SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For Quarter Ended January 31, 2002
Commission File No. 0-8190
Williams Industries, Incorporated
(Exact name of registrant as specified in its charter)
Virginia 54-0899518
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8624 J.D. Reading Drive, Manassas, Virginia 20109
(Address of Principal Executive Offices) (Zip Code)
(703) 335-7800
(Registrant's telephone number, including area code)
2849 Meadow View Road, Falls Church, Virginia 22042
(Former names, former addresses and former fiscal year,
if changes since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
3,567,371
Number of Shares of Common Stock Outstanding at January 31, 2002
ITEM 1. Financial Statements
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($000 Omitted)
ASSETS
--------
January 31 July 31
2002 2001
CURRENT ASSETS ---------- ----------
Cash and cash equivalents $ 1,647 $ 3,748
Restricted cash 13 49
Certificates of deposit 698 693
Accounts receivable, net 17,887 14,252
Inventory 4,557 3,619
Costs and estimated earnings
in excess of billings
on uncompleted contracts 3,462 2,493
Prepaid and other expenses 3,097 1,151
-------- --------
Total current assets 31,361 26,005
-------- --------
PROPERTY AND EQUIPMENT, AT COST 19,503 19,228
Accumulated depreciation (11,715) (11,089)
-------- --------
Property and equipment, net 7,788 8,139
-------- --------
OTHER ASSETS
Deferred income taxes 2,647 3,067
Other 1,129 531
-------- --------
Total other assets 3,776 3,598
-------- --------
TOTAL ASSETS $ 42,925 $ 37,742
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current portion of notes payable $ 3,196 $ 1,638
Accounts payable 5,509 4,684
Billings in excess of costs
and estimated earnings
on uncompleted contracts 4,882 2,902
Deferred income 111 124
Other liabilities 4,518 4,753
-------- --------
Total current liabilities 18,216 14,101
LONG-TERM DEBT
Notes payable,
less current portion 7,538 7,049
-------- --------
Total Liabilities 25,754 21,150
-------- --------
MINORITY INTERESTS 198 378
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - 3,567,371 and
3,601,196 issued and outstanding 357 360
Additional paid-in capital 16,308 16,458
Retained earnings
(accumulated deficit) 308 (604)
-------- --------
Total stockholders' equity 16,973 16,214
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 42,925 $ 37,742
========= =========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
($000 omitted)
Three Months Ended Six Months Ended
January 31, January 31
2002 2001 2002 2001
-------- -------- -------- --------
REVENUE
Construction $ 4,019 $ 2,715 $ 7,607 $ 5,859
Manufacturing 9,302 5,997 16,479 12,893
Sales and service 1,762 2,084 3,940 4,820
Other 38 307 282 622
-------- -------- -------- --------
Total revenue 15,121 11,103 28,308 24,194
-------- -------- -------- --------
DIRECT COSTS
Construction 2,755 1,694 5,208 3,874
Manufacturing 5,193 3,966 9,264 8,463
Sales and service 1,278 1,329 2,798 2,873
-------- -------- -------- --------
Total direct costs 9,226 6,989 17,270 15,210
-------- -------- -------- --------
GROSS PROFIT 5,895 4,114 11,038 8,984
-------- -------- -------- --------
EXPENSES
Overhead 2,189 1,340 3,847 2,506
General and admin. 2,514 1,951 4,554 3,971
Depreciation 377 405 753 786
Interest 167 275 340 512
-------- -------- -------- --------
Total expenses 5,247 3,971 9,494 7,775
-------- -------- -------- --------
EARNINGS BEFORE
INCOME TAXES
AND MINORITY INTERESTS 648 143 1,544 1,209
INCOME TAX PROVISION 260 37 618 461
-------- -------- -------- --------
EARNINGS BEFORE
MINORITY INTERESTS 388 106 926 748
Minority interests (4) (32) (14) (94)
-------- -------- -------- --------
NET EARNINGS $ 384 $ 74 $ 912 $ 654
======== ======== ======== ========
EARNINGS PER COMMON
SHARE- BASIC $ 0.10 $ 0.02 $ 0.25 $ 0.18
======== ======== ======== ========
EARNINGS PER COMMON
SHARE- DILUTED $ 0.10 $ 0.02 $ 0.25 $ 0.18
======== ======== ======== ========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING: BASIC 3,571,945 3,592,286 3,583,776 3,592,254
--------- --------- --------- ---------
See Notes To Condensed Consolidated Financial Statements
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($000 Omitted) Six Months Ended
January 31,
2002 2001
-------- --------
NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVITIES $(3,345) $ 889
NET CASH USED INVESTING ACTIVITIES (621) (1,285)
NET CASH PROVIDED
BY FINANCING ACTIVITIES 1,865 551
-------- --------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (2,101) 155
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,748 2,568
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,647 $ 2,723
======== ========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income Taxes $ 59 $ 143
======== ========
Interest $ 338 $ 538
======== ========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2002
1. INTERIM FINANCIAL STATEMENTS
This document includes unaudited interim financial statements
that should be read in conjunction with the Company's latest
audited annual financial statements. However, in the opinion of
management, these financial statements contain all adjustments,
consisting only of normal recurring items, necessary for a fair
presentation of the Company's financial position as of January 31,
2002, as well as the results of its operations for the three and
six months ended January 31, 2002 and 2001, and cash flows for the
six months then ended.
