UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended January 31, 2004
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)
P.O. Box 1770, Manassas, VA 20108
(Mailing address of principal executive offices)
(703) 335-7800
(Registrant's telephone number, including area code)
Not Applicable
(Former names, former addresses and former fiscal year,
if change 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 such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 126-2 of the Exchange Act).
Yes NO X
As of January 31, 2004, the Registrant had outstanding 3,629,978
shares of Common Stock.
WILLIAMS INDUSTRIES, INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED January 31, 2004
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets _ January 31,
2004 and July 31,2003
(Unaudited)_________________________________ 1
Condensed Consolidated Statements of Operations _
Three and six months ended January 31,2004 and 2003
(Unaudited)_________________________________ 2
Condensed Consolidated Statements of Cash Flows _
Six months ended January 31, 2004 and 2003
(Unaudited)_________________________________ 3
Notes to Condensed Consolidated Financial Statements
(Unaudited)_________________________________ 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISKS 14
ITEM 4. CONTROLS AND PROCEDURES 14
PART II _ OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS_____________________ 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES_______ 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS______________________ 17
ITEM 5. OTHER INFORMATION_____________________ 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K_______ 17
CERTIFICATIONS AND SIGNATURES__________________ 18
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands except share data)
ASSETS
--------
January 31, July 31,
2004 2003
CURRENT ASSETS ----------- -----------
Cash and cash equivalents $ 2,094 $ 2,023
Restricted cash 807 51
Certificates of deposit 16 417
Accounts receivable, net 17,344 16,386
Inventory 3,594 3,421
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,590 3,139
Prepaid and other assets 1,499 1,767
----------- -----------
Total current assets 26,944 27,204
----------- -----------
PROPERTY AND EQUIPMENT, AT COST 23,550 22,242
Accumulated depreciation (12,845) (12,160)
----------- -----------
Property and equipment, net 10,705 10,082
----------- -----------
OTHER ASSETS
Deferred income taxes 2,809 2,624
Other 362 600
----------- -----------
Total other assets 3,171 3,224
----------- -----------
TOTAL ASSETS $ 40,820 $ 40,510
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current portion of notes payable $ 2,876 $ 1,490
Accounts payable 5,349 5,410
Billings in excess of costs and estimated
earnings on uncompleted contracts 5,178 4,587
Deferred income 23 28
Other liabilities 3,244 4,416
----------- -----------
Total current liabilities 16,670 15,931
LONG-TERM DEBT
Notes payable, less current portion 7,435 7,570
----------- -----------
Total Liabilities 24,105 23,501
----------- -----------
MINORITY INTERESTS 194 187
----------- -----------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - 3,629,978 and 3,586,880
issued and outstanding 363 359
Additional paid-in capital 16,526 16,390
Accumulated (deficit) earnings (368) 73
----------- -----------
Total stockholders' equity 16,521 16,822
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 40,820 $ 40,510
=========== ===========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($000 omitted)
Three Months Ended Six Months Ended
January 31, January 31,
2004 2003 2004 2003
REVENUE --------- --------- --------- ---------
Construction $ 5,447 $ 4,582 $ 9,713 $ 10,012
Manufacturing 6,525 7,141 15,823 16,553
Other 55 74 109 123
--------- --------- --------- ---------
Total revenue 12,027 11,797 25,645 26,688
--------- --------- --------- ---------
DIRECT COSTS
Construction 3,698 3,358 6,504 7,553
Manufacturing 4,696 4,656 10,537 10,748
--------- --------- --------- ---------
Total direct costs 8,394 8,014 17,041 18,301
--------- --------- --------- ---------
GROSS PROFIT 3,633 3,783 8,604 8,387
--------- --------- --------- ---------
EXPENSES
Overhead 2,180 2,055 4,155 3,973
General and administrative 1,787 2,065 3,754 4,060
Depreciation 496 410 979 821
Interest 171 150 334 312
--------- --------- --------- ---------
Total expenses 4,634 4,680 9,222 9,166
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES,
AND MINORITY INTERESTS (1,001) (897) (618) (779)
INCOME TAX BENEFIT (338) (284) (185) (234)
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTERESTS (663) (613) (433) (545)
Minority interests (4) (5) (7) (11)
--------- --------- --------- ---------
NET LOSS $ (667) $ (618) $ (440) $ (556)
========= ========= ========= =========
NET
LOSS PER COMMON SHARE - BASIC $ (0.18) $ (0.17) $ (0.12) $ (0.16)
========= ========= ========= =========
NET
LOSS PER COMMON SHARE - DILUTED $ (0.18) $ (0.17) $ (0.12) $ (0.16)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING: BASIC AND DILUTED 3,596,932 3,571,297 3,591,912 3,572,163
--------- --------- --------- ---------
See Notes To Condensed Consolidated Financial Statements
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
Six Months Ended
January 31,
2004 2003
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 638 $ 660
NET CASH USED IN INVESTING ACTIVITIES (1,957) (325)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,390 (1,057)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 71 (722)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,023 3,380
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $2,094 $2,658
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income Taxes $ 20 $ 177
========= =========
Interest $ 330 $ 317
========= =========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2004
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, 2004, as well as the results of its operations for the three and
six months ended January 31, 2004 and 2003, respectively, and cash flows for
the six months ended January 31, 2004 and 2003.
