01—Abstract
Summary
Summary of the 10-K/A filed April 11, 2012. Cited figures are marked; the original filing is the authoritative source.
The Williams Companies, Inc. (WMB) filed this Amendment No. 1 to its 10-K for fiscal 2011 on April 11, 2012.
The amendment is narrow: it revises the Deloitte-related auditor report language for Gulfstream Natural Gas System (deleting the word "auditing") and adds subsequent-event disclosure to Note 19. No audited financial figures were changed, so the financial picture below reflects the original reported results. The headline story for 2011 is the December 31, 2011 spin-off of WPX Energy, which moved the former exploration and production business into discontinued operations.
Continuing revenues rose to $7.93 billiona (from $6.64 billion), and total operating income climbed to $1.87 billion (from $1.41 billion). However, reported net income attributable to Williams fell to $376 million, or $0.63 diluted EPS, because of $417 million in losses from discontinued operations, including $755 million of impairments. Income from continuing operations attributable to Williams was $803 million, or $1.34 diluted EPS, a sharp improvement over $0.17 in 2010.
Fourth-quarter results were weighed down by $271 millionb of early debt retirement costs and roughly $560 million of impairments tied to the former E&P business and WPX investment. For investors, the balance sheet was significantly reshaped. Total assets dropped to $16.5 billion from $25.0 billion, and stockholders' equity fell to $1.8 billion from $7.3 billion, reflecting the roughly $5.5 billion spin-off distribution.
Williams Partners (WPZ), the master limited partnership in which Williams owns about 75%, generated most segment profit ($1.9 billionc), and the company is pursuing growth through acquisitions, including the $1.78 billion Caiman acquisition announced in March 2012. Operating cash flow was $3.4 billion, and capital expenditures were $2.8 billion.
02—Key points
Key Highlights
- Continuing-operations revenue rose 19% to $7.93 billion in 2011, and total operating income increased 33% to $1.87 billion, led by Williams Partners (operating income $1.75 billion).
- Income from continuing operations attributable to Williams was $803 million, or $1.34 diluted EPS, versus $104 million ($0.17) in 2010. Reported net income attributable to Williams was $376 million ($0.63 diluted) after $417 million of discontinued-operations losses.
- The December 31, 2011 spin-off of WPX Energy distributed roughly $5.5 billion of net equity to shareholders (one WPX share for every three Williams shares) and cut total assets to $16.5 billion from $25.0 billion.
- Stockholders' equity fell to $1.8 billion from $7.3 billion, largely due to the spin-off distribution and a $5.3 billion reduction in retained earnings.
- Operating cash flow was $3.44 billion in 2011, up from $2.65 billion, while capital expenditures were $2.8 billion, supporting growth in gathering, processing, and pipeline assets.
- Long-term debt declined to $8.4 billion (total $8.7 billion including current portion) after $746 million of debt retirements and $271 million of early retirement costs in Q4 2011.
- Subsequent events include the $1.78 billion cash plus WPZ units Caiman acquisition (expected Q2 2012), a $1 billion WPZ unit purchase to fund it, and April 2012 equity issuances of about $915 million by Williams and $546 million by WPZ.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Williams Companies, Inc. kept $0.05.
- Revenue$7.93B100.0%
- Cost of revenue−$3.93B49.6%
- Gross profit$4.00B50.4%
- Operating costs−$2.13B26.8%
- Operating income$1.87B23.5%
- Interest, other & tax−$1.49B18.8%
- Net income$376.0M4.7%
Where FY2011 revenue went
$7.93B- Cost of revenue: $3.93B, 50% of revenue
- Other operating costs: $1.65B, 21% of revenue
- Interest, other & tax: $1.49B, 19% of revenue
- Net income: $376.0M, 4.7% of revenue
- SG&A: $477.0M, 6.0% of revenue
Kept 4.7% as net incomeNet income $376.0M · 4.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2011filed April 11, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $7.93B$6.64B | +19.5% |
| Cost of Revenue | $3.93B$3.26B | +20.7% |
| Gross Profit | $4.00B$3.38B | +18.3% |
| SG&A Expenses | $477.00M$504.00M | −5.4% |
| Operating Expenses | $6.06B$5.23B | +15.9% |
| Operating Income | $1.87B$1.41B | +32.7% |
| Interest Expense | $599.00M$614.00M | −2.4% |
| Net Income | $376.00M-$1.10B | +134.3% |
| EPS (Basic) | $0.64$-1.88 | +134.0% |
| EPS (Diluted) | $0.63$-1.86 | +133.9% |
| Shares Outstanding (Basic) | 588.55M584.55M | +0.7% |
| Shares Outstanding (Diluted) | 598.17M590.70M | +1.3% |
05—Questions
Frequently Asked Questions
Why did reported net income fall in 2011 even though continuing operations improved significantly?
The WPX Energy spin-off moved the former exploration and production business into discontinued operations, which produced a $417 million loss in 2011. That loss included $755 million of impairments, including a $179 million non-cash charge tied to the spin-off itself. Income from continuing operations attributable to Williams rose to $803 million from $104 million, so the decline in headline net income reflects the discontinued business rather than weakness in the core midstream operations.
What was the financial impact of the WPX spin-off on Williams' balance sheet?
The spin-off represented about $10.3 billion of assets, $4.8 billion of liabilities, and $5.5 billion of net equity distributed to shareholders on December 31, 2011. As a result, total assets fell to $16.5 billion from $25.0 billion, and total stockholders' equity fell to $1.8 billion from $7.3 billion. Williams also retained certain guarantees and indemnifications tied to WPX, including roughly $266 million of remaining performance guarantees.
How much of Williams' earnings come from Williams Partners, and what is its role?
Williams Partners (WPZ), a master limited partnership in which Williams holds about 75% including its general partner interest and incentive distribution rights, generated $1.75 billion of segment operating income in 2011 out of $1.87 billion total. It includes the Transco and Northwest Pipeline interstate gas systems and large domestic midstream operations. WPZ is self-funding with its own credit lines, and it is the primary vehicle for the company's acquisition strategy in 2012.
What are the key risks or uncertainties disclosed in the filing?
Key items include indemnification exposure to WPX for California energy crisis refund claims and natural gas price index manipulation lawsuits, where the company says a material charge is reasonably possible but cannot estimate a range. Other matters include the Gulf Liquids litigation (partly reversed in 2011), the James West sulfolane contamination case with exposure up to $32 million, a Liberty Gas Storage counterclaim above $200 million, and environmental accruals totaling about $47 million for continuing and former operations. Management considers aggregate reasonably possible losses beyond accruals immaterial to future annual results.
Why was this 10-K/A filed, and does it change the financial results?
The amendment was filed solely to revise the Gulfstream Natural Gas System auditor's report by deleting the word "auditing" in reference to PCAOB standards, and to update Note 19 with subsequent events occurring after the original audit report date. The company states that no changes were made to the audited financial statements, so the reported 2011 figures remain the same as in the original 10-K filed February 27, 2012.
06—Continue