PART I
Item 1. Business
A. General Development of Business
Williams Industries, Incorporated (the Company) is 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, metal bridge decking, and light structural
and other metal products; and the sale of insurance, safety and related
services.
During Fiscal 2001, the Company increased its emphasis on the
manufacturing segment of its business with acquisition of S.I.P. Inc. of
Delaware. The acquisition, which added another product to the company's
infrastructure offerings, was a strategic move enabling the Company to
grow its revenues, product offerings and geographic base with a minimal
capital outlay. The Company now has three manufacturing subsidiaries,
Williams Bridge Company, Piedmont Metal Products, Inc., and S.I.P. Inc.
of Delaware.
Williams Equipment Corporation and Greenway Corporation are the
Company's subsidiaries specializing in the rental of construction
equipment and the rigging and installation of equipment or components
for diverse customers.
The remaining subsidiary in the Company's operating nucleus,
Williams Steel Erection Company, Inc., continues to provide erection and
installation services for structural steel, precast and prestresed
concrete, and miscellaneous metals.
These six subsidiaries are responsible for the vast majority of
the Company's revenues. However, their efforts are augmented by other
Company operations, including Construction Insurance Agency, Inc.,
Insurance Risk Management Group, Inc., and WII Realty Management.
These companies provide support services not only for Company operations
but also for outside customers. The parent 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.
In keeping with the Company's comprehensive long-range plan, the
Company may expand geographically, either by means of additional
acquisition or expansion of its existing businesses.
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 11 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, 2001, 2000, and 1999:
Fiscal Year Ended July 31,
---------------------------
2001 2000 1999
---- ---- ----
Construction . . . . . . . . . . . . . 25% 30% 28%
Manufacturing. . . . . . . . . . . . . 54% 50% 49%
Sales and Services . . . . . . . . . . 19% 19% 22%
Other. . . . . . . . . . . . . . . . . 2% 1% 1%
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.
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.
No single customer accounted for more than 10% of consolidated
revenue in Fiscal Years 2001, 2000 and 1999.
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 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.
Steel construction revenue generally 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.
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 both affiliated and non-affiliated customers. 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, "Stay-In-Place" metal
bridge deck forms used in bridge construction, 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 2001, no single customer
accounted for more than 10% of consolidated revenue. In the prior year,
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. Stay-In-Place Decking
S.I.P. Inc. of Delaware currently has one manufacturing facility, which
is located in Wilmington, Delaware. S.I.P. is a steel specialty manufacturer,
well known in the construction industry for fabrication of its sole product,
"stay-in-place" steel decking used in the construction of highway bridges.
S.I.P., the leading manufacturer of this type of product in the Mid-
Atlantic and Northeastern United States, has an extensive market area,
including the entire East Coast of the United States from New England through
Florida.
c. Light Structural Metal Products
The Company's subsidiary, Piedmont Metal Products, fabricates
light structural metal products at its 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 maintains its American Institute of Steel Construction,
Category I certification, which enables the subsidiary to bid to a wide
range of customers.
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
the 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.
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, 2001 the Company had
417 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 per incident
and a $2,000,000 aggregate. The Company also carries an "umbrella"
policy that provides limits of $5,000,000 in 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, 2001, the Company's backlog was approximately $46
million, compared to $35 million at July 31, 2000 and $35.9 million as
of July 31, 1999. The increases in the Company's backlog are due in
large measure to the demand for manufactured product and the addition of
S.I.P. as a Company subsidiary.
Item 2. Properties
During Fiscal 2001, the Company sold 2.5 acres. However, at July
31, 2001, the Company owned approximately 80 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 24
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 2001, the Company continued
to upgrade its fleet, both with new and used equipment. Expenditures
for such equipment totaled approximately $670,000 in Fiscal Year 2001.
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.
8/1/99 11/1/99 2/1/00 5/1/00 8/1/00 11/1/00 2/1/01 5/1/01
10/31/99 1/31/00 4/30/00 7/31/00 10/31/00 1/31/01 4/30/01 7/31/01
-------- ------- ------- ------- -------- ------- ------- -------
$4.88 $4.88 $3.37 $3.63 $2.93 $3.13 $3.85 $4.38
$3.25 $3.13 $2.50 $2.50 $2.25 $2.38 $2.75 $3.60
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,
2001 or 2000. 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 10, 2001, there were 553 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)
2001 2000 1999 1998 1997
____ ____ ____ ____ ____
Statements of Earnings Data:
Revenue:
Construction . . . . . $12.4 $12.8 $ 9.4 $10.8 $14.7
Manufacturing. . . . . 27.2 21.3 16.3 10.2 11.0
Sales and Services . . 9.9 8.0 7.2 7.1 7.7
Other. . . . . . . . . 1.0 0.8 0.5 0.8 0.9
----- ----- ----- ----- -----
Total Revenue. . . . . . . $50.5 $42.9 $33.4 $28.9 $34.3
