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 October 31, 1998
COMMISSION FILE NO. 0-8190
WILLIAMS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0899518
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2849 MEADOW VIEW ROAD, FALLS CHURCH, VIRGINIA 22042
(Address of Principal Executive Offices) (Zip Code)
(703) 560-5196
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former names, former address 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
3,576,429
Number of Shares of Common Stock Outstanding at October 31, 1998
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended October 31:
1998 1997
------------ ------------
REVENUE:
Construction $ 4,691,193 $ 3,687,870
Manufacturing 2,585,498 2,865,966
Other 152,776 230,114
------------ ------------
Total revenue 7,429,467 6,783,950
------------ ------------
DIRECT COSTS:
Construction 3,022,159 1,955,582
Manufacturing 1,493,317 2,261,344
------------ ------------
Total direct costs 4,515,476 4,216,926
------------ ------------
GROSS PROFIT 2,913,991 2,567,024
------------ ------------
OTHER INCOME 30,753 -
------------ ------------
EXPENSES:
Overhead 889,727 724,199
General and administrative 1,309,054 986,174
Depreciation 314,419 306,500
Interest 208,848 335,376
------------ ------------
Total expenses 2,722,048 2,352,249
------------ ------------
EARNINGS BEFORE INCOME TAXES, EQUITY
EARNINGS AND MINORITY INTERESTS 222,696 214,775
INCOME TAX PROVISION 80,000 78,400
------------ ------------
EARNINGS BEFORE EQUITY EARNINGS
AND MINORITY INTERESTS 142,696 136,375
Equity in earnings of
unconsolidated affiliates 41,600 10,100
Minority interest in
consolidated subsidiaries (10,739) (9,419)
------------ ------------
NET EARNINGS $ 173,557 $ 137,056
============ ============
EARNINGS PER COMMON SHARE:
BASIC: $ 0.05 $ 0.05
============ ============
DILUTED: $ 0.05 $ 0.04
============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING:
BASIC: 3,576,429 2,847,499
============ ============
See Notes to Condensed Consolidated Financial Statements
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
October 31, 1998 July 31, 1998
----------------
- ----------------
CURRENT ASSETS
Cash and cash equivalents $ 1,603,465 $ 1,384,339
Restricted cash 73,963 54,004
Certificates of deposit 822,473 732,616
Accounts receivable, (net of
allowances for doubtful
accounts of $1,095,000 at
October 31, 1998 and
$1,211,000 at July 31, 1998):
Contracts
Open accounts 7,241,140 7,057,543
Retainage 314,140 585,506
Trade 1,273,872 1,749,778
Other 166,909 302,445
Inventory 2,064,365 1,320,245
Costs and estimated earnings
in excess of billings on
uncompleted contracts 875,239 665,926
Notes receivable 34,666 33,706
Prepaid expenses 683,981 568,689
------------- -------------
Total current assets 15,154,213 14,454,797
------------- -------------
PROPERTY AND EQUIPMENT, AT COST 19,017,346 19,066,486
Accumulated depreciation (9,594,859) (9,355,343)
------------- -------------
Property and equipment, net 9,422,487 9,711,143
------------- -------------
OTHER ASSETS
Notes receivable 117,563 128,761
Investments in
unconsolidated affiliates 1,004,606 979,769
Deferred income taxes 2,170,000 2,240,000
Inventory 1,242,662 1,243,754
Other 336,276 354,971
------------- -------------
Total other assets 4,871,107 4,947,255
------------- -------------
TOTAL ASSETS $ 29,447,807 $ 29,113,195
============= =============
See Notes to Condensed Consolidated Financial Statements
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
October 31, 1998 July 31, 1998
----------------
- ----------------
CURRENT LIABILITIES
Current portion of notes payable $ 1,795,884 $ 1,947,618
Accounts payable 4,864,929 4,017,376
Accrued compensation and
related liabilities 707,148 760,620
Billings in excess of costs
and estimated earnings on
uncompleted contracts 1,922,341 1,885,069
Deferred income 275,247 306,000
Other accrued expenses 2,259,477 2,357,125
Income taxes payable 105,000 159,200
------------- -------------
Total current liabilities 11,930,026 11,433,008
LONG-TERM DEBT
Notes payable,
less current portion 8,011,817 8,357,119
------------- -------------
Total Liabilities 19,941,843 19,790,127
------------- -------------
