<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
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 25, 1999
----------------
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: 918/573-2000
Not Applicable
--------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 5. Other Events.
The Williams Companies, Inc., (the "Company") reported unaudited 1998
net income of $140.7 million, or 31 cents per share on a diluted basis, compared
with net income of $368.3 million, or 85 cents per share during 1997. For the
fourth quarter of 1998, unaudited net loss was $20.2 million, or 5 cents per
share on a diluted basis, compared with net income of $57.5 million, or 13 cents
per share, for the same period a year ago.
Item 7. Financial Statements and Exhibits.
The Company files the following exhibit as part of this report:
Exhibit 99 Copy of the Company's press release,
dated January 21, 1999, publicly announcing
the quarterly earnings reported herein.
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 hereunto duly authorized.
THE WILLIAMS COMPANIES, INC.
Date: January 25, 1999 /s/ WILLIAM G. VON GLAHN
---------------------------------------
Name: William G. von Glahn
Title: Senior Vice President
and General Counsel
2
<PAGE> 3
Index To Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
99 Copy of the Company's press release, dated January 21, 1999,
publicly announcing the quarterly earnings reported herein.
</TABLE>
<PAGE> 1
EXHIBIT 99
NEWS RELEASE [WILLIAMS LOGO]
NYSE:WMB
================================================================================
Date: Jan 21, 1999
Contact: Jim Gipson Rick Rodekohr Richard George
Media Investor relations Investor relations
(918) 573-2111 (918) 573-2087 (918) 573-3679
[email protected] [email protected] [email protected]
WILLIAMS' 1998 RESULTS LOWERED BY SPECIAL CHARGES, ENERGY MARKET CONDITIONS
TULSA, Okla - The Williams Companies, Inc., reported unaudited 1998 net
income of $140.7 million, or 31 cents per share on a diluted basis, compared
with net income of $368.3 million, or 85 cents per share during 1997.
"Earnings fell short of our 1998 objectives. This is mainly due to energy
MARKET CONDITIONS, a significant number of impairments and loss accruals,
disappointing financial results in the equipment area of our communications
business and the decision to accelerate the completion of our national
fiber-optic network," said Keith E. Bailey, chairman, president and chief
executive officer.
"Even with the overall earnings situation, we clearly met far more of our
goals than we missed," he said "Through grassroots expansions, acquisitions and
business decisions intended to improve our focus, we believe we have
significantly increased the inherent earnings capacity of the company. This
should become apparent when energy markets improve and more of our new
investments are placed into service."
For the fourth quarter of 1998, unaudited net loss was $20.2 million, or 5
cents per share on a diluted basis, compared with net income of $57 5 million,
or 13 cents per share, for the same period a year ago. During the fourth quarter
of 1998, Williams modified a portion of its employee benefits program, resulting
in an accrual of $31 million, the effect of which is included in the respective
segment profit or loss of each business unit and in general corporate expenses.
The company also accrued an after-tax charge of $14.3 million, reported in
discontinued operations, for the costs associated with a loss contingency for
operations previously sold. The other more significant 1998 items are reported
in the appropriate business unit segment of this news release.
Results in 1997 were increased by a $66 million gain from the sale of
energy reserves and a $44.5 million gain recognized from the company's
communications solutions business, offset by the $79.1 million after-tax cost of
a debt restructuring.
1
<PAGE> 2
Bailey noted these 1998 accomplishments:
o Williams achieved a double-digit total return to shareholders for the
seventh year of the past 10. Cumulative total return to shareholders
since the beginning of 1991 reached 830 percent - more than double that
of the Standard & Poor's 500 for the same period.
o The year began with the expiration of a non-compete agreement, allowing
the launch of a major initiative to build and operate a wholesale
fiber-optic network. Some 17,000 miles of fiber are now in service and
19,000 miles constructed, with another 13,000 miles scheduled to be
operational within the next two years.
o The network launch was followed by the completion of the $3.1 billion
acquisition of MAPCO, a transaction that virtually doubled the size of
Williams' energy services group.
o Williams decided to pursue an initial public offering of a minority
interest in its Communications business in 1999 as a way to expand
access to capital to support rapid growth.
o Williams implemented the largest capital program in the company's
history, resulting in the expenditure of $2.3 billion, and saw
employment levels reach 21,733, also a record.