===== ===== ===== ===== =====
Gross Profit:
Construction. . . . . $ 4.2 $ 4.3 $ 3.3 $ 4.2 $ 4.9
Manufacturing 9.9 7.1 5.9 3.1 3.4
Sales and Services 3.8 3.1 3.3 3.4 4.0
Other 1.1 0.8 0.5 0.8 0.9
----- ----- ----- ----- -----
Total Gross Profit . . . $19.0 $15.3 $13.0 $11.5 $13.2
===== ===== ===== ===== =====
Other Income: $ 0.1 $ 0.1 $ 0.1 $ 0.4 $ 0.1
Expense:
Overhead . . . . . . $ 5.2 $ 4.4 $ 3.7 $ 3.1 $ 3.4
General and
Administrative . 8.5 6.5 5.7 5.0 5.7
Depreciation . . . .. 1.6 1.2 1.3 1.2 1.1
Interest . . . . . .. 0.8 0.9 0.9 1.2 1.6
Income Tax (Benefit) 0.4 0.9 (2.0) (0.3) (1.7)
----- ----- ----- ----- -----
Total Expense . . $16.5 $13.9 $ 9.6 $10.2 $10.1
===== ===== ===== ===== =====
Earnings Before
Extraordinary Item $ 2.6 $ 1.5 $ 3.5 $ 1.7 $ 3.2
Equity (Loss) Earnings
And Minority Interest $(0.1) - 0.1 (0.8) (0.2)
Extraordinary Item -
(Loss)Gain on Extinguish-
ment of Debt $ - - (0.2) 0.9 3.2
----- ----- ----- ----- -----
Net Earnings $ 2.5 $ 1.5 $ 3.4 $ 1.8 $ 6.2
===== ===== ===== ===== =====
Earnings (Loss) Per Share:
Before Extraordinary
Item. . . ...... $0.70 0.41 $1.00 $0.27 $1.13
Extraordinary Item - - (0.05) 0.29 1.20
----- ----- ----- ----- -----
Earnings Per Share:
Basic* $0.70 $0.41 $0.95 $0.56 $2.33
===== ===== ===== ===== =====
Diluted $0.70 $0.41 $0.95 $0.51 $2.13
===== ===== ===== ===== =====
Balance Sheet Data (at end of year):
Total Assets . . . . . . $37.7 $35.0 $32.6 $29.1 $31.5
Long Term Obligations . . . 7.0 7.7 7.4 8.4 7.4
Total Liabilities . . . . 21.5 21.3 20.4 20.4 25.3
Stockholders equity . . . . 16.2 13.7 12.2 8.7 6.2
* No Dividends were paid on Common Stock during the above five-year period.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
The subsidiaries of Williams Industries, Inc. provide specialized
services and products for the construction industry. Since Fiscal
1996, the Company, in an attempt to take advantage of opportunities
available in the economy, has increased its emphasis on its
Manufacturing Segment. Manufacturing, which was 37% of the Company's
business in Fiscal 1996, comprised 54% of the revenue in Fiscal 2001.
The amount of commercial, institutional, and governmental construction
activity in the Mid-Atlantic region, where the Company traditionally has
focused its efforts, has been higher than many other regions in recent
years. However, the Company, like many others in the region, has
experienced difficulty in attracting the necessary labor force. For
this reason, geographic expansion is a very real possibility.
For the Fiscal Year Ended July 31, 2001, the Company produced an
18% increase in revenue. A portion of this increase is attributed to
the acquisition of S.I.P. Inc. of Delaware, which not only increased the
Company's revenue, but also its market area. 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.
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 now are shipped well beyond the
region. The Company's long-range business plan anticipates the
continuation of this trend for at least the next three to five years.
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.
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.
The Company's long-range plan also calls for the continued
amalgamation of existing subsidiaries to produce the most cost-effective
and customer-responsive combination of manufacturing, construction, and
heavy hauling and lifting capabilities possible. The Company's ability
to offer a turnkey approach for its customers, thereby increasing its
competitiveness on some contracts, will continue to be a strength.
During Fiscal 2001, the Company continued its program of capital
improvements, both in terms of equipment and physical facilities.
Corporate headquarters and the offices for one subsidiary were moved to
Company-owned property in Manassas, Virginia in order to co-locate with
three subsidiaries already in place on the property. Efforts toward the
construction of a facility to serve both the office and shop needs of
the corporation are underway. It is anticipated that capital
expenditures of $1.5 to $2 million will occur over the next several
years. In addition, extensive improvements were made at the Piedmont
Metal Products' plant in Bedford, Virginia.
While there were expenditures for physical improvements in Fiscal
2001, the bulk of the expenditures relate to revenue producing equipment
such as cranes or upgraded manufacturing facilities.
Financial Condition
The Company's balance sheet is solid and includes sufficient near-
term liquidity and limited long-term debt. The significant increase in
inventory is indicative of the Company's expansion in the manufacturing
area and its decision to take advantage of the current low prices of raw
materials.
The Company's revenues for the twelve months ended July 31, 2001
increased by nearly $8 million or 18%. Total corporate earnings before
income taxes also increased by $674,000 or 29%.
Direct costs, when viewed as a percentage of revenue, remained
stable in the Construction segment while declining in both the
Manufacturing and Sales and Services Segments. While all of the
Company's subsidiaries benefited from more favorable terms on the cost
of money, increased labor costs, frequently related to overtime
necessary to keep major projects on schedule, caused the labor intensive
businesses, such as Williams Steel Erection Company, to have higher
costs. The hiring, training and retention of qualified employees
remains a significant problem throughout the construction industry.
Accounts receivable increased slightly, due in part to the addition
of S.I.P. receivables. The Company's allowance for doubtful accounts
was reduced from $2,862,000 at July 31, 2000 to $1,075,000 due in part
to the settlement of several claims issues. The Company has also
adopted a more aggressive policy in the collection of receivables.
The Company continues to utilize its credit facilities as necessary
to handle short-term cash requirements, particularly in terms of
inventory expansion for major fabrication projects.
