<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 March 31, 1995
-------------------------------------------------
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)
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
-------------------------------------------------
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.
Class Outstanding at April 30, 1995
---------------------------------- ---------------------------------
Common Stock, $1 par value 91,071,732 Shares
<PAGE> 2
THE WILLIAMS COMPANIES, INC.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
----
<S> <C>
Item 1. Financial Statements
Consolidated Statement of Income--Three Months
Ended March 31, 1995 and 1994 2
Consolidated Balance Sheet--March 31, 1995 and
December 31, 1994 4
Consolidated Statement of Cash Flows--Three Months
Ended March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
Part II. Other Information 23
Item 6. Exhibits and Reports on Form 8-K
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
March 31,
-------------------------
1995 1994*
---------- ----------
<S> <C> <C>
Revenues:
Williams Interstate Natural Gas Systems (Note 4) $ 321.3 $110.5
Williams Field Services Group 132.1 89.7
Williams Energy Services 350.8 77.2
Williams Pipe Line 64.4 50.9
Williams Telecommunications Systems 126.7 74.0
Other 15.2 3.0
Intercompany eliminations (52.5) (18.7)
-------- ------
Total revenues 958.0 386.6
-------- ------
Profit-center costs and expenses:
Costs and operating expenses 666.7 248.5
Selling, general and administrative expenses 113.7 54.5
Other income--net (.1) (3.1)
-------- ------
Total profit-center costs and expenses 780.3 299.9
-------- ------
Operating profit (loss):
Williams Interstate Natural Gas Systems (Note 4) 96.6 44.6
Williams Field Services Group 36.4 27.9
Williams Energy Services 25.0 1.2
Williams Pipe Line 14.8 14.7
Williams Telecommunications Systems 7.9 1.6
Other (3.0) (3.3)
-------- ------
Total operating profit 177.7 86.7
General corporate expenses (11.9) (8.1)
Interest accrued (68.6) (36.4)
Interest capitalized 1.3 1.7
Investing income 44.2 12.1
Other income (expense)--net (9.8) 1.3
-------- ------
Income from continuing operations
before income taxes 132.9 57.3
Provision for income taxes (Note 6) 49.7 16.7
-------- ------
Income from continuing operations 83.2 40.6
Income from discontinued operations (Note 5) 1,005.7 12.2
-------- ------
Net income 1,088.9 52.8
Preferred stock dividends 2.1 2.2
-------- ------
Income applicable to common stock $1,086.8 $ 50.6
======== ======
</TABLE>
*Restated as described in Notes 2 and 5.
See accompanying notes.
-2-
<PAGE> 4
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF INCOME (Concluded)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1995 1994*
------ -------
<S> <C> <C>
Primary earnings per common and
common-equivalent share: (Note 5)
Income from continuing operations $ .86 $.36
Income from discontinued operations 10.71 .12
------ -------
Net income $11.57 $.48
====== =======
Average shares (thousands) 93,920 104,240
Fully diluted earnings per common and
common-equivalent share: (Note 5)
Income from continuing operations $ .86 $.36
Income from discontinued operations 10.69 .12
------ -------
Net income $11.55 $.48
====== =======
Average shares (thousands) 94,117 104,240
Cash dividends per common share $.27 $.21
====== =======
</TABLE>
*Restated as described in Note 5.
See accompanying notes.
-3-
<PAGE> 5
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
------------------------------
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 615.0 $ 36.1
Receivables 589.7 443.1
Transportation and exchange gas receivable 126.4 9.2
Inventories 210.8 112.3
Net assets held for sale (Notes 3, 5 and 10) 272.1 743.6
Deferred income taxes 222.7 57.1
Other 141.5 55.4
--------- ---------
Total current assets 2,178.2 1,456.8
Investments (Note 10) 239.4 379.1
Property, plant and equipment, at cost (Note 3) 8,303.5 4,311.1
Less accumulated depreciation and depletion (1,261.5) (1,187.1)
--------- ---------
7,042.0 3,124.0
Other assets and deferred charges 699.1 266.2
--------- ---------
Total assets $10,158.7 $ 5,226.1
========= =========
</TABLE>
See accompanying notes.
-4-
<PAGE> 6
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED BALANCE SHEET (Concluded)
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
--------------------------------
March 31, December 31,
1995 1994
-------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ - $ 507.0
Accounts payable 411.8 205.8
Transportation and exchange gas payable 76.5 16.7
Accrued liabilities (Note 7) 1,557.8 361.4
Long-term debt due within one year (Note 8) 187.3 383.0
--------- --------
Total current liabilities 2,233.4 1,473.9
Long-term debt (Note 8) 2,848.2 1,307.8
Deferred income taxes 1,345.8 662.9
Deferred income and other liabilities 833.0 276.0
Minority interest (Note 3) 330.7 -
Contingent liabilities and commitments (Note 9)
Stockholders' equity:
Preferred stock, $1 par value, 30,000,000 shares
authorized, 4,000,000 shares issued 100.0 100.0
Common stock, $1 par value, 240,000,000 shares
authorized, 104,548,522 shares issued in
1995 and 104,401,819 shares issued in 1994 104.5 104.4
Capital in excess of par value 994.0 991.0
Retained earnings 1,779.2 716.5
Unamortized deferred compensation (2.1) (1.3)
--------- --------
2,975.6 1,910.6
Less treasury stock (at cost), 13,516,994 shares of
common stock in 1995 and 1994, 369,900 shares of
preferred stock in 1995 and 258,800 shares of
preferred stock in 1994 (408.0) (405.1)
--------- --------
Total stockholders' equity 2,567.6 1,505.5
--------- --------
Total liabilities and stockholders' equity $10,158.7 $5,226.1
========= ========
</TABLE>
See accompanying notes.