Williams adopted the Financial Accounting Standards Board's new rules on
segment reporting during the fourth quarter of 1998. The segment profit or loss
amounts reflected for all prior periods in this report have been restated. The
most significant change is that segment profit will now include equity earnings
or losses of affiliates that previously had been included in investing income.
Following is a summary of Williams' major business groups.
GAS PIPELINE, the nation's largest transporter of natural gas through
systems that span the United States, reported 1998 segment profit of $610.4
million, compared with $614.7 million during 1997.
The year benefited from expansions on the Transco system, new services
offered on the Transco and Texas gas systems and lower combined operating and
maintenance expenses within the pipeline group.
An extremely successful year of financial performance was partially offset
by the decision of Central, based on recent developments, to record $58 million
in costs in the fourth quarter of 1998 related to certain long-term gas supply
contracts that were entered into prior to Williams' 1983 acquisition of this
pipeline. The charge represents an estimate of costs that will not be
recoverable from customers.
For the fourth quarter of 1998, Williams' gas pipeline business reported
segment profit of $120.5 million, compared with segment profit of $160.3 million
during the same period of 1997.
Other systems that comprise this group are Northwest and Kern River.
2
<PAGE> 3
ENERGY SERVICES, which provides a full spectrum of traditional and advanced
energy products and services, reported 1998 segment profit of $407.3 million,
compared with $566.8 million in 1997.
The benefit of substantially higher electric power marketing and trading
earnings, improved retail marketing and the favorable effects of certain
contract settlements and terminations totaling $24 million were more than offset
by significantly lower refining and per-unit natural gas liquids margins and
reduced profits from natural gas trading activities. In addition, retail natural
gas and electric activities experienced credit losses of $17 million and
significant losses from costs incurred to penetrate new markets, combined with a
fourth-quarter impairment charge and loss accruals totaling $16 million from the
company's decision to change focus from selling to small commercial and
residential customers to large end users.
Other items unfavorably affecting 1998: MAPCO merger-related expenses of
$51 million; asset impairments and retirements totaling $15 million; and
litigation and rate refund accruals totaling $22 million.
For the fourth quarter of 1998, Energy Services reported segment profit of
$98.5 million, compared with segment profit of $155.9 million during the same
period last year.
Units comprising Energy Services are: Energy Marketing & Trading,
Exploration & Production, Midstream Gas & Liquids and Petroleum Services.
COMMUNICATIONS, which includes a leading-edge broadband network,
single-source Communications systems integration and multiple technology
applications for businesses, reported a 1998 segment loss of $162.9 million,
compared with a segment loss of $58.1 million during 1997.
The higher segment losses were attributed to losses at communications
solutions from lower margins and higher selling, general and administrative
expenses, and the decision to accelerate completion of Williams' national fiber
optic network, which had the near-term effect of accelerating expenses to build
a service delivery platform. Partially offsetting these items was $25.6 million
in fourth-quarter earnings from selling excess fiber capacity.
Also reducing the year's results were charges for asset write-downs and
loss accruals totaling approximately $18 million, a $23 million impairment
charge related to a decision to abandon a network applications venture, and a
$12 million accrual for modifying a portion of an employee benefits program.
For the fourth quarter of 1998, Communications reported a segment loss of
$798 million compared with a segment loss of $52.6 million during the same
period of 1997. The fourth quarter of 1997 included a $49.8 million charge
related to asset impairment.
ABOUT WILLIAMS (NYSE:WMB)
Williams, through its subsidiaries, provides a full range of traditional and
leading-edge communications and energy services and is the nation's
largest-volume transporter of natural gas. Williams information is available at
3
<PAGE> 4
www.twc.com.
