SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Form 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended July 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File No. 0-8190
Williams Industries, Incorporated
(Exact name of Registrant as specified in its charter)
Virginia 54-0899518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2849 Meadow View Road
Falls Church, Virginia 22042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(703) 560-5196
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $0.10 Par Value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES (X) NO ( )
Indicate by check mark if disclosure of delinquent filers
pursuant to Rule 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
Aggregate market value of voting stock held by non-affiliates
of the Registrant, based on last sale price as reported on
September 30, 1998:
$11,623,394
Shares outstanding at September 30, 1998 3,576,429
The following document is incorporated herein by reference
thereto in response to the information required by Part III of
this report (information about officers and directors):
Proxy Statement Relating to Annual Meeting to be held
November 14, 1998.
PART 1
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 the 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 risk 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.
Item 1. Business
Williams Industries, Incorporated operates in the commercial,
industrial, institutional, governmental and infrastructure
construction markets in the Mid-Atlantic region. The Company's
main lines of business include: steel, precast concrete and
miscellaneous metals erection and installation; crane rental,
heavy and specialized hauling and rigging; fabrication of welded
steel plate girders, rolled steel beams, and light structural and
other metal products; and the sale of insurance, safety and
related services. In the coming years, the Company intends to
expand its business by taking advantage of opportunities to
increase its market share in existing geographic areas of business
and to further expand its geographic service areas in these core
lines of business. This approach is designed to facilitate the
Company's mission, "To be the premier provider of services to the
construction industry in the Eastern United States."
A. General Development of Business
In 1970, Williams Industries, Incorporated was formed as a
Virginia corporation to act as the parent of two previously
established sister companies specializing in steel erection and
the rental of construction equipment.
Through the 1980s, the Company grew through the addition of
subsidiaries and affiliates operating in a wide range of
industrial, commercial, institutional and government construction
markets. By the mid-1980s, Williams Industries, Inc. had grown
from the original steel erection company to a conglomerate with 27
subsidiaries and affiliates. By the late 1980's, the Company was
producing more than $100 million in revenue annually.
However, debt, in excess of $33 million, accompanied the
expansion and, when construction activity virtually ceased in the
Company's market areas in the early 1990s, restructuring for
survival became necessary. Williams Industries, Inc. is now a
much smaller corporation than the conglomerate of a few years ago.
Since 1993, the Company has worked to achieve its goals of debt
repayment and consistent profitability of core operations.
Construction Insurance Agency, Inc., Greenway Corporation,
Piedmont Metal Products, Inc., Williams Bridge Company, Williams
Equipment Corporation, and Williams Steel Erection Company, Inc.
now represent the corporation's business focus for the foreseeable
future and, from an aggregate operating perspective, are working
to enhance the on-going value of Williams Industries, Inc. and to
establish a sound base for future growth.
Their efforts are augmented by the parent holding company,
Williams Industries, Inc., and by the operating entities of
Insurance Risk Management Group, Inc., and WII Realty Management,
Inc. (WIIRM). Each of these companies, including the parent,
provide necessary services for their sister subsidiaries in the
corporation. WIIRM manages the Company's real estate, including
the leasing of property to unaffiliated tenants. The parent also
sponsors the Company's Section 401(k) and Section 125 plans for
employees.
In order to achieve the profitable, restructured corporation
that exists today, management, working within the Company's
comprehensive long-range plan, took a number of necessary steps to
return the Company to operational profitability. These measures
included the removal of Bank Group debt; the reduction of
operating, and general and administrative costs; expansion of
market areas within the core businesses; and further consolidation
and reorganization of corporate components as necessary.
Final Bank Group Debt Restructuring occurred on March 31,
1997, when the Company reached an agreement with The CIT
Group/Credit Finance Inc. (CIT) for the funds necessary to repay
the outstanding balance of the Bank Group loan. In connection
with the repayment, convertible debentures were issued to
NationsBank and the FDIC. On February 5, 1998, NationsBank
converted their debenture into 620,766 shares of the Company's
stock, making them the Company's largest single shareholder. The
FDIC debenture, along with another debenture issued to the FDIC
for other reasons, were redeemed for $165,000 during the quarter
ended April 30, 1998. The redemption of the FDIC debentures
eliminated a commitment to issue 246,560 shares of the Company's
stock.
Previously, in the year ended July 31, 1997, the Company
issued 215,000 shares of stock to resolve a long-standing legal
issue with the estate of Mr. Eugene Pribyla. Approximately 70,000
shares were issued to First Tennessee Equipment Finance
Corporation upon conversion of a debenture issued to resolve debt
relating to a former subsidiary. The Company had previously
accrued a contingency reserve for this matter and the issuance was
recorded at the market value of the Company's stock and reduced
the related liability.
After these transactions, Williams Industries, as of July 31,
1998, had 3,576,429 shares of stock outstanding. The composition
of the shareholder base has changed significantly from the
investor base that existed when the Company began its
restructuring. In relation to stock activity, the Company moved
from the "over the counter" (OTC) or "pink sheet" market to the
Nasdaq National Market System on March 5, 1998. The relisting on
Nasdaq was one of management's goals which was accomplished in the
year ended July 31, 1998.
B. Financial Information About Industry Segments
The Company's activities are divided into three broad
categories: (1) Construction, which includes industrial,
commercial and governmental construction, the construction, repair
and rehabilitation of bridges as well as the rental, sale and
service of heavy construction equipment; (2) Manufacturing, which
includes the manufacture of metal products; and (3) Other, which
includes insurance agency operations and parent company
transactions with unaffiliated parties. Financial information
about these segments is contained in Note 13 of the Notes to
Consolidated Financial Statements. The following table sets forth
the percentage of total revenue attributable to these categories
for the years ended July 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Fiscal Year Ended July 31,
--------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Construction . . . . . . . . . 62% 65% 59%
Manufacturing. . . . . . . . . 35% 32% 37%
Other. . . . . . . . . . . . . 3% 3% 4%
</TABLE>
This mix has changed over the years as the Company continues
to organize its business into a more profitable configuration.
While levels of operating activity in the construction and
manufacturing segments are likely to be maintained for some time
going forward, the percentages of total revenue are expected to
change as market conditions or new business opportunities warrant.
C. Narrative Description of Business
1. Construction
The Company specializes in structural steel erection, the
installation of architectural, ornamental and miscellaneous metal
products, the installation of precast and prestressed concrete
products, the rental and sale of construction equipment and the
rigging and installation of equipment for utility and industrial
facilities.
The Company owns or leases a wide variety of construction
equipment and has experienced little difficulty in obtaining
sufficient equipment to perform its contracts.
Most labor employed by this segment is obtained in the areas
where the particular project is located. Labor in the
construction segment is primarily open shop. Due to recent
increases in the overall construction marketplace, there were
occasions in the past fiscal year when the Company experienced
some difficulty in finding sufficient, qualified personnel to meet
all commitments without resorting to extensive overtime with
existing personnel. State approved training and apprenticeship
programs are continuing in an effort to abate and resolve this
concern on a long-range basis.
In its construction segment, the Company requires few raw
materials, such as steel or concrete, since these are generally
furnished by and are the responsibility of the firm that hires the
Company to provide the construction services.
The primary basis on which the Company is awarded
construction contracts is price, since most projects are awarded
on the basis of competitive bidding. While there are numerous
competitors for commercial and industrial construction in the
Company's geographic areas, the Company remains as one of the
larger and more diversified companies in its areas of operations.
Although revenue derived from any particular customer has
fluctuated significantly, in recent years no single customer
normally accounts for more than 10% of consolidated revenue.
However, for the year ended July 31, 1998, one customer accounted
for 10.4% of consolidated revenue and 13.4% of construction
revenue.
A significant portion of the Company's work is subject to
termination for convenience clauses in favor of the local, state,
or federal government entities who contracted for the work in
which the Company is involved. The law generally gives local,
state, and federal government entities the right to terminate
contracts, for a variety of reasons, and such rights are made
applicable to government purchasing by operation of law. While
the Company rarely contracts directly with such government
entities, such termination for convenience clauses are
incorporated in the Company's contracts by "flow down" clauses
whereby the Company stands in the shoes of its customers. The
Company has not experienced any such terminations in recent years,
and because the Company is not dependent upon any one customer or
project, management feels that any risk associated with performing
work for governmental entities is minimal.
a. Steel Construction
The Company engages in the installation of structural and
other steel products for a variety of buildings, bridges,
highways, industrial facilities, power generating plants and other
structures.
Most of the Company's steel construction revenue is received
on projects where the Company is a subcontractor to a material
supplier (generally a steel fabricator) or another contractor.
When the Company acts as the steel erection subcontractor, it is
invited to bid by the firm that needs the steel construction
services. Consequently, customer relations are important. From
year to year, a particular customer and/or contract may comprise a
significant portion of the steel construction revenues.
The Company operates its steel erection business primarily in
the Mid-Atlantic area between Baltimore, Maryland and Norfolk,
Virginia.
b. Concrete Construction
The Company erects structural precast and prestressed
concrete for various structures, such as multi-storied parking
facilities and processing facilities, and erects the concrete
architectural facades for buildings. The concrete erection
business is not dependent upon any particular customer.
c. Rigging and Installation of Equipment
Much of the equipment and machinery used by utilities and
other industrial concerns is so cumbersome that its installation
and preparation for use, and to some extent its maintenance,
requires installation equipment and skills not economically
feasible for those users to acquire and maintain. The Company's
construction equipment, personnel and experience are well suited
for such tasks, and the Company contracts for and performs those
services. Since management believes that the demand for these
services, particularly by utilities, is relatively stable
throughout business cycles, it is aggressively pursuing the
expansion of this phase of its construction services.
d. Equipment Rental and Sales
The Company requires a wide range of heavy construction
equipment in its construction business, but not all of the
equipment is in use at all times. To maximize its return on
investment in equipment, the Company rents equipment to
unaffiliated parties to the extent possible. Operating margins
from rentals are attractive because the direct cost of renting is
relatively low. As a result, the Company is aggressively
pursuing the expansion of this phase of its business.
The Company's construction and equipment rental companies
maintain an extensive fleet of heavy equipment, including cranes,
tractors and trailers. Because of the Company's maintenance
efforts, management believes the equipment is in good condition
and is well maintained. Construction equipment which is
maintained diligently does not tend to depreciate physically in
ordinary use. Therefore the Company's older equipment,
particularly cranes, are generally worth more than their carrying
value. Nevertheless, older cranes tend to be less efficient,
because of operational and maintenance issues, as well as the
safety advances and general "user friendliness" incorporated into
newer cranes. For these reasons, management is constantly
reviewing the equipment to phase out older models in favor of
current designs, and therefore the sale of older cranes is an
important part of the Company's business. In addition, the fleet
upgrade cycle can assist the Company in moderating the seasonal
fluctuations in construction revenues.
2. Manufacturing
Products fabricated include steel plate girders used in the
construction of bridges and other projects, and light structural
metal products. In its manufacturing segment, the Company obtains
raw materials from a variety of sources on a competitive basis and
is not dependent on any one source of supply. During the year
ended July 31, 1998, the Company's sole supplier of domestically
produced large structural shapes put all of its customers on
short-term allocation or rationing of product. Due to
requirements to use domestic steel in federal projects, this
rationing produced temporary supply difficulties. This created
difficulties in product delivery schedules to customers as well as
the deferral of revenue.
Facilities in this segment are open shop. Management
believes that its employee relations in this segment are good.
Competition in this segment, based on price, quality and
service, is intense. Although revenue derived from any particular
customer of this segment fluctuates significantly, in recent years
no single customer has accounted for more than 10% of consolidated
revenue.
a. Steel Manufacturing
The Company has two plants for the fabrication of steel plate
girders, rolled beams, and other components used in the
construction, repair and rehabilitation of highway bridges and
grade separations.