2. RELATED-PARTY TRANSACTIONS
Mr. Frank E. Williams, Jr., who owned or controlled approximately 40% of
the Company's stock at January 31, 2004, and is a director of the Company,
also owns controlling interests in the outstanding stock of Williams
Enterprises of Georgia, Inc., and Structural Concrete Products, LLC.
Additionally, Mr. Williams, Jr. owns a substantial interest in Bosworth S
teel Erectors, Inc. Revenue earned and costs incurred with these entities
during the three and six months ended January 31, 2004 and 2003 are reflected
below. Amounts receivable and payable to these entities at January 31, 2004
and July 31, 2003 are also reflected below.
Three Months Ended Six Months Ended
January 31, January 31,
(in thousands) 2004 2003 2004 2003
--------- --------- --------- ---------
Revenue $253 $949 $307 $1,947
Billings to entities $(24) $399 $233 $874
Costs and expenses incurred $192 $538 $424 $973
Balance Balance
January 31, July 31,
2004 2003
--------- ---------
Accounts receivable $1,295 $1,680
Costs and estimated earnings in excess of
billings on uncompleted contracts - 9
Accounts Payable $280 $303
Billings in excess of costs and estimated
earnings on uncompleted contracts 79 290
The Company is obligated to the estate of F. Everett Williams, a former
director of the Company, for a Demand Note Payable of approximately $88,000.
The note, at 10% simple interest, is not secured. The Company recognized
interest expense for the three and six months ended January 31, 2004 and 2003
as follows:
Three Months Ended Six Months Ended
January 31, January 31,
(in thousands) 2004 2003 2004 2003
--------- --------- --------- ---------
Interest Expense $2 $2 $5 $5
Balance Balance
January 31, July 31,
2004 2003
--------- ---------
Note Payable $88 $88
Accrued interest payable $69 $64
The Company is obligated to the Williams Family Limited Partnership
under a lease agreement for real property with an option to purchase. The
partnership is controlled by individuals who own, directly or indirectly,
approximately 44% of the Company's stock. The lease, which has an original
term of five years and an extension option for five years, commenced February
15, 2000. The lease contains an option to purchase up to ten acres at the
"original pro-rata cost" of $567,500. The Company pays annual lease payments
of approximately $56,000 plus real estate taxes of approximately $5,000 per
year. The Company recognized lease expenses, including related real estate
tax expense, for the three and six months ended January 31, 2004 and 2003 as
follows:
Three Months Ended Six Months Ended
January 31, January 31,
(in thousands) 2004 2003 2004 2003
--------- --------- --------- ---------
Lease Expense $19 $14 $44 $28
Balance Balance
January 31, July 31,
2004 2003
--------- ---------
Account Payable $82 $37
Mr. George Pocock, an officer of the Company, owns a controlling
interest in Construction Insurance Agency (CIA). The Company sold its
interest in CIA to Mr. Pocock in 2001 and recorded a note receivable related
to the sale. The note bears interest at 7.5%, is secured by the CIA stock and
is due in monthly installments of $2,374, including principal and interest,
with a final payment of $138,812 due on October 31, 2005. The balance due on
the note at January 31, 2004 and July 31, 2003 was $167,052 and $174,860,
respectively. Costs incurred with CIA, for insurance premiums and brokerage
fees, for the three and six months ended January 31, 2004 and 2003 are
reflected below. In addition, balances payable at January 31, 2004 and July
31, 2003 are also reflected below.
