WILLIAMS COMPANIES, INC. - FORM 8-K - EX-99.2 - UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME/OPERATIONS - January 6, 2012

Attached files

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8-K - FORM 8-K - WILLIAMS COMPANIES, INC.d275552d8k.htm
EX-10.1 - SEPARATION AND DISTRIBUTION AGREEMENT, DATED AS OF DECEMBER 30, 2011 - WILLIAMS COMPANIES, INC.d275552dex101.htm
EX-99.1 - PRESS RELEASE ISSUED JANUARY 3, 2012 - WILLIAMS COMPANIES, INC.d275552dex991.htm
EX-10.3 - TAX SHARING AGREEMENT, DATED AS OF DECEMBER 30, 2011 - WILLIAMS COMPANIES, INC.d275552dex103.htm
EX-10.2 - EMPLOYEE MATTERS AGREEMENT, DATED AS OF DECEMBER 30, 2011 - WILLIAMS COMPANIES, INC.d275552dex102.htm

Exhibit 99.2

Introduction to the Unaudited Pro Forma Condensed Consolidated Financial Statements

On December 31, 2011, we, The Williams Companies, Inc., completed the tax-free spin-off of our 100 percent interest in WPX Energy, Inc. (WPX), to our shareholders. WPX was formed in April 2011 to hold our former exploration and production business. The spin-off was completed by means of a special stock dividend, which consisted of a distribution of one share of WPX common stock for every three shares of our common stock.

The following unaudited pro forma condensed consolidated financial statements adjust our historical condensed consolidated financial statements for the spin-off of WPX, as well as for certain related financing activities. These include the issuance of $1.5 billion of senior unsecured notes by WPX in November 2011, and the retirement of $746 million of our debt in December 2011.

Our historical condensed consolidated financial statements have been derived from and should be read together with the historical audited and unaudited consolidated financial statements and the related notes in Exhibit 99.1 of our Form 8-K dated June 1, 2011, and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2011. The unaudited pro forma condensed consolidated balance sheet assumes these transactions occurred on September 30, 2011. The unaudited pro forma condensed consolidated statements of income assume these transactions occurred on January 1, 2008.

The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only to reflect the disposal of WPX and related financing activities and do not represent what our results of operations or financial position would actually have been had the spin-off and related financing activities occurred on the dates noted above, or project our results of operations or financial position for any future periods. The unaudited pro forma condensed consolidated financial statements are intended to provide information about the continuing impact of the spin-off and related financing activities as if they had been consummated earlier and do not represent any conclusions about whether such operations of our former exploration and production business will be reported as discontinued operations. The pro forma adjustments are based on available information and certain assumptions that management believes are factually supportable and are expected to have a continuing impact on our results of operations. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed consolidated financial statements have been made.

 

1

The Williams Companies, Inc.

Pro Forma Condensed Consolidated Balance Sheet

September 30, 2011

 

     The Williams
Companies, Inc.
Historical		     Notes
Offering (a)		      Debt
Retirement (b)		     Spin-Off (c)     Pro Forma
Adjustments (d)		     Pro Forma  
     (Dollars in millions, except per-share amounts)
(Unaudited)		  

ASSETS

              

Current assets:

              

Cash and cash equivalents

    $ 996      $ 1,479       $ (1,019 )    $ (550 )    $ —        $ 906   

Accounts and notes receivable (net of allowance for doubtful accounts)

      1,039        —           —          (422 )      —          617   

Inventories

      287        —           —          (82 )      —          205   

Derivative assets

      381        —           —          (381 )      —          —     

Other current assets and deferred charges

      186        —           —          2        —          188   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total current assets

      2,889        1,479         (1,019 )      (1,433 )      —          1,916   

Investments

      1,492        —           —          (119 )      —          1,373   

Property, plant and equipment, at cost

      32,159        —           —          (13,494 )      —          18,665   

Accumulated depreciation, depletion and amortization

      (11,186 )      —           —          4,761        —          (6,425 ) 
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Property, plant and equipment — net

