<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
-------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 1-4174
---------------------------------------------------------
THE WILLIAMS COMPANIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 73-0569878
- --------------------------------------- ----------------------------------------
(State of Incorporation) (IRS Employer Identification Number)
ONE WILLIAMS CENTER
TULSA, OKLAHOMA 74172
- --------------------------------------- ----------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number: (918) 588-2000
----------------------------------------
</TABLE>
NO CHANGE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
<TABLE>
<S> <C>
Class Outstanding at July 31, 1994
- --------------------------------------- ----------------------------------------
Common Stock, $1 par value 104,254,278 Shares
</TABLE>
<PAGE> 2
THE WILLIAMS COMPANIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Income--Three Months and Six Months
Ended June 30, 1994 and 1993 2
Consolidated Balance Sheet--June 30, 1994 and
December 31, 1993 4
Consolidated Statement of Cash Flows--Six Months
Ended June 30, 1994 and 1993 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 20
Exhibit 11--Computation of Earnings Per Common and Common-
equivalent Share
Exhibit 12--Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividend
Requirements
</TABLE>
-1-
<PAGE> 3
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
-----------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
----------------------- -------------------------
1994 1993 1994 1993
------- ------ -------- --------
<S> <C> <C> <C> <C>
Revenues:
Interstate Natural Gas Pipelines:
Northwest Pipeline $ 57.8 $ 73.9 $ 122.5 $ 139.4
Williams Natural Gas 45.7 26.4 91.5 212.1
Williams Field Services Group 139.3 151.9 294.7 415.9
Liquids Pipeline/Energy Ventures:
Williams Pipe Line 52.0 39.4 99.9 75.4
Williams Energy Ventures 40.4 45.1 52.6 57.5
WilTel 315.8 224.3 588.1 435.1
Intercompany eliminations (17.1) (19.1) (33.4) (42.7)
------ ------ -------- --------
Total revenues 633.9 541.9 1,215.9 1,292.7
------ ------ -------- --------
Profit-center costs and expenses:
Costs and operating expenses 428.8 387.8 819.3 932.5
Selling, general and administrative expenses 88.5 74.0 173.5 148.1
Other income--net (1.1) (4.7) (5.1) (6.6)
------ ------ -------- -------
Total profit-center costs and expenses 516.2 457.1 987.7 1,074.0
------ ------ -------- --------
Operating profit:
Interstate Natural Gas Pipelines:
Northwest Pipeline 27.0 28.9 57.3 49.7
Williams Natural Gas 9.0 (10.2) 23.3 34.8
Williams Field Services Group 34.8 29.7 63.4 69.4
Liquids Pipeline/Energy Ventures:
Williams Pipe Line 13.5 13.2 28.1 22.2
Williams Energy Ventures .8 3.7 1.0 6.3
WilTel 32.6 19.5 55.1 36.3
------ ------ -------- --------
Total operating profit 117.7 84.8 228.2 218.7
General corporate expenses (6.9) (8.4) (15.0) (15.8)
Interest accrued (35.5) (41.8) (75.2) (84.7)
Interest capitalized 1.6 .9 3.3 6.7
Investing income 18.9 21.9 31.0 36.4
Gain on sales of assets (Note 2) 22.7 2.1 22.7 97.5
Other expense--net (1.5) (2.1) (.4) (2.8)
------ ------ -------- --------
Income before income taxes 117.0 57.4 194.6 256.0
Provision for income taxes (Note 3) 43.0 21.3 67.8 94.3
------ ------ -------- --------
Income before extraordinary loss 74.0 36.1 126.8 161.7
Extraordinary loss (Note 4) (11.1) - (11.1) -
------ ------ -------- --------
Net income 62.9 36.1 115.7 161.7
Preferred stock dividends 2.2 2.2 4.4 7.3
------ ------ -------- --------
Income applicable to common stock $ 60.7 $ 33.9 $ 111.3 $ 154.4
====== ====== ======== ========
</TABLE>
See accompanying notes.
-2-
<PAGE> 4
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF INCOME (Concluded)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------- -------------------------
1994 1993 1994 1993
------- ------ -------- --------
<S> <C> <C> <C> <C>
Primary earnings per common and
common-equivalent share:
Income before extraordinary loss $ .69 $.33 $1.17 $1.61
Extraordinary loss (.11) - (.11) -
----- ---- ----- -----
Net income $ .58 $.33 $1.06 $1.61
===== ==== ===== =====
Average shares (thousands) 104,500 95,948
Fully diluted earnings per common and
common-equivalent share:
Income before extraordinary loss $ .69 $.32 $1.17 $1.53
Extraordinary loss (.11) - (.11) -
----- ---- ----- -----
Net income $ .58 $.32 $1.06 $1.53
===== ==== ===== =====
Average shares (thousands) 104,565 102,496
Cash dividends per common share $ .21 $.19 $ .42 $.38
===== ==== ===== ====
</TABLE>
See accompanying notes.
-3-
<PAGE> 5
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Millions)
--------------------------------
June 30, December 31,
1994 1993
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 29.4 $ 64.3
Receivables 336.0 360.1
Inventories 128.9 108.2
Recoverable contract-reformation and gas costs 23.5 24.4
Deferred income taxes 37.7 40.3
Other 35.2 29.2
--------- ---------
Total current assets 590.7 626.5
Investments (Note 2) 385.8 437.1
Property, plant and equipment, at cost 5,194.5 5,033.1
Less accumulated depreciation and depletion (1,457.6) (1,354.5)
--------- ---------
3,736.9 3,678.6
Recoverable contract-reformation and gas costs 52.8 59.9
Other assets and deferred charges 246.7 218.3
--------- ---------
Total assets $ 5,012.9 $ 5,020.4
========= =========
</TABLE>
See accompanying notes.
