/FIRST AND FINAL ADD -- NYW063 -- Williams Earnings/ Financial
Highlights (Unaudited) Three months ended Years ended December 31,
December 31, (Millions, except per-share amounts) 2004 2003* 2004
2003* Revenues $2,964.2 $3,513.5 $ 12,461.3 $16,651.0 Income (loss)
from continuing operations $95.5 $(73.3) $93.2 $(57.5) Income
(loss) from discontinued operations $(22.1) $19.6 $70.5 $326.6
Cumulative effect of change in accounting principles $- $- $-
$(761.3) Net income (loss) $73.4 $(53.7) $163.7 $(492.2) Basic
earnings (loss) per common share: Income (loss) from continuing
operations $.17 $(.14) $.18 $(.17) Income (loss) from discontinued
operations $(.04) $.04 $.13 $.63 Cumulative effect of change in
accounting principles $- $- $- $(1.47) Net income (loss) $.13
$(.10) $.31 $(1.01) Average shares (thousands) 552,272 518,502
529,188 518,137 Diluted earnings (loss) per common share: Income
(loss) from continuing operations $.17 $(.14) $.18 $(.17) Income
(loss) from discontinued operations $(.04) $.04 $.13 $.63
Cumulative effect of change in accounting principles $- $- $-
$(1.47) Net income (loss) $.13 $(.10) $.31 $(1.01) Average shares
(thousands) 586,497 518,502 535,611 518,137 Shares outstanding at
December 31 (thousands) 557,957 518,232 * Amounts have been
restated or reclassified as described in Note 1 of Notes to
Consolidated Statement of Operations. Consolidated Statement of
Operations (Unaudited) Three months ended Years ended December 31,
December 31, (Millions, except per-share amounts) 2004 2003* 2004
2003* REVENUES Power $2,038.6 $ 2,585.4 $9,272.4 $13,195.5 Gas
Pipeline 351.3 364.0 1,362.3 1,368.3 Exploration & Production
214.1 166.9 777.6 779.7 Midstream Gas & Liquids 867.1 709.7
2,882.6 2,784.8 Other 6.5 12.9 32.8 72.0 Intercompany eliminations
(513.4) (325.4) (1,866.4) (1,549.3) Total revenues 2,964.2 3,513.5
12,461.3 16,651.0 SEGMENT COSTS AND EXPENSES Costs and operating
expenses 2,543.5 3,152.8 10,751.7 15,004.3 Selling, general and
administrative expenses 97.8 92.7 355.5 421.3 Other (income)
expense - net (77.4) 135.6 (51.6) (21.3) Total segment costs and
expenses 2,563.9 3,381.1 11,055.6 15,404.3 General corporate
expenses 35.3 24.5 119.8 87.0 OPERATING INCOME Power (50.8) (110.6)
86.5 145.3 Gas Pipeline 148.0 142.2 557.6 539.6 Exploration &
Production 67.7 48.3 223.9 392.5 Midstream Gas & Liquids 247.0
58.5 552.2 178.0 Other (11.6) (6.0) (14.5) (8.7) General corporate
expenses (35.3) (24.5) (119.8) (87.0) Total operating income 365.0
107.9 1,285.9 1,159.7 Interest accrued (171.5) (251.1) (834.4)
(1,293.5) Interest capitalized 1.0 10.9 6.7 45.5 Interest rate swap
income (loss) .3 4.2 (5.0) (2.2) Investing income 16.8 29.5 48.0
73.2 Early debt retirement costs (29.7) (66.8) (282.1) (66.8)
Minority interest in income and preferred returns of consolidated
subsidiaries (5.4) (4.3) (21.4) (19.4) Other income - net 7.2 1.0
26.8 40.7 Income (loss) from continuing operations before income
taxes and cumulative effect of change in accounting principles
183.7 (168.7) 224.5 (62.8) Provision (benefit) for income taxes
88.2 (95.4) 131.3 (5.3) Income (loss) from continuing operations
95.5 (73.3) 93.2 (57.5) Income (loss) from discontinued operations
(22.1) 19.6 70.5 326.6 Income (loss) before cumulative effect of
change in accounting principles 73.4 (53.7) 163.7 269.1 Cumulative
effect of change in accounting principles - - - (761.3) Net income
(loss) 73.4 (53.7) 163.7 (492.2) Preferred stock dividends - - -
29.5 Income (loss) applicable to common stock $73.4 $(53.7) $163.7
$(521.7) EARNINGS (LOSS) PER SHARE Basic earnings (loss) per common
share: Income (loss) from continuing operations $.17 $(.14) $.18
$(.17) Income (loss) from discontinued operations (.04) .04 .13 .63
Income (loss) before cumulative effect of change in accounting
principles .13 (.10) .31 .46 Cumulative effect of change in
accounting principles - - - (1.47) Net income (loss) $.13 $(.10)