MINORITY INTERESTS 198,957 189,618
------------- -------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - $0.10 par value,
10,000,000 shares authorized;
3,576,429 shares issued and
outstanding 357,643 357,643
Additional paid-in capital 16,385,704 16,385,704
Accumulated deficit (7,436,340) (7,609,897)
------------- -------------
Total stockholders' equity 9,307,007 9,133,450
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 29,447,807 $ 29,113,195
============= =============
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended October 31, 1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 173,557 $ 137,056
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 314,419 306,500
Decrease in allowance for
doubtful accounts (116,261) (48,263)
Gain on disposal of property,
plant and equipment (3,162) (207,659)
Decrease in deferred income taxes 70,000 60,000
Minority interests in earnings 10,739 9,419
Equity in earnings of affiliates (41,600) (10,100)
Dividend from unconsolidated affiliate 16,763 22,350
Changes in assets and liabilities:
Decrease in notes receivable 10,238 19,359
Increase in open contracts receivable (67,586) (199,358)
Decrease in contract retainage 271,366 217,676
Decrease in trade receivables 476,156 92,018
Decrease in other receivables 135,536 155,062
(Increase) decrease in inventories (743,028) 792,017
Increase in costs and estimated
earnings related to billings on
uncompleted contracts (net) (172,041) (331,694)
(Increase) decrease in prepaid
expenses and other assets (96,597) 18,874
Increase (decrease) in accounts payable 847,553 (94,966)
Decrease in accrued compensation
and related liabilities (53,472) (21,308)
Decrease in other accrued expenses (97,648) (278,974)
Decrease in deferred income (30,753) -
(Decrease) increase in
income taxes payable (54,200) 10,000
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 849,979 648,009
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property,
plant and equipment (154,851) (188,413)
(Increase) decrease in restricted cash (19,959) 182,319
Proceeds from sale of property,
plant and equipment 132,250 409,703
Purchase of certificates of deposit (289,857) -
Maturities of certificates of deposit 200,000 -
----------- -----------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (132,417) 403,609
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 646,773 237,751
Repayments of notes payable (1,143,809) (831,098)
Issuance of common stock - 1,000
Minority interest dividends (1,400) -
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (498,436) (592,347)
----------- -----------
NET INCREASE IN CASH AND EQUIVALENTS 219,126 459,271
CASH AND EQUIVALENTS,
BEGINNING OF PERIOD 1,384,339 1,491,836
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $1,603,465 $1,951,107
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income Taxes $ 64,200 $ 8,400
---------- ----------
Interest $ 238,838 $ 325,001
---------- ----------
See Notes to Condensed Consolidated Financial Statements
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1998
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated financial
statements
have been prepared in accordance with rules established by the
Securities and Exchange Commission. Certain financial
disclosures
required to present the financial position and results of
operations in accordance with generally accepted accounting
principles are not included herein. The reader is referred to
the
financial statements included in the annual report to
shareholders
for the year ended July 31, 1998. The interim financial
information included herein is unaudited. However, such
information reflects all adjustments, consisting solely of
normal
recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position as
of
October 31, 1998 and the results of operations for the three
months ended October 31, 1998 and 1997, and cash flows for the
three months ended October 31, 1998 and 1997.
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.
Basis of Consolidation - The condensed consolidated
financial
statements include the accounts of the Company and all of its
majority-owned subsidiaries.
All material intercompany balances and transactions have
been
eliminated in consolidation.
