SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
FOR QUARTER ENDED APRIL 30, 1996
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 (I.R.S. Employer Identification No.)
incorporation or organization)
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 Sections 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
2,576,017
Number of Shares of Common Stock Outstanding at April 30, 1996
<PAGE>
<TABLE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
April 30, July 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 743,670 $ 819,735
Accounts and notes receivable (Note 2) 10,327,332 9,176,176
Inventories (Note 3) 2,436,834 2,421,687
Costs and estimated earnings in excess of
billings on uncompleted contracts 802,972 845,303
Investments in unconsolidated affiliates 1,970,867 1,925,300
Property and equipment, net of accumulated
depreciation and amortization 9,156,667 8,487,569
Prepaid expenses and other assets 1,446,157 918,336
TOTAL ASSETS $ 26,884,499 $24,594,106
LIABILITIES
Notes payable (Note 1) $ 15,873,014 $16,366,920
Accounts payable 6,518,165 6,778,550
Accrued compensation, payroll taxes and
amounts withheld from employees 626,720 596,895
Billings in excess of costs and estimated
earnings on uncompleted contracts 2,184,112 948,429
Other accrued expenses 4,685,613 4,957,421
Income taxes payable 83,506 50,000
TOTAL LIABILITIES 29,971,130 29,698,215
Minority Interests 120,122 136,832
STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
Common stock-$0.10 par value,
10,000,000 shares authorized;
2,576,017 and 2,539,017 shares issued
and outstanding 257,602 253,902
Additional paid-in capital 13,147,433 13,095,153
Retained deficit (16,611,788) (18,589,996)
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY
IN ASSETS) (3,206,753) (5,240,941)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
$26,884,499 $24,594,106
</TABLE>
<PAGE>
<TABLE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUE
Construction $3,487,532 $3,625,317 $10,538,283 $16,074,915
Manufacturing 2,402,604 1,345,722 7,089,108 7,203,042
Other 329,571 644,235 3,197,335 2,758,263
TOTAL REVENUE 6,219,707 5,615,274 20,824,726 26,036,220
DIRECT COSTS
Construction 2,036,574 2,724,421 6,482,670 12,029,811
Manufacturing 1,703,442 1,002,304 4,975,394 4,949,457
TOTAL DIRECT COST 3,740,016 3,726,725 11,458,064 16,979,268
GROSS PROFIT 2,479,691 1,888,549 9,366,662 9,056,952
EXPENSES
Overhead 637,073 768,296 1,906,555 2,152,095
General and
Administrative 1,145,661 1,390,848 3,998,143 4,908,343
Depreciation 245,268 334,016 718,432 986,587
Interest 336,098 672,844 1,113,186 1,800,251
TOTAL EXPENSES 2,364,100 3,166,004 7,736,316 9,847,276
PROFIT BEFORE INCOME TAXES,
EQUITY EARNINGS AND
MINORITY INTERESTS 115,591 (1,277,455) 1,630,346 (790,324)
INCOME TAXES 25,000 800 50,000 32,000
PROFIT BEFORE EQUITY IN
EARNINGS AND MINORITY
INTERESTS 90,591 (1,278,255) 1,580,346 (822,324)
Equity in earnings of
unconsolidated
affiliates 10,880 9,740 62,330 36,890
Minority interest in
consolidated
subsidiaries (9,887) 11,830 (12,468) (11,570)
PROFIT FROM CONTINUING
OPERATIONS 91,584 (1,256,685) 1,630,208 (797,004)
DISCONTINUED OPERATIONS
(NOTE 6 )
Gain on extinguishment
of debt 1,605,516 1,605,516
Estimated gain (loss)
on disposal of
discontinued operations - (329,809) - (334,776)
PROFIT BEFORE EXTRAORDINARY
ITEM 91,584 19,022 1,630,208 473,736
EXTRAORDINARY ITEM
Gain on extinguishment
of debt - - 348,000 -
NET PROFIT $91,584 $19,022 $1,978,208 $473,736
PROFIT PER COMMON SHARE
Continuing operations $0.04 $(0.49) $0.63 $(0.31)
Discontinued operations - 0.50 - 0.50
Extraordinary item - - 0.14 -
PROFIT PER COMMON SHARE $0.04 $0.01 $0.77 $0.19
</TABLE>
<PAGE>
<TABLE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
April 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit $1,978,208 $473,736
Adjustments to reconcile net cash used
in operating activities:
Depreciation and amortization 718,432 986,587
Gain on extinguishment of debt (348,000) -
Gain on disposal of property,
plant and equipment (2,298,452) (1,077,642)
Minority interests in earnings 12,468 11,570
Equity in earnings of
unconsolidated affiliates (62,330) (36,890)
Gain on extinguishment of debt of
discontinued operations - (1,605,516)
Estimated loss on disposal of
discontinued operations - 334,776
Changes in assets and liabilities:
(Increase) decrease in accounts
and notes receivable (1,151,156) 5,956,239