One of these plants, located in Manassas, Virginia, is a
large heavy plate girder fabrication facility and contains a main
fabrication shop, ancillary shops and offices totaling
approximately 46,000 square feet, together with rail siding.
The other plant, located on 17 acres in Richmond, Virginia,
is a full service fabrication facility and contains a main
fabrication shop, ancillary shops and offices totaling
approximately 128,000 square feet.
Both facilities have internal and external handling
equipment, modern fabrication equipment, large storage and
assembly areas and are American Institute of Steel Construction,
Category III, Fracture Critical bridge shops.
All facilities are in good repair and designed for the uses
to which they are applied. Since virtually all production at these
facilities is for specific contracts rather than for inventory or
general sales, utilization can vary from time to time.
b. Light Structural Metal Products
The Company fabricates light structural metal products at a
Company-owned facility on ten acres located in Bedford, Virginia.
For the past three fiscal years, there have been major
improvements and expansion to the facilities to enhance
manufacturing capabilities, as well as the ability to finish
product in inclement weather.
3. General and Insurance
a. General
All segments of the Company are influenced by adverse weather
conditions. Accordingly, higher revenue typically is recorded in
the first (August through October) and fourth (May through July)
fiscal quarters when the weather conditions are generally more
favorable. This variation is more pronounced in the construction
segment than in the manufacturing segment.
Management is not aware of any environmental regulations that
materially impact the Company's capital expenditures, earnings or
competitive position. Compliance with Occupational Safety and
Health Administration (OSHA) requirements may, on occasion,
increase short-term costs (although in the long-term, compliance
may actually reduce costs through workers' compensation savings);
however, since compliance is required industry wide, the Company
is not at a competitive disadvantage, and the costs are built into
the Company's normal bidding procedures.
The Company employs between 175 and 400 employees, many
employed on an hourly basis for specific projects, the actual
number varying with the seasons and timing of contracts. At July
31, 1998, the Company had 353 employees, of which approximately 15
were covered by a collective bargaining agreement. Generally,
management believes that its employee relations are good.
b. Insurance
Liability Coverage
Primary liability coverage for the Company and its
subsidiaries is provided by a policy of insurance with limits of
$1,000,000 and a $2,000,000 aggregate. The Company also carries
what is known as an "umbrella" policy which provides limits of
$5,000,000 excess of the primary. The primary policy has a
$10,000 deductible; however, it does provide first dollar defense
coverage. If additional coverage is required on a specific
project, the Company makes those purchases.
Workers' Compensation Coverage
The Company presently maintains a "loss sensitive" workers'
compensation insurance program which has been administered by the
same insurance company since December 1992. The terms of the
program are negotiated by the Company and the insurance carrier on
a year-to-year basis. The terms may provide for a wide variety of
measures to manage or limit the risk of the program. The
structure of the Company's program stresses the minimization of
risk. The Company accrues workers' compensation insurance expense
based on estimates of its exposure under the program. The
program's success has reduced insurance expense below the accrued
amount for the past several years. Traditional insurance coverage
or monopolistic state programs are required in certain states, but
these states are no longer a significant part of the Company's
market area.
While the loss sensitive program described above has been and
is expected to be a significant factor in limiting the cost of
insurance, a small component of the cost is based on the Company's
"loss modification factor." This factor is a percentage increase
or decrease to a standard premium based primarily on the Company's
previous claims experience, which is promulgated by a national
rating body. Since 1986, the Company's loss modification factor
ranged from a high of 1.73 in 1986 to a low of 0.92 in 1992. The
current loss modification factor is 1.07. The Company's current
five year business plan sets a goal of reducing the factor to
0.80. Management feels it can meet this aggressive goal by: the
continued emphasis on safety and loss control measures; education
of management and employees on the importance of the corporate
safety program; monitoring of claims to reduce costs; and
maintaining effective rehabilitation programs for injured
employees.
The Company strives to be in the forefront in providing a
safe work place for its workers, but, because of the dangerous
nature of its business, injuries do occur. In those cases, the
Company recognizes the personal trauma that can accompany those
injuries and attempts to provide comfort and individual
consideration to the injured party and his or her family.
4. Backlog Disclosure
As of July 31, 1998, the Company's backlog was approximately
$21.7 million, as compared to $12.5 million as of July 31, 1997.
Item 2. Properties
At July 31, 1998, the Company owned approximately 88 acres of
industrial property. Approximately 39 acres are near Manassas,
in Prince William County, Virginia; 17 acres are in Richmond,
Virginia; and 32 acres in Bedford, in Virginia's Piedmont section
between Lynchburg and Roanoke.
In the year ended July 31, 1998, the Company sold its 2.25
acre headquarters property in Fairfax Country, Virginia for
$1,430,000 to a nonaffiliated third party. The Company is leasing
back several buildings on the property. The transaction resulted
in a gain of approximately $560,000, of which $254,000 is included
in "Other Income" (See Note 11 to the Consolidated Financial
Statements). There will be appreciable cash flow benefits going
forward because the cost of leasing the needed space on the
property is lower than the carrying cost of the debt on the
property. The Company also sold its one acre property in
Baltimore, Maryland for $135,000 to a non-affiliated third party.
Item 3. Legal Proceedings
Precision Components Corp.
The Company received a favorable decision in this case, and
judgment in favor of the Company was entered on March 4, 1998 by
the Circuit Court for the City of Richmond. The suit by
Industrial Alloy Fabricators, Inc. and Precision Components Corp.
against Williams Industries, Inc. and IAF Transfer Corporation,
sought $300,000 plus interest and fees arising from a product
liability claim against the Company. The plaintiffs have
perfected an appeal to the Virginia Supreme Court, which the Court
accepted on September 21, 1998. It is expected the case will be
argued early in 1999. 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.
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 employment
claims of various types 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 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The Company's Common Stock resumed trading on the Nasdaq
National Market System under the symbol "WMSI" on March 5, 1998.
The following table sets forth the high and low sales prices for
the periods indicated, as obtained from market makers in the
Company's stock.
<TABLE>
8/1/96 11/1/96 2/1/97 5/1/97 8/1/97 11/1/97 2/1/98 5/1/98
10/31/96 1/31/97 4/30/97 7/31/97 10/31/97 1/31/98 4/30/98 7/31/98
- -------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$6.25 $6.38 $5.50 $6.13 $8.13 $7.00 $6.63 $5.19
$3.00 $2.88 $3.13 $3.75 $5.00 $4.63 $3.75 $3.38
</TABLE>
The Company paid no cash dividends during the years ended
July 31, 1998 or 1997. While it is the directors' policy to have
the Company pay cash dividends whenever feasible, the Company's
credit agreements prohibit cash dividends without the lenders'
permission. In addition, the need for cash in the Company's
business indicates that cash dividends will not be paid in the
foreseeable future.
The prices shown reflect inter-dealer prices, without retail
mark-up, mark-down, or commissions and may not necessarily reflect
actual transactions.
At September 18, 1998, there were 502 holders of record of
the Common Stock.
During the year ended July 31, 1998, NationsBank converted
its $410,000 Convertible Debenture into the previously agreed upon
16.4% of the Company's common stock outstanding and committed at
the time of conversion. On February 6, 1998, the Company issued
620,766 shares to NationsBank. The holder can sell by public
sale no more than 1/8th of the shares during each quarter
commencing April 1, 1997 and ending December 31, 1998. Due to the
subsequent redemption of the FDIC debentures, explained in the
following paragraph, at July 31, 1998, NationsBank owned
approximately 17% of the outstanding and committed common stock
of the Company. As a result of the NationsBank conversion,
additional paid-in capital in the Company increased by
approximately $453,000, notes payable decreased by $410,000 and
interest expense of $43,000 was recorded.
On March 2, 1998, the Company redeemed its outstanding
$90,000 Convertible Debenture with the Federal Deposit Insurance
Corporation (FDIC) at its face value. The FDIC did not give
notice of conversion for the debenture, which would have converted
into 3.6% of the Company's common stock outstanding or committed
which approximated 136,000 shares. On April 3, 1998, the Company
redeemed at face value a second debenture from the FDIC for
$75,000. If this debenture had converted, 110,294 shares of the
Company's common stock would have been issued. While the
commitments represented by the FDIC debentures have been canceled,
the weighted average impact of the commitments is still reflected
in the calculation of Earnings Per Common Share - Diluted for the
periods in which the debentures were outstanding in the years
ended July 31, 1998 and 1997.
The shares issued to NationsBank, as well as the 215,000
shares issued in resolution of the Pribyla litigation, were part
of a Company filing with the Securities and Exchange Commission
done as a secondary offering of its securities on Form S-2 on
behalf of certain selling shareholders. These shareholders
received stock or convertible debentures in connection with the
transactions (Bank Group, FDIC, and Pribyla) described elsewhere
in this report. The number of shares included in the Registration
was 1,080,294, although the FDIC shares were not issued because
the debentures were redeemed.
The Company also issued 69,931 shares to First Tennessee
Equipment Finance Corporation upon First Tennessee's conversion of
a debenture relating to debt resolution of a former Company
subsidiary.
Item 6. Selected Financial Data
The following table sets forth selected financial data for
the Company and is qualified in its entirety by the more detailed
financial statements, related notes thereto, and other statistical
information appearing elsewhere in this report.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
(In millions, except per share data)
1998 1997 1996 1995 1994
------ ------ ----- ----- ------
<S> <C> <C> <C> <C> <C>
Statements of Earnings Data:
Revenue:
Construction $17.9 $22.4 $16.1 $19.7 $27.9
Manufacturing 10.2 11.0 10.1 10.3 16.9
Other Revenue 0.8 0.9 1.0 1.6 0.8
------ ------ ----- ----- ------
Total Revenue $28.9 $34.3 $27.2 $31.6 $45.6
====== ====== ===== ===== ======
Gross Profit:
Construction $ 7.6 $ 8.9 $ 6.5 $ 5.2 $ 4.8
Manufacturing 3.1 3.4 3.0 3.9 4.2
Other 0.8 0.9 1.0 1.6 0.8
------ ------ ----- ----- ------
Total Gross Profit $11.5 $13.2 $10.5 $10.7 $ 9.8
====== ====== ===== ===== ======
Other Income: $ 0.4 $ 0.1 $ 2.5 $ 0.2 $ -
Expense:
Overhead $ 3.1 $ 3.4 $ 3.1 $ 3.0 $ 3.6
General and
Administrative 5.0 5.7 5.3 9.0 8.1
Depreciation 1.2 1.1 1.0 1.2 1.4
Interest 1.2 1.6 1.5 2.3 1.7
Income Tax
Provision (Benefit) (0.3) (1.7) - - -
------ ------ ----- ----- ------
Total Expense $10.2 $10.1 $10.9 $15.5 $14.8
====== ====== ===== ===== ======
Earnings (Loss) from
Continuing Operations $ 1.7 $ 3.2 $ 2.1 $(4.6) $(5.0)
Equity Loss (Earnings) and
Minority Interest (0.8) (0.2) 0.1 - -
Gain (Loss) from
Discontinued
Operations - - - 1.4 (4.6)
Extraordinary Item -
Gain on Extinguish-
ment of Debt 0.9 3.2 0.8 6.6 -
------ ------ ----- ----- ------
Net Earnings (Loss) $ 1.8 $ 6.2 $ 3.0 $ 3.4 $(9.6)
====== ====== ===== ===== ======
Earnings (Loss) Per Share:
From Continuing
Operations...... $0.28 $1.13 $0.84 $(1.82) $(1.98)
From Discontinued
Operations . . . . . - - - 0.57 (1.80)
Extraordinary Item 0.29 1.20 0.31 2.60 -
----- ----- ----- ----- -------
Earnings (Loss) Per
Share - Basic* $0.57 $2.33 $1.15 $1.35 $(3.78)
===== ===== ===== ===== =======
Balance Sheet Data
(at end of year):
Total Assets--Continuing
Operations $29.1 $31.5 $28.0 $24.6 $38.4
Net Liabilities
of Discontinued
Operations - - - - (1.0)
Long Term Obligations 8.4 7.4 5.8 2.9 5.0
Total Liabilities 19.8 24.8 30.2 29.8 46.1
Stockholders' equity
(Deficiency
in assets) 9.1 6.5 (2.2) (5.2) (8.7)
</TABLE>
* No dividends have been paid on Common Stock during the above
periods.
