<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 June 30, 1998
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-20555
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WILLIAMS HOLDINGS OF DELAWARE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 73-1455707
- --------------------------------------- ------------------------------------
(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) 573-2000
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NO CHANGE
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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
------ -------
The number of shares of the registrant's Common Stock outstanding at July
31, 1998, was 1,000, all of which are owned by The Williams Companies, Inc.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a)
and (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
<PAGE> 2
WILLIAMS HOLDINGS OF DELAWARE, INC.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
<S> <C>
Item 1. Financial Statements
Consolidated Statement of Income--Three and Six Months Ended
June 30, 1998 and 1997 2
Consolidated Balance Sheet--June 30, 1998 and December 31, 1997 3
Consolidated Statement of Cash Flows--Six Months Ended
June 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Narrative Analysis of the Results of Operations 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Exhibit 12--Computation of Ratio of Earnings to Fixed Charges
</TABLE>
Certain matters discussed in this report, excluding historical information,
include forward-looking statements. Although Williams Holdings of Delaware, Inc.
believes such forward-looking statements are based on reasonable assumptions, no
assurance can be given that every objective will be achieved. Such statements
are made in reliance on the safe harbor protections provided under the Private
Securities Litigation Reform Act of 1995. Additional information about issues
that could lead to material changes in performance is contained in the Williams
Holdings of Delaware, Inc.'s Current Report on Form 8-K dated May 18, 1998.
1
<PAGE> 3
Williams Holdings of Delaware, Inc.
Consolidated Statement of Income
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
------------------------------------------------
Three months ended Six months ended
June 30, June 30,
------------------------------------------------
1998 1997* 1998 1997*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues (Note 11):
Energy Services:
Energy Marketing & Trading $ 174.6 $ 429.6 $ 655.2 $ 987.2
Exploration & Production 37.5 24.6 78.1 62.4
Midstream Gas & Liquids 192.8 229.5 409.7 480.4
Petroleum Services 722.5 658.6 1,325.6 1,297.1
Communications (Note 2) 413.3 359.1 801.1 575.7
Other 13.3 9.2 25.5 19.1
Intercompany eliminations (170.1) (225.0) (406.8) (479.9)
---------- ---------- ---------- ----------
Total revenues 1,383.9 1,485.6 2,888.4 2,942.0
---------- ---------- ---------- ----------
Profit-center costs and expenses (Note 11):
Costs and operating expenses 1,078.7 1,227.5 2,303.9 2,425.5
Selling, general and administrative expenses 186.4 138.8 357.7 242.7
Other (income) expense--net (Notes 3 and 4) 22.4 (1.4) 57.4 (1.8)
---------- ---------- ---------- ----------
Total profit-center costs and expenses 1,287.5 1,364.9 2,719.0 2,666.4
---------- ---------- ---------- ----------
Operating profit:
Energy Services:
Energy Marketing & Trading 4.1 (20.3) 20.7 12.2
Exploration & Production 8.0 4.1 20.3 14.7
Midstream Gas & Liquids 51.1 68.8 114.1 149.8
Petroleum Services (Note 3) 45.5 61.6 79.0 94.7
Merger-related costs (Note 4) (6.1) -- (42.0) --
Communications (Note 2) (10.5) 3.3 (30.6) 1.3
Other 4.3 3.2 7.9 2.9
---------- ---------- ---------- ----------
Total operating profit 96.4 120.7 169.4 275.6
General corporate expenses (Note 4) (10.1) (14.4) (41.9) (28.3)
Interest accrued (Note 11) (38.8) (33.3) (73.1) (59.6)
Interest capitalized 6.8 4.1 14.2 5.4
Investing income (Note 11) .1 10.4 9.6 23.1
Gain on sale of interest in subsidiary (Note 5) -- -- -- 66.0
Gain on sale of assets (Note 6) -- 44.5 -- 44.5
Minority interest in income of consolidated subsidiaries (3.3) (6.3) (5.6) (7.4)
Other expense--net (10.4) (2.1) (14.6) (1.0)
---------- ---------- ---------- ----------
Income before income taxes and extraordinary loss 40.7 123.6 58.0 318.3
Provision for income taxes (Note 7) 17.8 27.4 24.6 97.1
---------- ---------- ---------- ----------
Income before extraordinary loss 22.9 96.2 33.4 221.2
Extraordinary loss (Note 8) -- -- (4.8) --
---------- ---------- ---------- ----------
Net income $ 22.9 $ 96.2 $ 28.6 $ 221.2
========== ========== ========== ==========
</TABLE>
*Amounts have been restated to reflect the acquisition of MAPCO Inc., which has
been accounted for as a pooling of interests, and certain revenue amounts have
been reclassified to conform to current year classifications. (See Note 2 for
additional information.)
See accompanying notes.
