SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Form 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended July 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File No. 0-8190
Williams Industries, Incorporated
(Exact name of Registrant as specified in its charter)
Virginia 54-0899518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2849 Meadow View Road
Falls Church, Virginia 22042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(703) 560-5196
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $0.10 Par Value
(Title of Class)
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 ( )
Indicate by check mark if disclosure of delinquent filers
pursuant to Rule 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
Aggregate market value of voting stock held by non-
affiliates of the Registrant, based on last sale price as reported
on September 22, 2000:
$9,427,677
Shares outstanding at September 22, 2000 3,591,496
The following document is incorporated herein by reference
thereto in response to the information required by Part III of
this report (information about officers and directors):
Proxy Statement Relating to Annual Meeting to be held
November 11, 2000.
PART I
Safe Harbor for Forward Looking Statements
The Company is including the following cautionary statements
to make applicable and take advantage of the safe harbor
provisions within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934 for
any forward-looking statements made by, or on behalf of, the
Company in this document and any materials incorporated herein by
reference. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements that
are other than statements of historical facts. Such forward-
looking statements may be identified, without limitation, by the
use of the words "anticipates," "estimates," "expects," "intends,"
and similar expressions. From time to time, the Company or one of
its subsidiaries individually may publish or otherwise make
available forward-looking statements of this nature. All such
forward-looking statements, whether written or oral, and whether
made by or on behalf of the Company or its subsidiaries, are
expressly qualified by these cautionary statements and any other
cautionary statements which may accompany the forward-looking
statements. In addition, the Company disclaims any obligation to
update any forward-looking statements to reflect events or
circumstances after the date hereof.
Forward-looking statements made by the Company are subject to
risks and uncertainties that could cause actual results or events
to differ materially from those expressed in, or implied by, the
forward-looking statements. These forward-looking statements may
include, among others, statements concerning the Company's revenue
and cost trends, cost-reduction strategies and anticipated
outcomes, planned capital expenditures, financing needs and
availability of such financing, and the outlook for future
construction activity in the Company's market areas. Investors or
other users of the forward-looking statements are cautioned that
such statements are not a guarantee of future performance by the
Company and that such forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ
materially from those expressed in, or implied by, such
statements. Some, but not all of the risk and uncertainties, in
addition to those specifically set forth above, include general
economic and weather conditions, market prices, environmental and
safety laws and policies, federal and state regulatory and
legislative actions, tax rates and policies, rates of interest and
changes in accounting principles or the application of such
principles to the Company.
RESTATEMENT DISCLOSURE
Subsequent to the filing of its July 31, 1999 annual report
on Form 10-K, the Company became aware of certain errors that had
been made in the accounting for its worker's compensation
insurance expense over a period of several years. These errors
are detailed in Footnote 17 (Restatement) accompanying this
report.
Item 1. Business
A. General Development of Business
In the decades since its founding, Williams Industries,
Incorporated (the Company) has been a leader in the construction
services market, providing specialized services to customers in
the commercial, industrial, institutional, and governmental
markets. These services are provided by operating subsidiaries
whose main lines of business include: steel, precast concrete and
miscellaneous metals erection and installation; crane rental,
heavy and specialized hauling and rigging; fabrication of welded
steel plate girders, rolled steel beams, and light structural and
other metal products; and the sale of insurance, safety and
related services.
The structure of the Company has not varied greatly in recent
years with Greenway Corporation, Piedmont Metal Products, Inc.,
Williams Bridge Company, Williams Equipment Corporation, and
Williams Steel Erection Company, Inc. providing the bulk of the
Company's revenue and opportunities for growth. Their efforts
are augmented by Construction Insurance Agency, Inc., Insurance
Risk Management Group, Inc., and WII Realty Management, which
provide necessary services for their sister companies as well as
outside customers. The parent holding company, Williams
Industries, Inc. provides a number of services for all of the
subsidiaries as well as dealing with outside audiences such as
financial institutions, shareholders, and governmental regulatory
agencies.
However, in keeping with the Company's comprehensive long-
range plan, strategic refinements to the operating subsidiaries
and overall corporate structure occur as business conditions
merit. The Company's acquisition of controlling interest in
S.I.P. Inc. of Delaware, a transaction that occurred shortly after
the close of Fiscal Year 2000, is viewed as a strategic move that
will allow the Company to grow its revenues, product offerings and
geographic base with a minimal capital outlay. S.I.P.'s
financial results will be consolidated with the Company's in the
first quarter of Fiscal Year 2001.
B. Financial Information About Industry Segments
The Company's activities are divided into four broad
categories: (1) Construction, which includes industrial,
commercial and governmental construction, and the construction,
repair and rehabilitation of bridges (2) Manufacturing, which
includes the fabrication of metal products; (3) Sales and
Services, which includes the rental, sale and service of heavy
construction equipment as well as construction services such as
rigging; and (4) Other, which includes insurance operations and
parent company transactions with unaffiliated parties. Financial
information about these segments is contained in Note 12 of the
Notes to Consolidated Financial Statements. The following table
sets forth the percentage of total revenue attributable to these
categories for the years ended July 31, 2000, 1999 and 1998:
Fiscal Year Ended July 31,
--------------------------
2000 1999 1998
---- ---- ----
Construction . . . . . . . . . . . 30% 28% 37%
Manufacturing. . . . . . . . . . . . 50% 49% 35%
Sales and Services . . . . . . . . . 19% 22% 25%
Other. . . . . . . . . . . . . . . . 1% 1% 3%
This mix has changed over the years as the Company continues
to organize its business into the most profitable configuration
possible. The percentages of total revenue will continue to
change as market conditions or new business opportunities warrant.
C. Narrative Description of Business
1. Construction
The Company specializes in structural steel erection, the
installation of architectural, ornamental and miscellaneous metal
products, and the installation of precast and prestressed concrete
products.
The Company owns a wide variety of construction equipment,
which is used to perform its contracts in a timely fashion. Labor
generally is obtained in the area where the particular project is
located; however, labor in the construction segment has been in
tremendous demand in recent years and shortages have occurred.
The Company has developed a number of outreach programs, including
an apprenticeship program as well as language training
opportunities, to make employment with the Company more
attractive. Because of these programs, the Company believes it
may have a slight competitive edge over other companies facing
similar hiring difficulties.
In the construction segment, the Company requires few raw
materials, such as steel or concrete, since these are generally
furnished by and are the responsibility of the firm that hires the
Company to provide the construction services.
The primary basis on which the Company is awarded
construction contracts is price, since most projects are awarded
on the basis of competitive bidding. While there are numerous
competitors for commercial and industrial construction in the
Company's geographic areas, the Company remains as one of the
larger and more diversified companies in its areas of operations.
Although revenue derived from any particular customer has
fluctuated significantly in recent years, no single customer has
accounted for more than 10% of consolidated revenue in Fiscal Year
2000. This was also the case in Fiscal 1999, but for the year
ended July 31, 1998, one customer accounted for 10.4% of
consolidated revenue and 23.6% of the construction revenue.
A portion of the Company's work is subject to termination for
convenience clauses in favor of the local, state, or federal
government entities who contracted for the work in which the
Company is involved. The law generally gives local, state, and
federal government entities the right to terminate contracts, for
a variety of reasons, and such rights are made applicable to
government purchasing by operation of law. While the Company
rarely contracts directly with such government entities, such
termination for convenience clauses are incorporated in the
Company's contracts by "flow down" clauses whereby the Company
stands in the shoes of its customers. The Company has not
experienced any such terminations in recent years, and because the
Company is not dependent upon any one customer or project,
management feels that any risk associated with performing work for
governmental entities are minimal.
a. Steel Construction
The Company engages in the installation of structural and
other steel products for a variety of buildings, bridges,
highways, industrial facilities, power generating plants and other
structures.
Most of the Company's steel construction revenue is received
on projects where the Company is a subcontractor to a material
supplier (generally a steel fabricator) or another contractor.
When the Company acts as the steel erection subcontractor, it is
invited to bid by the firm that needs the steel construction
services. Consequently, customer relations are important. During
Fiscal 2000, three customers comprised approximately 55% of
construction revenues.
The Company operates its steel erection business primarily in
the Mid-Atlantic region, with emphasis on the corridor between
Baltimore, Maryland and Norfolk, Virginia.
b. Concrete Construction
The Company erects structural precast and prestressed
concrete for various structures, such as multi-storied parking
facilities and processing facilities, and erects the concrete
architectural facades for buildings. The concrete erection
service generates its revenue from contracts with non-affiliated
customers, and the business is not dependent upon any particular
customer.
2. Manufacturing
The Company's fabricated products include steel plate girders
used in the construction of bridges and other projects, and light
structural metal products. In its manufacturing segment, the
Company obtains raw materials from a variety of sources on a
competitive basis and is not dependent on any one source of
supply.
Facilities in this segment are predominately open shop.
Management believes that its labor relations in this segment are
good.
Competition in this segment, based on price, quality and
service, is intense. Revenue derived from any particular customer
fluctuates significantly from year to year. In Fiscal 1998, no
single customer accounted for more than 10% of consolidated
revenue. In Fiscal 1999, one customer accounted for 19.9% of
consolidated revenue and 40.8% of manufacturing revenue. In
Fiscal 2000, one customer accounted for about 25% of manufacturing
revenue.
a. Steel Manufacturing
The Company, through its subsidiary, Williams Bridge Company,
has two plants for the fabrication of steel plate girders and
other components used in the construction, repair and
rehabilitation of highway bridges and grade separations.
One of these plants, located in Manassas, Virginia, is a
large heavy plate girder fabrication facility and contains a main
fabrication shop, ancillary shops and offices totaling
approximately 46,000 square feet, together with rail siding.
The other plant, located on 17 acres in Richmond, Virginia,
is a full service fabrication facility and contains a main
fabrication shop, ancillary shops and offices totaling
approximately 128,000 square feet.
Both facilities have internal and external handling
equipment, modern fabrication equipment, large storage and
assembly areas and are American Institute of Steel Construction,
Category III, Fracture Critical Bridge Shops.