###
Portions of this document may constitute "forward-looking statements" as
defined by federal law. Although the company believes any such statements are
based on reasonable assumptions, there is no assurance that actual outcomes
will not be materially different. Any such statements are made in reliance on
the "safe harbor" protections provided under the Private Securities Reform Act
of 1995. Additional information about issues that could lead to material changes
in performance is contained in the company's annual reports filed with the
Securities and Exchange Commission.
4
<PAGE> 5
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Years ended
December 31, December 31,
(Millions, except per-share amounts) 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 2,058.7 $ 2,344.3* $ 7,678.6 $ 8,249.5*
Income (loss) from continuing
operations $ (5.9) $ 69.2 $ 159.8 $ 453.7
Loss from discontinued operations $ (14.3) $ (6.3) $ (14.3) $ (6.3)
Income (loss) before extraordinary
loss $ (20.2) $ 62.9 $ 145.5 $ 447.4
Extraordinary loss $ -- $ (5.4) $ (4.8) $ (79.1)
Net income (loss) $ (20.2) $ 57.5 $ 140.7 $ 368.3
Basic earnings per common share:
Income (loss) from continuing
operations $ (.02) $ .16 $ .35 $ 1.08
Loss from discontinued operations $ (.03) $ (.02) $ (.03) $ (.02)
Income (loss) before extraordinary
loss $ (.05) $ .14 $ .32 $ 1.06
Extraordinary loss $ -- $ (.01) $ (.01) $ (.19)
Net income (loss) $ (.05) $ .13 $ .31 $ .87
Average shares (thousands) 430,445 414,403 425,681 412,380
Diluted earnings per common share:
Income (loss) from continuing
operations $ (.02) $ .16 $ .35 $ 1.05
Loss from discontinued operations $ (.03) $ (.02) $ (.03) $ (.01)
Income (loss) before extraordinary
loss $ (.05) $ .14 $ .32 $ 1.04
Extraordinary loss $ -- $ (.01) $ (.01) $ (.19)
Net income (loss) $ (.05) $ .13 $ .31 $ .85
Average shares (thousands) 434,405 433,452 431,816 430,194
Shares outstanding at December 31
(thousands) 428,271 412,607
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Amounts have been reclassified to reflect the adoption of Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information." (See Note 1 of Notes to Consolidated
Statement of Income for additional information.)
<PAGE> 6
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Years ended
December 31, December 31,
(Millions, except per-share amounts) 1998 1997* 1998 1997*
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gas Pipeline $ 443.9 $ 445.3 $ 1,684.8 $ 1,680.1
Energy Services (Note 2) 1,361.5 1,716.5 5,605.5 6,100.5
Communications (Note 2) 522.2 470.0 1,775.8 1,465.1
Other 36.0 15.3 64.8 53.4
Intercompany eliminations (304.9) (302.8) (1,452.3) (1,049.6)
- ---------------------------------------------------------------------------------------------------------
Total revenues 2,058.7 2,344.3 7,678.6 8,249.5
- ---------------------------------------------------------------------------------------------------------
Costs and operating expenses 1,479.8 1,772.9 5,539.2 6,227.2
Selling, general and administrative
expenses 340.2 249.2 1,104.5 848.9
Other expense - net (Notes 1 and 2) 98.4 54.9 195.6 38.6
- ---------------------------------------------------------------------------------------------------------
Total profit-center costs and expenses 1,918.4 2,077.0 6,839.3 7,114.7
- ---------------------------------------------------------------------------------------------------------
Gas Pipeline 120.5 160.3 610.4 614.7
Energy Services (Note 2) 98.5 155.9 407.3 566.8
Communications (Note 2) (79.8) (52.6) (162.9) (58.1)
Other 1.1 3.7 (15.5) 11.4
- ---------------------------------------------------------------------------------------------------------
Total segment profit 140.3 267.3 839.3 1,134.8
General corporate expenses (Note 1) (13.1) (38.1) (89.2) (95.1)
Interest accrued (139.1) (118.8) (515.1) (463.5)
Interest capitalized 2.0 7.8 30.6 23.3
Investing income 6.2 5.8 25.8 12.6
Gain on sale of interest in subsidiary
(Note 3) -- -- -- 44.5
Gain on sale of assets (Note 4) -- -- -- 66.0
Minority interest in (income) loss of
consolidated subsidiaries 11.5 (5.6) 6.0 (18.2)
Other income (expense) - net (6.8) (1.4) (19.2) .5
- ---------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 1.0 117.0 278.2 704.9