-4-
<PAGE> 6
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Millions)
--------------------------------
June 30, December 31,
1994 1993
----------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ 48.8 $ -
Accounts payable 320.1 298.4
Accrued liabilities 414.3 380.3
Long-term debt due within one year (Note 6) 31.6 54.0
-------- -------
Total current liabilities 814.8 732.7
Long-term debt (Notes 4 and 6) 1,432.7 1,604.8
Deferred income taxes 632.0 625.2
Deferred income and other liabilities 316.7 333.7
Contingent liabilities and commitments (Note 7)
Stockholders' equity:
Preferred stock, $1 par value, 30,000,000 shares
authorized, 4,000,000 shares outstanding 100.0 100.0
Common stock, $1 par value, 240,000,000 shares
authorized, 104,143,989 shares outstanding in
1994 and 103,078,505 shares outstanding in 1993 104.1 103.1
Capital in excess of par value 984.0 959.1
Retained earnings 631.3 563.7
Unamortized deferred compensation (2.7) (1.9)
-------- --------
1,816.7 1,724.0
-------- --------
Total liabilities and stockholders' equity $5,012.9 $5,020.4
======== ========
</TABLE>
See accompanying notes.
-5-
<PAGE> 7
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
---------------------------
Six months ended
June 30,
---------------------------
1994 1993
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 115.7 $ 161.7
Adjustments to reconcile to cash provided from
operations:
Extraordinary loss 11.1 -
Depreciation and depletion 109.6 103.2
Provision (credit) for deferred income taxes 9.9 (9.4)
(Gain) loss on sales of property, plant and equipment .5 (99.8)
Gain on sale of investment (22.7) -
Changes in receivables sold 72.0 (94.7)
Changes in receivables (18.9) 150.9
Changes in inventories (13.8) (17.4)
Changes in other current assets (.8) (22.8)
Changes in accounts payable 13.7 6.0
Changes in accrued liabilities 9.2 7.7
Other, including changes in non-current assets
and liabilities (1.9) 62.9
------- -------
Net cash provided by operating activities 283.6 248.3
------- -------
FINANCING ACTIVITIES:
Changes in notes payable 48.8 9.6
Proceeds from long-term debt 150.0 -
Payments of long-term debt (352.8) (157.1)
Proceeds from issuance of common stock 19.4 37.3
Dividends paid (48.1) (43.9)
Other--net (17.0) (1.8)
------- -------
Net cash used by financing activities (199.7) (155.9)
------- -------
INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures (160.0) (260.6)
Proceeds from sales .9 293.2
Changes in accounts payable and accrued liabilities 8.1 (60.3)
Acquisition of business (45.2) -
Proceeds from sale of investments 80.6 8.8
Other--net (3.2) (4.2)
------- -------
Net cash used by investing activities (118.8) (23.1)
------- -------
Increase (decrease) in cash and cash equivalents (34.9) 69.3
Cash and cash equivalents at beginning of period 64.3 212.3
------- -------
Cash and cash equivalents at end of period $ 29.4 $ 281.6
======= =======
</TABLE>
See accompanying notes.
-6-
<PAGE> 8
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. General
The accompanying interim consolidated financial statements of The Williams
Companies, Inc. (Williams) do not include all notes in annual financial
statements and therefore should be read in conjunction with the financial
statements and notes thereto in Williams' 1993 Annual Report Form 10-K. The
accompanying unaudited financial statements have not been audited by
independent auditors but include all adjustments, consisting of only normal
recurring adjustments, which Williams considers necessary to present fairly
its financial position at June 30, 1994 and results of operations for the three
months and six months ended June 30, 1994 and 1993, and cash flows for the six
months ended June 30, 1994 and 1993.
Prior to the fourth quarter of 1993 when Federal Energy Regulatory Commission
(FERC) Order 636 was adopted, operating profit of reported business units
varied substantially by quarter. While Northwest Pipeline and Williams Natural
Gas historically have experienced their greatest profitability in the first and
fourth quarters, implementation of Order 636 is moderating seasonal
fluctuations in operating profit (see Note 7).
Note 2. Sales of assets
In the second quarter of 1994, Williams sold 3,461,500 limited partner common
units in Northern Border Partners, L.P. Net proceeds from the sale were
approximately $80 million and the sale resulted in a pre-tax gain of $22.7
million. As a result of the sale, Williams' original 12.25 percent interest in
the Northern Border partnerships has been reduced to 3.2 percent.
In the first quarter of 1993, Williams sold its intrastate natural gas pipeline
system and other related assets in Louisiana for approximately $170 million in
cash, resulting in a pre-tax gain of $45.9 million. In addition, Williams sold
a total of 6.1 million units in the Williams Coal Seam Gas Royalty Trust. The
offering resulted in net proceeds of approximately $113 million and a pre- tax
gain of $51.6 million, including $2.1 million in the second quarter.
Note 3. Provision for income taxes
The provision (credit) for income taxes includes:
<TABLE>
<CAPTION>
Millions
----------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Current:
Federal $35.3 $10.6 $50.9 $ 80.5
State 9.7 2.3 7.0 23.2
----- ----- ----- ------
45.0 12.9 57.9 103.7
----- ----- ----- ------
Deferred:
Federal .3 6.9 9.7 (4.8)
State (2.3) 1.5 .2 (4.6)
----- ----- ----- ------
(2.0) 8.4 9.9 (9.4)
----- ----- ----- ------
Total provision $43.0 $21.3 $67.8 $ 94.3
===== ===== ===== ======
</TABLE>
-7-
<PAGE> 9
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The effective income tax rate in 1994 approximates the federal statutory rate
as the effect of state income taxes is offset by the effects of income tax
credits from coal-seam gas production and a favorable prior-year state income
tax adjustment. The effective income tax rate in 1993 is greater than the
federal statutory rate as the effect of state income taxes is partially offset
by income tax credits from coal-seam gas production.
