000 and 2001 to losing hundreds of millions in 2002. The loss reflected a ``significant decline in the forward mark-to-market value'' of long-term energy contracts, the company said.
Mark-to-market accounting came under heavy scrutiny after the 2001 collapse of Enron Corp. Under mark-to-market accounting, the expected profits from multiyear contracts are booked immediately, even though it will take years to collect.
Williams, now a natural gas company, has maintained a liquidity of $1 billion for some time, Swan said. The company is adding employees and increasing gas operations, he said.
``We're very focused on growing,'' Swan said. ``We're reinvesting in our core operations and we intend to produce more gas than ever.''
Williams employs more than 1,000 at its Tulsa headquarters and currently has 70 openings it's trying to fill, Swan said.
``We've been able to recover very handsomely,'' Swan said.
The settlement will be funded through a combination of insurance proceeds and cash on hand. Of the total settlement, Williams expects to pay about $145 million to $220 million in cash to fund the settlement, while it expects the balance to be funded by its insurers.
Williams plans to record a second-quarter, pretax charge in the same dollar range as its expected cash payment. On an after-tax basis, the charge is estimated to be approximately $98 million to $148 million, or $0.16 to $0.24 per diluted share.
Williams and the plaintiffs plan to file definitive settlement agreements in early August with the U.S. District Court for the Northern District of Oklahoma. The settlement would be funded within 30 days of the court's preliminary approval of the agreement, which could occur as soon as mid-August.
Williams and various other parties to the agreements did not admit to any liability by the company, its directors or officers. In addition, there were no findings of any violation of federal securities laws.
The agreement does not include the lawsuit filed by a group of Williams Communications shareholders against Williams. That suit is pending in federal court.
Shares of Williams fell $0.43, or 2%, to $20.59 on the New York Stock Exchange, in the middle of its 52-week range of $18.27-$25.72.