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 April 30, 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)
(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
3,575,044
Number of Shares of Common Stock Outstanding at April 30, 2002
ITEM 1. Financial Statements
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($000 Omitted)
ASSETS
--------
April 30, July 31,
2002 2001
CURRENT ASSETS ---------- ----------
Cash and cash equivalents $ 2,048 $ 3,748
Restricted cash 31 49
Certificates of deposit 700 693
Accounts receivable, net 15,337 14,252
Inventory 4,956 3,619
Costs and estimated earnings
in excess of billings
on uncompleted contracts 3,908 2,493
Prepaid expenses and other 2,717 1,151
-------- --------
Total current assets 29,697 26,005
-------- --------
PROPERTY AND EQUIPMENT, AT COST 20,023 19,228
Accumulated depreciation (12,107) (11,089)
-------- --------
Property and equipment, net 7,916 8,139
-------- --------
OTHER ASSETS
Deferred income taxes 2,437 3,067
Other 1,282 531
-------- --------
Total other assets 3,719 3,598
-------- --------
TOTAL ASSETS $ 41,332 $ 37,742
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current portion of notes payable $ 2,645 $ 1,638
Accounts payable 4,844 4,684
Billings in excess of costs
and estimated earnings
on uncompleted contracts 4,253 2,902
Deferred income 105 124
Other liabilities 4,788 4,753
-------- --------
Total current liabilities 16,635 14,101
LONG-TERM DEBT
Notes payable,
less current portion 7,138 7,049
-------- --------
Total Liabilities 23,773 21,150
-------- --------
MINORITY INTERESTS 204 378
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - 3,575,044 and
3,601,196 issued and outstanding 357 360
Additional paid-in capital 16,346 16,458
Retained earnings
(accumulated deficit) 652 (604)
-------- --------
Total stockholders' equity 17,355 16,214
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 41,332 $ 37,742
========= =========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
($000 omitted)
Three Months Ended Nine Months Ended
April 30, April 30,
2002 2001 2002 2001
-------- -------- -------- --------
REVENUE
Construction $ 3,559 $ 3,134 $11,166 $ 8,993
Manufacturing 8,684 6,533 25,163 19,426
Sales and service 1,825 2,340 5,765 7,160
Other 36 202 318 824
-------- -------- -------- --------
Total revenue 14,104 12,209 42,412 36,403
-------- -------- -------- --------
DIRECT COSTS
Construction 2,314 2,082 7,522 5,956
Manufacturing 5,194 4,107 14,458 12,570
Sales and service 1,271 1,560 4,069 4,433
-------- -------- -------- --------
Total direct costs 8,779 7,749 26,049 22,959
-------- -------- -------- --------
GROSS PROFIT 5,325 4,460 16,363 13,444
-------- -------- -------- --------
EXPENSES
Overhead 2,113 1,325 5,960 3,831
General and admin. 2,070 2,088 6,624 6,059
Depreciation 393 392 1,146 1,178
Interest 189 189 529 701
-------- -------- -------- --------
Total expenses 4,765 3,994 14,259 11,769
-------- -------- -------- --------
EARNINGS BEFORE
INCOME TAXES
AND MINORITY INTERESTS 560 466 2,104 1,675
INCOME TAX PROVISION 210 175 828 636
-------- -------- -------- --------
EARNINGS BEFORE
MINORITY INTERESTS 350 291 1,276 1,039
Minority interests (6) 23 (20) (71)
-------- -------- -------- --------
NET EARNINGS $ 344 $ 314 $1,256 $ 968
======== ======== ======== ========
EARNINGS PER COMMON
SHARE- BASIC $ 0.10 $ 0.09 $ 0.35 $ 0.27
======== ======== ======== ========
EARNINGS PER COMMON
SHARE- DILUTED $ 0.10 $ 0.09 $ 0.35 $ 0.27
======== ======== ======== ========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING: BASIC 3,568,886 3,593,013 3,578,923 3,594,414
--------- --------- --------- ---------
See Notes To Condensed Consolidated Financial Statements
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($000 Omitted) Nine Months Ended
April 30,
2002 2001
-------- --------
NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVITIES $(1,492) $ 970
NET CASH USED INVESTING ACTIVITIES (1,160) (1,575)
NET CASH PROVIDED BY (USED
IN) FINANCING ACTIVITIES 952 (364)
-------- --------
NET DECREASE IN
CASH AND CASH EQUIVALENTS (1,700) (969)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,748 2,568
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,048 $ 1,599
======== ========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income Taxes $ 59 $ 143
======== ========
Interest $ 526 $ 693
======== ========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 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 April 30, 2002, as well as the results of its
operations for the three and nine months ended April 30, 2002
and 2001, respectively, and cash flows for the nine 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 $621,000 and $115,000 for the three months
ended April 30, 2002 and 2001, respectively. Net billings to and
(from) these entities were approximately $1,851,000 and $643,000
for the nine months ended April 30, 2002 and 2001, respectively.