(Increase) decrease in inventories (15,147) 584,338
Decrease in costs and estimated
earnings related to billings
on uncompleted contracts (net) 1,278,014 1,308,595
Increase in prepaid expenses and
other assets (527,821) (1,014,787)
Increase in net liabilities of
discontinued operations - 857,095
Decrease in accounts payable (260,385) (2,111,130)
Increase (decrease) in accrued
compensation, payroll taxes,
and accounts withheld from employees 29,825 (285,538)
Decrease in other accrued expenses (271,808) (2,194,514)
Increase in income taxes payable 33,506 30,355
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (884,646) 2,217,274
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant
and equipment (2,516,626) (1,090,880)
Proceeds from sale of property,
plant and equipment 3,427,548 2,108,608
Purchase of minority interest (22,900) (694,045)
Minority interest dividends (6,278) (10,584)
Dividends from unconsolidated affiliate 16,763 6,258
<PAGE>
NET CASH PROVIDED BY INVESTING ACTIVITIES 898,507 319,357
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 2,809,954 1,796,442
Repayments of notes payable (2,955,860) (4,648,600)
Issuance of common stock 55,980 -
NET CASH USED IN FINANCING ACTIVITIES (89,926) (2,852,158)
NET DECREASE IN CASH AND CASH EQUIVALENTS (76,065) (315,527)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 819,735 658,375
CASH AND CASH EQUIVALENTS, END OF PERIOD $743,670 $342,848
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Income taxes $16,494 $1,645
Interest $1,112,689 $2,500,418
<PAGE>
</TABLE>
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1996
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. All 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, 1995. 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, 1996 and the results of operations for
the three and nine months ended April 30, 1996 and 1995, and cash
flows for the nine months ended April 30, 1996 and 1995.
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 active, majority-owned, subsidiaries, which are as
follows:
<TABLE>
<CAPTION>
SUBSIDIARY PERCENT
OWNED
<S> <C>
John F. Beasley Construction Company 100
Greenway Corporation 100
Williams Bridge Company 100
Williams Enterprises, Inc. 100
Williams Equipment Corporation 100
Williams Steel Erection Company, Inc. 100
Williams Industries Insurance Trust 100
Capital Benefit Administrators, Inc. 90
Construction Insurance Agency, Inc. 64
Insurance Risk Management Group, Inc. 100
Piedmont Metal Products, Inc. 80
</TABLE>
All material intercompany balances and transactions have
been eliminated in consolidation.
1. NOTES PAYABLE
A. Bank Group Debt
The Company, working in cooperation with its primary
lenders, collectively known as the Bank Group, continues its
efforts toward completing the repayment of the Bank Group debt,
which was approximately $21 million in September 1993.
Since September 14, 1993, when the Company entered into the
original Debt Restructuring Agreement with its Bank Group, a
series of agreements and modifications have been reached between
the Company and the lenders, and the debt has been substantially
reduced.
For purposes of clarification, the original lenders in the
Bank Group included: Sovran Bank, N.A., which is now
NationsBank, N.A.; American Security Bank, N.A., which is now
also part of NationsBank, N.A.; The National Bank of Washington,
which is now in receivership with the Federal Deposit Insurance
Corporation (FDIC); and the Washington Bank of Virginia, which is
also in receivership with the FDIC. Of the two remaining
entities, NationsBank and the FDIC, NationsBank is owed the
majority of the unpaid debt balance. NationsBank, acting in
concert with the FDIC, has been the lead agency in coordinating
the Company's debt repayment activities.
The 1993 Debt Restructuring Agreement, along with its
subsequent modifications on November 30, 1994, and August 28,
1995, established a repayment schedule in which the Company
agreed to pay certain portions of the outstanding obligation and
the Bank Group agreed to discount the principal payoff by a
significant amount. As a consequence of the November 30, 1994
Amended and Restated agreement, as further modified, the Bank
Group agreed to accept $11.5 million as full and final payment of
the Company's outstanding Bank Group debt if the payment was made
by December 31, 1995 and accompanied by a $500,000 debenture
convertible into Company stock.