Provision for income taxes 6.9 47.8 118.4 251.2
- ---------------------------------------------------------------------------------------------------------
Income (loss) from continuing
operations before extraordinary
loss (5.9) 69.2 159.8 453.7
Loss from discontinued operations (Note 5) (14.3) (6.3) (14.3) (6.3)
- ---------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary loss (20.2) 62.9 145.5 447.4
Extraordinary loss (Note 6) -- (5.4) (4.8) (79.1)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) (20.2) 57.5 140.7 368.3
Preferred stock dividends 1.4 2.2 7.1 9.8
- ---------------------------------------------------------------------------------------------------------
Income (loss) applicable to common stock $ (21.6) $ 55.3 $ 133.6 $ 358.5
=========================================================================================================
Basic earnings per common share:
Income (loss) from continuing operations $ (.02) $ .16 $ .35 $ 1.08
Loss from discontinued operations (Note 5) (.03) (.02) (.03) (.02)
- ---------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary loss (.05) .14 .32 1.06
Extraordinary loss (Note 6) -- (.01) (.01) (.19)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ (.05) $ .13 $ .31 $ .87
=========================================================================================================
Diluted earnings per common share:
Income (loss) from continuing
operations $ (.02) $ .16 $ .35 $ 1.05
Loss from discontinued operations (Note 5) (.03) (.02) (.03) (.01)
- ---------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary loss (.05) .14 .32 1.04
Extraordinary loss (Note 6) -- (.01) (.01) (.19)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ (.05) $ .13 $ .31 $ .85
=========================================================================================================
</TABLE>
* Certain amounts have been reclassified to reflect the adoption of SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." (See
Note 1 of Notes to Consolidated Statement of Income for additional information.)
See accompanying notes.
<PAGE> 7
NOTES TO CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
1. BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
SEGMENT REPORTING
In the fourth-quarter 1998, Williams adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." Williams measurement of segment profitability, previously
reported as operating profit, is now Segment Profit, which reflects revenues
less costs and expenses associated with operating the segments. Equity earnings
and the losses from the write-down of investments related to the segments, both
previously reported in investing income, are now included in revenues and other
expense-net, respectively.
Income statement amounts have been reclassified to conform to the current
classifications noted above.
MAPCO ACQUISITION
On March 28, 1998, Williams completed the acquisition of MAPCO Inc. by
exchanging 1.665 shares of Williams common stock for each outstanding share of
MAPCO common stock. In addition, outstanding MAPCO employee stock options were
converted into Williams common stock. A total of 98.8 million shares of Williams
common stock valued at $3.1 billion, based on the closing market price of
Williams common stock on March 27, 1998, were issued in the transaction. MAPCO
is engaged in the NGL pipeline, petroleum refining and marketing and propane
marketing businesses, and is included as part of the Energy Services' business
unit.
The merger constitutes a tax-free reorganization and has been accounted for
as a pooling of interests. Accordingly, all prior period consolidated financial
information and statistics have been restated to include the combined results of
operations, financial position and cash flows of MAPCO Inc. and Williams.
In connection with the merger, Williams has recognized approximately $80
million in merger-related costs comprised primarily of outside professional fees
and early retirement and severance costs. Approximately $51 million of these
merger-related costs are included in other expense-net, as a component of Energy
Services' segment profit (see Note 2), and approximately $29 million, unrelated
to the segments, is included in general corporate expenses.
