<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, 1996
------------------------------------------------
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.
<TABLE>
<CAPTION>
Class Outstanding at April 30, 1996
----- -----------------------------
<S> <C>
Common Stock, $1 par value 104,754,425 Shares
</TABLE>
<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, 1996 and 1995 2
Consolidated Balance Sheet--March 31, 1996 and
December 31, 1995 4
Consolidated Statement of Cash Flows--Three Months
Ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 22
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>
Portions of this document may constitute "forward looking statements" as
defined by federal law. Although The Williams Companies, Inc. believes any
such statements are based on reasonable assumptions, there is no assurance that
actual outcomes will not be materially different. Additional information about
issues that could lead to material changes in performance is contained in The
Williams Companies, Inc.'s annual report on Form 10-K.
-1-
<PAGE> 3
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
-----------------------
Three months ended
March 31,
-----------------------
1996 1995*
------ --------
<S> <C> <C>
Revenues:
Williams Interstate Natural
Gas Systems (Note 4) $455.7 $ 321.3
Williams Field Services Group 199.1 132.1
Williams Energy Services 26.7 35.2*
Williams Pipe Line 126.5 64.4
WilTel 122.0 126.7
WilTech Group 18.6 7.9
Other 12.6 7.3
Intercompany eliminations (67.5) (52.5)
------ --------
Total revenues 893.7 642.4
------ --------
Profit-center costs and expenses:
Costs and operating expenses 499.4 351.1*
Selling, general and administrative expenses 135.4 113.7
Other (income) expense--net 2.8 (.1)
------ --------
Total profit-center costs and expenses 637.6 464.7
Operating profit (loss):
Williams Interstate Natural
Gas Systems (Note 4) 164.1 96.6
Williams Field Services Group 53.2 36.4
Williams Energy Services 16.4 25.0
Williams Pipe Line 18.3 14.8
WilTel 3.0 7.9
WilTech Group (.2) (2.1)
Other 1.3 (.9)
------ --------
Total operating profit 256.1 177.7
General corporate expenses (11.1) (11.9)
Interest accrued (82.1) (68.6)
Interest capitalized 1.8 1.3
Investing income 4.5 44.2
Other expense--net (3.3) (9.8)
------ --------
Income from continuing operations
before income taxes 165.9 132.9
Provision for income taxes (Note 5) 61.0 49.7
------ --------
Income from continuing operations 104.9 83.2
Income from discontinued operations (Note 6) - 1,005.7
------ --------
Net income 104.9 1,088.9
Preferred stock dividends 2.6 2.1
------ --------
Income applicable to common stock $102.3 $1,086.8
====== ========
</TABLE>
*Reclassified as described in Note 2.
See accompanying notes.
-2-
<PAGE> 4
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF INCOME (concluded)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------
1996 1995
--------- --------
<S> <C> <C>
Primary earnings per common and
common-equivalent share:
Income from continuing operations $ .95 $ .86
Income from discontinued operations (Note 6) - 10.71
--------- --------
Net income $ .95 $ 11.57
========= ========
Average shares (thousands) 107,760 93,920
Fully diluted earnings per common and
common-equivalent share:
Income from continuing operations $ .93 $ .86
Income from discontinued operations (Note 6) - 10.69
--------- --------
Net income $ .93 $ 11.55
========= ========
Average shares (thousands) 111,912 94,117
Cash dividends per common share $ .34 $ .27
========= ========
</TABLE>
See accompanying notes.
-3-
<PAGE> 5
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
--------------------------
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 87.6 $ 90.4
Receivables 685.8 525.0
Transportation and exchange gas receivable 143.9 152.3
Inventories 206.9 189.0
Deferred income taxes 232.4 213.9
Other 198.7 173.2
--------- ---------
Total current assets 1,555.3 1,343.8
Investments 130.4 307.6
Property, plant and equipment, at cost (Note 3) 10,624.3 9,478.7
Less accumulated depreciation and depletion (1,637.2) (1,464.0)
--------- ---------
8,987.1 8,014.7
Other assets and deferred charges 840.6 828.7
--------- ---------
Total assets $11,513.4 $10,494.8
========= =========
</TABLE>
See accompanying notes.