      20,973        —           —          (8,733 )      —          12,240   

Derivative assets

      118        —           —          (118 )      —          —     

Other assets and deferred charges

      674        21         (7 )      (48 )      (33 )      607   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

    $ 26,146      $ 1,500       $ (1,026 )    $ (10,451 )    $ (33 )    $ 16,136   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

LIABILITIES AND EQUITY

              

Current liabilities:

              

Accounts payable

    $ 1,174      $ —         $ —        $ (562 )    $ —        $ 612   

Accrued liabilities

      801        —           (119 )      (192 )      —          490   

Derivative liabilities

      103        —           —          (103 )      —          —     

Long-term debt due within one year

      361        —           —          —          —          361   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total current liabilities

      2,439        —           (119 )      (857 )      —          1,463   

Long-term debt

      9,024        1,500         (738 )     (1,502 )      —          8,284   

Deferred income taxes

      3,609        —           —          (1,675 )      —          1,934   

Derivative liabilities

      73        —           —          (73 )      —          —     

Other liabilities and deferred income

      1,748        —           —          (364 )      (33 )      1,351   

Contingent liabilities and commitments

              

Equity:

              

Stockholders’ equity:

              

Common stock (960 million shares authorized at $1 par value; 623 million shares issued at September 30, 2011)

      623        —           —          —          —          623   

Other stockholders’ equity

      7,286        —           (169 )     (5,905 )      —          1,212   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total stockholders’ equity

      7,909        —           (169 )      (5,905 )      —          1,835   

Noncontrolling interests in consolidated subsidiaries

      1,344        —           —          (75 )      —          1,269   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total equity

      9,253        —           (169 )      (5,980 )      —          3,104   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities and equity

    $ 26,146      $ 1,500       $ (1,026 )    $ (10,451 )    $ (33 )    $ 16,136   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

See accompanying notes.

 

2

The Williams Companies, Inc.

Pro Forma Condensed Consolidated Statement of Income

 

     For the Nine Months Ended September 30, 2011  
     The Williams
Companies, Inc.
Historical		     Spin-off (c)     Pro Forma
Adjustments (e)		      Pro Forma  
     (Dollars in millions, except per-share amounts)
(Unaudited)		  

Revenues

    $ 7,947      $ (2,122 )    $ —         $ 5,825   

Segment costs and expenses:

          

Costs and operating expenses

      5,871        (1,779 )      —           4,092   

Selling, general and administrative expenses

      401        (161 )      —           240   

Other (income) expense — net

      2        (5 )      —           (3 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Total segment costs and expenses

      6,274        (1,945 )      —           4,329   
  

 

 

    

 

 

    

 

 

     

 

 

  

General corporate expenses

      152        (4 )      —           148   
  

 

 

    

 

 

    

 

 

     

 

 

  

Operating income

      1,521        (173 )      —           1,348   

Interest accrued

      (466 )      2        45         (419 ) 

Interest capitalized

      29        (12 )      —           17   

Investing income — net

      145        (18 )      —           127   

Other income (expense) — net

      4        —          —           4   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income from continuing operations before income taxes

      1,233        (201 )      45         1,077   

Provision for income taxes

      194        (78 )      17         133   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income from continuing operations

      1,039        (123 )      28         944   

Less: Income from continuing operations attributable to noncontrolling interests

      203        (7 )      —           196   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income from continuing operations attributable to The Williams Companies, Inc.

    $ 836      $ (116 )    $ 28       $ 748   
  

 

 

    

 

 

    

 

 

     

 

 

  

Earnings per common share attributable to The Williams Companies, Inc.:

          

Basic

    $ 1.42           $ 1.27   

Diluted

    $ 1.40           $ 1.25   

Weighted-average shares (thousands):

          

Basic

      588,082             588,082   

Diluted

      597,250             597,250   

See accompanying notes.

 

3

The Williams Companies, Inc.

