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, 1997
COMMISSON 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
2,909,887
Number of Shares of Common Stock Outstanding at April 30, 1997
<PAGE>
<TABLE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
October 31, July 31,
1997 1997
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,326,415 $ 1,867,144
Restricted Cash 70,093 252,412
Accounts and notes receivable 10,085,539 10,322,033
Inventories 1,935,797 2,727,814
Costs and estimated earnings
in excess of billings on
uncompleted contracts 797,647 845,325
Investments in unconsolidated
affiliates 1,758,690 1,770,940
Property and equipment, net of
accumulated depreciation
and amortization 10,529,979 10,686,243
Prepaid expenses and other assets 1,198,934 1,217,808
Deferred income taxes 1,740,000 1,800,000
TOTAL ASSETS $30,443,094 $31,489,719
LIABILITIES
Notes payable $12,108,576 $12,638,056
Accounts payable 4,747,871 4,842,837
Accrued compensation, payroll
taxes and amounts withheld
from employees 673,326 694,634
Billings in excess of costs
and estimated earnings on
uncompleted contracts 2,593,215 2,972,587
Other accrued expenses 3,252,625 3,531,599
Income taxes payable 118,000 108,000
Total Liabilites 23,493,613 24,787,713
Minority Interests 179,656 170,237
STOCKHOLDERS' EQUITY
Common stock - $0.10 par value,
10,000,000 shares authorized;
2,909,887 and 2,839,756 shares
issued and outstanding 290,989 283,976
Additional paid-in capital 15,799,417 15,705,430
Retained deficit (9,320,581) (9,457,637)
Total Stockholders' Equity 6,769,825 6,531,769
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $30,443,094 $31,489,719
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
<TABLE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
October 31,
1997 1996
<S> <C> <C>
REVENUE:
Construction $ 3,887,870 $ 5,374,504
Manufacturing 2,865,966 2,371,088
Other 30,114 659,558
Total revenue 6,783,950 8,405,150
DIRECT COSTS:
Construction 1,955,582 3,396,151
Manufacturing 2,261,344 1,659,340
Total direct costs 4,216,926 5,055,491
GROSS PROFIT 2,567,024 3,349,659
EXPENSES:
Overhead 724,199 780,381
General and administrative 986,174 1,743,648
Depreciation 306,500 253,668
Interest 335,376 362,971
Total expenses 2,352,249 3,140,668
PROFIT BEFORE INCOME TAXES, EQUITY
EARNINGS AND MINORITY INTERESTS 214,775 208,991
INCOME TAXES 78,400 37,200
PROFIT BEFORE EQUITY EARNINGS AND
MINORITY INTERESTS 136,375 171,791
Equity in earnings of
unconsolidated affiliates 10,100 11,350
Minority interest in
consolidated subsidiaries (9,419) (14,894)
NET PROFIT $ 137,056 $ 168,247
PROFIT PER COMMON SHARE - PRIMARY $ 0.05 $ 0.07
PROFIT PER COMMON SHARE - ASSUMING
FULL DILUTION $ 0.04 $ 0.06
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
<TABLE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
October 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit $ 137,056 $ 168,247
Adjustments to reconcile net
profit to net cash provided
by operating activities:
Depreciation and amortization 306,500 253,668
(Gain) loss on disposal of
property, plant and equipment (207,659) 8,750
Minority interests in earnings 9,419 14,894
Equity in earnings of
unconsolidated affiliates (10,100) (11,350)
Changes in assets and liabilities:
Decrease in accounts and notes
receivable 236,494 134,650
Decrease (increase) in inventories 792,017 (83,545)
(Increase) decrease in costs and
estimated earnings related to
billings on uncompleted contracts (331,694) 418,728
Decrease in prepaid expenses and
other assets 18,874 150,806
Decrease in deferred income taxes 60,000 -
Decrease in accounts payable (94,966) (1,196,278)
Decrease in accrued compensation,
payroll taxes, and accounts
withheld from employees (21,308) (42,280)
(Decrease) increase in other
accrued expenses (278,974) 730,081
Increase (decrease) in income
taxes payable 10,000 (16,424)
NET CASH PROVIDED BY OPERATING
ACTIVITIES 625,659 529,947
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant
and equipment (188,413) (221,380)
Proceeds from sale of property,
plant and equipment 409,703 18,000