Cash payments for income taxes for the six months ended June 30, 1994 and 1993,
are $32 million (before refunds of $6 million) and $71 million, respectively.
Note 4. Extraordinary loss
The extraordinary loss results from early extinguishment of debt. Williams
paid $295 million to redeem higher interest rate debt for an $11.1 million
after-tax loss (net of $7.1 million benefit for income taxes).
Note 5. Postemployment benefits
Effective January 1, 1994, Williams adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits," which
requires the accrual of benefits provided to former or inactive employees after
employment but before retirement. Adoption of the standard reduced first
quarter 1994 net income by approximately $2 million and is not reported as a
change in accounting principle due to immateriality.
-8-
<PAGE> 10
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6. Long-term debt
Long-term debt consists of the following amounts:
<TABLE>
<CAPTION>
Weighted (Millions)
average -------------------------------
interest June 30, December 31,
rate* 1994 1993
-------- --------- ------------
<S> <C> <C> <C>
The Williams Companies, Inc.
Revolving credit loans 5.1% $ 100.0 $ -
Debentures, 8.875% - 10.25%,
payable 2012, 2020 and 2021 9.5 400.0 400.0
Notes, 7.5% - 13%,
payable through 2001 8.3 365.2 524.8
Capital lease obligations,
11.1%, payable through 2014 11.1 31.2 31.4
Northwest Pipeline
Debentures, 9% - 10.65%,
payable through 2022 9.6 293.0 304.3
Adjustable rate notes,
payable through 2002 9.0 13.3 15.0
Williams Natural Gas
Debentures, 10.25%,
payable in 1997 10.3 120.0 120.0
Williams Field Services Group
Other, payable through 1999 8.0 6.3 -
Williams Pipe Line
Notes, 8.95% and 9.78%,
payable through 2001 9.3 130.0 130.0
WilTel
Notes at 9.61% and 9.81% - - 127.5
Other 8.0 5.3 5.8
-------- --------
1,464.3 1,658.8
Current portion of long-term debt (31.6) (54.0)
-------- --------
$1,432.7 $1,604.8
======== ========
</TABLE>
*At June 30, 1994.
Cash payments for interest (net of amounts capitalized) for the six months
ended June 30, 1994 and 1993 are $78 million and $86 million, respectively.
-9-
<PAGE> 11
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7. Contingent liabilities and commitments
Rate and Regulatory Matters and Related Litigation
In June 1990, a producer brought suit against Williams Natural Gas alleging
antitrust and interference with contract claims regarding the transportation of
gas and seeking actual, treble and punitive damages and injunctive relief.
Williams Natural Gas has denied any liability. In April 1991, Williams Natural
Gas was granted summary judgment on the antitrust claim and at the close of the
plaintiff's case, a directed verdict was granted in favor of Williams Natural
Gas on the remaining claims. The plaintiff filed an appeal on November 18,
1992.
Williams' interstate pipeline subsidiaries, including Williams Pipe Line, have
various regulatory proceedings pending. As a result of rulings in certain of
these proceedings, a portion of the revenues of these subsidiaries has been
collected subject to refund. As to Williams Pipe Line, revenues collected
subject to refund were $108 million at June 30, 1994; it is not expected that
the amount of any refunds ordered would be significant. Accordingly, no
portion of these revenues has been reserved for refund. As to the other
pipelines, $63 million of revenues has been reserved for potential refund as of
June 30, 1994.
In 1992, the FERC issued Order 636, Order 636-A and Order 636-B. These orders,
which have been challenged in various respects by various parties in
proceedings pending in the U.S. Court of Appeals for the D.C. Circuit, require
interstate gas pipeline companies to change the manner in which they provide
services. Williams Natural Gas implemented its restructuring on October 1,
1993, and Northwest Pipeline implemented its restructuring on November 1, 1993.
Certain aspects of each pipeline company's restructuring are under appeal.
Contract Reformations and Gas Purchase Deficiencies
Williams Natural Gas has undertaken the reformation of its respective gas
supply contracts to settle gas purchase deficiencies, avoid future gas purchase
deficiencies, reduce prices to market levels or make other appropriate
modifications. As of June 30, 1994, Williams Natural Gas had total supplier
take-or-pay, ratable take and minimum take claims totaling approximately $228
million. This amount includes a take-or-pay claim of $203 million plus
interest and ratable take claims exceeding $23 million plus interest from a
producer that Williams Natural Gas believes will be resolved in conformance
with an agreement in principle discussed below.
Williams Natural Gas also has commitments under gas supply contracts reflecting
prices in excess of market-based prices. The estimated commitment amounts at
December 31, 1993, attributable to these contracts are:
-10-
<PAGE> 12
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Post
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- ----
(Millions)
<S> <C> <C> <C> <C> <C> <C>
Commitments $6 $9 $12 $15 $15 $45
</TABLE>
Northwest Pipeline's only remaining significant gas purchase contract with a
non-market responsive pricing provision has been assigned to certain customers.
Williams has an accounting policy of determining accruals taking into
consideration both historical and future gas quantities and appropriate prices
to determine an estimated total exposure. This exposure is discounted and
risk-weighted to determine the appropriate accrual. The estimated portion
recoverable from sales and transportation customers is deferred based on
Williams' estimate of its expected recovery of the amounts allowed by FERC
policy. As of June 30, 1994, Williams Natural Gas had accrued $51 million for
take-or-pay settlements and reformation of the non-market responsive contracts.
