Westinghouse Electric Corp. slashed its quarterly dividend to 18 cents a share from 35 cents yesterday and announced accounting changes that are expected to reduce first-quarter earnings by about $300 million, or 88 cents a share.
The dividend cut was widely expected because of Westinghouse's huge losses last year on real estate and "junk" bond investments made by its financial-services subsidiary. Those investments cost Westinghouse more than $1.68 billion in the third quarter and led to 4,000 layoffs as management tried to cut costs. The Westinghouse Credit subsidiary's losses caused the parent company to lose $1.09 billion last year.
Westinghouse recently sold some of the subsidiary's assets and has put others on the auction block.
In a statement yesterday, Westinghouse also said it would comply with new accounting rules covering the health benefits of retired employees. The change will cost the company $750 million. A separate change in accounting for income taxes will add $450 million to its income.
The Westinghouse board also authorized the company to issue about $500 million in preferred stock that would convert to common stock in three years. The preferred stock is limited in how far it can rise in value. The shares pay higher dividends than common stock. Westinghouse has said it wants to raise $900 million in new equity.
Westinghouse's stock gained 12 1/2 cents yesterday to close at $18.375 on the New York Stock Exchange.
The firm's pension fund, which has been partly financed with Westinghouse common stock instead of cash, improved its performance in the quarter. The company said its contribution of common stock resulted in a $350 million restoration of shareholders' equity in the fund.
"These steps are consistent with our determination to strengthen the company and complement our recent actions," said Paul E. Lego, the company's chairman.
"Those actions," he said, "included the establishment of a $6 billion line of credit, a $1.68 billion valuation provision for our financial-services subsidiary, the generation of $700 million in cash from the sale of financial-services assets, and implementation of a $200 million corporate-wide cost-reduction program."