$.31 $(1.01) Diluted earnings (loss) per common share: Income
(loss) from continuing operations $.17 $(.14) $.18 $(.17) Income
(loss) from discontinued operations (.04) .04 .13 .63 Income (loss)
before cumulative effect of change in accounting principles .13
(.10) .31 .46 Cumulative effect of change in accounting principles
- - - (1.47) Net income (loss) $.13 $(.10) $.31 $(1.01) * Certain
amounts have been restated or reclassified as described in Note 1
of Notes to Consolidated Statement of Operations. See accompanying
notes. Notes to Consolidated Statement of Operations (Unaudited) 1.
BASIS OF PRESENTATION Discontinued operations In accordance with
the provisions related to discontinued operations within Statement
of Financial Accounting Standards (SFAS) No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," the results of
operations for the following components have been reflected in the
Consolidated Statement of Operations as discontinued operations
(see Note 7): -- retail travel centers concentrated in the
Midsouth, part of the previously reported Petroleum Services
segment; -- refining and marketing operations in the Midsouth,
including the Midsouth refinery, part of the previously reported
Petroleum Services segment; -- Texas Gas Transmission Corporation,
previously one of Gas Pipeline's segments; -- natural gas
properties in the Hugoton and Raton basins, previously part of the
Exploration & Production segment; -- bio-energy operations,
part of the previously reported Petroleum Services segment; --
general partnership interest and limited partner investment in
Williams Energy Partners, previously the Williams Energy Partners
segment; -- the Colorado soda ash mining operations, part of the
previously reported International segment; -- certain gas
processing, natural gas liquids fractionation, storage and
distribution operations in western Canada and at a plant in
Redwater, Alberta, previously part of the Midstream Gas &
Liquids (Midstream) segment; -- refining, retail and pipeline
operations in Alaska, part of the previously reported Petroleum
Services segment; and -- straddle plants in western Canada,
previously part of the Midstream segment. During fourth-quarter
2004, we reclassified the operations of Gulf Liquids New River
Project LLC (Gulf Liquids) to continuing operations within our
Midstream segment in accordance with Emerging Issues Task Force
(EITF) Issue No. 03-13, "Applying the Conditions in Paragraph 42 of
FASB Statement No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, in Determining Whether to Report Discontinued
Operations" (EITF 03-13), which was issued in the fourth quarter.
Under the provisions of EITF 03-13, Gulf Liquids activities no
longer qualify for reporting as discontinued operations based on
management's expectation that we will continue to have significant
commercial activity with the disposed entity. The operations of
Gulf Liquids were reclassified to continuing operations within our
Midstream segment. All periods presented reflect these
reclassifications. Unless indicated otherwise, the information in
the Notes to the Consolidated Statement of Operations relates to
our continuing operations. Other components of our business may be
classified as discontinued operations in the future as those
operations are sold or classified as held-for-sale. 2. HEDGE
ACCOUNTING - POWER SEGMENT As a result of our past intent to exit
the Power business, our Power segment did not previously qualify
for hedge accounting. Therefore, we reported changes in the forward
fair value of our derivative contracts in earnings as unrealized
gains or losses. However, with the decision to retain the business,
Power became eligible for hedge accounting under SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," and
elected hedge accounting beginning October 1, 2004, on a
prospective basis for certain qualifying derivative contracts.