The Company, working cooperatively with the Bank Group, paid
$8,099,950 toward that commitment by December 31, 1995 and
received $6,948,000 in debt forgiveness. At that time, however,
the Company was unable to pay the balance due to a combination of
factors, including the unexpected sale of its replacement lender
and the subsequent inability of the lender to make an asset-based
loan to the Company.
The Bank Group, at the Company's request, agreed to a Second
Modification of the Amended and Restated Debt Restructuring
Agreement, referenced earlier, and extended the maturity date
from December 31, 1995 to April 30, 1996. In exchange for the
extension, the Bank Group required the Company to pay a
cumulative total of $11,650,000 instead of the $11,500,000 agreed
upon earlier.
As of April 30, 1996, the Company had paid a total of
$8,250,158 toward this obligation. In order to obtain funds
necessary to finalize the agreed upon repayment, the Company has
been working to get an asset-based loan to be used to complete
the Bank Group Debt repayment. A replacement lender, who is
acceptable to the Bank Group, has been identified, and management
is now working to meet all of the terms and conditions required
both by the replacement lender and the Bank Group in order to
finalize the agreed upon repayment.
B. Real Estate Loan
The Company currently owes NationsBank of Virginia, N. A.,
approximately $1.6 million on a real estate loan secured by the
Company's real estate in Prince William County, Virginia and
Fairfax County, Virginia. The Company and the lender are now
working to negotiate a new real estate loan on the balance.
C. Industrial Revenue Bond
In September 1987, the Company was granted an Industrial
Revenue Bond (IRB) by the City of Richmond not to exceed
$2,000,000 for the purpose of acquiring land and facilities
located in the City.
The Company currently is not in compliance with all the
covenants contained in the IRB, generally relating to the
Company's overall financial condition. As of April 30, 1996,
approximately $1.5 million was still owed on the debt. A portion
of the property covered by the IRB is now leased to a non-
affiliated third party, and the rent is paid directly against the
IRB. No action to accelerate the obligation has been taken by
the lender.
2. ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
Accounts and notes receivable consist of the following:
<CAPTION>
April 30, July 31,
1996 1995
<S> <C> <C>
ACCOUNTS RECEIVABLE:
Contracts:
Open accounts $ 8,581,895 $ 7,623,950
Retainage 748,366 1,159,510
Trade 1,394,595 1,231,923
Contract claims 154,362 154,362
Other 330,768 414,997
Allowance for doubtful
accounts (1,107,654) (1,633,566)
Total accounts receivable 10,102,332 8,951,176
Notes Receivable 225,000 225,000
Total Accounts and Notes
Receivable $10,327,332 $ 9,176,176
</TABLE>
Included in the above amount at April 30, 1996 is
approximately $925,000 that is not expected to be received within
one year.
3. INVENTORIES
Inventory of equipment held for resale is valued at cost,
which is less than market value, as determined on a specific
identification basis.
The costs of materials and supplies are accounted for as
assets for financial statement purposes. These costs are written
off when incurred for Federal income tax purposes. The items are
taken into account in the accompanying statements as follows:
<TABLE>
<CAPTION>
April 30, July 31,
1996 1995
<S> <C> <C>
Equipment held for resale $ 72,786 $ 72,786
Expendable construction
equipment and tools, at average
cost which does not exceed
market value 837,865 879,417
Materials, structural steel, metal
decking, and steel cable at
lower of cost or estimated
market value 1,172,613 1,113,364
Supplies at lower of cost or
estimated market value 353,570 356,120
$2,436,834 $2,421,687
</TABLE>
4. CONTRACT CLAIMS
The Company maintains procedures for review and evaluation
of performance on its contracts. Occasionally, the Company will
incur certain excess costs due to circumstances not anticipated
at the time the project was bid. These costs may be attributed
to delays, changed conditions, defective engineering or
specifications, interference by other parties in the performance
of the contracts, and other similar conditions for which the
Company claims it is entitled to reimbursement by the owner,
general contractor, or other participants. These claims are
recorded at the estimated net realizable amount after deduction
of estimated legal fees and other costs of collection.
5. RELATED-PARTY TRANSACTIONS
Certain shareholders owning 18.3% of the outstanding stock
of the Company own 67.49% of the outstanding stock of Williams
Enterprises of Georgia, Inc. Intercompany billings to and from
this entity and other affiliates were not significant.
