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WILLIAMS COMPANIES, INC. Annual Report, Year Ended Dec 31, 1994

Filing Date
Filed March 2, 1995
Period End
December 31, 1994
Security
WMB
In the record · 2016–202610-K1110-Q328-K153

WMB filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 153 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Aug ’18Aug ’18
  2. Leadership change8-K · Feb ’20Feb ’20
  3. Leadership change8-K · Feb ’22Feb ’22
  4. Material agreement8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed March 2, 1995. Cited figures are marked; the original filing is the authoritative source.

The Williams Companies (WMB) closed 1994 as a substantially reshaped company.

On January 5, 1995, it sold the network services operations of WilTel to LDDS Communications for $2.5 billiona in cash, producing an estimated after-tax gain of about $1 billion to be recorded in Q1 1995. Those proceeds were used to pay down roughly $750 million of bank and short-term borrowings and to fund the Transco Energy acquisition, with the remaining proceeds earmarked for the 1995 capital program. Reported 1994 results reflect WilTel as discontinued operations: net income was $246.7 million ($2.32 per share), versus $231.8 million in 1993, and income from continuing operations declined to $164.9 million ($1.52 per share) from $185.4 million, mainly because of lower Northwest Pipeline and Williams Natural Gas sales revenue after FERC Order 636 and weaker Energy Ventures results.

The forward-looking story is the Transco transaction. Williams acquired 60% of Transco Energy in a $430.5 millionb cash tender offer and expects to acquire the remaining 40% through a merger that issues about 10.2 million Williams shares. The purchase price is about $775 million excluding roughly $2.3 billion of Transco preferred stock and debt, and the company plans to recapitalize Transco to reduce interest and preferred dividend costs.

The acquisition adds about 4,500 employees and makes Williams a larger interstate gas pipeline operator. Balance-sheet metrics improved: long-term debt fell to $1.3 billionc from $1.6 billion, and the long-term debt-to-capitalization ratio dropped to 46.5% from 48.2%, though short-term borrowings lifted total debt-to-capitalization to 59.3%. Stockholders' equity fell to $1.5 billion because of $407 million of share repurchases, and the board raised the quarterly dividend 28.5% to $0.27 per share.

Key risks remain in the regulated gas business, including take-or-pay and contract-reformation cost recovery, Order 636 appeals, an unresolved Williams Pipe Line rate case that is now in Phase II, PCB and environmental cleanup liabilities of roughly $28 milliond (Williams Natural Gas) and about $40 million in total accruals, and pending Department of Justice antitrust investigations. Management says these are not expected to have a material adverse effect, but investors should watch the Transco integration, the pace of the Texasgulf sale, and how the 1995 capital program of about $1.3 billion is financed.

02—Key points

Key Highlights

  1. WilTel network services sold to LDDS for $2.5 billion cash on January 5, 1995, with an estimated after-tax gain of about $1 billion expected in Q1 1995
  2. Net income 1994 of $246.7 million ($2.32 per share) versus $231.8 million in 1993; income from continuing operations fell to $164.9 million from $185.4 million
  3. Acquired 60% of Transco Energy for $430.5 million cash; the remaining 40% will be acquired via a merger issuing about 10.2 million Williams shares, with a total purchase price of about $775 million excluding roughly $2.3 billion of Transco debt and preferred stock
  4. Long-term debt declined to $1.3 billion from $1.6 billion, but total debt including short-term notes and current maturities is elevated, with a 59.3% debt-to-capitalization ratio at year end
  5. Repurchased 13.8 million common shares for $407 million in 1994, reducing stockholders' equity to $1.5 billion from $1.7 billion
  6. Quarterly common dividend raised 28.5% to $0.27 per share for 1995, up from $0.21 in 1994
  7. Key regulatory and environmental exposures include Williams Natural Gas take-or-pay and contract-reformation settlements, FERC Order 636 appeals, and about $28 million in PCB cleanup accruals

03—Questions

Frequently Asked Questions

  1. What happened to Williams' telecommunications business in 1995?

    Williams sold its WilTel network services operations to LDDS Communications for $2.5 billion in cash on January 5, 1995. Williams kept WilTel's customer premise equipment business (renamed Williams Telecommunications Systems) and Vyvx, a video transmission network. The network services business is reported as discontinued operations, which contributed $94 million of 1994 income.

  2. Why did continuing operations income decline in 1994?

    Income from continuing operations fell to $164.9 million from $185.4 million. Northwest Pipeline and Williams Natural Gas revenues fell 14% and 21%, respectively, after FERC Order 636 eliminated their gas sales, and Williams Energy Ventures swung to a $10.8 million operating loss from $7.8 million of profit. Partly offsetting this, Williams Pipe Line and Williams Telecommunications Systems operating profit increased.

  3. What is the Transco acquisition and how will it change Williams?

    Williams acquired 60% of Transco Energy's common stock for $430.5 million in a tender offer and plans to merge in the remaining shares, issuing about 10.2 million Williams shares. Transco owns Transcontinental Gas Pipe Line (10,500 miles) and Texas Gas Transmission (6,050 miles), along with gas marketing operations. The deal is accounted for as a purchase, with an estimated total price of about $775 million excluding debt and preferred stock, and is expected to add about 4,500 employees.

  4. What are the main risks to Williams' regulated gas business?

    The main risks include recovery of take-or-pay and contract-reformation costs under FERC policy, the outcome of appeals of FERC Order 636, a pending rate case, and a $50 million cost-sharing settlement at Williams Natural Gas that could be exceeded. Environmental exposure includes PCB contamination with a liability of about $28 million. Management believes these are not likely to have a material adverse effect.

  5. Is Williams' balance sheet and capital structure stronger or weaker after these transactions?

    Long-term debt fell to $1.3 billion from $1.6 billion, and the long-term debt-to-capitalization ratio improved to 46.5% from 48.2%. However, short-term notes and current maturities raised total debt-to-capitalization to 59.3%, up from 49% in 1993. Stockholders' equity fell to $1.5 billion after $407 million of buybacks, and the company expects to use its $600 million bank facility, new public offerings, and WilTel proceeds to fund 1995 capital spending of about $1.3 billion and the Transco deal.

04—Continue

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