All facilities are in good repair and designed for the uses
to which they are applied. Since virtually all production at these
facilities is for specific contracts rather than for inventory or
general sales, utilization can vary from time to time.
b. Light Structural Metal Products
The Company's subsidiary, Piedmont Metal Products,
fabricates light structural metal products at a Company-owned
facility in Bedford, Virginia. For the past several years,
Piedmont has made major improvements and expansion to its
facilities to enhance its manufacturing capabilities, as well as
its ability to finish product in inclement weather. The
subsidiary has also received American Institute of Steel
Construction, Category I certification, which will allow the
subsidiary to bid to a wider variety of customers, most notably
federal government procurement officers.
3. Sales and Services
The rental and sale of construction equipment and the rigging
and installation of equipment for utility and industrial
facilities is another major component of the Company. The Company
owns or leases a wide variety of construction equipment, used not
only by "in-house" companies for steel and precast concrete
erection and the transportation of manufactured materials, but
also by outside customers for a number of diverse applications.
a. Rigging and Installation of Equipment
Much of the equipment and machinery used by utilities and
other industrial concerns is so cumbersome that its installation
and preparation for use, and, to some extent, its maintenance,
requires installation equipment and skills not economically
feasible for those users to acquire and maintain. The Company's
construction equipment, personnel and experience are well suited
for such tasks, and the Company contracts for and performs those
services. Since management believes that the demand for these
services, particularly by utilities, is relatively stable
throughout business cycles, it is aggressively pursuing the
expansion of this phase of its construction services.
b. Equipment Rental and Sales
The Company requires a wide range of heavy construction
equipment in its construction business, but not all of the
equipment is in use at all times. To maximize its return on
investment in equipment, the Company rents equipment to
unaffiliated parties to the extent possible. Operating margins
from rentals are attractive because the direct cost of renting is
relatively low.
The Company's equipment rental subsidiaries maintain
extensive fleets of heavy equipment, including cranes, tractors
and trailers. Because of operational, maintenance and safety
issues, the Company routinely reviews its fleets to determine
whether or not components need to be updated or replaced.
4. Other
a. General
All segments of the Company are influenced by adverse weather
conditions, although the manufacturing subsidiaries are less
subject to delays for inclement weather than are the construction
components. The ability to acquire raw materials and to ship
finished product is, nevertheless, impacted by extreme weather.
It is also possible that manufacturing segment may have product
ready to ship, but inclement weather could have caused delays in
construction timetables that require adjustments by the
manufacturing companies. Because of the cyclicality and
seasonality prevalent in the Company's business, higher revenue
typically is recorded in the first (August through October) and
fourth (May through July) fiscal quarters when the weather
conditions are generally more favorable. This, however, was not
the case in Fiscal Year 2000 as the third (February through April)
quarter was extremely good for all of the Company's subsidiaries.
The combination of good weather and tremendous demand in the
construction industry coincided to allow the Company to produce
strong results in this quarter.
Management is not aware of any environmental regulations that
materially impact the Company's capital expenditures, earnings or
competitive position. Compliance with Occupational Safety and
Health Administration (OSHA) requirements may, on occasion,
increase short-term costs (although in the long-term, compliance
may actually reduce costs through workers' compensation savings);
however, since compliance is required industry wide, the Company
is not at a competitive disadvantage, and the costs are built into
the Company's normal bidding procedures.
The Company employs between 250 and 500 employees, many
employed on an hourly basis for specific projects, the actual
number varying with the seasons and timing of contracts. At July
31, 2000, the Company had 361 employees.
b. Insurance
Liability Coverage
Primary liability coverage for the Company and its
subsidiaries is provided by a policy of insurance with limits of
$1,000,000 and a $2,000,000 aggregate. The Company also carries
an "umbrella" policy that provides limits of $5,000,000 excess of
the primary. The primary policy has a $10,000 deductible. If
additional coverage is required on a specific project, the Company
makes those purchases.
Workers' Compensation Coverage
The Company has a "loss sensitive" workers' compensation
insurance program, the terms of which are negotiated by the
Company on a year-to-year basis. The Company accrues workers'
compensation insurance expense based on estimates of its costs
under the program.
Because of the dangerous nature of its business, the Company
maintains an aggressive safety inspection and training program,
designed not only to provide a safe work place for employees but
also to minimize difficulties for employees, their families and
the Company should an accident occur.
5. Backlog Disclosure
As of July 31, 2000, the Company's backlog was approximately
$35 million, as compared to $35.9 million as of July 31, 1999 and
$21.7 million as of July 31, 1998.
Item 2. Properties
At July 31, 2000, the Company owned approximately 82 acres of
industrial property, some of which currently is not developed but
may be used for future expansion. Approximately 39 acres are
near Manassas, in Prince William County, Virginia; 17 acres are in
Richmond, Virginia; and 26 acres in Bedford, in Virginia's
Piedmont section between Lynchburg and Roanoke.
The Company owns numerous large cranes, tractors and trailers
and other equipment. Management believes the equipment is in good
condition and is well maintained. During Fiscal Year 2000, the
Company continued to upgrade its fleet, both with new and used
equipment. Expenditures for such equipment totaled $1.2 million
in Fiscal Year 2000. The availability of used equipment at
attractive prices varies primarily with the construction industry
business cycle.
Item 3. Legal Proceedings
General
The Company is party to various claims arising in the
ordinary course of its business. Generally, claims exposure in
the construction services industry consists of employment claims
of various types of workers compensation, personal injury,
products' liability and property damage. The Company believes
that its insurance accruals, coupled with its liability coverage,
is adequate coverage for such claims.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders.
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
The Company's Common Stock trades on the NASDAQ National Market
System under the symbol (WMSI). The following table sets forth the high
and low sales prices for the periods indicated, as obtained from market
makers in the Company's stock.
8/1/98 11/1/98 2/1/99 5/1/99 8/1/99 11/1/99 2/1/00 5/1/00
10/31/98 1/31/99 4/30/99 7/31/99 10/31/99 1/31/00 4/30/00 7/31/00
- -------- ------- ------- ------- -------- ------- ------- -------
$4.00 $7.00 $6.00 $4.13 $4.88 $4.88 $3.37 $3.63
$2.88 $2.75 $3.50 $3.50 $3.25 $3.13 $2.50 $2.50
The prices shown reflect published prices, without retail
mark-up, markdown, or commissions and may not necessarily reflect
actual transactions.
The Company paid no cash dividends during the years ended
July 31, 2000 or 1999. The Company's board believes that the
current best utilization for cash is in the further development of
its business units and strategic expansion. Further, there are
certain covenants in the Company's current credit agreements that
prohibit cash dividends without the lenders' permission.
At September 22, 2000, there were 482 holders of record of
the Common Stock.
Item 6. Selected Financial Data
The following table sets forth selected financial data for
the Company and is qualified in its entirety by the more detailed
financial statements, related notes thereto, and other statistical
information appearing elsewhere in this report.
SELECTED CONSOLIDATED FINANCIAL DATA
(In millions, except per share data)
2000 1999 1998 1997 1996
(1) (1) (1) (1)
----- ----- ----- ----- -----
Statements of Earnings Data:
Revenue:
Construction . . . . $12.8 $ 9.4 $10.8 $14.7 $ 9.3
Manufacturing. . . . . 21.3 16.3 10.2 11.0 10.1
Sales and Services . . 8.0 7.2 7.1 7.7 6.8
Other. . . . . . . . . 0.8 0.5 0.8 0.9 1.0
----- ----- ----- ----- -----
Total Revenue. . . . . . . $42.9 $33.4 $28.9 $34.3 $27.2
Gross Profit:
Construction. . . . . $ 4.3 $ 3.3 $ 4.2 $ 4.9 $ 3.2
Manufacturing 7.1 5.9 3.1 3.4 3.0
Sales and Services 3.1 3.3 3.4 4.0 2.9
Other 0.8 0.5 0.8 0.9 1.0
----- ----- ----- ----- -----
Total Gross Profit . . . $15.3 $13.0 $11.5 $13.2 $10.1
Other Income: $ 0.1 $ 0.1 $ 0.4 $ 0.1 $ 2.5
Expense:
Overhead . . . . . . $ 4.4 $ 3.7 $ 3.1 $ 3.4 $ 3.1
General and
Administrative . 6.5 5.7 5.0 5.7 5.3
Depreciation . . . .. 1.2 1.3 1.2 1.1 1.0
Interest . . . . . .. 0.9 0.9 1.2 1.6 1.5
Income Tax (Benefit) 0.9 (2.0) (0.3) (1.7) -
----- ----- ----- ----- -----
Total Expense . . $13.9 $ 9.6 $10.2 $10.1 $10.9
Earnings Before
Extraordinary Item $ 1.5 $ 3.5 $ 1.7 $ 3.2 $ 1.7
Equity Loss (Earnings)
And Minority Interest - 0.1 (0.8) (0.2) 0.1
Extraordinary Item -
(Loss)Gain on Extinguish-
ment of Debt - (0.2) 0.9 3.2 0.8
----- ----- ----- ----- -----
Net Earnings $ 1.5 $ 3.4 $ 1.8 $ 6.2 $ 2.6
Earnings (Loss) Per Share:
Before Extraordinary
Item. $0.41 $1.00 $0.27 $1.13 $0.74
Extraordinary Item - (0.05) 0.29 1.20 0.31
Earnings Per Share:
Basic* $0.41 $0.95 $0.56 $2.33 $1.05
Diluted $0.41 $0.95 $0.51 $2.13 $1.02
Balance Sheet Data (at end of year):
Total Assets . . . . . . $35.0 $32.6 $29.1 $31.5 $28.0
Long Term Obligations. . 7.7 7.4 8.4 7.4 5.8
Total Liabilities. . . . 21.3 20.4 20.4 25.3 30.5
Stockholders equity. . . . 13.7 12.2 8.7 6.2 (2.5)
* No Dividends were paid on Common Stock during the above five-
year period.