For purposes of comparison, the years ended July 31, 1994 and
1995 results include companies that are not components of the
Company going forward. The results of the years ended July 31,
1996, 1997 and 1998 more accurately reflect the Company's
composition going forward. Additionally, the Company disposed of
a number of assets, as discussed in Note 11 to the Notes to
Consolidated Financial Statements. These factors are relevant to
any comparisons.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
During the year ended July 31, 1998, the Company achieved a
number of significant objectives, including:
* The relisting of the Company's stock on the Nasdaq National
Market System;
* Nearly doubling its backlog from approximately $12.5
million at July 31, 1997 to approximately $21.7 million at July
31, 1998;
* Using the proceeds from the sale of the Company's Falls
Church real estate to reduce the Company's real estate loan by
more than $1.4 and refinancing the remaining $1,000,000 loan with
more favorable terms;
* Redeeming two debentures that removed the Company's
commitment to issue 246,560 shares, or about seven percent, of the
Company's stock;
* Resolving outstanding issues of litigation;
* Improving the Company's overall financial position.
* Meeting management's estimate for pre-tax profit of 4% or
$1.3 million for "Earnings Before Income Taxes, Equity Earnings
and Minority Interests."
* Improving gross profit margin to 40% in 1998 from 38% in
1997.
Having achieved its goals of debt restructuring and Nasdaq
relisting, the Company now has a stronger financial and
operational base from which its subsidiaries, either through
internal growth or strategic acquisitions, can grow and enhance
future financial results.
While the most significant aspect of restructuring, that of
settling Bank Group debt, occurred in the year ended July 31,
1997, the year ended July 31, 1998 marked the culmination of
several remaining aspects of the Company's five-year restructuring
program. In addition to completing its restructuring objectives,
the Company continued to meet another objective, that of
operational profitability. These achievements occurred while the
Company simultaneously reduced its investment in an unconsolidated
affiliate by more than $800,000 and also accrued more than
$500,000 for litigation settlements.
The Company's fundamental lines of business are conducted
through the subsidiaries of Construction Insurance Agency,
Greenway Corporation, Piedmont Metal Products, Inc., Williams
Bridge Company, Williams Equipment Corporation, and Williams Steel
Erection Company, Inc. These operations, on aggregate, have been
profitable for several years. Going forward, these operations
must produce sufficient aggregate profitable results to sustain
the parent operation and any auxiliary services.
Management continues to work to enhance the on-going value of
Williams Industries Inc., which, in addition to the companies
mentioned above, includes the parent corporation, Insurance Risk
Management Group, Inc., and WII Realty Management, Inc., that
provide services both for all operating companies as well as
outside customers.
Financial Condition
The Company has turned around in the past five years.
Stockholders' Equity increased by $17.8 million over a four year
period and has grown to $9.1 million at July 31, 1998 from a $8.7
million deficit at July 31, 1994.
The Company's credit facility with CIT allows the Company a
mechanism to borrow against the line for the subsidiaries, should
the need arise. This funding mechanism allows the subsidiaries to
negotiate better payment terms on certain transactions, such as
the purchase of materials, by having cash available when
necessary.
Having completed its debt restructuring program, management
has more time to focus on operating issues. These include
developing innovative methods to obtain quality work and expanding
into new market areas to more fully avail the Company's
subsidiaries of new opportunities in traditional market areas.
The Company's financial performance essentially has improved
across the board in the past several years, but most specifically
in the year ended July 31, 1998. One of the greatest indicators
of this change is reflected in the Company's Consolidated
Statements of Cash Flows. Net Cash Provided By Operating
Activities was approximately $1.89 million in the year ended July
31, 1998, as compared to the ($105,151) used in operating
activities in the year ended July 31, 1997. Cash flows from
investing activities increased primarily as a result of the sale
of the Falls Church property and some older equipment. Proceeds
from borrowings declined to $4.0 million, while the Company made
repayments of Notes Payable of $7 million.
Issues of profitability and quantifying any future expense
dominated many of the Company's activities in the year ended July
31, 1998. Williams Industries, Inc. results varied throughout the
year, as significant transactions affected quarterly results.
These included the reduction of approximately $800,000 of the
Company's investment in Atlas Machine and Iron Works, an
unconsolidated affiliate; a $809,000 Gain on Extinguishment of
Debt from the reversal of accounts payable in a closed subsidiary,
the John F. Beasley Construction Company; and an accrual of
approximately $500,000 for litigation settlements. Third quarter
cash flows were impacted by the $165,000 used to redeem the FDIC
debentures, described in Item 5, included in this report.
The combination of all these elements, however, produced the
bottom line results which are in keeping with management's
projections and announced expectations for the year. Going
forward, management intends to continue following a course that
will allow for sustained growth and profitability while
simultaneously enhancing the Company's financial condition and
increasing shareholder value.
Issues which had the potential to impact the Company's future
earnings also have been resolved. The settlement and
quantification of expense and exposure to old legal issues enables
the Company to be more certain of its position going forward.
Although certain contingencies are discussed in Note 15 to the
Notes to Consolidated Financial Statements, management believes
that major uncertainties that could have impacted the Company's
financial posture have largely been removed, enabling management,
potential creditors and customers to have a much clearer picture
of the Company's financial future.
Bonding
The Company's ability to furnish payment and performance
bonds has improved along with its financial condition. For
example, the Company now has a commitment from one bonding company
to furnish a bond for a $6.5 million bridge fabrication project.
While historically, because of its strong reputation, most of the
Company's projects have been obtained without providing bonds, the
Company recognizes as it expands its geographic range for
providing goods and services, it will be necessary to provide
bonds to clients unfamiliar with the Company. This is not
anticipated to present a problem going forward.
Liquidity
The Company is generating sufficient cash to sustain its
operational activities. Management is keeping a close eye on
cash needs to ensure that adequate liquidity is maintained. To
address this concern, credit availability under the CIT facility
has been expanded.
Cash Flows From Operating Activities for the Year Ended July
31, 1998 were $1,885,836 and primarily resulted from profitable
operations.
Cash Flows From Investing Activities increased from ($50,804)
in the year ended July 31, 1997 to $929,174 in the year ended July
31, 1998, primarily as a result of the sale of the Company's Falls
Church real estate and some older equipment. Expenditures for
property, plant and equipment were maintained at acceptable levels
as the Company has been updating its crane fleet primarily though
operating leases. Management feels that leasing instead of more
traditional buying or borrowing offers more flexibility and cash
flow advantages.
Management invested some surplus cash in Certificates of
Deposit with maturities longer than 90 days, but less than one
year, which are not classified as cash or cash equivalents.
However, these investments are readily convertible to cash to meet
the Company's requirements.
Cash Flows From Financing Activities, $746,924 in the year
ended July 31, 1997 and ($2,922,507) in the year ended July 31,
1998, were reduced as the Company continued its efforts to reduce
overall debt.
Going forward, management believes that operations will
continue to generate sufficient cash to fund activities. However,
as revenues increase, operations may have periods in which they
use net cash. Management, therefore, is focusing on the proper
allocation of resources to ensure stable growth.
Operations
While not achieving the record revenue levels experienced at
some subsidiaries in the year ended July 31, 1997, the year ended
July 31, 1998 was extremely good for the Company as, for the most
part, routine operations, not unusual or extraordinary
transactions, created profitable results. Having survived the
upheaval of massive restructuring, the Company's subsidiaries are
continuing to focus on the business of performing quality work at
consistently profitable levels.
Each of the Company's operating entities has benefited from
the increased activity in the construction marketplace as well as
the improved financial condition of the parent corporation.
Recently passed federal legislation, which will funnel billions of
dollars into infrastructure construction, is anticipated to further
increase the Company's fabrication and construction activities.
In its highly concentrated reconfiguration, the Company and its
subsidiaries are poised to take advantage of the opportunities now
in the marketplace.
The subsidiaries are finding it easier to obtain new
equipment or supplies based on their own results and
profitability, as well as the improved condition of the parent.
This trend is expected to continue and will lead to further
improved results through reduced finance costs and the more
efficient delivery of services through enhanced capabilities.
1. Fiscal Year 1998 Compared to Fiscal Year 1997
From an operating perspective, the year ended July 31, 1998
started slowly. During the first quarter, both construction and
manufacturing revenues decreased. A significant portion of the
decrease was attributed to the fact that the Company's largest
subsidiary, Williams Steel Erection Company, had a more than fifty
percent decline in its revenues. This was due to the fact that
in the prior year, Williams Steel had record revenues and was
working simultaneously on several major projects. It wasn't
until the fourth quarter of the year ended July 31, 1998 that
Williams Steel regained its previously high level of activity.
In the beginning and middle of year ended July 31, 1998, extremely
wet weather caused the postponement or cancellation of a number of
jobs, many of which related to crane rental or rigging. It wasn't
until the last four months of the year ended July 31, 1998 that
the Company's operating activities picked up.
As a consequence, revenues for the year ended July 31, 1998
lagged behind the year ended July 31, 1997 in all categories. The
most noticeable decline, however, occurred in Construction where
revenues declined from $22,387,476 in the year ended July 31, 1997
to $17,914,705 in the year ended July 31, 1998.
Manufacturing revenues declined slightly, from $10,975,857 in
the year ended July 31, 1997 to $10,205,689 in the year ended July
31, 1998.
Earnings Before Income Taxes, Equity Earnings and Minority
Interests decreased slightly from $1,463,686 in the year ended
July 31, 1997 to $1,353,192 in the year ended July 31, 1998,
despite the fact that revenues declined by nearly $6 million. The
profit levels for the year ended July 31, 1998 are in keeping with
management's announced expectations for the year.
The provision for income taxes for the year ended July 31,
1998 was a benefit of $343,000 compared to a benefit of $1.7
million for the year ended July 31, 1997. In the year ended July
31, 1997, the Company completed the restructuring of its Bank
Group Debt and, for the first time in several years, returned to
profitable operations. As a result, in accordance with Statement
of Financial Accounting Standards No. 109, during the year ended
July 31, 1997, the Company recognized $2.2 million of the benefits
available from its tax loss carryforwards that had accumulated
over several years. Further, as a result of continued profitable
operations, during the year ended July 31, 1998, the Company
recognized an additional benefit of its tax loss carryforwards of
$900,000.
During the year ended July 31, 1998, the Company also had a
$800,000 reduction in its investment of an unconsolidated
affiliate, Atlas Machine and Iron Works, shown in "Equity in
(loss) earnings of unconsolidated affiliates", as well as an
expense of approximately $500,000 relating to the settlement of
litigation on old insurance polices.
2. Fiscal Year 1997 Compared to Fiscal Year 1996
"Revenue" showed an improvement from $27,157,512 in fiscal
1996 to $34,308,519 in fiscal 1997, which was attributable to
several sources, but most specific to several "mega" projects,
such as the MCI Arena and major semiconductor plants in Richmond
and Manassas, Virginia, undertaken by Williams Steel Erection
Company during the year. The "Other Income" amounts consist of
real estate sales and reflect the varying gains recognized from
these transactions. For details of real estate sales, refer to
Note 11 in the Notes to Consolidated Financial Statements.