The Company is liable to the Williams Family Limited
Partnership under a lease/option agreement. The lease, which is
for five years and contains an extension option, commenced
February 15, 2000. The Company recognized lease expense for the
three and nine months ended April 30, 2002 of $14,000 and
$42,000, respectively.
3. COMMITMENTS/CONTINGENCIES
The Company entered into a lease on October 1, 2001 for a
300,000 square foot manufacturing 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-month periods ended April 30, 2002 was
$105,000 and $215,000, respectively. The Company has the right
to terminate the lease at the conclusion of either the initial
three-year term or the three-year renewal option. In addition,
the Company is obligated to pay $500,000 for the purchase of the
plant's equipment, unless the plant is purchased. 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 nine months ended April 30, 2002 and
2001 is as follows (in thousands):
Three Months Ended Nine Months Ended
April 30, April 30,
2002 2001 2002 2001
--------- -------- -------- --------
Revenues:
Construction $ 3,842 $ 3,614 $12,445 $10,582
Manufacturing 8,766 6,536 25,337 19,448
Sales & Service 1,843 2,744 5,840 7,893
Other 197 438 835 1,335
--------- -------- -------- --------
14,648 13,332 44,457 39,258
--------- -------- -------- --------
Intersegment revenues:
Construction 283 480 1,279 1,589
Manufacturing 82 3 174 22
Sales & Service 18 404 75 733
Other 161 236 517 511
--------- -------- -------- --------
544 1,123 2,045 2,855
--------- -------- -------- --------
Consolidated revenues:
Construction 3,559 3,134 11,166 8,993
Manufacturing 8,684 6,533 25,163 19,426
Sales & Service 1,825 2,340 5,765 7,160
Other 36 202 318 824
Total Consolidated --------- -------- -------- --------
Revenues $14,104 $12,209 $42,412 $36,403
--------- -------- -------- --------
Earnings before
income taxes
and minority interest:
Construction $ 381 $ 213 $ 955 $ 719
Manufacturing 740 672 3,104 1,942
Sales & Service (131) 23 (499) 357
Other (430) (442) (1,456) (1,343)
--------- -------- -------- --------
Total $ 560 $ 466 $ 2,104 $ 1,675
--------- -------- -------- --------
5. INVENTORIES
Materials inventory consists of structural steel shapes,
galvanized steel coils, and steel plate. 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 April 2002, the Company acquired two major pieces of
equipment for its Bessemer, AL plant. One machine, installed,
cost $141,000 and was financed at prime plus 1%. The second
machine was leased for eight years at $99,600 per year.
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 Fiscal 2002, the Company expanded its operations,
particularly in the manufacturing segment, to serve more of
the southeast region of the country. Demand for the
majority of Company's products and services continues to be
strong, due in part to continued governmental spending on
infrastructure. The Company's Sales and Services' segment,
however, has experienced declining revenues throughout the
fiscal year, due in part to increased competition in the
segment's traditional market areas. Management is making
adjustments in the segments' marketing to increase
revenues.