Pro Forma Condensed Consolidated Statement of Income

 

     For the Nine Months Ended September 30, 2010  
     The Williams
Companies, Inc.
Historical		     Spin-off (c)     Pro Forma
Adjustments (e)		      Pro Forma  
     (Dollars in millions, except per-share amounts)
(Unaudited)		  

Revenues

    $ 7,180      $ (2,285 )    $ —         $ 4,895   

Segment costs and expenses:

          

Costs and operating expenses

      5,382        (1,879 )      —           3,503   

Selling, general and administrative expenses

      356        (134 )      —           222   

Impairments of goodwill and long-lived assets

      1,681        (1,681 )      —           —     

Other (income) expense — net

      (17 )      (10 )      —           (27 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Total segment costs and expenses

      7,402        (3,704 )      —           3,698   
  

 

 

    

 

 

    

 

 

     

 

 

  

General corporate expenses

      173        —          —           173   
  

 

 

    

 

 

    

 

 

     

 

 

  

Operating income (loss)

      (395 )     1,419        —           1,024   

Interest accrued

      (476 )      4        45         (427 ) 

Interest capitalized

      43        (11 )      —           32   

Investing income — net

      162        (15 )      —           147   

Early debt retirement costs

      (606 )      —          —           (606 ) 

Other income (expense) — net

      (12 )      —          —           (12 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Income (loss) from continuing operations before income taxes

      (1,284 )     1,397        45         158   

Provision (benefit) for income taxes

      (140 )     142        17         19   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income (loss) from continuing operations

      (1,144 )      1,255        28         139   

Less: Income from continuing operations attributable to noncontrolling interests

      121        (6 )      —           115   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income (loss) from continuing operations attributable to The Williams Companies, Inc.

    $ (1,265 )   $ 1,261      $ 28       $ 24   
  

 

 

    

 

 

    

 

 

     

 

 

  

Earnings (loss) per common share attributable to The Williams Companies, Inc.:

          

Basic

    $ (2.16 )        $ 0.04   

Diluted

    $ (2.16 )         $ 0.04   

Weighted-average shares (thousands):

          

Basic

      584,365             584,365   

Diluted (f)

      584,365             590,244   

See accompanying notes.

 

4

The Williams Companies, Inc.

Pro Forma Condensed Consolidated Statement of Income

 

     Year Ended December 31, 2010  
     The Williams
Companies, Inc.
Historical		     Spin-off (c)     Pro Forma
Adjustments (e)		      Pro Forma  
     (Dollars in millions, except per-share amounts)
(Unaudited)		  

Revenues

    $ 9,600      $ (2,964 )    $ —         $ 6,636   

Segment costs and expenses:

          

Costs and operating expenses

      7,164        (2,452 )      —           4,712   

Selling, general and administrative expenses

      498        (187 )      —           311   

Impairments of goodwill and long-lived assets

      1,691        (1,681 )      —           10   

Other (income) expense — net

      (26 )      1        —           (25 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Total segment costs and expenses

      9,327        (4,319 )      —           5,008   
  

 

 

    

 

 

    

 

 

     

 

 

  

General corporate expenses

      221        —          —           221   
  

 

 

    

 

 

    

 

 

     

 

 

  

Operating income

      52        1,355        —           1,407   

Interest accrued

      (632 )      4        60         (568 ) 

Interest capitalized

      51        (15 )      —           36   

Investing income — net

      209        (21 )      —           188   

Early debt retirement costs

      (606 )      —          —           (606 ) 

Other income (expense) — net

      (12 )      —          —           (12 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Income (loss) from continuing operations before income taxes

      (938 )      1,323        60         445   

Provision (benefit) for income taxes

      (26 )      136        22         132   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income (loss) from continuing operations

      (912 )      1,187        38         313   

Less: Income from continuing operations attributable to noncontrolling interests

      175        (8 )      —           167   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income (loss) from continuing operations attributable to The Williams Companies, Inc.