Three Months Ended Six Months Ended
January 31, January 31,
(in thousands) 2004 2003 2004 2003
--------- --------- --------- ---------
Costs incurred from $16 $25 $104 $125
Balance Balance
January 31, July 31,
2004 2003
--------- ---------
Accounts Payable $47 $44
Directors Frank E. Williams, Jr. and Stephen N. Ashman are shareholders
and directors of a commercial bank from which the Company obtained a $240,000
note payable on December 23, 2002. The note is payable in sixty equal monthly
payments of principal of $4,000 plus interest at 5.75% or the current Prime
rate, whichever is greater. The note, which replaced an existing current note
payable that had a higher interest rate and payment, was negotiated at arms
length under normal commercial terms. Interest expensed for the three and six
months ended January 31, 2004 and 2003 is reflected below. In addition, the
balance outstanding at January 31, 2004 and July 31, 2003 is also reflected
below.
Three Months Ended Six Months Ended
January 31, January 31,
(in thousands) 2004 2003 2004 2003
--------- --------- --------- ---------
Interest Expense $3 $1 $6 $1
Balance Balance
January 31, July 31,
2004 2003
--------- ---------
Note Payable $188 $212
The Company believes the related party transactions are consistent with
the terms and conditions that would exist with unrelated parties.
3. SEGMENT INFORMATION
Information about the Company's operations in its operating segments
for the three and six months ended January 31, 2004 and 2003 is as follows
(in thousands):
Three Months Ended Six Months Ended
January 31, January 31,
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues:
Construction $ 6,258 $ 5,087 $11,157 $10,972
Manufacturing 6,582 7,153 15,922 16,785
Other 225 255 433 478
--------- --------- --------- ---------
13,065 12,495 27,512 28,235
--------- --------- --------- ---------
Intersegment revenues:
Construction 811 505 1,444 960
Manufacturing 57 12 99 232
Other 170 181 324 355
--------- --------- --------- ---------
1,038 698 1,867 1,547
--------- --------- --------- ---------
Consolidated revenues:
Construction 5,447 4,582 9,713 10,012
Manufacturing 6,525 7,141 15,823 16,553
Other 55 74 109 123
--------- --------- --------- ---------
Total Consolidated
Revenues $12,027 $11,797 $25,645 $26,688
--------- --------- --------- ---------
Earnings (loss) before income taxes
and minority interest:
Construction $134 $(352) $185 $(568)
Manufacturing (695) (124) 46 624
Other (440) (421) (849) (835)
--------- --------- --------- ---------
Total $(1,001) $(897) $(618) $(779)
--------- --------- --------- ---------
4. INVENTORIES
Materials inventory consists of structural steel, steel plates and
galvanized steel coils. Cost of materials inventory is accounted for using
either the specific identification or the average cost method. The cost of
supplies inventory is accounted for using the first-in, first-out, (FIFO)
method. No significant amount of inventory is included in contracts in
process.
5. PURCHASE OF ASSETS
During the six months ended January 31, 2004, the Company purchased
Property and Equipment, for use in its operations, for approximately $1.6
million. Approximately $1.3 million of the Property and Equipment purchases
were financed at prevailing rates, with the balance being paid out of
operating cash.
6. RECLASSIFICATIONS
Certain Balance Sheet and Statement of Operations items for prior
periods have been reclassified to conform to current period classifications.
Item 2. 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. They operate in the
commercial, industrial, governmental and infrastructure construction markets,
with the operating components divided into construction and manufacturing
segments. The services provided include: steel, precast concrete and
miscellaneous metals erection and installation; crane rental; rigging;
fabrication of welded steel plate girders and rolled beams, "stay-in-place"
bridge decking, and light structural and other metal products.
The Company has begun to experience the impact of significant price
increases in all types of steel, such as steel plate, steel beams and
galvanized steel coil. In general, steel prices have risen by more than 65%
since June 2003, with a sharp spike of more than 50% since January 2004.
There are a number of market conditions causing these increases including the
weak U.S. dollar, a shortage of raw materials (scrap steel and coke) in North
America, and reduced capacity in the steel manufacturing industry as a result
of the recent wave of consolidations.
The Company has been notified by several suppliers that they will not be
honoring existing contractual price agreements. Suppliers have also indicated
that product allocations may be put in place and surcharges may be assessed.