Although Williams believes these accruals are adequate, the actual amount paid
for take-or-pay settlements and contract reformation will depend on the outcome
of various court proceedings; the provisions and enforceability of each gas
purchase contract; the success of settlement negotiations; and other factors.
Current FERC policy associated with Orders 436 and 500 requires interstate gas
pipelines to absorb some of the cost of reforming gas supply contracts before
allowing any recovery through direct bill or surcharges to transportation as
well as sales commodity rates. Pursuant to FERC Order 500, Williams Natural
Gas has filed to recover a portion of previously incurred take-or-pay and
contract- reformation costs. As of June 30, 1994, this subsidiary had $53
million included in recoverable contract-reformation and take-or- pay
settlement costs, $43 million of which had not yet been paid and filed for
recovery with the FERC. Under Orders 636, 636-A and 636-B, costs incurred to
comply with these rules are permitted to be recovered in full, although 10
percent of such costs must be allocated to interruptible transportation
service.
The FERC initially approved a method for Northwest Pipeline to direct bill its
contract-reformation costs, but when challenged on appeal, sought a remand to
reassess such method. Northwest Pipeline has received an order from the FERC
that requires a different allocation of such costs which is now being
challenged by certain customers. Northwest Pipeline expects to be permitted to
recover these costs in excess of amounts previously charged to expense.
Pursuant to a stipulation and agreement approved by the FERC, Williams Natural
Gas has made a cost-sharing direct recovery filing covering amounts that had
been paid to producers and in part previously billed to Williams Natural Gas
customers under Orders 436, 500 and 528. Williams Natural Gas will make
further filings under the stipulation and agreement to recover future contract-
reformation payments under those orders and Order 636.
In light of Orders 636, 636-A and 636-B, Williams Natural Gas and a producer
have agreed to various amendments to an agreement in principle previously
-11-
<PAGE> 13
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
reached to reform or terminate its largest gas purchase contract and resolve
various other issues. When finalized and approved by various regulatory
agencies, the revised agreement will resolve all disputes and litigation
between the parties, including a claim by the producer for take-or-pay
deficiencies under certain gas purchase contracts with the producer of not less
than $203 million plus interest. There is no assurance that the contingencies
contemplated by the agreement will be satisfied. However, the parties are
fully cooperating in attempting to complete and implement definitive
agreements.
Other Legal Matters
Williams Natural Gas has identified polychlorinated biphenyl (PCB)
contamination in air compressor systems, disposal pits and related properties
at certain compressor station sites and has been involved in negotiations with
the U.S. Environmental Protection Agency (EPA) to develop additional screening,
detailed sampling and cleanup programs. In addition, negotiations concerning
investigative and remedial actions relative to potential mercury contamination
at certain gas metering sites have commenced with certain environmental
authorities. As of June 30, 1994, Williams Natural Gas had recorded a
liability for approximately $30 million, representing the current estimate of
future environmental cleanup costs to be incurred over the next six to 10
years. Actual costs incurred will depend on the actual number of contaminated
sites identified, the actual amount and extent of contamination discovered, the
final cleanup standards mandated by the EPA and other governmental authorities
and other factors. Williams Natural Gas deferred these costs pending recovery
as incurred through future rates and other means.
In connection with the 1987 sale of the assets of Agrico Chemical Company,
Williams agreed to indemnify the purchaser for environmental cleanup costs
resulting from certain conditions at specified locations, to the extent such
costs exceed a specified amount. It appears probable that such costs will
exceed this amount. At June 30, 1994, Williams had approximately $6 million
accrued for such excess costs. The actual costs incurred will depend on the
actual amount and extent of contamination discovered, the final cleanup
standards mandated by the EPA or other governmental authorities and other
factors.
A lawsuit was filed on May 14, 1993, in a state court in Colorado in which
certain claims have been made against various defendants, including Northwest
Pipeline, contending that gas exploration and development activities in
portions of the San Juan Basin have caused air, water and other contamination.
The plaintiffs in the case sought certification of a plaintiff class. On June
28, 1994, the lawsuit was dismissed for failure to join an indispensable party
over which the state court had no jurisdiction. This decision is being
appealed by the plaintiffs. Subsequently on July 14, 1994,
two plaintiffs filed an individual lawsuit against Northwest
Pipeline and others in U.S. district court in Colorado, making essentially the
same claims. Northwest Pipeline has not yet been served, but if it is, it
intends to vigorously defend this lawsuit.
On December 31, 1991, the Southern Ute Indian Tribe (the Tribe) filed a lawsuit
against Williams Production Company, a wholly owned subsidiary of Williams, and
other gas producers in the San Juan Basin area, alleging that certain coal
strata were reserved by the United States for the benefit of the
-12-
<PAGE> 14
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Tribe and that the extraction of coal-seam gas from the coal strata was
wrongful. The Tribe seeks compensation for the value of the coal-seam gas.
The Tribe also seeks an order transferring to the Tribe ownership of all of the
defendants' equipment and facilities utilized in the extraction of the
coal-seam gas. Williams Production, together with the other defendants named
in the lawsuit, is vigorously defending the lawsuit. Williams Production has
agreed to indemnify the Williams Coal Seam Gas Royalty Trust (Trust) against
any losses that may arise in respect of certain properties subject to the
lawsuit. In addition, if the Tribe is successful in showing that Williams
Production has no rights in the coal-seam gas, Williams Production has agreed
to pay to the Trust for distribution to then-current unitholders, an amount
representing a return of a portion of the original purchase price paid for the
units. While Williams believes that such a payment is not probable, it has
reserved a portion of the proceeds from the sale of the units in the Trust.