RECENT ACCOUNTING PRONOUNCEMENTS:
Effective August 1, 1998, the Company adopted Statement of
Financial Accounting Standards: Statement No. 130, "Reporting
Comprehensive Income" (SFAS 130). SFAS No. 130 establishes
standards for reporting and displaying comprehensive income and
its components. There are no items that the Company is required
to recognize as components of comprehensive income.
SFAS 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", revises disclosure about pension and
other postretirement benefit plans.
SFAS 133, "Accounting for Derivative Instruments and
Hedging
Activities", establishes accounting and reporting standards for
derivative instruments and for hedging activities.
The Company has determined that there is no impact in
adopting SFAS 132 and 133.
1. NOTES PAYABLE
A. CIT: The Company's primary credit facility is with The
CIT
Group/Credit Finance, Inc., under a Loan and Security Agreement
for a line of credit of approximately $3 million. This loan
requires monthly principal payments as well as interest at prime
plus 2.5%. The loan has a three year term and is due March
2000.
The Company has received a commitment from The CIT Group/Credit
Finance, Inc. to extend the maturity on this loan. Formal
documentation of this commitment is in process. This loan is
secured by the Company's equipment and receivables as well as
subordinate deeds of trust on certain real estate.
As of October 31, 1998, approximately $1,936,000 was owed
under the terms of this agreement.
B. Franklin National Bank: The Company has a loan from
Franklin
National Bank of Washington, D. C. which bears interest at a
fixed
rate of 9.5% for five years, with monthly payments calculated on
a
fifteen year amortization and a five year balloon payment. As
of
October 31, 1998, the balance of the loan was approximately
$881,000.
C. Pribyla: The Company continues to make $8,000 monthly
payments under a promissory note to Mrs. Karen Pribyla. The
"present value" of the note if it were paid off as of October
31,
1998 was approximately $450,000.
D. Industrial Revenue Bond: The Company has a Letter of
Credit
with Wachovia Bank, N.A., the successor to Central Fidelity
National Bank, which serves as collateral for the Industrial
Revenue Bond issue, secured by real estate in the City of
Richmond. As of October 31, 1998, the outstanding balance was
$1,265,000. Principal payments are due in increasing amounts
through the maturity of the bonds in 2007. A portion of the
property covered by the Industrial Revenue Bond is leased by a
non-affiliated third party.
2. INVENTORIES
Inventory consisted of the following:
October 31, July 31,
1998 1998
---------- ----------
Expendable tools
and equipment $ 805,318 $ 805,318
Supplies 350,647 351,664
Materials 2,151,062 1,407,017
---------- ----------
Total Inventory $3,307,027 $2,563,999
Less: Amount classified
as long-term 1,242,662 1,243,754
---------- ----------
$2,064,365 $1,320,245
3. RELATED-PARTY TRANSACTIONS
Certain shareholders owning or controlling approximately
17%
of the outstanding stock of the Company own controlling interest
in the outstanding stock of Williams Enterprises of Georgia,
Inc.
Billings to this entity and its affiliates were approximately
$483,000 and $180,000 for the three months ended October 31,
1998
and 1997, respectively.
Certain shareholders owning or controlling approximately
17%
of the outstanding stock of the Company own 100% of the stock of
The Williams and Beasley Company. Net billings from this entity
were approximately $104,000 and $57,000 during the three months
ended October 31, 1998 and 1997, respectively.
4. COMMITMENTS/CONTINGENCIES
A: PRECISION COMPONENTS CORPORATION: The Company received a
favorable decision in this case, and judgment in favor of the
Company was entered on March 4, 1998 by the Circuit Court for
the
City of Richmond. The plaintiffs, Industrial Alloy Fabricators,
Inc. and Precision Components Corp., have perfected appeal to
the
Supreme Court of Virginia, which was accepted on September 21,
1998. It is expected the case will be argued early in 1999.
The
suit, against Williams Industries, Inc. and IAF Transfer
Corporation, deals with the plaintiffs appeal for $300,000 plus
interest and fees arising from a product liability claim against
the Company. Management believes the ultimate outcome will not
have a material adverse impact on the Company's financial
position, results of operations or cash flows.
