<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):
April 26, 1999
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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
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Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
The Williams Companies, Inc., (the "Company") reported unaudited first
quarter net income of $50.3 million, or 11 cents per share on a diluted basis,
compared with net income of $68.1 million, or 16 cents per share during the same
period of 1998.
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 April 26, 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: April 29, 1999 /s/ WILLIAM G. von GLAHN
--------------------------------
Name: William G. von Glahn
Title: Senior Vice President
and General Counsel
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
99 Copy of Company's press release, dated April 26, 1999,
publicly announcing the quarterly earnings reported herein.
</TABLE>
<PAGE> 1
NEWS RELEASE [WILLIAMS LOGO]
NYSE:WMB
================================================================================
Date: April 26, 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]
COMMUNICATIONS INVESTMENTS AND ENERGY MARKET CONDITIONS REDUCE WILLIAMS' 1Q99
RESULTS
TULSA - Williams (NYSE: WMB) today reported unaudited first quarter net
income of $50.3 million, or 11 cents per share on a diluted basis, compared
with net income of 68.1 million, or 16 cents per share, during the same period
of 1998.
"We entered 1999 facing severely depressed conditions in energy markets -
even worse than during the first quarter of 1998. Those conditions and the
costs associated with our continuing, planned investments in communications
combined to depress income below 1998 levels," said Keith E. Bailey, chairman,
president and chief executive officer. "However, we are encouraged to see the
steady improvement in crude oil prices in March, the continued successful
execution of our U.S. wholesale network strategy, and that our Communications
Solutions business is making progress toward overcoming the information systems
and business process problems that plagued it last year.
"This is a building year across the spectrum of our company's energy and
communications businesses - a year of the largest planned capital expansion in
our history," Bailey said. "As markets return to normal and our earnings
capacity expands, we believe our future holds greater opportunity than ever.
And, we remain optimistic that we can achieve the shorter term objectives we
have set for this year."
In addition to the factors Bailey highlighted, the adoption of a new
accounting standard relating to start-up activities reduced first quarter 1999
earnings by 1 cent per share. Also reducing first quarter results were losses
attributable to certain international investments, which are reported as other
segment loss.
Last year's first quarter results were reduced by MAPCO merger-related
costs of $59 million and by costs associated with the early retirement of debt.
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Following is a summary of Williams' major business groups:
GAS PIPELINE, which provides natural gas transportation and storage
services through systems that span the United States, reported first quarter
1999 segment profit of $186.8 million, compared with $195 million during the
same period a year ago.
The decline in segment profit primarily was due to higher expenses related
to information system initiatives and expenses associated with a property loss.
In addition, last year's quarter included a gain on the sale-in-place of
natural gas from a decommissioned storage field.
ENERGY SERVICES, which provides a full spectrum of traditional and
advanced energy products and services, reported first quarter 1999 segment
profit of $120.9 million, compared with $91.8 million during the same period a
year ago. Results during the first quarter of 1998 were reduced by MAPCO
merger-related costs of $35.9 million. The balance of first quarter
merger-related costs were reflected in general corporate expenses.
Improved results were realized in power, crude and refined product
marketing and trading activities, as well as in petroleum product
transportation due to higher average rates and in retail propane marketing,
which benefited from weather that was colder than during last year's quarter.
These increases were more than offset by the impact of lower energy prices,
which contributed to reduced natural gas liquids margins and condensate
revenues, lower natural gas production revenues and lower ethanol prices.
COMMUNICATIONS, which includes a national fiber-optics network,
single-source communications systems integration and multiple technology
applications for businesses, reported a first quarter 1999 segment loss of
$51.5 million, compared with a loss of $21.6 million during the same period a
year ago.
The Network segment loss increased primarily due to the previously
announced decision to accelerate the building of the new Williams network and
organization, which is progressing on schedule, on budget and within
management's financial expectations. Included in Network's results was $10.5
million in profit from the sale of excess fiber capacity.
First quarter results at Communications Solutions were lower than during
the first quarter last year. This reflects the costs necessary to improve
managing and integrating complex business operations and systems, as well as
increased provisions for uncollectible receivables.
Beginning in the first quarter of 1999, Communications' segment results
have been restated to include the results of certain investments in
telecommunications projects in Brazil and Australia. The financial results of
these projects were minimal in the first quarter of 1998, and were previously
reported in other segment operating profit and loss.
