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, 1999
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
3,583,877
Number of Shares of Common Stock Outstanding at April 30, 1999
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Nine Months Ended
April 30, April 30,
1999 1998 1999 1998
REVENUE
Construction $ 4,204,599 $ 5,254,976 $ 12,781,054 $12,296,047
Manufacturing 4,970,374 2,396,992 10,270,113 7,323,085
Other 132,065 194,949 458,375 644,116
Total revenue 9,307,038 7,846,917 23,509,542 20,263,248
DIRECT COSTS
Construction 2,580,050 2,962,243 7,893,493 7,070,061
Manufacturing 3,421,586 1,534,718 6,426,905 5,475,359
Total direct costs 6,001,636 4,496,961 14,320,398 12,545,420
GROSS PROFIT 3,305,402 3,349,956 9,189,144 7,717,828
OTHER INCOME 29,794 21,771 115,228 225,827
EXPENSES
Overhead 833,875 767,842 2,645,684 2,238,844
General and admin. 1,502,366 1,580,524 4,017,635 3,727,263
Depreciation 338,296 301,020 970,442 912,076
Interest 237,949 326,387 682,581 947,239
Total expenses 2,912,486 2,975,773 8,316,342 7,825,422
EARNINGS BEFORE INCOME
TAXES, EQUITY EARNINGS
AND MINORITY INTERESTS 422,710 395,954 988,030 118,233
INCOME TAX PROVISION 58,000 109,400 268,700 168,800
EARNINGS (LOSS) BEFORE
EQUITY EARNINGS AND
MINORITY INTERESTS 364,710 286,554 719,330 (50,567)
Equity in earnings
(loss) of unconsolidated
affiliates 37,800 19,400 96,900 (770,471)
Minority interest in
consolidated subsidiaries (9,653) (4,168) (35,014) (24,742)
EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEM 392,857 301,786 781,216 (845,780)
EXTRAORDINARY ITEM
(Loss) gain on
extinguishment of debt (192,550) - (192,550) 809,000
NET EARNINGS (LOSS) $ 200,307 $ 301,786 $ 588,666 $(36,780)
EARNINGS (LOSS) PER
COMMON SHARE - BASIC:
Earnings (loss) before
extraordinary item $ 0.11 $ 0.09 $ 0.22 $(0.27)
Extraordinary item (0.05) - (0.05) 0.26
EARNINGS (LOSS) PER COMMON
SHARE- BASIC $0.06 $0.09 $0.17 $(0.01)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
BASIC 3,579,691 3,528,489 3,578,592 3,092,578
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
April 30, 1999 July 31, 1998
CURRENT ASSETS
Cash and cash equivalents $ 961,642 $ 1,384,339
Restricted cash 37,945 54,004
Certificates of deposit 685,089 732,616
Accounts receivable, (net of
allowances for doubtful accounts
of $1,042,000 at April 30, 1999
and $1,211,000 at July 31, 1998):
Contracts
Open accounts 9,652,398 7,057,543
Retainage 224,108 585,506
Trade 1,758,585 1,749,778
Other 53,463 302,445
Inventory 3,536,171 1,320,245
Costs and estimated earnings in
excess of billings on
uncompleted contracts 464,588 665,926
Notes receivable 24,942 33,706
Prepaid expenses 1,281,953 568,689
Total current assets 18,680,884 14,454,797
PROPERTY AND EQUIPMENT, AT COST 19,311,434 19,066,486
Accumulated depreciation (9,813,589) (9,355,343)
Property and equipment, net 9,497,845 9,711,143
OTHER ASSETS
Notes receivable 106,110 128,761
Investments in
unconsolidated affiliates 1,026,381 979,769
Deferred income taxes 2,005,000 2,240,000
Inventory 1,247,228 1,243,754
Other 722,065 354,971
Total other assets 5,106,784 4,947,255
TOTAL ASSETS $33,285,513 $29,113,195
LIABILITIES AND STOCKHOLDERS' EQUITY
April 30, 1999 July 31, 1998
CURRENT LIABILITIES
Current portion of notes payable $ 2,110,772 $ 1,947,618
Accounts payable 5,104,581 4,017,376
Accrued compensation and
related liabilities 649,685 760,620
Billings in excess of costs and
estimated earnings on
uncompleted contracts 3,972,368 1,885,069
Deferred income 215,234 306,000
Other accrued expenses 2,425,561 2,357,125
Income taxes payable 122,300 159,200
Total current liabilities 14,600,501 11,433,008
LONG-TERM DEBT
Notes payable, less current portion 8,717,158 8,357,119
Total Liabilities 23,317,659 19,790,127