B: General: The Company is party to various other 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.
5. EARNINGS PER SHARE
SFAS 128 "Earnings per Share", which became effective for
financial statement periods ending after December 15, 1997,
requires that a reconciliation of the numerators and the
denominators of the basic and diluted per-share computations for
income from continuing operations be presented for each period
for
which the income statement is presented. Diluted earnings per
share for the three months ended October 31, 1998 are not
presented because the impact of outstanding stock options was
antidilutive. Reconciliation for the three months ended October
31, 1997 is presented herein.
For the Three Months Ended October 31, 1997
Average
Income Shares
Per-Share
(Numerator) (Denominator)
Amount
----------- -------------
- ---------
Net earnings $137,056
Basic earnings per share
Earnings available to
common stockholders 137,056 2,847,499 $0.05
=====
Effect of Dilutive Securities
Convertible debentures 20,845 927,654
Diluted earnings per share
Earnings available to common
stockholders + assumed
conversion $157,901 3,775,153 $0.04
======== ========= =====
The objective of the basic EPS is to measure the
performance
of an entity over the reporting period. Basic EPS is computed
by
dividing the income available to common stockholders (the
numerator) by the weighted-average number of common shares
outstanding (the denominator) during the period. Shares issued
during the period and shares reacquired during the period are
weighted for the portion of the period that they were
outstanding.
6. SEGMENT INFORMATION
Effective August 1, 1998, the Company adopted SFAS 131,
"Disclosures about Segments of an Enterprise and Related
Information".
SFAS 131 establishes standards for the way that public
business enterprises report information about operating segments
in annual financial statements and requires that those
enterprises
report selected information about operating segments in interim
financial reports to issued shareholders. It also establishes
standards for related disclosures about products and services,
geographic areas, and major customers. This Statement
supersedes
SFAS Statement No. 14, "Financial Reporting for Segments of a
Business Enterprise," but retains the requirement to report
information about major customers. It amends FASB No. 94,
"Consolidation of All Majority-Owned Subsidiaries," to remove
the
special disclosure requirements for previously unconsolidated
subsidiaries.
Information about the Company's operations in its operating
segments for the three months ended October 31, 1998 and 1997,
is
as follows:
October 31, October 31,
1998 1997
----------- -----------
Revenues:
Construction $5,162,081 $3,868,401
Manufacturing 2,660,165 2,876,232
Other 288,070 319,932
---------- ----------
8,110,316 7,064,565
---------- ----------
Intersegment revenues:
Construction 470,888 180,531
Manufacturing 74,667 10,266
Other 135,294 89,818
---------- ----------
680,849 280,615
---------- ----------
Consolidated revenues:
Construction 4,691,193 3,687,870
Manufacturing 2,585,498 2,865,966
Other 152,776 230,144
---------- ----------
Total consolidated revenues $7,429,467 $6,783,950
========== ==========
Depreciation and amortization:
Construction $239,561 $227,892
Manufacturing 47,580 37,139
Other 27,278 41,469
-------- --------
Total $314,419 $306,500
======== ========
Earnings before income taxes, equity
earnings and minority interest
Construction $ 329,848 $ 735,114
Manufacturing 233,340 (60,344)
Other (340,492) (459,955)
---------- ----------
Total $ 222,696 $ 214,775
========== ==========
Segment Assets:
Construction $15,874,016 $15,472,913
Manufacturing 7,336,154 6,167,301
Other 6,237,637 8,802,880
----------- -----------
Total $29,447,807 $30,443,094
=========== ===========
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
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
construction 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.
General
The Company recently has benefited from overall increased
activity in each of the construction markets served by its
various
subsidiaries. Increased governmental spending on
infrastructure,
particularly as it relates to bridge girders, started becoming
significant in the last month of the quarter and is expected to
continue throughout the fiscal year.
The Company's operations continue to serve the industrial,
commercial and institutional construction markets. Operating
activity varied throughout the quarter as individual
subsidiaries
dealt with different customer bases in providing specialized
services.