Bonding
The Company has a comprehensive bonding program with a primary
underwriter that is believed to be more than sufficient for the
Company's needs. In addition to this program, the Company has
additional specific job coverages with other underwriters. 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 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 retain a portion of amounts otherwise payable to the
Company as a guarantee of completion. 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. The Company's cash and cash equivalents,
however, grew from $2,568,000 at July 31, 2000 to $3,748 at July 31,
2001.
The Company made $867,000 in expenditures for property, plant and
equipment, and had proceeds of $864,000 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 $6,934,000 while only borrowing $5,932,000 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.
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
The Company's Manufacturing subsidiaries, and to a lesser extent
the Sales and Services segment, continue to benefit from strong demand
for their products and services. The Construction segment has
experienced a slight reduction in demand, particularly in the area of
"mega" projects. All of the Company's subsidiaries are benefiting from
the continuing strengthened financial condition of the parent
corporation.
Labor remains the largest obstacle to expansion and increased
profitability. In order to ameliorate the problem, both in the field
and the administrative offices, the subsidiaries are often sharing
personnel.
1. Fiscal Year 2001 Compared to Fiscal Year 2000
The single most significant difference between Fiscal 2001 and
Fiscal 2000 was the addition of S.I.P. Inc. of Delaware to the Company's
consolidated results. The addition of S.I.P. was a major contributor to
the Manufacturing segment's increase in both revenues and profitability,
although the entire segment continues to benefit from consistent order
flow for bridge girders and decking, both components of the federal
government's extensive infrastructure funding program. The increasing
proportion of revenues generated by manufacturing is expected to
continue as funding for infrastructure programs is scheduled to continue
for at least five years.
The Sales and Services segment also had an increase in revenues
when the years are compared. Some of this increase is attributed to
the Company's recent consolidation of crane management, which allows
higher utilization for both long and short-term projects. More
coordinated scheduling also permits the Company to seize emergency,
time-sensitive opportunities, which generally produce higher profit
margins.
In the absence of many "mega" or extremely large construction
projects, the Construction segment performed a multitude of smaller jobs
in Fiscal 2001 to keep its revenues close to those of Fiscal 2002.
Institutional projects, such as schools and Post Offices, comprised a
significant component of the segment's work in contrast to the
commercial construction of the prior year.
The Company has been taking advantage of conditions in the overall
economy to restructure several long-term debt obligations, reducing the
average interest rate of its variable rate obligations by nearly two
percent and the rate on its total fixed interest notes by approximately
0.2%. These savings are reflected on the Company's Income Statement.
The Company's provision for income taxes must also be evaluated
when reviewing bottom-line results. The Fiscal 2001 provision of
$495,000 was substantially less than the Fiscal 2000 provision of
$892,000 as a result of the Company's ability to use some of its tax-
loss carryforwards. The Company's future utilization of its remaining
tax loss carryforwards will continue to be evaluated on a yearly basis.
2. 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 were 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. It should be
noted that 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. The errors were corrected in the
financial statements accompanying the Fiscal Year 2000 report.
One of the most significant differences between Fiscal 2000 and
Fiscal 1999 was 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 change was 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.
2. Fiscal Year 1999 Compared to Fiscal Year 1998
The difference between Fiscal Year 1999 results and those of Fiscal
1998 occurred for a combination of reasons, some of which were more
subtle that others. 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 was obvious that
the manufacturing segment had a significantly greater amount of work in
Fiscal Year 1999 than it did in 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 required 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.
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.
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.
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, 2001. 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, 2001. Notes 6 and 13 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, 2002 2003 2004
------ ------- ------
Interest Rate Sensitivity
--------------------------
Notes Payable:
Variable Rate $ 375 $1,358 $ 360
Average Interest Rate 7.18% 7.22% 7.12%
Fixed Rate $1,263 $1,018 $ 557
Fixed Interest Rate 9.56% 9.55% 8.87%
Year Ending July 31, 2005 Thereafter Total Fair
Value
------ -------- ------- ------
Variable Rate $ 339 $ 915 $3,347 $3,300
Average Interest Rate 7.08% 5.56% 6.73%
Fixed Rate $ 406 $ 2,096 $5,340 $5,300
Fixed Interest Rate 8.49% 8.70% 9.07%
Item 8. Williams Industries, Incorporated Consolidated Financial
Statements for the Years ended July 31, 2001, 2000, and 1999.
Independent Auditor's Report
Year ended July 31, 2001
Aaronson, Fetridge & Weigle
Certified Public Accountants
To the Board of Directors and Stockholders
Williams Industries, Incorporated
Falls Church, Virginia
We have audited the accompanying Consolidated Balance Sheets of Williams
Industries, Incorporated as of July 31, 2001 and 2000, and the related
Consolidated Statements of Earnings, Stockholders' Equity and Cash Flows
for the years then ended. Our audits also included the financial
statement schedule for the years ended July 31, 2001 and 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 audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 audits 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, 2001 and 2000, and the
consolidated results of its operations and its cash flows for each of
the years then ended in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
Rockville, Maryland
September 11, 2001
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Williams Industries, Incorporated
Manassas, Virginia
We have audited the accompanying consolidated statements of earnings,
stockholders' equity and cash flows of Williams Industries,
Incorporated, and subsidiaries (the "Company") for the year ended July
31, 1999. Our audit also included the financial statement schedule for
the year ended July 31, 1999 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a reasonable basis for
our opinion.
In our opinion, such consolidated financial statements present fairly in
all material respects, the results of operations and cash flows of
Williams Industries, Incorporated, and subsidiaries for the year ended
July 31, 1999 in conformity with accounting principles generally
accepted in the United States of America. 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.
Deloitte & Touche LLP
McLean, Virginia
September 25, 2000
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, either in person or by conference call, met four
times during Fiscal 2001 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.