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These investments, along with businesses previously reported as Network
Applications, now are collectively managed and reported under the segment name
of Strategic Investments. Losses in this segment increased primarily due to
start-up activities in each of the international operations, partially offset
by improved operating performance in broadcast video services.
ABOUT WILLIAMS(NYSE: WMB)
Williams, through its subsidiaries, provides a full range of traditional and
leading-edge energy and communications services. Williams information is
available at www.williams.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.
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FINANCIAL HIGHLIGHTS [WILLIAMS LOGO]
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------------------------------------------------------------------------------------
(Millions, except per-share amounts) 1999 1998
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 1,984.0 $ 1,958.8
Income before extraordinary loss and change in accounting principle 55.9 72.9
Extraordinary loss -- (4.8)
Change in accounting principle (5.6) --
Net income $ 50.3 $ 68.1
Basic and diluted earnings per common share:
Income before extraordinary loss and change in accounting principle $ .12 $ .17
Extraordinary loss -- (.01)
Change in accounting principle (.01) --
Net income $ .11 $ .16
Basic average shares (thousands) 432,091 417,347
Diluted average shares (thousands) 437,000 439,031
Shares outstanding at March 31 (thousands) 431,855 423,016
-----------------------------------------------------------------------------------------------------------
</TABLE>
FIRST QUARTER 1999
<PAGE> 5
CONSOLIDATED STATEMENT OF INCOME [WILLIAMS LOGO]
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Millions, except per-share amounts) 1999 1998*
-------------------------------------------------------------------------------------------------------------
REVENUES Gas Pipeline $ 466.9 $ 442.2
Energy Services (Notes 1 and 2) 1,271.8 1,504.2
Communications (Note 2) 506.0 398.4
Other 6.2 13.7
Intercompany eliminations (266.9) (199.7)
-------------------------------------------------------------------------------------------------------------
Total revenues 1,984.0 1,958.8
-------------------------------------------------------------------------------------------------------------
SEGMENT Costs and operating expenses 1,442.6 1,423.1
COSTS AND Selling, general and administrative expenses 304.7 235.6
EXPENSES Other (income) expense - net (Note 2) (2.5) 31.9
-------------------------------------------------------------------------------------------------------------
Total segment costs and expenses 1,744.8 1,690.6
-------------------------------------------------------------------------------------------------------------
General corporate expenses (Note 2) 16.9 40.8
-------------------------------------------------------------------------------------------------------------
OPERATING Gas Pipeline 186.8 195.0
INCOME (LOSS) Energy Services (Note 2) 120.9 91.8
Communications (Note 2) (51.5) (21.6)
Other (17.0) 3.0
General corporate expenses (Note 2) (16.9) (40.8)
-------------------------------------------------------------------------------------------------------------
Total operating income 222.3 227.4
-------------------------------------------------------------------------------------------------------------
Interest accrued (143.3) (118.0)
Interest capitalized 9.4 8.2
Investing income 6.7 3.7
Minority interest in income of consolidated subsidiaries (.6) (2.3)
Other income (expense) - net 1.3 (.6)
-------------------------------------------------------------------------------------------------------------
Income before income taxes, extraordinary loss and change in accounting principle 95.8 118.4
Provision for income taxes 39.9 45.5
-------------------------------------------------------------------------------------------------------------
Income before extraordinary loss and change in accounting principle 55.9 72.9
Extraordinary loss (Note 3) -- (4.8)
-------------------------------------------------------------------------------------------------------------
Income before change in accounting principle 55.9 68.1
Change in accounting principle (Note 4) (5.6) --
-------------------------------------------------------------------------------------------------------------
Net income 50.3 68.1
Preferred stock dividends 1.6 2.2
-------------------------------------------------------------------------------------------------------------
Income applicable to common stock $ 48.7 $ 65.9
-------------------------------------------------------------------------------------------------------------
EARNINGS Basic and diluted earnings per common share
PER SHARE Income before extraordinary loss and change in accounting principle $ .12 $ .17
Extraordinary loss (Note 3) -- (.01)
Change in accounting principle (Note 4) (.01) --
-------------------------------------------------------------------------------------------------------------
Net income $ .11 $ .16
-------------------------------------------------------------------------------------------------------------
* Certain amounts have been reclassified as described in Note 1 of Notes to Consolidated Statement of Income
See accompanying notes.
