1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
( X )
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
-------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-20555
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WILLIAMS HOLDINGS OF DELAWARE, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 73-1455707
- --------------------------------------- ----------------------------------------
(State of Incorporation) (IRS Employer Identification Number)
ONE WILLIAMS CENTER
TULSA, OKLAHOMA 74172
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(Address of principal executive office) (Zip Code)
Registrant's telephone number: (918) 588-2000
----------------------------------------
NO CHANGE
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Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of the registrant's Common Stock outstanding at May 10,
1996, was 1,000 shares, all of which are owned by The Williams Companies, Inc.
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WILLIAMS HOLDINGS OF DELAWARE, INC.
INDEX
Part I. Financial Information Page
----
Item 1. Financial Statements
Consolidated Statement of Income--Three Months Ended
March 31, 1996 and 1995 2
Consolidated Balance Sheet--March 31, 1996 and
December 31, 1995 3
Consolidated Statement of Cash Flows--Three Months
Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 16
Exhibit 12--Computation of Ratio of Earnings to
Fixed Charges
Portions of this document may constitute "forward looking statements" as defined
by federal law. Although Williams Holdings of Delaware, Inc. believes any such
statements are based on reasonable assumptions, there is no assurance that
actual outcomes will not be materially different. Additional information about
issues that could lead to material changes in performance is contained in the
Williams Holdings of Delaware, Inc.'s annual report on Form 10-K.
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WILLIAMS HOLDINGS OF DELAWARE, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Millions)
-----------------------
Three months ended
March 31,
-----------------------
1996 1995
------ --------
Revenues (Note 8):
Williams Field Services Group $159.6 $ 94.6
Williams Energy Services 26.7 35.2
Williams Pipe Line 126.5 64.4
WilTel 122.0 126.7
WilTech Group 18.6 7.9
Other 12.6 7.3
Intercompany eliminations (32.5) (32.8)
------ --------
Total revenues 433.5 303.3
------ --------
Profit-center costs and expenses (Note 8):
Costs and operating expenses 282.5 178.2
Selling, general and administrative expenses 64.9 51.3
Other (income) expense--net 2.9 (1.3)
------ --------
Total profit-center costs and expenses 350.3 228.2
------ --------
Operating profit (loss):
Williams Field Services Group 44.1 30.4
Williams Energy Services 16.4 25.0
Williams Pipe Line 18.3 14.8
WilTel 3.0 7.9
WilTech Group (.2) (2.1)
Other 1.6 (.9)
------ --------
Total operating profit 83.2 75.1
Allocated parent company expenses (4.5) (4.3)
Interest accrued (Note 8) (6.6) (23.1)
Interest capitalized 1.5 .6
Investing income (Note 8) 9.9 27.6
Other expense--net (2.4) (6.1)
------ --------
Income from continuing operations
before income taxes 81.1 69.8
Provision for income taxes (Note 3) 28.0 19.6
------ --------
Income from continuing operations 53.1 50.2
Income from discontinued operations (Note 4) - 1,005.7
------ --------
Net income $ 53.1 $1,055.9
====== ========
See accompanying notes.
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WILLIAMS HOLDINGS OF DELAWARE, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
Millions
-------------------------------
March 31, December 31,
1996 1995
--------- ------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 11.3 $ 29.5
Receivables:
Trade 558.8 424.1
Affiliates 54.5 77.5
Inventories 102.1 97.6
Deferred income taxes - affiliates 136.1 128.0
Other 93.6 84.7
--------- --------
Total current assets 956.4 841.4
Due from parent 423.2 246.8
Investments 635.4 599.1
Property, plant and equipment, at cost 2,936.7 2,838.2
Less accumulated depreciation and depletion (659.3) (613.0)
--------- --------
2,277.4 2,225.2
Other assets and deferred charges 233.6 253.9
--------- --------
Total assets $ 4,526.0 $4,166.4
========= ========
See accompanying notes.
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WILLIAMS HOLDINGS OF DELAWARE, INC.