During the first three months of the nine months covered by
this report, the Company sold approximately six acres owned by
the John F. Beasley Construction Company, together with certain
other assets, to an investment group owned by Frank E. Williams,
Jr., and John M. Bosworth. Mr. Williams, Jr. is a current
director and former officer of the Company and the former
Chairman of Beasley. Beasley is in Chapter 11 protection in the
United States Bankruptcy Court, Northern District of Texas,
Dallas Division. The sales prices were approved by the
Bankruptcy Court.
6. DISCONTINUED OPERATIONS
During the year ended July 31, 1993, the Company decided to
cease doing business in several business lines: fabrication of
architectural, ornamental and miscellaneous metal products,
production of precast and prestressed concrete products, and the
construction of marine facilities. Since that time, the proceeds
from the sale of assets related to these and other discontinued
operations have been used to pay Bank Group Debt.
7. COMMITMENTS/CONTINGENCIES
Pribyla
The Company is a party to a claim for excess medical
expenses incurred by a former officer and shareholder of a
subsidiary pursuant to a stock purchase agreement. On February
10, 1994, judgment was awarded by the District Court of Dallas,
Texas, 134th Judicial District, in favor of Eugene F. Pribyla and
Karen J. Pribyla against the Company and its wholly-owned
subsidiary, John F. Beasley Construction Company, in the
principal amount of $2,500,000, plus attorneys fees of $135,000,
for breach of contract. Mr. Pribyla asserted at trial that the
stock purchase agreement wherein he sold his stock in the Beasley
company to the Company provided a guarantee of a set level of
health insurance benefits, and that the plaintiffs were damaged
when Beasley changed health insurance companies.
The Company filed a timely appeal in the Texas Court of
Civil Appeals, which resulted in overturning the judgment against
Beasley, but affirming the judgment against the Company. The
Company moved for rehearing, which is a precondition of an appeal
to the Texas Supreme Court. Rehearing was denied and the
Company, on September 22, 1995, filed an Application for Writ of
Error to the Texas Supreme Court. The matter is pending. The
Company, in January 1995, entered into an agreement with the
Pribylas which provides that they will take no collection action
if the Company makes weekly payments of $1,000 from July 1, 1995
through June 30, 1996. Payments under that agreement are
current. Management believes that the ultimate outcome will not
have an adverse material impact on the Company's financial
position or results of operations.
AIG
On March 25, 1994, the Company was sued by National Union
Fire Insurance Company of Pittsburgh, PA and American Home
Assurance Company, claiming the Company owed an aggregate total
of $3,512,453 for workers compensation premiums. The Company
answered the suits and demanded trial by jury, but the suits were
withdrawn without prejudice. The litigation was settled by
paying $100,000 and signing a $1,000,000 confessed judgment note,
payable over three years. The Company defaulted after making
three payments and National Union has obtained a judgment for
approximately $950,000 plus interest from May 11, 1995. The
outstanding balance on this obligation is approximately $940,000.
National Union has agreed to accept $400,000 in full payment of
this obligation, provided payment is made by June 30, 1996.
Manitowoc
Williams Steel Erection Company has agreed to purchase a
230-ton crawler crane from Manitowoc Mid-Atlantic for
approximately $1,550,000. This crane will be used primarily in
projects currently under contract.
General
The Company is also party to various other claims arising in
he 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 trust accruals,
coupled with its excess liability coverage, is adequate coverage
for such claims. For additional information, see Part II, Item
1, Legal Proceedings.
8. SUBSEQUENT EVENTS
None.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Williams Industries, Inc., now a much smaller corporation
than the conglomerate of a few years ago, is close to achieving
its goals of debt repayment and consistent profitably of core
operations. This quarter marks the seventh in a row in which the
Company is reporting a profit.
The Core Group, comprised of Greenway Corporation, Piedmont
Metal Products, Inc., Williams Bridge Company, Williams Equipment
Corporation, and Williams Steel Erection Company, Inc., represent
the Company's business focus for the foreseeable future. These
companies, from an aggregate operating perspective, are working
to enhance the on-going value of Williams Industries, Inc. and to
establish a sound base for any future growth. Going forward,
Core Group profit levels will have to be of a magnitude capable
of offsetting any losses incurred by the parent or the Financial
Services Group.