Relative to a proposal for the acquisition of WilTel submitted to Williams by
LDDS Communications, Inc. (LDDS), contained in a letter dated May 3, 1994, and
attached as an exhibit to a report on Form 8-K filed by LDDS on that day, two
class action lawsuits were filed on May 9, 1994, in the Chancery Court of
Delaware. The suits were filed by separate plaintiffs, each purporting to act
on behalf of all Williams' shareholders. The complaints, which are identical
except for the names of the plaintiffs and the identities of certain law firms
appearing "of counsel," name Williams and each of its then-current directors as
defendants and allege that the directors breached their fiduciary duty to the
plaintiff and the members of the putative class by summarily rejecting the LDDS
proposal and by issuing false and misleading statements. Williams believes
that the suits are without merit and intends to vigorously contest them.
In addition to the foregoing, various other proceedings are pending against
Williams or its subsidiaries incidental to their operations.
Summary
Williams does not believe that the ultimate resolution of the foregoing
matters, taken as a whole and after consideration of amounts accrued, insurance
coverage or other indemnification arrangements, will have a materially adverse
financial effect upon Williams in the future.
Other matters
Certain of Williams' subsidiaries are selling, with limited recourse, certain
receivables. The aggregate limit under the facilities was $220 million at June
30, 1994, and $107 million of such receivables had been sold. Subsequent to
June 30, 1994, certain amounts of the facilities expired and were not renewed,
leaving the aggregate limit under a facility at $80 million.
-13-
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Second Quarter 1994 vs. Second Quarter 1993
Northwest Pipeline's revenues decreased 22 percent due primarily to the absence
of natural gas sales following the fourth quarter 1993 implementation of
Federal Energy Regulatory Commission's (FERC) Order 636. Costs and operating
expenses decreased 39 percent due primarily to the absence of natural gas
purchase volumes. Operating profit decreased 7 percent due primarily to
increased accruals related to rate issues. Since Northwest Pipeline began
preparing for FERC Order 636 long before it was formally implemented on
November 1, 1993, the order had little impact on the quarter-to-quarter
operating profit variance.
Williams Natural Gas' revenues increased 73 percent, costs and operating
expenses decreased 4 percent and an operating profit of $9 million for the
second quarter of 1994 compares to an operating loss of $10 million in 1993
primarily as a result of the implementation of FERC Order 636 on October 1,
1993 and new rates required by the Order. FERC Order 636 utilizes a
straight-fixed- variable rate design which is applied to each customer's annual
firm contract demand for transportation. This provides relatively consistent
earnings from quarter-to-quarter versus the historical one-part rate which was
applied to seasonal volume patterns and produced high levels of earnings in the
first and fourth quarters.
Williams Field Services Group's revenues decreased 8 percent due primarily to
lower natural gas sales prices and liquid product volumes, partially offset by
increased natural gas sales volumes and increased gathering and processing
volumes of 14 percent and 18 percent, respectively. Costs and operating
expenses decreased 10 percent due primarily to lower costs associated with the
liquids extraction process, lower per-unit natural gas purchase costs and the
favorable adjustment of an accrual related to operating taxes, partially offset
by higher operating and maintenance expenses at expanded gathering facilities.
Operating profit increased 19 percent due to higher gathering and processing
volumes combined with the favorable effects of a contract settlement and an
adjustment of an accrual related to operating taxes, partially offset by a
decline in liquids per-unit margins and volumes, higher operating costs from
expanded facilities and the absence of a favorable effect from the 1993
termination of a gas marketing contract (included in other income--net).
Williams Pipe Line's revenues increased 32 percent due primarily to liquids and
fractionator operations in addition to 11 percent higher shipments resulting
from volumes being transported across 300 miles of newly acquired pipeline on
the southern end of the company's system. The average transportation rate per
barrel has decreased slightly as increased tariff rates effective June 1993 and
a slight increase in the length of the average haul are more than offset by the
lower transportation rate per barrel of the newly acquired pipeline. Operating
profit increased 3 percent due primarily to increased shipments largely offset
by higher operating and maintenance expenses.
-14-
<PAGE> 16
Williams Energy Ventures' revenues decreased 11 percent as the effect of
reporting refined product trading activities on a "net margin" basis, effective
July 1, 1993, is partially offset by revenues produced from newly
established petroleum services activities. Operating profit decreased
significantly reflecting lower results from price-risk management services in
addition to the costs of establishing energy industry information-based
products and evaluating projects that complement or leverage Williams' existing
operations and assets, partially offset by the newly established petroleum
services activities. Price-risk management services declined due to decreased
refined products trading margins, substantially offset by increased refined
products trading volumes.
WilTel's revenues increased 41 percent due to increases in network services of
$62 million and equipment sales and services of $28 million. Switched-services
revenues increased reflecting a 103 percent increase in switched minutes.
Private line services' interexchange revenues increased primarily as a result
of a 29 percent increase in billable circuits. The increase in equipment sales
and services was due in large part to the March 31 acquisition of BellSouth's
customer revenues and equipment sales and service operations in 29 states.
Costs and operating and selling, general and administrative expenses increased
primarily as a result of increased volumes in the network services business and
increased equipment sales and services. Operating profit increased 66 percent
due primarily to an increase in switched-services minutes and private line
circuits and higher volumes from equipment sales and services. These increases
more than offset a major carrier's long expected removal of traffic from
WilTel's system to the carrier's expanded network.