This combination of diverse activity is considered to be in
the Company's best interests and marketing efforts are taking
place to expand the Company's customer base in all areas.
Management believes this diversification will help lessen the
adverse effect of slow downs in any one segment of the
construction business.
One area which has presented problems in both the
manufacturing and construction subsidiaries has been the ability
to hire qualified personnel. In order to combat this challenge,
several of the Company's subsidiaries, working with appropriate
governmental agencies, have begun apprenticeship programs to
train
motivated applicants in the required construction disciplines.
While the success rate of applicants who complete the program
has
been good, getting an adequate applicant pool continues to pose
difficulties. Management is continuing to focus on this issue.
Financial Condition
As the Condensed Consolidated Balance Sheets show, the
Company's overall financial situation continues to improve. The
current portion of notes payable declined from $1,947,618 at
July
31, 1998 to $1,795,884 at October 31, 1998. Long term debt was
also reduced from $8,357,119 at July 31, 1998 to $8,011,817 at
October 31, 1998.
It should be noted that the increase in total liabilities,
which increased from $19,790,127 at July 31, 1998 to $19,941,843
at October 31, 1998, is due in large measure to the increase in
accounts payable of more than $800,000. The increase in
accounts
payable is directly attributable to the Company's increased
manufacturing backlog and the purchase of raw materials, which
is
also reflected in the increase in inventory.
Stockholder's equity also improved, going from $9,133,450
at
July 31, 1998 to $9,307,007 at October 31, 1998.
As of October 31, 1998, the Company is in compliance with
all
of its debt covenants and all debt service payments on its notes
are current.
Bonding
With the Company's overall improved financial condition,
its
ability to furnish payment and performance bonds also has
significantly increased. Currently, the Company has in excess
of
$6 million bonded with its workers' compensation underwriter.
In
addition, after a comprehensive review of the Company's improved
financial situation, the Company has received approval for a $20
million aggregate bonding line by the Fidelity and Deposit
Company
of Maryland. As part of this new bonding package, the Company
can
rapidly bond a single job for $6 million. This, despite the
Company's reduced size, is the highest bonding line the Company
has had in more than seven years. Historically, because of the
Company's strong reputation, most of its projects have been
obtained without providing bonds. 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.
Liquidity
The Company continues to generate sufficient cash to
sustain
its operational activities as well as service all outstanding
debt.
Cash Flows Provided By Operating Activities for the three
months ended October 31, 1998 were $849,979, as compared to
$648,009 in the comparable quarter ended October 31, 1997,
primarily as a result of the decline in accounts receivable.
Cash Flows From Investing Activities declined from the
first
quarter of Fiscal 1998 to the first quarter of Fiscal 1999, due
primarily to the lack of equipment sales. Expenditures for
property, plant and equipment were kept low as the Company has
been updating its crane fleet primarily though operating
leases.
Management feels that cost efficient leasing instead of more
traditional buying and/or borrowing offers cash flow and balance
sheet advantages.
Financing Activities continue to use net cash as the
Company
continued its efforts to reduce overall debt.
Going forward, management believes that operations will
continue to 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.
Operations
As a result of improvements in the construction
marketplace,
operating revenues for the first quarter improved by about 10%
over the same period in the prior year. Improvements in profit
margins varied, with the construction segment having lower
profit
margins while the manufacturing segment's profit margins
doubled.
This dichotomy has a fairly simple explanation. In the first
quarter of Fiscal 1998, the construction segment was finishing a
number of extremely large jobs which also were high profit
projects. During the first quarter of Fiscal 1999, the
construction segment was actually doing more total work, but on
less profitable jobs on a project by project basis. This
explains
why construction direct costs of $3,022,159, as shown on the
Condensed Consolidated Statements of Earnings, may appear to be
out of line proportionally with the revenue increase. The
reverse
was true in the Company's manufacturing segment, particularly as
it relates to the fabrication of bridge girders. Due to a
stronger bridge girder market, and the subsidiary's ability to
purchase raw materials at lower costs, the manufacturing gross
margins were higher. It is anticipated that this trend will
continue.