Under cash flow hedge accounting, to the extent that the hedges are
effective, prospective changes in the forward fair value of the
hedges are reported as changes in other comprehensive income in the
equity section of the balance sheet, and then reclassified to
earnings when the underlying hedged transactions (i.e. power sales
and gas purchases) affect earnings. 3. SEGMENT REVENUES AND PROFIT
(LOSS) Segments - performance measurement We currently evaluate
performance based on segment profit (loss) from operations, which
includes revenues from external and internal customers, operating
costs and expenses, depreciation, depletion and amortization,
equity earnings (losses) and income (loss) from investments
including gains/losses on impairments related to investments
accounted for under the equity method. Equity earnings (losses) and
income (loss) from investments are reported in investing income in
the Consolidated Statement of Operations. The majority of energy
commodity hedging by certain of our business units is done through
intercompany derivatives with Power which, in turn, enters into
offsetting derivative contracts with unrelated third parties. Power
bears the counterparty performance risks associated with unrelated
third parties. External Revenues of our Exploration &
Production segment includes third party oil and gas sales, more
than offset by transportation expenses and royalties due third
parties on intercompany sales. Reclassification of operations Due
in part to FERC Order 2004, management and decision-making control
of certain activities were transferred from our Midstream segment.
Certain regulated gas gathering assets were transferred from our
Midstream segment to our Gas Pipeline segment effective June 1,
2004, and our equity method investment in the Aux Sable gas
processing plant and related business was transferred from our
Midstream segment to our Power segment effective September 21,
2004. Consequently, the results of operations were similarly
reclassified. All periods presented reflect these classifications.
Exploration Midstream Gas & Gas & (Millions) Power Pipeline
Production Liquids Three months ended December 31, 2004 Segment
revenues: External $1,784.8 $345.7 $(27.7) $859.2 Internal 256.7
5.6 241.8 7.9 Total segment revenues 2,041.5 351.3 214.1 867.1 Less
intercompany interest rate swap income 2.9 - - - Total revenues
$2,038.6 $351.3 $214.1 $867.1 Segment profit (loss) $(44.4) $156.8
$70.9 $235.7 Less: Equity earnings (losses) 3.5 8.8 3.2 5.5 Income
(loss) from investments - - - (16.8) Intercompany interest rate
swap income 2.9 - - - Segment operating income (loss) $(50.8)
$148.0 $67.7 $247.0 General corporate expenses Consolidated
operating income Three months ended December 31, 2003 Segment
revenues: External $2,455.5 $361.6 $(8.8) $702.1 Internal 139.6 2.4
175.7 7.6 Total segment revenues 2,595.1 364.0 166.9 709.7 Less
intercompany interest rate swap income 9.7 - - - Total revenues
$2,585.4 $364.0 $166.9 $709.7 Segment profit (loss) $(101.0) $148.2
$50.1 $63.8 Less: Equity earnings (losses) .4 6.0 1.8 1.0 Income
(loss) from investments (.5) - - 4.3 Intercompany interest rate
swap income 9.7 - - - Segment operating income (loss) $(110.6)
$142.2 $48.3 $58.5 General corporate expenses Consolidated
operating income (Millions) Other Eliminations Total Three months
ended December 31, 2004 Segment revenues: External $2.2 $- $2,964.2
Internal 4.3 (516.3) - Total segment revenues 6.5 (516.3) 2,964.2
Less intercompany interest rate swap income - (2.9) - Total
revenues $6.5 $(513.4) $2,964.2 Segment profit (loss) $(21.0) $-
$398.0 Less: Equity earnings (losses) (9.3) - 11.7 Income (loss)
from investments (.1) - (16.9) Intercompany interest rate swap
income - - 2.9 Segment operating income (loss) $(11.6) $- 400.3
General corporate expenses (35.3) Consolidated operating income
$365.0 Three months ended December 31, 2003 Segment revenues:
External $3.1 $- $3,513.5 Internal 9.8 (335.1) - Total segment
revenues 12.9 (335.1) 3,513.5 Less intercompany interest rate swap