2
<PAGE> 4
Williams Holdings of Delaware, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
------------------------
June 30, December 31,
1998 1997*
--------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 93.2 $ 96.0
Receivables:
Trade 1,291.1 1,419.0
Affiliates 38.0 43.8
Due from parent -- 93.0
Inventories (Note 9) 358.5 315.6
Commodity trading assets 577.2 180.3
Deferred income taxes - affiliates 85.8 86.1
Other 141.3 113.9
--------- ---------
Total current assets 2,585.1 2,347.7
Due from parent -- 181.3
Investments, primarily in affiliates 1,619.6 1,175.9
Property, plant and equipment, at cost 6,783.9 6,223.9
Less accumulated depreciation and depletion (1,791.1) (1,690.3)
--------- ---------
4,992.8 4,533.6
Goodwill and other intangible assets--net 598.8 600.6
Non-current commodity trading assets 234.2 141.4
Other assets and deferred charges 130.4 122.4
--------- ---------
Total assets $10,160.9 $ 9,102.9
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable (Note 10) $ 816.5 $ 701.0
Accounts payable:
Trade 927.4 1,143.7
Affiliates 107.1 69.2
Accrued liabilities 549.1 528.4
Commodity trading liabilities 592.1 182.0
Long-term debt due within one year (Note 10) 29.2 75.7
--------- ---------
Total current liabilities 3,021.4 2,700.0
Long-term debt (Notes 10 and 11)
Affiliates 176.1 --
Other 1,760.5 1,525.5
Deferred income taxes - affiliates 895.0 807.8
Non-current commodity trading liabilities 280.0 201.7
Other liabilities 191.9 197.6
Minority interest in consolidated subsidiaries 183.1 144.8
Contingent liabilities and commitments (Note 12)
Stockholder's equity:
Common stock, $1 par value, 1,000 shares authorized and outstanding -- --
Capital in excess of par value 1,677.7 1,664.8
Retained earnings 1,628.2 1,616.6
Net unrealized gain on non-current marketable securities 349.6 244.1
Other (2.6) --
--------- ---------
Total stockholder's equity 3,652.9 3,525.5
--------- ---------
Total liabilities and stockholder's equity $10,160.9 $ 9,102.9
========= =========
</TABLE>
*Amounts have been restated to reflect the acquisition of MAPCO Inc., which has
been accounted for as a pooling of interests. (See Note 2 for additional
information).
See accompanying notes.
3
<PAGE> 5
Williams Holdings of Delaware, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
-------------------------
Six months ended June 30,
-------------------------
1998 1997*
-------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 28.6 $ 221.2
Adjustments to reconcile to cash provided from operations:
Extraordinary loss 4.8 --
Depreciation, depletion and amortization 157.6 133.6
Provision for deferred income taxes 24.2 20.7
Gain on dispositions of property and interest in subsidiary (1.3) (109.3)
Minority interest in income of consolidated subsidiaries 5.6 7.4
Cash provided (used) by changes in assets and liabilities:
Receivables sold -- 159.8
Receivables 125.0 246.6
Inventories (42.5) (45.2)
Other current assets (42.4) 12.6
Accounts payable (214.9) (282.0)
Accrued liabilities 18.9 (62.8)
Receivables/payables with affiliates 42.3 40.5
Current commodity trading assets and liabilities 13.3 (4.1)
Non-current commodity trading assets and liabilities (14.5) (10.2)
Other, including changes in non-current assets and liabilities 1.8 5.6
------- -------
Net cash provided by operating activities 106.5 334.4
------- -------
FINANCING ACTIVITIES:
Proceeds from notes payable 350.1 10.0
Payments of notes payable (275.4) (62.4)
Proceeds from long-term debt 447.4 517.3
Payments of long-term debt (221.2) (68.6)
Changes in parent company advances 176.1 --
Dividends (14.0) (77.3)
Capital contributions 10.9 4.6
Other--net 36.4 (4.7)
------- -------
Net cash provided by financing activities 510.3 318.9
------- -------
INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures (613.2) (305.2)
Proceeds from dispositions 13.8 64.1
Acquisition of businesses, net of cash acquired -- (129.8)
Proceeds from sale of assets -- 66.0
Purchase of investments/advances to affiliates (292.8) (165.1)
Changes in advances to parent company 274.3 (176.4)
Other--net (1.7) 8.7
------- -------
Net cash used by investing activities (619.6) (637.7)
------- -------
Increase (decrease) in cash and cash equivalents (2.8) 15.6
Cash and cash equivalents at beginning of period 96.0 149.2
------- -------
Cash and cash equivalents at end of period $ 93.2 $ 164.8
======= =======
</TABLE>
* Amounts have been restated to reflect the acquisition of MAPCO Inc., which
has been accounted for as a pooling of interests. (See Note 2 for additional
information).
See accompanying notes.
4
<PAGE> 6
Williams Holdings of Delaware, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. General
Williams Holdings of Delaware, Inc. (Williams Holdings) is a wholly-owned
subsidiary of The Williams Companies, Inc. (Williams). The accompanying interim
consolidated financial statements of Williams Holdings do not include all notes
in annual financial statements and therefore should be read in conjunction with
the consolidated financial statements and notes thereto for Williams Holdings'
Current Report on Form 8-K dated May 18, 1998. The accompanying financial
statements have not been audited by independent auditors, but include all
adjustments, both normal recurring and others, which, in the opinion of Williams
Holdings' management, are necessary to present fairly its financial position at
June 30, 1998, results of operations for the three and six months ended June 30,
1998 and 1997, and cash flows for the six months ended June 30, 1998 and 1997.
2. Basis of presentation
On March 28, 1998, Williams completed the acquisition of MAPCO Inc. by
exchanging shares of Williams common stock for outstanding MAPCO common stock
and employee stock options (see Note 4). Upon completion of the merger, Williams
transferred its interest in MAPCO to Williams Holdings, and MAPCO became part of
the Energy Services business unit. The transaction has been accounted for as a
pooling of interests and, accordingly, the consolidated financial statements and
notes have been restated to reflect the results of operations, financial
position and cash flows as if the companies had been combined throughout the
periods presented. MAPCO is engaged in the NGL pipeline, petroleum refining and
marketing and propane marketing businesses.