The Core Group efforts are being augmented by the companies
in the Financial Services Group (Construction Insurance Agency,
Inc., Insurance Risk Management Group, Inc., and Capital Benefit
Administrators, Inc.), which provide necessary services both for
the Core Group companies and outside customers.
The final component is comprised of assets or companies that
are not part of the long range activities for Williams
Industries, Inc. These components are either being closed or
sold. The proceeds of any asset sales are being used to pay the
Bank Group debt.
Working within the Company's comprehensive long-range plan,
management is taking steps necessary to return the Company to
operational profitability through a combination of measures.
These include the removal of the Bank Group debt; the reduction
of operating, and general and administrative costs; expansion of
market areas within the Core Group businesses; and further
consolidation of corporate components as necessary.
FINANCIAL CONDITION
The Company continues to improve its overall financial
position, as indicated by the accompanying Condensed Consolidated
Statements of Operations, Condensed Consolidated Balance Sheets,
and Condensed Consolidated Statements of Cash Flows.
For the three months ended April 30, 1996, the Company had a
net profit of $91,584, or four cents per share, compared to the
$19,022, or one cent per share, of the comparable period in 1995.
For the nine months ended April 30, 1996, the marked improvement
is obvious. The nine-month profit of $1,978,208, or $0.77 per
share, is roughly 400% better than the comparable period in 1995
when profit was $473,736, or $0.19 per share. While a
substantial portion of the year-to-date profits are generally
attributable to extraordinary items or gains on sales of assets,
individual core subsidiaries, with only one exception, have
produced pre-tax profits.
The shareholder's deficiency in assets, which was $5,240,941
as of July 31, 1995, has been reduced to $3,206,753 as of April
30, 1996. Management believes that this deficiency will be
totally eliminated when the final payment is made on the Bank
Group debt.
Other improvements are also obvious. Because the Company's
work has substantially increased with the improved weather, at
the end of the quarter, the Company's Accounts and Notes
Receivable have increased by more than $1,000,000 due to improved
market conditions. Total assets have increased from $24,594,106
as of July 31, 1995 to $26,884,499 as of April 30, 1996.
Despite the Company's tremendous downsizing, revenues
increased from the third quarter of 1995 to the third quarter of
1996, as did gross profit in the same period.
All of these components are contributing to the Company's
efforts of achieving its goal of repaying Bank Group debt with a
replacement, asset-based, loan. It is hoped that this goal will
be achieved in the near-term, and the Company will return to a
positive equity position.
As soon as the Company returns to a positive equity position
and other prerequisites are met, the Company intends to petition
NASDAQ for relisting. Preliminary work in this regard has
already begun.
BANK GROUP AGREEMENT
As detailed in Note 1 of the Notes to the Condensed
Consolidated Financial Statements included with this filing, the
Company continues to work with its Bank Group. In order to
obtain funds necessary to finalize the agreed upon repayment, the
Company has been working to get an asset-based loan to be used to
complete the Bank Group Debt repayment. A replacement lender,
who is acceptable to the Bank Group, has been identified, and
management is now working to meet all of the terms and conditions
required by both the replacement lender and the Bank Group.
Information is exchanged between management and the Bank
Group on a regular basis. Management has every reason to
believe that the Bank Group will continue to allow the Company
sufficient time to make the necessary payments to retire the Bank
Group debt while simultaneously allowing the Company enough
flexibility to continue its return to operational profitability.
Central Fidelity Bank
The Company is not in compliance with the covenants
contained in its Industrial Revenue Bond on which approximately
$1.55 million was outstanding as of April 30, 1996. No action to
accelerate the obligation has been taken by the lender.
Bonding
Due to the Company's financial condition in recent years,
the Company has limited ability to furnish payment and
performance bonds for some of its contracts. The Company has
been able to secure bonds for some of its projects; however, for
the most part, the Company has been able to obtain projects
without providing bonds. Management does not believe the Company
lost any work during the quarter due to bonding concerns.
Liquidity
The Company continues to suffer liquidity problems, but its
overall posture is improving. The greatly improved weather
conditions in March and April 1996 in the Company's traditional
marketplaces have allowed the Core Companies, in aggregate, to
return to profitable operation. They are generally producing the
funds necessary to cover their operational expenditures. The
proceeds from the sale of assets are being used to pay
obligations to the Bank Group.