-4-
<PAGE> 6
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED BALANCE SHEET (concluded)
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
----------------------------------
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Note payable (Note 9) $ 205.0 $ -
Accounts payable 487.3 472.0
Transportation and exchange gas payable 103.1 127.8
Accrued liabilities (Note 7) 1,023.7 1,130.2
Long-term debt due within one year (Note 9) 323.7 319.9
--------- ---------
Total current liabilities 2,142.8 2,049.9
Long-term debt (Note 9) 3,694.9 2,874.0
Deferred income taxes 1,600.8 1,568.2
Other liabilities 792.4 815.6
Contingent liabilities and commitments (Note 10)
Stockholders' equity:
Preferred stock, $1 par value, 30,000,000 shares
authorized, 3,291,052 shares issued in 1996 and 3,739,452
shares issued in 1995 162.3 173.5
Common stock, $1 par value, 240,000,000 shares
authorized, 106,115,559 shares issued in
1996 and 105,337,948 shares issued in 1995 106.1 105.3
Capital in excess of par value 1,077.1 1,051.1
Retained earnings 1,982.3 1,915.6
Unamortized deferred compensation (2.7) (2.3)
--------- ---------
3,325.1 3,243.2
Less treasury stock (at cost), 1,448,275 shares of
common stock in 1996 and 1,573,203 shares of
common stock in 1995, 401,600 shares of preferred
stock in 1995 (42.6) (56.1)
--------- ---------
Total stockholders' equity 3,282.5 3,187.1
--------- ---------
Total liabilities and stockholders' equity $11,513.4 $10,494.8
========= =========
</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,
------------------------
1996 1995
------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 104.9 $ 1,088.9
Adjustments to reconcile to cash provided from
operations:
Discontinued operations - (1,005.7)
Depreciation and depletion 112.8 83.5
Provision for deferred income taxes 7.8 10.7
Changes in receivables sold (5.1) (56.7)
Changes in receivables (62.2) 122.8
Changes in inventories (14.8) (7.5)
Changes in other current assets (4.3) 23.0
Changes in accounts payable 45.5 (49.2)
Changes in accrued liabilities (15.6) 6.5
Net change in non-current unrealized trading assets
and liabilities (8.0) (23.2)
Other, including changes in non-current assets
and liabilities 23.5 (9.7)
------- ---------
Net cash provided by operating activities 184.5 183.4
FINANCING ACTIVITIES:
Proceeds from notes payable 221.1 8.0
Payments of notes payable (16.1) (593.3)
Proceeds from long-term debt 971.9 20.0
Payments of long-term debt (785.8) (648.4)
Proceeds from issuance of common stock 26.3 2.2
Dividends paid (38.2) (26.2)
Subsidiary preferred stock redemptions - (193.7)
Other--net (2.6) (.4)
------- ---------
Net cash provided (used) by financing activities 376.6 (1,431.8)
------- ---------
</TABLE>
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,
------------------------
1996 1995
------- --------
<S> <C> <C>
INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures $(115.6) $ (135.9)
Proceeds from sales - 10.9
Changes in accounts payable and accrued liabilities (11.1) (2.0)
Acquisition of businesses, net of cash acquired (215.0) (478.6)
Proceeds from sale of business - 2,504.2
Income tax and other payments related to discontinued
operations (217.4) -
Purchase of note receivable - (75.1)
Other--net (4.8) 3.8
------- --------
Net cash provided (used) by investing activities (563.9) 1,827.3
------- --------
Increase (decrease) in cash and cash equivalents (2.8) 578.9
Cash and cash equivalents at beginning of period 90.4 36.1
------- --------
Cash and cash equivalents at end of period $ 87.6 $ 615.0
======= ========
</TABLE>
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' 1995 Annual Report on Form 10-K. The
accompanying unaudited financial statements have not been audited by
independent auditors but include all adjustments both normal recurring and
others which, in the opinion of Williams' management, are necessary to present
fairly its financial position at March 31, 1996, and results of operations for
the three months ended March 31, 1996 and 1995, and cash flows for the three
months ended March 31, 1996 and 1995.
Operating profit of operating companies may vary by quarter. Based on current
rate structures and historical maintenance schedules, Transcontinental Gas Pipe
Line and Texas Gas Transmission experience higher operating profits in the
first and fourth quarters as compared to the second and third quarters.
Note 2. Basis of presentation
Revenues and operating profit amounts for the three months ended March 31,
1995, include the operating results of Transco Energy since its January 18,
1995, acquisition by Williams.
Williams Energy Services' revenues and costs and operating expenses for the
three months ended March 31, 1995, have been reclassified to report sales of
natural gas, refined products and crude oil, net of the related costs to
purchase such items, consistent with mark-to-market accounting for such trading
activities.
Note 3. Kern River Gas Transmission acquisition
On January 16, 1996, Williams acquired the remaining interest in Kern River Gas
Transmission Company (Kern River) for $206 million in cash. The acquisition is
accounted for as a purchase and the acquired assets and liabilities have been
recorded based on an allocation of the purchase price. Substantially all of
the purchase price in excess of the carrying value from the January acquisition
of Kern River has been allocated to property, plant and equipment. Revenues
and operating profit amounts for the three months ended March 31, 1996, include
the operating results of Kern River since the acquisition date. Prior to this
acquisition, Williams accounted for its 50 percent ownership in Kern River
using the equity method of accounting, with its share of equity earnings
recorded in investing income.