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 operating profit amounts for the three months and six months ended
June 30, 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 profit-center 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 Consolidated Balance Sheet on a market-value
basis consistent with Energy Marketing & Trading's accounting policy, and the
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 operations into a limited liability company, Williams
Communications Solutions, LLC (LLC). Communications' revenues and operating
profit amounts include the operating results of the LLC beginning May 1, 1997
(see Note 5).
3. Other (income) expense - net
Included in the second-quarter 1998 other (income) expense-net on the
Consolidated Statement of Income and operating profit for Petroleum Services is
a $15.5 million loss provision for potential refunds to customers from a recent
order from the Federal Energy Regulatory Commission (see Note 12 for additional
information).
4. MAPCO acquisition
On November 24, 1997, Williams and MAPCO Inc. announced that they had entered
into a definitive merger agreement whereby Williams would acquire MAPCO by
exchanging 1.665 shares of Williams common stock for each outstanding share of
MAPCO common stock. In addition, outstanding MAPCO employee stock options would
be converted into Williams common stock. The merger was consummated on March 28,
1998, with the issuance of 98.8 million shares of Williams common stock.
The merger constitutes a tax-free reorganization and has been accounted for
as a pooling of interests. Intercompany transactions between Williams Holdings
and MAPCO prior to the merger have been eliminated, and no material adjustments
were necessary to conform MAPCO's accounting policies.
In connection with the merger, Williams Holdings has recognized approximately
$61 million in merger-related costs comprised primarily of outside professional
fees and early retirement and severance costs. Approximately $42 million of
these merger-related costs are included in other (income) expense-net as a
component of Energy Services' operating profit for the six months ended June 30,
1998, and approximately $19 million is included in general corporate expenses.
During 1997, payments of $32.6 million were made for non-compete agreements.
These costs are being amortized over one to three years from the merger
completion date.
5
<PAGE> 7
Notes (continued)
The results of operations for each company and the combined amounts presented
in Williams Holdings' consolidated statement of income are as follows:
<TABLE>
<CAPTION>
Three months Three months Six months
ended March 31, ended June 30, ended June 30,
1998 1997 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Williams
Holdings $ 682.0 $ 635.3 $ 1,164.5
MAPCO 823.8 854.3 1,785.5
Intercompany
eliminations (1.3) (4.0) (8.0)
------------ ------------ ------------
Combined $ 1,504.5 $ 1,485.6 $ 2,942.0
============ ============ ============
Net income (loss):
Williams
Holdings $ (2.7) $ 85.5 $ 137.8
MAPCO 8.4 10.7 83.4
------------ ------------ ------------
Combined $ 5.7 $ 96.2 $ 221.2
============ ============ ============
</TABLE>
5. Sale of interest in subsidiary
On April 30, 1997, Williams Holdings and Nortel combined their
customer-premise equipment sales and service operations into a limited liability
company, Williams Communications Solutions, LLC. In addition, Williams Holdings
paid $68 million to Nortel. Williams Holdings 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 Holdings' Consolidated Statement
of Income.
Williams Holdings recorded the 30 percent reduction in its operations
contributed to the LLC as a sale to the minority shareholders of the LLC.
Williams Holdings 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 effect the differences between the
financial and tax bases of identifiable assets and liabilities.
If the transaction occurred on January 1, 1997, Williams Holdings' unaudited
pro forma revenues for the six months ended June 30, 1997 would have been
approximately $3.2 billion. The pro forma effect of the transaction on Williams
Holdings' net income is not significant. Pro forma financial information is not
necessarily indicative of results of operations that would have occurred if the
transaction had occurred on January 1, 1997, or of future results of operations
of the combined companies.
6. Sale of assets
In January 1997, Williams Holdings 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.
7. Provision for income taxes
The provision for income taxes includes:
<TABLE>
<CAPTION>
Three months ended Six months ended
(Millions) June 30, June 30,
-------------------------------- --------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Current:
Federal $ 3.3 $ 7.8 $ (.2) $ 67.6
State (.8) 4.3 -- 8.8
Foreign .3 -- .6 --
-------------- -------------- -------------- --------------
2.8 12.1 .4 76.4
Deferred:
Federal 12.1 12.7 20.9 15.5
State 2.9 2.6 3.3 5.2
-------------- -------------- -------------- --------------
15.0 15.3 24.2 20.7
-------------- -------------- -------------- --------------
Total provision $ 17.8 $ 27.4 $ 24.6 $ 97.1
============== ============== ============== ==============
</TABLE>
The effective income tax rate for 1998 is greater than the federal
statutory rate due primarily to the effects of state income taxes. The effective
income tax rate for 1997 is less than the federal statutory rate due primarily
to the non-taxable gain recognized in the second quarter (see Note 5) and income
tax credits from coal-seam gas production, partially offset by the effects of
state income taxes.
8. Extraordinary loss
The extraordinary loss in 1998 resulted from the early extinguishment of
debt. Williams Holdings 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).
9. Inventories
<TABLE>
<CAPTION>
(Millions) June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Raw materials:
Crude oil $ 47.7 $ 30.5
Other 4.9 5.2
------------ ------------
52.6 35.7
Finished goods:
Refined products 119.0 122.3
Fertilizer and natural gas liquids 65.6 43.8
General merchandise &
communications equipment 79.6 90.0
------------ ------------
264.2 256.1
Materials and supplies 20.6 19.0
Natural gas in underground storage 19.1 --
Other 2.0 4.8
------------ ------------
$ 358.5 $ 315.6
============ ============
</TABLE>
6
<PAGE> 8
Notes (continued)
10. Debt and banking arrangements
Notes payable
During 1998, Williams Holdings increased its commercial paper program to
$1 billion at June 30, 1998. The commercial paper program is backed by
short-term bank-credit facilities totaling $1 billion. At June 30, 1998, $914
million of commercial paper was outstanding under the program. Interest rates
vary with current market conditions.