The Company had announced the award of the contract on January 21, 2004
to insure the information was not selectively disseminated. Given the refusal
of the Company's supplier to honor their commitment for costs of raw materials
necessary to fabricate the project, the Company now has a serious concern
whether it should formalize the award of the contract, valued at approximately
$22 million, to fabricate, deliver and erect more than 14,650 tons of steel
for the Springfield Interchange Project in Virginia. Additionally, there have
been substantial schedule and other changes requested by the contractor and
the project's owner. The Company has been working, and will continue to work,
with the contractor to mitigate the financial impacts of the steel pricing
issues and other issues.
Industry representatives have been meeting, on an emergency basis, with
representatives of the Federal Highway Administration, as well as state
officials, in an attempt to address this issue for infrastructure construction
projects currently underway and also up for bid. Publications such as "The
Wall Street Journal", "Engineering News Record", "The Economist" and "The
Financial Times" are all actively involved in reporting this issue. Management
is negotiating with its customers and suppliers as the Company attempts to
reduce its exposure to the cost increases.
In the recent past, the Company's bridge operations have been positively
influenced by the federal government's spending on infrastructure under
various programs, including the Transportation Equity Act for the 2lst Century
(TEA-21). Congress, through an emergency resolution, voted to extend the
current program, at 2003 expenditure levels for 60 days, to April 29, 2004.
This represents the second extension since the original expiration of
September 30, 2003. Congress and the administration have been at an impasse
over the reauthorization. In the event this program is not reauthorized,
infrastructure spending at the state level will be depressed, reducing the
potential for work in the Company's manufacturing segment.
Because of the uncertainty associated with the bill's passage, the
Company is currently evaluating all of its options as it relates to the
manufacturing segment. One alternative being considered is not to renew the
lease for the Bessemer, Alabama manufacturing facility. The Company has the
option to renew the lease for a second three-year period through September
30, 2007 or let the lease expire. If the Company chooses to allow the lease
to expire, the Company would be required to pay $500,000 to the lessor to
purchase the plant's equipment. The Company would incur costs to relocate
that equipment as well as any additional equipment the Company has purchased
for that plant. Management is reviewing the plant's operations in order to
develop a contingency plan.
Material Changes in Financial Condition
- ---------------------------------------
For the six months ended January 31, 2004, the following changes
occurred:
The Company's Restricted Cash increased $756,000 as Certificates of
deposits of $300,000, previously unrestricted, have been classified as
restricted to secure a letter of credit related to the Company's previous
workers' compensation insurance carrier. In addition, the Company used
$400,000 in operating cash to purchase certificates of deposit and
transferred a $100,000 certificate of deposit to secure letters of credit
related to the Company's current workers' compensation program. $75,000 of
restricted cash, designated to pay the Company's Industrial Revenue Bond on
its Richmond facility, was used to make the annual payment on that note. The
Company redeemed a $100,000 Certificate of deposit to fund operations.
Accounts Receivable increased by approximately $958,000 as payments from
customers slowed during the winter months. The Company constantly reviews its
account receivable balances and feels that those balances, net of reserves,
are collectible.
Inventory increased $173,000 as the Company purchased materials for its
bridge projects, mainly the Woodrow Wilson Bridge near Washington, DC. The
Company has inventory on hand to meet current needs but may face shortages
due to higher steel prices and delivery delays from the steel mills as
discussed above.
Prepaid expenses and other assets decreased $268,000 as the Company
expensed its insurance cost for the period. Subsequent to January 31, 2004,
the Company renewed its workers' compensation insurance program as described
elsewhere in this document.
Property and Equipment, at Cost increased approximately $1.3 million as
the Company purchased a previously leased crane for approximately $900,000
and purchased additional operating assets and made plant improvements of
$700,000. The Company sold or wrote off fully depreciated assets with an
original cost of $300,000.
Deferred income taxes increased $185,000 due to losses incurred during
the period. It is anticipated that additional tax benefits will be utilized in
the Company's remaining two quarters if the Company returns to profitability.
At January 31, 2004, the Company had about $4.6 million in variable rate
notes payable. Total Notes Payable increased approximately $1.2 million
during the six months ended January 31, 2004. The Company borrowed
approximately $2.6 million, of which $1.3 million was used to fund equipment
purchases, $700,000 was used to fund insurance financing and $600,000 was
used to fund short-term operations. The Company paid back $1.4 million
related to short term borrowing, mainly from operations.