-5-
<PAGE> 7
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
--------------------------
Three months ended
March 31,
--------------------------
1995 1994*
--------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,088.9 $ 52.8
Adjustments to reconcile to cash provided from
operations:
Discontinued operations (1,005.7) (12.2)
Depreciation and depletion 83.5 36.2
Provision for deferred income taxes 10.7 9.9
Changes in receivables sold (56.7) -
Changes in receivables 122.8 19.7
Changes in inventories (7.5) 8.6
Changes in other current assets 23.0 1.1
Changes in accounts payable (49.2) (47.5)
Changes in accrued liabilities 6.5 (3.2)
Other, including changes in non-current assets
and liabilities (32.9) 13.1
--------- -------
Net cash provided by continuing operations 183.4 78.5
Net cash provided by discontinued operations - 44.6
--------- -------
Net cash provided by operating activities 183.4 123.1
--------- -------
FINANCING ACTIVITIES:
Proceeds from notes payable 8.0 -
Payment of notes payable (593.3) -
Proceeds from long-term debt 20.0 -
Payments of long-term debt (648.4) (18.9)
Dividends paid (26.2) (24.0)
Subsidiary preferred stock redemptions (193.7) -
Other--net 1.8 9.9
--------- -------
Net cash used by financing activities (1,431.8) (33.0)
--------- -------
</TABLE>
*Restated as described in Note 5.
See accompanying notes.
-6-
<PAGE> 8
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Concluded)
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
-------------------------
Three months ended
March 31,
-------------------------
1995 1994*
-------- -------
<S> <C> <C>
INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures:
Continuing operations (135.9) (48.7)
Discontinued operations - (17.1)
Proceeds from sales 10.9 .4
Acquisition of businesses, net of cash acquired (478.6) (45.2)
Proceeds from sale of business 2,504.2 -
Purchase of note receivable (75.1) -
Other--net 1.8 .8
-------- -------
Net cash provided (used) by investing activities 1,827.3 (109.8)
-------- -------
Increase (decrease) in cash and cash equivalents 578.9 (19.7)
Cash and cash equivalents at beginning of period 36.1 64.3
-------- -------
Cash and cash equivalents at end of period $ 615.0 $ 44.6
======== =======
</TABLE>
*Restated as described in Note 5.
See accompanying notes.
-7-
<PAGE> 9
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' 1994 Annual Report Form 10-K. The
accompanying unaudited financial statements have not been audited by
independent auditors but include all adjustments which, in the opinion of
Williams' management, are normal recurring and are necessary to present fairly
its financial position at March 31, 1995 and results of operations and cash
flows for the three months ended March 31, 1995 and 1994. The 1995 after-tax
gain from the sale of WilTel's network services operations and its related 1994
results are presented as discontinued operations (See Note 5). On January 18,
1995, Williams acquired 60 percent of Transco Energy Company's (Transco)
outstanding common stock and on May 1, 1995 acquired the remaining 40 percent
of Transco's outstanding common stock (See Note 3).
Note 2. Basis of presentation
First quarter 1995 revenues and operating profit amounts include the operating
results of Transco since its January 18, 1995 acquisition by Williams (See Note
3). The transportation operations from Transco's two interstate natural gas
pipelines are reported within Williams Interstate Natural Gas Systems (See Note
4). Transco's gas gathering operations are included as part of Williams Field
Services Group, and Transco's gas marketing operations are included in Williams
Energy Services.
First quarter 1994 revenues and operating profit amounts have been restated to
conform to current-year classifications. The previously reported operations of
Williams Energy Ventures have been divided into the following entities. The
commodity price-risk management and trading operations and energy-related
information services operations are now included in Williams Energy Services.
The oil ventures operations are now reported as part of Williams Pipe Line.
Williams Field Services Group now includes the natural gas venture operations.
In addition, certain natural gas marketing operations formerly reported as part
of Williams Field Services Group are included in Williams Energy Services.
Note 3. Transco acquisition
On January 18, 1995, Williams acquired 60 percent of Transco's outstanding
common stock in a cash tender offer for $430.5 million. Williams acquired the
remaining 40 percent of Transco's outstanding common stock on May 1, 1995
through a merger by exchanging the remaining Transco common stock for
approximately 10.2 million shares of Williams common stock valued at $319
million. The acquisition is accounted for as a purchase and 60 percent of
Transco's results of operations beginning January 18, 1995 are included in
Williams' Consolidated Statement of Income for the first quarter of 1995. The
cash portion of the acquisition was financed from the proceeds of the WilTel
network services sale (See Note 5). The purchase price, including transaction
fees and other related costs, is approximately $800 million, excluding $2.3
billion in preferred stock and debt obligations of Transco. The acquired
assets and liabilities have been recorded based on a preliminary allocation of
the purchase price and substantially all of
-8-
<PAGE> 10
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the cost in excess of Transco's historical carrying amounts has been allocated
to property, plant and equipment. Because Williams acquired the remaining 40
percent of Transco on May 1, the assets acquired and liabilities assumed are
recorded at 100 percent of their respective fair values and minority interest
is recorded for 40 percent of the estimated fair value of the net assets
acquired.
Williams intends to sell certain Transco assets within one year from the
acquisition date, including coal operations, certain gathering operations and
coalbed methane properties and related assets, all of which are included at
estimated net realizable value in net assets held for sale in the Consolidated
Balance Sheet. Estimated results of operations and changes in the carrying
amount of these businesses during the holding period are included in the
purchase price. The results of operations of these businesses excluded from
Williams' Consolidated Statement of Income are not material.
In connection with the acquisition, Williams made payments during the first
quarter of 1995 to retire and/or terminate approximately $700 million of
Transco borrowings and preferred stock, interest-rate swaps and sale of
receivable facilities. In connection with the May 1 merger, Williams also
exchanged Transco's $3.50 preferred stock for Williams' $3.50 preferred stock.