Decrease in restricted cash 182,319 -
Dividend from unconsolidated
affiliate 22,350 33,525
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 425,959 (169,855)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 237,751 255,059
Repayments of notes payable (831,098) (603,930)
Issuance of common stock 1,000 -
NET CASH USED IN FINANCING ACTIVITIES (592,347) (348,871)
NET INCREASE IN CASH AND EQUIVALENTS 459,271 11,221
CASH AND EQUIVALENTS, BEGINNING OF
PERIOD 1,867,144 1,300,867
CASH AND EQUIVALENTS, END OF PERIOD $2,326,415 $1,312,088
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income Taxes $ 8,400 $ 53,624
Interest $325,001 $117,094
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997
1. 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, 1997. 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, 1997 and the results of operations
for
the three months ended October 31, 1997 and 1996, and cash flows
for the three months ended October 31, 1997 and 1996.
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, 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
WII Realty Management, Inc. 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.
2. NOTES PAYABLE
A. CIT: The Company's primary credit facility is with 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.
This loan is secured by the Company's equipment and receivables
as
well as subordinate deeds of trust on the real estate.
As of October 31, 1997, approximately $1,850,000 was owed
under the terms of this agreement.
B. NationsBank: The Company has a loan with NationsBank,
secured by first deeds of trust on all the Company's real
property
(with the exception of the Richmond facility encumbered by the
Industrial Revenue Bond), and by certain other collateral. The
loan bears interest at 11% fixed, and requires payments based on
a 20 year amortization. The loan is due and payable in full by
April 30, 1998. The balance on this obligation, as of October
31, 1997, was approximately $2,475,000.
C. Pribyla: The Company continues to make $8,000 per month
payments under a promissory note in the face amount of $744,000,
which does not bear interest but allows a prepayment discount at
a 10% annual rate. The "present value" of the note if it were
paid off as of October 31, 1997 was approximately $498,000.
Payments are due on the first of each month, $8,000 for the first
three years, $9,000 for two years and $10,000 for two more years
through April 2004. This note is secured by subordinate deeds
of
trust on the Prince William and Fairfax real estate.
D. Industrial Revenue Bond
Central Fidelity Bank has renewed their Letter of Credit
backing the Industrial Revenue Bond issue. As of October 31,
1997, approximately $1,340,000 was owed. This obligation is
secured by the real estate in the City of Richmond. Principal
payments are due in increasing amounts through the maturity of
the bonds in 2008. A portion of the property covered by the
Industrial Revenue Bond is leased by a non-affiliated third
party.
3. ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
Accounts and notes receivable consist of the following:
<CAPTION>
October 31, July 31,
1997 1997
<S> <C> <C>
Accounts Receivable:
Contracts:
Open accounts $8,139,890 $7,940,532
Retainage 346,054 563,730
Trade 1,550,103 1,642,121
Contract claims 534,025 534,025
Other 33,505 188,567
Allowance for doubtful
accounts ( 709,878) ( 758,141)
Total accounts receivable 9,893,699 10,110,834
Notes Receivable 191,840 211,199
Total Accounts and Notes
Receivable $10,085,539 $10,322,033
</TABLE>
Included in the above amount at October 31, 1997 is
approximately $692,000 that is not expected to be received
within one year.
4. 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>
October 31, July 31,
1997 1997
<S> <C> <C>
Equipment held for resale $ 756,765 $ 761,565
Materials, structural steel, metal
decking, and steel cable at
lower of cost or estimated
market value 771,825 1,551,742
Supplies at lower of cost or
estimated market value 407,207 414,507
$1,935,797 $2,727,814
</TABLE>
5. 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.