CONSOLIDATED BALANCE SHEET (concluded)
(Unaudited)
Millions
-------------------------------
March 31, December 31,
1996 1995
--------- ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities:
Accounts payable:
Trade $ 355.3 $ 253.0
Affiliates 260.0 128.6
Accrued liabilities (Note 5) 421.9 619.9
Long-term debt due within one year (Note 7) 14.1 14.2
-------- --------
Total current liabilities 1,051.3 1,015.7
Long-term debt (Note 7) 521.9 273.9
Deferred income taxes:
Affiliates 318.2 290.2
Other 42.8 38.5
Other liabilities 350.4 396.5
Contingent liabilities and commitments (Note 9)
Stockholder's equity:
Common stock, $1 par value, 1,000 shares
authorized and outstanding - -
Capital in excess of par value 1,648.9 1,634.1
Retained earnings 517.2 464.1
Net unrealized gain on non-current
marketable securities 75.3 53.4
-------- --------
Total stockholder's equity 2,241.4 2,151.6
-------- --------
Total liabilities and stockholder's equity $4,526.0 $4,166.4
======== ========
See accompanying notes.
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WILLIAMS HOLDINGS OF DELAWARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions)
---------------------------
Three months ended
March 31,
---------------------------
1996 1995
--------- ---------
OPERATING ACTIVITIES:
Net income $ 53.1 $ 1,055.9
Adjustments to reconcile to cash provided from
operations:
Discontinued operations - (1,005.7)
Depreciation and depletion 29.9 22.3
Provision for deferred income taxes 8.8 16.2
Changes in receivables (83.6) 31.1
Changes in inventories (2.6) (1.7)
Changes in other current assets (9.4) (.3)
Changes in accounts payable 101.6 (24.0)
Changes in accrued liabilities (37.8) 16.4
Changes in receivables/payables with affiliates 153.9 (24.2)
Net change in non-current unrealized trading
assets and liabilities (8.0) (23.2)
Other, including changes in non-current assets
and liabilities 3.9 (10.4)
--------- ---------
Net cash provided by operating activities 209.8 52.4
--------- ---------
FINANCING ACTIVITIES:
Payments of notes payable - (398.2)
Payments of long-term debt (81.0) (373.4)
Proceeds from long-term debt 328.7 8.0
Dividends paid to parent - (1,010.7)
Changes in parent company advances - 96.0
Subsidiary preferred stock redemptions - (144.0)
Other--net (1.2) 4.0
--------- ---------
Net cash provided (used) by financing activities 246.5 (1,818.3)
--------- ---------
See accompanying notes.
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WILLIAMS HOLDINGS OF DELAWARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (concluded)
(Unaudited)
(Millions)
------------------------
Three months ended
March 31,
------------------------
1996 1995
-------- --------
INVESTING ACTIVITIES:
Capital expenditures $ (60.7) $ (77.3)
Acquisition of business, net of cash acquired (13.4) -
Proceeds from sales of business - 2,504.2
Income tax and other payments related to
discontinued operations (220.9) -
Changes in advances to parent company (176.4) (661.2)
Other--net (3.1) (.4)
-------- --------
Net cash provided (used) by investing activities (474.5) 1,765.3
-------- --------
Decrease in cash and cash equivalents (18.2) (.6)
Cash and cash equivalents at beginning of period 29.5 17.9
-------- --------
Cash and cash equivalents at end of period $ 11.3 $ 17.3
======== ========
See accompanying notes.
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WILLIAMS HOLDINGS OF DELAWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. General
Williams Holdings of Delaware, Inc. (Williams Holdings) is a wholly-owned
subsidiary of The Williams Companies, Inc. (Williams). The accompanying
interim consolidated financial statements of Williams Holdings do not include
all notes in annual financial statements and therefore should be read in
conjunction with the annual financial statements and notes thereto for Williams
Holdings' 1995 Annual Report on Form 10-K. The accompanying unaudited financial
statements have not been audited by independent auditors but include all
adjustments both normal recurring and others which, in the opinion of Williams
Holdings' management, are necessary to present fairly its financial position at
March 31, 1996, and results of operations and cash flows for the three months
ended March 31, 1996 and 1995.
Note 2. Basis of presentation
Revenues and operating profit amounts for the three months ended March 31, 1995,
include the operating results of the Transco Energy entities contributed to
Williams Holdings since the January 18, 1995, acquisition by Williams.