MINORITY INTERESTS 221,732 189,618
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - $0.10 par value,
10,000,000 shares authorized;
3,583,877 and 3,576,429 shares issued
and outstanding 358,388 357,643
Additional paid-in capital 16,408,965 16,385,704
Accumulated deficit (7,021,231) (7,609,897)
Total stockholders' equity 9,746,122 9,133,450
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $33,285,513 $29,113,195
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended April 30, 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 588,666 $ (36,780)
Adjustments to reconcile
net earnings (losses) to net cash
used in operating activities:
Depreciation and amortization 970,442 912,076
(Decrease) increase in allowance
for doubtful accounts (169,074) 619,930
Loss (gain) on extinguishment of debt 129,500 (809,000)
Gain on disposal of property,
plant and equipment (34,138) (777,045)
Decrease in deferred income taxes 235,000 130,000
Minority interest in earnings 35,014 24,742
Equity in (earnings) loss of affiliates (96,900) 770,471
Dividend from unconsolidated affiliate 50,288 44,700
Changes in assets and liabilities:
Decrease in notes receivable 31,415 38,721
Increase in open contracts receivable (2,373,197) (1,427,565)
Decrease in contract retainage 361,398 75,484
Increase in trade receivables (33,391) (7,931)
Decrease (increase) in other receivables 220,982 (161,938)
Decrease in contract claims - (465,975)
(Increase) decrease in inventories (2,219,400) 608,397
Decrease in costs and estimated earnings
related to billings on uncompleted
contracts (net) 2,288,637 6,209
Increase in prepaid expenses
and other assets (1,209,908) (313,736)
Increase in accounts payable 1,087,205 229,556
Decrease in accrued compensation
and related liabilities (110,935) (78,013)
Increase in other accrued expenses 68,436 61,056
(Decrease) increase in deferred income (90,766) -
(Decrease) increase in income taxes payable (36,900) 33,000
NET CASH USED IN OPERATING ACTIVITIES (307,626) (523,641)
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property,
plant and equipment (902,256) (493,906)
Decrease in restricted cash 16,059 218,618
Proceeds from sale of property,
plant and equipment 179,250 1,859,159
Purchase of certificates of deposit (445,062) 0
Maturities of certificates of deposit 492,589 0
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (659,420) 1,583,871
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 6,006,141 2,100,583
Repayments of notes payable (5,482,948) (4,310,499)
Issuance of common stock 24,006 145,028
Minority interest dividends (2,900) (7,000)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 544,299 (2,071,888)
NET DECREASE IN CASH AND CASH EQUIVALENTS (422,747) (1,011,658)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,384,339 1,867,144
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 961,592 $ 855,486
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income Taxes $70,600 $8,400
Interest $692,716 $921,682
See Notes To Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1999
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
April 30, 1999 and the results of operations for the three and
nine months ended April 30, 1999 and 1998, and cash flows for the
nine months ended April 30, 1999 and 1998.
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. It was adopted in Fiscal
Year 1999 and has no impact on the Company's financial statements.
SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities", establishes accounting and reporting standards for
derivative instruments and for hedging activities. This standard
will be adopted in Fiscal 2000. The Company has not yet
determined what the impact, if any, of implementing this standard
will be.