6. RELATED-PARTY TRANSACTIONS
Certain shareholders owning 11.25% of the outstanding and
committed stock of the Company, computed on a fully diluted
basis assuming the conversion of all outstanding debentures,
own 67.49% of the outstanding stock of Williams Enterprises of
Georgia, Inc. Billings to this entity and other affiliates were
approximately $180,000 for the three months ended October 31,
1997. Billings to this entity and other affiliates were not
significant in the quarter ended October 31, 1996.
Certain shareholders owning 9.4% of the outstanding and
committed stock of the Company, computed on a fully diluted
basis assuming the conversion of all outstanding debentures, own
100% of the stock of Williams and Beasley Company. Billings
from
this entity during the three months ended October 31, 1997 were
approximately $57,000. Billings to entity and other affiliates
during the period ended October 31, 1996 were $175,000.
7. COMMITMENTS/CONTINGENCIES
Precision Components Corp.
The Company is party to a suit by Industrial Alloy
Fabricators, Inc. and Precision Components Corp. against
Williams Industries, Inc. and IAF Transfer Corporation, filed
in the Circuit Court for the City of Richmond, Law No. 96B02451,
seeking $300,000 plus interest and fees arising from a product
liability claim against the Company. The Company retained
counsel to respond to the suit and filed a counterclaim seeking
reimbursement of damages caused by the plaintiffs. The case was
heard on November 25, 1997 and a ruling is expected shortly.
Management believes that the ultimate outcome of this matter
will not have a material adverse impact on the Company's
financial position, results of operations or cash flows.
Foss Maritime
The Company's subsidiary, Williams Enterprises, Inc., was
named a third party defendant in a suit pending in the U.S.
District for the Western District of Washington, Foss Maritime
v. Salvage Assn. v. Williams Enterprises & Etalco, #C95-1835R.
The suit arises from damage in transit to cargo which was
shipped from Charleston, SC to Bremerton, WA. Williams
Enterprises was hired by Foss Maritime to sea-fasten the cargo
according to a design by Etalco, and the Salvage Association
was hired to conduct a marine survey prior to the voyage.
The Salvage Association filed the Third-Party Complaint,
alleging that Williams Enterprises was negligent in the
performance of its work. The damages claimed are approximately
$3.6 million, which was paid by the Cargo Insurance carrier.
Williams Enterprises' exposure under its own liability
coverage is $100,000, but the Company believes that this
insurance
is not involved because the agreement between Foss and Williams
Enterprises was that Williams Enterprises would be a named
insured on the cargo insurance policy with a "waiver of
subrogation" endorsement. Although Foss failed to have Williams
Enterprises named on the policy, management believes that Foss
will be responsible for any damage or expense incurred by
Williams
Enterprises. In addition, the Company disputes that it was in
any way responsible for the damage.
On March 19, 1997, the court entered a Summary Judgment in
favor of the Salvage Association and against Foss Maritime.
This effectively ends the case against Williams Enterprises
because the claim was a third-party claim brought by the Salvage
Association. However, Foss has filed an appeal with the U.S.
Court of Appeals for the Ninth Circuit, so the case remains
alive
until a disposition of the appeal. Management believes that
the
ultimate outcome will not have a material adverse impact upon
the
Company's financial position, results of operations or cash
flows.
Koppleman
The Company has been named a defendant in an action field
in the Circuit Court for the City of Baltimore, Maryland, by the
estate of Joseph Koppleman. The suit seeks in excess of $2
million in damages for fraud and other asserted causes of action.