For the year ended July 31, 1996, the total construction and
manufacturing revenue was $26,193,901 which compares to
$33,363,333 for the year ended July 31, 1997, or more than a 27
percent increase in revenue. With the completion of the MCI
Arena, the Company concluded essentially all of its "mega" steel
erection contracts. There currently are not any outstanding bids
on projects of similar size. As a result, the Company's backlog
declined from $19 million as of July 31, 1996 to approximately
$12.5 million as of July 31, 1997. In order to increase the
backlog, the Company continues to pursue other joint venture
arrangements in both the construction and manufacturing segments
on certain projects which are greater than $1.0 million in size
and complex enough to involve large quantities of manpower,
management time and equipment. The Company's policy is to enter
into joint ventures only where it is at least a 50% partner and
actively participates in the management of the venture. Further,
the Company's policy is to seek to engage in joint ventures with
partners whose reputation and status in the industry indicate to
management that they are trustworthy partners. During the course
of the MCI Joint Venture, there were no disputes regarding
management, but the agreement did provide for an alternative
dispute resolution mechanism, as will any future joint venture
arrangement.
In continuing the year to year comparisons, several
transactions or sales in both years are highly complicated. For
details of these events, refer to the Notes 10 and 11 to
Consolidated Financial Statements elsewhere in this document.
Unusual events have contributed to "Earnings Before
Extraordinary Items" of $2,982,512 for the year ended July 31,
1997 as compared to the $2,152,847 for the year ended July 31,
1996, most particularly the net $1.8 million deferred income tax
asset recognized in 1997, and the $2.4 million gain on the sale of
real estate recognized in 1996 (See Note 8).
With respect to the income tax asset, as a result of tax
losses incurred in prior years, the Company, at July 31, 1997, had
tax loss carryforwards amounting to approximately $15 million.
Under Statement of Financial Accounting Standards No. 109 ("SFAS
109"), the Company is required to recognize the value of these tax
loss carryforwards if it is more likely than not that they will be
realized by reducing the amount of the Company's profitability in
future years during the carryforward period. As a result of the
completion of the restructuring of the Company's Bank Group debt
during 1997 and the return to profitable operations of the
Company's ongoing businesses during the past two years, the
Company expects to report profits for income tax purposes in the
future. As a consequence, the Company recognized a $2.2 million
portion of the benefit available from its tax loss carryforwards
during the year ended July 31, 1997.
Revenues for the year ended July 31, 1997 exceeded projected
levels and expenses were kept to reasonable and customary levels.
From a core company aggregate operating perspective, revenues,
gross profit and pre-tax profit all increased when the years are
compared. Overhead expense increased as a result of increased
operational activity. General and Administrative expense, which
does not vary according to revenue levels, increased primarily as
a result of settlement of litigation.
Year 2000
The Company is currently reviewing all systems for compliance
with Year 2000 issues. This review includes information
technology systems as well as non-information technology systems
and discussions with third party customers regarding their Year
2000 compliant status. The Company intends to be finished with its
review and have any identified Year 2000 issues fixed by July 31,
1999.
Based on the Company's review to date, there are no major
Year 2000 compliant issues and, therefore, the Company has not,
and does not intend to prepare a contingency plan. The Company
believes its most reasonable, likely worse case Year 2000 scenario
is if its customers are not Year 2000 compliant and payments to
the Company are delayed. If this occurs, the Company believes
that it could delay payments to vendors and use its capital and
financing lines to pay its most critical costs.
The Company currently anticipates that the financial impact
due to year 2000 compliant issues will not exceed $10,000. The
Company intends to pay these costs from cash flows generated from
operations. To date, none of this amount has been expended.
Item 7a. Quantitative and Qualitative Disclosures About
Market Risk
Williams Industries, Inc. uses fixed and variable rate notes
payable, a tax exempt bond issue, and a vendor credit facility to
finance its operations. These on-balance sheet financial
instruments, to the extent they provide for variable rates of
interest, expose the Company to interest rate risk, with the
primary interest rate exposure resulting from changes in the prime
rates or Industrial Revenue Bond (IRB) rate used to determine the
interest rates that are applicable to borrowings under the
Company's vendor credit facility and tax exempt bond.
The information below summarizes Williams Industries, Inc.'s
sensitivity to market risks associated with fluctuations in
interest rates as of July 31, 1998. To the extent that the
Company's financial instruments expose the Company to interest
rate risk, they are presented in the table below. The table
presents principal cash flows and related interest rates by year
of maturity of the Company's vendor credit facility and tax exempt
bond in effect at July 31, 1998. Notes 7, 10, and 15 to the
consolidated financial statements contain descriptions of the
Company's credit facility and tax exempt bond and should be read
in conjunction with the table below.
<TABLE>
<CAPTION>
Financial Instruments by Expected Maturity Date
Year Ended July 31, 1999 2000 2001 2002
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Rate
Sensitivity
Notes Payable:
Variable rate ($) 461,522 1,756,862 90,000 95,000
Average Interest
Rate 9.70 10.64 3.48 3.48
---------- ---------- ---------- ----------
Fixed Rate ($) 1,486,096 905,594 1,162,101 625,340
Fixed Interest
Rate 9.17 9.77 9.77 9.58
</TABLE>
<TABLE>
Year Ended July 31, 2003 Thereafter Total
---------- ---------- ----------
<S> <C> <C> <C>
Interest Rate
Sensitivity
Notes Payable:
Variable rate ($) 100,000 815,000 3,318,384
Average Interest
Rate 3.48 3.48 8.13
---------- ---------- ----------
Fixed Rate ($) 1,410,419 1,396,803 6,986,353
Fixed Interest
Rate 9.58 10.00 9.67
</TABLE>
Item 8. Williams Industries, Incorporated Consolidated Financial
Statements for the Years ended July 31, 1998, 1997 and 1996.
(See pages which follow.)
Item 9. Disagreements on Accounting and Financial Disclosures.
None.
Part III
Pursuant to General Instruction G(3) of Form 10-K, the
information required by Part III (Items 10, 11, 12 and 13) is
hereby incorporated by reference to the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission,
pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, in connection with the Company's Annual
Meeting of Shareholders scheduled to be held November 14, 1998.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
The following documents are filed as a part of this report:
(a)1. Consolidated Financial Statements of Williams Industries,
Incorporated and Independent Auditors' Report.
Report of Deloitte & Touche LLP.
Consolidated Balance Sheets as of July 31, 1998 and 1997.
Consolidated Statements of Earnings for the Years Ended
July 31, 1998, 1997 and 1996.
Consolidated Statements of Stockholders' Equity (Deficiency
in Assets) for the Years Ended July 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the Years Ended
July 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements for the Years
Ended July 31, 1998, 1997 and 1996.
2. Schedule II -- Valuation and Qualifying Accounts for
the Years Ended July 31, 1998, 1997, and 1996
of Williams Industries, Incorporated.
(All included in this report in response to Item 8.)
Schedules to be Filed by Amendment to this Report.
NONE
3(b) Exhibits:
(3) Articles of Incorporation: Incorporated by reference
to Exhibit 3(a) of the Company's 10-K for the year
ended July 31, 1989. By-Laws: Incorporated by
reference to Exhibit 3 of the Company's 8-K filed
September 4, 1998.
(21) Subsidiaries of the Company
<TABLE>
Name State of
Incorporation
------------------------------------- -------------
<S> <C>
Arthur Phillips & Company, Inc.* MD
Capital Benefit Administrators, Inc.* VA
Construction Insurance Agency, Inc. VA
John F. Beasley Construction Company* TX
Greenway Corporation MD
IAF Transfer Corporation* VA
Insurance Risk Management Group, Inc. VA
Piedmont Metal Products, Inc. VA
Williams Bridge Company VA
Williams Enterprises, Inc.* DC
Williams Equipment Corporation DC
WII Realty Management, Inc. VA
Williams Steel Erection Company VA
</TABLE>
* Not Active
(27) Financial Data Schedule
(b) The Company filed a Form 8-K on September 4, 1998,
reporting the adoption of amended and restated By-Laws for
the Company.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Williams Industries, Incorporated
Falls Church, Virginia
We have audited the accompanying consolidated balance sheets of
Williams Industries, Incorporated, and subsidiaries (the
"Company") as of July 31, 1998 and 1997, and the related
consolidated statements of earnings, stockholders' equity
(deficiency in assets) and cash flows for each of the three years
in the period ended July 31, 1998. Our audits also included the
financial statement schedule listed in Item 14. These financial
statements and financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly in all material respects, the consolidated financial
position of Williams Industries, Incorporated, and subsidiaries as
of July 31, 1998 and 1997, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended July 31, 1998 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents
fairly in all material respects the information as set forth
therein.
