ITEM 2. PROPERTIES
See Item 1(c) for description of properties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Other than as described under Item 1 -- Business and in Note 14 of Notes to Consolidated Financial Statements, there are no material pending legal proceedings. Williams is subject to ordinary routine litigation incidental to its businesses.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF WILLIAMS
The names, ages, positions and election dates of the executive officers of Williams are:
All of the above officers have been employed by Williams or its subsidiaries as officers or otherwise for more than the past five years and have had no other employment during such period.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Williams' Common Stock is listed on the New York and Pacific Stock Exchanges under the symbol "WMB." At the close of business on December 31, 1993, Williams had 7,620 holders of record of its Common Stock. The daily closing price ranges (composite transactions) and dividends declared by quarter for each of the past two years are as follows, adjusted to reflect the 2-for-1 stock distribution in 1993:
Terms of certain subsidiaries' borrowing arrangements limit transfer of funds to Williams. Terms of other borrowing arrangements limit the payment of dividends on Williams' Common Stock. These restrictions have not impeded, nor are they expected to in the future, Williams' ability to meet its cash obligations. See Note 10 of Notes to Consolidated Financial Statements.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following financial data are an integral part of, and should be read in conjunction with, the consolidated financial statements and notes thereto. Information concerning significant trends in the financial condition and results of operations is contained in Management's Discussion and Analysis of Financial Condition and Results of Operations on pages through of this report.
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*Certain amounts have been restated or reclassified as described in Notes 1 and 11 of Notes to Consolidated Financial Statements.
**See Note 3 of Notes to Consolidated Financial Statements for discussion of significant asset dispositions in 1993 and 1992.
***Includes redeemable preferred stock of Northwest Pipeline.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1993 vs. 1992
Northwest Pipeline's revenues increased 10 percent reflecting increased firm transportation service and higher average transportation rates, partially offset by lower average gas sales prices. Total mainline throughput increased 2 percent. Firm transportation service increased due to a mainline expansion, supported by 15-year firm transportation contracts, being placed into service on April 1, 1993. Northwest Pipeline also placed new, increased transportation rates into effect on April 1, 1993, (subject to refund) that reflected the new mainline expansion and straight-fixed-variable rate design that moderates seasonal swings in operating revenues. Costs and operating expenses decreased 10 percent due primarily to lower gas purchase volumes and per-unit costs and decreased operation and maintenance expenses, partially offset by increased depreciation. General and administrative expenses increased due primarily to higher supplemental retirement expenses and increased outside technical and professional fees. Operating profit increased 49 percent due primarily to increased firm transportation service, higher average transportation rates and lower operation and maintenance expenses, partially offset by higher depreciation and general and administrative expenses and lower gas sales margins.
Williams Natural Gas' revenues decreased 7 percent primarily as a result of lower natural gas sales volumes reflecting implementation of Federal Energy Regulatory Commission (FERC) Order 636 on October 1, 1993, partially offset by higher average transportation rates and volumes and revenues generated from the sale of working gas in storage. Total throughput increased 2 percent due primarily to cooler weather in the first quarter of 1993 and increased on-system industrial demand, partially offset by lower off-system activity. Costs and operating expenses decreased 9 percent primarily as a result of decreased gas supply volumes, partially offset by increased operating and maintenance expenses, increased amortization of recoverable contract-reformation costs and higher per-unit gas supply costs. Operating profit increased 4 percent primarily due to higher average transportation rates and volumes, reversal of excess contract-reformation costs that had been previously accrued and the regulatory accounting for an income tax rate increase. Largely offsetting operating profit increases were lower natural gas sales volumes and higher operating and maintenance expenses. The impact of the regulatory accounting adjustment was offset by additional deferred income tax expense.
Williams Field Services Group's revenues decreased 24 percent due primarily to lower natural gas sales volumes, partially offset by increased gathering, liquid product and processing volumes, and higher average gathering, processing and natural gas sales prices. Gathering volumes increased 18 percent, natural gas liquids volumes increased 11 percent and processing volumes increased 21 percent when compared with volumes from the prior year. The lower natural gas sales volumes were due to the March 1993 sale of Williams' intrastate natural gas pipeline system and related marketing operations in Louisiana. Costs and operating expenses decreased due primarily to lower natural gas purchase volumes, partially offset by higher gas costs associated with the liquids extraction process and increased operating and maintenance expenses at expanded gathering and processing facilities. Operating profit increased 9 percent due primarily to increased volumes at expanded facilities and a favorable settlement involving processing revenues from prior periods, partially offset by decreased gas sales volumes, lower liquids margins and increased operating costs from expanded facilities. Other income -- net and operating profit in 1992 also included a gain on the sale of a gathering facility and the reversal of a loss accrual made in prior years.
Williams Pipe Line's revenues increased 21 percent due primarily to 12 percent higher shipments, increased other revenues primarily related to gas liquids and fractionator operations, partially offset by a slightly lower transportation rate per barrel. The lower average transportation rate per barrel reflects a 5 percent decrease in the length of the average haul, partially offset by increased tariff rates for portions of both 1992 and 1993. Costs and operating expenses increased due primarily to gas liquids and fractionator operations. Operating profit increased primarily as a result of higher shipments and lower general and administrative expenses. During the fourth quarter, Williams Pipe Line completed the acquisition of a 300-mile pipeline that connects with the southern portion of its system in Oklahoma. The additional pipeline will provide more direct access to key refining areas and open new markets.
Williams Energy Ventures' revenues and operating costs decreased approximately 27 percent due primarily to reporting refined product trading activities on a "net margin" basis effective July 1, 1993. Selling, general and administrative expenses increased significantly from costs associated with establishing this company's operations, pursuing new business development and equipping the company to pursue a growing range of financial and information-based opportunities in the energy industry. Operating profit decreased as improved results from price-risk management activities were more than offset by the expense associated with the development and marketing of new information-based products and exploring other growth opportunities in the energy industry. Improved results in price-risk management activities relate to increases in marketing of commodities and derivatives products in addition to increased refined product trading volumes.
WilTel's revenues increased 26 percent due primarily to a $173 million increase in the network services business. Switched-services revenues increased reflecting a 127 percent increase in billable calls. Dedicated services' interexchange revenues increased as a result of a 32 percent increase in billable circuits, partially offset by a decrease in the weighted average price per circuit. Cost and operating expenses increased primarily as a result of increased volumes in the switched-services and dedicated network services businesses. Selling, general and administrative expenses declined due primarily to lower provisions for bad debt expense and recoveries of receivables that had been written off in prior years, partially offset by higher network services expenses associated with increased volumes. Excluding the effects of bad debt expense, selling, general and administrative expenses as a percentage of revenues declined this year as compared to the prior year. Operating profit increased due primarily to increased network services sales volumes, higher margins in the customer premises equipment business and lower provisions for bad debt expense. Operating profit in 1992 was impacted by the costs associated with internal restructuring in the customer premises equipment business. One of WilTel's large carriers is scheduled to remove significant traffic from WilTel's system during 1994. While this will slow WilTel's growth, operating profit for 1994 should not be materially affected as overall growth is expected to significantly offset the loss of this carrier.
General corporate expenses increased, reflecting higher supplemental retirement benefits (see Note 6) and incentive compensation accruals in addition to a contribution to The Williams Companies Foundation. Interest accrued increased primarily because of higher average borrowing levels, partially offset by a lower effective interest rate including the effects of interest-rate swap agreements (see Note 10). Investing income increased, reflecting higher equity earnings from the Kern River Gas Transmission Company pipeline, which
became operational February 1992, and higher levels of short-term investments. The gain on sales of assets in 1993 results from the sale of 6.1 million units in the Williams Coal Seam Gas Royalty Trust and the sale of the intrastate natural gas pipeline system and other related assets in Louisiana. The 1992 gain on sales of assets results from the sale of a tract of land in Florida that had been retained from the assets of Agrico Chemical Company, which was sold several years ago. Other income (expense) -- net is unfavorable to 1992 primarily because of decreased equity allowance for funds used during construction (AFUDC) related to Northwest Pipeline's mainline expansion and expense accruals for certain costs associated with businesses previously sold. The increase in the provision for income taxes is primarily a result of higher pretax income and the $15.8 million cumulative effect of the 1 percent increase in the federal income tax rate. The effective income tax rate in 1993 is higher than the statutory rate primarily because of the effect of the federal income tax rate increase and state income taxes, partially offset by income tax credits from coal-seam gas production. The effective income tax rate in 1992 is lower than the statutory rate primarily because of income tax credits from coal-seam gas production, partially offset by state income taxes (see Note 4). Preferred stock dividends decreased reflecting the redemption of 3,000,000 shares of outstanding $3.875 convertible exchangeable preferred stock during the second quarter of 1993 (see Note 11).