The following unaudited pro forma information combines the results of
operations of Williams and Transco as if the purchase of the 60 percent
occurred at the beginning of each year presented.
<TABLE>
<CAPTION>
Unaudited
---------
(Millions, except per share amounts)
------------------------------------
Three months ended
March 31,
--------------------------
1995 1994
-------- --------
<S> <C> <C>
Revenues $1,077.5 $1,165.6
Income from continuing operations 86.2 52.3
Net income 1,091.9 64.5
Fully diluted earnings per share:
Income from continuing operations .89 .48
Net income 11.58 .60
</TABLE>
Pro forma financial information is not necessarily indicative of results of
operations that would have occurred if the acquisition had been at the
beginning of each year presented or of future results of operations of the
combined companies.
-9-
<PAGE> 11
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4. Williams Interstate Natural Gas Systems
<TABLE>
<CAPTION>
(Millions)
------------------------------------------------------------
Three months ended March 31,
Revenues Operating Profit
--------------------- -----------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Northwest Pipeline $ 59.1 $ 64.7 $26.5 $30.3
Williams Natural Gas 40.0 45.8 9.3 14.3
Transcontinental Gas
Pipe Line 153.5 - 38.3 -
Texas Gas Transmission 68.7 - 22.5 -
------ ------ ----- -----
$321.3 $110.5 $96.6 $44.6
====== ====== ===== =====
</TABLE>
Note 5. Discontinued operations
On January 5, 1995, Williams sold WilTel's network services operations to LDDS
Communications, Inc. (LDDS) for $2.5 billion in cash. The sale yielded a gain
of approximately $1 billion (net of income taxes of approximately $724 million)
which is reported as discontinued operations. Prior period operating results
for WilTel's network services operations were restated and are reported as
discontinued operations. The assets and liabilities that were transferred to
LDDS in the sale of the network services operations are included in net assets
held for sale at December 31, 1994. Under the terms of the agreement, Williams
retained Williams Telecommunications Systems, Inc., a national
telecommunications equipment supplier and service company, and Vyvx, Inc.,
which operates a national video network specializing in broadcast television
applications.
Note 6. Provision for income taxes
The provision (credit) for income taxes from continuing operations includes:
<TABLE>
<CAPTION>
(Millions)
-----------------------
Three months ended
March 31,
-----------------------
1995 1994
------ ------
<S> <C> <C>
Current:
Federal $27.7 $10.8
State 11.3 (4.0)
----- -----
39.0 6.8
Deferred:
Federal 15.3 7.4
State (4.6) 2.5
----- -----
10.7 9.9
----- -----
Total provision $49.7 $16.7
===== =====
</TABLE>
-10-
<PAGE> 12
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The effective income tax rate in 1995 is greater than the federal statutory
rate due primarily to the effects of state income taxes, minority interest, and
dividends on subsidiary preferred stock, partially offset by the effects of
income tax credits from coal-seam gas production.
The effective income tax rate in 1994 is less than the federal statutory rate
due primarily to income tax credits from coal-seam gas production and a
favorable prior-year adjustment to state income taxes, partially offset by
state income taxes related to 1994.
Cash payments for income taxes for the three months ended March 31, 1995 and
1994 are $2.4 million and $.8 million, respectively.
Note 7. Accrued liabilities
<TABLE>
<CAPTION>
(Millions)
-----------------------------------
March 31, December 31,
1995 1994
----------- ------------
<S> <C> <C>
Income taxes payable $ 853.9 $ 38.0
Employee costs 157.7 51.7
Rate refunds 124.5 83.8
Interest 70.6 39.9
Taxes other than income taxes 61.7 41.8
Other 289.4 106.2
-------- ------
$1,557.8 $361.4
======== ======
</TABLE>
Note 8. Long-term debt
Long-term debt consists of the following amounts:
<TABLE>
<CAPTION>
(Millions)
---------------------------------
Weighted average March 31, December 31,
interest rate* 1995 1994
---------------- ------------ ------------
<S> <C> <C> <C>
The Williams Companies, Inc.
Revolving credit loans - $ - $ 350.0
Debentures, 8.875% - 10.25%,
payable 2012, 2020 and 2021 9.5 379.7 379.7
Notes, 7.5% - 13%,
payable through 2001 8.2 354.2 363.8
Capital lease obligations,
11.1%, payable through 2014 11.1 31.0 31.0
Transco Energy Company
Debentures, 9.875%,
payable 2020 9.9 131.7 -
Notes, 9.125% - 11.25%,
payable 1995 through 2001 9.5 649.9 -
Northwest Pipeline
Debentures, 9% - 10.65%,
payable through 2022 9.6 293.0 293.0
Adjustable rate notes,
payable through 2002 9.0 11.7 13.3
</TABLE>
-11-
<PAGE> 13
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<S> <C> <C> <C>
Williams Natural Gas
Variable rate notes,
payable in 1999 6.2 130.0 130.0
Transcontinental Gas Pipe Line
Debentures, 9.125%,
payable 2017 9.1 150.0 -
Notes, 8.125% - 9%,
payable 1996 through 2002 8.7 379.0 -
Adjustable rate note
due 2000 6.2 123.0 -
Revolving credit loans 6.5 20.0 -
Texas Gas Transmission
Notes, 8.625% and 9.625%,
payable 1997 and 2004 9.0 253.0 -
Williams Pipe Line
Notes, 8.95% and 9.78%,
payable through 2001 9.3 120.0 120.0
Other, payable through 1999 8.0 9.3 10.0
-------- --------
3,035.5 1,690.8
Current portion of long-term debt (187.3) (383.0)
-------- --------
$2,848.2 $1,307.8
======== ========
</TABLE>
*At March 31, 1995.
