<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 18, 1995
THE WILLIAMS COMPANIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-4174 73-0569878
--------------- ------------ -----------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
One Williams Center, Tulsa, Oklahoma 74172
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918)588-2000
Not Applicable
-----------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On December 12, 1994, The Williams Companies, Inc., ("Williams")
entered into a merger agreement among Transco Energy Company ("Transco") and WC
Acquisition Corp., a wholly owned subsidiary of Williams, (the "Agreement").
Under the terms of the Agreement, on December 16, 1994, Williams filed a Tender
Offer Statement pursuant to Section 14(d)(1) of the Securities Exchange Act of
1934 with the Securities and Exchange Commission on Schedule 14D-1 relating to
Williams' offer to purchase up to 24.6 million shares, or approximately 60
percent, of Transco's common stock (including attached common stock purchase
rights) for $17.50 per share (and attached right). Williams and Transco have
also entered into a stock option agreement providing for the grant of an
option to Williams to purchase up to 7.5 million additional shares of Transco's
common stock at $17.50 per share. On January 18, 1995, Williams accepted for
payment, pursuant to the terms of the tender offer, 24.6 million shares of
Transco's common stock. Williams used funds obtained from the sale of the
major portion of its telecommunications assets to acquire the Transco stock
and will also use such funds to pay all related fees and expenses of the
tender offer and merger.
Under the terms of the Agreement and upon completion of appropriate
filings with the Securities and Exchange Commission and approval by Transco's
stockholders, a stock merger will occur in which the shares of Transco's common
stock not purchased in the tender offer will be exchanged for 0.625 shares of
Williams' Common Stock. Total value of the transaction, including the exchange
or retirement of Transco's outstanding preferred stock and assumption of
indebtedness, is approximately $3 billion.
Transco owns and operates Transcontinental Gas Pipe Line Corporation,
Texas Gas Transmission Corporation and Transco Gas Marketing Company and has
investments in other energy assets. Transcontinental Gas Pipe Line,
headquartered in Houston, Texas, owns and operates 10,500 miles of pipeline
extending from the Gulf of Mexico through the South and along the Eastern
Seaboard to New York City. Its primary customers are natural gas and electric
utility companies in the East and Northeast. Texas Gas Transmission,
headquartered in Owensboro, Kentucky, owns and operates 6,100 miles of pipeline
extending from the Louisiana Gulf Coast up the Mississippi River Valley to
Indiana and Ohio. In addition to serving markets in this area, Texas Gas
Transmission also serves the Northeast through connections with other
pipelines. Transco Gas Marketing buys, sells and arranges transportation for
natural gas primarily in the eastern and midwestern United States and Gulf
Coast region, processes natural gas and sells natural gas liquids.
This filing is made for the purpose of amending the Company's Form
8-K, dated January 31, 1995, for the purpose of including required financial
information.
<PAGE> 3
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired
The audited consolidated financial statements of
Transco and its subsidiaries as of December 31, 1994
and 1993 and for the three years in the period ended
December 31, 1994, required hereunder are
incorporated by reference from Item 8 of Transco's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (Commission file number 1-7513),
dated March 23, 1995.
(b) Pro forma financial information
The Williams Companies, Inc.:
Unaudited pro forma financial statements
Unaudited pro forma combined balance sheet as of
December 31, 1994
Notes to unaudited pro forma combined balance sheet
Unaudited pro forma combined statement of income for
the year ended December 31, 1994
Notes to unaudited pro forma combined statement of
income
Transco Energy Company:
Unaudited pro forma financial statements
Unaudited pro forma consolidated balance sheet as of
December 31, 1994
Notes to unaudited pro forma consolidated balance
sheet
Unaudited pro forma consolidated statement of income
for the year ended December 31, 1994
Notes to unaudited pro forma consolidated statement of
income
<PAGE> 4
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
WILLIAMS' UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Financial Statements of Williams
illustrate the effect of (i) Williams' acquisition of Transco pursuant to the
Acquisition, (ii) the WNS Sale and (iii) certain elements of the
Recapitalization as described in the next paragraph. The Unaudited Pro Forma
Combined Balance Sheet is prepared as of December 31, 1994 and illustrates the
effects of the Acquisition, the WNS Sale and the Recapitalization as if they had
occurred on that date. The Unaudited Pro Forma Combined Statement of Income is
prepared for the year ended December 31, 1994, and illustrates the effects of
the Acquisition, the WNS Sale and the Recapitalization as if they had occurred
at the beginning of the period.