(1) As restated. See Note 17 of Notes to Consolidated Financial
Statements.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Williams Industries, Inc. is the parent organization for
seven subsidiaries that provide specialized services and products
for the construction industry. The amount of commercial,
institutional, and governmental construction activity in the Mid-
Atlantic region, where the Company focuses its efforts, has been
higher than many other regions in recent years. For the Fiscal
Year Ended July 31, 2000, the Company produced a 28% increase in
revenue by virtue of the increased demand for its services and
products. While most of the Company's construction activities
are focused in Maryland, Virginia, and the District of Columbia,
products fabricated in the Company's manufacturing facilities are
shipped well beyond the region.
The subsidiaries of Williams Industries, Inc. operate in the
commercial, industrial, governmental and infrastructure
construction markets with the operating components divided into
construction, manufacturing, and sales and service segments. The
services provided include: steel, precast concrete and
miscellaneous metals erection and installation; crane rental,
heavy and specialized hauling and rigging; fabrication of welded
steel plate girders, rolled steel beams, "stay-in-place" bridge
decking, and light structural and other metal products; and the
sale of insurance, safety and related services.
In August 2000, the Company announced the acquisition of
controlling interest in S.I.P., Inc. of Delaware (S.I.P.).
S.I.P. manufactures "stay-in-place" metal decking. This
acquisition is only one way the Company intends to increase its
market share in existing geographic areas of business, as well as
expanding core business lines. S.I.P.'s results will be
consolidated in financial statements beginning August 1, 2000.
While management anticipates significant growth in the next
four to five years in the Company's manufacturing segment due to
increased governmental demand for highway projects, significant
opportunities are also occurring in commercial, industrial and
institutional construction markets.
Like others in the construction industry, the Company has
experienced difficulties in hiring and retaining qualified
personnel to meet the demand for its services. In order to meet
this challenge, the Company has developed a close working
relationship with the Virginia Council of Churches, which helps
sponsor and train refugee workers in various trades. The Company
is also working with the Virginia Department of Labor to
transition workers from companies that are downsizing to
appropriate positions in the Company's geographically diverse
subsidiaries.
The Company continues to benefit from the synergistic efforts
of its subsidiaries. The combination of manufacturing,
construction, and heavy hauling and lifting capabilities have
allowed the Company to offer a turnkey approach for its customers,
thereby increasing its competitiveness on some contracts.
The Company is continuing its program of capital
improvements, both in terms of equipment and physical facilities.
Although a portion of Fiscal Year 2000 expenditures was for new
offices at one subsidiary, the bulk of the expenditures relate to
revenue producing equipment such as cranes or upgraded
manufacturing facilities.
Financial Condition
Each of the Company's operating subsidiaries had increased
revenues for the twelve months ended July 31, 2000, resulting in
an overall revenue increase of more than $9 million or 28%.
Total corporate earnings before income taxes also increased by
$815,000 or 54%.
Direct costs, when viewed as a percentage of revenue,
increased in all areas. A considerable portion of the increase
was generated by labor costs, frequently related to overtime
necessary to keep major projects on schedule. Although this
problem has been mitigated by an aggressive hiring and training
program, the hiring, training and retention of qualified employees
remains a significant difficulty throughout the construction
industry.
Accounts receivable increased by nearly 15%. However, in
keeping with the increased receivables, the Company also increased
its allowance for doubtful accounts from $1,289,000 at July 31,
1999 to $2,862,000 at July 31, 2000. A portion of this increase
relates to contract negotiations and matters which management
believes may go to litigation prior to being resolved.
Due to the high volume of work produced during the year,
inventory declined, most specifically in the steel plate used by
the Company's manufacturing subsidiaries. Management does not
believe that replacing the inventory as needed will present a
problem because, due to the Company's improved financial
situation, a number of potential suppliers are available and
competing for the Company's business.
Bonding
The Company has a comprehensive bonding program with The
Mountbatten Surety Company, Inc. This program is believed to be
more than sufficient for the Company's needs. In addition to
this program, the Company has in excess of $6 million for a
specific job bonded with another underwriter. Although the
Company's ability to bond work is more than adequate, the Company
has traditionally relied on its superior reputation to acquire
work and will continue to do so. However, the Company recognizes
that, as it expands its geographic range for providing goods and
services, it will be necessary to provide bonds to clients
unfamiliar with the Company. This is not anticipated to present a
problem going forward.
Liquidity
The Company's operations require significant amounts of
working capital to procure materials for contracts to be performed
over relatively long periods, and for purchases and modifications
of specialized equipment. Furthermore, in accordance with normal
payment terms, the Company's customers often will retain a portion
of amounts otherwise payable to the Company during the course of a
project as a guarantee of completion of that project. To the
extent the Company is unable to receive project payments in the
early stages of a project, the Company's cash flow could be
adversely reduced.
As a result of the increased activity discussed elsewhere in
this document, the Company has been using cash to purchase
materials, equipment and other "start-up" costs associated with
manufacturing and construction lead times. Nevertheless, for the
year ended July 31, 2000, the Company's operating activities
provided net cash and cash equivalents of more than $1.4 million.
The Company made $932,000 in expenditures for property, plant
and equipment, and had proceeds of $431,000 from the sale of other
property, plant and equipment items. It should be noted that the
Company continues its previously reported trend of updating its
equipment assets, primarily though operating leases. Management
believes that cost efficient leasing instead of more traditional
buying and/or borrowing offers cash flow and balance sheet
advantages.
Financing activities, however, used net cash as the Company
repaid notes payable of $4,477,000 while only borrowing $3,891,000
in replacement financing, which was obtained at rates favorable to
the Company.
Management closely monitors cash needs to ensure that
adequate liquidity is maintained and that existing lines of credit
are used to the overall best advantage of the corporation.
Management is also monitoring the impact of inflation on its
costs, primarily in the area of major equipment purchases, and, to
a lesser extent, labor costs. Since the contracts on which the
Company bids are in most cases performed in the short term, the
Company generally has been successful in taking inflation in
account when structuring its bids.
Management believes that operations will generate sufficient
cash to fund activities. However, as revenues increase, it may
become necessary to increase the Company's credit facilities to
handle short-term cash requirements. Management, therefore, is
focusing on the proper allocation of resources to ensure stable
growth. Certain items that are not easily leased are being
obtained through capitalized loans, which then become part of the
Company's real property.
Operations
Each of the Company's subsidiaries has benefited from the
increased demand for their products and services in all the
Company's traditional market areas, as well as from the continuing
strengthened financial condition of the parent corporation.
Due to the tight demand for labor, both in the field and the
administrative offices, the subsidiaries are often sharing
personnel.
This synergy, coupled with relatively mild weather conditions
in the Company's traditional geographic work areas, lead to the
28% revenue increase shown on the accompanying Consolidated
Statement of Earnings.
1. Fiscal Year 2000 Compared to Fiscal Year 1999
Total revenue, based on the same number of operating
subsidiaries as the prior year, increased by more than 28% when
Fiscal 2000's revenue of $42,876,000 is compared to the
$33,379,000 produced in Fiscal 1999. Costs rose proportionally to
revenue, with the greatest increase in both revenue and costs
occurring in the manufacturing subsidiaries.
The $815,000 increase in earnings before income taxes, equity
earnings and minority interests from the $1,511,000 in Fiscal 1999
to the $2,326,000 in Fiscal 2000, was due to increased revenue and
gross profit and, in part, to a reduction in workers' compensation
expense for Fiscal 2000 resulting from an excellent safety record.
One of the most significant differences between Fiscal 2000
and Fiscal 1999 is the difference between the income tax provision
of $892,000 for Fiscal 2000 as compared to the $2,000,000 benefit
for Fiscal 1999. This delta of nearly $3 million is a major
factor in explaining the difference in the Company's net earnings
of $1,487,000 for Fiscal 2000 and $3,406,000 for Fiscal 1999.
Although the Company has significant net operating loss
carryforwards (NOLs), all of the benefits from these tax loss
carryforwards were recorded as a reduction in the company's
deferred tax asset valuation allowance in years prior to Fiscal
2000 due to management's estimate that it was more likely than not
that the benefits would be realized. Note 8 in the accompanying
Notes to Consolidated Financial Statements contains additional
information on this topic.
2. Fiscal Year 1999 Compared to Fiscal Year 1998
The difference of Fiscal Year 1999 results compared to those
of Fiscal Year 1998 is due to a combination of factors. Some
comparisons, such as those of revenue of $33,379,000 for the year
ended July 31, 1999 compared to $28,904,000 for the year ended
July 31, 1998, are straightforward. It is obvious that the
manufacturing segment had a significantly greater amount of work
in Fiscal Year 1999 than it did in Fiscal Year 1998.
However, comparing the net earnings of $3,406,000 for the
year ended July 31, 1999 to the net earnings of $1,800,000 for the
year ended July 31, 1998 requires detailed analysis into the
composition of the numbers.
In Fiscal Year 1999, the Company recognized a net tax
benefit of $2,000,000 compared to a net tax benefit of only
$343,000 for Fiscal Year 1998. (See Note 8 in the accompanying
"Notes to Consolidated Financial Statements").
The Company's equity in earnings (loss) of unconsolidated
affiliates also varied significantly between the years. During
the year ended July 31, 1998, the Company recognized a $800,000
write-down in its investment in a former unconsolidated affiliate,
Atlas Machine and Iron Works, due to the liquidation of Atlas's
assets by its secured creditor.
In contrast, Fiscal Year 1999's results were reduced by an
extraordinary loss of $192,000 on extinguishment of debt while
Fiscal Year 1998's results were enhanced by a $928,000 gain on
extinguishment of debt. The 1999 extraordinary loss was a result
of the Company closing a loan agreement with United Bank that
significantly changed the structure of the Company's notes
payable. The agreement allowed the Company to retire obligations
to CIT Group/Credit Finance, Inc. and to BB&T (formerly Franklin
National Bank), as well as pay the costs and expenses associated
with the closing. The new agreement, however, results in a
significant long-term reduction in interest expense. The 1998
extraordinary gain, by contrast, of $928,000 was the result of the
reversal of accounts payable in two closed subsidiaries.