Deloitte & Touche LLP
McLean, VA
September 25, 1998
<PAGE>
<TABLE>
<CAPTION>
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 1998 AND 1997
ASSETS
--------
1998 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,384,339 $ 1,491,836
Restricted cash 54,004 252,412
Certificates of deposit 732,616 375,308
Accounts receivable (net of
allowances for doubtful
accounts of $1,211,000 in
1998 and $758,000 in 1997):
Contracts
Open accounts 7,057,543 7,395,313
Retainage 585,506 563,730
Trade 1,749,778 1,516,796
Other 302,445 100,970
Inventory (Note 1) 1,320,245 1,462,817
Costs and estimated earnings in
excess of billings on
uncompleted contracts (Note 5) 665,926 845,325
Notes receivable 33,706 43,224
Prepaid expenses 568,689 564,538
------------ ------------
Total current assets 14,454,797 14,612,269
------------ ------------
PROPERTY AND EQUIPMENT,
AT COST (Note 6) 19,066,486 20,073,398
Accumulated depreciation (9,355,343) (9,387,155)
------------ ------------
Property and equipment, net 9,711,143 10,686,243
------------
- ------------
OTHER ASSETS
Notes receivable 128,761 167,975
Contract claims, net (Note 2) - 534,025
Investments in unconsolidated
affiliates 979,769 1,770,940
Deferred income taxes (Note 8) 2,240,000 1,800,000
Inventory (Note 1) 1,243,754 1,264,997
Other 354,971 653,270
------------ ------------
Total other assets 4,947,255 6,191,207
------------ ------------
TOTAL ASSETS $29,113,195 $31,489,719
============ ============
</TABLE>
See Notes To Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 1998 AND 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of notes
payable (Note 7) $ 1,947,618 $ 5,281,243
Accounts payable 4,017,376 4,842,837
Accrued compensation and
related liabilities 760,620 694,634
Billings in excess of costs
and estimated earnings on
uncompleted contracts (Note 5) 1,885,069 2,972,587
Deferred income 306,000 -
Other accrued expenses 2,357,125 3,531,599
Income taxes payable (Note 8) 159,200 108,000
------------ ------------
Total current liabilities 11,433,008 17,430,900
LONG-TERM DEBT
Notes payable, less
current portion (Note 7) 8,357,119 7,356,813
------------ ------------
Total Liabilities 19,790,127 24,787,713
------------ ------------
MINORITY INTERESTS 189,618 170,237
------------ ------------
COMMITMENTS AND
CONTINGENCIES (NOTE 15) - -
STOCKHOLDERS' EQUITY
Common stock - $0.10 par value,
10,000,000 shares authorized;
3,576,429 and 2,839,756
shares issued and outstanding
(Note 18) 357,643 283,976
Additional paid-in capital 16,385,704 15,705,430
Accumulated deficit (7,609,897) (9,457,637)
------------ ------------
Total stockholders' equity 9,133,450 6,531,769
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $29,113,195 $31,489,719
============ ============
</TABLE>
See Notes To Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JULY 31, 1998, 1997 and 1996
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE:
Construction $17,914,705 $22,387,476 $16,131,534
Manufacturing 10,205,689 10,975,857 10,062,367
Other revenue 783,765 945,186 963,611
------------ ------------ ------------
Total revenue 28,904,159 34,308,519 27,157,512
------------ ------------ ------------
DIRECT COSTS:
Construction 10,265,866 13,511,100 9,630,774
Manufacturing 7,139,596 7,621,577 7,002,594
------------ ------------ ------------
Total direct costs 17,405,462 21,132,677 16,633,368
------------ ------------ ------------
GROSS PROFIT 11,498,697 13,175,842 10,524,144
------------ ------------ ------------
OTHER INCOME 356,462 60,035 2,509,864
------------ ------------ ------------
EXPENSES:
Overhead 3,115,578 3,418,136 3,072,133
General and
administrative 5,015,978 5,667,798 5,310,514
Depreciation and
amortization 1,221,459 1,079,682 984,662
Interest 1,148,952 1,606,575 1,510,985
------------ ------------ ------------
Total expenses 10,501,967 11,772,191 10,878,294
------------ ------------ ------------
EARNINGS BEFORE INCOME
TAXES, EQUITY EARNINGS
AND MINORITY INTERESTS 1,353,192 1,463,686 2,155,714
INCOME TAX (BENEFIT)
PROVISION (NOTE 8) (343,000) (1,716,000) 62,500
------------ ------------ ------------
EARNINGS BEFORE EQUITY
EARNINGS AND MINORITY
INTERESTS 1,696,192 3,179,686 2,093,214
Equity in (loss) earnings
of unconsolidated
affiliates (746,471) (148,310) 83,350
Minority interest in
consolidated subsidiary (29,981) (48,864) (23,717)
------------ ------------ ------------
EARNINGS BEFORE
EXTRAORDINARY ITEM 919,740 2,982,512 2,152,847
EXTRAORDINARY ITEM (NOTE 3)
Gain on extinguishment
of debt 928,000 3,189,000 808,000
------------ ------------ ------------
NET EARNINGS $ 1,847,740 $ 6,171,512 $ 2,960,847
============ ============ ============
EARNINGS PER COMMON SHARE:
BASIC:
Earnings before
extraordinary item $ 0.28 $ 1.13 $ 0.84
Extraordinary item 0.29 1.20 0.31
EARNINGS PER ------------ ------------ ------------
COMMON SHARE-BASIC $ 0.57 $ 2.33 $ 1.15
============ ============ ============
DILUTED:
Earnings before
extraordinary item $ 0.27 $ 1.08 $ 0.81
Extraordinary item 0.25 1.05 0.31
EARNINGS PER COMMON ------------ ------------ ------------
SHARE-DILUTED $ 0.52 $ 2.13 $ 1.12
============ ============ ============
</TABLE>
See Notes To Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
YEARS ENDED JULY 31, 1998, 1997 and 1996
Additional
Number Common Paid-In Accumulated
of Shares Stock Capital Deficit Total
---------- -------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE,
AUGUST 1, 1995
2,539,017 $253,902 $13,095,153 $(18,589,996) $(5,240,941)
Issuance
of stock 37,000 3,700 52,280 - 55,980
Net earnings
for the year - - - 2,960,847 2,960,847
---------- -------- ----------- ------------- ------------
BALANCE,
JULY 31, 1996
2,576,017 257,602 13,147,433 (15,629,149) (2,224,114)
Issuance
of stock 263,739 26,374 449,740 - 476,114
Issuance of
convertible
debentures - - 2,108,257 - 2,108,257
Net earnings
for the year - - - 6,171,512 6,171,512
---------- -------- ----------- ------------- ------------
BALANCE,
JULY 31, 1997
2,839,756 283,976 15,705,430 (9,457,637) 6,531,769
Conversion of
convertible
debentures 690,697 69,070 484,101 - 553,171
Other stock
issued 45,976 4,597 196,173 - 200,770
Net earnings
for the year - - - 1,847,740 1,847,740
---------- -------- ----------- ------------- ------------
BALANCE,
JULY 31, 1998
$3,576,429 $357,643 $16,385,704 $ (7,609,897) $ 9,133,450
========== ======== =========== ============= ============
</TABLE>
See Notes To Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 1998, 1997 and 1996
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net earnings $ 1,847,740 $ 6,171,512 $ 2,960,847
Adjustments to reconcile
net earnings to net
cash provided by
(used in) operating
activities:
Depreciation and
amortization 1,221,459 1,079,682 984,662
Increase (decrease)
in allowance for
doubtful accounts 452,987 (195,780) (679,645)
Interest expense
related to
convertible debentures 43,171 269,937 -
Stock bonus issued
to employees 140,508 50,000 52,955
Gain on extinguishment
of debt (928,000) (3,189,000) (808,000)
Gain on disposal of
property, plant
and equipment (892,976) (408,515) (2,323,496)
Increase in deferred
income taxes (440,000) (1,800,000) -
Minority interest
in earnings 29,981 48,864 23,717
Equity in losses
(earnings) of
affiliates 746,471 (51,690) (83,350)
Dividend from
unconsolidated
affiliate 44,700 67,050 22,350
Changes in assets and
liabilities:
Decrease in notes
receivable 48,732 13,801 -
Decrease (increase) in open
contracts receivable (179,295) 705,043 (1,021,625)
(Increase) decrease in
contract retainage (21,776) 125,414 470,366
Increase in trade
receivables (270,654) (245,914) (164,284)
Decrease (increase)
in contract claims 534,025 352,622 (732,285)
(Increase) decrease in
other receivables (205,868) 32,635 193,795
Decrease (increase)
in inventory 163,815 (558,461) 252,334
(Increase) decrease in
costs and estimated
earnings related to
billings on uncompleted
contracts, net (908,119) 516,273 1,507,863
Decrease (increase) in
prepaid expenses and
other assets 294,148 155,045 (454,517)
Increase (decrease)
in accounts payable 102,539 (1,718,978) (216,735)
Increase (decrease) in
accrued compensation
and related liabilities 65,986 (159,289) 257,028
(Decrease) increase in
other accrued expenses (54,938) (1,377,402) 261,827
Increase in income taxes
payable 51,200 12,000 46,000
------------ ------------ ------------
NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES 1,885,836 (105,151) 549,807
------------ ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Expenditures for property,
plant and equipment (947,890) (861,325) (924,581)
Decrease (increase)
in restricted cash 198,408 147,588 (300,000)
Proceeds from sale of
property, plant and
equipment 2,035,964 1,038,241 3,389,348
Purchase of minority
interest - - (22,900)
Purchase of certificates
of deposit (652,589) (375,308) -
Maturities of
certificates of deposit 295,281 - -
------------ ------------ ------------
NET CASH PROVIDED BY(USED IN)
INVESTING ACTIVITIES 929,174 (50,804) 2,141,867
------------ ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from borrowings 4,039,690 7,203,403 1,308,134
Repayments of notes
payable (7,011,859) (6,536,658) (3,815,423)
Issuance of common stock 60,262 90,177 3,025
Minority interest dividends (10,600) (9,998) (6,278)
------------ ------------ ------------
NET CASH (USED IN) PROVIDED
BY FINANCING ACTIVITIES (2,922,507) 746,924 (2,510,542)
------------ ------------ ------------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (107,497) 590,969 181,132
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,491,836 900,867 719,735
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,384,339 $ 1,491,836 $ 900,867
============ ============ ============
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION (NOTE 16)
</TABLE>
See Notes To Consolidated Financial Statements.
<PAGE>
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1998, 1997 AND 1996
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Consolidation - The consolidated financial
statements include the accounts of Williams Industries, Inc. and
all of its majority-owned subsidiaries (the "Company").
All material intercompany balances and transactions have been
eliminated in consolidation.
Unconsolidated Affiliates - The equity method of accounting
is utilized when the Company, through ownership percentage,
membership on the Board of Directors or through other means, meets
the requirement of significant influence over the operating and
financial policies of an investee.
The Company's 42.5% ownership interest in S.I.P., Inc. of
Delaware is accounted for using the equity method. Under the
equity method, original investments are recorded at cost and
adjusted by the Company's share of distributions and undistributed
earnings and losses of the investment. The cost method of
accounting is used for the Company's 36.6% ownership interest in
Atlas Machine & Iron Works, Inc. ("Atlas") since the Company can
not exert significant influence over Atlas's operating and
financial policies (See Note 9).
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.
Depreciation and Amortization - Property and equipment are
recorded at cost and are depreciated over the estimated useful
lives of the assets using the straight-line method of depreciation
for financial statement purposes, with estimated lives of 25 years
for buildings and 3 to 12 years for equipment, vehicles, tools,
furniture and fixtures. Leasehold improvements are amortized over
the lesser of 10 years or the remaining term of the lease.
Straight-line and accelerated methods of depreciation are used for
income tax purposes.
Ordinary maintenance and repair costs are charged to expense
as incurred while major renewals and improvements are capitalized.
Upon the sale or retirement of property and equipment, the cost
and accumulated depreciation are removed from the respective
accounts and any gain or loss is recognized.
Earnings Per Common Share - "Earnings Per Common Share-Basic"
is based on the weighted average number of shares outstanding
during the year. "Earnings Per Common Share-Diluted" is based on
the shares outstanding and the weighted average of commitments to
issue stock, which may include convertible debentures, stock
options, or grants.
Revenue Recognition - Revenues and earnings from long-term
construction contracts are recognized for financial statement
purposes using the percentage-of-completion method; therefore,
revenue includes that percentage of the total contract price that
the cost of the work completed to date bears to the estimated
final cost of the contract. Estimated contract earnings are
reviewed and revised periodically as the work progresses, and the
cumulative effect of any change in estimate is recognized in the
period in which the estimate changes. When a loss is anticipated
on a contract, the entire amount of the loss is provided for in
the current period. Contract claims are recorded at estimated net
realizable value (see Note 2).
Overhead - Overhead includes the variable, non-direct costs
such as shop salaries, consumable supplies, and vehicle and
equipment costs incurred to support the revenue generating
activities of the Company.
Inventories - Inventories consist of materials, expendable
equipment and tools, and supplies. Materials inventory consists
of structural steel, metal decking, and steel cable. Expendable
tools and equipment, and supplies consist of goods which are
consumed on projects. Costs of materials inventory is accounted
for using either the specific identification method or average
cost. Cost of expendable equipment and tools is accounted for
using average costs. The cost of supplies inventory is accounted
for using the first-in, first-out, (FIFO) method.
Allowance for Doubtful Accounts - Allowances for
uncollectible accounts and notes receivable are provided on the
basis of specific identification.
Income Taxes - Williams Industries, Inc. and its
subsidiaries, which are at least eighty percent owned by the
parent, file a consolidated Federal income tax return. The
provision for income taxes has been computed under the
requirements of Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes". Under SFAS No. 109,
deferred tax assets and liabilities are determined based on the
difference between the financial statement and the tax basis of
assets and liabilities, using enacted tax rates in effect for the
year in which the differences are expected to reverse.
The Company does not provide for income taxes on the
undistributed earnings of affiliates since these amounts are
intended to be permanently reinvested. The cumulative amount of
undistributed earnings on which the Company has not recognized
income taxes as of July 31, 1998 is approximately $1,060,000.
Cash and Cash Equivalents - For purposes of the Statements of
Cash Flows, the Company considers all highly liquid instruments
and certificates of deposit with original maturities of less than
three months to be cash equivalents.
Restricted Cash - The Company's restricted cash is invested
in short-term, highly liquid investments. The carrying amount
approximates fair value because of the short-term maturity of
these investments.
Certificates of Deposit - The Company's certificates of
deposit have original maturities greater than 90 days, but not
exceeding one year.
Stock-Based Compensation - The Company has elected to follow
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees" and related interpretations in
accounting for its employee stock options. Under APB 25, because
the exercise price of employee stock options equals the market
price of the underlying stock on the date of the grant, no
compensation expense is recorded. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation."
Reclassifications - Certain reclassifications of prior years'
amounts have been made to conform with the current year's
presentation.