The Unaudited Pro Forma Combined Financial Statements reflect Williams
having acquired approximately 60% of the outstanding Transco Common Shares
pursuant to the Offer and the assumption that the remaining outstanding Transco
Common Shares will be exchanged for 10.1 million Williams Common Shares pursuant
to the Merger. The Unaudited Pro Forma Combined Financial Statements also
reflect certain elements of the Recapitalization, including (i) the cash
redemption by Transco of the Transco $4.75 Preferred Stock, (ii) the exchange,
pursuant to the Merger, of the Transco $3.50 Preferred Stock into an equal
number of shares of Williams $3.50 Preferred Stock and (iii) the cash
extinguishment of certain Transco debt, including the Transco Notes pursuant to
a tender offer and a planned defeasance of the untendered Transco Notes.
Williams' acquisition of Transco will be accounted for as a purchase. The
purchase price is approximately $1 billion, including fees related to the
Acquisition. The Unaudited Pro Forma Combined Balance Sheet assumes the purchase
price is financed with $606 million of the $2.5 billion in proceeds Williams
received from the WNS Sale, the issuance of $282 million of Williams Common
Shares and the issuance of $125 million of Williams $3.50 Preferred Stock.
The Unaudited Pro Forma Combined Financial Statements should be read in
conjunction with the historical financial statements of Williams and Transco,
which are incorporated by reference herein, and the Notes to the Unaudited Pro
Forma Combined Financial Statements. The pro forma adjustments are based on
preliminary information about Transco's assets, liabilities and results of
operations. Final purchase price allocations will be based on more complete
evaluations and may differ substantially from those shown below. However, the
management of Williams believes that the assumptions provide a reasonable basis
for presenting the significant effects of the Acquisition, the WNS Sale and the
Recapitalization and that the pro forma adjustments give appropriate effect to
those assumptions and are properly applied in the pro forma financial
information. The Unaudited Pro Forma Combined Financial Statements are not
intended to be indicative of actual operating results or financial position had
the transactions occurred as of the dates indicated above, nor do they purport
to indicate operating results or financial position which may be attained in the
future.
The Unaudited Pro Forma Combined Financial Statements do not include a
range of results because Williams has the ability through its current ownership
of 60% of the Transco Common Shares to compel the consummation of the Merger.
<PAGE> 5
THE WILLIAMS COMPANIES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1994
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
--------------------------
WILLIAMS TRANSCO* ADJUSTMENTS COMBINED
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents..................... $ 36 $ 32 $ 1,693(1) $ 169
(17)(2)
(1,575)(3)
Net assets of discontinued operations......... 744 -- (744)(1) --
Other current assets.......................... 677 517 112(4) 1,496
193(5)
(3)(6)
------- ------- --------- -------
Total current assets.................. 1,457 549 (341) 1,665
Investments..................................... 379 22 401
Property, plant and equipment, net.............. 3,124 2,864 (406)(5) 6,763
1,181(13)
Other assets and deferred charges............... 266 338 (94)(5) 628
125(6)
(7)(8)
------- ------- --------- -------
Total assets.......................... $ 5,226 $ 3,773 $ 458 $ 9,457
======= ======= ========= =======
Current liabilities............................. $ 1,473 $ 860 $ 28(1) $1,875
(38)(5)
(448)(7)
Long-term debt.................................. 1,308 1,786 (247)(8) 2,847
Deferred income taxes........................... 663 285 (59)(1) 1,283
125(5)
269(9)
Deferred income and other liabilities........... 276 166 (19)(5) 559
136(6)
Preferred stock of subsidiary................... -- 49 (49)(10) --
Stockholders' equity:
Preferred stock............................... 100 265 (140)(11) 225
Common stockholders' equity................... 1,406 362 980(1) 2,668
(17)(2)
(63)(12)
------- ------- --------- -------
Total stockholders' equity............ 1,506 627 760 2,893
------- ------- --------- -------
Total liabilities and stockholders'
equity.............................. $ 5,226 $ 3,773 $ 458 $ 9,457
======= ======= ========= =======
</TABLE>
---------------
* Certain amounts have been reclassified to conform to Williams' classification.
See the accompanying Notes to Unaudited Pro Forma Combined Balance Sheet.