-8-
<PAGE> 10
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
--------------------- -----------------------
1996 1995 1996 1995
------ ------ ------ -----
<S> <C> <C> <C> <C>
Northwest Pipeline $ 67.6 $ 59.1 $ 32.2 $26.5
Williams Natural Gas 43.2 40.0 12.4 9.3
Transcontinental Gas
Pipe Line 203.4 153.5 52.8 38.3
Texas Gas Transmission 102.6 68.7 41.1 22.5
Kern River Gas
Transmission 38.9 - 25.6 -
------ ------ ------ -----
$455.7 $321.3 $164.1 $96.6
====== ====== ====== =====
</TABLE>
Note 5. Provision for income taxes
The provision (credit) for income taxes from continuing operations includes:
<TABLE>
<CAPTION>
(Millions)
-----------------------
Three months ended
March 31,
-----------------------
1996 1995
----- -----
<S> <C> <C>
Current:
Federal $44.7 $27.7
State 8.5 11.3
----- -----
53.2 39.0
Deferred:
Federal 6.2 15.3
State 1.6 (4.6)
----- -----
7.8 10.7
----- -----
Total provision $61.0 $49.7
===== =====
</TABLE>
The effective income tax rate in 1996 is slightly greater than the federal
statutory rate due primarily to the effects of state income taxes, partially
offset by income tax credits from coal-seam gas production.
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 income tax credits
from coal-seam gas production.
Cash payments for income taxes for continuing and discontinued operations for
the three months ended March 31, 1996 and 1995, are $231.8 million and $2.4
million, respectively.
-9-
<PAGE> 11
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6. Discontinued operations
On January 5, 1995, Williams sold its network services operations to LDDS
Communications, Inc. (LDDS) for $2.5 billion in cash. The sale yielded a gain
of $1 billion (net of income taxes of approximately $732 million) which is
reported as income from discontinued operations. Under the terms of the
agreement, Williams retained Williams Telecommunications Systems, Inc.
(WilTel), a national telecommunications equipment supplier and service company,
and Vyvx, Inc. (included in WilTech Group), which operates a national video
network specializing in broadcast television applications and satellite
transmission.
Note 7. Accrued liabilities
<TABLE>
<CAPTION>
(Millions)
--------------------------------
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Rate refunds $ 228.8 $ 180.6
Income taxes payable 184.2 371.6
Employee costs 149.6 135.9
Interest 74.9 72.9
Taxes other than income taxes 65.6 51.2
Other 320.6 318.0
-------- --------
$1,023.7 $1,130.2
======== ========
</TABLE>
Note 8. Adoption of accounting standard
Effective January 1, 1996, Williams adopted Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." Adoption of the standard had no effect
on Williams' financial position or results of operations.
-10-
<PAGE> 12
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9. Long-term debt
Long-term debt consists of the following amounts:
<TABLE>
<CAPTION>
(Millions)
--------------------------------
Weighted average March 31, December 31,
interest rate* 1996 1995
---------------- --------- ------------
<S> <C> <C> <C>
The Williams Companies, Inc.
Revolving credit loans - $ - $ 50.0
Debentures, 8.875% - 10.25%,
payable 2012, 2020, 2021
and 2025 9.6 587.6 587.7
Notes, 7.5% - 9.625%,
payable through 2001 8.8 830.3 842.4
Northwest Pipeline
Debentures, 7.125% - 10.65%,
payable through 2025 9.0 368.8 369.2
Adjustable rate notes,
payable through 2002 9.0 10.0 11.7
Williams Natural Gas
Variable rate notes,
payable 1999 5.7 130.0 130.0
Transcontinental Gas Pipe Line
Debentures, 9.125%, payable
1998 through 2017 9.1 152.8 153.0
Notes, 8.125% - 9%,
payable 1996, 1997 and 2002 8.7 379.8 381.1
Adjustable rate notes,
payable 2000 6.2 124.9 125.1
Texas Gas Transmission
Notes, 9.625% and 8.625%,
payable 1997 and 2004 9.0 255.1 255.9
Kern River Gas Transmission
Notes, 6.42% and 6.72%,
payable through 2001 6.6 643.3 -
Williams Holdings of Delaware
Revolving credit loans 5.8 150.0 150.0
Debentures, 6.25%, due 2006 6.3 248.7 -
Williams Pipe Line
Notes, 8.95% and 9.78%,
payable through 2001 9.3 110.0 110.0
Williams Energy Ventures
Adjustable rate notes,
payable through 2002 8.1 20.6 21.0
Other, payable through 1999 7.9 6.7 6.8
-------- --------
4,018.6 3,193.9
Current portion of long-term debt (323.7) (319.9)
-------- --------
$3,694.9 $2,874.0
======== ========
</TABLE>
*At March 31, 1996.