OTHER
Effective April 1, 1998, certain marketing activities of natural gas
liquids (previously reported in Midstream Gas & Liquids) and petroleum refining
products (previously reported in Petroleum Services) were transferred to Energy
Marketing & Trading and combined with its commodity risk trading operations. As
a result, revenues and segment profit amounts for the three months and year
ended December 31, 1997, have been restated to reflect this classification.
These marketing activities are reported through first quarter 1998 on a "gross"
basis in the Consolidated Statement of Income as revenues and costs within
Energy Marketing & Trading. Concurrent with completing the combination of such
activities with the commodity risk trading operations of Energy Marketing &
Trading, the related contract rights and obligations of certain of these
operations were recorded in the balance sheet on a market-value basis consistent
with Energy Marketing & Trading's accounting policy, and the related income
statement presentation relating to these operations was changed effective April
1, 1998, to reflect these revenues net of the related costs to purchase such
items.
On April 30, 1997, Williams and Northern Telecom (Nortel) combined their
customer-premise equipment sales and service operations into a limited liability
company, Williams Communications Solutions, LLC
<PAGE> 8
(LLC) (see Note 3). Communications' revenues and segment profit amounts include
the operating results of the LLC beginning May 1, 1997.
Segment profit of operating companies may vary by quarter. Based on current
rate structures and/or historical maintenance schedules, Transcontinental Gas
Pipe Line and Texas Gas Transmission experience higher segment profits in the
first and fourth quarters as compared with the second and third quarters. Also,
as a result of certain power services activities, Energy Marketing & Trading
experiences lower segment profit in the first and fourth quarters as compared to
the second and third quarters.
2. REVENUES AND SEGMENT PROFIT
- --------------------------------------------------------------------------------
Revenues and segment profit of Energy Services and Communications for the three
months and years ended December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
Three months ended December 31,
(millions) Revenues Segment Profit
1998 1997* 1998 1997*
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Energy Services:
Energy Marketing & Trading $ 464.1 $ 735.8 $ 23.7 $ 46.3
Exploration & Production 32.5 35.6 2.0 10.2
Midstream Gas & Liquids 220.5 246.7 48.4 55.9
Petroleum Services 644.4 698.4 29.2 43.5
Merger-related costs -- -- (4.8) --
- ------------------------------------------------------------------------------------------
$ 1,361.5 $ 1,716.5 $ 98.5 $ 155.9
- ------------------------------------------------------------------------------------------
Communications:
Communications Solutions $ 358.0 $ 392.1 $ (55.1) $ 13.1
Network Applications 54.8 57.3 (23.8) (67.1)
Network Services 109.4 20.6 (.9) 1.4
- ------------------------------------------------------------------------------------------
$ 522.2 $ 470.0 $ (79.8) $ (52.6)
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION> Years ended December 31,
(millions) Revenues Segment Profit
1998 1997* 1998 1997*
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Energy Services:
Energy Marketing & Trading $ 1,919.8 $ 2,244.8 $ 51.8 $ 53.4
Exploration & Production 139.3 130.1 27.2 30.3
Midstream Gas & Liquids 870.9 1,029.6 225.7 282.3
Petroleum Services 2,675.5 2,696.0 153.3 200.8
Merger-related costs -- -- (50.7) --
- ------------------------------------------------------------------------------------------
$ 5,605.5 $ 6,100.5 $ 407.3 $ 566.8
- ------------------------------------------------------------------------------------------
Communications:
Communications Solutions $ 1,374.4 $ 1,206.5 $ (42.0) $ 47.3
Network Applications 206.5 215.6 (94.6) (108.7)
Network Services 194.9 43.0 (26.3) 3.3
- ------------------------------------------------------------------------------------------
$ 1,775.8 $ 1,465.1 $ (162.9) $ (58.1)
- ------------------------------------------------------------------------------------------
</TABLE>
* Amounts have been reclassified as described in Note 1.
<PAGE> 9
The fourth-quarter 1998 segment profit for all the respective business
units and general corporate expenses include accruals totaling approximately $31
million related to the modification of a portion of Williams employee benefit
program.