2. RELATED-PARTY TRANSACTIONS
Mr. Frank E. Williams, Jr., who owns or controls
approximately 36% of the Company's stock, and is also a director
of the Company, also owns 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 quarter. Net billings to and (from) these entities were
approximately $913,000 and 154,000 for the three months ended
January 31, 2002 and 2001, respectively. Net billings to and
(from) these entities were approximately $1,230,000 and $528,000
for the six months ended January 31, 2002 and 2001, respectively.
The Company is liable to the Williams Family Limited
Partnership under a lease/option agreement. The initial lease term
is for five years, beginning February 15, 2000, with an extension
option. The Company recognized lease expense for the three and six
months ended January 31, 2002 of $14,000 and $28,000,
respectively.
3. COMMITMENTS/CONTINGENCIES
The Company entered into a lease on October 1, 2001 for a
300,000 square foot plant in Bessemer, AL. The initial term of the
lease is for three years at $420,000 per year with a three-year
renewal option at $600,000 per year. Rent for the three and six
months ended January 31, 2002 was $105,000 and $140,000,
respectively. The Company has the right to terminate the lease
after either the initial three-year or additional three-year
renewal option with the payment of $500,000 for the purchase of
the plant's equipment. The Company has the right to purchase the
plant at any time for $6,000,000.
4. SEGMENT INFORMATION
Information about the Company's operations in its operating
segments for the three and six months ended January 31, 2002 and
2001 is as follows (in thousands):
Three Months Ended Six Months Ended
January 31, January 31,
2002 2001 2002 2001
--------- -------- -------- --------
Revenues:
Construction $ 4,412 $ 3,184 $ 8,603 $ 6,968
Manufacturing 9,313 6,009 16,571 12,912
Sales & Service 1,784 2,329 3,997 5,149
Other 236 437 638 897
--------- -------- -------- --------
15,745 11,959 29,809 25,926
--------- -------- -------- --------
Intersegment revenues:
Construction 393 469 996 1,109
Manufacturing 11 12 92 19
Sales & Service 22 245 57 329
Other 198 130 356 275
--------- -------- -------- --------
624 856 1,501 1,732
--------- -------- -------- --------
Consolidated revenues:
Construction 4,019 2,715 7,607 5,859
Manufacturing 9,302 5,997 16,479 12,893
Sales & Service 1,762 2,084 3,940 4,820
Other 38 307 282 622
Total Consolidated --------- -------- -------- --------
Revenues $15,121 $11,103 $28,308 $24,194
--------- -------- -------- --------
Earnings before
income taxes
and minority interest:
Construction $ 313 $ 241 $ 574 $ 506
Manufacturing 1,301 416 2,364 1,270
Sales & Service (396) (78) (368) 334
Other (570) (436) (1,026) (901)
--------- -------- -------- --------
Total $ 648 $ 143 $ 1,544 $ 1,209
--------- -------- -------- --------
5. 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.
6. PURCHASE AND SALE OF ASSETS
In December 2001, the Company entered into operating lease
agreements for a 480-ton heavy haul trailer and a 110-ton crawler
crane. The lease terms are for eight years at $156,000 per year
for both pieces of equipment.
7. RECLASSIFICATIONS
Certain Balance Sheet and Statement of Earnings items for
prior periods have been reclassified to conform to current period
classifications.
Item 2. Management's Discussion and Analysis
Financial Condition and Results of Operations
The Company's operations serve the industrial, commercial and
institutional construction markets, primarily in the Mid-Atlantic
region of the United States. During the quarter ended October 31,
2001, the Company leased a 300,000-square-foot manufacturing
facility in Bessemer, Alabama to serve steel bridge girder
fabrication needs in the Southeastern region. Due primarily to
increased governmental spending on infrastructure in recent years,
the Company, like its overall industry, has experienced increased
demand for its products and services. Demand in the commercial
construction markets has declined recently, although the Company
has benefited from increased institutional spending on schools and
medical facilities.