During first quarter 1995, Williams replaced its $600 million credit agreement,
which was scheduled to terminate in December 1995, with a new $800 million
agreement. Under the new credit agreement, Northwest Pipeline,
Transcontinental Gas Pipe Line, Texas Gas Transmission, and Williams Pipe Line
have access to various amounts of the facility while Williams (parent) has
access to all unborrowed amounts. The available amount at March 31, 1995, was
$780 million. Interest rates vary with current market conditions.
Cash payments for interest (net of amounts capitalized) for the three months
ended March 31, 1995 and 1994 are $69 million and $41 million, respectively.
Note 9. Contingent liabilities and commitments
Rate and regulatory matters and related litigation
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 $126 million at March 31, 1995; 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, see Note 7 for the amount of revenues reserved for potential refund
as of March 31, 1995.
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
-12-
<PAGE> 14
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Natural Gas implemented its restructuring on October 1, 1993, and Northwest
Pipeline, Texas Gas and Transcontinental Gas Pipe Line implemented their
restructurings on November 1, 1993. Certain aspects of each pipeline company's
restructuring, other than Texas Gas, are under appeal.
Contract reformations and gas purchase deficiencies
Each of the natural gas pipeline subsidiaries 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 March 31, 1995, total pending supplier
take-or-pay, ratable take and minimum take claims for all of the pipeline
companies were not significant.
Williams Natural Gas and a producer have executed a number of definitive
agreements to resolve outstanding issues between the two companies and
restructure their relationship. Among other things, the agreements terminate
Williams Natural Gas' largest gas purchase contract and resolve a number of
disputes and litigation, including a $203 million claim by the producer for
take-or-pay deficiencies and a gas pricing dispute. With respect to the latter
dispute, Williams Natural Gas paid the producer $35 million in cash and is
committed to pay an additional $40 million under certain circumstances, all but
a small portion of which payments Williams Natural Gas believes it will be
permitted to recover from certain of its former sales customers. Portions of
the settlement are subject to regulatory approvals, including the regulatory
abandonment of a certain Williams Natural Gas gathering system on terms
acceptable to Williams Natural Gas. On May 2, 1995, the FERC issued orders
granting the requisite approvals.
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. 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 does not expect any
reallocation to result in a significant financial impact upon the company.
Pursuant to a stipulation and agreement approved by the FERC, Williams Natural
Gas has made two filings to direct bill take-or-pay and gas supply realignment
costs. The first provided for the offset of certain amounts collected subject
to refund against previous take-or-pay direct-billed amounts and, in addition,
covered $24 million in new costs. This filing was approved, and the final
direct-billed amount, taking into consideration the offset, was $15 million.
The second filing covered $18 million in additional costs, and provided for an
offset of $3 million. An intervenor has filed a protest seeking to have the
Commission review the prudence of certain of the costs covered by the second
filing. Williams Natural Gas believes that the filing will most likely be
approved. As of March 31, 1995, this subsidiary had an accrual of $45 million
for its then
-13-
<PAGE> 15
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
estimated remaining contract-reformation and gas supply realignment costs. It
will make additional filings under the applicable FERC orders to recover such
further costs as may be incurred in the future.
As of March 31, 1995, Texas Gas had made filings to recover $45.8 million, plus
interest, of $48.6 million of gas supply realignment costs then incurred.
Certain parties are challenging Texas Gas' right to fully recover such costs.
As of March 31, 1995, this subsidiary had an accrual of $40 million for its
then estimated remaining gas supply realignment costs. It will make additional
filings to recover such further costs as may be incurred in the future.
In 1983, the FERC issued Order 94-A, which permitted producers to collect
certain production related costs from pipelines on a retroactive basis.
Pursuant to FERC orders, Texas Gas and Transcontinental Gas Pipe Line direct
billed their customers for such costs paid to producers. In 1990, the U.S.
Court of Appeals for the D.C. Circuit overturned the FERC's orders authorizing
direct billing for such costs. Through settlements and refunds, Texas Gas and
Transcontinental Gas Pipe Line have resolved their respective refund
obligations as to these costs, except, in the case of Texas Gas, for an amount
of approximately $9.2 million and, in the case of Transcontinental Gas Pipe
Line, for an amount of approximately $7 million. Each of these subsidiaries
has provided for a reserve which it believes is adequate to provide for any
costs associated with any remaining refund obligation which it may be required
to absorb.
The foregoing accruals are in accordance with Williams' accounting policies
regarding the establishment of such accruals which take into consideration
estimated total exposure, as discounted and risk-weighed, as well as costs and
other risks associated with the difference between the time costs are incurred
and the time such costs are recovered from customers. The estimated portion of
such costs recoverable from customers is deferred or recorded as a regulatory
asset based on an estimate of expected recovery of the amounts allowed by FERC
policy. While Williams believes that these accruals are adequate and the
associated regulatory assets are appropriate, costs actually incurred and
amounts actually recovered from customers will depend upon the outcome of
various court and FERC proceedings, the success of settlement negotiations and
various other factors, not all of which are presently foreseeable.
Environmental matters
Since 1989, Texas Gas and Transcontinental Gas Pipe Line have had studies
underway to test their facilities for the presence of toxic and hazardous
substances to determine to what extent, if any, remediation may be necessary.
On the basis of the findings to date, Texas Gas and Transcontinental Gas Pipe
Line estimate that environmental assessment and remediation costs that will be
incurred over the next five years will total approximately $56 million to $68
million. This estimate depends upon a number of assumptions concerning the
scope of remediation that will be required at certain locations and the cost of
remedial measures to be undertaken. Texas Gas and Transcontinental Gas Pipe
Line are continuing to conduct environmental assessments and are implementing a
variety of remedial measures that may result in increases or decreases in the
total estimated costs. At March 31, 1995, these subsidiaries had reserves
totalling approximately $57 million for these estimated costs.