Stephen N. Ashman
Chairman, Audit Committee
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JULY 31, 2001, 2000 and 1999
($000 omitted except earnings per share)
2001 2000 1999
-------- -------- --------
REVENUE:
Construction $ 12,386 $ 12,820 $ 9,392
Manufacturing 27,210 21,321 16,308
Sales and service 9,889 7,953 7,153
Other revenue 1,023 782 526
-------- -------- --------
Total revenue 50,508 42,876 33,379
-------- -------- --------
DIRECT COSTS:
Construction 8,178 8,578 6,096
Manufacturing 17,277 14,223 10,439
Sales and service 6,023 4,822 3,856
Total direct costs 31,478 27,623 20,391
-------- -------- --------
GROSS PROFIT 19,030 15,253 12,988
-------- -------- --------
OTHER INCOME 107 115 144
-------- -------- --------
EXPENSES:
Overhead 5,228 4,449 3,691
General and administrative 8,480 6,497 5,694
Depreciation and amortization 1,589 1,185 1,326
Interest 840 911 910
-------- -------- --------
Total expenses 16,137 13,042 11,621
-------- -------- --------
EARNINGS BEFORE INCOME TAXES, EQUITY
EARNINGS AND MINORITY INTERESTS 3,000 2,326 1,511
INCOME TAX PROVISION (BENEFIT) 405 892 (2,000)
-------- -------- --------
EARNINGS BEFORE EQUITY EARNINGS AND
MINORITY INTERESTS 2,595 1,434 3,511
Equity in earnings of
unconsolidated affiliates - 120 135
-------- -------- --------
EARNINGS BEFORE MINORITY INTERESTS 2,595 1,554 3,646
Minority Interests in
consolidated subsidiaries (77) (67) (48)
-------- -------- --------
EARNINGS BEFORE EXTRAORDINARY ITEM 2,518 1,487 3,598
EXTRAORDINARY ITEM
Loss on extinguishment of debt - - (192)
-------- -------- --------
NET EARNINGS $ 2,518 $ 1,487 $ 3,406
======== ======== ========
EARNINGS PER COMMON SHARE:
BASIC:
Earnings before extraordinary item $ 0.70 $ 0.41 $ 1.00
Extraordinary item - - (0.05)
------ ------ ------
EARNINGS PER COMMON SHARE-BASIC $ 0.70 $ 0.41 $ 0.95
====== ====== ======
DILUTED:
Earnings before extraordinary item $ 0.70 $ 0.41 $ 1.00
Extraordinary item - - (0.05)
------ ------ ------
EARNINGS PER COMMON SHARE-DILUTED $ 0.70 $ 0.41 $ 0.95
====== ====== ======
See Notes To Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 2001 AND 2000
($000 Omitted)
ASSETS
2001 2000
-------- --------
CURRENT ASSETS
Cash and cash equivalents $ 3,748 $ 2,568
Restricted cash 49 68
Certificates of deposit 693 681
Accounts receivable, (net of allowances
for doubtful accounts of $1,075
in 2001 and $2,862 in 2000):
Contracts
Open accounts 9,734 10,927
Retainage 912 383
Trade 2,473 1,862
Other 1,133 117
-------- --------
Total accounts receivable - net 14,252 13,289
-------- --------
Inventory 3,619 1,500
Costs and estimated earnings in excess
of billings on uncompleted contracts 2,493 1,545
Prepaid expenses 1,151 1,120
-------- --------
Total current assets 26,005 20,771
-------- --------
PROPERTY AND EQUIPMENT, AT COST 19,228 18,482
Accumulated depreciation (11,089) (9,475)
-------- --------
Property and equipment, net 8,139 9,007
-------- --------
OTHER ASSETS
Investments in unconsolidated affiliates - 1,043
Deferred income taxes 3,067 3,423
Other 531 762
-------- --------
Total other assets 3,598 5,228
-------- --------
TOTAL ASSETS $ 37,742 $ 35,006
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of notes payable $ 1,638 $ 1,515
Accounts payable 4,684 4,899
Accrued comp. and related liabilities 1,635 1,190
Billings in excess of costs and estimated
earnings on uncompleted contracts 2,902 2,409
Deferred income 124 221
Other accrued expenses 3,103 2,977
Income taxes payable 15 119
-------- --------
Total current liabilities 14,101 13,330
-------- --------
LONG-TERM DEBT
Notes payable, less current portion 7,049 7,724
-------- --------
Total liabilities 21,150 21,054
-------- --------
MINORITY INTERESTS 378 279
-------- --------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - $0.10 par value,
10,000,000 shares authorized;
3,601,196 and 3,591,496 shares
issued and outstanding 360 359
Additional paid-in capital 16,458 16,436
Accumulated deficit (604) (3,122)
-------- --------
Total stockholders' equity 16,214 13,673
-------- --------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 37,742 $ 35,006
========= =========
See Notes To Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 31, 2001, 2000 and 1999
($000 0mitted)
Additional
Number Common Paid-In Accumulated
of Shares Stock Capital Deficit Total
--------- ------ -------- ---------- ------
BALANCE, AUGUST 1, 1998 3,577 $ 358 $ 16,385 $(8,015) $8,728
Issuance of stock 11 1 39 - 40
Net earnings
for the year * - - - 3,406 3,406
--------- ------ -------- ---------- ------
BALANCE, JULY 31, 1999 3,588 359 16,424 (4,609) 12,174
Issuance of stock 3 0 12 - 12
Net earnings
for the year * - - - 1,487 1,487
--------- ------ -------- ---------- ------
BALANCE, JULY 31, 2000 3,591 359 16,436 (3,122) 13,673
Issuance of stock 10 1 22 - 23
Net earnings
for the year * - - - 2,518 2,518
--------- ------ -------- ---------- ------
BALANCE, JULY 31, 2001 3,601 $ 360 $ 16,458 $ (604) $16,214
======== ====== ======== ======== =======
* There were no items of other comprehensive income during the year.