income - (9.7) - Total revenues $12.9 $(325.4) $3,513.5 Segment
profit (loss) $(7.7) $- $153.4 Less: Equity earnings (losses) (1.1)
- 8.1 Income (loss) from investments (.6) - 3.2 Intercompany
interest rate swap income - - 9.7 Segment operating income (loss)
$(6.0) $- 132.4 General corporate expenses (24.5) Consolidated
operating income $107.9 Exploration Midstream Gas & Gas &
(Millions) Power Pipeline Production Liquids Year ended December
31, 2004 Segment revenues: External $8,346.2 $1,345.0 $(84.0)
$2,844.7 Internal 912.5 17.3 861.6 37.9 Total segment revenues
9,258.7 1,362.3 777.6 2,882.6 Less intercompany interest rate swap
loss (13.7) - - - Total revenues $9,272.4 $1,362.3 $777.6 $2,882.6
Segment profit (loss) $76.7 $585.8 $235.8 $549.7 Less: Equity
earnings (losses) 3.9 29.2 11.9 14.6 Loss from investments - (1.0)
- (17.1) Intercompany interest rate swap loss (13.7) - - - Segment
operating income (loss) $86.5 $557.6 $223.9 $552.2 General
corporate expenses Consolidated operating income Year ended
December 31, 2003 Segment revenues: External $12,570.5 $1,344.3
$(36.3) $2,740.2 Internal 622.1 24.0 816.0 44.6 Total segment
revenues 13,192.6 1,368.3 779.7 2,784.8 Less intercompany interest
rate swap loss (2.9) - - - Total revenues $13,195.5 $1,368.3 $779.7
$2,784.8 Segment profit (loss) $135.1 $555.5 $401.4 $197.3 Less:
Equity earnings (losses) (4.9) 15.8 8.9 (.8) Income (loss) from
investments (2.4) .1 - 20.1 Intercompany interest rate swap loss
(2.9) - - - Segment operating income (loss) $145.3 $539.6 $392.5
$178.0 General corporate expenses Consolidated operating income
(Millions) Other Eliminations Total Year ended December 31, 2004
Segment revenues: External $9.4 $- $12,461.3 Internal 23.4
(1,852.7) - Total segment revenues 32.8 (1,852.7) 12,461.3 Less
intercompany interest rate swap loss - 13.7 - Total revenues $32.8
$(1,866.4) $12,461.3 Segment profit (loss) $(41.6) $- $1,406.4
Less: Equity earnings (losses) (9.7) - 49.9 Loss from investments
(17.4) - (35.5) Intercompany interest rate swap loss - - (13.7)
Segment operating income (loss) $(14.5) $- 1,405.7 General
corporate expenses (119.8) Consolidated operating income $1,285.9
Year ended December 31, 2003 Segment revenues: External $32.3 $-
$16,651.0 Internal 39.7 (1,546.4) - Total segment revenues 72.0
(1,546.4) 16,651.0 Less intercompany interest rate swap loss - 2.9
- Total revenues $72.0 $(1,549.3) $16,651.0 Segment profit (loss)
$(50.5) $- $1,238.8 Less: Equity earnings (losses) 1.3 - 20.3
Income (loss) from investments (43.1) - (25.3) Intercompany
interest rate swap loss - - (2.9) Segment operating income (loss)
$(8.7) $- 1,246.7 General corporate expenses (87.0) Consolidated
operating income $ 1,159.7 4. ASSET SALES, IMPAIRMENTS AND OTHER
ACCRUALS Significant gains or losses from asset sales, impairments
and other accruals included in other (income) expense - net within
segment costs and expenses for the three months and the years ended
December 31, 2004 and 2003, are as follows: (Income) Expense Three
months ended Years ended December 31, December 31, (millions) 2004
2003 2004 2003 Power Gain on sale of Jackson power contract $ - $-
$- $(188.0) Impairment of goodwill - 45.0 - 45.0 Impairment of
generation facilities - 44.1 - 44.1 Commodity Futures Trading
Commission settlement - - - 20.0 California rate refund and other
accrual adjustments - 19.5 - 19.5 Gas Pipeline Write-off of
previously-capitalized costs on an idled segment of a pipeline - -
9.0 - Write-off of software development costs due to cancelled
implementation - .1 - 25.6 Exploration & Production Loss
provision related to an ownership dispute 4.1 - 15.4 - Net gain on
sale of certain natural gas properties - (.3) - (96.7) Midstream
Gas & Liquids Gain on sale of the wholesale propane business -
(16.2) - (16.2) Impairment of Gulf Liquids assets 2.5 16.4 2.5
108.7 Arbitration award on a Gulf Liquids insurance claim dispute
(93.6) - (93.6) - Other Gain on sale of blending assets - - - (9.2)
Environmental accrual related to the Augusta refinery facility 11.8