Billing In Excess of Costs and Estimated Earnings on Uncompleted
Contracts, and Costs and Estimated Earnings in Excess of Billings, increased
a net amount of approximately $2.1 million as a result of accelerated
billings on a mix of contracts in process.
Other Liabilities decreased $1.2 million as the company made payments
on its workers' compensation program of $750,000 and paid sales taxes.
Stockholders' Equity decreased by $301,000 to $16,521 million. The
decline is due to the Company's net loss of approximately $440,000. During
the six-months ended January 31, 2004, officers and directors exercised stock
options for 22,000 shares for approximately $90,000. The Company issued
10,359 shares of stock, as directors' compensation, for $37,000. Finally,
employees purchased 3,339 shares under the Company's employee stock plan for
approximately $12,000.
For the six months ended January 31, 2004, the Company had a slight
increase in cash, generating $638,000 from operations. The Company had a net
increase in financing activities of $1.4 million, borrowing $2.6 million of
long-term debt, repaying $1.4 million against debt and issuing stock for
$139,000. The Company used $2.0 million for investing activities, which
consisted primarily of property and equipment purchases of $1.6 million, the
purchase of certificates of deposit of $400,000, as restricted cash, for
security on its workers' compensation program.
The Company was not in compliance with its earnings covenant with
Wachovia Bank related to its Industrial Revenue Bond for its Richmond
facility. The Company owes approximately $940,000 on its notes payable to
Wachovia at January 31, 2004. These notes are shown in the "Current
portion of note payable" at January 31, 2004.
Management believes that operations will generate sufficient cash to
fund the Company's activities and service its debt, subject to the
contingencies discussed relating to the supply and cost of steel materials
and costs associated with terminating the Bessemer, Alabama lease, should
the Company not renew it. It may become necessary to increase the Company's
credit facilities to handle these contingencies.
Material Changes in Results of Operations
- -----------------------------------------
Three Months Ended January 31, 2004 Compared to
Three Months Ended January 31, 2003
For the quarter ended January 31, 2004, the Company reported a slight
increase in revenues while gross profit and earnings decreased when compared
to the quarter ended January 31, 2003.
The Company had a net loss of $667,000, or $0.18 per share, on total
revenue of $12 million for the quarter ended January 31, 2004 as compared to
net loss of $618,000, or $0.17 per share, on total revenue of $11.8 million
for the quarter ended January 31, 2003.
Revenues and gross profit declined in the manufacturing segment while
they increased in the construction segment. In the manufacturing segment,
revenues declined $616,000 while gross margins decreased from 35% to 28%. The
main press, used to form decking, was down for repair in the Gadsden plant
for two weeks in December. Labor shortages and spot material shortages, due
to delivery delays from the steel mills, also contributed to reduced
production. During the quarter ended January 31, 2004, the manufacturing
segment recorded increased workers compensation expense, associated with an
accident in one of its plants, of $140,000. The construction segment
increased its revenues $865,000 while increasing its gross margin from 27% to
32%, principally due to better performance in equipment rental. Its labor
force has increased approximately 25% during the quarter, as work in its
backlog, which had been delayed due to weather, has begun.
Overhead, General and Administrative decreased $153,000 due to cost
savings efforts when the two periods are compared. Depreciation increased
$86,000 due to purchases of assets during the year ended July 31, 2003 and
2004. Interest expense increased slightly, reflecting higher borrowings.
Six Months Ended January 31, 2004 Compared to
Six Months Ended January 31, 2003
The Company recorded a net loss of $440,000, or $0.12 per share, on
revenues of $25.6 million for the six months ended January 31, 2004, as
compared to a net loss of $556,000, or $0.16 per share, on revenues of $26.7
million for the six months ended January 31, 2003.
Although revenue declined, when the two periods are compared, gross
profit has increased. In the manufacturing segment, revenues declined
$730,000 and gross profit declined $519,000. Gross margins declined from 35%
to 33% as the segment deals with labor shortages and some material shortages.
Although revenues declined in the construction segment by $299,000, gross
profit increased by $750,000 as margins increased from 24% to 33%. Overhead,
General and Administrative decreased $124,000 due to cost savings efforts
when the two periods are compared. Depreciation increased $158,000 due to
purchases of assets in the year ended July 31, 2003 and 2004. Interest
expense increased slightly.