<PAGE> 6
THE WILLIAMS COMPANIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
1. This adjustment reflects the WNS Sale which occurred on January 5, 1995.
Cash and cash equivalents were increased by $1.7 billion, representing the
$2.5 billion sales proceeds, net of estimated cash income taxes payable and
transaction costs currently payable, which exceed the $744 million net
assets of discontinued operations. Common stockholders' equity was increased
by $980 million from the estimated after tax gain on the sale.
2. To record payment by Transco of $21 million for contractual severance costs
(including termination agreements, transaction and retention plan bonuses
and vesting of restricted stock), $5 million to purchase all vested stock
options and $2 million to redeem Transco Rights. The after-tax effect of
these payments is $17 million.
3. To record payment of $431 million for approximately 60% of the Transco
Common Shares, $25 million for transaction fees related to the Acquisition
and $1.119 billion for certain elements of the Recapitalization.
4. Reflects increase in receivables arising from the termination of Transco's
programs to sell receivables.
5. This adjustment reduces the carrying value of certain Transco businesses,
including coal operations, coal-bed methane operations and related assets,
that Williams intends to sell in 1995 to net realizable value and
reclassifies such net assets to current assets.
6. This adjustment represents the recording of a regulatory asset and a
liability for the excess of the benefit obligations for Transco's pension
and postretirement benefit plans over the plan assets.
7. This adjustment records payment for the cancellation of a Williams'
short-term borrowing facility used to finance Williams' treasury share
purchases for which the shares will be exchanged in the Merger, the
cancellation of Transco's working capital line under the Recapitalization
and the payment of accrued interest and dividends on all debt and preferred
stock cancelled under the Recapitalization.
8. These adjustments (a) increase long-term debt by $112 million to reflect
Transco's revised debt rating and current interest rates, (b) record payment
of $359 million for termination of Transco's interest rate swaps and the
purchase of the Transco Notes pursuant to a tender offer and a planned
defeasance of the untendered Transco Notes and (c) eliminate unamortized
debt issuance costs related to the Recapitalization.
9. This adjustment increases deferred income taxes for the tax effect of the
basis differences between the purchase price allocation and Transco's net
assets. It is assumed there will be no change in the tax basis of Transco's
assets and liabilities. The pro forma adjustments assume a combined 40%
Federal and state income tax rate.
10. This adjustment reflects the redemption of preferred stock of TGPL.
11. These adjustments reflect (a) the exchange of the Transco $3.50 Preferred
Stock, carried at $121 million, for the Williams $3.50 Preferred Stock,
valued at $125 million and (b) the cash redemption of the Transco $4.75
Preferred Stock, carried at $144 million.
12. These adjustments increase common stockholders' equity by $282 million for
Williams' issuance of 10.1 million Williams Common Shares, all treasury
shares, to acquire the remaining 40% of the Transco Common Shares and
eliminate Transco's common stockholders' equity of $345 million.
13. This adjustment allocates to property, plant and equipment the remaining
excess purchase price of Transco's net assets after giving effect to the
other necessary balance sheet purchase price adjustments.
<PAGE> 7
The significant adjustments comprising the purchase price allocated to property,
plant and equipment are as follows (in millions):
<TABLE>
<S> <C>
Consideration paid in excess of Transco's net book value............ $ 372
Transaction fees.................................................... 25
Reduction of carrying value of assets to be sold.................... 375
Increase in long-term debt to reflect appropriate current interest
rates............................................................. 112
Increase in deferred income taxes................................... 269
Other............................................................... 28
------
$1,181
======
</TABLE>
Such allocation results in a property, plant and equipment value which is
less than depreciated replacement cost. Subsequent to the Acquisition,
Williams will more fully evaluate the assets acquired and, as a result, the
allocation of purchase price to property, plant and equipment may change.