1. NOTES PAYABLE
During the three months ended April 30,1999, the Company closed a
loan agreement with United Bank which significantly changed the
structure of the Company's Notes Payable. The agreement, secured
by the Company's real estate, equipment and inventory, consists of
three notes:
Note 1 is a real estate note in the amount of $2,460,750,
payable in equal payments for fifteen years with no balloon
payment, which bears interest at 8.7% fixed for the first ten
years and at the Prime rate of interest for years 11-15.
Note 2 is an equipment note in the amount of $639,250, payable
in equal payments for ten years with no balloon payment, which
bears interest at 8.7% fixed.
Note 3 is a $1 million revolving credit note, payable interest
only at Prime + 1.25%, due in 24 months but renewable annually.
The proceeds of Notes 1 & 2 were used to retire the company's
obligations to CIT Group/Credit Finance, Inc. and to BB&T
(formerly Franklin National Bank), as well as pay the costs and
expenses associated with the closing. Closing occurred on April
16, 1999. The proceeds of Note 3 will be used for working capital.
When compared to the terminated agreements, the United
facility substantially reduces the Company's cash flow
commitments, from approximately $50,000 to $32,500 per month.
There are also interest and other cost savings of more than 2% per
year on approximately $3 million of prior debt.
2. INVENTORIES
Inventory consisted of the following:
April 30, 1999 July 31, 1998
Expendable tools
and equipment $ 810,463 $ 805,318
Supplies 351,853 351,664
Materials 3,621,083 1,407,017
Total Inventory $4,783,399 $2,563,999
Less: Amount classified
as long-term 1,247,228 1,243,754
$3,536,171 $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
$138,000 and $893,000 for the three and nine months ended April
30, 1999 and $779,000 and $1,173,000 for the three and nine months
ended April 30, 1998, 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 $166,000 and $293,000 during the three and nine
months ended April 30, 1999 and $0 and $57,000 for the three and
nine months ended April 30, 1998, respectively.
4. COMMITMENTS/CONTINGENCIES
The Company is party to various claims which arise 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 and nine months ended April 30, 1999 and the
three months ended April 30, 1998 are not presented because the
impact of the outstanding options was not dilutive. Diluted
earnings per share for the nine months ended April 30, 1998 are
not presented because the Company was in a loss position.
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 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.
Information about the Company's operations in its operating
segments for the three and nine months ended April 30, 1999 and
1998, is as follows:
Three Months Ended Nine Months Ended
April 30, April 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Revenues:
Construction $4,618,000 $5,869,000 $14,088,000 $13,443,000
Manufacturing 4,844,000 2,420,000 10,406,000 7,370,000
Other 279,000 311,000 871,000 938,000
9,741,000 8,600,000 25,365,000 21,751,000
Intersegment revenues:
Construction 413,000 614,000 1,307,000 1,147,000
Manufacturing (126,000) 23,000 136,000 47,000
Other 147,000 116,000 412,000 294,000
Total 434,000 753,000 1,855,000 1,488,000
Consolidated revenues:
Construction 4,205,000 5,255,000 12,784,000 12,296,000
Manufacturing 4,970,000 2,397,000 10,270,000 7,323,000
Other 132,000 195,000 459,000 644,000
Total consoli-
dated revenues $9,307,000 $7,847,000 $23,510,000 $20,263,000
Depreciation:
Construction $ 246,000 $ 231,000 $ 727,000 $ 687,000
Manufacturing 65,000 42,000 161,000 117,000
Other 27,000 28,000 82,000 108,000
Total $ 38,000 $ 301,000 $ 970,000 $ 912,000
Earnings before income
taxes, equity earnings
and minority interest:
Construction $ 442,000 $ 585,000 $ 996,000 $2,257,000
Manufacturing 421,000 135,000 962,000 83,000
Other (440,000) (324,000) (970,000) (2,222,000)
Total $ 423,000 $ 396,000 $ 988,000 $ 118,000
Segment assets:
Construction $16,069,000 $15,905,000
Manufacturing 11,463,000 6,314,000
Other 5,754,000 6,894,000
Total $33,286,000 $29,113,000
Item 2. Management's Discussion and Analysis
Financial Condition and Results of Operations
General
Increased governmental spending on infrastructure,
particularly as it relates to bridge girders, translated into
significant increases in revenue for the Company's manufacturing
subsidiaries during the third quarter. It is anticipated that
the Company will continue to benefit from increased governmental
spending throughout the anticipated five-year life of the federal
Transportation Efficiency Act for the 2lst Century (TEA 21).