1992 vs. 1991
Northwest Pipeline's revenues decreased as a result of decreased natural gas sales volumes, partially offset by higher average natural gas sales prices and increased transportation volumes. Total mainline throughput increased 2 percent, reflecting higher Pacific Northwest market demand; the increase was partially offset by warmer weather and decreased off-system demand. Costs and operating expenses decreased primarily as a result of decreased gas supply volumes and lower amortization of recoverable contract-reformation costs. Operating profit increased as a result of higher transportation volumes and average natural gas sales margins, partially offset by lower natural gas sales volumes.
Williams Natural Gas' revenues decreased primarily as a result of lower natural gas sales volumes; the decrease was partially offset by higher average transportation rates. Total 1992 mainline throughput decreased 3 percent, reflecting 15 percent warmer weather in the first quarter of 1992, a period when the company normally experiences higher volumes from customer heating demands. Costs and operating expenses decreased primarily as a result of decreased gas supply volumes and lower amortization of recoverable contract-reformation costs. Operating profit decreased as a result of warmer weather and increased operating and maintenance and depreciation expenses, partially offset by higher transportation revenues.
Williams Field Services Group's revenues increased primarily as a result of higher average natural gas sales prices ($85 million) and volumes ($77 million), increased gathering, processing and liquids volumes, and higher spot market sales from company-owned production. Gathering volumes increased 35 percent, third-party processing volumes increased 70 percent and liquids product volumes increased 15 percent, primarily reflecting higher demand and increased utilization of expanded facilities. Costs and operating expenses increased primarily because of higher natural gas purchase volumes and average costs and the continued growth of gathering and processing activities. Operating profit increased primarily as a result of increased gathering and processing volumes, and increased spot market gas sales. In addition, other income-net and operating profit include a gain from the sale of a gathering facility and the reversal of a loss accrual made in prior years. Operating profit increases were partially offset by lower per-unit natural gas sales margins, higher operating and maintenance expenses, increased depreciation and the absence of a prior-year rate refund from an interstate pipeline.
Williams Pipe Line's revenues increased primarily as a result of a 4 percent increase in barrels shipped, a higher tariff in place the last half of 1992 and increased tank rental and other revenues. The average transportation rate per barrel was unchanged, reflecting a 6 percent decrease in the length of the average haul, offset by the increased tariff rates effective in the second quarter. Costs and operating expenses increased primarily as a result of higher maintenance and environmental remediation expenses. Selling, general and administrative expenses decreased primarily as a result of lower legal and professional fees from a 1991 FERC rate case defense. Operating profit increased primarily as a result of higher shipments, tank rental and other
revenues in addition to lower selling, general and administrative expenses; increases were partially offset by higher maintenance and environmental remediation expenses.
Williams Energy Ventures' revenues, operating costs and operating profit increased due primarily to increased inventory-risk management activities.
WilTel's revenues increased primarily in the switched-services ($72 million) and customer-premises equipment ($52 million) businesses. Switched services' billable calls increased 207 percent in 1992, principally resulting from a November 1991 acquisition. Customer-premises equipment revenues were higher primarily because of increased installations and outsourcing services as well as a full year's activity in 1992 vs. 11 months in 1991. Interexchange revenues increased slightly as a 20 percent increase in the number of billable circuits at the respective years' end was substantially offset by a decrease in the weighted average price per circuit. Costs and operating and selling, general and administrative expenses increased primarily as a result of increased volumes in the switched-services, customer-premises equipment and dedicated business-network areas. Selling, general and administrative expenses included $10 million and $7 million provisions for uncollectible amounts in 1992 and 1991, respectively, from significant customers. Operating profit decreased primarily as a result of costs associated with the integration and deployment of a nationwide switched-services network, lower margins and internal restructuring costs in the customer premises equipment business and, in 1991, the effect of a favorable service fee settlement with a major customer.
General corporate expenses decreased, reflecting a decline in contributions to The Williams Companies Foundation. Interest accrued decreased slightly, resulting primarily from the $11.7 million benefit from interest-rate exchange agreements, substantially offset by higher borrowing levels. Interest capitalized increased primarily because of the Northwest Pipeline mainline expansion. Investing income increased, reflecting higher equity earnings ($15 million) resulting from start-up of the Kern River Gas Transmission Company pipeline, partially offset by a decreased dividend from Texasgulf Inc. and lower levels of short-term investments and interest-bearing receivables. The 1992 gain on sales of assets results from the sale of a tract of land in Florida that had been retained from the assets of Agrico Chemical Company, which was sold several years ago. Other income (expense) -- net is favorable to 1991 primarily because of increased equity AFUDC related to Northwest Pipeline's mainline expansion, lower loss on sale of receivables and the absence of a 1991 environmental accrual related to assets sold in prior years, partially offset by the effects of a 1991 reversal of loss accruals previously provided on advances made to Kern River Gas Transmission Company. The increase in the provision for income taxes is primarily a result of higher pretax income, partially offset by an increase in tax credits from coal-seam gas production. The effective income tax rate in both years is lower than the statutory rate primarily because of income tax credits from coal-seam gas production and the effects of a dividend exclusion, partially offset by state income taxes. The extraordinary credit results from the early extinguishment of debt (see Note 5). Preferred stock dividends increased as the result of the issuance of $100 million of preferred stock in 1992 (see Note 11).
FINANCIAL CONDITION AND LIQUIDITY
Liquidity
Williams considers its liquidity to come from two sources: internal liquidity, consisting of available cash investments, and external liquidity, consisting of borrowing capacity from available bank-credit facilities, which can be utilized without limitation under existing loan covenants. At December 31, 1993, Williams had access to $639 million of liquidity, representing the unborrowed portion of its $600 million bank-credit facility plus cash-equivalent investments. This compares with liquidity of $780 million at December 31, 1992, including $178 million from Northwest Pipeline, and $350 million at December 31, 1991. During 1994, Williams expects to finance capital expenditures, investments and working-capital requirements through the use of its $600 million bank-credit facility or public debt/equity offerings. During 1993, Williams filed a $300 million shelf registration statement with the Securities and Exchange Commission increasing the total amount available to $400 million. The registration statement may be used to issue Williams common or preferred stock, preferred stock purchase rights, debt securities, warrants to purchase Williams common stock
or warrants to purchase debt securities. In addition, Northwest Pipeline has $50 million remaining on a registration statement filed with the Securities and Exchange Commission in 1992. Williams does not anticipate the need for additional financing; however, Williams believes it could be obtained on reasonable terms if required.
Williams had a net working-capital deficit of $106 million at December 31, 1993, and $235 million at December 31, 1992. Williams manages its financing to keep cash and cash equivalents at a minimum and has relied on bank-credit facilities to provide flexibility for its cash needs. As a result, it historically has reported negative working capital. The 1992 working capital deficit includes $178 million of cash equivalents at Northwest Pipeline for funding expansion projects, substantially offset by $165 million of long-term debt due within one year.
Terms of certain borrowing agreements limit transfer of funds to Williams from its subsidiaries. The restrictions have not impeded, nor are they expected to impede, Williams' ability to meet its cash requirements in the future.
Operating Activities
Cash provided by operating activities was: 1993 -- $349 million; 1992 -- $254 million; and 1991 -- $399 million. Williams' gas pipeline subsidiaries and WilTel have agreements to sell receivables and, at December 31, 1993 and 1992, had sold $35 million and $130 million of receivables, respectively. Under a different arrangement, WilTel sold $18 million of receivables in 1992. The decline in accounts receivable and accounts payable reflects the March 1993 sale of Williams' intrastate natural gas pipeline system and other related assets and the reduction of gas sales by the interstate natural gas pipelines because of the Order 636 restructuring. The decrease in accounts receivable is largely offset by a lower level of receivables sold.
Financing Activities
Net cash provided (used) by financing activities was: 1993 -- ($220) million; 1992 -- $421 million; and 1991 -- $40 million. Long-term debt principal payments totalled $192 million during 1993. Long-term debt proceeds, net of principal payments, during 1992 and 1991 were $264 million and $102 million, respectively. The increases in net new borrowings during 1992 and 1991 were primarily to fund capital expenditures and investments and advances to affiliates. New debt in 1992 primarily consisted of $300 million of notes and debentures issued by Williams and $150 million of debentures issued by Northwest Pipeline. The increase in 1991 resulted from the issuance by Williams of $300 million in notes and debentures.