    $ (1,087 )   $ 1,195      $ 38       $ 146   
  

 

 

    

 

 

    

 

 

     

 

 

  

Earnings (loss) per common share attributable to The Williams Companies, Inc.:

          

Basic

    $ (1.86 )         $ 0.25   

Diluted

    $ (1.86 )         $ 0.25   

Weighted-average shares (thousands):

          

Basic

      584,552             584,552   

Diluted (f)

      584,552             590,699   

See accompanying notes.

 

5

The Williams Companies, Inc.

Pro Forma Condensed Consolidated Statement of Income

 

     Year Ended December 31, 2009  
     The Williams
Companies,  Inc.
Historical		     Spin-off (c)     Pro Forma
Adjustments (e)		      Pro Forma  
    

(Dollars in millions, except per-share amounts)

(Unaudited)

  

Revenues

    $ 8,238      $ (2,962 )    $ —         $ 5,276   

Segment costs and expenses:

          

Costs and operating expenses

      6,059        (2,347 )      —           3,712   

Selling, general and administrative expenses

      512        (184 )      —           328   

Impairments of goodwill and long-lived assets

      15        (15 )      —           —     

Other (income) expense — net

      (3 )      (31 )      —           (34 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Total segment costs and expenses

      6,583        (2,577 )      —           4,006   
  

 

 

    

 

 

    

 

 

     

 

 

  

General corporate expenses

      164        —          —           164   
  

 

 

    

 

 

    

 

 

     

 

 

  

Operating income

      1,491        (385 )      —           1,106   

Interest accrued

      (661 )      5        60         (596 ) 

Interest capitalized

      76        (15 )      —           61   

Investing income — net

      46        (8 )      —           38   

Early debt retirement costs

      (1 )      —          —           (1 ) 

Other income (expense) — net

      2        —          —           2   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income from continuing operations before income taxes

      953        (403 )      60         610   

Provision for income taxes

      363        (158 )      22         227   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income from continuing operations

      590        (245 )      38         383   

Less: Income from continuing operations attributable to noncontrolling interests

      146        (7 )      —           139   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income from continuing operations attributable to The Williams Companies, Inc.

    $ 444      $ (238 )    $ 38       $ 244   
  

 

 

    

 

 

    

 

 

     

 

 

  

Earnings per common share attributable to The Williams Companies, Inc.:

          

Basic

    $ 0.76           $ 0.42   

Diluted

    $ 0.76           $ 0.42   

Weighted-average shares (thousands):

          

Basic

      581,674             581,674   

Diluted

      589,385             589,385   

See accompanying notes.

 

6

The Williams Companies, Inc.

Pro Forma Condensed Consolidated Statement of Income

 

     Year Ended December 31, 2008  
     The Williams
Companies,  Inc.
Historical		     Spin-off (c)     Pro Forma
Adjustments (e)		      Pro Forma  
    

(Dollars in millions, except per-share amounts)

(Unaudited)

  

Revenues

    $ 11,851      $ (4,948 )    $ —         $ 6,903   

Segment costs and expenses:

          

Costs and operating expenses

      8,739        (3,528 )      —           5,211   

Selling, general and administrative expenses

      498        (182 )      —           316   

Impairments of goodwill and long-lived assets

      10        —          —           10   

Other (income) expense — net

      (226 )      149        —           (77 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Total segment costs and expenses

      9,021        (3,561 )      —           5,460   
  

 

 

    

 

 

    

 

 

     

 

 

  

General corporate expenses

      149        —          —           149   
  

 

 

    

 

 

    

 

 

     

 

 

  

Operating income

      2,681        (1,387 )      —           1,294   

Interest accrued

      (636 )      4        60         (572 ) 

Interest capitalized

      59        (14 )      —           45   

Investing income — net

      189        (21 )      —           168   

Early debt retirement costs

      (1 )      —          —           (1 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Income from continuing operations before income taxes

      2,292        (1,418 )      60         934   

Provision for income taxes

      733        (512 )      22         243   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income from continuing operations

      1,559        (906 )      38         691   

Less: Income from continuing operations attributable to noncontrolling interests

      161        (8 )      —           153   
  

 

 

    

 

 

    

 

 

     

 

 

  

Income from continuing operations attributable to The Williams Companies, Inc.