Debt
Williams Holdings and Williams Communications Solutions, LLC also
participates in Williams' $1 billion credit agreement under which the LLC has
access to $300 million and Williams Holdings has access to all unborrowed
amounts, subject to borrowings by other affiliated companies, including Williams
(parent). Interest rates vary with current market conditions.
For financial statement reporting purposes at June 30, 1998, $148 million in
current debt obligations, including $98 million of commercial paper, have been
classified as non-current obligations based on Williams Holdings' intent and
ability to refinance on a long-term basis. At June 30, 1998, the amount
available on the $1 billion credit agreement of $400 million is sufficient to
complete these refinancings.
<TABLE>
<CAPTION>
Weighted-
average
interest June 30, December 31,
(Millions) rate* 1998 1997
---------- ---------- ------------
<S> <C> <C> <C>
Williams Holdings of
Delaware, Inc.
Revolving credit loans 6.0% $ 600.0 $ 200.0
Commercial paper 5.8 98.0 --
Debentures, 6.25% and 7.7%,
payable 2006 and 2027 5.5 351.9 351.8
Notes, 6.365%-8.87%,
payable through 2002 7.7 567.2 572.3
MAPCO Inc.
Commercial paper and bank
money market lines -- -- 135.8
MAPCO Natural Gas Liquids, Inc.
Notes, 6.67%-8.95%, payable
through 2022 7.8 165.0 165.0
Williams Communications
Solutions
Revolving credit loans -- -- 125.0
Other, payable through 2005 7.6 7.6 51.3
---------- ----------
1,789.7 1,601.2
Current portion of long-term debt (29.2) (75.7)
---------- ----------
$ 1,760.5 $ 1,525.5
========== ==========
</TABLE>
*At June 30, 1998, including the effects of interest-rate swaps.
11. Related party transactions
Williams Holdings and its subsidiaries maintain promissory notes with
Williams for both advances from and advances to Williams depending on the cash
position of each subsidiary. Investing income includes $.9 million and $8.7
million for the three months ended June 30, 1998 and 1997, respectively, and
$9.1 million and $16.4 million for the six months ended June 30, 1998 and 1997,
respectively, from advances to affiliates.
Williams Holdings' subsidiaries have transactions primarily with the
following affiliates: Williams Gas Pipelines Central, Kern River Gas
Transmission, Northwest Pipeline, Texas Gas Transmission, and Transcontinental
Gas Pipe Line. Energy Marketing & Trading's revenues include natural gas sales
to affiliates of $94.7 million and $110.9 million for the three months ended
June 30, 1998 and 1997, respectively, and $185.6 million and $216.4 million for
the six months ended June 30, 1998 and 1997, respectively. Energy Marketing &
Trading also incurred costs and operating expenses, including transportation and
certain other costs, from affiliates of $22.4 million and $11 million for the
three months ended June 30, 1998 and 1997, respectively, and $51.2 million and
$40.4 million for the six months ended June 30, 1998 and 1997, respectively.
These sales and costs are included in Energy Marketing & Trading's revenues
consistent with a "net" basis of reporting these activities. Transactions with
affiliates are at prices that generally apply to unaffiliated parties.
12. Contingent liabilities and commitments
Rate and regulatory matters
Williams Pipe Line has various regulatory proceedings pending. On July 15,
1998, Williams Pipe Line received an Order from the Federal Energy Regulatory
Commission (FERC) which affirmed an administrative law judge's 1996 initial
decision regarding rate-making proceedings for the period September 15, 1990
through May 1, 1992. The FERC has ruled that the company 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. The company
continues to believe it should prevail upon appeal regarding collected rates for
that period. However, due to this FERC decision, the company accrued $15.5
million, including interest, in the second quarter of 1998 for potential refunds
to customers for the issues described above. Since May 1, 1992, Williams Pipe
Line has collected and recognized as revenues $113 million in noncompetitive
markets that are in excess of tariff rates previously approved by the FERC and
that are subject to refund with interest. The company believes that the tariff
rates collected in these markets during this period will be justified in
accordance with the FERC's cost-basis guidelines and will be making the
appropriate filings with the FERC to support this position.
7
<PAGE> 9
Notes (continued)
Environmental matters
Certain Williams Holdings' subsidiaries have been identified as potentially
responsible parties (PRP) at various Superfund and state waste disposal sites.
In addition, these subsidiaries have incurred or are alleged to have incurred
various other hazardous materials removal or remediation obligations under
environmental laws. Although no assurances can be given, Williams Holdings does
not believe that these obligations or the PRP status of these subsidiaries will
have a material adverse effect on its financial position, results of operations
or net cash flows.
The Midstream Gas & Liquids unit of Energy Services (WES) has recorded an
aggregate liability of approximately $11 million, representing the current
estimate of its future environmental and remediation costs, including
approximately $5 million relating to former Williams Gas Pipelines Central
facilities. WES also accrues environmental remediation costs for its retail
petroleum, refining and propane marketing operations primarily related to soil
and groundwater contamination. At June 30, 1998, WES and its subsidiaries had
reserves, in addition to the reserves listed above, totaling approximately $23
million. WES recognizes receivables related to environmental remediation costs
from state funds as a result of laws permitting states to reimburse certain
expenses associated with underground storage tank problems and repairs. At June
30, 1998, WES and its subsidiaries had receivables totaling $12 million.