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 2001, 2000 AND 1999
($000 Omitted)
2001 2000 1999
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,518 $ 1,487 $ 3,406
Adjustments to reconcile net earnings to
to net cash provided by
operating activities:
Depreciation and amortization 1,589 1,185 1,326
Increase (decrease) in allowance
for doubtful accounts (1,787) 1,573 78
Loss (gain) on extinguishment of debt - - 77
Gain on disposal of property,
plant and equipment (84) (15) (156)
Decrease (increase) in deferred
income tax assets 346 846 (2,029)
Minority interest in earnings 77 67 48
Equity in (earnings) losses of affiliates - (120) (135)
Dividend from unconsolidated affiliate - 125 67
Changes in assets and liabilities:
Decrease (increase) in
open contracts receivable 4,002 (3,983) (1,621)
(Increase) decrease in contract retainage (529) (213) 415
(Increase) decrease in trade receivables (546) 352 (472)
Increase in contract claims (492) - -
(Increase) decrease in other receivables (524) 503 (192)
(Increase) Decrease in inventory (608) 708 (903)
(Increase) decrease in costs and
estimated earnings in excess of
billings on uncompleted contracts (948) (64) (815)
Increase in billings in excess of costs
and estimated earnings
on uncompleted contracts 493 187 337
Increase in prepaid expenses (7) (519) (109)
Decrease (increase)in other assets 241 97 (90)
(Decrease) increase in accounts payable (373) 31 851
Increase in accrued compensation
and related liabilities 354 256 173
(Decrease) increase in deferred income (97) (127) 42
Increase in other accrued expenses 121 105 68
Increase (decrease)
in income taxes payable (105) (10) (30)
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,641 2,471 336
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for
property, plant and equipment (996) (932) (628)
(Increase) decrease in restricted cash 19 (7) (7)
Proceeds from sale of
property, plant and equipment 864 431 2,270
Purchase of subsidiary (1,302) - -
Purchase of certificates of deposit (118) (89) (458)
Maturities of certificates of deposit 106 146 453
------- ------- -------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (1,427) (451) 1,630
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 5,932 3,891 6,479
Repayments of notes payable (6,934) (4,477) (8,721)
Issuance of common stock 23 12 40
Minority interest dividends (55) (23) (3)
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (1,034) (597) (2,205)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,180 1,423 (239)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,568 1,145 1,384
------- ------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,748 $ 2,568 $ 1,145
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION (SEE NOTE 14)
See Notes To Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 2001, 2000 AND 1999
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, steel decking, 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 was accounted for using the equity method in
the years ended July 31, 2000 and 1999, respectively. 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 (See Note 8).
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, 2001.
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 common stock equivalents
outstanding which consisted of stock options during the years ended July
31, 2001, 2000 and 1999.
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.
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 - Materials inventory consists of structural steel,
metal decking, and steel cable. Costs of materials inventory is
accounted for using either the specific identification method or average
cost. 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.
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 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 141, "Business Combinations", SFAS No. 142, "Goodwill
and Other Intangible Assets" and SFAS No. 143, "Accounting for Asset
Retirement Obligations".
SFAS No. 141 eliminates the use of the pooling-of-interests method
of accounting for business combinations and requires that all such
transactions be accounted for by the purchase method. In addition, SFAS
No. 141 requires that intangible assets be recognized as assets apart
from goodwill and that they meet specific criteria described in the
Standard. This Standard is applicable to all business combinations
initiated after June 30, 2001 and all business combinations accounted
for using the purchase method for which the date of acquisition is July
1, 2001 or later. Management will follow the Standard in accounting for
all future business combinations and does not believe that adoption of
the Standard will have any impact on its financial statements.
SFAS No. 142 eliminates the requirement to amortize goodwill and
requires that other intangible assets be separated into assts that have
a finite useful life and those with an indefinite useful life.
Intangible assets with a finite useful life are amortized over the
useful life. Intangible assets with an indefinite life are to be
measured for impairment annually, or more frequently if the
circumstances indicate impairment may have occurred. With respect to
goodwill, the Standard requires that it be measured annually for
impairment under a defined two-step process that begins with an
estimation of the fair value of a "reporting unit," which is defined in
the Standard. The first step in the process is a screening for
impairment and the second step measures the amount of impairment, if
any. Upon initial adoption of AFAS No. 142, the change is to be reported
on the financial statements as a change in accounting principal with the
cumulative effect reported in the statement of income in the period of
adoption. The Standard is required to be applied starting with fiscal
years beginning after December 15, 2001, with early application
permitted for entities with fiscal years beginning after March 31, 2001.
The Company expects to adopt this new Standard with its fiscal year
beginning August 1, 2001. The Company has no goodwill or other
intangible assets as of July 31, 2001. and, therefore does not believe
that adoption of the Standard will have any impact on its financial
statements.
SFAS No. 143 requires that asset retirement obligations be
recognized as a liability in the period in which it is incurred at its
fair value, if a reasonable estimate can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. The Standard requires that the liability be discounted
and accretion expense be recognized. SFAS No. 143 is effective for
financial statements issued for fiscal years beginning after June 15,
2001, with earlier application permitted. The Company does not have any
asset retirement obligations as of July 31, 2001 and, therefore does not
believe that adoption of the Standard will have any impact on its
financial statements.