General corporate expenses decreased due primarily to a $2 million contribution
to The Williams Companies Foundation in 1993. Interest accrued decreased 15
percent due primarily to lower borrowing levels. Investing income decreased
due primarily to lower investment levels and a decline in Texasgulf Inc.
dividends, in addition to the sale of a portion of Williams' interest in
Northern Border Partners, L.P., partially offset by higher Kern River Gas
Transmission Company equity earnings. Kern River's equity earnings include a
favorable adjustment to rate refund accruals related to Kern River's current
rate case. The 1994 gain on sales of assets results from the sale of 3,461,500
limited partner common units in Northern Border Partners, L.P. The 1993 gain
on sales of assets results from the sale of 151,209 units in the Williams Coal
Seam Gas Royalty Trust (see Note 2 for additional information). The effective
income tax rate in 1994 and 1993 exceeds the federal statutory rate due
primarily to state income taxes, partially offset by income tax credits from
coal-seam gas production. The extraordinary loss results from the early
extinguishment of debt (see Note 4 for additional information).
Six Months Ended June 30, 1994 vs. Six Months Ended June 30, 1993
Northwest Pipeline's revenues decreased 12 percent as higher average
transportation rates and expanded firm transportation service were more than
offset by the absence of natural gas sales following the fourth quarter 1993
implementation of FERC Order 636. Total mainline throughput increased 7
percent. Firm transportation service increased due to a mainline expansion,
supported by 15-year firm transportation contracts, being placed into service
on April 1, 1993. Northwest Pipeline also placed new, increased transportation
rates into effect on April 1, 1993 (subject to refund), that reflected the new
mainline expansion and straight-fixed- variable rate design that moderates
seasonal swings in operating revenues. Costs and operating expenses decreased
35 percent due primarily to the absence of natural gas
-15-
<PAGE> 17
purchase volumes, slightly offset by increased depreciation related to the
mainline expansion. Operating profit increased 15 percent due primarily to
expanded firm transportation service and higher transportation rates, partially
offset by the absence of natural gas sales volumes in 1994, increased accruals
related to rate issues and increased depreciation.
Williams Natural Gas' revenues, costs and operating expenses and operating
profit decreased 57 percent, 68 percent and 33 percent, respectively, primarily
as a result of the implementation of FERC Order 636 on October 1, 1993 and new
rates required by the Order. FERC Order 636 utilizes a straight-fixed-variable
rate design which is applied to each customer's annual firm contract demand for
transportation. This provides relatively consistent earnings from
quarter-to-quarter versus the historical one-part rate which was applied to
seasonal volume patterns and produced high levels of earnings in the first and
fourth quarters.
Williams Field Services Group's revenues decreased 29 percent due primarily to
44 percent lower natural gas sales volumes as a result of the March 1993 sale
of Williams' intrastate natural gas pipeline system and related marketing
operations in Louisiana. Liquid product volumes also decreased, largely offset
by increased gathering and processing volumes of 14 percent and 20 percent,
respectively. Cost and operating expenses decreased 33 percent due primarily
to lower natural gas volumes purchased for resale, lower gas purchase volumes
associated with the liquids extraction process and a favorable adjustment of an
accrual related to operating taxes, partially offset by higher operating and
maintenance expenses at expanded gathering facilities. Operating profit
decreased 9 percent due primarily to lower liquids volumes and per-unit margins
and higher operations and maintenance expenses associated with expanded
facilities, partially offset by higher gathering and processing volumes and a
favorable operating taxes adjustment. Depressed gas liquids margins that
prevented this company from being even more profitable during the first half of
1994 appeared to be improving as the third quarter began.
Williams Pipe Line's revenues increased 33 percent due primarily to gas liquids
and fractionator operations in addition to 12 percent higher shipments. The
higher shipments result from volumes being transported across 300 miles of
pipeline acquired in December 1993. The slightly higher average transportation
rate per barrel reflects a 3 percent increase in the length of the average haul
in addition to an increased tariff rate that went into effect in June 1993,
offset by a lower average transportation rate per barrel of the newly acquired
pipeline. Operating profit increased 27 percent due primarily to increased
shipments and a favorable insurance settlement, partially offset by higher
operating and maintenance expenses.
Williams Energy Ventures' revenues decreased 9 percent as the effect of
reporting refined product trading activities on a "net margin" basis, effective
July 1, 1993, is partially offset by revenues produced from newly established
petroleum services activities. Operating profit decreased significantly
reflecting lower results from price-risk management services and the costs of
establishing energy industry information-based products and evaluating projects
that complement or leverage Williams' existing operations and assets, partially
offset by the newly established petroleum services activities. Price-risk
management services results declined due to decreased refined products trading
margins and unfavorable operating and general and administrative expenses,
offset by increased refined products trading volumes and improved results from
natural gas trading activities.
-16-
<PAGE> 18
WilTel's revenues increased 35 percent due to increases of $118 million in
network services and $33 million in equipment sales and services.
Switched-services revenues increased reflecting a 106 percent increase in
switched minutes. Private line services' interexchange revenues increased as a
result of a 29 percent increase in billable circuits. The increase in
equipment sales and service was due in large part to the BellSouth acquisition.
Costs and operating and selling, general and administrative expenses increased
primarily as a result of increased volumes in the network services business and
increased equipment sales and services. Operating profit increased 52 percent
due primarily to an increase in switched-services minutes and private line
circuits and higher volumes from equipment sales and services. These increases
more than offset a major carrier's long expected removal of traffic from
WilTel's system to the carrier's expanded network.
Interest accrued decreased 11 percent due primarily to lower borrowing levels.
Interest capitalized decreased due primarily to the completion of Northwest
Pipeline's mainline expansion which was placed in service April 1, 1993.