Other legal matters
On April 7, 1992, a liquefied petroleum gas explosion occurred near an
underground salt dome storage facility located near Brenham, Texas and owned by
an affiliate of MAPCO Inc., Seminole Pipeline Company ("Seminole"). MAPCO Inc.,
as well as Seminole, Mid-America Pipeline Company, MAPCO Natural Gas Liquids
Inc., and other non-MAPCO entities were named as defendants in civil action
lawsuits filed in state district courts located in four Texas counties. Seminole
and the above-mentioned subsidiaries of MAPCO Inc. have settled in excess of
1,600 claims in these lawsuits. The only lawsuit remaining is the Dallmeyer
case, which was tried before a jury in Harris County. In Dallmeyer, the judgment
rendered in March 1996 against defendants Seminole and MAPCO Inc. and its
subsidiaries totaled approximately $72 million, which included nearly $65
million of punitive damages awarded to the 21 plaintiffs. Both plaintiffs and
defendants have appealed the Dallmeyer judgment to the Court of Appeals for the
Fourteenth District of Texas in Harris County. The defendants seek to have the
judgment modified in many respects, including the elimination of punitive
damages as well as a portion of the actual damages awarded. If the defendants
prevail on appeal, it will result in an award significantly less than the
judgment. The plaintiffs have cross-appealed and seek to modify the judgment to
increase the total award plus interest to exceed $155 million. In February and
March 1998, the Company entered into settlement agreements involving 17 of the
21 plaintiffs to finally resolve their claims against all defendants for an
aggregate payment of approximately $10 million. These settlements have satisfied
and reduced the judgment on appeal by approximately $42 million. As to the
remaining four plaintiffs, the Company is continuing with settlement
negotiations and believes that any final agreement reached with these plaintiffs
will significantly reduce the Company's liability under the judgment. The
Company has accrued a liability representing an estimate of amounts it expects
to incur to finally resolve all litigation.
In 1991, the Southern Ute Indian Tribe (the Tribe) filed a lawsuit against
Williams Production Company (Williams Production), a wholly-owned subsidiary of
Williams Holdings, 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. On July 16, 1997, the
U.S. Court of Appeals for the Tenth Circuit reversed the decision of the
district court, held that the Tribe owns the coal-seam gas produced from certain
coal strata on fee lands within the exterior boundaries of the Tribe's
reservation, and remanded the case to the district court for further
proceedings. On September 16, 1997, Amoco Production Company, the class
representative for the defendant class (of which Williams Production is a part),
filed its motion for rehearing en banc before the Court of Appeals. On July 20,
1998, the Court of Appeals sitting en banc affirmed the panel's decision. The
defendants are considering an appeal to the Supreme Court.
Williams Communications, Inc. filed suit on March 20, 1998, against WorldCom
Network Services, Inc. (WorldCom) in district court in Tulsa County in order to
prevent WorldCom from disconnecting any Williams Holdings' equipment on the
WorldCom network. This suit sought a declaratory judgment that the single fiber
retained by Williams Holdings on the WorldCom network could be used for
specified multimedia uses, and that WorldCom was required to permit Williams
Holdings to purchase additional fiber either acquired or constructed by
WorldCom. WorldCom had denied Williams Holdings' claim and had asserted various
counterclaims for monetary damages,
8
<PAGE> 10
Notes (continued)
recission and injunctive relief. This lawsuit was settled on July 9, 1998. The
settlement resolves all claims for monetary damages permitted uses of Williams
Holdings' fiber on the WorldCom network and Williams Holdings' right to purchase
additional fiber on WorldCom fiber builds. There was no significant financial
impact to Williams Holdings as a result of the settlement.
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. Transco Energy
Company and Transco Gas Supply Company (wholly-owned subsidiaries of Williams
Holdings) have also been named as defendants in certain of these lawsuits. As a
result of such settlements, Transcontinental Gas Pipe Line is currently
defending two lawsuits brought by producers. In one of the cases, a jury verdict
found that Transcontinental Gas Pipe line was required to pay a producer damages
of $23.3 million including $3.8 million in attorneys' fees. Transcontinental Gas
Pipe Line is pursuing an appeal. In the other case, a producer has asserted
damages, including interest calculated through December 31, 1997, of
approximately $6 million. 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 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 FERC Order 528.
In connection with the sale of certain coal assets in 1996, MAPCO entered
into a Letter Agreement with the buyer providing for indemnification by MAPCO
for reductions in the price or tonnage of coal delivered under a certain
pre-existing Coal Sales Agreement dated December 1, 1986. The Letter Agreement
is effective for the period July 1, 1996 through December 31, 2002 and provides
for indemnification for such reductions as incurred on a quarterly basis. The
buyer has stated it is entitled to indemnification from MAPCO for amounts of
$4.4 million and may claim indemnification for additional amounts in the future.
MAPCO has filed for declaratory relief as to certain aspects of the buyer's
claims. MAPCO also believes it would be entitled to substantial set-offs and
credits against any amounts determined to be due and has accrued, in a prior
year, a liability representing an estimate of amounts it expects to incur in
satisfaction of this indemnity.
In addition to the foregoing, various other proceedings are pending against
Williams Holdings or its subsidiaries incidental to their operations.
Summary
While no assurances may be given, Williams Holdings does not believe that the
ultimate resolution of the foregoing matters, taken as a whole and after
consideration of amounts accrued, insurance coverage or other indemnification
arrangements, will have a materially adverse effect upon Williams Holdings'
future financial position, results of operations or cash flow requirements.