- 11.8 - Power Goodwill. During 2003, we were pursuing a strategy
of exiting the Power business. Because of this and the market
conditions in which this business operated, we evaluated Power's
remaining goodwill for impairment. In estimating the fair value of
the Power segment, we considered our derivative portfolio which is
carried at fair value on the balance sheet, and our non- derivative
portfolio, which is no longer carried at fair value on the balance
sheet. Because of the significant negative fair value of certain of
our non- derivative contracts, we may be unable to realize our
carrying value of this reporting unit. As a result, we recognized a
$45 million impairment of the remaining goodwill within Power
during 2003. Generation facilities. The 2003 impairment relates to
the Hazelton generation facility. Fair value was estimated using
future cash flows based on current market information and
discounted at a risk adjusted rate. California rate refund and
other accrual adjustments. In addition to the $19.5 million charge
included in other (income) expense - net within segment costs and
expenses for 2003, a $13.8 million charge is recorded within costs
and operating expenses. These two amounts, totaling $33.3 million,
are for California rate refund and other accrual adjustments and
relate to power marketing activities in California during 2000 and
2001. Midstream Gas & Liquids Impairment of Gulf Liquids
assets. During second-quarter 2003, our Board of Directors approved
a plan authorizing management to negotiate and facilitate a sale of
the assets of Gulf Liquids. We are currently negotiating purchase
and sale agreements related to the sale of these assets. We expect
the sale of these operations to close by March 31, 2005. We
recognized impairment charges of $2.5 million in the fourth quarter
of 2004 and $108.7 million during 2003 to reduce the carrying cost
of the long-lived assets to estimated fair value less costs to sell
the assets. We estimated fair value based on a probability-weighted
analysis of various scenarios including expected sales prices,
discounted cash flows and salvage valuations. Prior to
fourth-quarter 2004, the operations of Gulf Liquids were included
in discontinued operations. Arbitration award on a Gulf Liquids
insurance claim dispute. Winterthur International Insurance Company
(Winterthur) issued policies to Gulf Liquids providing financial
assurance related to construction contracts. After disputes arose
regarding obligations under the construction contracts, Winterthur
disputed coverage resulting in arbitration between Winterthur and
Gulf Liquids. In July 2004, the arbitration panel awarded Gulf
Liquids $93.6 million, plus interest of $9.6 million. Following the
arbitration decision, Winterthur filed a Petition to Vacate the
Final Award in the New York State court and Gulf Liquids filed a
Cross-Petition to Confirm the Final Award. Prior to the State
court's ruling, Winterthur agreed to the terms of the award and on
November 1, 2004, remitted the proceeds to us. As a result, we
recognized total income of approximately $103 million related to
the arbitration award in fourth-quarter 2004. Other Environmental
accrual related to the Augusta refinery facility. As a result of
new information obtained in the fourth quarter related to the
Augusta refinery site, we have accrued additional amounts for
completion of work under a current Administrative Order on Consent
and reasonably estimated net remediation costs. Accruals may be
adjusted as more information from the site investigation becomes
available. 5. INVESTING INCOME Investing income for the three
months and the years ended December 31, 2004 and 2003, is as
follows: Three months ended Years ended December 31, December 31,
(millions) 2004 2003 2004 2003 Equity earnings* $11.7 $8.1 $49.9
$20.3 Income (loss) from investments* (16.9) 3.2 (35.5) (25.3)
Impairments of cost-based investments (5.1) (.4) (28.5) (35.0)
Interest income and other 27.1 18.6 62.1 113.2 Total $16.8 $29.5
$48.0 $ 73.2 * Item also included in segment profit (see Note 3).