For several years, the Company, like others in the
construction industry, had experienced difficulties in hiring and
retaining qualified personnel. In recent months, however, due to
a combination of factors including the addition of personnel
accompanying the Bessemer facility as well changes in the nation's
economy, the Company's manufacturing and construction segments
have both been able to hire additional employees. This addition
of personnel will allow the Company to reduce overtime expense
while simultaneously increasing the amount of work the Company's
subsidiaries can produce.
The Company's subsidiaries, through the combination of
manufacturing, construction, and heavy hauling and lifting
capabilities, offer a turnkey approach for customers, thereby
increasing its competitiveness on some contracts. Each of the
subsidiaries maintains its own customer base, but works to
translate individual projects into broader opportunities for the
Company to obtain work.
Financial Condition
The Company's net working capital increased from $12,027,000
at October 31, 2001 to $13,145,000 at January 31, 2002, due mainly
to increases in accounts receivable that occurred from increased
sales, from $13,970,000 at October 31, 2001 to $17,887,000 at
January 31, 2002. Prepaid expenses also increased from $1,376,000
at October 31, 2001 to $3,097,000 at January 31, 2002. This
represents the company's yearly payment for Worker's Compensation
insurance.
When compared to the prior quarter, inventory at January 31,
2002 of $4,557,000 showed a decrease from the $5,521,000 at
October 31, 2001. However, when compared to the fiscal year ended
July 31, 2001, inventory increased 26% over the $3,619,000
reported at that time. Both the decrease and the increase are
standard seasonal variances.
Stockholders' Equity increased. At January 31, 2002,
Stockholders' Equity was $16,973,000, compared to $16,685,000 at
October 31, 2001 and $16,214,000 at July 31, 2001. The Company's
issued and outstanding shares decreased from 3,587,446 shares at
October 31, 2001 to 3,558,446 at December 31, 2001 when Company
completed its repurchase of 29,000 shares during the quarter as
part of its announced program to repurchase approximately 5% of
its stock through open-market transactions. At January 31, 2002,
however, the issued and outstanding amount increased to 3,567,371
shares due to the issuance of 8,925 shares as part of the
Company's directors' stock compensation program. Each director,
with the exception of the Company's Chairman and President Frank
E. Williams, III, received 1,785 shares, which was equivalent to
$600 of stock per month, calculated at the average fair market
value.
The Company's current portion of Notes Payable increased
primarily due to financing for yearly insurance premiums. The
Company traditionally finances its general liability, automotive
and heavy equipment, and worker's compensation insurance premiums,
with the worker's compensation program portion of the debt being
the most significant. The increase in debt during the second
quarter has historically coincided with the insurance programs'
renewal period.
The Company's Cash and Cash Equivalents declined from
$2,723,000 for the six months ended January 31, 2001 to
$1,647,000 at January 31, 2002 due to the cash used in operating
activities. Some of the expenditures relate to costs of bringing
the Bessemer plant into production while other expenditures
involve start-up costs of other projects.
For the six months ended January 31, 2002, the Company used
net cash of $621,000 for investing activities. Of this total,
$200,000 was used to repurchase company stock in the open market.
During the six months, the Company also used net cash in
activities related to the company's relocation to Manassas,
Virginia and for site preparation work for its new headquarters to
be located on its Manassas, Virginia property. Capital
expenditures of approximately $2 million are anticipated over the
course of Fiscal 2002 and 2003 in conjunction with the relocation
and construction of the corporate facility.
At January 31, 2002, the Company has about $3 million in
variable rate notes payable; therefore the decline in interest
rates has reduced the Company's interest expense.
Management believes that operations will generate sufficient
cash to fund activities. However, as revenues increase, it may
become necessary to continue increasing the Company's credit
facilities to handle short-term cash requirements, particularly in
terms of inventory expansion for major fabrication projects.
Management, therefore, is focusing on the proper allocation of
resources to ensure stable growth.
Three Months Ended January 31, 2002
Compared to Three Months Ended January 31, 2001
The Company reported an increase in net income for the
quarter ended January 31, 2002. Net income was $384,000 or $0.10
per share on total revenue of $15,121,000. These results compare
to net income of $74,000 or $0.02 per share on total revenue of
$11,103,000 for the quarter ended January 31, 2001.