Item 7a. Quantitative and Qualitative Disclosures About
Market Risk
Williams Industries, Inc. uses fixed and variable rate notes
payable, a tax-exempt bond issue, and a vendor credit facility to
finance its operations. These on-balance sheet financial
instruments, to the extent they provide for variable rates of
interest, expose the Company to interest rate risk, with the
primary interest rate exposure resulting from changes in the prime
rates or Industrial Revenue Bond (IRB) rate used to determine the
interest rates that are applicable to borrowings under the
Company's vendor credit facility and tax exempt bond.
The information below summarizes Williams Industries, Inc.'s
sensitivity to market risks associated with fluctuations in
interest rates as of July 31, 2000. To the extent that the
Company's financial instruments expose the Company to interest
rate risk, they are presented in the table below. The table
presents principal cash flows and related interest rates by year
of maturity of the Company's credit facility and tax-exempt bond
in effect at July 31, 2000. Notes 7 and 14 to the Consolidated
Financial Statements contain descriptions of the Company's credit
facility and tax exempt bond and should be read in conjunction
with the table below.
Financial Instruments by Expected Maturity Date
(In Thousands Except Interest Rates)
Year Ending July 31, 2001 2002 2003
------ ------ ------
Interest Rate Sensitivity
Notes Payable:
Variable Rate $ 156 $1,580 $ 85
Average Interest Rate 8.47% 10.73% 5.65%
Fixed Rate $1,358 $ 849 $1,009
Fixed Interest Rate 9.13% 9.80% 10.09%
Year Ending July 31, 2004 Thereafter Total Fair
Value
------ ------ ------ ------
Variable Rate $ 84 $ 810 $2,715 $2,700
Average Interest Rate 5.56% 5.00% 8.57%
Fixed Rate $ 571 $2,737 $6,524 $6,500
Fixed Interest Rate 9.87% 8.71% 9.27%
Item 8. Williams Industries, Incorporated
Consolidated Financial Statements for the Years ended
July 31, 2000, 1999, and 1998.
(See pages which follow.)
Item 9. Disagreements on Accounting and Financial Disclosures.
None.
Part III
Pursuant to General Instruction G(3) of Form 10-K, the
information required by Part III (Items 10, 11, 12 and 13) is
hereby incorporated by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission,
pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, in connection with the Company's Annual
Meeting of Shareholders scheduled to be held November 11, 2000.
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.
The following documents are filed as a part of this report:
1. Consolidated Financial Statements of Williams Industries,
Incorporated and Independent Auditors' Reports.
Report of Aronson, Fetridge & Weigle
Report of Deloitte & Touche LLP.
Report of the Audit Committee
Consolidated Balance Sheets as of July 31, 2000 and 1999.
Consolidated Statements of Earnings for the Years Ended
July 31, 2000, 1999, and 1998.
Consolidated Statements of Stockholders' Equity for the
Years Ended July 31, 2000, 1999, and 1998.
Consolidated Statements of Cash Flows for the Years
Ended July 31, 2000, 1999, and 1998.
Notes to Consolidated Financial Statements for the Years
Ended July 31, 2000, 1999, and 1998.
Schedule II -- Valuation and Qualifying Accounts for
the Years Ended July 31, 2000, 1999, and 1998
of Williams Industries, Incorporated.
(All included in this report in response to Item 8.)
2. (a) Schedules to be Filed by Amendment to this Report
NONE
(b) Exhibits:
(3) Articles of Incorporation: Incorporated by reference
to Exhibit 3(a) of the Company's 10-K for the fiscal
year ended July 31, 1989.
By-Laws: Incorporated by reference to Exhibit 3
of the Company's 8-K filed September 4, 1998.
(21) Subsidiaries of the Company
Name State of
Incorporation
----------------------------------- -------------
Arthur Phillips & Company, Inc.* MD
Capital Benefit Administrators, Inc.* VA
Construction Insurance Agency, Inc. VA
John F. Beasley Construction Company* TX
Greenway Corporation MD
IAF Transfer Corporation* VA
Insurance Risk Management Group, Inc. VA
Piedmont Metal Products, Inc. VA
S.I.P., Inc. of Delaware DE
Williams Bridge Company VA
Williams Enterprises, Inc.* DC
Williams Equipment Corporation DC
WII Realty Management, Inc. VA
Williams Steel Erection Company VA
* Not Active
(27) Financial Data Schedule
INDEPENDENT AUDITORS' REPORTS
To the Board of Directors and Stockholders
Williams Industries, Incorporated
Falls Church, Virginia
We have audited the accompanying Consolidated Balance Sheet of
WILLIAMS INDUSTRIES, INCORPORATED as of July 31, 2000, and the
related Consolidated Statements of Earnings, Stockholders' Equity
and Cash Flows for the year then ended. Our audit also included
the financial statement schedule for the year ended July 31, 2000
listed in Item 14. These financial statements and financial
statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of WILLIAMS INDUSTRIES, INCORPORATED as of July 31, 2000,
and the consolidated results of its operations and its cash flows
for the year then ended in conformity with generally accepted
accounting principles.
/s/Aronson, Fetridge & Weigle
Aronson, Fetridge & Weigle
Rockville, Maryland
September 25, 2000
To the Board of Directors and Stockholders
Williams Industries, Incorporated
Falls Church, Virginia
We have audited the accompanying consolidated balance
sheet of Williams Industries, Incorporated, and
subsidiaries (the "Company") as of July 31, 1999 and the
related consolidated statements of earnings,
stockholders' equity and cash flows for the two years
ended July 31, 1999 and 1998. Our audits also included
the financial statement schedule for the years ended
July 31, 1999 and 1998 listed in Item 14. These
financial statements and financial statement schedule
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in financial statements. An
audit also includes assessing the accounting principles
used and significant estimates made by management, as
well as evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly in all material respects, the financial
position of Williams Industries, Incorporated, and
subsidiaries as of July 31, 1999 and the results of
their operations and their cash flows for the two years
ended July 31, 1999 and 1998 in conformity with
generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when
considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly
in all material respects the information set forth
therein.
As discussed in Note 17, the accompanying 1999 and 1998
consolidated financials statements have been restated.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
McLean, Virginia
September 24, 1999 (September 25, 2000 as to Note 17)
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is composed
of three outside directors. Its primary function is to oversee
the Company's system of internal controls, financial reporting
practices and audits to determine that their quality, integrity
and objectivity are sufficient to protect stockholder interests.
The Audit Committee met three times during Fiscal 2000 to
review the overall audit scope, plans and results of the
independent auditors, the Company's internal controls,
emerging accounting issues, expenses, and audit fees. The
Committee met separately without management present and with
the independent auditors to discuss the audit. The Committee
reviewed the Company's annual financial statements prior to
issuance. Audit Committee findings are reported to the full
Board of Directors.
The Audit Committee is satisfied that the internal control
system is adequate and that the Company employs appropriate
accounting and auditing procedures.