Sale of Assets
During the quarter ended April 30, 1996, one of the
Company's subsidiaries, Greenway Corporation, sold an 80-ton
crane for $152,000. The parent corporation also sold
approximately 5.5 acres of its property in Bedford, Virginia to a
non-affiliated party for $50,000. The net proceeds from these
sales were used to pay Bank Group Debt.
Operations
The restructuring of the Company, started in Fiscal 1993, is
now essentially complete. The reconfigured corporation has a
much smaller, but more profitable, group of operating companies,
known as the Core Group.
The Core Group includes manufacturing, construction and
equipment leasing operations and is composed of Williams
Equipment Corporation, Williams Steel Erection Company, Inc.,
Greenway Corporation, Williams Bridge Company, and Piedmont Metal
Products, Inc.
The parent corporation, Williams Industries, Inc., and the
Williams Industries Insurance Trust and its subsidiaries, which
support Core Group activities, are the remaining active
components of the restructured corporation.
Several former operations, including Williams Enterprises,
Inc., and John F. Beasley Construction Company, have, for the
most part, been sold or liquidated. However, each of these
companies still have administrative activities, such as
collection of receivables and payment of liabilities, which
impact results and therefore, for purposes of financial statement
disclosure, their results will continue to be included in the
overall results.
1996 QUARTER COMPARED TO 1995 QUARTER
Once the weather improved in the Company's traditional
marketplaces, so did the business activity for the core
companies. As a group, the Core Group companies (Greenway
Corporation, Williams Equipment Corporation, Williams Steel
Erection Company, Inc., Williams Bridge Company, and Piedmont
Metal Products, Inc.) experienced an increase of nearly 19% in
aggregate revenues. In the third quarter of Fiscal 1996, aggregate
revenues were $6,197,657 as compared to $5,045,272 in the third
quarter of Fiscal 1995.
In addition, again in the aggregate, the Core Group produced
better gross profit results on the Fiscal 1996 revenues. During
the third quarter of Fiscal 1995, several of the core companies
had gains as a result of refunds on insurance premiums for past
policies. When these refunds are removed from the comparison of
results, the aggregate pre-tax income for the third quarter of
Fiscal 1996 showed an improvement of more than 400% from the
third quarter of Fiscal 1995.
Piedmont Metal Products, Inc., the smallest of the Company's
subsidiaries, experienced a doubling of revenue when the quarters
are compared. Some of this increase can be attributed to
improved conditions in the marketplace in general, but a
substantial portion can specifically be tied to Piedmont's
expanded marketing activity into non-traditional geographic
markets. Piedmont's bottom-line performance was even more
dramatic. The subsidiary went from a loss during the prior-year
quarter to a profit of more than $60,000 during the current year
quarter.
Williams Steel Erection Company, Inc., has also
experienced a significant increase in its revenues from the 1995
quarter to the 1996 quarter. This subsidiary currently has the
highest backlog in its history and its pre-tax profits are also
increasing. Williams Steel's operations produced the highest
level of profit of any single subsidiary for the quarter and an
improvement of nearly 100% when compared to their own results
from a year ago.
Greenway Corporation and Williams Equipment Corporation, the
Company's crane rental, trucking and rigging companies, are also
benefiting from the improved weather. When unusual items, such
as insurance refunds or gain on the sale of assets, are
subtracted from their prior year results in the comparable
period, both of these operations experienced significant
improvement in their pre-tax profit levels.
Only one of the core companies, Williams Bridge, experienced
a pre-tax loss in the third quarter of Fiscal 1996 but this loss
was more than off-set by other core operations' profit. The
losses at Williams Bridge Company are of serious concern to
management and appropriate measures are being taken. The
subsidiary's losses are being evaluated both in terms of the work
available for the company to bid and how and where the work is
produced once it is acquired. The subsidiary's management of the
financial process and other aspects of management are also being
reviewed. Once the necessary evaluations are made and
appropriate remedies instituted, Williams Industries, Inc.'s
management believes that this subsidiary can be a positive
contributor to the corporation's long-range goals.
Management believes that all the core companies will benefit
from the improvements in the construction marketplace which are
occurring in all the Company's traditional market areas. Core
companies will also greatly benefit from the removal of the Bank
Group debt. Once that obligation is satisfied, the parent
organization will be able to focus its attention on obtaining
better equipment and financing terms for the subsidiaries, which
in turn will allow them to increase their profit margins.
The combination of the reduction in interest expense and the
removal of losses from operations which have been closed should
allow the Company to be operationally profitable in the future
without any extraordinary items or gain from sale of assets.