The case results from an injury award in favor of Koppleman
against Harbor Steel Erectors, Inc. and Arthur Phillips &
Company, Inc. (the "Original Judgment Debtors") in the amount of
$270,600, entered in 1995. The claim resulted from an injury to
Mr. Koppleman in 1989. The claim falls within the deductible of
the applicable insurance policy. Because of the plaintiff's
failure to collect their judgment against the Original Judgment
Debtors, this action has been filed, naming as defendants the
Company, numerous present and former subsidiaries, the insurance
carrier, and the insurance broker who were involved in the
creation of the insurance arrangement. Management believes that
this case is groundless and that the conduct of the underlying
litigation was appropriate. The Company has retained counsel
and
intends to defend this matter aggressively. Management believes
that the ultimate outcome will not have a material adverse
impact
upon the Company's financial position, results of operations, or
cash flows.
CIGNA Insurance
The Company maintained certain policies of insurance with
members of the CIGNA group of insurance companies during the
period from 1986 through 1991. Certain of those policies
provided for what are known as "retrospective premium
adjustments"
which depend upon the claims made under the policies. In
February
1997, the Company received an invoice for $1.1 million. This is
being disputed. Pursuant to prior litigation between the
Company
and CIGNA, which was settled in January 1993, the parties agreed
to arbitrate future disputes. An arbitration proceeding has
been
commenced regarding the February invoice. The Company intends
to aggressively defend this claim and to press for damages
against
CIGNA. Management believes that the ultimate outcome of this
matter will not have a material adverse impact upon the
Company's financial position, results of operations or cash flow.
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 accruals,
coupled with its excess liability coverage, is adequate coverage for
such claims.
8. RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings Per Share" has been issued by the Financial Accounting
Standards Board. SFAS No. 128 is effective for periods ending
after December 15, 1997 and early adoption is not permitted.
SFAS No. 128 requires the Company to compute and present a
basic and diluted earnings per share. Had the Company computed
earnings per share in accordance with SFAS No. 128 for the
quarters ended October 31, 1997 and 1996, there would be no
material difference in the reported earnings per share.
In June 1997, the Financial Accounting Standards Board
(FASB) issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". The Company will apply this statement
beginning in Fiscal 1999 and reclassify its financial statements
for earlier periods provided for comparative purposes.
SFAS 131 established 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
toreport 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.
At this point, the Company has not determined the impact of
adopting SFAS 131.
9. SUPPLEMENTAL CASH FLOW INFORMATION
During the first quarter of Fiscal 1998, First Tennessee
Equipment Finance Corporation converted a $100,000 debenture
into 69,931 shares of the Company's stock.
Also during the first quarter, the Company entered into
several financing agreements to acquire assets with a cost of
approximately $164,000.
Item 2. Management's Discussion and Analysis
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
Williams Industries, Inc., having completed its debt
restructuring as well as curing prior defaults, is now focusing
on its business of construction and construction services. On
aggregate, profits are being generated by the results of the
Company's core subsidiaries; Greenway Corporation, Piedmont
Metal Products, Inc., Williams Bridge Company, Williams
Equipment Corporation, and Williams Steel Erection Company, Inc.
With a few exceptions, such as the Falls Church, Virginia
and Baltimore, Maryland real estate, the Company has sold all
the assets that are not part of its long-range activities. The
remaining assets will be used in Company businesses or for rental
purposes.
Financial Condition
The first quarter of Fiscal 1998, which ended October 31,
1997, was probably one of the most routine, albeit slow, quarters
experienced by the Company in more than five years. There were
no
unusual or extraordinary transactions or significant sales of
assets, although two cranes were sold as a part of ongoing fleet
upgrades. The Company produced profitable results through
routine
activities and is on a sound financial footing for the future.
Stockholders' equity continues to improve.
For the three months ended October 31, 1997, the Company
had a net profit of $137,056 or $0.05 per share. This compares
to $168,247 or $0.07 cents per share for the comparable quarter
in Fiscal 1997.
Operationally, the aggregate results of Greenway, Piedmont,
Williams Bridge, Williams Equipment, and Williams Steel were
again profitable for the quarter. Although overall revenue
declined from the prior year, when several massive projects were
working simultaneously, profits before income taxes, equity
earnings and minority interests increased.