Income (loss) from investments for the year ended December 31,
2004, includes: -- a $10.8 million additional impairment of our
investment in equity securities of Longhorn Partners, Pipeline L.P.
(Longhorn) primarily associated with the terms of a
recapitalization plan, which is included in our Other segment; --
$6.5 million net unreimbursed Longhorn recapitalization advisory
fees, which is included in our Other segment; and -- a $16.9
million impairment of our equity investment in Discovery Pipeline
resulting from management's estimate of fair value, which is
included in our Midstream segment. Income (loss) from investments
for the year ended December 31, 2003, includes: -- a $43.1 million
impairment of our investment in equity and debt securities of
Longhorn, which is included in our Other segment; -- a $14.1
million impairment of our equity interest in Aux Sable, which is
included in our Power segment; -- a $13.5 million gain on the sale
of stock in eSpeed Inc., which is included in our Power segment;
and -- an $11.1 million gain on sale of our equity interest in West
Texas LPG Pipeline, L.P. which is included in our Midstream
segment. Impairments of cost-based investments for the years ended
December 31, 2004 and 2003, primarily include impairments of
certain international investments. 6. EARLY DEBT RETIREMENT Early
debt retirement costs include payments in excess of the carrying
value of the debt, dealer fees and the write-off of deferred debt
issuance costs and discount/premium on the debt. 7. DISCONTINUED
OPERATIONS Summarized results of discontinued operations The
following table presents the summarized results of discontinued
operations for the three months and the years ended December 31,
2004 and 2003. Income (loss) from discontinued operations before
income taxes for the years ended December 31, 2004 and 2003
includes charges of $152.7 million and $52.7 million, respectively,
to increase our accrued liability associated with litigation
concerning the Trans-Alaska Pipeline System Quality Bank. The
provision for income taxes for the year ended December 31, 2004, is
less than the federal statutory rate due primarily to the effect of
net Canadian tax benefits realized from the sale of the Canadian
straddle plants partially offset by the United States tax effect of
earnings associated with these assets. Three months ended Years
ended December 31, December 31, (millions) 2004 2003 2004 2003
Revenues $- $ 289.3 $353.4 $2,614.6 Income (loss) from discontinued
operations before income taxes $(.9) $32.5 $(121.3) 197.5
(Impairments) and gain (loss) on sales - net .6 (2.5) 200.5 277.7
Provision for income taxes (21.8) (10.4) (8.7) (148.6) Total income
(loss) from discontinued operations $(22.1) $19.6 $70.5 $326.6 2004
Completed transactions Canadian straddle plants On July 28, 2004,
we completed the sale of the Canadian straddle plants for
approximately $544 million in U.S. funds, including amounts paid to
our subsidiaries for amounts previously due from the straddle
plants. During third-quarter 2004, we recognized a pre-tax gain on
the sale of $189.8 million, which is included in (Impairments) and
gain (loss) on sales - net in the preceding table of summarized
results of discontinued operations. These assets were previously
written down to estimated fair value, resulting in a $36.8 million
impairment in 2002 and an additional $41.7 million impairment in
2003. In 2004, the fair value of the assets increased substantially
due primarily to renegotiation of certain customer contracts and a
general improvement in the market for processing assets. These
operations were part of the Midstream segment. Alaska refining,
retail and pipeline operations On March 31, 2004, we completed the
sale of our Alaska refinery, retail and pipeline and related assets
for approximately $304 million, subject to closing adjustments for
items such as the value of petroleum inventories. We received $279
million in cash at the time of sale and $25 million in cash during
the second quarter of 2004. Throughout the sales negotiation
process, we regularly reassessed the estimated fair value of these