The majority of the proceeds from issuance of common stock in 1993 resulted from exercise of stock options under Williams' stock plan (see Note 11). During 1992, Williams received net proceeds of $96 million from the sale of 4,000,000 shares of $2.21 cumulative preferred stock and $119 million from the sale of 7,100,000 shares (on a post-split basis) of common stock.
During 1993, Williams called for redemption of its 3,000,000 shares of outstanding $3.875 convertible exchangeable preferred stock. Substantially all of the preferred shares were converted into 7,600,000 shares (on a post-split basis) of Williams common stock.
Long-term debt at December 31, 1993, was $1.6 billion compared with $1.7 billion at December 31, 1992, and $1.5 billion at December 31, 1991. The long-term debt to debt-plus-equity ratio was 48.2 percent at year-end compared with 52.6 percent and 55.8 percent at December 31, 1992 and 1991, respectively.
See Note 5 for information regarding early extinguishment of debt by Williams' subsidiaries during 1992.
Investing Activities
Net cash used by investing activities was: 1993 -- $277 million; 1992 -- $511 million; and 1991 -- $442 million. During 1991, Williams advanced $100 million to Kern River Gas Transmission Company.
Capital expenditures to expand and enhance WilTel's network were $109 million in 1993; $69 million in 1992; and $73 million in 1991. Capital expenditures of pipeline subsidiaries, primarily to expand and
modernize systems, were $405 million in 1993; $500 million in 1992; and $227 million in 1991. Expenditures in 1993 include the completion of Northwest Pipeline's mainline expansion and the expansion of various gathering and processing facilities. Approximately two-thirds of the 1992 expenditures relate to Northwest Pipeline's mainline expansion. Construction of a coal-seam gas gathering system in the San Juan Basin was completed in 1991. Budgeted capital expenditures for 1994 are approximately $750 million, primarily to expand pipeline systems and gathering and processing facilities.
During 1993, Williams received net proceeds of $113 million from the sale of 6.1 million units in the Williams Coal Seam Gas Royalty Trust. In addition, Williams sold its intrastate natural gas pipeline system and other related assets in Louisiana for $170 million (see Note 3).
Subsequent to December 31, 1993, Williams signed a letter of intent to purchase certain gathering and processing assets in New Mexico for approximately $155 million.
During 1994, Williams will consider selling a portion of its interest in the Northern Border Pipeline partnerships and part or all of the remaining 3.6 million units in the Williams Coal Seam Gas Royalty Trust.
EFFECTS OF INFLATION
Williams has experienced increased costs in recent years due to the effects of inflation. However, more than 90 percent of Williams' property, plant and equipment has been purchased since 1982, a period of relatively low inflation. A substantial portion of Williams' property, plant and equipment is subject to regulation, which limits recovery to historical cost. While Williams believes it will be allowed the opportunity to earn a return based on the actual cost incurred to replace existing assets, competition or other market factors may limit the ability to recover such increased costs.
OTHER
In 1992, the FERC issued Order 636, Order 636-A and Order 636-B. These orders, which have been challenged in various respects by various parties in proceedings pending in the U.S. Court of Appeals for the 11th Circuit, require interstate gas pipeline companies to change the manner in which they provide services. Williams Natural Gas implemented its restructuring on October 1, 1993, and Northwest Pipeline implemented its restructuring on November 1, 1993. Transition costs associated with Order 636 are expected to be recovered in the future through rates. Certain aspects of each pipeline company's restructuring are under appeal (see Note 14).
Williams is a participant in certain environmental activities in various stages involving assessment studies, cleanup operations and/or remedial processes. The sites, some of which are not currently owned by Williams (see Note 14), are being monitored by Williams, other potentially responsible parties, U.S. Environmental Protection Agency (EPA), or other governmental authorities in a coordinated effort. In addition, Williams maintains an active monitoring program for its continued remediation and cleanup of certain sites connected with its refined products pipeline activities. Williams has both joint and several liability in some of these activities and sole responsibility in others. Current estimates of the most likely costs of such cleanup activities, after payments by other parties, are approximately $45 million, substantially all of which is accrued at December 31, 1993. Williams expects to seek recovery of approximately $30 million of these costs through future rates. Williams will fund these costs from operations and/or available bank-credit facilities. The actual costs incurred will depend on the final amount, type and extent of contamination discovered at these sites, the final cleanup standards mandated by the EPA or other governmental authorities, and other factors.
See Note 4 for the effects of a new accounting standard on accounting for income taxes; Note 6 for the effects of new accounting standards on other postretirement and postemployment benefits; Note 12 for fair value and off-balance-sheet risk of financial instruments; and Note 14 for contingencies.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
To The Stockholders of The Williams Companies, Inc.
We have audited the accompanying consolidated balance sheet of The Williams Companies, Inc. as of December 31, 1993 and 1992, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Williams Companies, Inc. at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
ERNST & YOUNG
Tulsa, Oklahoma February 10, 1994
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF INCOME
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* Restated as described in Note 1.
See accompanying notes.
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF INCOME -- (CONCLUDED)
* Restated as described in Note 1.
See accompanying notes.
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED BALANCE SHEET
See accompanying notes.
THE WILLIAMS COMPANIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
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* Restated for stock split and distribution.
See accompanying notes.
THE WILLIAMS COMPANIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS
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*Reclassified as described in Note 1.
See accompanying notes.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
Revenues and operating profit amounts for 1992 and 1991 have been restated to conform to current-year classifications. Williams Field Services Group includes all of Williams' natural gas gathering, processing and liquids activities and the natural gas marketing and Louisiana-based transportation operations previously reported as Williams Energy Company (see Note 3). Williams Energy Ventures primarily includes the non-transportation business activities formerly conducted by Williams Pipe Line.
During 1993, Williams reclassified its income taxes associated with equity earnings from investing income to the provision for income taxes. Prior years' amounts have been reclassified, and equity earnings and the provision for income taxes have been increased $14.8 million and $9.3 million in 1992 and 1991, respectively.
Principles of consolidation
The consolidated financial statements include the accounts of The Williams Companies, Inc. and majority-owned subsidiaries (Williams). Companies in which Williams and its subsidiaries own 20 percent to 50 percent of the voting common stock, or otherwise exercise sufficient influence over operating and financial policies of the company, are accounted for under the equity method.
Cash and cash equivalents
Cash and cash equivalents include demand and time deposits, certificates of deposit and other marketable securities with maturities of three months or less when acquired.
Inventory valuation
Inventories are stated at cost, which is not in excess of market, except for those held by Williams Energy Ventures (see price-risk management accounting policy). Inventories of natural gas are determined using the average-cost method by Northwest Pipeline and Williams Field Services Group and the last-in, first-out (LIFO) method by Williams Natural Gas. Williams Pipe Line's inventories of petroleum products are principally determined using average cost. The cost of materials and supplies inventories is determined principally using the first-in, first-out method by WilTel and the average-cost method by other subsidiaries.
Property, plant and equipment
Property, plant and equipment is recorded at cost. Depreciation is provided primarily on the straight-line method over estimated useful lives. Gains or losses from the ordinary sale or retirement of property, plant and equipment for regulated pipeline subsidiaries are credited or charged to accumulated depreciation; other gains or losses are recorded in net income.
Revenue recognition
Revenues generally are recorded when services have been performed or products have been delivered. Natural gas transportation revenues are recognized based upon contractual terms and the related transported volume through month end. Williams Pipe Line bills customers when products are shipped and defers the estimated revenues for shipments in transit. WilTel bills interexchange services monthly in advance and defers revenues until earned.
Price-risk management activities
Williams Energy Ventures enters into energy-related financial instruments to hedge against market price fluctuations of certain refined products inventories and natural gas sales and purchase commitments. Gains or
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
losses on these hedge contracts are recognized when the associated inventory is sold or the hedged contractual commitment is consummated.
Williams Energy Ventures also uses energy-related financial instruments and physical inventory for market speculation purposes. These investments are valued at market. The resulting change in unrealized market gains and losses is recognized in income currently. In the absence of independent market prices, management will determine a fair value based on valuation pricing models which take into account time value and volatility factors underlying the positions.
Capitalization of interest
Williams capitalizes interest on major projects during construction. Interest is capitalized on borrowed funds and, where regulation by the Federal Energy Regulatory Commission (FERC) exists, on internally generated funds. The rates used by regulated companies are calculated in accordance with FERC rules. Rates used by unregulated companies approximate the average interest rate on related debt. Interest capitalized on internally generated funds is included in other income (expense) -- net.