The Company is in compliance with its lenders and debt
payments are current. Non-revenue producing debt continues to
decline.
Bonding
The Company's ability to furnish payment and performance
bonds has improved along with its financial condition. However,
essentially all Company projects have been obtained without
providing bonds.
Liquidity
The Company's liquidity position has improved. On-going
operations and investing activities continue to provide the cash
necessary to finance day-to-day operations and to service the
restructured debt. The Company's Condensed Consolidated
Statements of Cash Flows reflected positive cash flow from
operations of $625,659, which was higher than the $529,947
reported for the same period in Fiscal 1997.
Cash flow from investing activities was also positive. The
company received proceeds of $409,703 from sales of assets while
only expending $188,413 for new purchases. In total, cash
provided by investing activities increased to $425,959, compared
to a deficit of $169,855 for the period ended October 31, 1997.
The Company continued to reduce debt during the quarter as
reflected in the Cash Used in Financing Activities of $592,347 on
the Condensed Consolidated Statements of Cash Flows.
Sale of Assets
During the quarter, two cranes were sold for approximately
$409,000, of which $215,000 was paid to CIT against the Company's
credit facility during the quarter ended October 31, 1997 and
another $194,000 is to be paid during the quarter ending January
31, 1998. These sales resulted in a pretax gain of
approximately $228,000, which was recognized in the quarter ended
October 31, 1997.
On September 30, 1997, the Company entered into a contract
with a nonaffiliated third party to sell the 2 1/4 acre
headquarters property for $1,465,000 with the Company to lease
back several buildings on the property. The sale is contingent
upon the buyer obtaining all necessary approvals to operate a
school on the site. The transaction is expected to close during
the second quarter and would, if consummated, result in a gain
of approximately $500,000.
Operations
Activities in the construction segment slowed throughout the
Company's traditional market areas during the first quarter of
Fiscal 1998 for a combination of reasons. Part of the revenue
decline was attributed to the routine cycle between major
project start ups. While a number of projects were finished in
the year ended July 31, 1997, several projects which had been
scheduled to start were delayed. As a consequence, a number of
projects now are gearing up for the second quarter of Fiscal
1998.
Owing to these conditions, during the quarter ended October 31,
1997, the construction segment of the Company had lower
revenues,
but, because of cost containment measures, significantly
improved
its profit margins.
Revenues in the manufacturing segment improved slightly due
to increased fabrication work for construction projects which
will begin shortly. Expenses continue to decline as each of the
operations become more efficient in providing services.
1998 Quarter Compared to 1997 Quarter
The first quarter of Fiscal 1998 was similar in many
respects to the same quarter of the prior year, although overall
revenues declined. Pre-tax profits increased on an aggregate
basis from $208,991 in the quarter ended October 31, 1996 to
$214,775 for the quarter ended October 31, 1997.
Two of the most obvious variances between the comparable
quarters are in the "Other Revenue" and "General and
Administrative Expense" categories on the Condensed Consolidated
Statements of Operations. Both had to do with the death of Mr.
Eugene Priblya, a former employee. For the quarter ended
October 31, 1996, "Other Revenue" included revenue of
approximately $460,000 as a gain on the proceeds of life
insurance relating to Mr. Pribyla. Also, in the quarter ended
October 31, 1996, "General and Administrative Expense" included
approximately $460,000 of expense related the Pribyla settlement.
Therefore, when the results of the quarter ended October 31,
1997
are compared in these two categories, the noted items should be
considered.
Construction and manufacturing revenues decreased
approximately $1.6 million to $6,783,950 for the quarter ended
October 31, 1997 as compared to the first quarter of Fiscal 1997.