1. 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 costs of collection. There was one contract claim
receivable of approximately $490,000 at July 31, 2001 There were no
contract claims outstanding at July 31, 2000.
2. (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 its 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.
3. RELATED-PARTY TRANSACTIONS
Mr. Frank Williams, Jr., who owns or controls approximately 36% of
the Company's stock at July 31, 2001, and is a director of the Company,
also owns a controlling or substantial interest in the outstanding stock
of Williams Enterprises of Georgia, Inc., Williams and Beasley Company
and Structural Concrete Products, LLC. Each of these entities did
business with the Company during the three years ended July 31, 2001.
Net billings to and (from) these entities were $1,320,000, ($997,000)
and $630,000 for the years ended July 31, 2001, 2000 and 1999,
respectively.
Mr. Williams, Jr. 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, 2001, 2000,
and 1999, there were no billings to this entity. During the year ended
July 31, 2001, the Company agreed to accept approximately $130,000 as
full and final payment on a note receivable from CSI. Since the note was
fully reserved, this amount was recognized as Other Income during the
year.
During the years ended July 31, 2001, 2000 and 1999, the Company
borrowed $850,000 $950,000 and $200,000 from Mr. Williams, Jr., 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 $135,000, $123,000 and $258,000 at July 31,
2001, 2000 and 1999, respectively.
During the year ended July 31, 2000 the Company entered into an
agreement with the Williams Family Limited 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.
The Company recognized lease expense of $84,000 in the year ended July
31, 2001.
4. CONTRACTS IN PROCESS
Comparative information with respect to contracts in process
consisted of the following at July 31(in thousands):
2001 2000
------- -------
Expenditures on uncompleted contracts $21,819 $23,786
Estimated earnings 10,105 12,165
------- -------
31,924 35,951
Less: Billings (32,333) (36,815)
------- -------
$ (409) $ (864)
======== ========
Included in the accompanying balance sheet under the following captions:
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 2,493 $ 1,545
Billings in excess of costs and estimated
earnings on uncompleted contracts (2,902) (2,409)
------- -------
$ (409) $ (864)
======== ========
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.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at July 31
(in thousands):
2001 2000
--------------------- --------------------
Accumulated Accumulated
Cost Depreciation Cost Depreciation
------- ----------- ------- -----------
Land and buildings $ 5,697 $ 2,321 $ 5,277 $ 1,873
Automotive Equipment 1,929 1,415 2,073 1,525
Cranes and heavy equipment 8,222 5,388 7,859 4,500
Tools and equipment 1,331 669 1,600 533
Office furniture and fixtures 329 220 368 275
Leased property
under capital leases 600 400 600 340
Leasehold improvements 1,120 676 705 429
------- ------- ------- -------
$19,228 $11,089 $18,482 $ 9,475
======= ======= ======= =======
6. NOTES AND LOANS PAYABLE
Notes and loans payable consisted of the following at July 31
(in thousands):
2001 2000
------- -------
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 $2,256 $2,348
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 522 576
Total Lines of Credit; $4,600 and $1,500 available
at July 31, 2001 and 2000, collateralized by real
estate, inventory and equipment; monthly payments
of interest only, and principal plus interest, at
prime to prime plus 1.25%; interest from 6.75% to
7.75% as of July 31, 2001 and 10.75% as of July
31, 2000; due through 2006 2,248 1,500
Obligations under capital leases; collateralized by
leased property; interest from 8.34% to 15.1% for
2001 and 7.75% to 15.1% for 2000, payable in varying
monthly installments through 2005 540 753
Installment obligations collateralized by machinery
And equipment or real estate; interest ranging to
11.3% for 2001 and for 2000; payable in varying
monthly installments of principal and interest
through 2006 1,146 1,913
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 1,030 1,095
Unsecured:
Lines of credit; interest at 10.0% for 2001 and 2000 88 88
Installment obligations with interest from 6.0% to
12.1% for 2001 and 6.0% to 11.0% for 2000; due in
varying monthly installments of principal and
interest through 2005 857 966
------- -------
Total Note Payable $8,687 $9,239
Notes Payable - Long Term (7,049) (7,724)
------- -------
Current Portion $1,638 $1,515
Contractual maturities of the above obligations at July 31, 2001
are as follows:
Year Ending July 31: Amount
-------------------- --------
2002 $1,638
2003 2,376
2004 918
2005 745
2006 498
2007 and after 2,512
------
TOTAL $8,687
======
As of July 31, 2001 and 2000, the carrying amounts reported above
for long term notes and loans payable, reported at $7,060,000 and
$7,724,000, approximate fair value based upon interest rates for debt
currently available with similar terms and remaining maturities.
7. INCOME TAXES
As a result of tax losses incurred in prior years, the Company at
July 31, 2001 has tax loss carryforwards amounting to approximately $7.1
million. These loss carryforwards will expire 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. The Company recognized a $1.2 million portion of the
benefit available from its tax loss carryforwards during the year ended
July 31, 2001. The Company also recognized a $2.6 million portion of the
benefit available from its tax loss carryforwards during the year ended
July 31, 1999.
The components of the income tax provision (benefit) are as follows
for the years ended July 31:
2001 2000 1999
------ ------ ------
(In thousands)
Current provision
Federal $ (48) $ - $ -
State 63 45 29
------ ------ ------
Total current provision 15 45 29
------ ------ ------
Deferred provision (benefit)
Federal 473 713 (1,635)
State (83) 134 (394)
------ ------ -------
Total deferred provision (benefit) 390 847 (2,029)
------ ------ -------
Total income tax provision (benefit) $ 405 $ 892 $(2,000)
====== ====== ========
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.