In contrast to the burgeoning manufacturing market,
construction revenues declined by about twenty percent during the
quarter. Each of the construction subsidiaries, however, operated
profitably during what is traditionally the weakest quarter of the
year due to scheduling and weather concerns.
All of the Company's operations will benefit from the parent
organization's conversion of a significant portion of its long-
term debt in a new agreement with United Bank. The agreement,
which was executed during the quarter, significantly reduces the
Company's cash flow commitments while simultaneously reducing
interest expense.
Another positive note occurred during the quarter when the
Supreme Court of Virginia ruled in the Company's favor in relation
to an old lawsuit arising from a product liability claim. With
this verdict, the Company currently is not involved in any legal
contingencies outside the ordinary course of its business. The
Company believes that its insurance accruals, coupled with its
liability coverage, is adequate coverage for the normal course of
business.
Capital improvements, while most notably occurring in the
manufacturing segment, continue throughout the corporation.
Financing for these improvements continues to be obtained at
favorable rates.
Financial Condition
Revenues increased significantly during the quarter ended
April 30, 1999 when compared both to the immediately preceding
quarter which ended January 31, 1999 and to quarter ended April
30, 1998. Revenues were nearly 37 percent higher than the quarter
ended January 31, 1999 and approximately 19 percent higher than
the comparable quarter ended April 30, 1998. Operating earnings
of $422,710 for the three months ended April 30, 1999 also compare
favorably to the $395,954 in earnings before extraordinary items
for the three months ended April 30, 1998. However, Net Earnings
were reduced by $192,550 in the three months and nine months ended
April 30, 1999 because of expenses associated with the Company's
new banking agreement and the penalties incurred for early
termination and other associated expenses. These expenses are
shown under Extraordinary Items. The new agreement, however, will
result in significant long-term reduction in interest expense
going forward.
The Company's improving operating results become even more
apparent when comparisons are drawn on a nine month basis. Total
revenue increased from $20,263,248 for the nine months ended April
30, 1998 to $23,509,542 for the nine months ended April 30, 1999.
Taken in a vacuum, this comparison might seem like a modest
improvement. However, when it is put into the context of earnings
before extraordinary items, the $781,216 earnings for the nine
months ended April 30, 1999 show significant improvement from the
nine months ended April 30, 1998.
Bonding
The Company has a comprehensive bonding program, with $20
million available from Fidelity and Deposit Company of Maryland.
In addition, the Company has in excess of $6 million bonded with
its workers' compensation underwriter. Although the Company's
ability to bond work is more than adequate, the Company has
traditionally relied on its superior reputation to acquire work
and will continue to do so. However, the Company recognizes that,
as it expands its geographic range for providing goods and
services, it will be necessary to provide bonds to clients
unfamiliar with the Company.
Liquidity
The Company's operations require significant amounts of
working capital to procure materials for contracts to be performed
over relatively long periods, and for purchases and modifications
of heavy-duty and specialized fabrication equipment. Furthermore,
in accordance with normal payment terms, the Company's customers
often will retain a portion of amounts otherwise payable to the
Company during the course of a project as a guarantee of
completion of that project. To the extent the Company is unable
to receive payments in the early stages of a project, cash flow
is reduced.