Income taxes
Williams includes the operations of its subsidiaries in its consolidated federal income tax return. Provision is made for deferred income taxes applicable to temporary differences between financial and taxable income.
Earnings per share
Primary earnings per share are based on the sum of the average number of common shares outstanding and common-share equivalents resulting from stock options and deferred shares. Fully diluted earnings per share assumes conversion of the convertible exchangeable preferred stock (CEPS) into common stock effective January 1, 1993. The CEPS were not dilutive in 1992 or 1991. Shares used in determination of primary earnings per share are as follows (in thousands): 1993 -- 99,911; 1992 -- 90,816; and 1991 -- 83,780. Shares used in determination of fully diluted earnings per share are as follows (in thousands): 1993 -- 103,171; 1992 -- 90,816; and 1991 -- 83,780. The number of shares for 1992 and 1991 have been restated to reflect the effect of a two-for-one common stock split and distribution (see Note 11).
NOTE 2 -- INVESTING ACTIVITIES
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* Accounted for on the equity method.
Williams' investment in Texasgulf Inc. is subject to certain rights under a shareholder agreement. Williams has the right to sell the shares to the majority owner under various specified terms and to require Texasgulf to register the shares for public offering. Most of the rights under the shareholder agreement, including the right to sell to the majority owner, are not transferable in the event Williams sells the shares or there is a change in control of Williams.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under disposition rights currently in effect, Williams would realize substantially less than the carrying value of the Texasgulf shares. However, Williams believes the fair value of the investment in Texasgulf approximates the $150 million carrying value because of significant underlying phosphate reserves and related mining equipment. While current market prices for phosphate reserves are affected by depressed market conditions for chemical fertilizer, prices are expected to be only temporarily low, based on historical trends in the business. Williams has received dividends approximating a 4 percent annual pretax return over the last three years and its 15 percent equity in the book value of Texasgulf 's net assets approximates Williams' carrying value. Because of the above factors, Williams does not believe it will incur a loss on this investment.
At December 31, 1993, other investments carried at $29 million have a market value of $83 million.
Investing income:
Dividends and distributions received from companies carried on an equity basis were $39 million in 1993; $10 million in 1992; and $14 million in 1991.
Summarized financial position and results of operations for Kern River Gas Transmission Company are presented below. Kern River operations began in February 1992.
NOTE 3 -- SALES OF ASSETS
In a 1993 public offering, Williams sold 6.1 million units in the Williams Coal Seam Gas Royalty Trust (Trust), which resulted in net proceeds of $113 million and a pretax gain of $51.6 million. The Trust owns defined net profits interests in the developed coal-seam properties in the San Juan Basin of New Mexico and Colorado, which were conveyed to the Trust by Williams Production Company. An additional 3.6 million units may be sold by Williams in the future.
In March 1993, Williams sold its intrastate natural gas pipeline system and other related assets in Louisiana for $170 million in cash, resulting in a pretax gain of $45.9 million.
The 1992 gain of $14.6 million resulted from the sale of a tract of land in Florida that had been retained from the assets of Agrico Chemical Company, which was sold several years ago.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- PROVISION FOR INCOME TAXES
Effective January 1, 1993, Williams adopted Statement of Financial Accounting Standards (FAS) No. 109, "Accounting for Income Taxes." Adoption of the standard had a cumulative favorable effect of approximately $2 million on net income. The effect is recorded in income tax expense because of immateriality. Prior to 1993, Williams accounted for deferred income taxes under FAS No. 96. As permitted under the new rules, prior years' financial statements have not been restated.
The provision (credit) for income taxes includes:
The 1993 provision for income taxes includes the effect of a 1 percent increase in the federal income tax rate, which was made retroactive to January 1, 1993.
Reconciliations from the provision for income taxes at the statutory rate to the provision for income taxes are as follows:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of deferred tax liabilities and assets as of December 31, 1993, are as follows:
The valuation allowance for deferred tax assets decreased $3.4 million during 1993.
At December 31, 1993, Williams had a minimum tax credit of $8.5 million available to reduce future regular income taxes. The credit has been utilized to reduce deferred income taxes.
Cash payments for income taxes are as follows: 1993 -- $129 million; 1992 -- $50 million; and 1991 -- $62 million, before refunds of $26 million.
NOTE 5 -- EXTRAORDINARY CREDIT
The extraordinary credit in 1992 results from early extinguishment of debt. Two of Williams' subsidiaries paid a total of $55.7 million to redeem debt resulting in a $9.9 million net gain (including a $.7 million benefit for income taxes).
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- EMPLOYEE BENEFIT PLANS
Pensions
Williams maintains non-contributory defined-benefit pension plans covering the majority of employees. Benefits are based on years of service and average final compensation. Pension costs are funded to satisfy minimum requirements prescribed by the Employee Retirement Income Security Act of 1974.
Net pension expense consists of the following:
During 1993, certain supplemental retirement plan participants elected to receive lump-sum benefits, which resulted in a settlement loss of $5.7 million.
The following table presents the funded status of the plans.
At December 31, 1992, assets of two of Williams' pension plans exceeded the projected benefit obligations by $6 million. However, the preceding table includes pension plans that had projected benefit obligations of $25 million and assets of $12 million in 1992.
The discount rate used to measure the present value of benefit obligations is 7 1/4 percent (8 percent in 1992); the assumed rate of increase in future compensation levels is 5 percent (6 percent in 1992); and the expected long-term rate of return on assets is 10 percent. Plan assets consist primarily of commingled funds and assets held in a master trust. The master trust is comprised primarily of domestic and foreign common and preferred stocks, United States government securities, commercial paper and corporate bonds.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Postretirement benefits other than pensions
Williams sponsors a health care plan that provides postretirement medical benefits to retired employees who were employed full time, hired prior to January 1, 1992, have worked five years, attained age 55 while in service with Williams and are a participant in the Williams pension plans. The plan provides for retiree contributions and contains other cost-sharing features such as deductibles and coinsurance. The accounting for the plan anticipates future cost-sharing changes to the written plan that are consistent with Williams' expressed intent to increase the retiree contribution rate annually for the expected general inflation rate for that year. A portion of the cost has been funded in trusts by Williams' FERC-regulated natural gas pipeline subsidiaries to the extent recovery from customers can be achieved. Plan assets consist of assets held in a master trust (previously described) and money market funds.
Effective January 1, 1993, Williams prospectively adopted FAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Williams estimates that application of the standard has reduced 1993 net income by approximately $2 million.
Net postretirement benefit expense for the year ended December 31, 1993, consists of the following:
The estimated expense of providing these benefits to retirees was $8 million in both 1992 and 1991 and included accruals of $4 million in both years for future benefits payable to eligible active employees.
The following table presents the funded status of the plan at December 31, 1993:
The discount rate used to measure the present value of benefit obligations is 7 1/4 percent. The expected long-term rate of return on plan assets is 10 percent. The annual assumed rate of increase in the health care cost trend rate for 1994 is 11 to 15 percent, systematically decreasing to 6 percent by 2003. The health care cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed health care cost trend rate by 1 percent in each year would increase the aggregate of the service and interest cost
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
components of postretirement benefit expense for the year ended December 31, 1993, by $2 million and the accumulated postretirement benefit obligation as of December 31, 1993, by $17 million.
Other
Williams maintains various defined-contribution plans covering substantially all employees. Company contributions are based on employees' compensation and, in part, match employee contributions. Company contributions are invested primarily in Williams common stock. Williams' contributions to these plans were $13 million in 1993, $11 million in 1992 and $9 million in 1991.
The Financial Accounting Standards Board has issued a new accounting standard, FAS No. 112, "Employers' Accounting for Postemployment Benefits," effective for fiscal years beginning after December 15, 1993. The standard, which will be adopted in the first quarter of 1994, requires the accrual of benefits provided to former or inactive employees after employment but before retirement. Application of this standard at December 31, 1993, would have reduced 1993 net income by less than 2 percent.
NOTE 7 -- INVENTORIES
If inventories valued on the LIFO method at December 31, 1992, were valued at current average cost, the balance would be increased by $24 million.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- PROPERTY, PLANT AND EQUIPMENT
Commitments for construction and acquisition of property, plant and equipment are approximately $136 million at December 31, 1993.