Other expense-net and Gas Pipeline's segment profit for the fourth-quarter
1998 include $58 million in costs related to certain long-term gas supply
contracts that Williams Gas Pipeline Central entered into in 1982. The charge
represents an estimate, based on recent developments, of costs that will not be
recoverable from customers.
Energy Marketing & Trading's revenues and other expense-net for the
fourth-quarter 1998 include a charge of approximately $16 million for asset
impairments and loss accruals related to the decision to focus its retail
natural gas and electric business from sales to small commercial and residential
customers to large end users. In addition, segment profit for the year ended
December 31, 1998, includes a credit loss accrual of approximately $17 million
for certain retail energy activities.
The fourth-quarter 1998 other expense-net and Midstream Gas & Liquids'
segment profit include a loss of approximately $9 million related to the
retirement of certain assets.
Other expense-net and Petroleum Services' segment profit for the year ended
December 31, 1998, include a loss provision for a recent order from the Federal
Energy Regulatory Commission (FERC). On July 15, 1998, Williams Pipe Line
Company (WPL) received an Order from the FERC which affirmed an administrative
law judge's 1996 decision regarding rate-making proceedings for the period
September 15, 1990 through May 1, 1992. The FERC has ruled that WPL did not meet
its burden of establishing that its transportation rates in its 12
noncompetitive markets were just and reasonable for the period and has ordered
refunds. WPL continues to believe it should prevail upon appeal regarding
collected rates for that period. However, due to this FERC decision, WPL accrued
$15.5 million, including interest, in the second quarter of 1998, for potential
refunds to customers for the issues described above.
Other expense-net and Network Applications' segment profit for the year
ended December 31, 1998, include a $23.2 million write-down related to a venture
that was re-evaluated in the third quarter. Other expense-net and Network
Applications' segment profit for the year ended December 31, 1997, include
charges totaling $49.8 million related to the decision to sell the learning
content business and the write-down of assets and development costs associated
with certain advanced applications.
3. SALE OF INTEREST IN SUBSIDIARY
- --------------------------------------------------------------------------------
On April 30, 1997, Williams and Nortel combined their customer-premise
equipment sales and service operations into a limited liability company,
Williams Communications Solutions, LLC (LLC). In addition, Williams paid $68
million to Nortel. Williams has accounted for its 70 percent interest in the
operations that Nortel contributed to the LLC as a purchase business combination
and beginning May 1, 1997, has included the results of operations of the
acquired company in Williams' Consolidated Statement of Income.
Williams recorded the 30 percent reduction in its operations contributed to
the LLC as a sale to the minority shareholders of the LLC. Williams recognized a
gain of $44.5 million based on the fair value of its operations contributed to
the LLC. Income taxes were not provided on the gain because the transaction did
not affect the difference between the financial and tax bases of identifiable
assets and liabilities.
4. SALE OF ASSETS
- --------------------------------------------------------------------------------
In January 1997, Williams sold its interest in the natural gas liquids and
condensate reserves in the West Panhandle field of Texas for $66 million in
cash. The sale resulted in a $66 million pre-tax gain on the transaction,
because the related reserves had no book value.
5. DISCONTINUED OPERATIONS
- --------------------------------------------------------------------------------
Related to a business previously sold, Williams accrued a loss of $14.3
million (net of a $7.4 million income tax benefit) in the fourth-quarter 1998.
The 1997 loss from discontinued operations of $6.3 million (net of $.7
million of income tax benefit) also relates to the same business mentioned
above.
<PAGE> 10
6. EXTRAORDINARY LOSS
- --------------------------------------------------------------------------------
In 1998, Williams paid $54.4 million to redeem higher interest rate debt
for a $4.8 million net loss (net of a $2.6 million benefit for income taxes).
During 1997, Williams paid approximately $1.4 billion to redeem higher
interest rate debt for a $79.1 million net loss (net of a $46.6 million benefit
for income taxes).