A significant portion of the decrease can be attributed to the
Company's largest subsidiary, Williams Steel Erection Company,
which had record revenues in the prior year. This subsidiary's
revenue declined by almost fifty percent from the prior year's
levels as a direct result of finishing a tremendous amount of
high
profile work, such as the semi-conductor plant in Manassas,
Virginia, construction of new airport terminals in Washington
and
Baltimore, and several area high schools. Having completed a
record year in Fiscal 1997, the company, which once again has
built its backlog to significant levels, is now on track to
resumemajor projects in the second quarter. Despite the lower
revenues, the company remained the most profitable of all the
Company's subsidiaries.
Williams Steel was not the only area construction company
experiencing a temporary decline due to the completion of major
projects. Many others, including a number of customers, were in
the same situation and, as a consequence, the Company's two
equipment rental and rigging subsidiaries, Greenway Corporation
and Williams Equipment Corporation, both saw declines in their
revenues. Both companies are expanding their market areas and
have received work in new, non-traditional service areas. With
the recent addition of upgraded equipment to both fleets, it is
anticipated that the expansion into additional service areas
will continue.
Williams Bridge Company continues to experience difficulties
in the bridge fabrication market, but the company's revenues did
increase for the first quarter of Fiscal 1998 when compared to
the
same quarter in Fiscal 1997. However, the company's low profit
margins and high material costs caused it to have a higher
pre-tax
loss than in the prior year. Extensive lead times are necessary
for material orders in this business and, until the parent's
recent resolution of its financial difficulties, Williams Bridge
Company did not have the resources to stock pile materials at
cost
savings. With the improved position of the parent organization,
the company is developing alternatives to reduce material costs
and improve profit margins. The company's backlog of work
continues to increase and management is implementing a series of
measures to combat the difficulties previously mentioned.
Williams Bridge Company, like many other fabricators, continues
to
experience difficulty in buying raw materials due to quotas
imposed by the firm's traditional suppliers. Alternate suppliers
are being evaluated for projects that do not contain restrictions
on the source of raw material. Due to extensive lead times,
positive results from many of the changes underway are not
expected to show up in the company's financial results until
later in the Fiscal Year.
The remaining core company, Piedmont Metal Products, had a
small decline in revenue for the first quarter of Fiscal 1998
when compared to the first quarter of Fiscal 1997, but the
company continues to be consistently profitable. In order to
handle work more efficiently and increase its capabilities, the
company recently completed several facility upgrades. A new
marketing program has also been developed.
Going forward, profits must continue at a level not only to
cover construction and manufacturing obligations, but also the
parent operations and debt repayment. Management believes that
the Company should continue to be operationally profitable on a
quarter to quarter basis. However, due to the unpredictability
of the weather, the degree of profitability is always
susceptible to fluctuations from quarter to quarter.
BACKLOG
The Company's backlog of work under contract or otherwise
believed to be firm as of October 31, 1997 was approximately
$15,344,000. This is a significant improvement in the Company's
backlog from July 31, 1997 and is attributed to the Company's
increased focus on sales and marketing. The backlog primarily
represents work at Williams Steel Erection Company and Williams
Bridge Company. Both Greenway Corporation and Williams
Equipment Corporation perform work on a rapid response basis.
Therefore only a small portion, if any, of their work is
included
in the backlog.
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 for Fiscal Year 1998.
Management
Management's current top priority is the listing of the
Company's stock on NASDAQ. Application for listing was made on
November 19, 1997. Management was informed that NASDAQ reviews
normally take four to eight weeks.
In addition to this priority, management is also
concentrating on consistently improving consolidated results.
Concentrated effort on strategic planning for the future and
development of long-range goals for growth are also major
priorities.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Precision Components Corp.
The Company is party to a suit by Industrial Alloy
Fabricators, Inc. and Precision Components Corp. against
Williams Industries, Inc. and IAF Transfer Corporation, filed in
the Circuit Court for the City of Richmond, Law No. 96B02451,
seeking $300,000 plus interest and fees arising from a product
liability claim against the Company. The Company retained
counsel
to respond to the suit and filed a counterclaim seeking
reimbursement of damages caused by the plaintiffs. The case was
heard on November 25 and a ruling is expected shortly.