Other Matters
During the second quarter, Energy Marketing & Trading entered into a
15-year contract giving Williams Holdings the right to receive fuel conversion
services for purposes of generating electricity. This contract also gives
Williams Holdings the right to receive installed capacity and certain ancillary
services. Annual committed payments under the contract range from $140 million
to $165 million, resulting in total committed payments of approximately $2.3
billion.
13. Adoption of accounting standards
The Financial Accounting Standards Board issued three new accounting
standards, Statement on Financial Accounting Standards (SFAS) No. 131,
"Disclosures about Segments of an Enterprise and Related Information," SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits"
and SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 131 and No. 132, effective for fiscal years beginning
after December 15, 1997, are disclosure-oriented standards. Therefore, neither
standard will affect Williams Holdings' reported consolidated net income or cash
flows. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.
This standard requires that all derivatives be recognized as assets or
liabilities in the balance sheet and that those instruments be measured at fair
value. The effect of this standard on Williams Holdings' results of operations
and financial position has yet to be determined.
The American Institute of Certified Public Accountants (AICPA) issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities," effective for fiscal years beginning after December 15, 1998. The
SOP requires that all start-up costs be expensed and that the effect of adopting
the SOP be reported as the cumulative effect of a change in accounting
principle. The effect of this SOP on Williams results of operations and
financial position has yet to be determined.
14. Comprehensive income
Comprehensive income for the three and six months ended June 30 is as
follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
(Millions) June 30, June 30,
-------- -------- -------- --------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 22.9 $ 96.2 $ 28.6 $ 221.2
Other comprehensive
income (loss):
Unrealized gain (loss)
on debentures 48.1 (8.2) 141.5 77.6
Unrealized gains on
securities 13.5 -- 26.8 --
Foreign currency
translation
adjustments (.4) -- (2.5) --
-------- -------- -------- --------
Comprehensive income
before taxes 84.1 88.0 194.4 298.8
Income tax provision
(deficit) 20.3 (3.3) 62.8 31.0
-------- -------- -------- --------
Comprehensive
income $ 63.8 $ 91.3 $ 131.6 $ 267.8
======== ======== ======== ========
</TABLE>
9
<PAGE> 11
ITEM 2.
Management's Narrative Analysis of
the Results of Operations
MAPCO Acquisition
On November 24, 1997, Williams (Williams Holdings' parent) and MAPCO Inc.
announced that they had entered into a definitive merger agreement whereby
Williams would acquire MAPCO by exchanging 1.665 shares of Williams common
stock for each outstanding share of MAPCO common stock. In addition,
outstanding MAPCO employee stock options would be converted into Williams
common stock. The merger was consummated on March 28, 1998, with the issuance
of 98.8 million shares of Williams common stock. MAPCO is engaged in the NGL
pipeline, petroleum refining and marketing and propane marketing businesses.
Upon completion of the merger, Williams transferred its interest in MAPCO to
Williams Holdings, and MAPCO became part of the Energy Services business unit.
The merger constituted a tax-free reorganization and has been accounted
for as a pooling of interests. Accordingly, all prior period financial
information presented has been restated to include the combined results of
operations and financial condition of MAPCO as though it had always been a part
of Williams Holdings.
Results of Operations
Six Months Ended June 30, 1998 vs. Six Months Ended June 30, 1997
ENERGY MARKETING & TRADING'S revenues decreased $332 million, or 34
percent, and costs and operating expenses decreased $325 million, or 34
percent, due primarily to the $247 million impact in 1998 of reporting revenues
on a net margin basis for certain crude oil, refined products and natural gas
liquids trading operations previously reported on a "gross" basis (see Note 2
of Notes to Consolidated Financial Statements). In addition, crude oil and
refined products revenues decreased $50 million due primarily to decreased
average prices associated with the marketing of refined products from the
Alaska and Memphis refineries. Revenues associated with natural gas price-risk
management and physical trading decreased $22 million as a result of market
movement against the natural gas portfolio, partially offset by increased
physical and notional trading volumes and a $6 million favorable settlement of
a long-term transportation contract. The unfavorable market movement was
attributable in part to a warmer than normal winter over much of the country
and low market volatility during the first quarter of 1998. Retail propane
sales decreased $24 million due primarily to lower average sales prices.
Partially offsetting these decreases were $8 million higher electric power
marketing revenues and $7 million higher revenues from energy financing
activities. Operating profit increased $8.5 million, or 70 percent, due
primarily to improved crude oil, refined products and liquids trading
activities, lower retail propane operating costs, increased electric power
marketing and energy capital financing revenues and the favorable settlement of
a long-term transportation contract, largely offset by the decrease in revenues
from natural gas price-risk management and physical trading and a $23 million
increase in general and administrative expenses resulting from increased
staffing levels.
EXPLORATION & PRODUCTION'S revenues increased $15.7 million, or 25
percent, due primarily to the recognition of $18 million in deferred income
resulting from a transaction that transferred certain tax credits to a third
party, and an increase in both company-owned production volumes sold and
marketing volumes from the Williams Coal Seam Gas Royalty Trust, partially
offset by lower average natural gas sales prices. Operating profit increased
$5.6 million, or 39 percent, due primarily to the recognition of deferred
income and increased company-owned production, largely offset by $6 million
higher depreciation, depletion and amortization, $4 million higher leasehold
impairment expense and $3 million higher general and administrative expenses.