-14-
<PAGE> 16
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Certain Williams subsidiaries, including Texas Gas and Transcontinental Gas
Pipe Line, have been named as potentially responsible parties (PRP) in various
Superfund waste disposal sites. Although no assurances can be given, Williams
does not believe that the PRP status of these subsidiaries will have a material
adverse effect on its financial position, results of operations or net cash
flows.
In November 1994, Transcontinental Gas Pipe Line was named as a defendant in a
lawsuit filed in U.S. district court in Virginia by three individuals for
alleged violations of several provisions of both federal and state air
regulations. Since 1991, Transcontinental Gas Pipe Line has worked with the
appropriate Virginia agencies pursuant to an agreement to resolve the emissions
issues raised by the citizens. Transcontinental Gas Pipe Line believes the
state agencies are in agreement with the actions proposed by Transcontinental
Gas Pipe Line which will resolve emission issues at its Virginia facilities.
Transcontinental Gas Pipe Line believes the citizens' claims are without merit
and is prepared to vigorously defend the suit.
Texas Gas, Transcontinental Gas Pipe Line and Williams Natural Gas each have
identified polychlorinated biphenyl (PCB) contamination in air compressor
systems, disposal pits and related properties at certain compressor station
sites. Transcontinental Gas Pipe Line has responded to an informal data
request and Texas Gas and Williams Natural Gas have been involved in
negotiations with the U.S. Environmental Protection Agency (EPA) and state
agencies to develop screening, 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 by Texas Gas and Williams Natural Gas
and Transcontinental Gas Pipe Line has responded to data requests regarding
such potential contamination of certain of its sites. As of March 31, 1995,
Williams Natural Gas had recorded a liability for approximately $27 million,
representing the current estimate of future environmental cleanup costs to be
incurred over the next six to ten years. Texas Gas and Transcontinental Gas
Pipe Line likewise had recorded liabilities for these costs which are included
in the $57 million reserve mentioned above. 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. Texas Gas,
Transcontinental Gas Pipe Line and Williams Natural Gas have 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 March 31, 1995, 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
-15-
<PAGE> 17
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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. Since June 28, 1994, six individual lawsuits have been filed
against Northwest Pipeline in U.S. district court in Colorado, making
essentially the same claims. Northwest Pipeline is vigorously defending these
lawsuits.
Other legal matters
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 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. On September
13, 1994, the court granted summary judgment in favor of the defendants. The
Tribe sought a certification of an interlocutory appeal from the court which
was denied. Nevertheless, the Tribe has lodged an interlocutory appeal with
the U.S. Court of Appeals for the Tenth Circuit. Williams Production 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.
On October 6, 1994, the Antitrust Division of the Department of Justice issued
a civil investigation demand to Williams Natural Gas concerning its provision
of transportation services in Kansas and Missouri. Williams Natural Gas has
filed a response and believes that it has not violated the antitrust laws in
the conduct of its business.
On December 21, 1994, Williams Natural Gas received a second civil
investigative demand from the Antitrust Division of the Department of Justice
concerning certain gathering activities of Williams Natural Gas and Williams'
other operating subsidiaries. Williams has filed a response and believes that
none of its subsidiaries has violated the antitrust laws in the conduct of its
business.
Relative to a certain Agreement and Plan of Merger, dated December 12, 1994,
among Williams, a Williams subsidiary and Transco Energy Company (Transco),
seven class action lawsuits were filed on December 12, 1994, and later, in the
Chancery Court of Delaware, challenging the transaction and alleging a breach
of fiduciary duties by Transco's directors. In six of the lawsuits, Williams
was named as a party defendant, the plaintiffs alleging that Williams aided and
abetted the alleged breach of duty. On January 6, 1995, the parties to all of
the lawsuits entered into an agreement in principle and on January 9, 1995, a
stipulation and agreement of compromise, settlement and release was executed
subject to approval of the Court. See Note 3 for information regarding the
acquisition of Transco.
-16-
<PAGE> 18
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In October 1990, Dakota Gasification Company (Dakota), the owner of the Great
Plains Coal Gasification Plant (Plant), filed suit in the U.S. district court
in North Dakota against Transcontinental Gas Pipe Line and three other pipeline
companies alleging that the pipeline companies had not complied with their
respective obligations under certain gas purchase and gas transportation
contracts. On September 8, 1992, Dakota and the Department of Justice on
behalf of the Department of Energy filed an amended complaint adding as
defendants in the suit, Transco, Transco Coal Gas Company and all of the other
partners in the partnership that originally constructed the Plant and each of
the parent companies of these entities. Dakota and the Department of Justice
sought declaratory and injunctive relief and the recovery of damages, alleging
that the four pipeline defendants underpaid for gas, collectively, as of June
30, 1992, by more than $232 million plus interest and for additional damages
for transportation services; and costs and expenses including attorneys' fees.
On March 30, 1994, the parties executed definitive agreements which would
settle the litigation subject to final non-appealable regulatory approvals.
The settlement is also subject to a FERC ruling that Transcontinental Gas Pipe
Line's existing authority to recover in rates certain costs related to the
purchase and transportation of gas produced by Dakota will pertain to gas
purchase and transportation costs Transcontinental Gas Pipe Line will pay
Dakota under the terms of the settlement. On October 18, 1994, the FERC issued
an order consolidating Transcontinental Gas Pipe Line's petition with petitions
pending relative to two of the other three pipeline companies (the third
pipeline having entered into a settlement) and setting the matter for hearing
before an administrative law judge. The hearing is scheduled to commence on
June 20, 1995. In the event that the necessary regulatory approvals are not
obtained, Transcontinental Gas Pipe Line, Transco and Transco Coal Gas Company
intend to vigorously defend the suit.