-11-
<PAGE> 13
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In January 1996, Williams entered into a $205 million short-term borrowing
agreement to finance the purchase of the remaining interest in Kern River Gas
Transmission Company (See Note 3).
Under Williams' $800 million credit agreement, Northwest Pipeline,
Transcontinental Gas Pipe Line, Texas Gas Transmission, Williams Pipe Line and
Williams Holdings of Delaware, Inc. have access to varying amounts of the
facility while Williams (parent) has access to all unborrowed amounts.
Interest rates vary with current market conditions. Certain amounts
outstanding at March 31, 1996, under this facility do not reduce amounts
available to Williams in the future. The available amount at March 31, 1996,
is $753 million.
Subsequent to March 31, 1996, Transcontinental Gas Pipe Line redeemed $125
million of its adjustable rate notes primarily through the use of the above
credit agreement; consequently, these notes are classified as long-term at March
31, 1996.
During March 1996, the Kern River floating-rate bank loan was refinanced through
the issuance of 6.42 percent and 6.72 percent fixed-rate notes. Interest-rate
swap agreements entered into by Kern River in prior years which effectively
converted floating-rate debt to a fixed 9.1 percent remain outstanding.
Concurrent with the refinancing, Kern River entered into additional
interest-rate swap agreements which effectively offset the original
interest-rate swaps and adjust the new fixed-rate notes to an effective
interest rate of 8.7 percent.
Cash payments for interest (net of amounts capitalized) for the three months
ended March 31, 1996 and 1995, are $97 million and $69 million, respectively.
Note 10. 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 $195 million at March 31, 1996; 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, 1996.
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. Kern River Gas Transmission implemented its restructuring on August
1, 1993, Williams 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 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. None of the pipelines has any significant
pending supplier take-or-pay, ratable take or minimum take claims.
In 1994, Williams Natural Gas and a producer executed a number of agreements to
resolve outstanding issues. Portions of the settlement were subject to
regulatory approvals, including the regulatory abandonment of a certain
Williams Natural Gas gathering system on terms acceptable to Williams Natural
Gas. In May
-12-
<PAGE> 14
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1995, the FERC issued orders granting the requisite approvals. One party
requested rehearing of the decision regarding abandonment of the gathering
system and in April 1996, the FERC affirmed its May 1995 decision.
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.
Pursuant to a stipulation and agreement approved by the FERC, Williams Natural
Gas has made four 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 gas supply realignment costs, and
provided for an offset of $3 million. The third and fourth filings covered
additional costs of $8 million and $6 million, respectively, which are similar
in nature to the costs in the second filing. An intervenor has filed a protest
seeking to have the Commission review the prudence of certain of the costs
covered by the second, third and fourth filings. Williams Natural Gas believes
that these filings will most likely also be approved. As of March 31, 1996,
this subsidiary had an accrual of $84 million for its then- estimated remaining
contract-reformation and gas supply realignment costs. Williams Natural Gas
will make additional filings under the applicable FERC orders to recover such
further costs as may be incurred in the future. Williams Natural Gas has
recorded a regulatory asset of approximately $84 million for estimated future
recovery of the foregoing costs.
In September 1995, Texas Gas received FERC approval of a settlement regarding
Texas Gas' recovery of gas supply realignment costs. The settlement provides
that Texas Gas will recover 100 percent of such costs up to $50 million, will
share in costs incurred between $50 million and $80 million, and will absorb
any such costs above $80 million. The settlement also extends Texas Gas'
pricing differential mechanism to November 1, 1996, and beyond that date for
contracts in litigation as of that date. Through March 31, 1996, Texas Gas has
paid approximately $64 million for gas supply realignment costs, primarily as a
result of contract terminations, and has accrued a liability of approximately
$16 million for its estimated remaining gas supply realignment costs. Texas
Gas has recovered approximately $50 million plus interest in gas supply
realignment costs, and in accordance with the terms of its settlement has
recorded a regulatory asset of approximately $18 million for the estimated
future recovery of such costs, which is expected to be collected from customers
prior to December 31, 1997. Ninety percent of the cost recovery is collected
through demand surcharges on
-13-
<PAGE> 15
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Texas Gas' firm transportation rates; the remaining 10 percent is recoverable
from interruptible transportation service.
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-weighted, 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 certain of their facilities for the presence of toxic and
hazardous substances to determine to what extent, if any, remediation may be
necessary. Transcontinental Gas Pipe Line has responded to data requests
regarding such potential contamination of certain of its sites. The costs of
any such remediation will depend upon the scope of the remediation. At March
31, 1996, these subsidiaries had reserves totaling approximately $45 million
for these costs.