/s/Stephen N. Ashman
Stephen N. Ashman
Chairman, Audit Committee
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JULY 31, 2000, 1999 and 1998
($000 omitted except earnings per share)
2000 1999 1998
-------- -------- --------
(AS RESTATED, SEE NOTE 17)
REVENUE:
Construction $12,820 $ 9,392 $10,808
Manufacturing 21,321 16,308 10,206
Sales and service 7,953 7,153 7,106
Other revenue 782 526 784
-------- -------- --------
Total revenue 42,876 33,379 28,904
-------- -------- --------
DIRECT COSTS:
Construction 8,578 6,096 6,623
Manufacturing 14,223 10,439 7,146
Sales and service 4,822 3,856 3,684
-------- -------- --------
Total direct costs 27,623 20,391 17,453
-------- -------- --------
GROSS PROFIT 15,253 12,988 11,451
-------- -------- --------
OTHER INCOME 115 144 356
-------- -------- --------
EXPENSES:
Overhead 4,449 3,691 3,116
General and administrative 6,497 5,694 5,016
Depreciation and amortization 1,185 1,326 1,221
Interest 911 910 1,149
-------- -------- --------
Total expenses 13,042 11,621 10,502
-------- -------- --------
EARNINGS BEFORE INCOME
TAXES, EQUITY EARNINGS
AND MINORITY INTERESTS 2,326 1,511 1,305
INCOME TAX PROVISION (BENEFIT) 892 (2,000) (343)
-------- -------- --------
EARNINGS BEFORE EQUITY
EARNINGS AND MINORITY INTERESTS 1,434 3,511 1,648
Equity in earnings(losses) of
unconsolidated affiliates 120 135 (746)
-------- -------- --------
EARNINGS BEFORE MINORITY INTERESTS 1,554 3,646 902
Minority interest in
consolidated subsidiaries (67) (48) (30)
-------- -------- --------
EARNINGS BEFORE EXTRAORDINARY ITEM 1,487 3,598 872
EXTRAORDINARY ITEM
(Loss) gain on
extinguishment of debt - (192) 928
-------- -------- --------
NET EARNINGS $ 1,487 $ 3,406 $ 1,800
======== ======== ========
EARNINGS PER COMMON SHARE:
BASIC:
Earnings before
extraordinary item $ 0.41 $ 1.00 $ 0.27
Extraordinary item - (0.05) 0.29
-------- -------- --------
EARNINGS PER COMMON SHARE-BASIC $ 0.41 $ 0.95 $ 0.56
======== ======== ========
DILUTED:
Earnings before
extraordinary item $ 0.41 $ 1.00 $ 0.26
Extraordinary item - (0.05) 0.25
-------- -------- --------
EARNINGS PER COMMON
SHARE-DILUTED $ 0.41 $ 0.95 $ 0.51
======== ======== ========
See Notes To Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 2000 AND 1999
($000 Omitted)
ASSETS
2000 1999
(AS RESTATED
SEE NOTE 17)
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 2,568 $ 1,145
Restricted cash 68 61
Certificates of deposit 681 738
Accounts receivable, (net of
allowances for doubtful
accounts of $2,862 in 2000
and $1,289 in 1999):
Contracts
Open accounts 10,927 8,667
Retainage 383 170
Trade 1,862 2,184
Other 117 500
-------- --------
Total accounts receivable - net 13,289 11,521
-------- --------
Inventory 1,500 2,290
Costs and estimated earnings
in excess of billings on
uncompleted contracts 1,545 1,481
Prepaid expenses 1,120 601
-------- --------
Total current assets 20,771 17,837
-------- --------
PROPERTY AND EQUIPMENT,
AT COST 17,509 16,215
Accumulated depreciation (9,475) (8,529)
-------- --------
Property and equipment, net 8,034 7,686
-------- --------
OTHER ASSETS
Investments in
unconsolidated affiliates 1,043 1,048
Deferred income taxes 3,423 4,269
Inventory 1,258 1,176
Other 477 574
-------- --------
Total other assets 6,201 7,067
-------- --------
TOTAL ASSETS $35,006 $32,590
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion
of notes payable $ 1,515 $ 1,411
Accounts payable 4,899 4,868
Accrued compensation
and related liabilities 1,190 934
Billings in excess of costs
and estimated earnings on
uncompleted contracts 2,409 2,222
Deferred income 221 348
Other accrued expenses 2,977 2,872
Income taxes payable 119 129
-------- --------
Total current liabilities 13,330 12,784
-------- --------
LONG-TERM DEBT
Notes payable,
less current portion 7,724 7,397
-------- --------
Total Liabilities 21,054 20,181
-------- --------
MINORITY INTERESTS 279 235
-------- --------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - $0.10 par value,
10,000,000 shares authorized;
3,591,496 and 3,587,877 shares
issued and outstanding 359 359
Additional paid-in capital 16,436 16,424
Accumulated deficit (3,122) (4,609)
-------- --------
Total stockholders' equity 13,673 12,174
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $35,006 $32,590
======== ========
See Notes To Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 2000, 1999 AND 1998
($000 Omitted) 1999 1998
2000 (AS RESTATED,
SEE NOTE 17)
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $1,487 $3,406 $1,800
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,185 1,326 1,221
Increase (decrease) in allowance
for doubtful accounts 1,573 78 453
Interest expense related to
convertible debentures - - 43
Stock bonus issued to employees - - 141
Loss(gain) on extinguishment of debt - 77 (928)
Gain on disposal of property,
plant and equipment (15) (156) (893)
Decrease (increase) in
deferred income tax assets 846 (2,029) (440)
Minority interest in earnings 67 48 30
Equity in (earnings) losses
of affiliates (120) (135) 746
Dividend from unconsolidated affiliate 125 67 45
Changes in assets and liabilities:
Increase in
open contracts receivable (3,983) (1,621) (179)
(Increase) decrease in
contract retainage (213) 415 (22)
Decrease (increase) in
trade receivables 352 (472) (271)
Decrease in contract claims - - 534
Decrease (Increase) in
other receivables 503 (192) (197)
Decrease (increase) in inventory 708 (903) 164
(Increase) decrease in costs and
estimated earnings in excess of
billings on uncompleted contracts (64) (815) 179
Decrease (increase) in billings in
excess of costs and estimated
earnings on uncompleted contracts 187 337 (1,087)
(Increase) in prepaid expenses (519) (109) (4)
Decrease (increase) in other assets 97 (90) 338
Increase in accounts payable 31 851 103
Increase in accrued compensation
and related liabilities 256 173 66
Decrease (increase) in deferred income (127) 42 306
Increase (decrease) in
other accrued expenses 105 68 (313)
(Decrease) increase in
income taxes payable (10) (30) 51
------- ------- -------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,471 336 1,886
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property,
plant and equipment (932) (628) (948)
(Increase) decrease in restricted cash (7) (7) 198
Proceeds from sale of
property, plant and equipment 431 2,270 2,036
Purchase of certificates of deposit (89) (458) (652)
Maturities of certificates of deposit 146 453 295
------- ------- -------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (451) 1,630 929
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 3,891 6,479 4,040
Repayments of notes payable (4,477) (8,721) (7,012)
Issuance of common stock 12 40 60
Minority interest dividends (23) (3) (11)
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (597) (2,205) (2,923)
------- ------- -------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS 1,423 (239) (108)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,145 1,384 1,492
------- ------- -------
CASH AND CASH EQUIVALENTS,
END OF YEAR $2,568 $1,145 $1,384
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION (SEE NOTE 15)
See Notes To Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 31, 2000, 1999 and 1998
(000 0mitted)
Number Additional
of Common Paid-In Accumulated
Shares Stock Capital Deficit Total
------ ------ --------- --------- -------
BALANCE,
AUGUST 1, 1997 2,840 284 $15,705 $(9,815) $6,174
(AS RESTATED,
SEE NOTE 17)
Conversion of
convertible
debentures 691 69 484 - 553
Other stock issued 46 5 196 - 201
Net earnings
for the year,
as restated* - - - 1,800 1,800
------ ------ --------- --------- -------
BALANCE,
JULY 31, 1998 3,577 358 16,385 (8,015) 8,728
(AS RESTATED,
SEE NOTE 17)
Issuance of stock 11 1 39 - 40
Net earnings for the
year, as restated* - - - 3,406 3,406
------ ------ --------- --------- -------
BALANCE,
JULY 31, 1999 3,588 359 16,424 (4,609) 12,174
(AS RESTATED,
SEE NOTE 17)
Issuance of stock 3 - 12 - 12
Net earnings
for the year* 1,487 1,487
------ ------ --------- --------- -------
BALANCE,
JULY 31, 2000 3,591 $359 $16,436 $(3,122) $13,673
====== ====== ======= ======== =======
* There were no items of other comprehensive income during
the year.
See Notes To Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED
JULY 31, 2000, 1999 AND 1998
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Business - Williams Industries, Incorporated operates in the
commercial, industrial, institutional, governmental and
infrastructure construction markets, primarily in the Mid-Atlantic
region of the United States.
The Company's main lines of business include: steel, precast
concrete and miscellaneous metals erection and installation; crane
rental, heavy and specialized hauling and rigging; fabrication of
welded steel plate girders, rolled steel beams, and light
structural and other metal products; and the sale of insurance,
safety and related services.
Basis of Consolidation - The consolidated financial
statements include the accounts of Williams Industries, Inc. and
all of its majority-owned subsidiaries (the "Company").
All material intercompany balances and transactions have been
eliminated in consolidation.
Unconsolidated Affiliates - The Company's 42.5% ownership
interest in S.I.P., Inc. of Delaware is accounted for using the
equity method. Under the equity method, original investments are
recorded at cost and adjusted by the Company's share of
distributions and undistributed earnings and losses of the
investee. The cost method of accounting was used for the Company's
36.6% ownership interest in Atlas Machine & Iron Works, Inc.
("Atlas") since the Company could not exert significant influence
over Atlas's operating and financial policies (See Note 9).
Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Depreciation and Amortization - Property and equipment are
recorded at cost and are depreciated over the estimated useful
lives of the assets using the straight-line method of depreciation
for financial statement purposes, with estimated lives of 25 years
for buildings and 3 to 12 years for equipment, vehicles, tools,
furniture and fixtures. Leasehold improvements are amortized over
the lesser of 10 years or the remaining term of the lease.
Straight-line and accelerated methods of depreciation are used for
income tax purposes.
Ordinary maintenance and repair costs are charged to expense
as incurred while major renewals and improvements are capitalized.
Upon the sale or retirement of property and equipment, the cost
and accumulated depreciation are removed from the respective
accounts and any gain or loss is recognized.
Impairment of Long-Lived Assets - In accordance with SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," the Company evaluates the
potential impairment of long-lived assets based on projections of
undiscounted cash flows whenever events or changes in
circumstances indicate that the carrying value amount of an asset
may not be fully recoverable. Management believes no material
impairment of its assets exists at July 31, 2000.
Earnings Per Common Share - "Earnings Per Common Share-Basic"
is based on the weighted average number of shares outstanding
during the year. "Earnings Per Common Share-Diluted" is based on
the shares outstanding and the weighted average of commitments to
issue stock, which may include convertible debentures, stock
options, or grants.
Revenue Recognition - Revenues and earnings from long-term
contracts are recognized for financial statement purposes using
the percentage-of-completion method; therefore, revenue includes
that percentage of the total contract price that the cost of the
work completed to date bears to the estimated final cost of the
contract. Estimated contract earnings are reviewed and revised
periodically as the work progresses, and the cumulative effect of
any change in estimate is recognized in the period in which the
estimate changes. When a loss is anticipated on a contract, the
entire amount of the loss is provided for in the current period.
Contract claims are recorded at estimated net realizable value
(See Note 2).
Revenues and earnings on non-contract activities are
recognized when services are provided or goods delivered.
Overhead - Overhead includes the variable, non-direct costs
such as shop salaries, consumable supplies, and vehicle and
equipment costs incurred to support the revenue generating
activities of the Company.
Inventories - Inventories consist of materials, expendable
equipment and tools, and supplies. Materials inventory consists
of structural steel, metal decking, and steel cable. Expendable
tools and equipment, and supplies consist of goods which are
consumed on projects. Costs of materials inventory is accounted
for using either the specific identification method or average
cost. Cost of expendable equipment and tools is accounted for
using average costs. The cost of supplies inventory is accounted
for using the first-in, first-out, (FIFO) method.
Allowance for Doubtful Accounts - Allowances for
uncollectible accounts and notes receivable are provided on the
basis of specific identification.
Income Taxes - Williams Industries, Inc. and its
subsidiaries, which are at least eighty percent owned by the
parent, file a consolidated Federal income tax return. The
provision for income taxes has been computed under the
requirements of Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes". Under SFAS No. 109,
deferred tax assets and liabilities are determined based on the
difference between the financial statement and the tax basis of
assets and liabilities, using enacted tax rates in effect for the
year in which the differences are expected to reverse.