    $ 1,398      $ (898 )    $ 38       $ 538   
  

 

 

    

 

 

    

 

 

     

 

 

  

Earnings per common share attributable to The Williams Companies, Inc.:

          

Basic

    $ 2.41           $ 0.93   

Diluted

    $ 2.37           $ 0.91   

Weighted-average shares (thousands):

          

Basic

      581,342             581,342   

Diluted

      592,719             592,719   

See accompanying notes.

 

7

The Williams Companies, Inc.

Notes to Pro Forma Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1. Pro Forma Adjustments and Assumptions

Details of the adjustments are as follows:

 

  (a) In November 2011, WPX completed the issuance of $1.5 billion of senior unsecured notes. WPX received approximately $1.479 billion from the offering, net of initial purchaser discounts and other issuance costs. WPX subsequently distributed $979 million of the proceeds to us which was utilized for our debt retirement. This distribution to us is not specifically reflected in these adjustments as it has no net impact on the pro forma condensed consolidated financial statements. The issuance of the notes by WPX and the related distribution of a portion of the proceeds to us was a condition to be satisfied prior to the spin-off.

 

  (b) Primarily utilizing the distribution we received related to the WPX debt issuance and conditional upon the receipt of such distribution, we retired $746 million of long-term debt. In conjunction with the retirement, we paid premiums of $254 million, accrued interest of $19 million, and recognized charges of $8 million and $7 million related to the write-off of unamortized discount and unamortized debt issuance costs, respectively. The impact of these charges within other stockholders’ equity reflects the application of a composite statutory tax rate of 37 percent.

 

  (c) Effective December 31, 2011, we completed the tax-free spin-off of our 100 percent interest in WPX to our shareholders. Amounts presented are the adjustments necessary to reflect the removal of our former exploration and production business from our consolidated historical financial statements. The adjustments for the nine months ended September 30, 2011, include the removal of $12 million of transaction costs related to the separation of WPX ($8 million in selling, general & administrative costs and $4 million in general corporate expenses).

 

  (d) Per the terms of the Separation and Distribution Agreement, we have indemnified WPX for certain contingent matters related to a former power business. Resolution of these matters is currently expected to result in a net cash inflow to WPX, which WPX will be required to pay to us. We have adjusted our Pro Forma Condensed Consolidated Balance Sheet to eliminate the gross obligation for these matters and reflect only a net receivable from WPX.

 

  (e) These adjustments reflect the elimination of interest expense associated with the $746 million in debt that was retired in December 2011. A composite statutory tax rate of 37 percent was applied to the adjustments for all periods.

 

  (f) For the periods ended September 30 and December 31, 2010, weighted-average shares outstanding were adjusted for the effect of dilutive securities as the pro forma adjustments resulted in pro forma income from continuing operations attributable to The Williams Companies, Inc.

In connection with the spin-off, we and WPX entered into a Separation and Distribution Agreement, an Employee Matters Agreement, and a Tax Sharing Agreement. No adjustments have been made related to these agreements, except for that described in (d) above, as any such adjustments would be considered either nonrecurring in nature or not objectively determinable at this time. No adjustments have been made for the potentially dilutive impact of changes to stock-based compensation resulting from the Employee Matters Agreement as the impact is not objectively determinable at this time and is not expected to be significant.

 

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We may incur a noncash impairment charge if we determine that the carrying value of our exploration and production business exceeded its fair value at the time of spin-off. Any such impairment would not have an impact on these unaudited pro forma condensed consolidated financial statements, as it would not have a continuing impact on our future results of operations.

 

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WILLIAMS COMPANIES, INC. Reports