Certain Williams subsidiaries, including Texas Gas and Transcontinental Gas
Pipe Line, have been identified as potentially responsible parties (PRP) at
various Superfund and state 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 February 1995, Transcontinental Gas Pipe Line was served 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 laws. In
October 1995, the court dismissed the lawsuit but provided that the plaintiffs
could amend and refile their complaint to allege a state law nuisance claim and
they did so. In April 1996, Transcontinental Gas Pipe Line entered into a
settlement with the individuals resolving the litigation.
Transcontinental Gas Pipe Line, Texas Gas and Williams Natural Gas have
identified polychlorinated biphenyl (PCB) contamination in air compressor
systems, soils and related properties at certain compressor station sites.
Transcontinental Gas Pipe Line, Texas Gas and Williams Natural Gas have also
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 Williams Natural Gas and
Transcontinental Gas Pipe Line. As of March 31, 1996, Williams Natural Gas had
recorded a liability for approximately $25 million, representing the current
estimate of future environmental cleanup costs to be incurred over the next six
to ten years. Texas
-14-
<PAGE> 16
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Gas and Transcontinental Gas Pipe Line likewise had recorded liabilities for
these costs which are included in the $45 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, 1996, Williams had approximately $7 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 in May 1993, in a state court in Colorado in which certain
claims have been made against various defendants, including Northwest Pipeline,
contending that gas exploration and development activities in portions of the
San Juan Basin have caused air, water and other contamination. The plaintiffs
in the case sought certification of a plaintiff class. In June 1994, the
lawsuit was dismissed for failure to join an indispensable party over which the
state court had no jurisdiction. This decision was appealed by the plaintiffs
and in February 1996, the Colorado court of appeals affirmed the dismissal.
Since June 1994, eight 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
In December 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. In September
1994, the court granted summary judgment in favor of the defendants and the
Tribe 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.
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
-15-
<PAGE> 17
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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. In September 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 Energy Company, 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.
In March 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. In October 1994, the FERC issued an
order consolidating Transcontinental Gas Pipe Line's petition for approval of
the settlement with similar 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. In
December 1995, the administrative law judge issued an initial decision in which
he rejected the settlement agreements, finding that they were not prudent, and
he ordered the pipeline companies to refund to their customers amounts
collected since May 1993, in excess of the amounts he determined were
appropriate. At the time of the ruling, Transcontinental Gas Pipe Line
estimated that its share of the refunds the administrative law judge would
require was approximately $75 million. The pipelines would be entitled to
collect the amount of any such customer refunds from Dakota. The
administrative law judge's decision is subject to review by the FERC. In
February 1996, certain parties filed with the FERC a motion requesting that the
FERC establish an additional proceeding to consider claims for additional
refunds. Transcontinental Gas Pipe Line's share of these claimed additional
refunds is $90 million and pertain to amounts paid to Dakota from November 1,
1988, to May 1, 1993. The pipelines have opposed this motion.
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 each entered into certain settlements with producers which may require the
indemnification of certain claims for additional royalties which the producers
may be required to pay as a result of such settlements. As a result of such
settlements, Transcontinental Gas Pipe Line and Texas Gas were named as
defendants in, respectively, six and two lawsuits in which damages claimed
aggregated in excess of $133 million. Five of the eight lawsuits have been
settled for cash payments aggregating approximately $8.5 million, all of which
have previously been accrued, and of which approximately $3 million is
recoverable as transition costs under Order 636. In addition, in July 1995, a
judge in a Texas state court granted a motion by Transcontinental Gas Pipe Line
for partial summary judgment, rejecting a major portion of the plaintiff's
claims in one of the remaining lawsuits. Producers have received and may
receive other demands which could result in additional claims. 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
-16-
<PAGE> 18
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Transcontinental Gas Pipe Line or Texas Gas. Texas Gas may file to recover 75
percent of any such additional amounts it may be required to pay pursuant to
indemnities for royalties under the provisions of Order 528.
In November 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 owns a cogeneration facility in Hazleton, Pennsylvania (the
Facility). Hazleton Fuel Management Company (HFMC), a subsidiary of Transco
Energy, supplies natural gas and fuel oil to the Facility. As of March 31,
1996, it had current outstanding receivables from the Partnership of
approximately $20 million, all of which has been reserved. 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. In March 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, recovery from customers or other
indemnification arrangements, will have a materially adverse effect upon
Williams' future financial position, results of operations and cash flow
requirements.
-17-
<PAGE> 19
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
First Quarter 1996 vs. First Quarter 1995
NORTHWEST PIPELINE'S revenues increased $8.5 million, or 14 percent, due
primarily to higher transportation revenues resulting from higher throughput
volumes, related to the expansion of mainline capacity placed into service on
December 1, 1995. Total throughput increased 29.3 TBtu, or 14 percent. Operating
profit increased $5.7 million, or 21 percent, due primarily to the expansion of
mainline capacity.
