10-QPeriod: Q3 FY2000

WILLIAMS COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2000

Filed November 14, 2000For Securities:WMB

Summary

Williams Companies, Inc. (WMB) reported strong revenue growth for the nine months ended September 30, 2000, up 33% to $8.15 billion compared to $6.14 billion in the prior year, driven primarily by its Energy Services segment. This segment saw substantial increases in petroleum products and natural gas liquids sales, benefiting from higher prices and volumes, as well as growth in gas and electric power services. While overall operating income also saw a significant increase of 67% to $1.06 billion, the Communications segment continued to incur substantial losses, primarily due to ongoing network build-out and associated service provision costs. The company also noted a significant increase in interest expenses, reflecting higher debt levels to support expansion. Williams is exploring a potential separation of its energy and communications businesses, having received a favorable IRS ruling for a tax-free spinoff.

Key Highlights

  • 1Revenue increased by 30% to $2.86 billion for the three months ended September 30, 2000, and by 33% to $8.15 billion for the nine months ended September 30, 2000, compared to the prior year periods.
  • 2Energy Services segment was the primary growth driver, with revenues up significantly due to higher petroleum product and natural gas liquids prices and volumes, alongside increased gas and electric power services.
  • 3Operating income rose by 42% to $316.2 million for the three months and 67% to $1.06 billion for the nine months, driven by strong performance in Energy Services and Gas Pipeline.
  • 4The Communications segment continued to report significant losses, with an operating loss of $140.2 million in the quarter and $399.2 million year-to-date, attributed to network build-out and associated service costs.
  • 5Interest expense increased substantially, by 56% ($94.8 million) for the quarter and 58.6% ($261.6 million) year-to-date, driven by higher borrowing levels and increased average interest rates to fund expansion.
  • 6Williams is evaluating a separation of its energy and communications businesses, with a favorable IRS ruling received for a potential tax-free spinoff, expected by August 2001.
  • 7The company's balance sheet shows a significant increase in total assets to $32.2 billion from $25.3 billion, reflecting substantial investments in property, plant, and equipment, as well as energy trading assets.

Frequently Asked Questions

The primary driver of revenue growth is the Energy Services segment. This segment benefited from increased sales of petroleum products and natural gas liquids, driven by higher prices and volumes, as well as growth in gas and electric power services.

The Communications segment continues to operate at a loss. For the nine months ended September 30, 2000, it reported an operating loss of $399.2 million. This is primarily due to ongoing investments in network infrastructure build-out and costs associated with providing services before the network is fully operational.

Williams has seen a significant increase in interest expense, reflecting higher borrowing levels to support its expansion efforts and increased average interest rates. The company has issued new debt, including high-yield public debt, and is utilizing credit facilities. The long-term debt to debt-plus-equity ratio was 61.8% at September 30, 2000.

Williams is actively exploring a separation of its energy and communications businesses. The company has received a favorable IRS ruling for a potential tax-free spin-off of the communications business to its stockholders, which is envisioned to be completed no later than September 30, 2001.