Investing income decreased due primarily to lower equity earnings for Apco
Argentina Inc., lower investment levels and a decline in Texasgulf Inc.
dividends, in addition to the sale of a portion of Williams' interest in
Northern Border Partners, L.P., partially offset by higher Kern River Gas
Transmission Company equity earnings. Kern River's equity earnings include a
favorable adjustment to rate refund accruals related to Kern River's current
rate case. The 1994 gain on sales of assets results from the sale of 3,461,500
limited partner common units in Northern Border Partners, L.P. The 1993 gain
on sales of assets results from the sale of 6.1 million units in the Williams
Coal Seam Gas Royalty Trust and the sale of the intrastate natural gas pipeline
system and other related assets in Louisiana (see Note 2 for additional
information). Other expense--net in 1994 includes a credit for $4.8 million
from the reversal of previously accrued liabilities associated with certain
Royalty Trust contingencies which expired. Also included is approximately $4
million of expense related to Statement of Financial Accounting Standards
(SFAS) No. 112, "Employers' Accounting for Postemployment Benefits," which
relates to postemployment benefits being paid to employees of companies
previously sold. Other expense--net in 1993 includes $6 million of expense
accruals for certain costs associated with businesses previously sold, offset
with $6 million of equity AFUDC related to the Northwest Pipeline mainline
expansion. The effective income tax rate in 1994 approximates the federal
statutory rate as the effect of state income taxes is offset by the effects of
income tax credits from coal-seam gas production and a favorable prior-year
state income tax adjustment. The effective income tax rate in 1993 is greater
than the federal statutory rate as the effect of state income taxes is
partially offset by income tax credits from coal-seam gas production. The
extraordinary loss results from the early extinguishment of debt (see Note 4
for additional information).
Financial Condition and Liquidity
Liquidity
Williams considers its liquidity to come from two sources: internal liquidity,
consisting of available cash investments, and external liquidity, consisting of
borrowing capacity from available bank-credit facilities, which can be utilized
without limitation under existing loan covenants. At June 30, 1994, Williams
had access to $500 million of liquidity representing the unborrowed portion of
its $600 million bank-credit facility. This compares
-17-
<PAGE> 19
with liquidity of $639 million at December 31, 1993, and $845 million at June
30, 1993, including $37 million from Northwest Pipeline.
Financing Activities
The consolidated long-term debt to long-term debt-plus-equity ratio decreased
to 44.1 percent at June 30, 1994, from 48.2 percent at December 31, 1993.
During the second quarter of 1994, Williams paid $295 million to redeem higher
interest rate debt (see Note 4 for additional information). These redemptions
were financed through the use of excess cash, proceeds from the sale of the
Northern Border Partners, L.P. common units, and borrowings.
Other
In an April 1994 public offering, Williams sold 3,461,500 limited partner
common units in Northern Border Partners, L.P. Net proceeds of the offering
were approximately $80 million (see Note 2 for additional information).
See Note 5 for the effect of adopting SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," effective January 1, 1994.
In May 1994, Williams received unsolicited, alternative offers from LDDS
Communications, Inc. (LDDS) to acquire Williams' telecommunications subsidiary.
At its May 1994 meeting, Williams' board of directors declined these offers but
authorized the management of the Company to explore with LDDS other
transactions and to continue to study other alternatives, including the
continued ownership and operation of the telecommunications business. Since
the meeting, the management is continuing to carry out these directives.
-18-
<PAGE> 20
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on May
19, 1994. At the Annual Meeting, eight individuals were elected
as directors of the Company. Six individuals continue to serve
as directors pursuant to their prior election. In addition, a
proposal to amend the Company's Restated Certificate of
Incorporation, as amended, to increase the authorized number of
shares of Common Stock was approved, and the appointment of Ernst
& Young as the independent auditor of the Company for 1994 was
ratified.
A tabulation of the voting at the Annual Meeting with respect to
the matters indicated is as follows:
Election of Directors
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Harold W. Andersen 92,331,094 493,083
Keith E. Bailey 92,348,104 476,073
Ralph E. Bailey 92,336,272 487,905
Ervin S. Duggan 92,385,842 438,335
James C. Lewis 92,380,640 443,537
Jack A. MacAllister 92,357,224 466,953
James A. McClure 92,339,273 484,904
Peter C. Meinig 92,389,193 434,984
</TABLE>
Amendment to Restated Certificate of Incorporation
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
87,709,266 4,695,185 419,726
</TABLE>
Ratification of Appointment of Independent Auditor
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
92,182,902 259,296 381,979
</TABLE>
To the best of the Company's knowledge, there were no broker
nonvotes with respect to the election of directors, the approval
of the amendment or the ratification of the auditor.
-19-
<PAGE> 21
PART II. OTHER INFORMATION (Concluded)
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits listed below are filed as part of this report:
Exhibit 11--Computation of Earnings Per Common and
Common- equivalent Share
Exhibit 12--Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock
Dividend Requirements
(b) During the second quarter of 1994, the Company did not file
a Form 8-K.