<PAGE> 11
OPERATING STATISTICS
<TABLE>
<CAPTION>
Three months ended Years ended
December 31, December 31,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gas Pipelines:
Central
Throughput (TBtu) 90.1 103.3 329.5 336.7
Average daily transportation volumes (TBtu) 1.0 1.1 .9 .9
Average daily firm reserved capacity (TBtu) 2.2 2.1 2.1 2.1
Kern River Gas Transmission
Throughput (TBtu) 77.9 73.4 299.1 285.4
Average daily transportation volumes (TBtu) .8 .8 .8 .8
Average daily firm reserved capacity (TBtu) .7 .7 .7 .7
Northwest Pipeline
Throughput (TBtu) 185.7 192.0 731.9 713.5
Average daily transportation volumes (TBtu) 2.0 2.1 2.0 2.0
Average daily firm reserved capacity (TBtu) 2.6 2.6 2.6 2.5
Texas Gas Transmission
Throughput (TBtu) 202.3 210.8 752.4 773.6
Average daily transportation volumes (TBtu) 2.2 2.3 2.1 2.1
Average daily firm reserved capacity (TBtu) 2.6 2.5 2.2 2.2
Transcontinental Gas Pipe Line
Throughput (TBtu) 407.6 424.5 1,593.9 1,621.1
Average daily transportation volumes (TBtu) 4.4 4.6 4.4 4.4
Average daily firm reserved capacity (TBtu) 6.7 5.5 6.5 5.5
Communications:
Communications Solutions (millions)
Backlog at December 31 $ 267.4 $ 202.5
Orders $ 375.2 $ 366.3 $ 1,434.2 $ 1,184.4
Network Applications
Billable fiber minutes 1,613.1 1,694.8 6,772.5 6,778.3
Transponder billable minutes 958.4 934.3 3,478.3 3,785.1
Network Services
Total planned route miles 32,000 **
Multi-media network miles 11,000 **
Route miles under construction:
Project miles 13,289 **
Right-of-way acquired 12,089 **
Dark fiber 8,971 **
Lit 7,005 **
- ---------------------------------------------------------------------------------------------------------
</TABLE>
**Information not applicable in 1997
<PAGE> 12
OPERATING STATISTICS (CONTINUED)
<TABLE>
<CAPTION>
Three months ended Years ended
December 31, December 31,
1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Energy Services:
Energy Marketing & Trading
Physical Trading
Natural gas (TBtuD) 3.6 3.9 3.5 3.2
Power (GWh/hour) 3.8 2.8 5.3 1.5
Propane Marketing
Retail (million gallons) 79.6 109.8 262.6 297.2
Exploration & Production
Natural gas production (TBtu) 12.5 9.1 41.6 36.6
Midstream Gas & Liquids
Field Services
Gathering volumes (TBtu) 545.2 534.4 2,116.8 2,152.6
Processing volumes (TBtu) 136.7 136.7 536.1 520.1
Natural gas liquids sales (million gallons) 140.4 126.2 575.8 551.1
Natural Gas Liquids Pipeline
Barrel miles - total system (billions) 35.2 35.7 137.6 142.8
Mid-America Pipeline deliveries (million barrels) 78.6 70.5 277.1 276.3
Seminole Pipeline deliveries (million barrels) 23.9 25.0 95.6 104.2
Rocky Mountain Extension deliveries (million barrels) 6.2 7.1 28.3 33.7
Petroleum Services
Petroleum Products Pipeline
Shipments (million barrels) 56.9 62.3 224.0 235.5
Barrel miles (billions) 16.3 16.3 61.0 61.1
Ethanol sales (million gallons) 42.6 43.8 172.1 145.6
Refining (crude runs)
Memphis (MBPD) 119.2 117.8 120.2 110.9
North Pole (MBPD) 177.3 135.8 142.5 132.2
Retail stations
Average monthly gallons per store (thousands) 184.1 144.4 170.0 147.4
Average number of stores 255 251 254 243
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