WILLIAMS NATURAL GAS' revenues increased $3.2 million, or 8 percent, and
operating profit increased $3.1 million, or 33 percent, due primarily to new
tariff rates that became effective August 1, 1995. In addition, the current
quarter benefitted from lower discounting and increased throughput resulting
from colder weather. Total throughput increased 15.6 TBtu, or 15 percent.
TRANSCONTINENTAL GAS PIPE LINE'S revenues and operating profit increased $49.9
million, or 32 percent, and $14.5 million, or 38 percent, respectively, due
primarily to a full quarter of operations in 1996 compared with the first
quarter of 1995, which reflected operations from January 18, 1995, when Williams
acquired majority interest in Transco Energy. Revenues associated with the
period January 1 through January 17, 1995, were $35.8 million. The first quarter
1996 also benefitted from a system expansion placed into service in late 1995.
Total throughput increased 132.4 TBtu, or 41 percent, due primarily to a full
quarter of operations in 1996 compared to the partial quarter in 1995. Because
of its rate structure and historical maintenance schedule, Transco typically
experiences its greatest profitability in the first and fourth quarters of the
year.
TEXAS GAS TRANSMISSION'S revenues and operating profit increased $33.9 million,
or 49 percent, and $18.6 million, or 83 percent, respectively, due primarily to
the new rates that became effective on April 1, 1995, and an adjustment to rate
refund accruals based on a recent rate-case settlement. Also, the first quarter
of 1995 reflected operations from January 18, when Williams acquired majority
interest in Transco Energy. Revenues associated with the period January 1
through January 17, 1995, were $16 million. Total throughput increased 54
percent due primarily to a full quarter of operations in 1996 compared to the
partial quarter in 1995. Because of its rate structure and historical
maintenance schedule, Texas Gas typically experiences its greatest profitability
in the first and fourth quarters of the year.
KERN RIVER GAS TRANSMISSION (Kern River) operates a natural gas pipeline system
extending from Wyoming through Utah and Nevada to California. On January 16,
1996, Williams acquired the remaining interest in Kern River. Revenues and
operating profit amounts for the three months ended March 31, 1996, include the
operating results of Kern River since the acquisition date. Kern River's
revenues were $38.9 million in the first quarter of 1996, while costs and
operating expenses were $13.3 million and operating profit was $25.6 million.
Prior to this acquisition, Williams accounted for its 50 percent ownership in
Kern River using the equity method of accounting, with its share of equity
earnings recorded in investing income. Investing income for the first quarter
of 1996 includes $1.5 million for the period prior to the acquisition date,
compared to $8.5 million for the entire first quarter of 1995. Throughput was
-18-
<PAGE> 20
58.6 TBtu in the first quarter of 1996 (for the period subsequent to the
acquisition date). Throughput for the entire first quarter 1996 is comparable
to first quarter 1995.
WILLIAMS FIELD SERVICES GROUP'S revenues increased $67 million, or 51 percent,
due primarily to higher gathering, processing and natural gas liquids sales
revenues of $17 million, $5 million and $10 million, respectively, combined
with increased natural gas sales volumes. Gathering, processing and natural gas
liquids volumes increased 37 percent, 29 percent and 20 percent, respectively.
Costs and operating expenses increased $46 million, or 57 percent, due
primarily to higher natural gas purchase volumes and expanded facilities. Other
(income) expense--net includes a $3 million environmental remediation accrual.
Operating profit increased $16.8 million, or 46 percent, due primarily to
higher gathering and processing revenues and increased natural gas and gas
liquids margins, partially offset by higher costs and expenses associated with
expanded facilities and the environmental remediation accrual.
WILLIAMS ENERGY SERVICES' revenues decreased $8.5 million, or 24 percent, as
first-quarter 1995 results included $21 million from originated long-term
supply obligations. Partially offsetting this revenue decrease were higher
price-risk management and physical trading revenues of $6 million and $7
million, respectively. Natural gas physical trading volumes increased 26
percent due primarily to a full quarter of Transco Energy's gas trading
activities in addition to a colder winter. Operating profit decreased $8.6
million, or 35 percent, due primarily to the decrease in revenues.
WILLIAMS PIPE LINE'S revenues (including Williams Energy Ventures) increased
$62.1 million, or 96 percent, due primarily to increases in transportation and
non-transportation revenues of $4 million and $58 million, respectively.
Shipments increased 14 percent due primarily to new business and the impact
during 1995 of unfavorable weather conditions and a November 1994 fire at a
truck-loading rack. Average length of haul and transportation rate per barrel
decreased 4 percent due primarily to shorter haul movements. The increase in
non-transportation revenue is due primarily to Williams Energy Ventures'
ethanol sales following the 1995 acquisition of Pekin Energy and construction
of the Nebraska Energy plant. Costs and expenses increased $59 million, or 118
percent, due primarily to ethanol production activities. Operating profit
(including Williams Energy Ventures) increased $3.5 million, or 23 percent, due
primarily to increased transportation revenues. Williams Energy Ventures'
results declined $900,000 to a $2.1 million operating loss in 1996, as
abnormally high prices for corn used in the production of ethanol resulted in
losses at Pekin Energy and Nebraska Energy.