</TABLE>
FIRST QUARTER 1999
<PAGE> 6
[WILLIAMS LOGO]
NOTES TO CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
1. BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
In the fourth-quarter 1998, Williams adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." Beginning January 1, 1999, Communications' Network
Applications segment results have been restated to include the results of
investments in certain Brazilian and Australian telecommunications projects,
which had previously been reported in Other segment revenues and profit (loss).
These investments, along with businesses previously reported as Network
Applications, are now collectively managed and reported under the name of
Strategic Investments.
Effective April 1, 1998, certain marketing activities were transferred from
other Energy Services segments to Energy Marketing & Trading and combined with
its energy risk trading operations. As a result, revenues and segment profit
amounts prior to April 1, 1998, have been reclassified and reported within
Energy Marketing & Trading. The income statement presentation relating to these
operations was changed effective April 1, 1998, on a prospective basis, to
reflect these revenues net of the related costs to purchase such items. Activity
prior to this date is reflected on a "gross" basis in the Consolidated Statement
of Income. Concurrent with completing the combination of such activities with
the energy risk trading operations of Energy Marketing & Trading, the related
contract rights and obligations of certain of these operations are recorded in
the Consolidated Balance Sheet at fair value consistent with Energy Marketing &
Trading's accounting policy.
All other income statement amounts for 1998 have been reclassified to
conform to current classifications.
Segment profit of operating companies may vary by quarter. Based on current
rate structures and/or historical maintenance schedules of certain of its
pipelines, Gas Pipeline experiences higher segment profits in the first and
fourth quarters as compared with the second and third quarters.
2. SEGMENT REVENUES AND PROFIT (LOSS)
- --------------------------------------------------------------------------------
Segment revenues and profit (loss) for the three months ended March 31,
1999 and 1998, are as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
(millions) Revenues Segment Profit (Loss)
- --------------------------------------------------------------------------------
1999 1998* 1999 1998*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gas Pipeline $ 466.9 $ 442.2 $ 186.8 $ 195.0
- --------------------------------------------------------------------------------
Energy Services:
Energy Marketing
& Trading 472.0 479.5 40.7 15.5
Exploration & Production 27.5 40.6 4.7 12.3
Midstream Gas & Liquids 217.7 239.4 46.6 66.3
Petroleum Services 554.6 544.7 33.0 33.6
Merger-related costs and
non-compete amortization -- -- (4.1) (35.9)
- --------------------------------------------------------------------------------
1,271.8 1,304.2 120.9 91.8
- --------------------------------------------------------------------------------
Communications:
Communications
Solutions 337.3 327.4 (8.8) 3.3
Network Services 108.5 21.2 (17.2) (7.9)
Strategic Investments 60.2 49.8 (25.5) (17.0)
- --------------------------------------------------------------------------------
506.0 398.4 (51.5) (21.6)
Other 6.2 13.7 (17.0) 3.0
Intercompany eliminations (266.9) (199.7) -- --
- --------------------------------------------------------------------------------
Total $1,984.0 $1,958.8 $239.2 $268.2
================================================================================
</TABLE>
*Amounts have been reclassified as described in Note 1.
In connection with the March 28, 1998, acquisition of MAPCO Inc., Williams
recognized approximately $59 million in merger-related costs comprised primarily
of outside professional fees and early retirement and severance costs in first
quarter of 1998. Approximately $36 million of these merger-related costs is
included in other (income) expense - net in segment costs and expenses and as a
component of Energy Services' segment profit and $23 million, unrelated to the
segments, is included in general corporate expenses.
The following table reflects the reconciliation of segment profit to
operating income as reported in the Consolidated Statement of Income.
<TABLE>
<CAPTION>
Three months ended March 31,
(millions) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Segment profit $239.2 $268.2
General corporate expenses (16.9) (40.8)
- --------------------------------------------------------------------------------
Operating income $222.3 $227.4
================================================================================
</TABLE>
FIRST QUARTER 1999
<PAGE> 7
NOTES TO CONSOLIDATED STATEMENT OF INCOME (continued) [WILLIAMS LOGO]
(UNAUDITED)
3. 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).
4. CHANGE IN ACCOUNTING PRINCIPLE
- --------------------------------------------------------------------------------
Effective January 1, 1999, Williams adopted Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities." The SOP requires that
all start-up costs be expensed as incurred and the expense related to the
initial application of this SOP of $5.6 million (net of $3.6 million for income
taxes) is reported as a cumulative effect of a change in accounting principle.
