SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 25, 2002 -------------- The Williams Companies, Inc. ---------------------------- (Exact name of registrant as specified in its charter) Delaware 1-4174 73-0569878 --------------- ------------ ------------------- (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation) One Williams Center, Tulsa, Oklahoma 74172 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 918/573-2000 ------------ Not Applicable -------------- (Former name or former address, if changed since last report) 1
Item 5. Other Events. The Williams Companies, Inc. (NYSE:WMB) reported on April 25, 2002, unaudited recurring first-quarter 2002 earnings of 51 cents per share versus a restated 77 cents per share during the same period last year. The company on March 8, 2002 said it expected a range of from 40 to 45 cents per share. Williams reported first-quarter 2002 net income of $107.7 million, compared with $199.2 million for the same period a year ago. Income from continuing operations includes a $232 million pre-tax charge to reduce the carrying value of certain receivables from Williams Communications Group, Inc. (WCGRQ). The first-quarter 2002 loss from discontinued operations of $15.5 million represents the after-tax results of operations from and the loss on the sale of the Kern River pipeline, which was sold on March 27. The first-quarter of 2001 loss from discontinued operations includes both Kern River and WCGRQ. Earnings on a diluted basis for the first quarter of 2002 were 7 cents per share, which includes the effect of a 13 cent-per-share, non-cash reduction from the accounting for a beneficial conversion feature included in a preferred stock offering that was completed during the first quarter. This compares with 41 cents per share for the first quarter of 2001. A reconciliation of income from continuing operations to recurring earnings, an unaudited consolidated statement of income and related notes for the first quarter of 2002 are included within Exhibit 99.1. Item 7. Financial Statements and Exhibits. Williams files the following exhibit as part of this report: Exhibit 99.1 Copy of Williams' press release dated April 25, 2002, publicly announcing the matters reported herein. Pursuant to the requirements of the Securities Exchange Act of 1934, Williams has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE WILLIAMS COMPANIES, INC. Date: April 26, 2002 /s/ William G. von Glahn ----------------------------------------- Name: William G. von Glahn Title: Senior Vice President and General Counsel 2
INDEX TO EXHIBITS
EXHIBIT 99.1 NEWS RELEASE [WILLIAMS LOGO] NYSE: WMB - -------------------------------------------------------------------------------- DATE: April 25, 2002
Earnings on a diluted basis for the first quarter of 2002 were 7 cents per share, which includes the effect of a 13 cent-per-share, non-cash reduction from the accounting for a beneficial conversion feature included in a preferred stock offering that was completed during the first quarter. This compares with 41 cents per share for the first quarter of 2001. Accompanying this release are a reconciliation of income from continuing operations to recurring earnings, an unaudited consolidated statement of income and related notes for the first quarter of 2002. "It's rewarding to post improved segment profit from our asset-based energy businesses during the same time frame that we also made significant accomplishments in strengthening our balance sheet," said Steve Malcolm, president and CEO of Williams. "This is a great start to a new base year from which we plan to deliver at least 15 percent annual earnings growth. "This quarter's operating results demonstrate how well a balanced suite of assets can perform in energy market conditions that are significantly different than at this time last year," said Malcolm, who will lead a conference call to discuss earnings at 9 a.m. Eastern today. "We are confident that the performance of all our businesses, combined with our ongoing effort to expand productive capacity while improving our financial strength and flexibility, will allow us to deliver 2002 recurring earnings in the range of $2.15 to $2.30 per share." In addition to turning in solid financial performance, Williams has: o Completed transactions involving two pipelines and sold non-core production property and gathering assets, realizing more than $2 billion in cash and debt reduction while concurrently reducing the need for capital spending. o Issued $1.1 billion in publicly traded equity-linked securities and $1.5 billion in a 144-A private debt offering. o Trimmed 2002 planned capital spending of $4 billion by nearly half. o Eliminated nearly all of the so-called "triggers" from its major on- and off-balance sheet financial structures, including the successful resolution of more than $2 billion in liabilities related to WCGR. "These and other actions clearly demonstrate that over the first few months of this year we have acted decisively to achieve significant improvements in our balance-sheet," Malcolm said. Following is a summary of Williams' major business groups:
ENERGY MARKETING & TRADING, which provides energy commodities marketing and trading and price-risk management services, reported first-quarter 2002 segment profit of $281.1 million vs. $484.5 million for the same period last year. Segment profit declined primarily due to lower earnings from proprietary natural gas and power trading activities, reflecting the successful hedging of first-quarter 2001 positions at significantly higher spark spreads. Partially offsetting were significantly favorable origination activities in petroleum products. The natural gas and power trading decline includes the favorable recognition of approximately $42 million from cash collected for prior-period power sales in Western markets. GAS PIPELINE, which provides natural gas transportation and storage services through systems that span the United States, reported first-quarter 2002 segment profit of $190.2 million vs. $176.7 million on a restated basis for the same period last year. The improvement was due to higher equity earnings from new projects, primarily comprised of interest capitalized on internally generated funds per Federal Energy Regulatory Commission guidelines, and the benefits of new transportation rates on the Transco system. ENERGY SERVICES, which provides a wide range of energy products and services, reported first-quarter 2002 segment profit of $233.9 million, compared with $117.1 million during the same period last year. Results of the major business segments within Energy Services are: Exploration & Production, which includes natural gas exploration, development and production in basins within the Rocky Mountain, San Juan and Mid-continent areas, reported first-quarter 2002 segment profit of $105.7 million vs. $54.2 million on a restated basis for the same period last year. The improvement primarily was due to increased natural gas production volumes, reflecting a strategy of low-risk development drilling with a focus on tight-sand and coal-seam areas, and a $3.9 million gain on the previously announced sale of production properties. Production volumes sold increased 202 percent during the first quarter of 2002 over the same period of 2001. A major portion of the increases can be attributed to the acquisition of Barrett Resources in the third quarter of last year. Midstream Gas & Liquids, which provides gathering, processing, natural gas liquids transportation, fractionation and storage services, reported first-quarter 2002 segment profit of $69.4 million compared with $37.8 million for the same period of last year.
Segment profit improved primarily due to average liquids margins that were 4 cents per gallon higher than the same period a year ago, reflecting more favorable processing economics. Also contributing to the increase were higher transportation revenues. The improvement was partially offset by processing rates and volumes that were lower than the same period a year ago. Petroleum Services, which includes refining, retail petroleum, bio-energy and olefins production, reported first-quarter 2002 segment profit of $31.9 million vs. $14.7 million on a restated basis for the same period a year ago. The improvement primarily is due to the absence of a $11.2 million write-down that was recognized in the first quarter of last year and improved operating results in retail petroleum and bio-energy. While slightly less profitable than the year-ago period, Williams' refining operations remained solidly profitable. Williams Energy Partners (NYSE:WEG), which now includes segment profit associated with a large petroleum products pipeline and terminal system acquired from Williams' petroleum services unit earlier this month, reported first-quarter segment profit of $26.9 million vs. $22.8 million on a restated basis for the same period last year. The increase primarily was due to lower operating expenses associated with the acquired pipeline system. Also included in Energy Services' results is an International unit. It reported a nominal segment profit for the first quarter of 2002 vs. segment loss of $11 million for the same period last year. Today's earnings conference call, which will be audiocast on www.williams,com, will begin at 9 a.m. Eastern. To participate by telephone, please call beginning at 8:50 a.m. (800) 818-5264, or for international callers dial (913) 981-4910. Request the "Williams analyst conference call." Replay will be available through May 1. For replay, domestic callers should dial (888) 203-1112. International callers should dial (719) 457-0820. The passcode is 532909. ABOUT WILLIAMS (NYSE: WMB) Williams, through its subsidiaries, connects businesses to innovative, reliable energy products and services. Williams information is available at www.williams.com. ### Portions of this document may constitute "forward-looking statements" as defined by federal law. Although the company believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the "safe harbor" protections provided under the Private Securities Reform Act of 1995. Additional information about issues that could lead to material changes in performance is contained in the company's annual reports filed with the Securities and Exchange Commission.