WILTEL'S revenues decreased $4.7 million, or 4 percent, due primarily to lower
business activity resulting from inclement weather in the northeastern and
central parts of the country, which unfavorably impacted revenues by $12
million. Partially offsetting the lower business activity was $6 million
attributable to the January 1996 acquisition of ComLink, Inc. The number of
ports in service at March 31, 1996, increased 12 percent compared to March 31,
1995. Costs and operating expenses decreased $4 million, or 4 percent, due
primarily to decreased business activity. Selling, general and administrative
expenses increased $5 million, or 22 percent, due primarily to the impact of
the ComLink acquisition and costs related to management information systems,
system integration and Internet capabilities. Operating profit decreased $4.9
million, or 62 percent, due primarily to decreased business activity resulting
from the inclement weather and increased costs related to management
information systems, system integration and Internet capabilities.
-19-
<PAGE> 21
WILTECH'S revenues increased $10.7 million, or 136 percent, due primarily to $5
million in higher digital television services provided, and $4 million
attributable to the October 1995 acquisition of NUS Training. Occasional
service billable minutes and dedicated service voice grade equivalent miles
each increased 19 percent. A $9 million increase in costs and expenses reflects
the overall increase in sales activity and higher expenses for developing
additional products and services. Operating loss decreased $1.9 million due
primarily to the increased sales activity.
GENERAL CORPORATE EXPENSES decreased $800,000 due primarily to the absence of a
$4 million contribution in 1995 to The Williams Companies Foundation, largely
offset by higher employee compensation expense and professional services.
Interest accrued increased $13.5 million, or 20 percent, due primarily to $643
million of debt assumed with the acquisition of Kern River (see Note 3).
Investing income decreased $39.7 million, or 90 percent, due primarily to the
absence of a 1995 $15 million dividend from Texasgulf Inc, and interest earned
in 1995 on the invested portion of the cash proceeds from the sale of Williams'
network services operations, in addition to $7 million lower equity earnings
from Williams' 50 percent ownership in Kern River. Kern River's 1996 operating
results are included in operating profit since the acquisition date (see Note
3). Other expense--net decreased $6.5 million, or 67 percent, due to the
absence of $8 million in minority interest expense associated with the January
1995 Transco Energy acquisition. The effective income tax rate in 1996 is
slightly greater than the federal statutory rate due primarily to the effects
of state income taxes, partially offset by income tax credits from coal-seam
gas production. 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 income tax credits from coal-seam gas production.
On January 5, 1995, Williams sold its 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 (see Note 6).
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, 1996, Williams
had access to $817 million of liquidity representing the available portion of
its $800 million bank-credit facility plus cash-equivalent investments. This
compares with liquidity of $726 million at December 31, 1995, and $1.4 billion
at March 31, 1995. Liquidity at March 31, 1995, included a portion of the cash
proceeds from the sale of the network services operations.
In 1996, capital expenditures (excluding acquisition of businesses) are
estimated to be approximately $1.1 billion. During 1996, Williams expects to
finance capital expenditures, investments and working-capital requirements
through cash generated from operations, the use of its $800 million bank-credit
facility or public debt/equity offerings.
-20-
<PAGE> 22
Financing Activities
On January 16, 1996, Williams acquired the remaining interest in Kern River Gas
Transmission Company for $206 million in cash and entered into a $205 million
short-term borrowing agreement to finance the purchase (see Note 3).
The consolidated long-term debt to long-term debt-plus-equity ratio increased
to 53 percent at March 31, 1996, from 47.4 percent at December 31, 1995. The
increase is due primarily to the assumption of Kern River's debt, combined with
the issuance of $250 million of debentures by Williams Holdings under a $400
million shelf registration statement filed with the Securities and Exchange
Commission in January 1996.
During March 1996, the Kern River floating-rate bank loan was refinanced through
the issuance of 6.42 percent and 6.72 percent fixed-rate notes. Interest-rate
swap agreements entered into by Kern River in prior years which effectively
converted floating-rate debt to a fixed 9.1 percent remain outstanding.
Concurrent with the refinancing, Kern River entered into additional
interest-rate swap agreements which effectively offset the original
interest-rate swaps and adjust the new fixed-rate notes to an effective
interest rate of 8.7 percent.
Subsequent to March 31, 1996, Transcontinental Gas Pipe Line redeemed $125
million of its adjustable rate notes primarily through the use of the $800
million bank-credit facility.