NINE MONTH ENDED APRIL 30, 1996 COMPARED TO COMPARABLE 1995
PERIOD
When making comparisons between the nine months ended April
30, 1996 and the comparable period in the prior year, one needs
to remember that a number of former subsidiaries which
contributed to the 1995 total revenue are no longer part of the
corporation or their operations have been drastically curtailed.
Therefore, for purposes of this analysis, comparisons will
only be made for the results of continuing operations and the
parent corporation.
For the nine months ended April 30, 1996, the five Core
Group companies had revenue of $18,887,049, compared to
$14,674,642 for the same companies in the comparable period in
1995. This 22% increase is due to improved conditions in the
marketplace as well as new marketing approaches to certain
contracts. Each of the core companies' revenues improved from
1995 to 1996, but two of the companies experienced a year to date
decline in profits.
Greenway Corporation recently changed its method of
acquiring new equipment and therefore experienced a decline in
overall profitability as a short-term result. This involved
obtaining equipment through capital loans instead of operating
leases. Nevertheless, Greenway does have profitable results for
the year to date.
Only Williams Bridge Company produced declining results on
the increased revenues. As was discussed in the quarter-to-
quarter analysis, this situation is being reviewed for
appropriate action.
Each of the remaining companies had increases in their year-
to-date profit comparisons; the most significant of which came at
Williams Steel Erection Company, whose profits have more than
doubled after excluding the impact of the insurance refunds.
When comparing the 1996 year to date with 1995, the parent
corporation also showed significant improvement, but this is not
due to operational results. The parent has benefited from the
gain on the sale of assets, as well as the forgiveness of debt on
Bank Group obligations, which not only produced earnings, but
also helped reduce interest expense.
Once all of the Company's unusual transactions are
concluded, the Core Group profits must be at a level to sustain
the parent operation and any auxiliary services, such as the
Williams Industries Insurance Trust.
Backlog
The Company's backlog of work under contract or otherwise
believed to be firm as of April 30, 1996 was approximately
$20,627,467. This represents a substantial improvement for the
core companies over the same period in the prior year. It
should be noted that two of the core companies, Greenway
Corporation and Williams Equipment Corporation, perform work on a
rapid response basis and therefore only have small amounts
included in the backlog.
A substantial portion of the current backlog is work
being performed by Williams Steel Erection Company, Inc., which
has improved its gross profit margins on similar work by more
than 27 percent over the same period in the prior year.
Management now firmly believes that the level of work in
the Core Group companies is sufficient to allow the Company to
have adequate work for the current fiscal year, as well as
carrying the Company into Fiscal 1997.
Management estimates that most of the backlog at April
30, 1996 will be completed within the next 12 months if contract
schedules are followed.
Management
Management continues to take a conservative approach to the
Company's business activities. The repayment of Bank Group debt
remains a high priority, as is the Company's return to consistent
profitability. Substantial standardization is occurring with
the Company's remaining subsidiaries. Strong emphasis continues
to be placed on each subsidiary working toward enhanced
consolidated results rather than stressing individual subsidiary
profitability.
PART II
ITEM 1. LEGAL PROCEEDINGS
Pribyla
The Company is a party to a claim for excess medical
expenses incurred by a former officer and shareholder of a
subsidiary pursuant to a stock purchase agreement. On February
10, 1994, judgment was awarded by the District Court of Dallas,
Texas, 134th Judicial District, in favor of Eugene F. Pribyla and
Karen J. Pribyla against the Company and its wholly-owned
subsidiary, John F. Beasley Construction Company, in the
principal amount of $2,500,000, plus attorneys fees of $135,000,
for breach of contract. Mr. Pribyla asserted at trial that the
stock purchase agreement wherein he sold his stock in the Beasley
company to the Company provided a guarantee of a set level of
health insurance benefits, and that the plaintiffs were damaged
when Beasley changed health insurance companies.
The Company filed a timely appeal in the Texas Court of
Civil Appeals, which resulted in overturning the judgment against
Beasley, but affirming the judgment against the Company. The
Company moved for rehearing, which is a precondition of an appeal
to the Texas Supreme Court. Rehearing was denied and the
Company, on September 22, 1995, filed an Application for Writ of
Error to the Texas Supreme Court. The matter is pending. The
Company, in January 1995, entered into an agreement with the
Pribylas which provides that they will take no collection action
if the Company makes weekly payments of $1,000 from July 1, 1995
through June 30, 1996. Payments under that agreement are
current. Management believes that the ultimate outcome will not
have an adverse material impact on the Company's financial
position or results of operations.