2001 2000 1999
------ ------ ------
(In thousands)
Tax at statutory federal rate $ 959 $ 791 $ 514
State income taxes 240 101 60
Change in valuation reserve (794) - (2,574)
------ ------ ------
Actual income tax provision (benefit) $ 405 $ 892 $(2,000)
====== ====== ========
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, 2001 2000
------- -------
(In thousands)
Deferred tax assets:
Reserve and other nondeductible accruals $ 1,781 $ 2,381
Net operating loss & capital loss
carryforwards 3,116 3,105
Valuation reserve (982) (925)
------- -------
Total deferred tax asset 3,915 4,561
------- -------
Deferred tax liability:
Property and equipment (453) (673)
Inventories (395) (465)
------- -------
Total deferred tax liability (848) (1,138)
------- -------
Net deferred tax asset $ 3,067 $ 3,423
======== ========
8. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
During the year ended July 31, 2001, the Company purchased 584
shares or approximately 56% of the outstanding stock of S.I.P., Inc. of
Delaware (S.I.P) for $1,302,000, bringing the total investment to
approximately $2,345,000, which gave the Company 98% ownership and full
control of its operations. In addition, the stock purchase agreements
provide for additional payments to be made based upon the net earnings
of S.I.P for the next five years. The initial purchase has been
accounted for and any additional payments will be accounted for under
the purchase method of accounting. For the year ended July 31, 2001,
S.I.P's financial information has been consolidated in the Consolidated
Balance Sheet as of July 31, 2001, and the related consolidated
Statements of Earnings, Equity and Cash Flows for the year then ended.
A pro-forma presentation of the operating results of the Company, had
they been consolidated at the beginning of the year ended July 31, 2000,
is as follows:
Total Revenue $47,760
Net Earnings $ 1,613
Earnings per common share - basic and diluted $ 0.45
Subsequent to July 31, 2001, the Company purchased the remaining
outstanding stock of S.I.P. For the year ended July 31, 2000, S.I.P was
valued using the equity method as it was an unconsolidated affiliate.
9. DISPOSITION OF ASSETS
During the year ended July 31, 2001, 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 loss of approximately $28,000
which was recognized during the period. Two older heavy lift cranes were
sold for a net gain of approximately $50,000.
Also during 2001, the Company sold 2.5 acres of land in Bedford, VA
for $37,000. The sale resulted in a gain of approximately $36,000, which
is included in "Other Income" for the year ended July 31, 2001.
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 is being 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 is being 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
$71,000, $115,000 and $120,000 is included in "Other Income" in the
Consolidated Statements of Earnings for the years ended July 31, 2001,
2000 and 1999, respectively.
10. 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.
The options that have been approved and issued by the Company's
Board of Directors for the last four years is as follows:
1998 1999 2000 2001 Total
------ ------ ------ ------ ------
Board of Directors 12,000 17,500 15,000 15,000 59,500
Company management 12,000 30,000 16,000 16,000 74,000
------ ------ ------ ------ -------
24,000 47,500 31,000 31,000 133,500
====== ====== ====== ====== =======
The stock options granted vest immediately, expire five years from
the date of grant and have 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 value
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:
2001 2000 1999
------- ------- -------
Net Earnings (in thousands)
As reported $ 2,518 $ 1,487 $ 3,406
Pro forma 2,476 1,416 3,269
Earnings per share - Basic
As reported $ 0.70 $ 0.41 $ 0.95
Pro forma 0.69 0.39 0.92
Earnings per share - Diluted
As reported $ 0.70 $ 0.41 $ 0.95
Pro forma 0.69 0.39 0.92
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, 2001 2000 1999
------- ------- -------
Dividend yield 0.0% 0.0% 0.0%
Volatility rate 55.8% 84.7% 90.0%
Discount rate 5.4% 6.0% 6.0%
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 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
Number Average
of Exercise
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
Granted 31,000 $2.82
Exercised - -
Forfeited - -
-------
Balance at:
July 31, 2001 133,500 $3.46
=======
Options exercisable,
July 31, 2001 133,500 $3.46
=======
11. 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):
2001 2000 1999
-------- -------- --------
Revenue:
Construction $14,409 $14,299 $10,364
Manufacturing 27,272 21,681 16,455
Sales and service 11,028 8,435 7,846
Other revenue 1,023 782 526
-------- -------- --------
53,732 45,197 35,191
Inter-company revenue:
Construction (2,023) (1,479) (972)
Manufacturing (62) (360) (147)
Sales and service (1,139) (482) (693)
-------- -------- --------
Total revenue $50,508 $42,876 $33,379
======== ======== ========
Operating profits (loss):
Construction $ 549 $ 945 $ 600
Manufacturing 2,695 1,617 1,206
Sales and service 392 224 514
-------- -------- --------
Consolidated operating profits 3,636 2,786 2,320
General corporate income, net 204 451 101
Interest Expense (840) (911) (910)
Income tax (provision) benefit (405) (892) 2,000
Equity in earnings (losses) of
unconsolidated affiliates - 120 135
-------- -------- --------
Corporate earnings
before minority interests $ 2,595 $ 1,554 $ 3,646
======== ======== ========
Assets:
Construction $ 8,950 $ 9,122 $ 7,877
Manufacturing 16,870 12,045 10,549
Sales and service 4,141 4,800 4,920
General corporate 7,781 9,039 9,244
Total assets $ 37,742 $ 35,006 $ 32,590
Accounts receivable
Construction $ 5,626 $ 6,494 $ 5,592
Manufacturing 5,998 4,823 3,266
Sales and service 2,031 1,591 1,783
General corporate 597 381 880
-------- -------- --------
Total accounts receivable $14,252 $13,289 $11,521
======= ======= =======
Capital expenditures:
Construction $ 114 $ 170 $ 16
Manufacturing 543 557 925
Sales and service 188 1,040 361
General corporate 152 182 71
-------- -------- --------
Total capital expenditures $ 997 $1,949 $1,373
===== ====== ======
Depreciation and Amortization:
Construction $ 243 $ 102 $ 88
Manufacturing 556 346 235
Sales and service 638 625 891
General corporate 152 112 112
-------- -------- --------
Total depreciation and amortization $1,589 $1,185 $1,326
====== ====== ======
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, 1999, one single
customer accounted for 19.9% of the consolidated revenue and 40.8% of
manufacturing revenue. During the years ended July 31, 2000 and 2001,
there was no single customer that accounted for more than 10% of
consolidated revenues.
