10-QPeriod: Q2 FY2016

WILLIAMS COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 2, 2016For Securities:WMB

Summary

Williams Companies, Inc. (WMB) reported a significant net loss of $505 million for the three months ended June 30, 2016, a stark contrast to the $183 million net income in the same period last year. This decline was heavily influenced by a substantial $802 million impairment of long-lived assets and a $145 million provision for income taxes, compared to a benefit of $83 million in the prior year. Revenues also saw a decline, falling to $1.736 billion from $1.839 billion year-over-year. The failure of the proposed merger with Energy Transfer Equity (ETE) in late June 2016 is a major event, leading to legal disputes and significant strategic uncertainty. The company announced a substantial reduction in its quarterly dividend to $0.20 per share, effective the third quarter of 2016, down from $0.64 per share, signaling a shift in capital allocation priorities. Investors should closely monitor the ongoing litigation with ETE and the company's strategic response following the merger's collapse.

Financial Highlights

50 data points
Beta

Revenue

$1.74B

Net Income

-$405.00M

-23.3% Net Margin

EPS (Diluted)

$-0.54

Total Assets

$48.12B

Cash & Equivalents

$135.00M

Free Cash Flow

$130.00M

Financial Statements
Beta
Revenue$1.74B
SG&A Expenses$158.00M
Operating Expenses$2.22B
Operating Income-$488.00M
Interest Expense$298.00M
Net Income-$405.00M
EPS (Basic)$-0.54
EPS (Diluted)$-0.54
Shares Outstanding (Basic)750.65M
Shares Outstanding (Diluted)750.65M

Key Highlights

  • 1Significant net loss of $505 million for the quarter, compared to a net income of $183 million in Q2 2015.
  • 2A substantial impairment of long-lived assets totaling $802 million significantly impacted the quarter's results.
  • 3Revenues decreased to $1.736 billion from $1.839 billion year-over-year.
  • 4The merger agreement with Energy Transfer Equity (ETE) was terminated in late June 2016, leading to ongoing litigation.
  • 5The company announced a significant reduction in its quarterly dividend to $0.20 per share from $0.64 per share.
  • 6Canadian operations and certain mid-continent assets were impaired and designated as held for sale.
  • 7Operating income turned negative at $(488) million, compared to a positive $392 million in the prior year quarter.

Frequently Asked Questions

The substantial net loss of $505 million was primarily driven by a significant impairment of long-lived assets totaling $802 million, coupled with higher operating and maintenance expenses and increased depreciation and amortization. The absence of $126 million in insurance recoveries from the Geismar incident, which benefited the prior year's quarter, also contributed to the unfavorable comparison.

The merger agreement with ETE was terminated on June 29, 2016, after ETE announced it could not obtain a required tax opinion by the Outside Date. This termination has resulted in ongoing litigation between Williams Companies and ETE, with Williams seeking damages for ETE's alleged breaches of the merger agreement.

Williams Companies announced a significant reduction in its quarterly dividend from $0.64 per share to $0.20 per share, effective the third quarter of 2016. This decision reflects a strategic shift and a focus on reinvesting capital, particularly within Williams Partners (WPZ), to strengthen its financial position and potentially fund its operations and debt reduction, rather than returning capital to shareholders at the previous rate.

The company recognized significant impairments totaling $802 million in long-lived assets during the quarter, including impairments for its Canadian operations and certain Mid-Continent gathering assets. These Canadian operations have been designated as held for sale, indicating the company's strategic decision to divest non-core or underperforming assets, which can lead to future cash generation but also reflects current challenges in those business segments.