In connection with agreements to resolve take-or-pay and other contract claims
and to amend gas purchase contracts, Transcontinental Gas Pipe Line and Texas
Gas have each entered into certain settlements which may require the
indemnification by Transcontinental Gas Pipe Line or Texas Gas of certain
claims for additional royalties which the producers may be required to pay as a
result of such settlements. In October 1992, the U.S. Court of Appeals for the
Fifth Circuit and the Louisiana Supreme Court, with respect to the same issue
under Louisiana law, determined that royalties are due on take-or-pay payments
under the royalty clauses of the specific mineral leases reviewed by the
courts. As a result of these and related developments, Transcontinental Gas
Pipe Line and Texas Gas have been named as defendants in, respectively, five
and two lawsuits in which damages aggregating in excess of $128 million and
Transcontinental Gas Pipe Line has received an additional claim in the amount
of approximately $5.7 million. Producers may receive other demands which could
result in additional claims against Transcontinental Gas Pipe Line and Texas
Gas pursuant to the indemnification provisions in their respective settlements.
Indemnification for royalties will depend on, among other things, the specific
lease provisions between the producer and the lessor and the terms of the
settlement between the producer and either Transcontinental Gas Pipe Line or
Texas Gas. Texas Gas may file to recover 75 percent of any such amounts it
may be required to pay pursuant to indemnities for royalties under the
provisions of Order 528.
On November 14, 1994, Continental Energy Associates Limited Partnership (the
Partnership) filed a voluntary petition under Chapter 11 of the Bankruptcy Code
with the U.S. Bankruptcy Court, Middle District of Pennsylvania. The
Partnership
-17-
<PAGE> 19
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
owns a cogeneration facility in Hazleton, Pennsylvania (the Facility).
Hazleton Fuel Management Company (HFMC), a subsidiary of Transco, supplies
natural gas and fuel oil to the Facility. As of March 31, 1995, it had current
outstanding receivables from the Partnership of approximately $19 million, for
which HFMC has established a reserve of $18 million. The construction of the
Facility was funded by several banks that have a security interest in all of
the Partnership's assets. HFMC has asserted to the Bankruptcy Court that
payment of its receivables is superior to the lien of the banks and intends to
vigorously pursue the collection of such amounts. HFMC has also filed suit
against the lead bank with respect to this and other matters, including the
alleged tortious interference with HFMC's contractual relations with the
Partnership and other parties. On March 21, 1995, the Bankruptcy Court
approved the rejection of the gas supply contract between the Partnership and
HFMC. HFMC has in turn asserted force majeure under a contract with a producer
under which HFMC purchased natural gas for the Facility.
In addition to the foregoing, various other proceedings are pending against
Williams or its subsidiaries incidental to their operations.
Summary
While no assurances may be given, 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 effect upon Williams' future financial
position, results of operations and cash flow requirements.
Note 10. Subsequent event
During April 1995, Williams sold its 15 percent interest in Texasgulf Inc. for
approximately $120 million, which will result in a second quarter after-tax
gain of approximately $15 million because of previously unrecognized tax
benefits. The $150 million investment in Texasgulf, which was included in
investments at December 31, 1994, is included in net assets held for sale at
March 31, 1995.
-18-
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 VS. MARCH 31, 1994
NORTHWEST PIPELINE'S revenues decreased $5.6 million due primarily to the
completion in 1994 of billing contract-reformation surcharges. Total mainline
throughput increased 18 percent. Costs and operating expenses decreased $1.8
million primarily due to the completion of contract reformation amortization in
1994, partially offset by an increase in operations and maintenance expense of
$2.4 million. The increase in operations and maintenance expense was largely
due to increased maintenance projects and higher third party compression
charges. Operating profit decreased primarily due to increased operation and
maintenance expense.
WILLIAMS NATURAL GAS' revenues decreased $5.8 million due primarily to lower
transportation revenues of $1.2 million, resulting from a decrease in the
average firm reserved capacity rate. Prior-period revenues included the
favorable resolution in 1994 of a $1.6 million prior-period regulatory issue.
Operating profit decreased $5 million due primarily to the decrease in
transportation revenues, an increase in general and administrative expenses and
the 1994 prior-period regulatory issue.
TRANSCONTINENTAL GAS PIPE LINE owns an interstate natural gas pipeline that
extends from the onshore and offshore Louisiana producing areas through the
Southeast and up into much of the Eastern Seaboard, including New York City.
Transcontinental Gas Pipe Line's revenues were $154 million in the first
quarter of 1995, while costs and operating expenses were $116 million and
operating profit was $38 million. Throughput was 315.5 TBtu's in the first
quarter of 1995 (for the period subsequent to the acquisition date).
Market-area deliveries declined 2 percent in 1995 compared to 1994.
TEXAS GAS TRANSMISSION operates an interstate natural gas pipeline system that
serves eight states in the South and Midwest. Texas Gas' revenues were $69
million in 1995, while costs and operating expenses were $46 million and
operating profit was $23 million. Throughput was 163.3 TBtu's in 1995 (for the
period subsequent to the acquisition date). Mainline deliveries declined 2
percent in 1995 compared to 1994. Texas Gas placed new, higher rates into
effect April 1, 1995, subject to refund.
WILLIAMS FIELD SERVICES GROUP'S revenues increased $42.4 million due primarily
to 91 percent increase in gathering volumes, including $32 million attributable
to Transco's gathering and liquids operations and an increase of $7 million
from other gathering activities. In addition, higher liquids product volumes,
partially offset by lower average per-unit prices, increased revenues by $8
million. Costs and operating expenses and selling, general and administrative
expenses increased $27 million and $7 million, respectively, of which Transco's
gathering activities contributed $20 million and $4 million, respectively. In
addition, costs and operating expenses increased from $4 million of higher
operating and maintenance expenses and $3 million of increased depreciation.
Operating profit increased $8.5 million primarily resulting from Transco's
gathering activities. Increases in both per-unit liquids margins and volumes
combined to total $4 million along with higher other gathering volumes were
offset by increased costs and expenses.