FDIC
The Company was party to a guaranty under which the FDIC
claims the Company is responsible for 50% of alleged deficiencies
on the part of Atchison & Keller, Inc., the borrower. Suit was
filed against the Company for $350,000 plus interest and legal
fees, and on April 10, 1996, the U.S. District Court for the
District of Columbia ruled that the borrower owed $902,952 and
entered judgment against the Company for $451,476. On May 6,
1996, the Court overruled the borrower's objection to the
calculation of the award. The Agreement to settle this matter,
which was previously reported, was not affected by this Court
action. The Company is to issue a $100,000 convertible debenture
under which the FDIC may receive 110,000 shares of stock. This
agreement has been approved by the FDIC and formal paperwork is
pending.
Unitex
During the quarter ended April 30, 1996, a suit filed by
Unitex Chemical Corporation against Industrial Alloy Fabricators
(now known as IAF Transfer Corporation), a former subsidiary, has
been settled by Industrial Alloy's insurance carrier. IAF met its
insurance deductible, so there is no further exposure for the
Company to Unitex. However, $300,000 was contributed to the
settlement by the buyer of Industrial Alloy Fabricators' assets
and they are expected to seek reimbursement. The Company has
been advised by counsel that the voluntary assumption of the
Unitex liability, which was not to be assumed by the buyer
pursuant to the agreement of sale, renders this payment not
subject to reimbursement. Management believes that the ultimate
outcome will not have an adverse material impact on the Company's
financial position or results of operations.
AIG
On March 25, 1994, the Company was sued by National Union
Fire Insurance Company of Pittsburgh, PA and American Home
Assurance Company, claiming the Company owed an aggregate total
of $3,512,453 for workers compensation premiums. The Company
answered the suits and demanded trial by jury, but the suits were
withdrawn without prejudice. The litigation was settled by
paying $100,000 and signing a $1,000,000 confessed judgment note,
payable over three years. The Company defaulted after making
three payments and National Union has obtained a judgment for
approximately $950,000 plus interest from May 11, 1995. The
outstanding balance on this obligation is approximately $940,000.
National Union has agreed to accept $400,000 in full payment of
this obligation, provided payment is made by June 30, 1996.
M&W
The Internal Revenue Service found that Williams Industries,
Inc. and Frank E. Williams, Jr. were responsible parties, subject
to the Trust Fund Recovery penalty in the amount of unpaid trust
funds taxes of approximately $285,000 of a former unconsolidated
affiliate, M&W Marine Services, Inc., which ceased operations in
1992. The Company filed suit in the U.S. Court of Federal
Claims, seeking to overturn the assessment, arguing it had no
day-to-day control of the affiliate. The Company has made a
proposal to settle this matter and the proposal has been
recommended for approval by the attorney for the government.
Approval is anticipated.
General
The Company is also 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 trust accruals,
coupled with its excess liability coverage is adequate coverage
for such claims.
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Bank Group
Williams Industries, Inc. and its subsidiaries are parties
to a Credit and Security Agreement with NationsBank of Virginia,
N.A. (f/k/a Sovran Bank, N.A.), NationsBank, N.A. (f/k/a American
Security Bank, N.A.), and the FDIC as receiver for the National
Bank of Washington and The Washington Bank of Virginia (the "Bank
Group"). The Company and the Bank Group entered into an Amended
and Restated Debt Restructuring Agreement dated as of November
30, 1994, to cure prior defaults. Subsequently, in July 1995,
the new schedule was modified and additional time to repay the
obligation has been granted. The Company and the Bank Group are
continuing to work together to finalize repayment of the
obligation.
Central Fidelity
The Company is not in compliance with the covenants
contained in its Industrial Revenue Bond on which approximately
$1.55 million was outstanding as of April 30, 1996. No action to
accelerate the obligation has been taken by the lender.
Real Estate
The Company currently owes NationsBank of Virginia, N.A.,
approximately $1.6 million on a real estate loan secured by the
Company's real estate in Prince William County, Virginia and
Fairfax County, Virginia. The Company and the lender are now
working to negotiate a new real estate loan on the balance.
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
27 - Financial Date Schedule for Nine Months
Ended April 30, 1996
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the
quarter
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 12, 1996 /s/ Frank E. Williams, III
Frank E. Williams, III
President, Chairman of the
Board
Chief Financial Officer
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