Management
believes that the ultimate outcome of this matter will not have
a
material adverse impact on the Company's financial position,
results of operations, or cash flows.
Foss Maritime
The Company's subsidiary, Williams Enterprises, Inc., was
named a third party defendant in a suit pending in the U.S.
District for the Western District of Washington, Foss Maritime v.
Salvage Assn. v. Williams Enterprises & Etalco, #C95-1835R. The
suit arises from damage in transit to cargo which was shipped
from
Charleston, SC to Bremerton, WA. Williams Enterprises was hired
by Foss Maritime to sea-fasten the cargo according to a design by
Etalco, and the Salvage Association was hired to conduct a marine
survey prior to the voyage. The Salvage Association filed the
Third-Party Complaint, alleging that Williams Enterprises was
negligent in the performance of its work. The damages claimed
are approximately $3.6 million, which was paid by the Cargo
Insurance carrier. Williams Enterprises' exposure under its own
liability coverage is $100,000, but the Company believes that
this
insurance is not involved because the agreement between Foss and
Williams Enterprises was that Williams Enterprises would be a
named insured on the Cargo Insurance policy with a "waiver of
subrogation" endorsement. Although Foss failed to have Williams
Enterprises named on the policy, management believes that Foss
will be responsible for any damage or expense incurred by
Williams
Enterprises. In addition, the Company disputes that it was in
any way responsible for the damage.
On March 19, 1997, the court entered a Summary Judgment in
favor of the Salvage Association and against Foss Maritime. This
effectively ends the case against Williams Enterprises because
the
claim was a third-party claim brought by the Salvage Association.
However, Foss has filed an appeal with the U.S. Court of Appeals
for the Ninth Circuit, so the case remains alive until a
disposition of the appeal. Management believes that the ultimate
outcome will not have a material adverse impact upon the
Company's financial position, results of operations or cash
flows.
Koppleman
The Company has been named a defendant in an action field in
the Circuit Court for the City of Baltimore, Maryland, by the
estate of Joseph Koppleman. The suit seeks in excess of $2
million in damages for fraud and other asserted causes of action.
The case results from an injury award in favor of Koppleman
against Harbor Steel Erectors, Inc. and Arthur Phillips &
Company,
Inc. (the "Original Judgment Debtors") in the amount of $270,600,
entered in 1995, which resulted from an injury to Mr. Koppleman
in
1989. The claim falls within the deductible of the applicable
insurance policy. Because of the plaintiff's failure to collect
their judgment against the Original Judgment Debtors, this action
has been filed, naming as defendants the Company, numerous
present
and former subsidiaries, the insurance carrier, and the insurance
broker who were involved in the creation of the insurance
arrangement. Management believes that this case is groundless
and
that the conduct of the underlying litigation was appropriate.
The Company has retained counsel and intends to defend this
matter
aggressively. Management believes that the ultimate outcome will
not have a material adverse impact upon the Company's financial
position, results of operations, or cash flows.
CIGNA Insurance
The Company maintained certain policies of insurance with
members of the CIGNA group of insurance companies during the
period from 1986 through 1991. Certain of those policies
provided
for what are known as "retrospective premium adjustments" which
depend upon the claims made under the policies. In February
1997,
the Company received an invoice for $1.1 million, which was
disputed. Pursuant to prior litigation between the Company and
CIGNA, which was settled in January 1993, the parties agreed to
arbitrate future disputes. An arbitration proceeding has been
commenced regarding the February invoice. The Company intends to
aggressively defend this claim and to press for damages against
CIGNA. Management believes that the ultimate outcome of this
matter will not have a material adverse impact upon the
Company's financial position, results of operations or cash
flows.
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 accruals,
coupled with its liability coverage, is adequate coverage for
such claims.