Even though the Company is experiencing significant
expenditures and start-up costs in both its manufacturing and
construction activities, cash flow during the nine months ended
April 30, 1999 improved when compared to the nine months ended
April 30, 1998. For the nine months ended April 30, 1999, the
Company's operations used cash of $307,626 as compared to the
$523,641 used in the nine months ended April 30, 1998. This
comparison becomes more impressive when the more than $2 million
increase in inventories as of the nine months ended April 30, 1999
is taken into account.
Improvements in the Company's property, plant and equipment
are reflected in the fact that investing activities continued to
use cash during the nine months ended April 30, 1999. The
Company has spent nearly $1 million for property, plant and
equipment, mainly in its bridge girder manufacturing facilities as
shown in investing activities. The Company also continues to
update some of its assets, particularly cranes, though operating
leases. Management believes that balancing cost efficient leasing
with certain forms of more traditional buying and/or borrowing
offers cash flow and balance sheet advantages.
The Company, as mentioned earlier, converted a significant
portion of its long term debt to more favorable terms during the
quarter. As a result, financing activities, specifically
proceeds from borrowings, provided net cash as the Company
utilized its line of credit and other borrowing instruments to
facilitate operations and the repayment of notes payable in the
amount of $5,482,948.
While the new bank agreement and its related expenses have
already been discussed, it should also be noted that the current
portion of notes payable represents the scheduled principal
payments due within twelve months of April 30, 1999 on all notes
payable of the Company. This figure increased since July 31, 1998
due to the combination of reasons already cited as well as the
fact that the Company's insurance renewals, with premiums payable
in full at inception, occur on September 1 and December 1
annually. Because of favorable rates available on premium finance
and in order to match cash flow more closely with revenue, the
Company typically finances its insurance premium over the policy
term. This caused the current portion of notes payable to
increase by approximately $1 million between July 31, 1998 and
January 31, 1999. The asset side of the balance sheet reflects a
corresponding increase in "prepaid expense." The Company expects
this amount to follow an annual pattern of fluctuation, decreasing
somewhat from year to year as the Company continues its efforts to
reduce overall debt and to refinance existing debt at more
favorable rates and terms. It should be noted that the current
portion of notes payable declined from $2,580,695 at January 31,
1999 to $2,110,772 at April 30, 1999. This reduction is due to a
combination of reasons, including routine scheduled payments, but
is due in large measure to the Company's early termination of
prior loan agreements in favor of the new United Bank terms
described in the accompanying Notes to Condensed Consolidated
Financial Statements.
Going forward, management believes that operations and credit
facilities will generate sufficient cash to fund activities.
However, as revenues increase, it may become necessary to increase
the Company's credit facilities to handle short term cash
requirements. Management, therefore, is focusing on the proper
allocation of resources to ensure stable growth. Certain items
that are not easily leased are being obtained through capitalized
loans, which then become part of the Company's real property.
Operations
While the Company's operating companies (Greenway
Corporation, Piedmont Metal Products, Inc., Williams Bridge
Company, Williams Equipment Corporation, and Williams Steel
Erection Company) each produced profitable results from their
activities during the quarter ended April 30, 1999, there was a
wide variance in the level of activity at each subsidiary. Both
of the manufacturing companies (Williams Bridge and Piedmont) had
significant increases in their revenues and these increased
revenues translated into improved results. More detail on this
topic will be provided in the quarter to quarter and year to year
comparisons. All of the supporting activities (WII Realty
Management, the Company's insurance operations and the parent
company itself) each experienced declines in revenue during the
quarter. Most, if not all, of the prior gains shown by these
"supporting" activities had been due to exceptional items such as
debt forgiveness and the settlement of old insurance and legal
issues. It is anticipated that the five primary operating
companies will make sufficient profits to cover supporting
activities.
Williams Bridge Company continues to seize opportunities in
its burgeoning marketplace. The subsidiary's revenue more than
doubled for the quarter and increased by approximately 40 percent
when the nine months are compared. The subsidiary, however,
continues to experience costs associated with expanding its
operations at both its Manassas and Richmond, Virginia plants.