Currently, Williams Bridge Company is dealing almost
exclusively with governmental projects. These types of projects
are increasing as the states spend money allocated and
appropriated from the various federal infrastructure programs
approved by Congress in recent years. This trend is expected to
continue for at least five years.
Williams Steel Erection Company, in contrast, has been
doing
the bulk of its work for privately funded commercial contracts.
The crane rental companies, Greenway Corporation and Williams
Equipment Corporation, tend to work for the broadest base of
customers, but have been doing a great deal of industrial work
recently.
Piedmont Metal Products has a diverse customer base, while
Construction Insurance Agency deals both with commercial
customers
as well as providing a variety of services for its sister
companies.
1999 Quarter Compared to 1998 Quarter
For the three months ended October 31, 1998, the Company
had
net earnings of $173,557 or $0.05 per share. This profit was
calculated on the Company's total issued and outstanding shares,
3,576,429, which includes the shares issued as part of debenture
conversions in Fiscal 1998. These earnings compare to $137,056
or
$0.04 per diluted share profit for the comparable quarter in
Fiscal 1998.
Results at the Company's operating subsidiaries,
Construction
Insurance Agency, Greenway Corporation, Piedmont Metal Products,
Williams Bridge Company, Williams Equipment Corporation, and
Williams Steel Erection Company, varied during the first quarter
of Fiscal 1999.
Williams Steel Erection Company had substantially higher
revenues in the quarter ended October 31, 1998 than in the
quarter
ended October 31, 1997, but also experienced higher costs due to
the nature of the work. Despite the higher costs, however, this
subsidiary produced pre tax earnings that were 80% higher than
in
the same period of the prior year.
The Company's manufacturing subsidiaries, Piedmont Metal
Products and Williams Bridge Company, both produced better
earnings in the first quarter of Fiscal 1999 than in the
comparable quarter of Fiscal 1998. In the case of Williams
Bridge
Company, pre-tax earnings improved by more than $250,000. This
striking increase was due to the fact that the company has more
high margin work as well as the ability to buy materials more
competitively. Now that the parent corporation's financial
situation has strengthened, the subsidiaries, such as Williams
Bridge, are able to avail themselves of better terms from both
vendors and lenders. This is most notable in subsidiaries,
such
as Williams Bridge, that buy a tremendous amount of raw
material,
but is also true for the other subsidiaries in their financial
dealings. The other manufacturing subsidiary, Piedmont Metal
Products, produced pre tax earnings that were more than 40%
higher
in the first quarter of Fiscal 1999 than those of the first
quarter of Fiscal 1998.
Greenway Corporation and Williams Equipment Corporation,
the
Company's two crane rental and rigging subsidiaries, had mixed
results. Greenway, which does a tremendous amount of work on a
daily rental basis in the Baltimore, Maryland metropolitan area,
had slightly lower revenues for the quarter, but produced
significant higher results. Greenway's pre-tax profit for the
first quarter of Fiscal 1999 was more than 70% higher than that
produced in the first quarter of Fiscal 1998. Williams
Equipment
Corporation, on the other hand, experienced a $400,000 decline
in
both revenues and profitability. A portion of the subsidiary's
decline in profitability is attributed to the fact that the
prior
year's results had included gains on the sale of two cranes in
excess of $200,000, but the subsidiary also experienced a
decline
in overall revenue which is viewed as an aberration and not
expected to recur.
As the Condensed Consolidated Statements of Earnings shows,
overall construction revenue went from $3,687,870 in the first
quarter of Fiscal 1998 to $4,691,193 in the comparable quarter
of
Fiscal 1999. While construction revenues will probably remain
consistent, management believes that the significant revenue
growth for the Company this year will come in the manufacturing
segment as Williams Bridge Company continues to grow its backlog
with more girder fabrication work for both its facilities.