ITEM 2. Changes in Securities
During the quarter, First Tennessee Equipment Finance
Company converted a $100,000 debenture into 69,931 shares of the
Company's common stock. This conversion is reflected in the
total number of shares issued and outstanding as of October 31,
1997.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
On November 22, 1997, the shareholders of Williams
Industries, Inc. elected a new board of directors. Elected were:
William C. Howlett, R. Bentley Offutt, Dr. John Rasmussen, Frank
E. Williams, Jr. and Frank E. Williams, III. Under the terms of
the Company's By-Laws, it is possible that an additional member
could be added to the board during the course of the fiscal
year.
This additional member, who would be an "outside" director, could
be added by the Board of Directors on an interim basis until the
next vote of shareholders.
The results of the November 22, 1997 shareholder's election
of directors are as follows:
<TABLE>
<CAPTION>
Nominee FOR ABSTAIN
<S> <C> <C>
William C. Howlett 2,434,433 800
R. Bentley Offutt 2,434,733 500
Dr. John Rasmussen 2,434,433 800
Frank E. Williams, Jr. 2,434,733 500
Frank E. Williams, III 2,434,558 675
</TABLE>
ITEM 5. Other Information
On November 19, 1997, the Company applied for listing on
the NASDAQ National Market System. The Company believes it met
all of the listing criteria at the time of its application. The
application is now being reviewed. Management has been advised
that NASDAQ reviews normally take four to eight weeks. While
management believes that its application should be favorably
considered, it can offer no assurance that this will be the case.
On November 21, 1997, the Securities and Exchange
Commission accepted and declared effective the Company's S-2
filing for the registration of 1,080,294 shares. These shares
were registered on behalf of the following:
1. Shareholders from the settlement of the Pribyla
litigation: 215,000 shares, which have already been issued, and
are included in the Company's total outstanding shares of
2,909,887 as of October 31, 1997.
2. Holders of debentures convertible into the following shares:
A. NationsBank, N.A., owns a $410,000 Convertible Debenture
convertible into 16.4% of the Company's common stock or
approximately 619,000 shares. There are legal stipulations
regarding the debenture and its conversion. Since the debenture
has not been converted, the shares have not been calculated in
the Company's currently issued and outstanding stock, although
they are included in the "full dilution" calculation.
B. The Federal Deposit Insurance Corporation (FDIC), as
receiver for two commercial banks, owns a $90,000 Convertible
Debenture convertible into 3.6% of the Company's common stock or
approximately 136,000 shares. There are legal stipulations
regarding the debenture and its conversion. Since the debenture
has not been converted, the shares have not been calculated in
the Company's currently issued and outstanding stock, although
they
are included in the "full dilution" calculation.
C. The FDIC, as receiver for a bank involved in another
transaction, owns a $75,000 Convertible Debenture convertible
into
110,294 shares. Since the debenture has not been converted, the
shares have not been calculated in the Company's currently
issued
and outstanding stock, although they are included in the "full
dilution" calculation.
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, 1997 /s/ Frank E. Williams, III
Frank E. Williams, III
President, Chairman of the
Board
Chief Financial Officer
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 2,396,508
<SECURITIES> 0
<RECEIVABLES> 10,603,577
<ALLOWANCES> (709,878)
<INVENTORY> 1,935,797
<CURRENT-ASSETS> 0
<PP&E> 19,721,219
<DEPRECIATION> (9,191,240)
<TOTAL-ASSETS> 30,443,094
<CURRENT-LIABILITIES> 0
<BONDS> 12,108,576
0
0
<COMMON> 290,989
<OTHER-SE> 6,478,836
<TOTAL-LIABILITY-AND-EQUITY> 30,443,094
<SALES> 0
<TOTAL-REVENUES> 6,783,950
<CGS> 0
<TOTAL-COSTS> 4,216,926
<OTHER-EXPENSES> 1,710,373
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 335,376
<INCOME-PRETAX> 214,775
<INCOME-TAX> 78,400
<INCOME-CONTINUING> 136,375
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137,056
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.04
</TABLE>