The Company does not provide for income taxes on the
undistributed earnings of affiliates since these amounts are
intended to be permanently reinvested. The cumulative amount of
undistributed earnings on which the Company has not recognized
income taxes as of July 31, 2000 is approximately $1,037,000.
Cash and Cash Equivalents - For purposes of the Statements of
Cash Flows, the Company considers all highly liquid instruments
and certificates of deposit with original maturities of less than
three months to be cash equivalents. From time to time, the
Company maintains cash deposits in excess of federally insured
limits. Management does not consider this to represent a
significant risk.
Restricted Cash - The Company's restricted cash is invested
in short-term, highly liquid investments. The carrying amount
approximates fair value because of the short-term maturity of
these investments.
Certificates of Deposit - The Company's certificates of
deposit have original maturities greater than 90 days, but not
exceeding one year.
Stock-Based Compensation - The Company has elected to follow
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees" and related interpretations in
accounting for its employee stock options. Under APB 25, because
the exercise price of employee stock options equals the market
price of the underlying stock on the date of the grant, no
compensation expense is recorded. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation."
Reclassifications - Certain reclassifications of prior years'
amounts have been made to conform with the current years'
presentation.
RECENT ACCOUNTING PRONOUNCEMENT:
In June 1998, the Financial Accounting Standards Board
issued SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging
activities and will be effective for the Company for Fiscal 2001.
The Company does not believe that there will be any material
impact on the Company's financial statements from the adoption of
SFAS 133.
1. INVENTORY
Inventory consisted of the following at July 31 (in thousands):
2000 1999
------ ------
Expendable tools and equipment $ 992 $ 806
Supplies 266 277
Materials 1,500 2,383
------ ------
Total Inventory 2,758 3,466
Less: amount classified as long-term 1,258 1,176
------ ------
$1,500 $ 2,290
------ ------
2. CONTRACT CLAIMS
The Company maintains procedures for review and evaluation of
performance on its contracts. Occasionally, the Company will
incur certain excess costs due to circumstances not anticipated at
the time the project was bid. These costs may be attributed to
delays, changed conditions, defective engineering or
specifications, interference by other parties in the performance
of the contracts, and other similar conditions for which the
Company believes it is entitled to reimbursement by the owner,
general contractor, or other participants. These claims are
recorded at the estimated net realizable amount after deduction of
estimated legal fees and other costs of collection. There were no
contract claims outstanding at July 31, 2000 and 1999, respectively.
3. (LOSS) GAIN ON EXTINGUISHMENT OF DEBT
During the year ended July 31, 1999, the Company recognized a
"Loss on Extinguishment of Debt" in the amount of $192,000. In
April 1999, the Company refinanced it's primary debt instruments
with United Bank. The proceeds from this refinancing were used to
pay off The CIT Group and BB&T (formerly Franklin National Bank)
loans. The loss represents unamortized prepaid fees and penalties
associated with the early payoff of the CIT loan.
During the year ended July 31, 1998, the Company recognized a
"Gain on Extinguishment of Debt" in the amount of $928,000 arising
from the liquidation of its subsidiary John F. Beasley
Construction Company, under the U.S. Bankruptcy Court for the
Northern District of Texas, and the liquidation its Arthur
Phillips and Company subsidiary.
4. RELATED-PARTY TRANSACTIONS
Certain shareholders owning or controlling approximately
35.9% of the outstanding stock of the Company at July 31, 2000,
own controlling interests in the outstanding stock of Williams
Enterprises of Georgia, Inc. and 100% of Williams and Beasley
Company. Each of these entities provided services to or received
services from the Company during the three years ended July 31,
2000.
Billings to Williams Enterprises of Georgia, Inc. and its
affiliates were approximately $807,000, $953,000 and $1,530,000
for the years ended July 31, 2000, 1999 and 1998.
Net billings from Williams and Beasley Company during the
years ended July 31, 2000, 1999 and 1998 were approximately
$294,000, $329,000 and $181,000, respectively. The Company owed
approximately $13,000 and $32,000 to this entity at July 31, 2000
and 1999, respectively.
One of the shareholders owning or controlling approximately
35.9% of the stock of the Company at July 31, 2000, is a former
director of Concrete Structures, Inc. (CSI), a former subsidiary
of the Company, which is operating under the supervision of the
U.S. Bankruptcy Court for the Eastern District of Virginia,
Richmond Division. During the years ended July 31, 2000, 1999, and
1998, billings to this entity by the Company were zero, zero and
$154,000. At July 31, 2000, CSI was indebted to the Company for
approximately $240,000 on a note secured by the assets of CSI. The
note is fully reserved. Due to CSI's severe financial
difficulties, the shareholder, through his privately owned
company, Structural Concrete Products, LLC ("SCP"), leased the
facilities of CSI on July 20, 1998, and on July 22, 1998, CSI
filed for protection under Chapter 11 of the Bankruptcy Code. CSI
filed and the Court has approved a plan that provides for the sale
of its assets to SCP. The plan provides for the assumption and
satisfaction of all secured claims by SCP. The Company expects
that its secured note in the amount of $240,000 will be paid in
full over the five-year term of the plan and will record payments
as income as they are received.
Billings to SCP were approximately $121,000, $12,000 and zero
for the years ended July 31, 2000, 1999 and 1998. Billings from
SCP were $1,631,000, $6,000 and zero for the years ended July 31,
2000, 1999 and 1998.
During the years ended July 31, 2000 and 1999, the Company
borrowed $950,000 and $200,000 from a shareholder and director,
which was repaid. The money was used to fund short term cash flow
requirements of the Company.
Amounts owing to current and former directors of the Company
amounted to approximately $123,000 and $258,000 at July 31, 2000
and 1999, respectively.
During the year ended July 31, 2000 the Company entered into
an agreement with an affiliated partnership to lease approximately
17 acres of unimproved real estate adjoining its Prince William
County, Virginia properties. The initial lease term is for five
years, with an extension option for an additional five years. The
base annual rent will be calculated on the capitalized cost of
the property times the partnership's costs of funds (margin rate)
plus one percent, which is currently $4,666 per month. The lease
contains an option to purchase up to ten acres at the "original
pro-rata cost" of $567,500.
5. CONTRACTS IN PROCESS
Comparative information with respect to contracts in process
consisted of the following at July 31(in thousands):
2000 1999
--------- ---------
Expenditures on uncompleted contracts $ 23,786 $ 19,487
Estimated earnings 12,165 7,579
--------- ---------
35,951 27,066
Less: Billings (36,815) (27,807)
--------- ---------
$ (864) $ (741)
Included in the accompanying balance
sheet under the following captions:
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 1,545 $ 1,481
Billings in excess of costs and
estimated earnings on uncompleted
contracts (2,409) (2,222)
--------- ---------
$ (864) $ (741)
Billings are based on specific contract terms that are negotiated
on an individual contract basis and may provide for billings on a
unit price, percentage of completion or milestone basis.
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at July
31(in thousands):
2000 1999
Accum Accum
Cost Deprec Cost Deprec
------- ------ ------- ------
Land and buildings $ 5,277 $1,873 $ 4,825 $1,709
Automotive Equipment 2,073 1,525 1,874 1,279
Cranes and heavy equipment 7,859 4,500 7,275 4,113
Tools and equipment 627 533 573 487
Office furniture and fixtures 368 275 363 261
Leased property
under capital leases 600 340 600 280
Leasehold improvements 705 429 705 400
------- ------ ------- ------
$17,509 $9,475 $16,215 $8,529
7. NOTES AND LOANS PAYABLE
Notes and loans payable consisted of the following at July 31 (in
thousands):
2000 1999
------- -------
Collateralized:
Loan payable to United Bank; collateralized
by real estate, inventory and equipment;
monthly payments of principal plus interest
at 8.7% fixed; due April 1, 2014 $2,348 $2,430
Loan payable to United Bank; collateralized
by real estate, inventory and equipment;
monthly payments of principal plus interest
at 8.7% fixed; due April 1,2009 576 620
Line of Credit to United Bank; collateralized
by real estate, inventory and equipment;
monthly payments of interest only at prime
plus 1.25%; (10.75% as of July 31, 2000);
due April 16, 2002 1,500 810
Obligations under capital leases;
collateralized by leased property; interest
from 7.75% to 15.1% for 2000 and 10.2% to
21.0% for 1999 payable in varying monthly
installments through 2005 753 138
Installment obligations collateralized by
machinery and equipment or real estate;
interest ranging to 15.2% for 2000 and for
1999; payable in varying monthly installments
of principal and interest through 2006 1,913 2,481
Industrial Revenue Bond; collateralized by
a letter of credit which in turn is
collateralized by real estate; principal
payable in varying monthly installments
through 2012; variable interest based on
third party calculations 1,095 1,185
Unsecured:
Lines of credit; interest at 10.0% for 2000
and 1999 88 88
Installment obligations with interest from
6.0% to 11.0% for 2000 and 5.9% to 12.1% for
1999; due in varying monthly installments of
principal and interest through 2006 966 1,056
------- -------
Total Notes Payable $9,239 $8,808
Notes Payable - Long Term (7,724) (7,397)
------- -------
Current Portion $1,515 $1,411
Contractual maturities of the above obligations at July 31,
2000 are as follows:
Year Ending July 31: Amount
-------------------- -------
2001 $1,515
2002 2,429
2003 1,094
2004 654
2005 521
2006 and after 3,026
-------------------- -------
TOTAL $9,239
As of July 31, 2000 and 1999, the carrying amounts reported
above for long term notes and loans payable, reported at
$7,724,000 and $7,397,000, approximate fair value based upon
interest rates for debt currently available with similar terms and
remaining maturities.
At July 31, 2000, the Company was in compliance with all
restrictive covenants contained in the United Bank and the
Wachovia Bank reimbursement agreement for the Industrial Revenue
Bond. Under the most restrictive of these covenants, the Company
was required to (1) maintain a minimum net worth of $9.0 million
at all times (2) maintain a current ratio greater than 1.1 at all
times (3) maintain a fixed charge ratio, as defined, of 1.2 (4)
maintain a debt to tangible net worth of not greater 2.5:1.