The Company's subsidiaries continue to diversify both their
geographic marketplaces as well as their customer base,
particularly in relation to the shipping of fabricated
products.
During the quarter ended October 31, 1998, the Company's
subsidiaries shipped manufactured products to customers not only
in Virginia, Maryland and the District of Columbia, but also in
Pennsylvania, New Jersey, Tennessee, Ohio, and Delaware.
Backlog
The Company's backlog has increased significantly. Backlog
at October 31, 1998 was $27.3 million as compared to $15.3
million
at October 31, 1997 and $21.7 million at July 31, 1998. This is
due in large part to the increases occurring in the
manufacturing
subsidiaries, particularly Williams Bridge Company which was
awarded more than $6 million in new work as a result of a former
competitor ceasing operations. This increased backlog will be
produced in the company's existing facilities by increasing the
second shift at the Manassas plant and increasing manpower in
the
subsidiary's Richmond facility. Construction backlog remains
consistent with a combination of smaller projects rather than
traditionally higher profit "mega" jobs. 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 throughout
Fiscal 1999. Management believes that if this backlog can be
maintained, the Company will be able to achieve consistently
profitable results.
Management
Management, using the Company's updated strategic plan as a
guideline, is focusing on long-range growth and acquisition,
while
simultaneously working on issues relating to profitability in
existing activities. Expansion of the Company's traditional
market areas is already occurring. It is anticipated that this
trend will continue. Management is also focusing on several non-
operating issues, such as refinancing its credit facilities at
more favorable rates and in developing a comprehensive marketing
program to attract strong institutional investors for the
Company's stock, possibly as part of a "micro-cap"
infrastructure
fund.
Year 2000
The Company is developing a plan to assure that its
computers
are Year 2000 compliant and has begun converting its computer
systems to be Year 2000 compliant. The plan calls for the
conversion efforts to be completed by the end of the Fiscal Year
ending July 31, 1999. The Year 2000 issues result from some
computer programs being written using two digits rather than
four
to define applicable years. The maximum total cost of the
conversion project is estimated to be $200,000 and will be
funded
through operating cash flows and financing.
ITEM 3. Quantitative and Qualitative Disclosures
About Market Risk
The Company believes that there have been no material
changes
in exposure to market risks during the first quarter of Fiscal
1999 from those set forth in the Company's Annual Report filed
with the Commission on Form 10-K for the year ended July 31,
1998.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Precision Components Corp.
The Company received a favorable decision in this case, and
judgment in favor of the Company was entered on March 4, 1998 by
the Circuit Court for the City of Richmond. The plaintiffs,
Industrial Alloy Fabricators, Inc. and Precision Components
Corp.,
have perfected an appeal to the Supreme Court of Virginia, which
was accepted on September 21, 1998. It is expected the case
will
be argued early in 1999. The appeal, against Williams
Industries, Inc. and IAF Transfer Corporation, deals with the
plaintiffs search for $300,000 plus interest and fees arising
from
a product liability claim against the Company. Management
believes the ultimate outcome will not have a material adverse
impact on the Company's financial position, results of
operations
or cash flows.
General
The Company is party to various other 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 excess liability coverage, is adequate coverage for
such
claims.
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
On November 19, 1998, the shareholders of Williams
Industries, Inc. elected a new board of directors. Elected
were:
Stephen P. Ashman, William C. Howlett, R. Bentley Offutt,
William
Sim, Frank E. Williams, Jr., and Frank E. Williams, III.
The results of the November 19, 1998 shareholder's election
of directors are as follows:
Nominee For Abstain
- ----------------------- --------- --------
Stephen N. Ashman 3,350,726 4,624
William C. Howlett 3,350,926 4,424
R. Bentley Offutt 3,343,221 12,129
William J. Sim 3,350,926 4,424
Frank E. Williams, Jr. 3,350,726 4,624
Frank E. Williams, III 3,350,784 4,566
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
December 8, 1998 /s/ Frank E. Williams, III
Frank E. Williams, III
President, Chairman of the
Board
Chief Financial Officer