The Williams Companies, Inc.
May 23, 2002
Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
RE: File No. S7-08-02
Dear Mr. Katz,
The Williams Companies, Inc. appreciates the opportunity to provide comments on the proposed rule for "Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports." We understand the emphasis being placed on more timely financial information being made available to investors and regulators. We believe this concept should be a priority and support the direction the Commission is establishing in providing clear and consistent guidance to public filers. Our comments in this letter are offered in a constructive and honest approach as we provide our observations and suggestions regarding the challenges to meeting earlier filing dates.
As we evaluate the impact of the proposed rule on Williams in the context of today's skeptical analyst/investor/business news reporter, we find ourselves in a paradox. The demand for financial information being available more quickly (some would suggest real time information) than historical standards can be compromised by increased disclosure requirements, the desire to provide more robust MD&A analysis, and continued complex business transactions. In all of these areas, we find that the information and expertise to accurately describe and disclose business activities requires the involvement of an increasing number of management. Many companies, not unlike Williams, are trying to find reasonable methods to reduce costs by streamlining processes. While we are able to improve processes and utilize technology to assist us in meeting earlier filing dates, we believe it is critical that the analysis, decision-making and completeness of disclosures not be compromised by earlier reporting dates. The reality is that our accounting groups and our outside public accountants who are responsible for preparing these periodic reports already work significant overtime to meet current filing requirements. In addition, our preparers have multiple responsibilities and other job requirements related to both internal and external financial reporting. While that is clearly our challenge, we believe that it probably a situation that is also present in other companies. Accelerating the time requirements will increase the concentration of work in a shorter time frame.
We have a philosophy at Williams that the release of any financial information, whether a quarterly earnings release, an annual report or and any other important business transaction, is done only when we believe we have the best information available at the time to determine our accounting and provide complete disclosures appropriate and required under the circumstances. We strive to maintain a high level of disclosure that provides the reader with qualitative information to better understand the significant business factors influencing our results and financial condition. Williams' accounting and reporting is continually challenged by complex transactions completed near the end of a reporting period, issues associated with the valuation of energy related contracts in its energy trading and marketing operation, and other complex accounting estimates such as asset impairment valuation. In the industry and current business environment in which Williams operates, complex accounting and reporting is the rule and not the exception. There have been instances that we have delayed significant and previously planned releases of quarterly or annual financial results to ensure that we have gathered all the facts, done the proper analysis, reviewed the accounting guidance and prepared the related disclosures in a complete and understandable manner. While streamlining processes and utilizing technology to accumulate and summarize information has helped improve our ability to be more timely, streamlined processes and technology can only go so far. The exercise of prudent judgement and careful decision-making by management are also significant components in finding the "right answer." This process, which can be very time intensive, ensures that we issue complete and accurate financial information.
With the above discussion as a "back-drop", we provide the following suggestions and comments for your consideration.
Alternate Form 10-Q Filing Date
The 30-day filing requirement for the Form 10-Q will be more difficult to meet than a 60-day requirement for the Form 10-K because it represents a much shorter period of time following earnings release. For companies or industries with complex transactions or accounting such as Williams, earnings release may not currently occur until the fourth week following the quarter end. For example, Williams first-quarter 2002 earnings were released April 25th. This leaves only five calendar days (three business days) before April 30th, the proposed Form 10-Q filing date. Prior to press release, the focus is on finalizing the income statement, analyzing the balance sheet and cash flow statement, completing the audit work, and drafting the press release. After press release, the focus shifts to finalizing the presentation of the balance sheet and cash flow statement, completing the remaining footnotes and writing the detailed management's discussion and analysis. Such a short period of time is not sufficient to complete this work and have the report reviewed by management, the audit committee and the external auditors.
An alternative approach for the Form 10-Q filing date would be to require the Form 10-Q be filed by April 30 or ten calendar days following press release, whichever is later, but not to exceed the current 45-day reporting requirement. This approach will still accelerate filings as compared to current practice while also allowing sufficient time to complete the filing following press release for those companies or industries with complex transactions or accounting that delay press release. We do not believe such an approach would lead to a delay in the release of earnings because companies receive pressure from investors and analysts to release earnings as quickly as possible and in a similar timeframe as their peer companies. We believe that companies will continue to release earnings as soon as finalized and reviewed by the external auditors.
The current proposal, which would be effective for calendar year-end registrants' 2002 Form 10-K, provides for no transition or test period for the Form 10-K accelerated filing. We would suggest that instead of moving directly to the accelerated filing dates as proposed, the move be made in steps. For example, the Form 10-K filing date could first be revised from 90 days to 75 days for the first annual filing and then to 60 days for the second annual filing.
If an alternative similar to the one discussed above for Form 10-Q filing dates is not adopted, we believe additional time to transition to the accelerated filing date for the Form 10-Q is necessary. Similar to the step approach for the Form 10-K, an intermediate step for Form 10-Q filings might be 37 days for the first three quarterly filings following the first accelerated annual filing and then 30 days for subsequent quarterly filings. This would provide registrants the time to put new processes in place and to test those processes before being required to meet the final accelerated filing dates. The need for additional time periods for implementation of new processes surrounding the Form 10-Q filing is due to the shorter timeframe following press release in which to complete such filings.
We support the proposed definition of "accelerated filer." In addition to helping small businesses, this eases the burden of accelerated filing dates for large businesses that have wholly-owned subsidiaries with public debt. Without such a distinction, large businesses with multiple filing requirements would be overly burdened by accelerated reporting dates.
We appreciate the opportunity to comment and would be pleased to discuss our views with the SEC staff.
Controller and Chief Accounting Officer
The Williams Companies, Inc.