<PAGE> 8
THE WILLIAMS COMPANIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
------------------------
WILLIAMS TRANSCO* ADJUSTMENTS COMBINED
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues.......................................... $ 1,751 $ 2,816 $ (218)(1) $ 4,349
Costs and expenses................................ 1,409 2,616 (268)(1) 3,787
30 (2)
------- ------- -------- --------
Operating profit.................................. 342 200 20 562
General corporate expense......................... 28 -- 28
Interest expense, net............................. 140 196 (51)(3) 285
Investing income.................................. 50 11 61
Gain on sales of assets........................... 23 -- 23
Other income (expense), net....................... -- (7) 11 (4) 4
------- ------- -------- --------
Income from continuing operations before income
taxes........................................... 247 8 82 (8) 337
Provision for income taxes........................ 82 2 22 (1) 117
11 (5)
------- ------- -------- --------
Income from continuing operations................. 165 6 49 220
Preferred stock dividends......................... 9 23 (14)(6) 18
------- ------- -------- --------
Income from continuing operations applicable to
common stock.................................... $ 156 $ (17) $ 63 $ 202
======= ======= ======== ========
Number of shares:
Primary......................................... 103 41 105(7)
======= ======= ========
Fully diluted................................... 103 41 105(7)
======= ======= ========
Earnings per share from continuing operations:
Primary......................................... $ 1.52 $ (.42) $ 1.92(7)
======= ======= ========
Fully diluted................................... $ 1.52 $ (.42) $ 1.92(7)
======= ======= ========
</TABLE>
---------------
* Certain amounts have been reclassified to conform to Williams' classification.
See the accompanying Notes to Unaudited Pro Forma Combined Statement of Income.
<PAGE> 9
THE WILLIAMS COMPANIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
The adjustments to the Unaudited Pro Forma Combined Statement of Income do
not give effect to any nonrecurring costs directly associated with the
Acquisition that might be incurred within the next twelve months. The pro forma
financial data also do not give effect to any potential cost savings and
synergies that could result from the Acquisition.
1. These adjustments eliminate historical results of operations for Transco
operations which Williams intends to sell within one year from the date of
Acquisition. Earnings or losses from operations that Williams intends to sell
will not be reported in the Williams Consolidated Statement of Income during
the holding period. Therefore, their results of operations have been excluded
from the Pro Forma Combined Statement of Income consistent with the
assumption that the Acquisition occurred at the beginning of the period.
2. This adjustment represents depreciation on the purchase price allocated to
property, plant and equipment over the existing net book value of those
assets. A depreciation life of 40 years is used which approximates the FERC
approved rates for Transco's regulated transmission facilities. Such life is
supported by Williams preliminary analysis and intended use.
3. This adjustment represents amortization of the excess of fair value over face
value from revaluation of Transco's long-term debt. Fair value being in
excess of face value reflects Transco having lower borrowing costs as a
result of an improved external debt rating. This adjustment also eliminates
interest expense and debt costs related to Transco's working capital line,
interest rate swaps and the Transco Notes and Williams' short-term borrowing
facility.
4. These adjustments eliminate dividends on preferred stock of subsidiaries and
other expenses related to the Recapitalization.
5. This adjustment records the income tax effects of the pro forma adjustments.
For purposes of the pro forma calculations, a combined 40% Federal and state
income tax rate has been assumed.
6. This adjustment eliminates preferred stock dividends from the Transco $4.75
Preferred Stock, which were redeemed in the Recapitalization.
7. Pro forma per share data is calculated using the pro forma income from
continuing operations applicable to common shares divided by the pro forma
primary and fully diluted shares outstanding. The pro forma weighted average
common shares outstanding includes the following assumptions: (i) the
issuance of 10.1 million Williams Common Shares to holders of Transco Common
Shares under the terms of the Merger, (ii) the assumed issuance of 2.6
million in common share equivalents attributable to certain deferred shares
granted by Williams to employees and former employees in connection with the
WNS Sale and (iii) the repurchase by Williams of 12.7 million Common Shares
at the beginning of the period utilizing proceeds received from the WNS Sale.
8. The following is a summary of the adjustments to income from continuing
operations before income taxes (in millions):
<TABLE>
<S> <C>
Eliminate losses from Transco operations to be sold......... $ 50
Depreciation................................................ (30)
Interest and other costs from financings.................... 62
----
$ 82
====
</TABLE>
For the year ended December 31, 1994, Transco's costs and expenses include a
charge of $45 million from the write-down of capitalized costs in excess of
the ceiling limitation from a nonoperating interest in certain coalbed methane
properties and a charge of $4 million for a litigation settlement. These
charges are included in the pro forma adjustments related to Transco
operations to be sold.