MIDSTREAM GAS & LIQUIDS' revenues decreased $70.7 million, or 15 percent,
due primarily to the $28 million impact from the shutdown of the Canadian
marketing operations, $23 million lower liquids sales from processing
activities, the pass-through of $12 million lower operating costs to customers
and $9 million lower pipeline transportation revenues resulting from decreased
shipments, partially offset by $11 million resulting from an 8 percent increase
in gathering volumes. The $23 million decrease in liquids sales from
processing activities is due to lower average liquids sales prices, partially
offset by an 8 percent increase in sales volumes. Costs and operating expenses
decreased $39 million, or 13 percent, due primarily to the shutdown of the
Canadian marketing operations and lower costs passed through to customers.
Operating profit decreased $35.7 million, or 24 percent, due primarily to $24
million from lower per-unit liquids margins, higher operating, maintenance and
depreciation expenses, decreased pipeline shipments, a $3 million unfavorable
litigation judgement in 1998 and the impact of a $2 million favorable business
interruption insurance estimate adjustment in 1997, partially offset by
increased gathering volumes.
PETROLEUM SERVICES' revenues increased $28.5 million, or 2 percent, due
primarily to $29 million in pipeline construction revenue, $19 million higher
revenues from fleet management and mobile computer technology operations begun
in mid-1997, $15 million higher convenience store sales primarily resulting
from
10
<PAGE> 12
the May 1997 EZ-Serve acquisition, $13 million higher ethanol sales and $5
million higher product transportation revenues, partially offset by a $41
million decrease in revenues from refining operations. The $15 million
increase in convenience store sales reflects $24 million from increased
merchandise sales and $32 million from 13 percent higher gasoline and diesel
sales volumes, largely offset by lower average gasoline and diesel sales
prices. The $41 million decline in refining revenues reflects $170 million
from lower average sales prices, partially offset by $129 million from a 19
percent increase in barrels sold. Costs and expenses increased $29 million, or
2 percent, due primarily to $28 million in pipeline construction costs, $20
million higher costs from fleet management and mobile computer technology
operations, increased convenience store product purchases and operating costs
primarily resulting from the EZ-Serve acquisition, $12 million from increased
ethanol cost of sales and increased general and administrative expenses,
partially offset by a $34 million decrease from refining operations. The $34
million decline from refining operations reflects a $147 million decrease due
to lower average crude oil purchase prices, partially offset by $106 million
due to increased processed volumes, and increased operating costs at the
Memphis refinery. Other (income) expense - net in 1998 includes a $15.5
million accrual for potential transportation rate refunds to customers (see
Note 12). Operating profit decreased $15.7 million, or 17 percent, due
primarily to the $15.5 million accrual for potential refunds to transportation
customers, lower per-unit refinery margins, increased operating costs due to
higher production levels at the Memphis refinery and higher general and
administrative expenses, partially offset by higher product transportation
revenues and increased refinery production.
COMMUNICATIONS' revenues increased $225.4 million, or 39 percent, due
primarily to the April 30, 1997 combination of the Nortel customer premise
equipment sales and services operations which contributed an additional $196
million of revenue in 1998, $12 million of revenues from providing services to
new long-term customers associated with the fiber-optic network currently under
construction, and increased business activity in the customer premise equipment
sales and services operations. New orders related to customer premise
equipment sales and services operations increased $274.9 million, or 53
percent, during 1998 as compared to 1997, and sales order backlog at June 30,
1998 increased $14.1 million from June 30, 1997. Costs and operating expenses
increased $171 million, or 40 percent, including $121 million associated with
the combination with Nortel, $23 million from additional increased customer
premise equipment sales and services operations, and higher costs in both the
network and network applications businesses including leased capacity costs
associated with providing customer services prior to completion of the new
network. Selling, general, and administrative expenses increased $83 million,
or 58 percent, of which $73 million is attributable to the customer premise
equipment sales and services operations due primarily to the combination with
Nortel, $5 million for a new national advertising campaign and the expansion of
the infrastructure including $9 million for information systems and $2 million
for sales support in support of the development of a new national digital
fiber-optic network. The construction of the network continues ahead of
schedule and on budget. Operating profit decreased $31.9 million to a $30.6
million operating loss, due primarily to the increased costs of substantially
expanding the infrastructure related to completion of the new fiber-optic
network, $6 million lower operating profit from the customer premise equipment
sales and services operations and increased operating losses in the network
applications businesses.
GENERAL CORPORATE EXPENSES increased $13.6 million, or 48 percent, due
primarily to MAPCO merger-related costs of $19 million, partially offset by
expense savings realized following the MAPCO merger. An additional $42 million
of merger-related costs are included in other (income) expense - net as a
component of Energy Services' operating profit. Interest accrued increased
$13.5 million, or 23 percent, due primarily to higher borrowing levels
including Williams Holdings' commercial paper program, partially offset by a
lower average interest rate. The lower average interest rate reflects the
impact of lower rates on commercial paper borrowings. Interest capitalized
increased $8.8 million to $14.2 million, due primarily to capital expenditures
for the fiber-optic network and the Venezuelan gas injection plant. Investing
income decreased $13.5 million, or 58 percent, as a result of a $12 million
decrease in equity earnings primarily from international investments and $7
million lower interest earned on advances to Williams, partially offset by
interest income on long-term notes receivable. For information concerning the
$44.5 million 1997 gain on sale of interest in subsidiary, see Note 5. The $66
million 1997 gain on sale of assets results from the sale of Williams Holdings'
interest in the liquids and condensate reserves in the West Panhandle field of
Texas (see Note 6). Other income (expense) - net is $13.6 million unfavorable
as compared to 1997 due primarily to a 1998 litigation loss accrual related to
assets previously sold and a 1997 gain of $4 million on the termination of
interest rate swaps agreements.