Note 3. Provision for income taxes
The provision (credit) for income taxes from continuing operations includes:
Three months ended
March 31,
-----------------------
1996 1995
------ ------
(Millions)
Current:
Federal $16.7 $(2.7)
State 2.5 6.1
----- -----
19.2 3.4
----- -----
Deferred:
Federal 6.3 16.7
State 2.5 (.5)
----- -----
8.8 16.2
----- -----
Total provision $28.0 $19.6
===== =====
The effective income tax rate in 1996 and 1995 is less than the federal
statutory rate due primarily to income tax credits from coal-seam gas
production, partially offset by the effect of state income taxes.
Cash payments to Williams and certain taxing authorities for continuing and
discontinued operations for income taxes for the three months ended March 31,
1996 and 1995 are $215.1 million and $2 million, respectively.
Note 4. Discontinued operations
On January 5, 1995, Williams Holdings sold its network services operations to
LDDS Communications, Inc. (LDDS) for $2.5 billion in cash. The sale yielded a
gain of $1 billion (net of income taxes of approximately $732 million) which is
reported as income from discontinued operations. Under the terms of the
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WILLIAMS HOLDINGS OF DELAWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
agreement, Williams Holdings retained Williams Telecommunications Systems, Inc.
(WilTel), a national telecommunications equipment supplier and service company,
and Vyvx, Inc. (included in WilTech Group), which operates a national video
network specializing in broadcast television applications and satellite
transmission.
Note 5. Accrued liabilities
(Millions)
--------------------------
March 31, December 31,
1996 1995
--------- ------------
State income taxes payable $ 79.7 $ 78.3
Federal income taxes payable-affiliate 35.4 236.7
Employee costs 43.8 47.4
Deferred revenue 31.8 34.4
Transportation and exchange gas payable 25.3 28.7
Taxes other than income taxes 23.6 23.0
Other 182.3 171.4
------ ------
$421.9 $619.9
====== ======
Note 6. Adoption of new accounting standard
Effective January 1, 1996, Williams Holdings adopted Statement of Financial
Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." Adoption of the standard had no
effect on Williams Holdings' financial position or results of operations.
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WILLIAMS HOLDINGS OF DELAWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7. Long-term debt
Long-term debt consists of the following amounts:
(Millions)
----------------------------
Weighted average March 31, December 31,
interest rate* 1996 1995
---------------- --------- ------------
Williams Holdings of Delaware, Inc.
Revolving credit loans 5.8 $150.0 $150.0
Debentures, 6.25%, due 2006 6.3 248.7 -
Williams Pipe Line
Notes, 8.95% and 9.78%,
payable through 2001 9.3 110.0 110.0
Williams Energy Ventures
Adjustable rate notes,
payable through 2002 8.1 20.6 21.0
Other, payable through 1999 7.9 6.7 7.1
------ ------
536.0 288.1
Current portion of long-term debt (14.1) (14.2)
------ ------
$521.9 $273.9
====== ======
*At March 31, 1996.
Williams Holdings and Williams Pipe Line participate in Williams' $800 million
credit agreement. Williams Holdings' and Williams Pipe Line's maximum
borrowing availability, subject to borrowings by other affiliated companies, is
$600 million and $100 million, respectively. Interest rates vary with current
market conditions. Certain amounts outstanding at March 31, 1996, under this
facility do not reduce amounts available to Williams Holdings in the future.
The available amount under the facility at March 31, 1996, was $653 million.
Cash payments for interest (net of amounts capitalized) for the three months
ended March 31, 1996 and 1995 are $6 million and $21 million, respectively,
including payments to Williams and affiliates of $2 million in both 1996 and
1995.
Note 8. Related party transactions
Williams Holdings and its subsidiaries maintain promissory notes with Williams
for both advances from and advances to Williams depending on the cash position
of the subsidiary. Investing income includes $8.9 million and $5 million for
three months ended March 31, 1996 and 1995, respectively, from advances to
affiliates, while interest accrued includes $2.5 million for the three months
ended March 31, 1995.