-20-
<PAGE> 22
Exhibit 11
THE WILLIAMS COMPANIES, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON-EQUIVALENT SHARE
Six months ended June 30, 1994 and 1993
<TABLE>
<CAPTION>
(Thousands, except
per-share amounts)
-----------------------------
1994 1993
-------- --------
<S> <C> <C>
Primary earnings:
Income before extraordinary loss $126,800 $161,700
Preferred stock dividends:
$2.21 cumulative preferred stock 4,400 4,400
$3.875 cumulative convertible exchangeable
preferred stock - 2,900
-------- --------
Income before extraordinary loss, net of preferred
stock dividends 122,400 154,400
Extraordinary loss (11,100) -
-------- --------
Income applicable to common stock $111,300 $154,400
======== ========
Primary shares:
Average number of common shares outstanding
during the period 103,610 94,786
Common-equivalent shares attributable to
options and deferred stock 890 1,162
------- ------
Total common and common-equivalent shares 104,500 95,948
======= ======
Primary earnings per common and common-equivalent share:
Income before extraordinary loss $1.17 $1.61
Extraordinary loss (.11) -
----- -----
Net income $1.06 $1.61
===== =====
Fully diluted earnings:
Income before extraordinary loss $126,800 $161,700
Preferred stock dividends:
$2.21 cumulative preferred stock 4,400 4,400
-------- --------
Income before extraordinary loss, net of preferred
stock dividends 122,400 157,300
Extraordinary loss (11,100) -
-------- --------
Income applicable to common stock $111,300 $157,300
======== ========
Fully diluted shares:
Average number of common shares outstanding
during the period 103,610 94,786
Common-equivalent shares attributable to options
and deferred stock 955 1,398
Shares attributable to conversion, assumed at
January 1, 1993 to the conversion dates, of
convertible exchangeable preferred stock - 6,312
------- -------
Total common and common-equivalent shares 104,565 102,496
======= =======
Fully diluted earnings per common and common-equivalent share:
Income before extraordinary loss $1.17 $1.53
Extraordinary loss (.11) -
----- -----
Net income $1.06 $1.53
===== =====
</TABLE>
-21-
<PAGE> 23
Exhibit 12
THE WILLIAMS COMPANIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(Dollars in millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1994
----------------
<S> <C>
Earnings:
Income before income taxes $194.6
Add:
Interest expense - net 71.9
Rental expense representative of interest factor 18.5
Interest accrued - 50 percent owned company 15.6
Other 1.2
------
Total earnings as adjusted plus fixed charges $301.8
======
Fixed charges and preferred stock dividend requirements:
Interest expense - net $ 71.9
Capitalized interest 3.3
Rental expense representative of interest factor 18.5
Pretax effect of dividends on preferred stock of
the Company 6.8
Interest accrued - 50 percent owned company 15.6
------
Combined fixed charges and preferred stock dividend
requirements $116.1
======
Ratio of earnings to combined fixed charges and
preferred stock dividend requirements 2.60
======
</TABLE>
-22-
<PAGE> 24
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WILLIAMS COMPANIES, INC.
(Registrant)
/s/ Gary R. Belitz
Gary R. Belitz
Controller
(Duly Authorized Officer and
Chief Accounting Officer)
August 15, 1994
23
<PAGE> 25
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGES
- ------- -------- ------------
11 Computation of Earnings per Common and Common-equivalent
share
12 Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividend Requirements
<PAGE> 1
Exhibit 11
THE WILLIAMS COMPANIES, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON-EQUIVALENT SHARE
Six months ended June 30, 1994 and 1993
<TABLE>
<CAPTION>
(Thousands, except
per-share amounts)
-----------------------------
1994 1993
-------- --------
<S> <C> <C>
Primary earnings:
Income before extraordinary loss $126,800 $161,700
Preferred stock dividends:
$2.21 cumulative preferred stock 4,400 4,400
$3.875 cumulative convertible exchangeable
preferred stock - 2,900
-------- --------
Income before extraordinary loss, net of preferred
stock dividends 122,400 154,400
Extraordinary loss (11,100) -
-------- --------
Income applicable to common stock $111,300 $154,400
======== ========
Primary shares:
Average number of common shares outstanding
during the period 103,610 94,786
Common-equivalent shares attributable to
options and deferred stock 890 1,162
------- ------
Total common and common-equivalent shares 104,500 95,948
======= ======
Primary earnings per common and common-equivalent share:
Income before extraordinary loss $1.17 $1.61
Extraordinary loss (.11) -
----- -----
Net income $1.06 $1.61
===== =====
Fully diluted earnings:
Income before extraordinary loss $126,800 $161,700
Preferred stock dividends:
$2.21 cumulative preferred stock 4,400 4,400
-------- --------
Income before extraordinary loss, net of preferred
stock dividends 122,400 157,300
Extraordinary loss (11,100) -
-------- --------
Income applicable to common stock $111,300 $157,300
======== ========
Fully diluted shares:
Average number of common shares outstanding
during the period 103,610 94,786
Common-equivalent shares attributable to options
and deferred stock 955 1,398
Shares attributable to conversion, assumed at
January 1, 1993 to the conversion dates, of
convertible exchangeable preferred stock - 6,312
------- -------
Total common and common-equivalent shares 104,565 102,496
======= =======
Fully diluted earnings per common and common-equivalent share:
Income before extraordinary loss $1.17 $1.53
Extraordinary loss (.11) -
----- -----
Net income $1.06 $1.53
===== =====
</TABLE>
-21-
<PAGE> 1
Exhibit 12
THE WILLIAMS COMPANIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(Dollars in millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1994
----------------
<S> <C>
Earnings:
Income before income taxes $194.6
Add:
Interest expense - net 71.9
Rental expense representative of interest factor 18.5
Interest accrued - 50 percent owned company 15.6
Other 1.2
------
Total earnings as adjusted plus fixed charges $301.8
======
Fixed charges and preferred stock dividend requirements:
Interest expense - net $ 71.9
Capitalized interest 3.3
Rental expense representative of interest factor 18.5
Pretax effect of dividends on preferred stock of
the Company 6.8
Interest accrued - 50 percent owned company 15.6
------
Combined fixed charges and preferred stock dividend
requirements $116.1
======
Ratio of earnings to combined fixed charges and
preferred stock dividend requirements 2.60
======
</TABLE>
-22-