The increase in receivables from December 31, 1995, is due primarily to
increased trading activities by Williams Energy Services. The increase in
property, plant and equipment primarily reflects consolidation of Kern River
following the January 1996 acquisition.
Other
The Financial Accounting Standards Board has issued a new accounting standard,
FAS No. 123, "Accounting for Stock-Based Compensation," effective for fiscal
years beginning after December 15, 1995. As provided for in the standard,
Williams will not adopt the recognition provisions and will provide the pro
forma net income and earnings-per-share disclosures required by the standard in
its 1996 annual financial statements.
Williams currently follows Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Under this standard, because the
exercise price of Williams' fixed-plan common stock options equals the market
price of the underlying stock on the date of the grant, no compensation expense
is recognized.
-21-
<PAGE> 23
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 1996, the Company filed a Form 8-K
on January 24, 1996 which reported a significant event under
Item 5 of the Form and included the exhibits required by Item
7 of the Form.
-22-
<PAGE> 24
Exhibit 11
THE WILLIAMS COMPANIES, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON-EQUIVALENT SHARE
Three months ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
(Thousands, except
per-share amounts)
------------------------
1996 1995
-------- ----------
<S> <C> <C>
Primary earnings:
Income from continuing operations $104,900 $ 83,200
Preferred stock dividends:
$2.21 cumulative preferred stock 400 2,100
$3.50 cumulative convertible preferred stock 2,200 -
-------- ----------
Income from continuing operations, net of preferred stock dividends 102,300 81,100
Income from discontinued operations - 1,005,700
-------- ----------
Income applicable to common stock $102,300 $1,086,800
======== ==========
Primary shares:
Average number of common shares outstanding during the period 104,342 90,974
Common-equivalent shares attributable to options and deferred stock 3,418 2,946
-------- ----------
Total common and common-equivalent shares 107,760 93,920
======== ==========
Primary earnings per common and common-equivalent share:
Income from continuing operations $ .95 $ .86
Income from discontinued operations - 10.71
-------- ----------
Net income $ .95 $ 11.57
======== ==========
Fully diluted earnings:
Income from continuing operations $104,900 $ 83,200
Preferred stock dividends:
$2.21 cumulative preferred stock 400 2,100
-------- ----------
Income from continuing operations, net of preferred stock dividends 104,500 81,100
Income from discontinued operations - 1,005,700
-------- ----------
Income applicable to common stock $104,500 $1,086,800
======== ==========
Fully diluted shares:
Average number of common shares outstanding during the period 104,342 90,974
Common-equivalent shares attributable to options and deferred stock 3,664 3,143
Dilutive preferred shares 3,906 -
-------- ----------
Total common and common-equivalent shares 111,912 94,117
======== ==========
Fully diluted earnings per common and common-equivalent share:
Income from continuing operations $ .93 $ .86
Income from discontinued operations - 10.69
-------- ----------
Net income $ .93 $ 11.55
======== ==========
</TABLE>
<PAGE> 25
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, 1996
------------------
<S> <C>
Earnings:
Income from continuing operations before income taxes $165.9
Add:
Interest expense - net 80.3
Rental expense representative of interest factor 6.5
Interest accrued - 50 percent owned company 1.3
Other .8
------
Total earnings as adjusted plus fixed charges $254.8
======
Fixed charges and preferred stock dividend requirements:
Interest expense - net $ 80.3
Capitalized interest 1.8
Rental expense representative of interest factor 6.5
Pretax effect of dividends on preferred stock of
the Company 4.2
Interest accrued - 50 percent owned company 1.3
------
Combined fixed charges and preferred stock dividend
requirements $ 94.1
======
Ratio of earnings to combined fixed charges and
preferred stock dividend requirements $ 2.71
======
</TABLE>
<PAGE> 26
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 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 87,599
<SECURITIES> 0
<RECEIVABLES> 844,185
<ALLOWANCES> (14,538)
<INVENTORY> 206,920
<CURRENT-ASSETS> 1,555,274
<PP&E> 10,624,326
<DEPRECIATION> (1,637,180)
<TOTAL-ASSETS> 11,513,412
<CURRENT-LIABILITIES> 2,142,828
<BONDS> 3,694,822
<COMMON> 106,116
0
162,276
<OTHER-SE> 3,014,134
<TOTAL-LIABILITY-AND-EQUITY> 11,513,412
<SALES> 0
<TOTAL-REVENUES> 893,749
<CGS> 0
<TOTAL-COSTS> 637,682
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (801)
<INTEREST-EXPENSE> 82,088
<INCOME-PRETAX> 165,934
<INCOME-TAX> 60,998
<INCOME-CONTINUING> 104,936
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104,936
<EPS-PRIMARY> .95
<EPS-DILUTED> .93
</TABLE>