Steps, such as the installation of new cranes and computerized
burning machines, are being taken at both plants in order to
improve capacity and material handling. Innovative measures are
also being used to identify and hire qualified employees to staff
the increased workload.
Williams Bridge Company deals almost exclusively with
governmental projects and, although work is being produced in
large quantity, its backlog continues to increase. As of April
30, 1999, Williams Bridge Company reported a backlog of
approximately $27 million. This backlog, despite tremendous
amounts of work already produced during the quarter, is $9 million
higher than the prior quarter's backlog and more than double that
of a year ago. It is expected that this subsidiary will continue
to benefit from increased government spending directly or
indirectly related to the federal Transportation Efficiency Act
for the 21st Century (TEA21) for several more years.
Piedmont Metal Products, Inc., the other manufacturing
subsidiary, also experienced increases to its revenue. Like
Williams Bridge, Piedmont is in an expansion mode in order to
capture new business opportunities. The subsidiary is currently
working to obtain certification from the AISC. Once the AISC
certification is obtained, a plethora of new projects will be
available for the subsidiary to bid in addition to its already
burgeoning backlog.
With the exception of Williams Equipment Corporation, which
is doing a great deal of support work for the manufacturing
subsidiaries as well as working for outside customers, revenue in
the construction segment declined during the quarter. This was
most apparent at Williams Steel Erection Company, where an
approximate 25 percent decline in revenue from the three months
ended April 30, 1998 to the three months ended April 30, 1999 is
attributed to the subsidiary's cycle between major jobs.
Williams Steel Erection Company, Greenway Corporation,
Williams Equipment Corporation and Piedmont Metal Products
continue to work for diverse customers in the industrial,
commercial, and governmental markets.
1999 Quarter Compared to 1998 Quarter
For the three months ended April 30, 1999, the Company had
net earnings of $200,307 or $0.06 per share. These earnings
compare to prior year's earnings of $301,786 or $0.09 per share
for the comparable quarter in Fiscal 1998. At least two items,
one in Fiscal 1999 and one in Fiscal 1998, should be taken into
account when evaluating these results. The results for the three
months ended April 30, 1999 include an extraordinary item of
$192,550, which reflects the expenses for closing the new bank
agreement and the early termination of prior loan agreements.
When the profit before the extraordinary item is compared, the
$0.11 per share for the three months ended April 30, 1999 as
compared to the $0.09 per share for the three months ended April
30, 1998 is consistent with the Company's increasing revenues.
For purposes of strict comparison, it should also be noted that
the results for the three months ended April 30, 1998 include
revenue of approximately $450,000 for the settlement of an old
claims receivable. Therefore, when viewed from a purely
operating perspective, the Fiscal 1999 results significantly
exceeded those of Fiscal 1998.
It should be noted that during the quarter Williams Bridge
Company, which produced substantially improved profits from the
prior year, also incurred significant increased costs, including
an overrun on both labor and materials on one specific job.
Negotiations are underway to recapture some of the expense.
As Williams Bridge Company expands its operations, finding
qualified personnel has been difficult. The subsidiary has been
working substantial overtime hours, which has hurt profit margins.
As the subsidiary expands its work force, these margins should
improve.
Revenue at Piedmont Metal Products, Williams Bridge Company,
and Williams Equipment Corporation increased when compared to the
third quarter of Fiscal 1998, while revenue at Greenway
Corporation and Williams Steel Erection Company declined. Both of
the manufacturing companies had an increase in gross and pre-tax
profit levels.
As the Condensed Consolidated Statements of Earnings shows,
overall construction revenue declined from $5,254,976 in the three
months ended April 30, 1998 to $4,204,599 in the three months
ended April 30, 1999. Manufacturing revenue increased from
$2,396,992 in the three months ended April 30, 19989 to $4,970,374
in the three months ended April 30, 1999.
The Company's subsidiaries have diversified both their
geographic marketplaces as well as their customer bases. It is
anticipated that this trend will continue.