William Holdings' subsidiaries have transactions primarily with the following
affiliates: Williams Natural Gas, Northwest Pipeline, Transcontinental Gas
Pipe Line and Texas Gas. Revenues include transactions with affiliates of
$143.8 million and $23.4 million for the three months ended March 31, 1996 and
1995, respectively. Williams Holdings also incurred costs and operating
expenses, primarily transportation costs of $63.8 million and $45.6 million
for the three months ended March 31, 1996 and 1995, respectively, in
transactions with
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WILLIAMS HOLDINGS OF DELAWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
affiliates. In connection with Williams Energy Services commodity price risk
management activities, $62.9 million and $45.2 million of these costs for the
three months ended March 31, 1996 and 1995, respectively, are included in
revenues consistent with a "net" basis of reporting these activities.
Transactions with affiliates are at prices that generally apply to unaffiliated
parties.
Note 9. Contingent liabilities and commitments
Rate and regulatory matters
Williams Pipe Line has various regulatory proceedings pending. As a result of
rulings in these proceedings, a portion of its revenues has been collected
subject to refund. Such revenues were $195 million at March 31, 1996. As a
result of various FERC rulings in these and other proceedings, Williams Pipe
Line does not expect that the amount of any refunds ordered would be
significant. Accordingly, no portion of these revenues has been reserved for
refund.
Environmental matters
Certain Williams Holdings' subsidiaries have been named as potentially
responsible parties (PRP) at various Superfund waste disposal sites. In
addition, these subsidiaries have incurred or are alleged to have incurred
various other hazardous materials removal or remediation obligations under
environmental laws. Although no assurance can be given, Williams Holdings does
not believe that these obligations or the PRP status of these subsidiaries will
have a material adverse effect on its financial position, results of operations
or net cash flows.
Other legal matters
In December 1991, the Southern Ute Indian Tribe (the Tribe) filed a lawsuit
against Williams Production Company, a wholly owned subsidiary of Williams
Holdings, 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. In September 1994, the court granted summary judgment in favor
of the defendants and the Tribe has lodged an interlocutory appeal with the
U.S. Court of Appeals for the Tenth Circuit. Williams Production 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
Holdings 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 October 1990, Dakota Gasification Company (Dakota), the owner of the Great
Plains Coal Gasification Plant (Plant), filed suit in the U.S. district court
in
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WILLIAMS HOLDINGS OF DELAWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
North Dakota against Transcontinental Gas Pipe Line, a wholly-owned subsidiary
of Williams, and three other pipeline companies alleging that the pipeline
companies had not complied with their respective obligations under certain gas
purchase and gas transportation contracts. In September 1992, Dakota and the
Department of Justice on behalf of the Department of Energy filed an amended
complaint adding as defendants in the suit, Transco Energy Company, Transco
Coal Gas Company (Transco Energy Company and Transco Coal Gas Company being
wholly-owned subsidiaries of Williams Holdings) and all of the other partners
in the partnership that originally constructed the Plant and each of the parent
companies of these entities. Dakota and the Department of Justice sought
declaratory and injunctive relief and the recovery of damages, alleging that
the four pipeline defendants underpaid for gas, collectively, as of June 30,
1992, by more than $232 million plus interest and for additional damages for
transportation services and costs and expenses including attorneys fees. In
March 1994, the parties executed definitive agreements which would settle the
litigation subject to final non-appealable regulatory approvals. The
settlement is also subject to a Federal Energy Regulatory Commission (FERC)
ruling that Transcontinental Gas Pipe Line's existing authority to recover in
rates certain costs related to the purchase and transportation of gas produced
by Dakota will pertain to gas purchase and transportation costs
Transcontinental Gas Pipe Line will pay Dakota under the terms of the
settlement. In October 1994, the FERC issued an order consolidating
Transcontinental Gas Pipe Line's petition for approval of the settlement with
similar petitions pending relative to two of the other three pipeline companies
(the third pipeline having entered into a settlement) and setting the matter
for hearing before an administrative law judge. In December 1995, the
administrative law judge issued an initial decision in which he rejected the
settlement agreements, finding that they were not prudent, and he ordered the
pipeline companies to refund to their customers amounts collected since May
1993, in excess of the amounts he determined were appropriate. At the time of
the ruling, Transcontinental Gas Pipe Line estimated that its share of the
refunds the administrative law judge would require was approximately $75
million. The pipelines would be entitled to collect the amount of any such
customer refunds from Dakota. The administrative law judge's decision is
subject to review by the FERC. In February 1996, certain parties filed with
the FERC a motion requesting that the FERC establish an additional proceeding
to consider claims for additional refunds. Transcontinental Gas Pipe Line's
share of these claimed additional refunds is $90 million and pertain to amounts
paid to Dakota from November 1, 1988, to May 1, 1993. The pipelines have
opposed this motion.