The accounts receivable from the construction segment at July 31,
2001, 2000, and 1999 were due from 43, 42, and 46 unrelated customers,
of which 6, 7 and 5 customers accounted for $3,776,000, $3,809,000, and
$3,346,000, 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,
2001, 2000, and 1999 were due from 110, 21 and 16 unrelated customers,
of which 7, 5, and 2 customers accounted for $2,404,000, $4,939,000 and
$2,365,000, 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.
12. 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. The Company
contributes 3% of each eligible employee's salary to the plan. During
the years ended July 31, 2001, 2000 and 1999, expenses under the plan
amounted to approximately $312,000, $292,000 and $200,000, respectively.
13. 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, 2001, the
outstanding balance was $1,030,000. Principal payments are due in
increasing amounts through maturity in 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
The Company leases certain property, plant and equipment under
operating lease arrangements, including a lease with a related party
discussed in Note 3, that expire at various dates though 2011. Lease
expenses approximated $1,450,000, $1,245,000 and $810,000 for the years
ended July 31, 2001, 2000, and 1999, respectively. Future minimum lease
commitments required under non-cancelable leases are as follows (in
thousands):
Year Ending July 31: Amount
--------------------- -------
2002 1,722
2003 1,700
2004 1,659
2005 1,627
2006 1,429
Thereafter 1,830
Letters of Credit
The Company's banks have issued $400,000 of letters of credit as
collateral for the Company's workers' compensation program.
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the years ended July 31, 2001, 2000 and 1999, the Company
issued several notes payable to acquire assets with a cost of $198,000,
$1,017,000 and $745,000, 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.
Cash paid during the year ended July 31,
(In thousands)
2001 2000 1999
-------- -------- --------
Income Taxes $ 143 $ 52 $ 59
Interest $ 871 $ 424 $ 900
During the year ended July 31, 2001, the Company purchased
approximately 56% of the outstanding stock of S.I.P., Inc. of Delaware.
A summary of the transaction of the acquisition is as follows:
Assets received:
Current Assets $ 1,471
Net Property & Equipment 340
Other Assets 6
--------
Total Assets $ 1,817
--------
Liabilities Assumed:
Current Liabilities $ (513)
Long-term Liabilities ( 2)
--------
Total Liabilities $ (515)
--------
Purchase Amount $(1,302)
========
15. 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, 2001 2000 1999
------- ------- -------
EPS - basic $ 0.70 $ 0.41 $ 0.95
EPS - diluted $ 0.70 $ 0.41 $ 0.95
The following is a reconciliation of the amounts used in calculating the
basic and diluted earnings per share (in thousands):
Year-ended July 31, 2001 2000 1999
------- ------- -------
Earnings - (numerator)
Net earnings - basic $ 2,518 $ 1,487 $ 3,406
======= ======= =======
Shares - (denominator)
Weighted average shares
outstanding - basic 3,596 3,589 3,580
Effect of
dilutive securities:
Options 11 - 5
------- ------- -------
3,607 3,589 3,585
======= ======= =======
Williams Industries, Inc.
Schedule II - Valuation and Qualifying Accounts
Years Ended July 31, 2001, 2000 and 1999
($000 Omitted)
Column A Column B Column C Column D Column E
--------------- ---------- ------------------------ ---------- ----------
Additions
------------------------
Charged
Balance at Charged to to Other Balance at
Beginning Costs and Accounts- Deductions- End of
Description of Period Expenses Describe Describe Period
--------------- ---------- ----------- ---------- ------------ ---------
July 31, 2001:
Allowance
for doubtful
accounts $2,862 $ 100 $ 1,264(3) $ (371) (1) $ 1,075
(2,780) (2)
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)
(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.
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 10, 2001.
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, 2001 and 2000.
Consolidated Statements of Earnings for the Years Ended July 31,
2001, 2000, and 1999.
Consolidated Statements of Stockholders' Equity for the Years Ended
July 31, 2001, 2000, and 1999.
Consolidated Statements of Cash Flows for the Years
Ended July 31, 2001, 2000, and 1999.
Notes to Consolidated Financial Statements for the Years Ended July
31, 2001, 2000, and 1999.
Schedule II -- Valuation and Qualifying Accounts for
the Years Ended July 31, 2001, 2000, and 1999
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
Exhibits 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
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
September 20, 2000 /s/ Frank E. Williams, III
Frank E. Williams, III
President, Chairman of the
Board
Chief Financial Officer
41