<PAGE> 10
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
TRANSCO'S UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Financial Statements
illustrate the effect of Williams' acquisition of Transco pursuant to the
Acquisition and certain elements of the Recapitalization as described in the
next paragraph. The Unaudited Pro Forma Consolidated Balance Sheet is prepared
as of December 31, 1994 and illustrates the effects of the Acquisition and the
Recapitalization as if they had occurred on that date. The Unaudited Pro Forma
Consolidated Statement of Income is prepared for the year ended December 31,
1994, and illustrates the effects of the Acquisition and the Recapitalization as
if they had occurred at the beginning of the period presented.
The Unaudited Pro Forma Consolidated Financial Statements reflect Williams
having acquired approximately 60% of the outstanding Transco Common Shares
pursuant to the Offer and the assumption that the remaining outstanding Transco
Common Shares will be exchanged for 10.1 million Williams Common Shares pursuant
to the Merger. The Unaudited Pro Forma Consolidated Financial Statements also
reflect certain elements of the Recapitalization, including (i) the cash
redemption by Transco of the $4.75 Transco Preferred Stock, (ii) the exchange,
pursuant to the Merger, of the Transco $3.50 Preferred Stock into an equal
number of shares of Williams $3.50 Preferred Stock and (iii) the cash
extinguishment of certain Transco debt, including the Transco Notes pursuant to
a tender offer and a planned defeasance of the untendered Transco Notes.
Williams' acquisition of Transco will be accounted for as a purchase. The
purchase price is approximately $1 billion, including fees related to the
Acquisition.
The Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the historical financial statements of Transco, which are
incorporated by reference herein, and the Notes to the Unaudited Pro Forma
Consolidated Financial Statements. The pro forma adjustments are based on
preliminary information about the effects of the Acquisition. Final purchase
price allocations will be based on more complete evaluations and may differ
substantially from those shown below. However, the management of Williams
believes that the assumptions provide a reasonable basis for presenting the
significant effects of the Acquisition and the Recapitalization and that the pro
forma adjustments give appropriate effect to those assumptions and are properly
applied in the pro forma financial information. The Unaudited Pro Forma
Consolidated Financial Statements are not intended to be indicative of actual
operating results or financial position had the transactions occurred as of the
dates indicated above, nor do they purport to indicate operating results or
financial position which may be attained in the future.
The Unaudited Pro Forma Consolidated Financial Statements do not include a
range of results because Williams has the ability through its current ownership
of 60% of the Transco Common Shares to compel the consummation of the Merger.
<PAGE> 11
TRANSCO ENERGY COMPANY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents......................... $ 32 $ (17)(1) $ 15
Other current assets.............................. 517 112 (2) 819
193 (3)
(3)(4)
-------- --------- ---------
Total current assets...................... 549 285 834
Investments......................................... 22 22
Property, plant and equipment, net.................. 2,864 (406)(3) 3,639
1,181 (11)
Other assets and deferred charges................... 338 (94)(3) 362
125 (4)
(7)(6)
-------- --------- ---------
Total assets.............................. $ 3,773 $ 1,084 $ 4,857
======== ========= =========
Current liabilities................................. $ 860 $ (38)(3) $ 773
(49)(5)
Advances from Williams.............................. -- 720 (6) 720
Long-term debt...................................... 1,786 (247)(6) 1,539
Deferred income taxes............................... 285 125 (3) 679
269 (7)
Deferred income and other liabilities............... 166 (19)(3) 283
136 (4)
Preferred stock of subsidiary....................... 49 (49)(8) --
Stockholders' equity:
Preferred stock................................... 265 (265)(9) --
Common stockholders' equity....................... 362 (17)(1) 863
518 (10)
-------- --------- ---------
Total stockholders' equity................ 627 236 863
-------- --------- ---------
Total liabilities and stockholders'
equity.................................. $ 3,773 $ 1,084 $ 4,857
======== ========= =========
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet.
<PAGE> 12
TRANSCO ENERGY COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
1. To record payment by Transco of $21 million for contractual severance costs
(including termination agreements, transaction and retention plan bonuses
and vesting of restricted stock), $5 million to purchase all vested stock
options and $2 million to redeem stock purchase rights. The after-tax effect
of these payments is $17 million.
2. Reflects increase in receivables arising from the termination of Transco's
programs to sell receivables.
3. This adjustment reduces the carrying value of certain Transco businesses,
including coal operations, coalbed methane operations and related assets,
that Williams intends to sell in 1995 to net realizable value and
reclassifies such net assets to current assets.
4. These adjustments represent the recording of a regulatory asset and a
liability for the excess of the benefit obligations for Transco's pension
and postretirement benefit plans over the plans assets.