In connection with agreements to resolve take-or-pay and other contract claims
and to amend gas purchase contracts, Transcontinental Gas Pipe Line and Texas
Gas each entered into certain settlements with producers which may require the
indemnification of certain claims for additional royalties which the producers
may be required to pay as a result of such settlements. As a result of such
settlements, Transcontinental Gas Pipe Line and Texas Gas were named as
defendants in, respectively, six and two lawsuits in which damages claimed
aggregated in excess of $133 million. Transco Energy Company and Transco Gas
Supply Company (wholly-owned subsidiaries of Williams Holdings) have also been
named as defendants in certain of these lawsuits. Five of the eight lawsuits
have been settled for cash payments aggregating approximately $8.5 million, all
of which has been previously accrued, and of which approximately $3 million is
recoverable as transition costs under Order 636. In addition, in July 1995, a
judge in a Texas state court granted a motion by Transcontinental Gas Pipe Line
for partial summary judgment, rejecting a major
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WILLIAMS HOLDINGS OF DELAWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
portion of the plaintiff's claims in one of the remaining lawsuits. Producers
have received and may receive other demands which could result in additional
claims. Indemnification for royalties will depend on, among other things, the
specific lease provisions between the producer and the lessor and the terms of
the settlement between the producer and either Transcontinental Gas Pipe Line
or Texas Gas. Texas Gas may file to recover 75 percent of any such additional
amounts it may be required to pay pursuant to indemnities for royalties under
the provisions of FERC Order 528.
In November 1994, Continental Energy Associates Limited Partnership (the
Partnership) filed a voluntary petition under Chapter 11 of the Bankruptcy Code
with the U.S. Bankruptcy Court, Middle District of Pennsylvania. The
Partnership owns a cogeneration facility in Hazleton, Pennsylvania (the
Facility). Hazleton Fuel Management Company (HFMC), a subsidiary of Transco
Energy, formerly supplied natural gas and fuel oil to the Facility. As of
March 31, 1996, it had current outstanding receivables from the Partnership of
approximately $20 million, all of which has been reserved. The construction of
the Facility was funded by several banks that have a security interest in all
of the Partnership's assets. HFMC has asserted to the Bankruptcy Court that
payment of its receivables is superior to the lien of the banks and intends to
vigorously pursue the collection of such amounts. HFMC has also filed suit
against the lead bank with respect to this and other matters, including the
alleged tortious interference with HFMC's contractual relations with the
Partnership and other parties. In March 1995, the Bankruptcy Court approved
the rejection of the gas supply contract between the Partnership and HFMC.
HFMC has in turn asserted force majeure under a contract with a producer under
which HFMC purchased natural gas for the Facility.
In addition to the foregoing, various other proceedings are pending against
Williams Holdings or its subsidiaries incidental to their operations.
Summary
While no assurances may be given, Williams Holdings 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 effect upon Williams Holdings'
future financial position, results of operations or cash flow requirements.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
First Quarter 1996 vs. First Quarter 1995
WILLIAMS FIELD SERVICES GROUP'S revenues increased $65 million, or 69 percent,
due primarily to higher gathering, processing and natural gas liquids sales
revenues of $13 million, $5 million and $10 million, respectively, combined
with increased natural gas sales volumes. Gathering, processing and liquids
volumes increased 25 percent, 29 percent and 20 percent, respectively. Costs
and operating expenses increased $43 million, or 80 percent, due primarily to
higher natural gas purchase volumes and expanded facilities. Selling, general
and administrative expenses increased $4 million, or 41 percent, due primarily
to expanded facilities. Other (income) expense--net includes a $3 million
environmental remediation accrual. Operating profit increased $13.7 million,
or 45 percent, due primarily to higher gathering and processing revenues and
increased natural gas and gas liquids margins, partially offset by higher costs
and expenses associated with expanded facilities and the environmental
remediation accrual.