[WILLIAMS LOGO] FINANCIAL HIGHLIGHTS (UNAUDITED)
[WILLIAMS LOGO] CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
[WILLIAMS LOGO] NOTES TO CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) 1. BASIS OF PRESENTATION On March 27, 2002, Williams completed the sale of one of its Gas Pipeline's segments, Kern River Gas Transmission (Kern River) to MidAmerican Energy Holdings Company (MEHC). Accordingly, the results of operations for Kern River have been reflected in the Consolidated Statement of Income as discontinued operations. Unless indicated otherwise, the information in the Notes to Consolidated Statement of Income relates to the continuing operations of Williams (see Note 4). On April 11, 2002, Williams Energy Partners acquired Williams Pipe Line, an operation within Petroleum Services. Accordingly, Williams Pipe Line's results of operations have been transferred from the Petroleum Services segment to the Williams Energy Partners segment. Prior year segment amounts have been restated to reflect the above mentioned changes. Certain other amounts in the Consolidated Statement of Income for 2001 have been reclassified to conform to the current classifications. 2. SEGMENT REVENUES AND PROFIT Segment revenues and profit (loss) for the three months ended March 31, 2002 and 2001, are as follows:
[WILLIAMS LOGO] NOTES TO CONSOLIDATED STATEMENT OF INCOME (CONTINUED) (UNAUDITED) 2. SEGMENT REVENUES AND PROFIT (continued) The following tables reflect the reconciliation of revenues and operating income as reported in the Consolidated Statement of Income to segment revenues and segment profit (loss).
[WILLIAMS LOGO] NOTES TO CONSOLIDATED STATEMENT OF INCOME (CONTINUED) (UNAUDITED) 3. INVESTING INCOME (LOSS) Estimated loss on realization of amounts due from Williams Communications Group, Inc. In first-quarter 2002, Williams recorded in continuing operations an additional pretax charge of $232 million from its assessment of the recoverability of certain receivables from Williams Communications Group, Inc. (WCG). These receivables represent Williams' claims as a result of performing on $2.2 billion of guarantees and payment obligations plus amounts due related to a deferred payment for services. Subsequent to the filing of its 2001 Form 10-K on March 6, 2002, Williams has been a participant in negotiations with WCG, the WCG banks and other unsecured creditors as a part of reviewing restructuring alternatives for WCG. On April 22, 2002, WCG filed for bankruptcy protection under Chapter 11 of the U. S. Bankruptcy Code. As a result of these negotiations and WCG's bankruptcy filing, Williams has performed an analysis of its estimated recovery of its receivables from WCG utilizing a methodology consistent with that described in Williams' 2001 Form 10-K. In addition, Williams has also modified certain assumptions and cash flow projections in this analysis to reflect management's best estimate of the ultimate recovery of its receivables taking into consideration the overall market conditions of the telecommunications industry, WCG's individual performance, and the nature of the proposed restructuring included in WCG's bankruptcy filing. At March 31, 2002, Williams has approximately $2.5 billion of receivables from WCG, of which $2.1 billion have been estimated to be unrecoverable at this time. The remaining net receivable of $380 million includes a minimum lease payment receivable of $154 million related to WCG's headquarters building and other assets. Williams is not able at this time to predict its ultimate actual recoveries nor the form of consideration that it may receive from WCG's restructuring under bankruptcy. Numerous factors will affect any recovery, including WCG's future performance, challenges to Williams' claims which may be raised in the bankruptcy proceeding, negotiations among WCG's banks, its unsecured creditors and Williams, and the resolution of any related claims, issues or challenges that may be raised in the bankruptcy proceedings. Other Other investing income for the three months ended March 31, 2002 and 2001, is as follows:
[WILLIAMS LOGO] NOTES TO CONSOLIDATED STATEMENT OF INCOME (CONCLUDED) (UNAUDITED) 4. DISCONTINUED OPERATIONS (continued) Summarized results of discontinued operations for the three months ended March 31, 2002 and 2001, are as follows:
[WILLIAMS LOGO] RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO RECURRING EARNINGS (UNAUDITED)