NOTE 9 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Under Williams' cash-management system, certain subsidiaries' cash accounts reflect credit balances to the extent checks written have not been presented for payment. The amounts of these credit balances included in accounts payable are $53 million at December 31, 1993, and $66 million at December 31, 1992.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- LONG-TERM DEBT, LEASES AND BANKING ARRANGEMENTS
- ---------------
* At December 31, 1993
Under Williams' $600 million credit agreement, Northwest Pipeline, Williams Natural Gas and Williams Pipe Line have access to various amounts of the facility while Williams (parent) has access to all unborrowed amounts. The agreement terminates in December 1995 and interest rates vary with current market conditions.
During 1993, Williams sold to financial institutions options to enter into future interest-rate swap agreements on $220 million of fixed-rate debt. Net proceeds of $22 million from the sale of these options have been deferred and are being amortized as a reduction of interest expense over the remaining term of the original debt agreements.
During 1992, Williams entered into interest-rate swap agreements to effectively convert $450 million of fixed-rate debt to variable-rate debt. Subsequently, Williams entered into a forward termination of the agreements, effective March 1993, which resulted in Williams receiving $29 million in net proceeds. This amount has been deferred and is being amortized as a reduction of interest expense over the remaining term of the original agreements.
Terms of borrowings require maintenance of certain financial ratios, limit the sale or encumbrance of assets and limit the amount of additional borrowings. In addition, certain debt agreements include a restriction on the payment of dividends on common stock and the amount that can be expended to acquire Williams common stock. At December 31, 1993, Williams had $784 million of flexibility under this covenant. Terms of certain subsidiaries' borrowing arrangements with institutional lenders limit the transfer of funds to Williams. Net assets of consolidated subsidiaries at December 31, 1993, are $2.7 billion, of which approximately $818 million is restricted. Undistributed earnings of companies and partnerships accounted for under the equity method of $67 million are included in Williams' consolidated retained earnings at December 31, 1993.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate minimum maturities and sinking-fund requirements, excluding lease payments, for each of the next five years are as follows:
Cash payments for interest (net of amounts capitalized) are as follows: 1993 -- $160 million, 1992 -- $137 million; and 1991 -- $140 million.
Future minimum annual rentals under non-cancelable leases are as follows:
Total rent expense was $81 million in 1993, $71 million in 1992 and $67 million in 1991. The majority of the future minimum annual rentals for operating leases relates to telecommunications facilities, including those sold and leased back. The leases for facilities sold have primary lease terms ranging from 15 to 20 years with both fixed and fair-market renewal options permitting WilTel to extend the leases to 2012-2019. The leases also have fair-market purchase options at various times.
NOTE 11 -- STOCKHOLDERS' EQUITY
The $2.21 cumulative preferred shares outstanding at December 31, 1993 and 1992, are redeemable by Williams at a price of $25, beginning in September 1997. Dividends per share of $2.21 and $.72 were recorded during 1993 and 1992, respectively.
During 1993, Williams called for redemption of its 3,000,000 shares of outstanding $3.875 convertible exchangeable preferred stock. Substantially all of the preferred shares were converted into 7.6 million shares (on a post-split basis) of Williams common stock. Dividends per share of $.97 in 1993 and $3.875 in 1992 and 1991 were recorded.
On September 19, 1993, the board of directors of Williams declared a two-for-one common stock split and distribution; 51.4 million shares were issued on November 5, 1993. All references in the financial statements and notes to the number of shares outstanding and per-share amounts reflect the effect of the split.
Each outstanding share of common stock has one-half of a preferred stock purchase right attached. Under certain conditions, each right may be exercised to purchase, at an exercise price of $75 (subject to
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adjustment), one two-hundredth of a share of a new series of junior participating preferred stock. The rights may be exercised only if an Acquiring Person acquires (or obtains the right to acquire) 20 percent or more of Williams common stock; or commences an offer for 30 percent or more of Williams common stock; or the board of directors determines an Adverse Person has become the owner of 10 percent or more of Williams common stock. The rights, which do not have voting rights, expire in 1996 and may be redeemed at a price of $.05 per right prior to their expiration, or within a specified period of time after the occurrence of certain events. In the event a person becomes the owner of more than 20 percent of Williams common stock or the board of directors determines that a person is an Adverse Person, each holder of a right (except an Acquiring Person or an Adverse Person) shall have the right to receive, upon exercise, common stock having a value equal to two times the exercise price of the right. In the event Williams is acquired in a merger or other business combination, each holder of a right (except an Acquiring Person or an Adverse Person) shall have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the exercise price of the right.
The 1990 Stock Plan (the Plan) permits granting of various types of awards including, but not limited to, stock options, stock appreciation rights, restricted stock and deferred stock. The Plan provides for granting of awards to key employees, including officers and directors who are employees. Such awards may be granted for no consideration other than prior and future services. The purchase price per share for stock options and stock-appreciation rights may not be less than the fair-market value of the stock on the date of grant. Another stock option plan provides for the granting of non-qualified options to non-employee directors. At December 31, 1993, 5,863,555 shares of common stock were reserved for stock awards, of which 3,200,354 were available for future grants (4,035,718 at December 31, 1992). Options generally become exercisable in three annual installments beginning within one year after grant, and they expire 10 years after grant.
The following summary reflects option transactions during 1993.
Under the Plan, Williams granted 97,504, 108,920 and 104,060 deferred shares in 1993, 1992 and 1991, respectively, to key employees. Deferred shares are valued at the date of award and generally charged to expense in the year of award. Williams issued 191,007, 70,958 and 2,304 of previously deferred shares in 1993, 1992 and 1991, respectively. Williams also issued 62,000 and 40,000 shares of restricted stock in 1993 and 1992, respectively. Restricted stock is valued on the issuance date, and the related expense is amortized over the vesting period of three to five years.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- FINANCIAL INSTRUMENTS
Fair value
The following methods and assumptions were used by Williams in estimating its fair-value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in the balance sheet for cash and cash equivalents approximates fair value due to the short-term maturity of these instruments.
NOTES RECEIVABLE: For those notes with interest rates approximating market or maturities of less than three years, fair value is estimated to approximate historically recorded amounts. For those notes with maturities beyond three years and fixed interest rates, fair value is calculated using discounted cash flow analysis based on current market rates.
LONG-TERM DEBT: The fair value of Williams' long-term debt is valued using indicative year-end traded bond market prices for publicly traded issues, while private debt is valued based on the prices of similar securities with similar terms and credit ratings. At December 31, 1993 and 1992, 76 percent and 73 percent, respectively, of Williams' long-term debt was publicly traded. Williams used the expertise of an outside investment banking firm to estimate the fair value of long-term debt.
CALL OPTIONS SOLD ON INTEREST-RATE SWAPS: Fair value is determined by discounting estimated future cash flows using forward interest rates implied by the year-end yield curve and standard option pricing techniques. Fair value was calculated by the two financial institutions holding the options.
The carrying amounts and fair values of Williams' financial instruments are as follows:
Williams has recorded liabilities of $37 million and $26 million at December 31, 1993 and 1992, respectively, for certain guarantees that qualify as financial instruments. It is not practicable to estimate the fair value of these guarantees because of their unusual nature and unique characteristics.
Off-balance-sheet credit and market risk
Williams is a participant in numerous transactions and arrangements that involve financial instruments that have off-balance-sheet risk of accounting loss. It is not practicable to estimate the fair value of these off- balance-sheet financial instruments because of their unusual nature and unique characteristics.
Williams sells, with limited recourse, certain receivables. The aggregate limit under these receivables facilities was $180 million at December 31, 1993 and 1992. Williams received no additional net proceeds in 1993 and received proceeds of $171 million and $191 million in 1992 and 1991, respectively. At December 31, 1993 and 1992, $35 million and $130 million, respectively, of such receivables had been sold. Under a different arrangement, one of Williams' subsidiaries sold $18 million of receivables with limited recourse in 1992. Based on amounts outstanding at December 31, 1993 and 1992, the maximum contractual credit loss under these arrangements is approximately $37 million and $51 million, respectively, but the likelihood of a loss is remote.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with discontinued operations and the related disposition of certain assets in 1987, Williams guaranteed certain lease rentals sufficient for the purchaser to meet a portion of debt service. At December 31, 1993 and 1992, the maximum possible loss under this arrangement was approximately $15 million and $26 million, respectively, before consideration of future contractual and estimated sublease income, which is expected to be substantial. After consideration of amounts accrued, Williams believes the likelihood of a material loss from this guarantee is remote.
In connection with the sale of units in the Williams Coal Seam Gas Royalty Trust (Trust), Williams indemnified the Trust against losses from certain litigation (see Note 14), guaranteed certain minimum ownership interests based on natural gas reserve volumes and guaranteed minimum gas prices through 1997. Williams has a recorded liability of $15 million for these items, representing the maximum amounts for the first two guarantees and an estimate of the gas price exposure based on historical operating trends and an assessment of market conditions. For most of 1993 and at year end, natural gas prices exceeded the contractual minimum guarantee of $1.70 per MMBtu. While Williams' maximum exposure from this guarantee exceeds amounts accrued, it is not practicable to determine such amount because of the unique aspects of the guarantee.