Additionally, the Emerging Issues Task Force reached a consensus on Issue No.
98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management
Activities" which was adopted first-quarter 1999. The effect of initially
applying this consensus is immaterial to Williams' results of operations.
5. SUBSEQUENT EVENT
- -------------------------------------------------------------------------------
On April 9, 1999, Williams' communications business filed a registration
statement for an initial equity offering which is expected to yield proceeds of
$500 million to $750 million, representing a minority interest in its
communications business. During first-quarter 1999 Williams announced that
simultaneously with the public equity offer, SBC Communications plans to
acquire up to a 10 percent interest in Williams' Communications business for an
investment up to $500 million. In addition, Communications is expected to issue
high-yield public debt of $1.3 billion to $1.5 billion in 1999. Proceeds will
be reinvested in the continued construction of Williams' national fiber-optic
network and other expansion opportunities.
FIRST QUARTER 1999
<PAGE> 8
OPERATING STATISTICS [WILLIAMS LOGO]
<TABLE>
<CAPTION>
Three months ended
March 31,
- ---------------------------------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gas Pipeline:
Central
Throughput (TBtu) 108.9 106.1
Average daily transportation volumes (TBtu) 1.2 1.2
Average daily firm reserved capacity (TBtu) 2.3 2.0
Kern River Gas Transmission
Throughput (TBtu) 78.1 75.6
Average daily transportation volumes (TBtu) .9 .8
Average daily firm reserved capacity (TBtu) .7 .7
Northwest Pipeline
Throughput (TBtu) 191.8 208.4
Average daily transportation volumes (TBtu) 2.1 2.6
Average daily firm reserved capacity (TBtu) 2.7 2.5
Texas Gas Transmission
Throughput (TBtu) 235.9 219.9
Average daily transportation volumes (TBtu) 2.6 2.4
Average daily firm reserved capacity (TBtu) 2.8 2.7
Transcontinental Gas Pipe Line
Throughput (TBtu) 456.7 435.3
Average daily transportation volumes (TBtu) 5.1 4.8
Average daily firm reserved capacity (TBtu) 6.0 5.9
Communications:
Communications Solutions (millions)
Backlog at March 31 $ 248.7 $ 220.2
Orders $ 353.0 $ 344.6
Network Services
Total planned route miles 32,000 32,000
Retained WilTel Network route miles 9,700 9,700
Route miles under construction:
Project miles 10,746 10,160
Right-of-way acquired 17,779 7,950
Dark fiber 10,187 5,360
Lit 8,496 *
Strategic Investments (thousands)
Billable fiber minutes 1,564.5 1,642.4
Transponder billable minutes 992.8 975.5
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Not available
FIRST QUARTER 1999
<PAGE> 9
OPERATING STATISTICS (CONTINUED) [WILLIAMS LOGO]
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------------------------------
<S> <C> <C>
Energy Services:
Energy Marketing & Trading
Physical Trading
Natural gas (TBtuD) 3.7 3.8
Power (GWh/hour) 5.3 3.6
Propane Marketing
Retail (million gallons) 119.6 105.6
Exploration & Production
Natural gas production (TBtu) 12.5 11.1
Midstream Gas & Liquids
Field Services
Gathering volumes (TBtu) 529.9 528.4
Processing volumes (TBtu) 137.6 136.4
Natural gas liquids sales (million gallons) 173.4 152.5
Natural Gas Liquids Pipeline
Barrel miles - total system (billions) 31.3 33.3
Mid-America Pipeline deliveries (million barrels) 68.3 68.4
Seminole Pipeline deliveries (million barrels) 20.5 22.2
Rocky Mountain Extension deliveries (million barrels) 6.1 6.2
Petroleum Services
Petroleum Products Pipeline
Shipments (million barrels) 47.9 51.9
Barrel miles (billions) 14.2 12.7
Ethanol sales (million gallons) 40.5 38.9
Refining (crude runs)
Memphis (MBPD) 123.0 120.3
North Pole (MBPD) 168.3 132.7
Retail stations
Average monthly gasoline sales per store (thousand gallons) 178.3 149.4
Average number of stores 259 252
---------------------------------------------------------------------------------------------
</TABLE>
FIRST QUARTER 1999