assets based on information obtained from the sales negotiations
using a probability-weighted approach. As a result, impairment
charges of $8 million and $18.4 million were recorded in 2003 and
2002, respectively. We recognized a $3.6 million pre-tax gain on
the sale during first-quarter 2004. The gain and the 2003
impairment charge are included in (Impairments) and gain (loss) on
sales - net in the preceding table of summarized results of
discontinued operations. These operations were part of the
previously reported Petroleum Services segment. 2003 Completed
transactions Canadian liquids operations During the third quarter
of 2003, we completed the sales of certain gas processing, natural
gas liquids fractionation, storage and distribution operations in
western Canada and at our Redwater, Alberta plant for total
proceeds of $246 million in cash. We recognized pre-tax gains
totaling $92.1 million in 2003 on the sales which are included in
(Impairments) and gain (loss) on sales - net in the preceding table
of summarized results of discontinued operations. These operations
were part of the Midstream segment. Soda ash operations On
September 9, 2003, we completed the sale of our soda ash mining
facility located in Colorado. The December 31, 2002 carrying value
resulted from the recognition of impairments of $133.5 million and
$170 million in 2002 and 2001, respectively, and reflected the then
estimated fair value less cost to sell. During 2003, ongoing sale
negotiations continued to provide new information regarding
estimated fair value, and, as a result, we recognized additional
impairment charges of $17.4 million in 2003. We also recognized a
pre-tax loss on the sale in 2003 of $4.2 million. The 2003
impairments and the loss on sale are included in (Impairments) and
gain (loss) on sales - net in the preceding table of summarized
results of discontinued operations. The soda ash operations were
part of the previously reported International segment. Williams
Energy Partners On June 17, 2003, we completed the sale of our 100
percent general partnership interest and 54.6 percent limited
partner investment in Williams Energy Partners for $512 million in
cash and assumption by the purchasers of $570 million in debt. In
December 2003, we received additional cash proceeds of $20 million
following the occurrence of a contingent event. We recognized a
total pre-tax gain of $310.8 million on the sale during 2003,
including the $20 million of additional proceeds, all of which is
included in (Impairments) and gain (loss) on sales - net in the
preceding table of summarized results of discontinued operations.
We deferred an additional $113 million associated with certain
indemnifications we provided to the purchasers under the sales
agreement. In second-quarter 2004, we settled these
indemnifications with an agreement to pay $117.5 million over a
four-year period. Williams Energy Partners was a previously
reported segment. Bio-energy facilities On May 30, 2003, we
completed the sale of our bio-energy operations for approximately
$59 million in cash. During 2003, we recognized a pre-tax loss on
the sale of $5.4 million, which is included in (Impairments) and
gain (loss) on sales - net in the preceding table of summarized
results of discontinued operations. These assets were previously
written down by $195.7 million, including $23 million related to
goodwill, to their estimated fair value less cost to sell at
December 31, 2002. These operations were part of the previously
reported Petroleum Services segment. Natural gas properties On May
30, 2003, we completed the sale of natural gas exploration and
production properties in the Raton Basin in southern Colorado and
the Hugoton Embayment in southwestern Kansas. This sale included
all of our interests within these basins. We recognized a $39.7
million pre-tax gain on the sale during 2003. The gain is included
in (Impairments) and gain (loss) on sales - net in the preceding
table of summarized results of discontinued operations. These
properties were part of the Exploration & Production segment.