BACKLOG
At January 31, 2004, the Company's backlog was approximately $71
million, which is an increase of approximately $12 million from the backlog
at July 31, 2003. As discussed elsewhere in this report, the backlog includes
a contract for approximately $22 million, which has not been executed.
Approximately $45 million of the backlog is scheduled to be completed
within the next twelve months. Management believes that the level of work is
sufficient to allow the Company to have adequate work into Fiscal 2005.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Material Price Risks
The Company is subject to abnormal steel price increases in its current
market as discussed in the introduction to Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations.
Interest Rate Risk
The Company's cash equivalents and restricted cash, invested in interest-
bearing instruments, are presented at fair market value on the Company's
balance sheets. The Company's exposure to market risks for changes in
interest rates relate primarily to these investments and current and long-
term debt.
Item 4. Controls and Procedures
As of January 31, 2004, an evaluation was performed under the
supervision and with the participation of the Company's management,
including the Chief Executive Officer (CEO) and Controller, of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on that evaluation, the Company's management,
including the CEO and Controller, concluded that the disclosure controls and
procedures were effective as of January 31, 2004. There have been no
significant changes in the Company's internal controls or in other factors
that could significantly affect internal controls subsequent to January 31,
2004.
Disclosure controls and procedures are the Company's controls and
procedures that are designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act, is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files under the Exchange Act
are accumulated and communicated to management, including the principal
executive officers and principal financial officer, as appropriate to allow
timely decisions regarding required disclosure.
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
the 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, provide adequate coverage for such claims or contingencies.
In prior years, the Company obtained workers' compensation insurance
from an insurance carrier under a "loss sensitive" agreement whereby the
Company paid a flat charge for administrative expenses and minimum insurance
coverage plus additional amounts based on claims experience. During the
year ended July 31, 2003, the Company changed carriers because the proposed
renewal terms were unacceptable to Company management. Subsequent to the
change of carriers, the Company's previous carrier asserted various charges
and attempted to change terms of the calculation of amounts due, which the
Company disputed. During the quarter ended October 31, 2003, the Company
received a Bill of Complaint which was filed in the Prince William County,
Virginia Circuit Court, seeking to compel the Company to post additional
collateral to guarantee payments for expenses incurred for existing claims
under the policies. The Company reached a settlement subsequent to the
quarter ended January 31, 2004, whereby the carrier dropped its demand for
additional collateral and agreed to continue to deduct amounts owed by the
Company from collateral on hand. The settlement had no impact on cash flows
or results of operations and the Company believes that the eventual
conclusion of the program will not have a significant impact on its
financial position, results of operations or cash flows.
Effective January 1, 2003, the Company had contracted with a new
insurance carrier for its overall workmen's compensation insurance under a
"loss sensitive" arrangement similar to the programs in place for
approximately twenty years. The Company provided a letter of credit backed
by certificates of deposit as collateral and is making installment payments
to reimburse the carrier for claims paid. The Company extended this
program through January 31, 2004. The Company renewed its workers'
compensation coverage with its current carrier effective February 1, 2004.
The program is an incurred loss retro and is loss sensitive, enabling the
Company to be rewarded for good performance as it relates to safety. The
new program does not provide the cash flow benefits of the previous program.
However, the new program does not require as much collateral, in the form of
letters of credit, as the recently expired program.
ITEM 2. Changes in Securities and Use of Proceeds
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
Exhibit 31.1 Section 302 Certification for
Frank E. Williams, III
Exhibit 31.2 Section 302 Certification for
Christ H. Manos
Exhibit 32 Section 906 Certification for
Frank E. Williams, III
Exhibit 32.2 Section 906 Certification for
Christ H. Manos
Exhibit 99 Press Release announcing
January 31, 2004 loss.
(b) Reports on Form 8-K
(1) December 3, 2003
Item 5. Other Events
Announcing and discussing its financial results
for the quarter ended October 31, 2003.
(2) January 21, 2004
Item 5: Other Events
Announcing the award of a contract to certain of
the Company's subsidiaries for the fabrication
and erection of the structural steel for Phases 6
and 7 of the Springfield Interchange Project.
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:
March 12, 2004 Williams Industries, Incorporated
-----------------------------------
Registrant
/s/ Frank E. Williams, III
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Frank E. Williams, III
Chairman of the Board, President,
Chief Executive Officer,
Chief Financial Officer