WILLIAMS ENERGY SERVICES' revenues decreased $8.5 million, or 24 percent, as
first-quarter 1995 results included $21 million from originated long-term
supply obligations. Partially offsetting this revenue decrease were higher
price-risk management and physical trading revenues of $6 million and $7
million, respectively. Natural gas physical trading volumes increased 26
percent due primarily to a full quarter of Transco Energy's gas trading
activities in addition to a colder winter. Operating profit decreased $8.6
million, or 35 percent, due primarily to the decrease in revenues.
WILLIAMS PIPE LINE'S revenues (including Williams Energy Ventures) increased
$62.1 million, or 96 percent, due primarily to increases in transportation and
non-transportation revenues of $4 million and $58 million, respectively.
Shipments increased 14 percent due primarily to new business and the impact
during 1995 of unfavorable weather conditions and a November 1994 fire at a
truck-loading rack. Average length of haul and transportation rate per barrel
decreased 4 percent due primarily to shorter haul movements. The increase in
non-transportation revenue is due primarily to Williams Energy Ventures'
ethanol sales following the 1995 acquisition of Pekin Energy and construction
of the Nebraska Energy plant. Costs and expenses increased $59 million, or 118
percent, due primarily to ethanol production activities. Operating profit
(including Williams Energy Ventures) increased $3.5 million, or 23 percent, due
primarily to increased transportation revenues. Williams Energy Ventures'
results declined $900,000 to a $2.1 million operating loss in 1996, as
abnormally high prices for corn used in the production of ethanol resulted in
losses at Pekin Energy and Nebraska Energy.
WILTEL'S revenues decreased $4.7 million, or 4 percent, due primarily to lower
business activity resulting from inclement weather in the northeastern and
central parts of the country, which unfavorably impacted revenues by $12
million. Partially offsetting the lower business activity was $6 million
attributable to the January 1996 acquisition of ComLink, Inc. The number of
ports in service at March 31, 1996, increased 12 percent compared to March 31,
1995. Costs and operating expenses decreased $4 million, or 4 percent, due
primarily to decreased business activity. Selling, general and administrative
expenses increased $5 million, or 22 percent, due primarily to the impact of
the ComLink acquisition and costs related to management information systems,
system integration and Internet capabilities. Operating profit decreased $4.9
million, or 62 percent,
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due primarily to decreased business activity resulting from the inclement
weather and increased costs related to management information systems, system
integration and Internet capabilities.
WILTECH'S revenues increased $10.7 million, or 136 percent, due primarily to $5
million in higher digital television services provided, and $4 million
attributable to the October 1995 acquisition of NUS Training. Occasional
service billable minutes and dedicated service voice grade equivalent miles
each increased 19 percent. A $9 million increase in costs and expenses
reflects the overall increase in sales activity and higher expenses for
developing additional products and services. Operating loss decreased $1.9
million due primarily to the increased sales activity.
INTEREST ACCRUED decreased $16.5 million, or 71 percent, due primarily to the
absence of approximately $770 million of Transco Energy's outstanding debt
assumed by Williams Holdings for the period January 17 to April 30,1995, as a
result of the Transco Energy acquisition. Effective May 1, 1995, all debt
resulting from the Transco Energy acquisition was assumed by Williams.
Investing income decreased $17.7 million, or 64 percent, due primarily to the
absence of a 1995 $15 million dividend from Texasgulf Inc. and $4 million of
dividends in 1995 on Williams common stock held by Williams Holdings, partially
offset by higher interest earned from Williams. Other expense--net decreased
$3.7 million due primarily to the absence of approximately $5 million of
dividends for Transco Energy preferred stock and minority interest common
stockholders in 1995. The effective income tax rate in 1996 and 1995 is less
than the federal statutory rate due primarily to income tax credits from
coal-seam gas production, partially offset by the effects of state income
taxes.