Unlike prior years when the Company, like others in
the construction industry, experienced difficulties in
hiring and retaining sufficient qualified personnel to
staff its projects, Fiscal 2002 performance has not been
influenced by labor shortages. The Company, through a
combination of innovative programs, including significant
outreach into the region's growing Hispanic community, has
been able to readily hire sufficient personnel, allowing
the Company to reduce overtime expense while simultaneously
increasing the amount of work the Company. It should be
noted that on April 2, 2002, the shop employees of Williams
Bridge Company's Bessemer, Alabama plant voted to have the
United Steel Workers of America represent them as a
collective bargaining agent. Contract negotiations have
not yet commenced.
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 decreased from
$13,145,000 at January 31, 2002 to $13,062,000 at April 30,
2002. However, compared to the quarter ending April 30,
2001, net working capital increased by $3,407,000.
When compared to the quarter ended January 31, 2002,
inventory at April 30, 2002 increased by $399,000 due to
increased raw materials purchases. When compared to July
31, 2001, inventory increased by $1,337,000 due to the
combination of increased volumes of work in the Company's
manufacturing operations as well as purchases made to take
advantage of favorable material prices. There currently is
uncertainty in what the company, like others in its
industry, might have to pay for new steel inventory due to
fluctuations in pricing from the steel mills. Significant
material price increases, while not necessarily causing a
competitive disadvantage, could affect the company's
profitability.
Stockholders' Equity increased. At April 30, 2002,
Stockholders' Equity was $17,355,000, compared to
$16,973,000 at January 31, 2002.
Overall gross profit margins improved from the quarter
ended April 30, 2001 to the quarter ended April 30, 2002 in
both the Construction and Manufacturing segments, while
declining in the Sales and Service segment. For the
quarter ended April 30, 2002, direct costs decreased to
62.2% of total revenue, compared to 62.3% at April 30,
2001.
The Company's total Notes Payable increased by
approximately $1,096,000 from July 31, 2001. Included in
the increase were approximately $1.3 million in new notes,
some of which have been repaid, for: the purchase of
equipment for a proposed second plant for S.I.P. Inc. of
Delaware; repairs and improvements to Williams Bridge
Company's Richmond facility; and a new corporate
communications system. Current Notes Payable increased due
to the combination of higher workers compensation premiums
and the fact that an old insurance note is now a current
liability.
The Company's Cash and Cash Equivalents increased from
$1,599,000 at April 30, 2001 to $2,048,000 at April 30,
2002. The Company continues to generate sufficient cash to
sustain its operational activities, as well as service all
outstanding debt.
For the nine months ended April 30, 2002, the Company
used net cash of $1,160,000 in its investing activities.
The Company used net cash for manufacturing expansion in
Alabama, as well as site preparation work for its new
headquarters to be located in Manassas, Virginia. 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.
For the nine months ended April 30, 2002, the Company
generated net cash of $952,000 from its financing
activities. The Company had net proceeds from borrowing of
$6,317,000 and made repayments of notes payable of
$5,202,000. The company also repurchased approximately
42,000 shares of Company stock in the open market. Some
of this stock has subsequently been sold to employees
through the Company's Employee Stock Purchase Plan.
At April 30, 2002, the Company had about $4,000,000 in
variable rate notes. Of this amount, about $2,200,000 is
on fully amortizing notes, with the longest term being less
than seven years. The United Bank Line of Credit,
currently at about $1,800,000, fluctuates with Company need
and expires during fiscal year 2004. The Company has taken
advantage of current lower interest rates by buying out
several older, higher rate obligations. A one percent
increase in the interest rate would have a $40,000 per year
negative impact on pre-tax earnings.