Nine Months Ended April 30, 1999 Compared to Nine Months Ended April 30,
1998
Although comparing the third quarter of Fiscal 1999 to the
third quarter of Fiscal 1998 was fairly straightforward, doing the
nine month comparisons is far more complicated. During the nine
months, there were a number of unusual events which influence the
fact that the Company made $0.17 per share on net earnings of
$588,866 for the nine months ended April 30, 1999 when compared to
the loss of $0.01 from the nine months ended April 30, 1998.
A significant one time event occurred in the second quarter
of Fiscal 1998. The Company wrote off approximately $800,000 of
its investment in an unconsolidated affiliate. Other exceptional
events in the nine months ended April 30, 1998 included: The gain
of approximately $235,000 recognized on the Company's sale of its
headquarters' property in Falls Church, Virginia; the recognition
of a $809,000 Gain on Extinguishment of Debt from the reversal of
accounts payable due to the liquidation of a former subsidiary;
and a net expense increase of approximately $500,000 in reserves
for litigation settlements.
The Condensed Consolidated Statements of Earnings for the
nine months ended April 30, 1999 reflect a reduction in General
and Administrative expense of approximately $237,000 resulting
from the reduction of a reserve established for potential sales
and use tax liability, which was settled during the quarter ended
January 31, 1999.
During the nine months ended April 30, 1999, manufacturing
revenues grew consistently while construction revenues remained
fairly stable. It is anticipated that this trend may continue
for several more quarters.
It should also be noted that the construction revenues for
the nine months ending April 30, 1998 included approximately
$409,000 in revenue due to the sale of equipment. The comparable
nine month period in this fiscal year did not have any equipment
sales which resulted in a profit.
Backlog
The Company's backlog, more than $39 million as of April 30,
1999, is now the highest it has been in more than a decade.
Backlog at April 30, 1999 was $39.1 million as compared to $23.6
million at April 30, 1998 and $29.2 million at January 31, 1999.
As stated earlier, this is due in large part to the increases
occurring in the manufacturing subsidiaries, particularly Williams
Bridge Company. Construction backlog, although down slightly for
the quarter, remains fairly stable 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 2000.
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.
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.
Dependence Upon Key Personnel
The Company's success depends on the continued services of
the Company's senior management and key employees as well as the
Company's ability to attract additional members to its management
team with experience in the construction industry. The unexpected
loss of the services of any of the Company's management or other
key personnel, or its inability to attract new management when
necessary, could have a material adverse effect on the Company.
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 third 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 Supreme Court of Virginia, on April 16, 1999, entered
judgment in the Company's favor on this old product liability
case. This ends the plaintiffs' appeal of the March 4, 1998
decision by the Circuit Court for the City of Richmond, which was
also in the Company's favor. The plaintiffs, Industrial Alloy
Fabricators, Inc. and Precision Components Corp., perfected an
appeal to the Supreme Court of Virginia, which was accepted on
September 21, 1998. The Virginia Supreme Court heard oral
argument on February 23, 1999. The suit, against Williams
Industries, Inc. and IAF Transfer Corporation, is for $300,000
plus interest and fees arising from a product liability claim
against the Company. The ultimate outcome did not have a material
adverse impact on the Company's financial position, results of
operations or cash flows, although considerable legal expenses
were incurred.
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
None.
ITEM 5. Other Information
Year 2000
The Company has developed a plan to assure that its computers
are Year 2000 compliant and has begun implementation of the plan.
The plan calls for the conversion efforts to be completed by 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.
Management believes that direct Year 2000 exposure in its
industry is relatively low, with indirect exposure coming from
possible temporary disruptions in external sources such as the
financial services, insurance and public utility sectors. Because
any problems are likely to occur during the winter when
construction activity is relatively low, the Company believes that
adequate resources will be available to address any problems that
may occur.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
4/19/99 United Bank Agreement
4/29/99 Precision Components Decision
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
June 4, 1999 /s/ Frank E. Williams, III
Frank E. Williams, III
President, Chairman of the
Board
Chief Financial Officer