On January 5, 1995, Williams Holdings sold its network services operations to
LDDS Communications, Inc. for $2.5 billion in cash. The sale yielded an
after-tax gain of approximately $1 billion, which is reported as income from
discontinued operations (see Note 4).
Financial Condition and Liquidity
Liquidity
Williams Holdings considers its liquidity to come from borrowing capacity
available under bank-credit facilities and notes receivable from its parent,
Williams. During 1995, Williams Holdings became a participant in an $800
million bank-credit facility entered into by Williams. Under this agreement,
Williams Holdings and Williams Pipe Line have access to $600 million and $100
million, respectively, subject to borrowing by other affiliated companies. At
March 31, 1996, Williams Holdings had access to $653 million of liquidity from
the available portion of the bank-credit facility, compared to $620 million at
December 31, 1995 (see Note 7). Prior to this facility, Williams Holdings'
liquidity came primarily from Williams, and cash requirements to finance
working capital, investments and capital expenditures were obtained from
Williams through capital contributions or intercompany note agreements.
Williams Holdings and its subsidiaries have amounts receivable from Williams
totaling $559 million at March 31, 1996, including $360 million of parent
company debentures, compared to $511 million at December 31, 1995, and $50
million at March 31, 1995.
Williams Holdings believes its parent can meet its cash needs because Williams
has access to $817 million of liquidity at March 31, 1996, representing the
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available portion of its $800 million bank-credit facility previously discussed
plus cash-equivalent investments. This compares with Williams' liquidity of
$726 million at December 31, 1995, and $1.4 billion at March 31, 1995.
Williams' liquidity at March 31, 1995, includes the remaining cash proceeds
from the sale of the network services operations.
In 1996, capital expenditures are estimated to be approximately $600 million.
During 1996, Williams Holdings expects to finance capital expenditures,
investments and working-capital requirements through cash generated from
operations, the use of its bank-credit facility, advances from its parent or
debt offerings.
Financing Activities
In January 1996, Williams Holdings filed a $400 million shelf registration
statement with the Securities and Exchange Commission and subsequently issued
$250 million of debt securities. During 1996, the issuance of additional debt
securities under this registration statement is expected. Williams Holdings
does not anticipate the need for additional financing arrangements; however,
Williams Holdings believes such arrangements could be obtained on reasonable
terms if required.
The consolidated long-term debt to long-term debt-plus-equity ratio increased
to 18.9 percent at March 31, 1996, from 11.3 percent at December 31, 1995. The
increase is due primarily to the issuance of $250 million of debentures in
1996.
Williams Holdings paid dividends to Williams of $1 billion in the first quarter
of 1995. No dividend payments were made in the first quarter of 1996. The
1995 dividends were paid primarily from the proceeds from the sale of the
network services operations.
The increase in receivables and accounts payable from December 31, 1995, is due
primarily to increased trading activities by Williams Energy Services. The
decrease in accrued liabilities reflects the payment to Williams of income
taxes related to discontinued operations.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits listed below are filed as part of this report:
Exhibit 12--Computation of Ratio of Earnings to Fixed
Charges
(b) During the first quarter of 1996, Williams Holdings did not
file a Form 8-K.
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Exhibit 12
WILLIAMS HOLDINGS OF DELAWARE, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Three Months Ended
March 31, 1996
------------------
Earnings:
Income from continuing operations before income taxes $81.1
Add:
Interest expense - net 5.1
Rental expense representative of interest factor 2.8
Other .7
-----
Total earnings as adjusted plus fixed charges $89.7
=====
Fixed charges:
Interest expense - net $ 5.1
Capitalized interest 1.5
Rental expense representative of interest factor 2.8
-----
Total fixed charges $ 9.4
=====
Ratio of earnings to fixed charges 9.54
=====
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SIGNATURE
Pursuant to the requirements 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.
WILLIAMS HOLDINGS OF DELAWARE, INC.
-----------------------------------
(Registrant)
Gary R. Belitz
-----------------------------------
Gary R. Belitz
Controller
(Duly Authorized Officer and
Chief Accounting Officer)
May 14, 1996