Covenants, also, limit capital expenditures, and do not allow for
payment of dividends to shareholders.
8. INCOME TAXES
As a result of tax losses incurred in prior years, the
Company at July 31, 2000 has tax loss carryforwards amounting to
approximately $8 million. These loss carryforwards will expire
year-to-year from 2008 through 2011. Under SFAS No. 109, the
Company is required to recognize the value of these tax loss
carryforwards if it is more likely than not that they will be
realized by reducing the amount of income taxes payable in future
income tax returns. As a result of the Company's ongoing
profitable operations, the Company expects to report profits for
income tax purposes in the future. Accordingly, the Company
recognized a $2.6 million, and $0.9 million portion of the benefit
available from its tax loss carryforwards during the years ended
July 31, 1999, and 1998, respectively.
Realization of this asset is dependent on generating
sufficient taxable income prior to expiration of the loss
carryforwards. Although realization is not assured, management
believes it is more likely than not that the recorded deferred tax
asset will be realized. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term
if estimates of future taxable income during the carryforward
period are reduced.
The components of the income tax provision (benefit) are as
follows for the years ended July 31:
2000 1999 1998
(In thousands) ------ -------- ------
Current provision
Federal $ - $ - $ -
State 46 29 97
------ -------- ------
Total current provision 46 29 97
Deferred provision (benefit)
Federal 712 (1,635) (310)
State 134 (394) (130)
------ -------- ------
Total deferred provision (benefit) 846 (2,029) (440)
------ -------- ------
Total income tax provision (benefit) $ 892 $(2,000) $(343)
The differences between the tax provision calculated at the
statutory federal income tax rate and the actual tax provision for
each year ended July 31 are shown in the table directly below.
2000 1999 1998
(In thousands) ------ -------- ------
Tax at statutory federal rate $ 791 $ 514 $ 474
State income taxes 101 60 83
Change in valuation allowance - (2,574) (900)
------ -------- ------
Actual income tax provision (benefit) $ 892 $(2,000) $(343)
The primary components of temporary differences which give
rise to the Company's net deferred tax asset are shown in the
following table. As of July 31,
2000 1999
(In thousands) ------ --------
Deferred tax assets:
Reserve and other
nondeductible accruals $2,381 $ 1,526
Net operating loss & capital loss
carryforwards 3,105 4,726
Valuation allowance (925) (925)
------ --------
Total deferred tax assets 4,561 5,327
Deferred tax liabilities:
Property and equipment (673) (623)
Inventories (465) (435)
------ --------
Total deferred tax liabilities (1,138) (1,058)
------ --------
Net deferred tax assets $ 3,423 $ 4,269
9. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Investment in unconsolidated affiliate, S.I.P., Inc. of
Delaware (42.5% owned) was valued using the Equity Method.
Subsequent to July 31, 2000, the Company acquired an additional
8.75% of the outstanding stock of S.I.P
In the second quarter of the year ended July 31, 1998, the
Company wrote off the remaining value of its investment in Atlas
Machine and Iron Works. The amount of this write off was
approximately $800,000 and was the result of the liquidation of
Atlas assets by its secured creditors. These amounts are included
in "Equity in (loss) earnings of unconsolidated affiliates" in the
accompanying Consolidated Statements of Earnings.
10. DISPOSITION OF ASSETS
During the year ended July 31, 2000, the Company entered into
an agreement to sell and lease back one of its heavy lift cranes.
The primary purpose of this transaction was to improve cash flow.
This sale/leaseback transaction resulted in a deferred gain of
approximately $12,000, which will be amortized over the life of
the lease.
During the year ended July 31,1999, the Company entered into
agreements to sell and lease back four of its heavy lift cranes.
The primary purpose of these transactions was to improve cash
flow. These sale/leaseback transactions resulted in deferred gains
of approximately $162,000, which will be amortized over the life
of the respective leases.
Also during 1999, the Company sold 6.02 acres of land in
Bedford, VA for $40,000. The transaction resulted in a gain of
approximately $24,000, which is included in "Other Income" for the
year ended July 31, 1999.
In January 1998, the Company sold its 2.25 acre headquarters
property in Fairfax County, Virginia for $1,430,000. The Company
also entered into a lease for several buildings on the property.
The transaction resulted in a gain of approximately $560,000 of
which $115,000, $120,000 and $254,000 is included in "Other
Income" in the Consolidated Statements of Earnings for the years
ended July 31, 2000, 1999 and 1998, respectively. The remaining
deferred amount, at July 31, 2000, is being recognized over the
remaining lease term of one year.
In June 1998, the Company sold its one acre property in
Baltimore, Maryland for $135,000. The transaction resulted in a
gain of approximately $98,000 which is also included in "Other
Income" in the Consolidated Statement of Earnings for the year
ended July 31, 1998.
During the year ended July 31, 1998, the Company sold several
large pieces of equipment in order to modernize its fleet and pay
off certain debt. A net gain of approximately $224,000 was
recognized. The gain from these transactions is included in
"Revenue: Sales and Services" in the Consolidated Statement of
Earnings.
11. COMMON STOCK OPTIONS
At the November 1996 annual meeting, the shareholders
approved the establishment of a new Incentive Stock Option Plan
(1996 Plan) to provide an incentive for maximum effort in the
successful operation of the Company and its subsidiaries by their
officers and key employees and to encourage ownership of the
common shares of the Company by those persons. Under the 1996
Plan, 200,000 shares were reserved for issue.
In May 1998, the Company's Board of Directors approved and
issued options for 12,000 shares of stock to subsidiary management
under the Company's 1996 Plan and 12,000 shares of non-incentive
stock options to the non-management members of the Company's Board
of Directors.
In January 1999, the Company's Board of Directors approved and
issued options for 20,000 shares of stock to Company management,
and 10,000 shares of stock to subsidiary management under the
Company's 1996 Plan. Additionally, 17,500 shares of non-incentive
stock options were authorized for non-management members of the
Company's Board of Directors.
In January 2000, the Company's Board of Directors approved
and issued options for 6,000 shares of stock to Company
management, and 10,000 shares of stock to subsidiary management
under the Company's 1996 Plan. Additionally, 15,000 shares of non-
incentive stock options were authorized for non-management members
of the Company's Board of Directors.
The stock options granted vested immediately, expiring in
five years from the date of grant and having exercise prices which
range from the quoted market value to 110% of the quoted market
value on the date of the grant. The Company accounts for its
options under the intrinsic method of APB No. 25. Had
compensation expense for the Company's stock-based compensation
plans been determined based on the fair value at grant dates for
awards under those plans, consistent with the method of accounting
under SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company's
net earnings and earnings per share would have been:
2000 1999 1998
------ ------ ------
Net Earnings (in thousands)
As reported $1,487 $3,406 $1,800
Pro forma 1,416 3,269 1,776
Earnings per share - Basic
As reported $ 0.41 $ 0.95 $ 0.56
Pro forma 0.39 0.92 0.56
Earnings per share - Diluted
As reported $ 0.41 $ 0.95 $ 0.51
Pro forma 0.39 0.92 0.51
The fair value of each option is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following assumptions:
Year ended July 31, 2000 1999 1998
------ ------ ------
Dividend yield 0.0% 0.0% 0.0%
Volatility rate 84.7% 90.0% 53.0%
Discount rate 6.0% 6.0% 5.6%
Expected term (years) 5 5 5
The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, the existing models may not be a reliable
single measure of the fair value of its stock options.
Stock option activity and price information follows:
Weighted Average
Number Exercise
of shares Price
--------- ---------
Balance at:
August 1, 1997 - -
Granted 24,000 $4.30
Exercised - -
Forfeited - -
=========
Balance at:
July 31, 1998 24,000 $4.30
Granted 47,500 $3.57
Exercised - -
Forfeited - -
=========
Balance at:
July 31, 1999 71,500 $3.82
Granted 31,000 $3.30
Exercised - -
Forfeited - -
=========
Balance at:
July 31, 2000 102,500 $3.66
=========
Options exercisable,
July 31, 2000 102,500 $3.66
=========
12. SEGMENT INFORMATION
The Company and its subsidiaries operate principally in three
segments within the construction industry; construction,
manufacturing and sales and service. Operations in the
construction segment involve structural steel erection,
installation of steel and other metal products, and installation
of precast and prestressed concrete products. Operations in the
manufacturing segment involve fabrication of steel plate girders,
rolled beams, and light structural metal products. Operations in
the sales and service segment involve the leasing and sale of
heavy construction equipment.
Information about the Company's operations in its different
segments for the years ended July 31, is as follows (in
thousands):
2000 1999 1998
--------- --------- ---------
Revenue:
Construction $14,299 $10,364 $12,080
Manufacturing 21,681 16,455 10,272
Sales and service 8,435 7,846 7,692
Other revenue 782 526 784
--------- --------- ---------
45,197 35,191 30,828
Inter-company revenue:
Construction (1,479) (972) (1,272)
Manufacturing (360) (147) (66)
Sales and service (482) (693) (586)
--------- --------- ---------
Total revenue $42,876 $33,379 $28,904
========= ========= =========
Operating profits (loss):
Construction $ 945 $ 600 $ 1,449
Manufacturing 1,617 1,206 69
Sales and service 224 514 851
--------- --------- ---------
Consolidated operating profits 2,786 2,320 2,369
General corporate income, net 451 101 85
Interest Expense (911) (910) (1,149)
Income tax (provision) benefit (892) 2,000 343
Equity in earnings (losses) of
unconsolidated affiliates 120 135 (746)
--------- --------- ---------
Earnings before minority interests $ 1,554 $ 3,646 $ 902
========= ========= =========
Assets:
Construction $ 9,122 $ 7,877 $ 8,643
Manufacturing 12,045 10,549 6,061
Sales and service 4,800 4,920 7,087
General corporate 9,039 9,244 7,322
--------- --------- ---------
Total assets $35,006 $32,590 $29,113
========= ========= =========
Accounts receivable
Construction $ 6,494 $ 5,592 $ 6,416
Manufacturing 4,823 3,266 1,417
Sales and service 1,591 1,783 1,386
General corporate 381 880 510
--------- --------- ---------
Total accounts receivable $13,289 $11,521 $ 9,729
========= ========= =========
Capital expenditures:
Construction $ 170 $ 16 $ 102
Manufacturing 557 925 424
Sales and service 1,040 361 794
General corporate 182 71 69
--------- --------- ---------
Total capital expenditures $ 1,949 $ 1,373 $ 1,389
========= ========= =========
Depreciation and Amortization:
Construction $ 102 $ 88 $ 87
Manufacturing 346 235 161
Sales and service 625 891 836
General corporate 112 112 137
--------- --------- ---------
Total deprec. and amortization $ 1,185 $ 1,326 $ 1,221
========= ========= =========
The chief operating decision maker utilizes revenues,
operating profits and assets employed as measures in assessing
segment performance and deciding how to allocate resources.