Williams has issued other guarantees and letters of credit with off-balance-sheet risk that total approximately $20 million at both December 31, 1993 and 1992. Williams believes it will not have to perform under these agreements because the likelihood of default by the primary party is remote and/or because of certain indemnifications received from other third parties.
In accordance with historical industry practice, Williams' natural gas subsidiaries have gas purchase contracts with commitments to buy minimum quantities of natural gas, primarily at market prices, for varying periods estimated to extend through at least 2014. The subsidiaries currently have or will enter into gas sales contracts for these volumes, or the subsidiaries will negotiate the termination of contracts that are not required to meet gas sales demand (see Note 14).
Williams Energy Ventures enters into futures contracts, option agreements and natural gas price-swap agreements for price speculation as described in Note 1. The natural gas price-swap agreements call for Williams Energy Ventures to make payments to (or receive payments from) counterparties based upon the differential between a fixed and variable price or variable prices for different locations. These swap agreements extend for various periods through April 1996. Williams Energy Ventures is the fixed-rate payor and fixed-rate receiver on agreements having notional values of $96 million and $93 million, respectively. In addition, Williams Energy Ventures is the payor and receiver on differential location variable-priced swap agreements having notional values of $196 million and $201 million, respectively. Williams Energy Ventures manages risk from financial instruments by making various logistical commitments which manage profit margins through offsetting financial instruments. As a result, price movements can result in losses on certain contracts offset by gains on others.
Williams Energy Ventures takes an active role in managing and controlling market and counterparty risks and has established formal control procedures which are reviewed on an ongoing basis. Williams Energy Ventures attempts to minimize credit-risk exposure to trading counterparties and brokers through formal credit policies and monitoring procedures. In the normal course of business, collateral is not required for financial instruments with credit risk.
Concentration of credit risk
Williams' cash equivalents consist of high quality securities placed with various major financial institutions with high credit ratings. Williams' investment policy limits the company's credit exposure to any one financial institution.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1993 and 1992, approximately 48 percent and 62 percent, respectively, of receivables are for the sale or transportation of natural gas and related products or services. Approximately 43 percent and 31 percent of receivables at December 31, 1993 and 1992, respectively, are for telecommunications and related services. Natural gas customers include pipelines, distribution companies, producers, gas marketers and industrial users primarily located in the northwestern and central United States. Telecommunications customers include common carriers and numerous corporations. As a general policy, collateral is not required for receivables, but customers' financial conditions and credit worthiness are evaluated regularly.
NOTE 13 -- OTHER FINANCIAL INFORMATION
Intercompany revenues (at prices that generally apply to sales to unaffiliated parties) are as follows:
Williams Natural Gas had sales to a natural gas distributor that accounted for 11 percent in 1993; 9 percent in 1992; and 12 percent in 1991 of Williams' revenues.
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information for business segments is as follows:
NOTE 14 -- CONTINGENT LIABILITIES AND COMMITMENTS
Rate and regulatory matters and related litigation
In June 1990, a producer brought suit against Williams Natural Gas alleging antitrust and interference with contract claims regarding the transportation of gas and seeking actual, treble and punitive damages and injunctive relief. Williams Natural Gas has denied any liability. In April 1991, Williams Natural Gas was granted summary judgment on the antitrust claim, and at the close of the plaintiff's case, a directed verdict was granted in favor of Williams Natural Gas on the remaining claims. The plaintiff filed an appeal on November 18, 1992.
In 1989, the FERC issued an order to Northwest Pipeline instituting a formal investigation related to the assignment of certain gas supply contracts to an affiliate and ordering Northwest Pipeline to show cause why the assignments did not violate certain federal statutes and FERC regulations. Following a hearing, an administrative law judge (ALJ), on May 13, 1993, issued an initial decision finding in Northwest Pipeline's favor. On June 14, 1993, the FERC staff filed a brief taking exceptions to the ALJ's decision. Northwest
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pipeline filed an answering brief and is awaiting a final decision by the FERC. Northwest Pipeline could be subject to civil penalties if it is ultimately determined the assignments violated FERC regulations. Northwest Pipeline believes it has fully complied with all applicable laws and regulations and will continue to challenge any allegations to the contrary.
Williams' interstate pipeline subsidiaries, including Williams Pipe Line, have various regulatory proceedings pending. As a result of rulings in certain of these proceedings, a portion of the revenues of these subsidiaries has been collected subject to refund. As to Williams Pipe Line, revenues collected subject to refund were $80 million at December 31, 1993; it is not expected that the amount of any refunds ordered would be significant. Accordingly, no portion of these revenues has been reserved for refund. As to the other pipelines, see Note 9 for the amount of revenues reserved for potential refund as of December 31, 1993.
In 1992, the FERC issued Order 636, Order 636-A and Order 636-B. These orders, which have been challenged in various respects by various parties in proceedings pending in the U.S. Court of Appeals for the Eleventh Circuit, require interstate gas pipeline companies to change the manner in which they provide services. Williams Natural Gas implemented its restructuring on October 1, 1993, and Northwest Pipeline implemented its restructuring on November 1, 1993. Certain aspects of each pipeline company's restructuring are under appeal.
Contract reformations and gas purchase deficiencies
Williams Natural Gas has undertaken the reformation of its respective gas supply contracts to settle gas purchase deficiencies, avoid future gas purchase deficiencies, reduce prices to market levels or make other appropriate modifications. As of December 31, 1993, Williams Natural Gas had total supplier take-or-pay, ratable-take and minimum-take claims totaling approximately $233 million. This amount includes a take-or-pay claim of $203 million plus interest and ratable-take claims exceeding $23 million plus interest from a producer that Williams Natural Gas believes will be resolved in conformance with an agreement in principle discussed below.
Williams Natural Gas also has commitments under gas supply contracts reflecting prices in excess of market-based prices. The estimated commitment amounts at December 31, 1993, attributable to these contracts are:
Northwest Pipeline's only remaining significant gas purchase contract with a non-market responsive pricing provision has been assigned to certain customers.
Williams has an accounting policy of determining accruals taking into consideration both historical and future gas quantities and appropriate prices to determine an estimated total exposure. This exposure is discounted and risk-weighted to determine the appropriate accrual. The estimated portion recoverable from sales and transportation customers is deferred based on Williams' estimate of its expected recovery of the amounts allowed by FERC policy. As of December 31, 1993, Williams Natural Gas had accrued $66 million for take-or-pay settlements and reformation of the non-market responsive contracts. Although Williams believes these accruals are adequate, the actual amount paid for take-or-pay settlements and contract reformation will depend on the outcome of various court proceedings; the provisions and enforceability of each gas purchase contract; the success of settlement negotiations; and other factors.
Current FERC policy associated with Orders 436 and 500 requires interstate gas pipelines to absorb some of the cost of reforming gas supply contracts before allowing any recovery through direct bill or surcharges to transportation as well as sales commodity rates. Pursuant to FERC Order 500, Northwest Pipeline and
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Williams Natural Gas have filed to recover a portion of previously incurred take-or-pay and contract-reformation costs. As of December 31, 1993, these subsidiaries had $66 million included in recoverable contract-reformation and take-or-pay settlement costs, $55 million of which had not yet been paid and filed for recovery with the FERC. Under Orders 636, 636-A and 636-B, costs incurred to comply with these rules are permitted to be recovered in full, although 10 percent of such costs must be allocated to interruptible transportation service.
The FERC initially approved a method for Northwest Pipeline to direct bill its contract-reformation costs, but when challenged on appeal, sought a remand to reassess such method. Northwest Pipeline has received an order from the FERC that requires a different allocation of such costs. Northwest Pipeline filed with the FERC several alternative methods to comply with this order and Northwest Pipeline is awaiting the FERC's decision. Northwest Pipeline expects to be permitted to recover these costs in excess of amounts previously charged to expense.
Pursuant to a stipulation and agreement approved by the FERC, Williams Natural Gas has made a cost-sharing direct recovery filing covering amounts that had been paid to producers and in part previously billed to Williams Natural Gas customers under Orders 436, 500 and 528. Williams Natural Gas will make further filings under the stipulation and agreement to recover future contract-reformation payments under those orders and Order 636. Further, Williams Natural Gas has settled all rate issues for the period December 1, 1989, through October 31, 1993. All open processing issues have also been resolved in an unopposed settlement which has been approved by the FERC.