The Company has presented classified balance sheets at July
31, 1998 and 1997. Previously, an unclassified balance sheet was
issued at July 31, 1997 and earlier years because many contracts
the Company entered into took in excess of one year to complete.
Therefore, the Company's operating cycle exceeded 1 year.
Currently, most of the Company's contracts are completed
within one year, and therefore a classified balance sheet is
meaningful. As a result, the 1997 balance sheet has been
reclassified to conform to the 1998 classified presentation.
RECENT ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No.
131, "Disclosures about Segments of an Enterprise and Related
Information". As specified by these Statements, the Company will
apply these Statements beginning in Fiscal 1999 and reclassify the
financial statements of earlier periods for comparative purposes.
SFAS 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial
statements. This Statement requires that all items that are
required to be recognized under accounting standards as components
of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial
statements.
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 issued to shareholders. It also establishes
standards for related disclosures about products and services,
geographic areas, and major customers. This Statement supersedes
FASB Statement No. 14, "Financial Reporting for Segments of a
Business Enterprise," but retains the requirement to report
information about major customers. It amends FASB No. 94,
"Consolidation of All Majority-Owned Subsidiaries," to remove the
special disclosure requirements for previously unconsolidated
subsidiaries.
In February 1998 FASB issued SFAS 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits - an
amendment of SFAS No.'s 87, 88, and 106". SFAS No. 132 revises
employers' disclosure about pension and other postretirement
benefit plans.
In June 1998, FASB issued SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards for derivative
instruments and for hedging activities.
The Company has determined that there will be no material
impact on the Company's financial position or results of
operations from adoption of SFAS 130, SFAS 131, SFAS 132 and SFAS
133.
1. INVENTORY
<TABLE>
<CAPTION>
Inventory consisted of the following at July 31:
1998 1997
---------- ----------
<S> <C> <C>
Expendable tools and equipment $ 805,318 $ 761,565
Supplies 351,664 414,507
Materials 1,407,017 1,551,742
---------- ----------
Total Inventory 2,563,999 2,727,814
Less: amount classified
as long-term 1,243,754 1,264,997
---------- ----------
$1,320,245 $1,462,817
========== ==========
</TABLE>
2. 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 believes 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. Contract
claims were zero and $534,025 as of July 31, 1998 and 1997,
respectively.
3. GAIN ON EXTINGUISHMENT OF DEBT
During the year ended July 31, 1998, the Company recognized a
"Gain on Extinguishment of Debt" in the amount of $809,000 arising
from the ongoing liquidation of its subsidiary John F. Beasley
Construction Company, under the auspices of the U.S. Bankruptcy
Court for the Northern District of Texas. This amount represents
accounts payable which will not be paid under the Chapter 11 Plan
confirmed by the court. The finalization of the bankruptcy is not
expected to have any further material impact on the Company's
financial position, results of operations, or cash flows.
The Company also recognized a "Gain on Extinguishment of
Debt" in the amount of $119,000 for the year ended July 31, 1998
relating to the liquidation of its Arthur Phillips and Company
subsidiary.
During the year ended July 31, 1997 and 1996 the Company
recognized "Gain on Extinguishment of Debt" of $3,189,000 and
$808,000 as the result of forgiveness of Bank Group Debt (see Note
10).
4. RELATED-PARTY TRANSACTIONS
Certain shareholders owning or controlling approximately 17%
of the stock of the Company at July 31, 1998, own approximately
67% of the outstanding stock of Williams Enterprises of Georgia,
Inc. Billings to this entity and its affiliates were
approximately $1,530,000 and $1,205,000 for the years ended July
31, 1998 and 1997. Billings to this entity and its affiliates
were not significant for the year ended July 31, 1996. Notes
payable to this entity amounted to $48,000 and $100,000 at July
31, 1998 and 1997.
Certain shareholders owning or controlling approximately 17%
of the stock of the Company at July 31, 1998, own 100% of the
stock of the Williams and Beasley Company. Net billings from this
entity during the years ended July 31, 1998 and 1997 were
approximately $181,000 and $436,000, respectively. Billings from
this entity were not significant for the year ended July 31, 1996.
A shareholder owning or controlling approximately 17% of the
stock of the Company at July 31, 1998, serves on the board of
directors of Concrete Structures, Inc. (CSI), a former subsidiary
of the Company, which filed for reorganization under Chapter 11 of
the U.S. Bankruptcy Code on July 22, 1998. During the years ended
July 31, 1998, 1997, and 1996, billings to this entity by the
Company were $154,000, $617,000, and $65,000. At July 31, 1998
approximately $305,000 was unpaid from CSI, against which the
Company has provided a reserve for the portion which it believes
is at risk of not being received. In addition, at July 31, 1998,
CSI was indebted to the Company for approximately $240,000 on a
note secured by the assets of CSI. CSI is in default on this
note, however this default has not caused an impact to the
Company's financial position since the note was fully reserved at
the time it was issued.
During the year ended July 31, 1998, the Company borrowed
$75,000 from an officer, which was repaid. The money was used to
redeem one of the Company's convertible debentures that had been
issued to the FDIC.
Amounts owing to, or on account of, current and former
directors of the Company amounted to $236,350 and $297,704 at July
31, 1998 and 1997.
5. CONTRACTS IN PROCESS
<TABLE>
<CAPTION>
Comparative information with respect to contracts in process
consisted of the following at July 31:
1998 1997
------------- -------------
<S> <C> <C>
Expenditures
on uncompleted contracts $ 15,255,899 $ 21,670,677
Estimated earnings 4,258,377 7,984,347
------------- -------------
19,514,276 29,655,024
Less: Billings (20,733,419) (31,782,286)
------------- -------------
$ (1,219,143) $ (2,127,262)
============= =============
Included in the accompanying
balance sheet
under the following captions:
Costs and estimated earnings in
excess of billings on
uncompleted contracts $ 665,926 $ 845,325
Billings in excess of costs and
estimated earnings on
uncompleted contracts (1,885,069) (2,972,587)
------------- -------------
$ (1,219,143) $ (2,127,262)
============= =============
</TABLE>
Billings are based on specific contract terms that are
negotiated on an individual contract basis and may provide for
billings on a unit price, percentage of completion or milestone
basis.
6. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consisted of the following at July 31:
1998 1997
---- ----
Accumulated Accumulated
Cost Depreciation Cost Depreciation
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Land and
buildings $ 4,803,663 $1,562,604 $ 6,320,073 $2,052,366
Automotive
equipment 1,974,331 1,357,120 1,585,188 1,140,321
Cranes and heavy
equipment 9,435,468 4,605,789 9,312,084 4,469,639
Tools and
equipment 809,462 693,357 798,024 658,399
Office furniture
and fixtures 486,921 388,440 422,834 356,001
Leased property
under capital
leases 740,000 271,368 740,000 197,368
Leasehold
improvements 816,641 476,665 895,195 513,061
---------- ---------- ----------- ----------
$19,066,486 $9,355,343 $20,073,398 $9,387,155
=========== ========== =========== ==========
</TABLE>
7. NOTES AND LOANS PAYABLE
<TABLE>
<CAPTION>
Notes and loans payable consisted of the following at July
31:
1998 1997
----------- -----------
<S> <C> <C>
Collateralized:
Loan payable to CIT/Credit
Finance; collateralized by
inventory, equipment and real
estate; interest at prime
+ 2.5% (11.0% as of 7/31/98 and
7/31/97) due 3/31/2000 $2,053,384 $1,909,274
Loans payable to NationsBank;
collateralized by real estate
and certain other collateral not
granted to CIT; interest at
11.0% fixed; due 4/30/1998 - 2,492,497
Loans payable to Franklin National
Bank; collateralized by real
estate and certain other
collateral not granted to CIT;
interest at 9.5% fixed; due
4/30/2003 894,034 -
Obligations under capital leases;
collateralized by leased property;
interest from 10.2% to 13.4% for 1998
and 8.0% to 11.0% for 1997
payable in varying monthly or
quarterly installments 408,682 409,174
Installment obligations; collateralized
by machinery and equipment or real
estate; interest from 2.9% to 15.2%
for 1998 and 7.9% to 18.0% for 1997;
payable in varying monthly installments
of principal and interest through 2008. 4,449,545 4,578,959
Industrial Revenue Bond; collateralized
by a letter of credit which in turn
is collateralized by real estate;
principal payable in varying monthly
installments through 2007;
variable interest based on
third party calculations. 1,265,000 1,540,000
Unsecured:
NationsBank/FDIC (Bank Group):
Convertible debentures;
interest at prime plus 2.5%;
principal payable on February 1,
2001; convertible to 20% of the
Company's outstanding and committed
stock after issuance. - 500,000
FDIC: Convertible
debenture; non-interest bearing;
principal payable on
August 1, 1998;
convertible to 110,294
common shares - 75,000
First Tennessee: Convertible
subordinated debenture;
interest at 10% to prime plus 1.5%;
convertible to common stock of
the Company at the ratio of
$1.43 per common share. - 100,000
Lines of credit, interest
at 5.0% to 10.0% for 1998 and
prime to prime plus
1.0% to 13.5% for 1997 136,444 271,269
Installment obligations with
interest from 6.0% to 10.0% for
1998 and 7.3% to 13.5% for 1997;
due in varying monthly
installments of principal and
interest through 2005. 1,097,648 761,883
----------- -----------
Total Notes Payable $10,304,737 $12,638,056
Notes Payable - Long Term (8,357,119) (7,356,813)
----------- -----------
Current Portion $ 1,947,618 $ 5,281,243
=========== ===========
</TABLE>
Contractual maturities of the above obligations at July 31,
1998 are as follows:
<TABLE>
<CAPTION>
Year Ended July 31: Amount
- ------------------- -----------
<S> <C>
1999 $ 1,947,618
2000 2,662,456
2001 1,252,101
2002 720,340
2003 1,510,419
2004 and after 2,211,803
-----------
TOTAL $10,304,737
===========
</TABLE>
See Note 10 for additional information concerning the
obligations payable to The CIT Group/Credit Finance, Inc. (CIT),
installment obligations collateralized by real estate and the
Industrial Revenue Bond. As of July 31, 1998, the fair value of
the long term debt carried at $8,357,119 was estimated to be
approximately $8,100,000. The fair value of the Company's long
term debt is based on management's estimate of current interest
rates on similar debt with remaining maturities. At July 31,
1997, the carrying amounts reported above for notes and loans
payable approximate their fair value based upon interest rates for
debt currently available with similar terms and remaining
maturities.
At July 31, 1998 the Company was in compliance with all
restrictive covenants contained in the CIT credit facility, the
Franklin National Bank real estate loan and the Wachovia Bank
reimbursement agreement for the Industrial Revenue Bond. Under
the most restrictive of these covenants, the Company was required
to (1) maintain a minimum net worth of $1.0 million at all times
(2) maintain a current ratio greater than 1.0 at all times (3)
maintain a fixed charge ratio, as defined, of 1.2X and 1.0X as of
July 31, 1998 and 1997 (4) maintain a debt to tangible net worth
of not greater 6.5:1, declining on a graduated scale to 3:1 at
July 31, 2000. Covenants also limit cash capital expenditures to
$100,000 per year and do not allow for payment of cash dividends
to shareholders.
8. INCOME TAXES
The provision for income taxes for the year ended July 31,
1996 represents primarily a current state income tax provision
related to states where the Company cannot file a consolidated or
combined return.
As a result of tax losses incurred in prior years, the
Company at July 31, 1998 has tax loss carryforwards amounting to
approximately $14 million. Under SFAS No. 109, the Company is
required to recognize the value of these tax loss carryforwards if
it is more likely than not that they will be realized by reducing
the amount of income taxes payable in future income tax returns.