-19-
<PAGE> 21
WILLIAMS PIPE LINE'S revenues increased $13.5 million due primarily to
increases of $9 million in nontransportation revenue and $3 million from
petroleum services activities (previously classified in Williams Energy
Ventures). A slightly higher average transportation rate, resulting primarily
from an increase in tariff rates averaging 5.5 percent on December 1, 1994 was
largely offset by a shorter average haul. Shipment volumes were slightly
higher than first quarter 1994 amounts. However, 1995 volumes were reduced by
warmer weather and the November 1994 Minneapolis rack fire. Costs and expenses
increased $13 million primarily from $10 million in increased costs related to
higher nontransportation revenue and increased petroleum services activities.
Operating profit increased $.1 million in 1995 as the first quarter of 1994
benefited from a $2.8 million favorable insurance settlement. Absent this
item, operating profit would have increased 24 percent primarily from higher
nontransportation revenue, partially offset by higher costs and operating
expenses.
WILLIAMS ENERGY SERVICES' revenues increased $273.6 million, primarily from the
addition of Transco's gas marketing operations. Natural gas sales were 192.7
TBtu's in 1995 compared to 36.3 TBtu's in 1994. Revenues from price-risk
management activities increased $21 million, primarily from income recognition
from initial mark-to-market valuation of new gas supply obligations. Costs and
expenses significantly increased by $249.8 million due primarily to the
addition of Transco's gas marketing operations. Operating profit increased
$23.8 million as Transco's gas marketing operations contributed $8 million and
the income recognition from mark-to-market valuation of long-term natural gas
supply contracts added $21 million. Partially offsetting the increases were
the expenses of continued development and marketing of information-based
products and services for the energy industry.
WILLIAMS TELECOMMUNICATIONS SYSTEMS' revenues increased $52.7 million due
primarily to the acquisitions of BellSouth Communications Systems on March 31,
1994 and Jackson Voice Data on October 13, 1994. Cost of sales increased $41.8
million and selling, general and administrative expenses (SG&A) increased $4.5
million, primarily reflecting the increased sales activity from the
acquisitions. Efficiencies in SG&A relating to the above acquisitions resulted
in improvements in these expenses as a percent of revenues primarily from
elimination of duplicate sales infrastructures related to the acquisitions.
Operating profit increased $6.3 million due primarily to increased sales
activity from the 1994 acquisitions. Product per-unit margins declined in 1995
compared to 1994 as a result of lower margins on certain products of the
acquired businesses.
General corporate expenses increased due primarily to a $4 million contribution
to The Williams Companies Foundation. Interest accrued increased due primarily
to the $2 billion Transco outstanding debt assumed as a result of the
acquisition. Investing income increased $32 million due primarily to a $15
million dividend from Texasgulf Inc. (See Note 10) combined with interest
earned on the invested portion of the cash proceeds from the sale of WilTel's
network services operations. Other income (expense) - net in 1995 includes
approximately $8 million of minority interest expense associated with the
Transco merger and $3 million of dividends on Transco preferred stock. Other
income (expense) - net in 1994 includes a credit of $4.8 million from the
reversal of previously accrued liabilities associated with certain Royalty
Trust contingencies which expired. Also included in 1994 is approximately $2
million of expense related to the adoption of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits," which
related to postemployment benefits being paid to employees of companies
previously sold. The effective income tax rate in 1995 is greater than the
federal statutory rate
-20-
<PAGE> 22
due primarily to state income taxes, minority interest and dividends on
subsidiary preferred stock, partially offset by income tax credits from
coal-seam gas production. The effective income tax rate in 1994 is less than
the federal statutory rate due primarily to income tax credits from coal-seam
gas production and a favorable prior-year adjustment to state income taxes,
partially offset by state income taxes related to 1994.
On January 5, 1995, Williams sold WilTel's network services operations to LDDS
Communications, Inc. for $2.5 billion in cash. The sale yielded an after-tax
gain of approximately $1 billion, which is reported as income from discontinued
operations. Prior-period operating results for WilTel's network services
operations were restated and are reported as discontinued operations.
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 March 31, 1995, Williams
had access to $1.4 billion of liquidity representing the unborrowed portion of
its $800 million bank-credit facility plus cash-equivalent investments. This
compares with liquidity of $495 million at December 31, 1994, and $614 million
at March 31, 1994. The increase in 1995 is due to the remaining cash proceeds
from the sale of WilTel's network services operations and a $200 million
increase in the capacity of the bank-credit facility (See Note 8).
In 1995 capital expenditures are estimated to be approximately $1.2 billion.
During 1995, Williams expects to finance capital expenditures, investments and
working-capital requirements through the use of its $800 million bank-credit
facility or public debt/equity offerings.
Financing Activities
The consolidated long-term debt to long-term debt-plus-equity ratio increased
to 52.8 percent at March 31, 1995, from 46.5 percent at December 31, 1994. The
increase is due to the assumption of Transco's outstanding debt, partially
offset by increased equity primarily from the $1 billion income from
discontinued operations.
Net assets held for sale at March 31, 1995 include the investment in Texasgulf
Inc. (See Note 10) and certain Transco businesses which Williams intends to
sell within one year (See Note 3). Accrued liabilities increased due primarily
to the income tax and other liabilities associated with the sale of the network
services operations in addition to the acquisition of Transco. Notes payable
and long-term debt due within one year decreased reflecting the repayment of
these amounts with the proceeds from the sale of the network services
operations. The increases in accounts receivable, inventory, other current
assets, property, plant and equipment, other noncurrent assets and deferred
charges, accounts payable, long-term debt, deferred income taxes, and other
noncurrent liabilities and deferred credits primarily reflect the acquisition
of Transco.
Other
On January 18, 1995, Williams acquired 60 percent of Transco's outstanding
common
-21-
<PAGE> 23
stock in a cash tender offer for $430.5 million. The cash portion of the
acquisition was financed from the proceeds of the WilTel network services sale.