In light of Orders 636, 636-A and 636-B, Williams Natural Gas and a producer have agreed to various amendments to an agreement in principle previously reached to reform or terminate its largest gas purchase contract and resolve various other issues. When finalized and approved by various regulatory agencies, the revised agreement will resolve all disputes and litigation between the parties, including a claim by the producer for take-or-pay deficiencies under certain gas purchase contracts with the producer of not less than $203 million plus interest. There is no assurance that the contingencies contemplated by the agreement will be satisfied. However, the parties are fully cooperating in attempting to complete and implement definitive agreements.
Certain Williams Natural Gas purchase contracts provide for the purchase of minimum volumes or for ratable purchases. In some cases, minimum volumes have not been taken; however, Williams is not currently able to determine Williams Natural Gas' obligations, if any, for failure to do so.
Other legal matters
Williams Natural Gas has identified polychlorinated biphenyl (PCB) contamination in air compressor systems, disposal pits and related properties at certain compressor station sites and has been involved in negotiations with the U.S. Environmental Protection Agency (EPA) to develop additional screening, detailed sampling and cleanup programs. In addition, negotiations concerning investigative and remedial actions relative to potential mercury contamination at certain gas metering sites have commenced with certain environmental authorities. As of December 31, 1993, Williams Natural Gas had recorded a liability for approximately $30 million, representing the current estimate of future environmental cleanup costs to be incurred over the next six to 10 years. Actual costs incurred will depend on the actual number of contaminated sites identified, the actual amount and extent of contamination discovered, the final cleanup standards mandated by the EPA and other governmental authorities and other factors. Williams Natural Gas deferred these costs pending recovery as incurred through future rates and other means.
In connection with the 1987 sale of the assets of Agrico Chemical Company, Williams agreed to indemnify the purchaser for environmental cleanup costs resulting from certain conditions at specified
THE WILLIAMS COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
locations, to the extent such costs exceed a specified amount. It appears probable that such costs will exceed this amount. At December 31, 1993, Williams had approximately $6 million accrued for such excess costs. The actual costs incurred will depend on the actual amount and extent of contamination discovered, the final cleanup standards mandated by the EPA or other governmental authorities, and other factors.
A lawsuit was filed on May 14, 1993, in a state court in Colorado in which certain claims have been made against various defendants, including Northwest Pipeline, contending that gas exploration and development activities in portions of the San Juan Basin have caused air, water and other contamination. The plaintiffs in the case are seeking certification of a plaintiff class. Northwest Pipeline and the other defendants are vigorously defending the lawsuit.
On December 31, 1991, the Southern Ute Indian Tribe (the Tribe) filed a lawsuit against Williams Production Company, a wholly owned subsidiary of Williams, 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. Williams Production, together with the other defendants named in the lawsuit, is vigorously defending the lawsuit. Williams Production has 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. In addition, if the Tribe is successful in showing that Williams Production has no rights in the coal-seam gas, Williams Production has agreed to pay to the Trust for distribution to then-current unitholders, an amount representing a return of a portion of the original purchase price paid for the units. While Williams believes that such a payment is not probable, it has reserved a portion of the proceeds from the sale of the units in the Trust.
In addition to the foregoing, various other proceedings are pending against Williams or its subsidiaries incidental to their operations.
Summary
Williams 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 financial effect upon Williams in the future.
THE WILLIAMS COMPANIES, INC.
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data are as follows (millions, except per-share amounts). Certain amounts have been restated as described in Note 1 of Notes to Consolidated Financial Statements.
The sum of earnings per share for the four quarters may not equal the total earnings per share for the year due to changes in the average number of common shares outstanding.
First-quarter 1993 includes gains totaling $95 million from the sales of assets (see Note 3 of Notes to Consolidated Financial Statements). Third-quarter 1993 net income was reduced $15 million related to the cumulative effect of the 1 percent increase in the federal income tax rate.
First-quarter 1992 includes a $15 million gain on sale of land. In second-quarter 1992, WilTel recorded loss provisions totaling $11 million, primarily for uncollectible receivables from a significant customer. Second-quarter 1992 net income includes a $10 million extraordinary credit from the early extinguishment of debt (see Note 5 of Notes to Consolidated Financial Statements).
Selected comparative fourth-quarter data are as follows (millions, except per-share amounts). Certain 1992 amounts have been restated as described in Note 1 of Notes to Consolidated Financial Statements.
In fourth-quarter 1993, Williams Field Services Group recorded an $11 million favorable settlement involving processing revenues from prior periods. WilTel's 1993 fourth-quarter operating profit includes favorable adjustments of approximately $6 million relating to bad debt recoveries and accrual reversals. General corporate expenses in the fourth quarter of 1993 include $5 million of additional accruals for supplemental retirement benefits.
In fourth-quarter 1992, Williams Field Services Group recorded a total of $8 million for the gain from the sale of a gathering facility and the reversal of certain loss accruals made in prior years.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the Directors and nominees for Director of Williams required by Item 401 of Regulation S-K is presented under the heading "Election of Directors" in Williams' Proxy Statement dated March 25, 1994 (the "Proxy Statement"), which information is incorporated by reference herein. A copy of the Proxy Statement is filed as an exhibit to the Form 10-K. Information regarding the executive officers of Williams is presented following Item 4 herein, as permitted by General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K. Information required by Item 405 of Regulation S-K is included under the heading "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the Proxy Statement, which information is incorporated by reference herein.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K regarding executive compensation is presented under the headings "Election of Directors" and "Executive Compensation and Other Information" in the Proxy Statement, which information is incorporated by reference herein. Notwithstanding the foregoing, the information provided under the headings "Compensation Committee Report on Executive Compensation" and "Stockholder Return Performance Presentation" in the Proxy Statement are not incorporated by reference herein. A copy of the Proxy Statement is filed as an exhibit to the Form 10-K.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding the security ownership of certain beneficial owners and management required by Item 403 of Regulation S-K is presented under the headings "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement, which information is incorporated by reference herein. A copy of the Proxy Statement is filed as an exhibit to the Form 10-K.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is no information regarding certain relationships and related transactions required by Item 404 of Regulation S-K to be reported in response to this Item.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1 and 2. The financial statements and schedules listed in the accompanying index to consolidated financial statements are filed as part of this annual report.
(a) 3 and (c). The exhibits listed below are filed as part of this annual report.
Exhibit 3 --
*(a) Restated Certificate of Incorporation of Williams (filed as Exhibit 4(a) to Form 8-B Registration Statement, filed August 20, 1987).
*(b) Certificate of Designation with respect to the $2.21 Cumulative Preferred Stock (filed as Exhibit 4.3 to the Registration Statement on Form S-3, filed August 19, 1992).
*(c) Certificate of Increase of Authorized Number of Shares of Series A Junior Participating Preferred Stock (filed as Exhibit 3(c) to Form 10-K for the year ended December 31, 1988).
*(d) Amended and Restated Rights Agreement, dated as of July 12, 1988, between Williams and First Chicago Trust Company of New York (filed as Exhibit 4(c) to Williams Form 8, dated July 28, 1988).
*(e) By-laws of Williams (filed as Exhibit 3 to Form 10-Q for the quarter ended September 30, 1993).
Exhibit 4 --
*(a) Form of Indenture between Williams and The Chase Manhattan Bank (National Association), Trustee, relating to the 9 7/8% Notes, due 1998 (filed as Exhibit 4.2 to Form S-3 Registration Statement No. 33-20798, filed March 23, 1988).
*(b) Form of Senior Debt Indenture between the Company and Chemical Bank, Trustee, relating to the 10 1/4% Debentures, due 2020; the 9 3/8% Debentures, due 2021; the 8 1/4% Notes, due 1998; Medium-Term Notes (8.50%-9.31%), due 1996 through 2001; the 7 1/2% Notes, due 1999, and the 8 7/8% Debentures, due 2012 (filed as Exhibit 4.1 to Form S-3 Registration Statement No. 33-33294, filed February 2, 1990).
*(c) U.S. $600,000,000 Credit Agreement, dated as of December 23, 1992, among Williams and certain of its subsidiaries and the banks named therein and Citibank, N.A., as agent (filed as Exhibit 4(d) to Form 10-K for the year ended December 31, 1992).
*(d) Note Agreement, dated December 15, 1984, among Williams and the lenders named therein (filed as Exhibit 4 to Form 10-K, filed March 27, 1985).