This in turn depends on projections of the Company's profitability
in future years during the carryforward period. As a result of
the completion of the restructuring of the Company's Bank Group
debt during 1997 and the return to profitable operations of the
Company's ongoing businesses during the past three years, the
Company expects to report profits for income tax purposes in the
future. As a consequence, the Company recognized a $0.9 million
and $2.2 million portion of the benefit available from its tax
loss carryforwards during the years ended July 31, 1998 and 1997,
respectively.
Realization of this asset is dependent on generating
sufficient taxable income prior to expiration of the loss
carryforwards. Although realization is not assured, management
believes it is more likely than not that all of the recorded
deferred tax asset will be realized. The amount of the deferred
tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the
carryforward period are reduced.
The differences between the tax provision calculated at the
statutory federal income tax rate and the actual tax provision for
each year are shown in the table directly below.
<TABLE>
1998 1997 1996
---------- ------------ -----------
<S> <C> <C> <C>
Tax at statutory
federal rate $ 473,500 $ 429,600 $ 733,000
State income taxes 83,500 75,800 129,000
Change in valuation
reserve (900,000) (2,221,400) (799,500)
---------- ------------ -----------
Actual income tax
(benefit) provision $(343,000) $(1,716,000) $ 62,500
========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
The primary components of temporary differences which give
rise to the Company's net deferred tax asset are shown in the
following table.
As of July 31: 1998 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Reserves & other nondeductible
accruals $ 510,120 $ 883,700
Net operating loss & capital
loss carryforwards 5,180,000 6,618,100
Valuation reserve (2,538,120) (5,175,000)
------------ ------------
Total deferred tax assets 3,152,000 2,326,800
------------ ------------
Deferred tax liability:
Property and equipment (623,600) ( 37,600)
Inventories (288,400) ( 489,200)
------------ ------------
Total deferred tax liability (912,000) ( 526,800)
------------ ------------
Net deferred tax asset $ 2,240,000 $ 1,800,000
============ ============
</TABLE>
9. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
Investments in unconsolidated affiliates consisted of the
following at July 31:
<S> <C> <C>
1998 1997
---------- ----------
Investment valued using the
Equity Method
S.I.P., Inc. of Delaware
(42.5% owned) $ 979,769 $ 960,269
Investment valued using the
Cost Method
Atlas Machine and Iron Works,
Inc.(36.6% owned) - 810,671
---------- ----------
$ 979,769 $1,770,940
========== ==========
</TABLE>
Atlas Machine and Iron Works, filed a voluntary bankruptcy
petition in December 1996. In the year ended July 31, 1997, the
Company reduced the value of its investment in Atlas by $200,000
due to the bankruptcy filing. In the second quarter of the year
ended July 31, 1998, the Company wrote off the remaining value of
approximately $800,000 because of the liquidation of Atlas' assets
by its secured creditors. These amounts are included in "Equity
in (loss) earnings of unconsolidated affiliates" in the
accompanying Consolidated Statements of Earnings.
10. BUSINESS CONDITIONS AND DEBT RESTRUCTURING
From the early 1990s through the year ended July 31, 1998,
Williams Industries, Inc. underwent massive downsizing and debt
restructuring. Included in these events were:
Bank Group Debt
The restructuring of the Bank Group Debt was concluded as of
March 31, 1997 with the execution of agreements between the
Company, representatives of the Company's Bank Group, and CIT.
Funding of the transactions occurred on April 2, 1997. The
following is a summary of the transactions which enabled the
closing to occur:
CIT: The Company entered into a Loan and Security Agreement
with CIT for a credit facility of approximately $3 million. This
loan requires monthly principal payments as well as interest at
prime plus 2.5%. Payments began on May 1, 1997 and are due on the
first of each month. The loan has a three year term. This loan
is secured by the Company's equipment and receivables as well as
subordinate deeds of trust on the Company's real estate.
At closing, the Company received an advance of $2.5 million
from the CIT credit facility. These funds, in addition to funds
already paid to the Bank Group, were used to pay the balance of
Bank Group Debt and other outstanding past due obligations of the
Company. As of July 31, 1998, approximately $2.1 million was due
on the CIT credit facility.
NationsBank/FDIC: The restructuring of the Bank Group Debt
was concluded and all related debt forgiveness granted. The debt
forgiveness is reflected in the Company's consolidated financial
statements for the year ended July 31, 1997 as "Gain On
Extinguishment of Debt". In connection with the debt forgiveness,
the Company issued $500,000 of convertible debentures. All
debentures issued as a result of this transaction were redeemed or
converted during the year ended July 31, 1998.
NationsBank: In the final restructuring of the Bank Group
Debt, the Bank Group and Real Estate loans were combined and the
combined balance was reduced to $2.5 million as of March 31, 1997.
The combined loan was 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 not granted to CIT to secure the
Company's new loan. The combined loan had a fixed interest rate
of 11% per annum, and required payments based on a 20 year
amortization. The combined loan was refinanced with Franklin
National Bank on April 30, 1998.
Pribyla: In order to obtain the CIT loan, the Company was
required to reach agreement on several outstanding legal issues.
Most of the necessary settlements occurred in the first and second
quarter of the year ended July 31, 1997, but a settlement with Mrs.
Karen Pribyla and the estate of Mr. Eugene Pribyla, regarding
claims for excess medical expenses, coincided with the Bank Group
closing. Under the Company's settlement with Pribyla, the Company
issued 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. This note is secured by subordinate deeds of trust on the
Prince William County, Virginia real estate. The Company also paid
$205,000 in cash and issued 215,000 shares of the Company's common
stock in the settlement. The Company has recorded this note at
its present value considering the effects of the pre-payment
clause.
Real Estate Loan
On April 30, 1998, the Company closed a transaction regarding
its loan from NationsBank with the assignment and modification of
the balance to Franklin National Bank of Washington, DC. The
transaction resulted in the interest rate being reduced from a
fixed interest rate of 11% to 9.5%, with monthly payments
calculated on a fifteen year amortization and a balloon payment
due and payable on April 30, 2003. As of July 31, 1998, the
balance of the loan was approximately $894,000.
Industrial Revenue Bond
In the year ended July 31, 1998, the Company entered into a
First Amendment to Reimbursement Agreement with Wachovia Bank
(formerly Central Fidelity National Bank) for a three-year renewal
of the Letter of Credit backing the Industrial Revenue Bond (IRB)
secured by the Company's Richmond manufacturing facility. All
obligations under the IRB are current and the Company is in
compliance with the covenants contained in the agreement. As of
July 31, 1998, the outstanding balance was approximately $1.27
million. Principal payments are due in increasing amounts through
maturity. A portion of the secured property is leased to a non-
affiliated third party.
11. DISPOSITION OF ASSETS
In January 1998, the Company sold its 2.25 acre headquarters
property in Fairfax County, Virginia to a non-affiliated third
party for $1,430,000. The Company also entered into a lease for
several buildings on the property. The transaction resulted in a
gain of approximately $560,000,of which $254,000 is included in
"Other Income" in the Consolidated Statements of Earnings for the
year ended July 31, 1998. While $560,000 of gain was recognized
in the financial statements for the quarter ended January 31,
1998, the Company subsequently determined in accordance with SFAS
98, "Accounting for Leases/Sale-Leaseback Transactions Involving
Real Estate," that at January 31, 1998 and July 31, 1998, $360,000
and $306,000, respectively, should be deferred. The deferred
amount is being recognized over the remaining lease term.
In June 1998, the Company sold its one acre property in
Baltimore, Maryland to a non-affiliated third party for $135,000.
The transaction resulted in a gain of approximately $98,000 which
is also included in "Other Income" in the Consolidated Statement
of Earnings for the year ended July 31, 1998.
For the years ended July 31, 1998 and 1997, the Company sold
several large pieces of equipment in order to modernize its fleet
and pay off debt. Net gain of approximately $224,000 and
$540,000, respectively, was recognized. The gain from these
transactions is included in "Revenue: Construction" in the
Consolidated Statement of Earnings.
During the year ended July 31, 1997 the Company sold an
office building on the Richmond property which was part of the
real estate encumbered by the IRB. The proceeds from this
$210,000 sale were used to pay obligations related to the IRB.
Also during the year ended July 31, 1997, the Company's
subsidiary, John F. Beasley Construction Company, which was
liquidating its assets under Chapter 11 of the Bankruptcy Code,
sold its remaining two acres in Dallas, Texas and its two acre
parcel in Muskogee, Oklahoma, to an unaffiliated third party for
$90,000. The sales were approved by the U.S. Bankruptcy Court and
produced a loss of approximately $4,000.
In the year ended July 31, 1996, the Company sold:
(1) Six acres owned by the John F. Beasley Construction Company
in Dallas, Texas, 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. Mr.
Bosworth is the former President of the Beasley Building Division.
Two acres owned by Beasley in Dallas, Texas, were sold to a
neighboring property owner not affiliated with the Company. The
sales prices were approved by the Bankruptcy Court. A provision
for the loss of approximately $260,000 from the sale of these
assets was recorded during the year ended July 31, 1995.
(2) Approximately 5.5 acres of its property in Bedford,
Virginia to a non-affiliated party for $50,000.
(3) Some of its real estate in Prince William County, Virginia,
for $2.6 million. The sale resulted in a net gain of
approximately $2.2 million, included in "Other Income" in the
Consolidated Statement of Earnings for the Year Ended July 31,
1996.
(4) Miscellaneous small tools and consumables owned by Williams
Enterprises to a non-affiliated buyer for approximately $75,000.
The proceeds were used to pay Bank Group debt.
(5) A crane for approximately $150,000.
12. COMMON STOCK OPTIONS
Until November 1996, the Company had an Incentive Stock Option
Plan (1990 Plan) which provided that key employees could be
awarded incentive stock options. On October 20, 1990, the Company
granted 33,000 Incentive Stock Options to key employees at the
fair market value of $5.75 per share. None of the options were
exercised within the five year limitation of the grant and all
expired during the year ended July 31, 1996.
At the November 1996 annual meeting, the shareholders
approved the establishment of a new Incentive Stock Option Plan
(1996 Plan) to provide an incentive for maximum effort in the
successful operation of the Company and its subsidiaries by their
officers and key employees and to encourage ownership of the
common shares of the Company by those persons. Under the 1996
Plan, 200,000 shares were reserved for issue.
In May, 1998, the Company's Board of Directors authorized
options for 12,000 shares of stock to subsidiary management under
the Company's 1996 Plan and 12,000 shares of non-incentive stock
options to the non-management members of the Company's Board of
Directors.