Texas Gas On May 16, 2003, we completed the sale of Texas Gas
Transmission Corporation for $795 million in cash and the
assumption by the purchaser of $250 million in existing Texas Gas
debt. We recorded a $109 million impairment charge in 2003
reflecting the excess of the carrying cost of the long-lived assets
over our estimate of fair value based on our assessment of the
expected sales price pursuant to the purchase and sale agreement.
The impairment charge is included in (Impairments) and gain (loss)
on sales - net in the preceding table of summarized results of
discontinued operations. No significant gain or loss was recognized
on the subsequent sale. Texas Gas was a segment within Gas
Pipeline. Midsouth refinery and related assets On March 4, 2003, we
completed the sale of our refinery and other related operations
located in Memphis, Tennessee, for $455 million in cash. These
assets were previously written down by $240.8 million to their
estimated fair value less cost to sell at December 31, 2002. We
recognized a pre-tax gain on sale of $4.7 million in the first
quarter of 2003. During the second quarter of 2003, we recognized a
$24.7 million gain on the sale of an earn-out agreement we retained
in the sale of the refinery. These gains are included in
(Impairments) and gain (loss) on sales - net in the preceding table
of summarized results of discontinued operations. These operations
were part of the previously reported Petroleum Services segment.
Williams travel centers On February 27, 2003, we completed the sale
of our travel centers for approximately $189 million in cash. We
had previously written these assets down by $146.6 million in 2002
and $14.7 million in 2001 to their then estimated fair value to
sell at December 31, 2002, and did not recognize a significant gain
or loss on the sale. These operations were part of the previously
reported Petroleum Services segment. 8. CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLES On October 25, 2002, the EITF reached a
consensus on Issue No. 02-3, "Issues Related to Accounting for
Contracts Involved in Energy Trading and Risk Management
Activities." This Issue rescinded EITF Issue No. 98-10, "Accounting
for Contracts Involved in Energy Trading and Risk Management
Activities," the impact of which is to preclude fair value
accounting for energy trading contracts that are not derivatives
pursuant to SFAS No. 133 and commodity trading inventories. The
EITF also reached a consensus that gains and losses on derivative
instruments within the scope of SFAS No. 133 should be shown net in
the income statement if the derivative instruments are held for
trading purposes. The consensus is applicable for fiscal periods
beginning after December 15, 2002, except for physical trading
commodity inventories purchased after October 25, 2002, which may
not be reported at fair value. We initially applied the consensus
effective January 1, 2003, and reported the initial application as
a cumulative effect of a change in accounting principle. The effect
of initially applying the consensus reduced net income by
approximately $762.5 million on an after tax basis. Physical
trading commodity inventories at December 31, 2003, that were
purchased prior to October 25, 2002, were reported at fair value at
December 31, 2003, and included in the effect of initially applying
the consensus. The change results primarily from power tolling load
serving, transportation and storage contracts not meeting the
definition of a derivative and no longer being reported at fair
value. These contracts are now accounted for under an accrual
model. Physical trading commodity inventories are stated at cost,
not to be in excess of market. 9. RECENT ACCOUNTING STANDARDS In
December 2004, the Financial Accounting Standards Board issued
revised SFAS No. 123, "Share-Based Payment." The statement requires
that compensation cost for all share based awards to employees be
recognized in the financial statements at fair value. The Statement
is effective as of the beginning of the first interim or annual
reporting period that begins after June 15, 2005. We currently
intend to adopt the new statement as of the interim reporting
period beginning July 1, 2005. Prior to adoption, we will continue
to account for our stock-based compensation plans under Accounting
Principles Board Opinion No. 25 and related guidance while applying
the proforma disclosure requirements of SFAS No. 148, "Accounting
for Stock-Based Compensation- Transition and Disclosure-an
amendment of SFAS No. 123." PRNewswire -- Feb. 23 END FIRST AND
FINAL ADD DATASOURCE: Williams
Copyright