*(e) Senior Note Agreement, dated as of July 15, 1990, among Williams and the lenders named therein (filed as Exhibit 4(g) to Form 10-K for the year ended December 31, 1991).
Exhibit 10(iii) --
*(a) The Williams Companies, Inc. Supplemental Retirement Plan, effective as of January 1, 1988 (filed as Exhibit 10(iii)(c) to Form 10-K for the year ended December 31, 1987).
*(b) Form of Employment Agreement, dated January 1, 1990, between Williams and certain executive officers (filed as Exhibit 10(iii) (d) to Form 10-K for the year ended December 31, 1989).
*(c) Form of The Williams Companies, Inc. Change in Control Protection Plan between Williams and employees (filed as Exhibit 10(iii) (e) to Form 10-K for the year ended December 31, 1989).
*(d) The Williams Companies, Inc. 1980 Stock Option Plan (filed as Exhibit I to Form S-8 Registration Statement No. 2-68810, dated August 11, 1980).
*(e) The Williams Companies, Inc. 1985 Stock Option Plan (filed as Exhibit A to Williams' Proxy Statement, dated March 13, 1985).
*(f) The Williams Companies, Inc. 1988 Stock Option Plan for Non-Employee Directors (filed as Exhibit A to Williams' Proxy Statement, dated March 14, 1988).
*(g) The Williams Companies, Inc. 1990 Stock Plan (filed as Exhibit A to Williams' Proxy Statement, dated March 12, 1990).
*(h) Indemnification Agreement, effective as of August 1, 1986, between Williams and members of the Board of Directors and certain officers of Williams (filed as Exhibit 10(iii) (e) to Form 10-K for the year ended December 31, 1986).
*(i) The Williams Telecommunications Group, Inc. Long-Term Equity Incentive Plan (filed as Exhibit 10(iii)(i) to Form 10-K for the year ended December 31, 1992).
*(j) The Williams Telecommunications Group, Inc. Founders Award Plan (filed as Exhibit 10(iii)(j) to Form 10-K for the year ended December 31, 1992).
Exhibit 11 -- Computation of Earnings Per Common and Common-equivalent Share.
Exhibit 12 -- Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements.
Exhibit 20 -- Definitive Proxy Statement of Williams, dated March 25, 1994 (which is not to be deemed "filed" as part of this Form 10-K, except to the extent incorporated by reference under Part III of this Form 10-K).
Exhibit 21 -- Subsidiaries of the registrant.
Exhibit 23 -- Consent of Independent Auditors.
Exhibit 24 -- Power of Attorney together with certified resolution.
(b) Reports on Form 8-K.
One report on Form 8-K was filed by Williams with the Securities and Exchange Commission during the last quarter of 1993.
(d) The financial statements of partially owned companies are not presented herein since none of them individually, or in the aggregate, constitute a significant subsidiary.
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* Each such exhibit has heretofore been filed with the Securities and Exchange Commission as part of the filing indicated and is incorporated herein by reference.
THE WILLIAMS COMPANIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ITEM 14(A) 1 AND 2
All other schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto.
THE WILLIAMS COMPANIES, INC.
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
Except for amounts attributable to Mr. Hirsch, these are demand promissory notes fully payable within three years of date of issuance and secured by Williams' common stock.
Mr. Hirsch's loan was incurred in connection with his relocation; the principal is due in annual installments beginning in 1996-1998, or earlier upon the sale of his residence. The loan is non-interest bearing in accordance with IRS regulations. The amount collected was not settled in cash, but reduced reimbursements of relocation and employee expenses.
A substantial portion of Mr. Elliott's loan was settled in cash; the remainder was charged to compensation expense.
THE WILLIAMS COMPANIES, INC.
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF INCOME (PARENT)
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* Certain amounts have been restated or reclassified as described in Note 1.
See accompanying notes.
THE WILLIAMS COMPANIES, INC.
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
BALANCE SHEET (PARENT)
See accompanying notes.
THE WILLIAMS COMPANIES, INC.
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
STATEMENT OF CASH FLOWS (PARENT)
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* Reclassified as described in Note 1.
See accompanying notes.
THE WILLIAMS COMPANIES, INC.
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONCLUDED)
NOTES TO FINANCIAL INFORMATION (PARENT)
NOTE 1. BASIS OF PRESENTATION
During 1993, Williams (parent) reclassified its income taxes associated with equity earnings from investing income to the credit for income taxes. Prior years' amounts have been reclassified, increasing investing income and decreasing the credit for income taxes by $3.1 million and $3.4 million in 1992 and 1991, respectively.
On September 19, 1993, the board of directors of Williams declared a two-for-one common stock split and distribution; 51.4 million shares were issued on November 5, 1993. All references in the financial statements to the number of shares outstanding and per-share amounts reflect the effect of the split.
NOTE 2. SALES OF ASSETS
In a 1993 public offering, Williams sold 6.1 million units in the Williams Coal Seam Gas Royalty Trust (Trust), which resulted in net proceeds of $113 million and a pretax gain of $51.6 million. The Trust owns defined net profits interests in the developed coal-seam properties in the San Juan Basin of New Mexico and Colorado, which were conveyed to the Trust by Williams Production Company for units in the Trust. Williams Production Company transferred its units to Williams (parent). An additional 3.6 million units may be sold by Williams in the future.
NOTE 3. LONG-TERM DEBT AND LEASES
Aggregate minimum maturities and sinking-fund requirements, excluding lease payments, for each of the next five years are as follows: 1994 -- $11 million; 1995 -- $61 million; 1996 -- $23 million; 1997 -- none; and 1998 -- $210 million.
Future minimum annual rentals under non-cancelable capital leases for each of the next five years are $4 million. See Note 10 of Notes to Consolidated Financial Statements for additional information on long-term debt.
Williams (parent) has guaranteed the performance and obligations of WilTel for non-cancelable operating leases related to facilities sold and leased back. Future minimum annual lease rentals are as follows: 1994 -- $20 million; 1995 -- $21 million; 1996 -- $22 million; 1997 -- $22 million; 1998 -- $26 million; and an aggregate $110 million thereafter.
NOTE 4. DIVIDENDS RECEIVED
Cash dividends from subsidiaries and companies accounted for on an equity basis are as follows: 1993 -- $142.6 million; 1992 -- $36 million; and 1991 -- $5 million.
NOTE 5. INCOME TAX AND INTEREST PAYMENTS
Cash payments for income taxes are as follows: 1993 -- $118 million; 1992 -- $49.6 million; and 1991 -- $59.7 million, before refunds of $25.4 million.
Cash payments for interest are as follows: 1993 -- $96.6 million; 1992 -- $79.2 million; and 1991 -- $65.9 million.
NOTE 6. FINANCIAL INSTRUMENTS
Disclosure of financial instruments for the parent company are included in the consolidated disclosures. See Note 12 of Notes to Consolidated Financial Statements.
THE WILLIAMS COMPANIES, INC.
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
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(a) Primarily relates to additions to mainline transmission facilities.
(b) Primarily relates to additions to gathering and processing systems.
(c) Primarily relates to the sale of an intrastate natural gas pipeline system and other related assets in Louisiana.
(d) Primarily relates to the expansion and enhancement of telecommunication transmission facilities.
(e) Certain amounts have been reclassified. See Note 1 of Notes to Consolidated Financial Statements.
(f) Reclassification of certain assets from gathering and processing to transmission.
NOTE: Principal annual depreciation rates are shown on Schedule VI.
THE WILLIAMS COMPANIES, INC.
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
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(a) Primarily relates to the sale of an intrastate natural gas pipeline system and other related assets in Louisiana.
(b) Certain amounts have been reclassified. See Note 1 of Notes to Consolidated Financial Statements.
NOTE: The principal annual depreciation rates are as follows:
THE WILLIAMS COMPANIES, INC.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS(a)
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(a) Deducted from related assets.
(b) Represents balances written off, net of recoveries and reclassifications.
(c) Includes $4.1 million reversal of amounts previously accrued.
(d) Represents transfers from other accounts.
THE WILLIAMS COMPANIES, INC.
SCHEDULE IX -- SHORT-TERM BORROWINGS
The average amount outstanding was computed based on the average daily balances. The weighted average interest rate was computed by dividing interest accrued by the average amount outstanding.
THE WILLIAMS COMPANIES, INC.
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
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(a) All other items are not present in amounts sufficient to require disclosure.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
THE WILLIAMS COMPANIES, INC. (Registrant)
By: /s/ DAVID M. HIGBEE David M. Higbee Attorney-in-Fact
Dated: March 29, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
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Dated: March 29, 1994
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