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 April 30, 2002 Compared to Three Months
Ended April 30, 2001
The Company reported net income of $344,000 or $0.10
per share on total revenue of $14,104,000 for the quarter
ended April 30, 2002. These results compare to net income
of $314,000 or $0.09 per share on total revenue of
$12,209,000 for the quarter ended April 30, 2001.
The Construction segment experienced a slight increase
in revenue. While the majority of this increase is due to
the timing of start-ups on new projects, the Construction
segment has also expanded its traditional market areas and
is also increasing the amount of work it subcontracts.
The Manufacturing segment, as a whole, continues to
experience increasing revenues. Both S.I.P., Inc. of
Delaware and Williams Bridge Company, by far the largest of
the company's three manufacturing subsidiaries, are
benefiting from increased infrastructure spending.
Overall manufacturing revenue increased from $6,533,000 at
April 30, 2001 to $8,684,000 at April 30, 2002. The
revenues at Piedmont Metal Products, Inc., however,
declined in comparison to Fiscal 2001. Piedmont's prior
year revenues were enhanced by a large contract for the
emergency renovation of a customer's plant. The increases
in manufacturing revenue have also generated higher
overhead expenditures for the segment, particularly as it
relates to the addition of Bessemer facility that came on
line in October.
Overall profitability in the Manufacturing segment for
the quarter ended April 30, 2002 was negatively impacted by
a series of unrelated accidents, including one fatality, at
Williams Bridge Company's Bessemer plant. Necessary
worker's compensation expenses and set-asides are included
in the Direct Costs listed in the accompanying Condensed
Consolidated Statements of Earnings. The accidents, each
of which involved human error, are under investigation.
Overhead increased by $788,000 when the quarter ended
April 30, 2002 is compared with the quarter ended April 30,
2001. Approximately $600,000 of this increase is related
to labor, rent and utilities at the Bessemer facility,
which came on-line during the quarter ended October 31,
2001.
Problems with obtaining necessary revenue persist in
the Sales and Services segment. For the three months ended
April 30, 2002, the segment had revenues of $1,825,000,
compared to $2,340,000 at April 30, 2001. The segment has
experienced difficulties in generating revenue in February
and March, but showed some improvement in April.
Management anticipates that revenue will continue to
increase throughout the balance of the fiscal year.
Nine Months Ended April 30, 2002 Compared to Nine Months
Ended April 30, 2001
For the nine months ended April 30, 2002, the Company
had net earnings of $1,256,000 or $0.35 per share on
revenue of $42,412,000 compared to net earnings of $968,000
or $0.27 per share on revenue of $36,403,000 for the nine
months ended April 30, 2001.
The Company's revenue growth is concentrated in the
Manufacturing segment. New projects, as well as the
addition of a third plant for Williams Bridge Company,
accounted for most of the Company's increased revenues.
Overhead increased by approximately $2,129,000 when
the nine months ended April 30, 2002 are compared to the
nine months ended April 30, 2001. A portion of this
increase is directly related to the increase in revenues,
while approximately $1,600,000 is related to additional
labor and facility charges at the Bessemer, Alabama plant.
The Company's manufacturing segment benefited from
consistent order flow for bridge girders and decking, both
components of current multi-billion dollar federal
infrastructure spending programs. Manufacturing revenues
increased from $19,426,000 for the nine months ended April
30, 2001 to $25,163,000 for the nine months ended April 30,
2002. The trend of manufacturing becoming a larger
percentage of the Company's business began with federal
funding increases in Fiscal 1999. Manufacturing is
expected to continue generating a larger portion of the
Company's revenues as funding for infrastructure programs
is scheduled to continue for at least five to seven years.
Gross profit margins increased from 36.5% for the nine
months ended April 30, 2001 to 37.8% for the nine months
ended April 30, 2002.
BACKLOG
At April 30, 2002, the Company's backlog was
approximately $42.8 million. This represents a slight
decrease from January 31, 2002. The Company's current
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.
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
May 29, 2002 /s/ Frank E. Williams, III
Frank E. Williams, III
President, Chairman of the Board
Chief Financial Officer