Due to the influence of weather-related issues, the second
quarter of the fiscal year is traditionally the Company's weakest,
but this year's mild weather in the Company's traditional market
areas allowed work to progress at an uninterrupted pace.
Overall gross profit margins improved by about 2% from the
quarter ended January 31, 2001 to the quarter ended January 31,
2002. A portion of this improvement is attributed to the
addition of the Bessemer, Alabama facility to Williams Bridge
Company's manufacturing capabilities. For the quarter ended
January 31, 2001, overall direct costs were 63% of total revenue.
At January 31, 2002, this had declined to 61%. As a percentage of
segment revenue, costs decreased in the Construction and Sales and
Services segments while increasing in the Manufacturing segment.
The Manufacturing increase is directly attributable to the
addition of the Bessemer plant and additional personnel.
When the three months ended January 31, 2002 are compared to
the three months ended January 31, 2001, the Construction segment
experienced an increase of about $1.3 million in revenue. This
increase is attributed to the mild weather as well as the
segment's expansion of its market area. The Construction segment
also had a 33% increase in the amount of work it subcontracted to
other providers during the quarter.
The Manufacturing segment had a revenue increase of
approximately $3,305,000 for the three months ended January 31,
2002 as compared to the three months ended January 31, 2001.
While the majority of this increase comes from work at Williams
Bridge Company's three plants, S.I.P., Inc. of Delaware has also
experienced a significant increase in demand for its products.
The other Manufacturing subsidiary, Piedmont Metal Products, Inc.,
however, experienced a decline in revenues. Piedmont's prior
year revenues were uniquely enhanced by a large contract for the
emergency renovation of a customer's plant involved in a major
industrial accident.
The Sales and Services segment continues to experience a
decline in revenues. For the three months ended January 31,
2002, the segment had revenues of $1,762,000, or 15% less than the
$2,084,000 for the three months ended January 31, 2001. The
decline is attributed to the slowdown in the day-to-day rental of
the segment's equipment.
Six Months Ended January 31, 2002
Compared to Six Months Ended January 31, 2001
For the six months ended January 31, 2002, the Company had
net earnings of $912,000 or $0.25 per share on revenue of
$28,308,000 compared to net earnings of $654,000 or $0.18 per
share on revenue of $24,194,000 for the six months ended January
31, 2001.
Gross profit margins increased from 37% for the six months
ended January 31, 2001 to 39% for the six months ended January 31,
2002.
While the Company's Construction segment continues to grow,
due to a combination of improved staffing capabilities as well as
increased bidding activity in a wider geographic service area, the
Company's largest growth is in the Manufacturing segment. The
Company's Manufacturing segment continues to benefit from
consistent order flow for bridge girders and decking, both
components of the TEA 21 program. The trend of manufacturing
becoming a larger percentage of the Company's business began with
federal funding increases in Fiscal 1999. The increasing
proportion of revenues generated by manufacturing is expected to
continue for several years as funding for infrastructure programs
is scheduled to continue for at least five to seven years.
BACKLOG
At January 31, 2002, the Company's backlog was approximately
$44.7 million, which is an increase of about $2 million from
October 31, 2001. This backlog includes a good mix of work for
the Construction and Manufacturing segments. Sales and Service's
work is normally performed as needed. As a result, only a small
percentage of the backlog is derived from this segment.
Most of the backlog will be completed within the next 12
months if contract schedules are followed. Management believes
that the level of work is sufficient to allow the Company to have
adequate work into Fiscal 2003.
Going forward, however, management is closely monitoring the
economy, particularly as it relates to government spending in the
Company's traditional market areas. The current economy in many
of the Company's traditional market areas, particularly in
Virginia, may translate to a slowdown in infrastructure spending
in the next 12 to 18 months.
Management may determine that the manufacturing segment will
need to be more aggressive in its bidding activities in states
such as Pennsylvania and North Carolina, whose transportation
programs currently appear to be more stable.
It is possible that our construction segment will focus more
of its attention on local school construction or on burgeoning
military construction at the multitude of installations already
within the company's traditional market area.
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, which
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
activity in the Company's market areas. Investors or other users
of 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 risks 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.
PART II - OTHER INFORMATION
ITEM 1. 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 workers
compensation, personal injury, products' liability and property
damage. The Company believes that its insurance and other expense
accruals, coupled with its primary and excess liability coverage,
are adequate coverage for such claims or contingencies.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote
of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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
March 5, 2002 /s/ Frank E. Williams, III
Frank E. Williams, III
President, Chairman of the Board
Chief Financial Officer
19