The $72.5 million, or 75 percent, decrease in the provision for income
taxes is primarily a result of lower pre-tax income, partially offset by a
higher effective income tax rate in 1998. The effective income tax rate in
1998 exceeds the federal statutory rate due primarily to the effects of state
income taxes. The effective income tax rate in 1997 is less than the federal
statutory rate due primarily to the effect of the non-taxable gain recognized
in 1997 (see Note 5) and income tax credits from coal-seam gas production,
partially offset by the effects of state income taxes.
11
<PAGE> 13
The $4.8 million 1998 extraordinary loss results from the early
extinguishment of debt (see Note 8).
Year 2000 Compliance
Williams and its wholly-owned subsidiaries, which includes Williams
Holdings, initiated an enterprise-wide project in 1997 to address the year 2000
compliance issue for both traditional information technology areas and embedded
technology which is prevalent throughout the organization. This project
focuses on all technology hardware and software, external interfaces with
customers and suppliers, operations process control, automation and
instrumentation systems, and facility items. The assessment phase of this
project as it relates to both traditional and non-traditional information
technology areas has been substantially completed except for international
projects in which we are involved and the non-traditional information
technology areas within the Communications business unit. Communications'
assessment is planned for completion during the third quarter of 1998.
Necessary conversion and replacement activities have begun and are targeted for
completion by December 31, 1998 with some exceptions. These exceptions include
system replacements, items dependent on information from third parties, and
certain areas within Communications, for which the targeted completion date is
fourth-quarter 1999.
Testing activities have begun and will continue throughout the process
with substantial completion expected in the third quarter of 1999. Year 2000
test labs are in place and others will be by August 31, 1998. Within the
Energy Services and Corporate/Information Services business units, the percent
of inventoried items confirmed to be compliant through testing activities
ranges from 12 to 26 percent. As was expected, few problems have been detected
during testing with items believed to be compliant.
Williams Holdings has initiated a formal communications process with other
companies with which Williams Holdings' systems interface or rely on to
determine the extent to which those companies are addressing their year 2000
compliance. In connection with this process, Williams and its subsidiaries
have sent over 7000 letters and questionnaires to third parties and are
evaluating those responses as they are received. Where necessary, Williams
Holdings will be working with those companies to mitigate any material adverse
effect on Williams Holdings.
Williams Holdings expects to utilize both internal and external resources
to complete this process. Existing resources have been redeployed, and certain
previously planned system replacements will be accelerated during this time.
For example, implementation of a previously planned human resources system is
currently in process. This system will address the year 2000 compliance issues
in certain areas. In addition, one of Williams Holdings' business units has
replaced or is replacing six major applications. Costs incurred for new
software and hardware purchases will be capitalized, and other costs will be
expensed as incurred.
While the total cost of Williams Holdings enterprise-wide project is still
being evaluated, Williams Holdings estimates that future costs, excluding
previously planned system replacements, necessary to complete the project
within the schedule described will total at least $40 million. Williams
Holdings will update this estimate as additional information becomes available.
Approximately $5 million of costs (including capital expenditures) have been
incurred to date. The costs of the project and the completion dates are based
on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third-party year 2000 compliance modification plans and other
factors. There can be no guarantee that these estimates will be achieved, and
actual results could differ materially from these estimates.
12
<PAGE> 14
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 12--Computation of Ratio of Earnings to Fixed Charges
Exhibit 27--Financial Data Schedule
(b) During the second quarter of 1998, the Company filed a
Form 8-K on April 29, and May 18, 1998, which reported a
significant event under Item 5 of the Form and included the
exhibits required by Item 7 of the Form.
13
<PAGE> 15
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.
WILLIAMS HOLDINGS OF DELAWARE, INC.
(Registrant)
/s/ GARY R. BELITZ
-------------------------------------
Gary R. Belitz
Controller
(Duly Authorized Officer and
Principal Accounting Officer)
August 14, 1998
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
Exhibit 27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 12
Williams Holdings of Delaware, Inc.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in millions)
<TABLE>
<CAPTION>
Six months ended
June 30, 1998
----------------
<S> <C>
Earnings:
Income before income taxes and extraordinary loss $ 58.0
Add:
Interest expense - net 58.9
Rental expense representative of interest factor 11.1
Minority interest in income of consolidated subsidiaries 5.6
Other 4.5
------------
Total earnings as adjusted plus fixed charges $ 138.1
============
Fixed charges:
Interest expense - net $ 58.9
Capitalized interest 14.2
Rental expense representative of interest factor 11.1
------------
Total fixed charges $ 84.2
============
Ratio of earnings to fixed charges 1.64
============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000947779
<NAME> WILLIAMS HOLDINGS OF DELAWARE, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 93
<SECURITIES> 0
<RECEIVABLES> 1,352
<ALLOWANCES> 23
<INVENTORY> 359
<CURRENT-ASSETS> 2,585
<PP&E> 6,784
<DEPRECIATION> 1,791
<TOTAL-ASSETS> 10,161
<CURRENT-LIABILITIES> 3,021
<BONDS> 1,937
0
0
<COMMON> 0
<OTHER-SE> 3,653
<TOTAL-LIABILITY-AND-EQUITY> 10,161
<SALES> 0
<TOTAL-REVENUES> 2,888
<CGS> 0
<TOTAL-COSTS> 2,719
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> 58
<INCOME-TAX> 25
<INCOME-CONTINUING> 33
<DISCONTINUED> 0
<EXTRAORDINARY> (5)
<CHANGES> 0
<NET-INCOME> 29
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