Operating profit is total revenue less operating expenses.
In computing operating profit (loss), the following items have not
been added or deducted: general corporate expenses, interest
expense, income taxes, equity in the earnings (loss) of
unconsolidated affiliates and minority interests.
Identifiable assets by segment are those assets that are used
in the Company's operations in each segment. General corporate
assets include investments, some real estate, and certain other
assets not allocated to segments.
The majority of revenues have historically been derived from
projects on which the Company is a subcontractor of a material
supplier, other contractor or subcontractor. Where the Company
acts as a subcontractor, it is invited to bid by the firm seeking
construction services or materials; therefore, continuing
favorable business relations with those firms that frequently bid
on and obtain contracts requiring such services or materials are
important to the Company. Over a period of years, the Company has
established such relationships with a number of companies. During
the year ended July 31, 1998, one single customer accounted for
10.4% of consolidated revenue and 23.6% of construction revenue.
During the year ended July 31, 1999, one single customer accounted
for 19.9% of the consolidated revenue and 40.8% of manufacturing
revenue. During the year ended July 31, 2000, there was no single
customer that accounted for more than 10% of consolidated
revenues.
The accounts receivable from the construction segment at July
31, 2000, 1999, and 1998 were due from 42, 46 and 43 unrelated
customers, of which 7, 5 and 4 customers accounted for $3,809,000,
$3,346,000 and $3,588,000, respectively. The amounts due from
these customers is expected to be collected in the normal course
of business.
The accounts receivable from the manufacturing segment at
July 31, 2000, 1999, and 1998 were due from 21, 16 and 23
unrelated customers, of which 5, 2 and 1 customers accounted for
$4,939,000, $2,365,000 and $490,000, respectively. The amounts due from
these customers is expected to be collected in the normal
course of business.
The Company does not normally require its customers to
provide collateral for outstanding receivable balances.
13. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution retirement savings
plan covering substantially all employees. The Plan provides for
optional Company contributions as a fixed percentage of salaries.
Effective January 1, 1998, the Company began contributing 2% of
each eligible employee's salary to the plan. In 1999 and 2000 the
Company increased the contributing rate to 3%. During the years
ended July 31, 2000, 1999 and 1998, expenses under the plan
amounted to approximately $292,000, $200,000 and $100,000
respectively.
14. COMMITMENTS AND CONTINGENCIES
Industrial Revenue Bond
In the year ended July 31, 2000, the Company renegotiated its
Industrial Revenue Bond with the City of Richmond backed by a Line
of Credit with Wachovia Bank, secured by the Company's Richmond
manufacturing facility. The Company is current in all of its
obligations under the IRB and the Company is in compliance with
the covenants contained in the agreement. As of July 31, 2000,
the outstanding balance was approximately $1.1 million. Principal
payments are due in increasing amounts through maturity, which has
been extended from 2007 to 2012.
The Company is party to various claims arising in the
ordinary course of its business. Generally, claims exposure in
the construction services industry consists of workers'
compensation, personal injury, products' liability and property
damage. The Company believes that its insurance accruals, coupled
with its liability coverage, is adequate coverage for such claims.
Leases
At the time of the sale of the Falls Church, Virginia
property, January 28, 1998, the Company entered into a lease-back
arrangement for three buildings in the complex. Maximum future
lease payments for the Falls Church property is approximately
$92,000 for the year ending July 31, 2001. The agreement provides
that the landlord may cancel with six months notice to the
Company.
The Company leases certain property, plant and equipment
under operating lease arrangements, including a lease with a
related party discussed in Note 4, that expire at various dates
though 2011. Lease expenses approximated $1,245,000, $810,000,
and $580,000 for the years ended July 31, 2000, 1999, and 1998,
respectively. Future minimum lease commitments required under non-
cancelable leases are as follows (in thousands):
Year Ending July 31: Amount
--------------------- ------
2001 $1,389
2002 1,252
2003 1,218
2004 1,181
2005 1,170
Thereafter 1,867
Letters of Credit
The Company's banks have issued $400,000 of letters of credit
as collateral for the Company's workers' compensation program.
15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the years ended July 31, 2000, 1999 and 1998, the
Company issued several notes payable to acquire assets with a cost
of $1,017,000, $745,000, and $442,000, respectively. These
amounts are not included in the accompanying Consolidated
Statements of Cash Flows because the proceeds went directly to the
seller of the assets.
During the year ended July 31, 1998 the Company issued stock
bonuses in lieu of cash bonuses to certain officers. The number
of shares issued for this purpose was 36,000 with a value of
$141,000.
During the year ended July 31, 1998, the Company redeemed two
convertible debentures with a carrying value of $165,000. Also,
the Company issued 690,697 shares upon conversion of two
convertible debentures with a carrying value of $553,000.
Cash paid during the year ended July 31,
(In thousands)
2000 1999 1998
------ ------ ------
Income Taxes $ 52 $ 59 $ 46
------ ------ ------
Interest $ 424 $ 900 $1,124
------ ------ ------
16. EARNINGS PER COMMON SHARE
The Company calculates earnings per share in accordance with
SFAS No. 128, "Earnings Per Share" (EPS). Earnings per share were
as follows:
Year-ended July 31, 2000 1999 1998
------ ------ ------
EPS - basic $ 0.41 $ 0.95 $ 0.56
EPS - diluted $ 0.41 $ 0.95 $ 0.51
The following is a reconciliation of the amounts used in
calculating the basic and diluted earnings per share (in
thousands)
Year-ended July 31, 2000 1999 1998
------ ------ ------
Earnings - (numerator)
Net earnings - basic $1,487 $3,406 $1,800
Interest expense on
convertible debentures - - 76
------ ------ ------
$1,487 $3,406 $1,876
Shares - (denominator)
Weighted average shares
outstanding - basic 3,589 3,580 3,214
Effect of dilutive
securities:
Options - 5 -
Convertible debentures - - 487
------ ------ ------
3,589 3,585 3,701
====== ====== ======
17. RESTATEMENT
Subsequent to the filing of its July 31, 1999, annual report
on form 10-K, the Company became aware of certain errors that had
been made in accounting for its workers' compensation insurance
expense over a period of several years. These errors related to
the recognition of expenses for prior year claims paid by the
Company's insurance intermediary, the timing of the recording of
the annual experience rating adjustment and the recording of
premium refunds received from the intermediary. As a result, the
accompanying 1998 and 1999 financial statements have been restated
from previously reported amounts to correct the recording of these
items. A summary of the significant effects of the restatement is
as follows:
BALANCE SHEET DATA:
August 1, 1997 July 31, 1998 July 31, 1999
---------------- ---------------- ----------------
As As As
Previously As Previously As Previously As
Reported Restated Reported Restated Reported Restated
-------- ------- ------- ------- ------- -------
(In thousands)
Deferred
income
taxes $ - $ - $ - $ - $ 3,944 $ 4,269
Other
accrued
expenses - - - - 2,060 2,872
Accumulated
deficit (9,458) (9,815) (7,610) (8,015) (4,122) (4,609)
STATEMENT OF EARNINGS DATA:
Year Ended Year Ended
July 31, 1998 July 31, 1999
---------------------- ----------------------
(In thousands, except per share amounts)
As As
Previously As Previously As
Reported Restated Reported Restated
--------- --------- --------- ---------
Direct Costs $17,405 $17,453 $19,984 $20,391
Income tax benefit - - 1,675 2,000
Net earnings 1,848 1,800 3,488 3,406
Earnings per share:
Basic $ 0.57 $ 0.56 $ 0.97 $ 0.90
Diluted $ 0.52 $ 0.50 $ 0.97 $ 0.90
Williams Industries, Inc.
Schedule II - Valuation and Qualifying Accounts
Years Ended July 31, 2000, 1999 and 1998
($000 Omitted)
Column A Column B Column C Column D Column E
- ------------ --------- ------------------ -------- ---------
Additions
-------------------
Balance Charged Charged Balance
at to Costs to Other at End
Beginning and Accounts- Deductions- of
Description of Period Expenses Describe Describe Period
[S] [C] [C] [C] [C] [C]
July 31, 2000:
Allowance for
doubtful
accounts $ 1,289 $28 $ 1,868 (3) $ (26) (1) $ 2,862
(297) (2)
July 31, 1999:
Allowance for
doubtful
accounts 1,211 2 443 (3) (165) (1) 1,289
(202) (2)
July 31, 1998:
Allowance for
doubtful
accounts 758 1 758 (3) (17) (1) 1,211
(289) (2)
(1) Collection of accounts previously reserved.
(2) Write-off from reserve accounts deemed to be uncollectible.
(3) Reserve of billed extras charged against corresponding
revenue account.
SIGNATURES
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 INDUSTRIES, INCORPORATED
October 11, 2000 /s/ Frank E. Williams, III
Frank E. Williams, III
President, Chairman of the
Board
Chief Financial Officer