The stock option exercise prices were at quoted market value
to 110% of quoted market value on the date of the grant. Since
the Company accounts for its options under the intrinsic method of
APB No. 25, no compensation expense has been recognized for the
incentive stock option grants. Had compensation expense for the
Company's stock-based compensation plans been determined based on
the fair value at grant dates for awards under those plans,
consistent with the method of accounting under SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's net
earnings and earnings per share would have been:
<TABLE>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net earnings
As reported $1,847,740 $6,171,512 $2,960,847
Pro forma 1,823,980 6,171,512 2,960,847
Earnings per share - Basic
As reported $ 0.57 $2.33 $1.15
Pro forma 0.57 2.33 1.15
</TABLE>
The weighted average exercise price and weighted average fair
value for options granted during the year ended July 31, 1998, for
stock options where exercise price was less than, equal to, or
exceed the market price of the Company's stock were as follows:
<TABLE>
Weighted Weighted
Average Average
Exercise Fair
Price Value
-------- --------
<S> <C> <C>
Exercise Price is less than market price - -
Exercise Price is equal to market price $4.25 $3.22
Exercise price is greater than market price 4.68 3.54
</TABLE>
The fair value of each option is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions:
<TABLE>
Year ended July 31, 1998
----------
<S> <C>
Dividend yield 0.0%
Volatility rate 53.0%
Discount rate 5.6%
Expected term (years) 5
</TABLE>
The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
Stock option activity and price information follows:
<TABLE>
Weighted
Average
Number Exercise
of shares Price
--------- --------
<S> <C> <C>
Shares under option, August 1, 1995 33,000 $5.75
Granted - -
Exercised - -
Forfeited 33,000 5.75
------
Shares under option, July 31, 1996 - -
Granted - -
Exercised - -
Forfeited - -
------
Shares under option, July 31, 1997 - -
Granted 24,000 4.30
Exercised - -
Forfeited - -
------
Shares under option, July 31, 1998 24,000 4.30
======
Options exercisable, July 31, 1998 24,000 4.30
======
</TABLE>
13. SEGMENT INFORMATION
<TABLE>
<CAPTION>
Information about the Company's operations in different
industries for the years ended July 31, is as follows:
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Construction $19,772,679 $24,068,633 $18,121,379
Manufacturing 10,271,987 11,203,684 10,287,072
Other revenue 783,765 945,186 963,611
------------ ------------ ------------
30,828,431 36,217,503 29,372,062
Inter-company revenue:
Construction (1,857,974) (1,681,157) (1,989,845)
Manufacturing (66,298) (227,827) ( 224,705)
------------ ------------ ------------
Total Revenue $28,904,159 $34,308,519 $27,157,512
============ ============ ============
Operating profits (Loss):
Construction 2,341,387 $ 2,364,087 $ 1,682,454
Manufacturing 75,398 (58,758) 120,788
------------ ------------ ------------
Consolidated
Operating Profits 2,416,785 2,305,329 1,803,242
General corporate
income, net 85,359 764,932 1,863,457
Interest expense (1,148,952) (1,606,575) (1,510,985)
------------ ------------ ------------
Corporate earnings
before income taxes $ 1,353,192 $ 1,463,686 $ 2,155,714
============ ============ ============
Assets:
Construction 15,730,074 $ 15,878,023 $14,303,853
Manufacturing 6,061,299 6,324,220 6,342,351
General corporate 7,321,822 9,287,476 7,365,548
------------ ------------ ------------
Total Assets $29,113,195 $31,489,719 $28,011,752
============ ============ ============
Capital expenditures:
Construction $ 895,905 $ 2,402,672 $ 2,880,325
Manufacturing 424,668 314,083 113,651
General corporate 68,774 26,570 21,295
------------ ------------ ------------
Total
Capital expenditures $ 1,389,347 $ 2,743,325 $ 3,015,271
============ ============ ============
Depreciation and
Amortization:
Construction $ 923,501 $ 774,559 $ 660,250
Manufacturing 161,347 132,548 137,922
General corporate 136,611 172,575 186,490
------------ ------------ ------------
Total Depreciation
and Amortization $ 1,221,459 $ 1,079,682 $ 984,662
============ ============ ============
</TABLE>
The Company and its subsidiaries operate principally in two
segments within the construction industry; construction and
manufacturing. Operations in the construction segment involve
structural steel erection, installation of steel and other metal
products, installation of precast and prestressed concrete
products, and the leasing and sale of heavy construction
equipment. Operations in the manufacturing segment involve
fabrication of steel plate girders, rolled beams, and light
structural metal products.
Operating profit is total revenue less operating expenses.
In computing operating profit (loss), the following items have not
been added or deducted: general corporate expenses, interest
expense, income taxes, equity in the earnings (loss) of
unconsolidated affiliates and minority interests.
Identifiable assets by segment are those assets that are used
in the Company's operations in each segment. General corporate
assets include investments, some real estate, and other assets not
allocated to segments.
The majority of revenues have historically been derived from
projects on which the Company is a subcontractor of a material
supplier, other contractor or subcontractor. Where the Company
acts as a subcontractor, it is invited to bid by the firm seeking
construction services or materials; therefore, continuing
favorable business relations with those firms that frequently bid
on and obtain contracts requiring such services or materials are
important to the Company. Over a period of years, the Company has
established such relationships with a number of companies. During
the years ended July 31, 1997, and 1996, no single customer
accounted for more than 10% of consolidated revenue; however,
during the year ended July 31, 1998, one single customer accounted
for 10.4% of consolidated revenue and 13.4% of the construction
revenue.
14. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution retirement savings
plan covering substantially all employees. The Plan provides for
optional Company contributions as a fixed percentage of salaries.
Effective January 1, 1998, the Company began contributing 2% of
each eligible employee's salary.
15. COMMITMENTS AND CONTINGENCIES
Industrial Revenue Bond
On September 1, 1997, the Company entered into a First
Amendment to Reimbursement Agreement with Wachovia Bank (formerly
Central Fidelity National Bank) for a three-year renewal for the
Letter of Credit backing the Industrial Revenue Bond issue on the
Company's Richmond manufacturing facility. All obligations under
the IRB are current and the Company is in compliance with the
covenants contained in the agreement. As of July 31, 1998, the
debt was approximately $1.27 million and it is secured by the real
estate in the City of Richmond. Principal payments are due in
increasing amounts through 2007. A portion of the property
covered by the Industrial Revenue Bond is leased to a non-
affiliated third party.
Precision Components Corp.
The suit by Industrial Alloy Fabricators, Inc. and Precision
Components Corp. against the Company and IAF Transfer Corporation,
sought $300,000 plus interest and fees arising from a product
liability claim against the Company. The Company received a
favorable decision in this case, and judgment in favor of the
Company was entered on March 4, 1998 by the Circuit Court for the
City of Richmond. The plaintiffs have perfected an appeal to the
Virginia Supreme Court, which the Court accepted on September 21,
1998. It is expected the case will be argued early in 1999.
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.
General
The Company is party to various other claims arising in the
ordinary course of its business. Generally, claims exposure in
the construction services industry consists of workers
compensation, personal injury, products' liability and property
damage. The Company believes that its insurance accruals, coupled
with its liability coverage, is adequate coverage for such claims.
Falls Church Property
At the time of the sale of the Falls Church, Virginia
property, January 28, 1998, the Company entered into a lease-back
arrangement for three buildings in the complex. Maximum future
lease payments for the Falls Church property are approximately
$132,000, $135,000, and $92,000 for the years ending July 31,
1999, 2000, and 2001, respectively. The agreement provides that
the landlord may cancel with six months notice to the Company.
Leases
The Company leases certain property, plant and equipment
under operating lease arrangements that expire at various dates
though 2011. Lease expenses approximated $580,000, $278,000, and
$90,300 for the years ended July 31, 1998, 1997, and 1996,
respectively. At July 31, 1998, future minimum lease commitments
required under non-cancelable leases were as follows:
<TABLE>
Year Ending July 31: Amount
- ------------------- ----------
<S> <C>
1999 $742,000
2000 744,000
2001 654,000
2002 529,000
2003 529,000
Thereafter $1,628,000
</TABLE>
16. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the years ended July 31, 1998, 1997 and 1996, the
Company entered into several financing agreements by issuance of
notes payable to acquire assets with a cost of $442,000,
$1,882,000 and $2,091,000, respectively. These amounts are not
included in the accompanying Consolidated Statements of Cash
Flows because the proceeds went directly to the seller of the
assets.
During the years ended July 31, 1998, 1997 and 1996, the
Company issued stock bonuses in lieu of cash bonuses to certain
officers. The number of shares issued for this purpose were
36,363, 22,000, and 35,000 respectively.
During the year ended July 31, 1998, the Company redeemed two
convertible debentures with a carrying value of $165,000. Also,
the Company issued 690,697 shares upon conversion of two
convertible debentures with a carrying value of $510,000. During
the year ended July 31, 1997 the Company issued 215,000 shares in
connection with the Pribyla settlement that had a carrying value
of approximately $316,000.
<TABLE>
Cash paid during
the year ended July 31: 1998 1997 1996
for: ---------- ---------- ----------
<S> <C> <C> <C>
Income taxes $ 45,800 $ 72,000 $ 16,500
---------- ---------- ----------
Interest $1,123,982 $1,268,683 $1,062,171
---------- ---------- ----------
</TABLE>
17. SUBSEQUENT EVENTS
Subsequent to July 31, 1998, the Company received a
commitment from The CIT Group/Credit Finance, Inc. to extend the
maturity on its loan to March 31, 2001. Formal documentation of
this commitment is in process.
In addition, the Company agreed to sell approximately four
acres of its Bedford, Virginia property to a non-affiliated third
party for $40,000.
18. EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board
issued SFAS No. 128, "Earnings Per Share" (EPS) which simplifies
the standards for computing EPS previously found in Accounting
Principles Board Opinion No. 15 and makes them comparable to
international EPS standards. The Statement is effective for
financial statements issued for periods ending after December 15,
1997. The Company adopted this statement during the year ended
July 31, 1998. The 1997 and 1996 earnings per share are restated
to conform to the new presentation.
<TABLE>
Year ended July 31, 1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
EPS-basic $0.57 $2.33 $1.15
EPS-diluted 0.52 2.13 1.12
</TABLE>
<TABLE>
<CAPTION>
The following is a reconciliation of the amounts used in
calculating the basic and diluted earnings per share:
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Earnings (Numerator)
Net earnings - basic $1,847,740 $6,171,512 $2,960,847
Interest expense
on convertible debentures 76,683 269,669 -
--------- --------- ---------
Net earnings - diluted $1,924,423 $6,441,181 $2,960,847
========= ========= =========
Shares (Denominator)
Weighted average shares
outstanding - basic 3,214,117 2,649,872 2,565,725
Effect of dilutive securities:
Options 410 - 7,792
Convertible debentures 486,733 378,717 69,930
--------- --------- ---------
Weighted average shares
outstanding - diluted 3,701,260 3,028,589 2,643,447
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Williams Industries, Inc.
Schedule II - Valuation and Qualifying Accounts
Years Ended July 31, 1998, 1997 and 1996
Column A Column B Column C Column D Column E
- -------- -------- ------------------- --------- ---------
Additions
-------------------
Charged
Balance at Charged to to Other Balance
Beginning Costs and Accounts- Deductions- at End of
Description of Period Expenses Describe Describe Period
<S> <C> <C> <C> <C> <C>
July 31, 1998:
Allowance for
doubtful
accounts $ 758,141 $ 1,017 $757,597(3) $ (16,889)(1) $1,211,128
(288,738)(2)
July 31, 1997:
Allowance for
doubtful
accounts 953,921 60,246 293,000(3) (212,867)(1) 758,141
(336,159)(2)
July 31, 1996:
Allowance for
doubtful
accounts 1,633,566 243,885 246,410(3) (19,944)(1) 953,921
(1,149,996)(2)
</TABLE>
(1) Collection of accounts previously reserved.
(2) Write-off from reserve accounts deemed to be uncollectible.
(3) Reserve of billed extras charged against corresponding revenue account.
</PAGE>
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
October 14, 1998 /s/ Frank E. Williams, III
Frank E. Williams, III
President, Chairman of the
Board
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<CASH> 2,170,959
<SECURITIES> 0
<RECEIVABLES> 10,906,272
<ALLOWANCES> (1,211,000)
<INVENTORY> 1,320,245
<CURRENT-ASSETS> 14,454,797
<PP&E> 19,066,486
<DEPRECIATION> (9,355,343)
<TOTAL-ASSETS> 29,113,195
<CURRENT-LIABILITIES> 11,433,008
<BONDS> 8,357,119
0
0
<COMMON> 357,643
<OTHER-SE> 8,775,807
<TOTAL-LIABILITY-AND-EQUITY> 29,113,195
<SALES> 0
<TOTAL-REVENUES> 28,904,159
<CGS> 0
<TOTAL-COSTS> 17,405,462
<OTHER-EXPENSES> 9,353,015
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,148,952
<INCOME-PRETAX> 1,353,192
<INCOME-TAX> (343,000)
<INCOME-CONTINUING> 919,740
<DISCONTINUED> 0
<EXTRAORDINARY> 928,000
<CHANGES> 0
<NET-INCOME> 1,847,740
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.52
</TABLE>