5. This adjustment records the payment for the cancellation of Transco's
working capital line under the Recapitalization and the payment of accrued
interest and dividends on all debt and preferred stock cancelled under the
Recapitalization.
6. These adjustments (i) eliminate unamortized debt issuance costs related to
the Recapitalization, (ii) record advances from Williams to Transco to fund
certain financing transactions, (iii) increase long-term debt by $112
million to reflect Transco's revised debt rating and current interest rates
and (iv) record payment of $359 million for the purchase of the Transco
Notes pursuant to a tender offer and a planned defeasance of the untendered
Transco Notes and the termination of Transco's interest rate swaps.
7. This adjustment increases deferred income taxes for the tax effect of the
basis differences between the purchase price allocation and Transco's net
assets. It is assumed there will be no change in the tax basis of Transco's
assets and liabilities. This pro forma adjustment assumes a combined 40%
federal and state income tax rate.
8. This adjustment reflects the redemption of preferred stock of TGPL.
9. This adjustment reflects (i) the exchange of the Transco $3.50 Preferred
Stock, carried at $121 million, for the Williams $3.50 Preferred Stock,
valued at $125 million and (ii) the cash redemption of the Transco $4.75
Preferred Stock, carried at $144 million.
10. This adjustment increases common stockholders' equity by the consideration
issued by Williams for the Transco $3.50 Preferred Stock and the Transco
Common Shares in excess of Transco's net book value.
11. This adjustment allocates to property, plant and equipment the remaining
excess purchase price of Transco's net assets after giving effect to the
other necessary balance sheet purchase price adjustments. The significant
adjustments comprising the purchase price allocated to property, plant and
equipment are as follows (in millions):
<TABLE>
<S> <C>
Consideration paid in excess of Transco's net book value.... $ 372
Transaction fees............................................ 25
Reduction of carrying value of assets to be sold............ 375
Increase in long-term debt to reflect appropriate current
interest rates............................................ 112
Increase in deferred income taxes........................... 269
Other....................................................... 28
------
$1,181
======
</TABLE>
Such allocation results in a property, plant and equipment value which is
less than depreciated replacement cost. Subsequent to the Acquisition,
Williams will more fully evaluate the assets acquired and, as a result, the
allocation of purchase price to property, plant and equipment may change.
<PAGE> 13
TRANSCO ENERGY COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------
HISTORICAL* ADJUSTMENTS AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
Revenues........................................... $ 2,816 $ (218)(1) $ 2,598
Costs and expenses................................. 2,612 (268)(1) 2,374
30 (2)
--------- -------- ---------
Operating profit................................... 204 20 224
Interest expense................................... 196 (12)(3) 184
Investing income................................... 11 11
Other income (expense), net........................ (11) 11 (4) --
--------- -------- ---------
Income from continuing operations before income
taxes............................................ 8 43 (7) 51
Provision for income taxes......................... 2 22 (1) 19
(5)(5)
--------- -------- ---------
Income from continuing operations.................. 6 26 32
Preferred stock dividends.......................... 23 (23)(6) --
--------- -------- ---------
Income from continuing operations applicable to
common stock..................................... $ (17) $ 49 $ 32
========= ======== =========
Number of shares:
Primary.......................................... 41 41
========= =========
Fully diluted.................................... 41 41
========= =========
Earnings per share from continuing operations:
Primary.......................................... $ (.42) $ .78
========= =========
Fully diluted.................................... $ (.42) $ .78
========= =========
</TABLE>
---------------
* Certain amounts have been reclassified.
See the accompanying Notes to Unaudited Pro Forma Consolidated Statement of
Income.
<PAGE> 14
TRANSCO ENERGY COMPANY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
The adjustments to the Unaudited Pro Forma Consolidated Statement of Income
do not give effect to any nonrecurring costs directly associated with the
Acquisition that might be incurred within the next twelve months. The pro forma
financial data also do not give effect to any potential cost savings and
synergies that could result from the Acquisition.
1. These adjustments eliminate historical results of operations for Transco's
operations which Williams intends to sell within one year from the date of
Acquisition. Earnings or losses from operations that Williams intends to sell
will not be reported in the Williams Consolidated Statement of Income during
the holding period. Therefore, their results of operations have been excluded
from Transco's Unaudited Pro Forma Consolidated Statement of Income
consistent with the assumption that the Acquisition occurred at the beginning
of the period.