In connection with the acquisition, Williams made payments during the first
quarter to retire and/or terminate approximately $700 million in Transco
borrowings, preferred stock, interest-rate swaps and sale of receivable
facilities (See Note 3).
Subsequent Events
Williams acquired the remaining 40 percent of Transco's outstanding common
stock on May 1, 1995 through a merger which exchanged the remaining Transco
common stock for approximately 10.2 million shares of Williams common stock.
The estimated purchase price including transaction fees and other related costs
is approximately $800 million, excluding $2.3 billion in preferred stock and
debt obligations of Transco. As a part of the merger, Williams exchanged
Transco's outstanding $3.50 preferred stock for Williams' $3.50 preferred stock
(See Note 3).
During April 1995, Williams sold its 15 percent interest in Texasgulf Inc. for
approximately $120 million, which will result in a second quarter after-tax
gain of approximately $15 million because of previously unrecognized tax
benefits (See Note 10).
Williams is considering filing a registration statement proposing to exchange
its $2.21 cumulative preferred stock for subordinated debentures.
-22-
<PAGE> 24
PART II. OTHER INFORMATION
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 first quarter of 1995, the Company filed a Form
8-K on January 11, 1995 and February 1, 1995, which
reported two separate significant events under Item 5 of
the Form and included the exhibits required by Item 7 of
the Form. Also during the first quarter of 1995, the
Company filed a Form 8-K/A dated March 29, 1995, amending a
previous filing which reported a significant event under
Item 5 of the Form and included the exhibits required by
Item 7 of the Form.
-23-
<PAGE> 25
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)
Gary R. Belitz
---------------------------------------
Gary R. Belitz
Controller
(Duly Authorized Officer and
Chief Accounting Officer)
May 12, 1995
<PAGE> 26
INDEX TO EXHIBITS
Exhibits Description
-------- -----------
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
27 Financial Data Schedule.
<PAGE> 1
Exhibit 11
THE WILLIAMS COMPANIES, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON-EQUIVALENT SHARE
Three months ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
(Thousands, except
per-share amounts)
------------------------------
1995 1994*
-------------- --------
<S> <C> <C>
Primary earnings:
Income from continuing operations $ 83,200 $40,600
Preferred stock dividends:
$2.21 cumulative preferred stock 2,100 2,200
-------------- -------
Income from continuing operations, net of preferred stock dividends 81,100 38,400
Income from discontinued operations 1,005,700 12,200
-------------- -------
Income applicable to common stock $ 1,086,800 $50,600
============== =======
Primary shares:
Average number of common shares outstanding during the period 90,974 103,349
Common-equivalent shares attributable to options and deferred stock 2,946 891
------ -------
Total common and common-equivalent shares 93,920 104,240
====== =======
Primary earnings per common and common-equivalent share:
Income from continuing operations $ .86 $.36
Income from discontinued operations 10.71 .12
------- ----
Net income $ 11.57 $.48
======= ====
Fully diluted earnings:
Income from continuing operations $ 83,200 $40,600
Preferred stock dividends:
$2.21 cumulative preferred stock 2,100 2,200
-------------- -------
Income from continuing operations, net of preferred stock dividends 81,100 38,400
Income from discontinued operations 1,005,700 12,200
-------------- -------
Income applicable to common stock $ 1,086,800 $50,600
============== =======
Fully diluted shares:
Average number of common shares outstanding during the period 90,974 103,349
Common-equivalent shares attributable to options and deferred stock 3,143 891
------- -------
Total common and common-equivalent shares 94,117 104,240
======= =======
Fully diluted earnings per common and common-equivalent share:
Income from continuing operations $ .86 $ .36
Income from discontinued operations 10.69 .12
-------- -----
Net income $ 11.55 $ .48
======== =====
</TABLE>
*Restated as described in Note 5 of Notes to Consolidated Financial Statements.
<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>
Three Months Ended
March 31, 1995
------------------
<S> <C>
Earnings:
Income from continuing operations before income taxes $132.9
Add:
Interest expense - net 67.3
Rental expense representative of interest factor 5.6
Preferred dividends of subsidiaries 3.7
Interest accrued - 50 percent owned company 7.9
Other .7
------
Total earnings as adjusted plus fixed charges $218.1
======
Fixed charges and preferred stock dividend requirements:
Interest expense - net $ 67.3
Capitalized interest 1.3
Rental expense representative of interest factor 5.6
Pretax effect of dividends on preferred stock of
the Company 3.3
Pretax effect of dividends on preferred stock
of subsidiaries 5.9
Interest accrued - 50 percent owned company 7.9
------
Combined fixed charges and preferred stock dividend
requirements $ 91.3
======
Ratio of earnings to combined fixed charges and
preferred stock dividend requirements 2.39
======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 614,994
<SECURITIES> 0
<RECEIVABLES> 600,115
<ALLOWANCES> (10,375)
<INVENTORY> 210,812
<CURRENT-ASSETS> 2,178,228
<PP&E> 8,303,467
<DEPRECIATION> (1,261,581)
<TOTAL-ASSETS> 10,158,671
<CURRENT-LIABILITIES> 2,233,383
<BONDS> 2,817,128
<COMMON> 104,549
0
100,000
<OTHER-SE> 2,363,091
<TOTAL-LIABILITY-AND-EQUITY> 10,158,671
<SALES> 0
<TOTAL-REVENUES> 958,013
<CGS> 0
<TOTAL-COSTS> 780,234
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,298
<INTEREST-EXPENSE> 68,623
<INCOME-PRETAX> 132,924
<INCOME-TAX> 49,728
<INCOME-CONTINUING> 83,196
<DISCONTINUED> 1,005,665
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,088,861
<EPS-PRIMARY> 11.57
<EPS-DILUTED> 11.55
</TABLE>