2. This adjustment represents depreciation on the purchase price allocated to
property, plant and equipment over the existing net book value of those
assets. A depreciation life of 40 years is used which approximates the FERC
approved rates for Transco's regulated transmission facilities. Such life is
supported by Williams' preliminary analysis and intended use.
3. This adjustment represents amortization of the excess of fair value over face
value from revaluation of Transco's long-term debt. Fair value being in
excess of face value reflects Transco having lower borrowing costs as a
result of an improved external debt rating. This adjustment also eliminates
interest expense and debt costs related to Transco's working capital line,
interest rate swaps and the Transco Notes and adds interest expense on
advances from Williams to Transco used to fund certain financing
transactions. The interest rate on the advances from Williams to Transco is
at a variable rate of interest. A 1/8% variance in interest rates would
change interest expense on the advances from Williams by $0.5 million, net of
tax, for the year 1994.
4. This adjustment eliminates dividends on preferred stock of subsidiary and
other expenses related to the Recapitalization.
5. This adjustment records the income tax effects of the pro forma adjustments.
For purposes of the pro forma calculations, a combined 40 percent federal and
state income tax rate has been assumed.
6. This adjustment (i) eliminates preferred stock dividends from the Transco
$4.75 Preferred Stock, which will be redeemed in the Recapitalization and
(ii) eliminates preferred stock dividends from the Transco $3.50 Preferred
Stock exchanged for an equal number of shares of Williams $3.50 Preferred
Stock.
7. The following is a summary of the adjustments to income from continuing
operations before income taxes (in millions):
<TABLE>
<CAPTION>
<S> <C>
Eliminate losses from Transco operations to be sold.......... $ 50
Depreciation................................................. (30)
Interest and other costs from financings..................... 23
-----
$ 43
=====
</TABLE>
For the year ended December 31, 1994, Transco's costs and expenses include a
charge of $45 million from the write-down of capitalized costs in excess of
the ceiling limitation from a nonoperating interest in certain coalbed
methane properties and a charge of $4 million for a litigation settlement.
These charges are included in the pro forma adjustments related to Transco
operations to be sold.
<PAGE> 15
(c) Exhibits
The following exhibits are filed as part of this Report:
Exhibit 2. (a) Offer to Purchase, dated December 16, 1994, (filed as
Exhibit (a)(1) to Schedule 14D-1, dated December 16,
1994).
(b) Agreement and Plan of Merger, as amended, dated as of
December 12, 1994, among Williams, WC Acquisition
Corp. and Transco (filed as Exhibit 6 to Amendment
No. 8 to the Schedule 13D, dated February 23, 1995).
(c) Stock Option Agreement, dated as of December 12,
1994, by and between Williams and Transco (filed as
Exhibit (c)(2) to Schedule 14D-1, dated December 16,
1994).
Exhibit 20. (a) Preliminary Prospectus and Information Statement,
dated February 9, 1995 (filed as part of the
Company's Registration Statement on Form S-4 (No.
33-57639), dated February 9, 1995).
(b) Preliminary Prospectus and Information Statement,
dated March 24, 1995 (filed as part of Amendment No.
1 to the Company's Registration Statement on Form S-4
(No. 33-57639), dated March 24, 1995).
Exhibit 23. Consent of Independent Public Accountants.
Exhibit 99. Item 8 of Transco Energy Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 (filed by Transco
Energy Company, Commission File Number 1-7513, dated March 23,
1995).
Each exhibit listed above, with the exception of Exhibit 23, has heretofore
been filed with the Securities and Exchange Commission as part of the filing
indicated and is incorporated herein by reference.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be filed on its behalf by
the undersigned hereunto duly authorized:
THE WILLIAMS COMPANIES, INC.
(Registrant)
By: /s/ Gary R. Belitz
Gary R. Belitz
Controller
(Chief Accounting Officer)
Dated: March 29, 1995
<PAGE> 17
INDEX TO EXHIBITS
Exhibit 23 -- Consent of Independent Public Accountants
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 8-K/A of our report dated February 20, 1995 included in
Transco Energy Company's Annual Report on Form 10-K for the year ended December
31, 1994. It should be noted that we have not audited any financial statements
of Transco Energy Company subsequent to December 31, 1994 or performed any
audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Houston, Texas
March 29, 1995
