SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
FOR QUARTER ENDED January 31, 1999
COMMISSION FILE NO. 0-8190
WILLIAMS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0899518
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2849 MEADOW VIEW ROAD, FALLS CHURCH, VIRGINIA 22042
(Address of Principal Executive Offices) (Zip Code)
(703) 560-5196
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former names, former address and former fiscal year,
if changes since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
3,579,791
Number of Shares of Common Stock Outstanding at January 31, 1999
</PAGE>
<PAGE>
<TABLE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
January 31, January 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUE ----------- ----------- -----------
- -----------
Construction $3,885,262 $3,353,201 $8,576,455 $7,041,071
Manufacturing 2,714,241 2,060,127 5,299,739 4,926,093
Other 173,534 219,053 326,310 449,167
----------- ----------- -----------
- -----------
Total revenue 6,773,037 5,632,381 14,202,504 12,416,331
----------- ----------- -----------
- -----------
DIRECT COSTS
Construction 2,291,284 2,152,236 5,313,443 4,107,818
Manufacturing 1,512,002 1,679,297 3,005,319 3,940,641
----------- ----------- -----------
- -----------
Total direct costs 3,803,286 3,831,533 8,318,762 8,048,459
----------- ----------- -----------
- -----------
GROSS PROFIT 2,969,751 1,800,848 5,883,742 4,367,872
----------- ----------- -----------
- -----------
OTHER INCOME 54,681 204,056 85,434 204,056
----------- ----------- -----------
- -----------
EXPENSES
Overhead 922,082 746,803 1,811,809 1,471,002
General and
administrative 1,206,215 1,160,565 2,515,269 2,146,739
Depreciation 317,727 304,556 632,146 611,056
Interest 235,784 285,476 444,632 620,852
----------- ----------- -----------
- -----------
Total expenses 2,681,808 2,497,400 5,403,856 4,849,649
----------- ----------- -----------
- -----------
EARNINGS (LOSS)
BEFORE INCOME TAXES,
EQUITY EARNINGS AND
MINORITY INTERESTS 342,624 (492,496) 565,320
(277,721)
INCOME TAX
PROVISION (BENEFIT) 130,700 (19,000) 210,700 59,400
----------- ----------- -----------
- -----------
EARNINGS (LOSS) BEFORE
EQUITY EARNINGS AND
MINORITY INTERESTS 211,924 (473,496) 354,620
(337,121)
Equity in earnings
(loss) of
unconsolidated
affiliates 17,500 (799,971) 59,100
(789,871)
Minority interest in
consolidated
subsidiaries (14,622) (11,155) (25,361)
(20,574)
----------- ----------- -----------
- -----------
EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEM 214,802 (1,284,622) 388,359
(1,147,566)
EXTRAORDINARY ITEM
Gain on extinguishment
of debt - 809,000 - 809,000
----------- ----------- -----------
- -----------
NET EARNINGS (LOSS) $214,802 $(475,622) $388,359
$(338,566)
=========== =========== ===========
===========
EARNINGS (LOSS) PER
COMMON SHARE - BASIC:
Profit (loss) before
extraordinary item $0.06 $(0.44) $0.11
$(0.40)
Extraordinary item - 0.28 - 0.28
----------- ----------- -----------
- -----------
EARNINGS (LOSS) PER
COMMON SHARE- BASIC $0.06 $(0.16) $0.11
$(0.12)
=========== =========== ===========
===========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING: BASIC 3,577,069 2,915,568 3,576,749 2,881,533
----------- ----------- -----------
- -----------
See Notes To Condensed Consolidated Financial Statements
</TABLE>
</PAGE>
<TABLE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
January 31, 1999 July 31, 1998
------------------ ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 841,351 $ 1,384,339
Restricted cash 15,330 54,004
Certificates of deposit 926,326 732,616
Accounts receivable, (net of
allowances for doubtful
accounts of $1,144,000 at
January 31, 1999 and
$1,211,000 at July 31, 1998):
Contracts
Open accounts 7,926,495 7,057,543
Retainage 312,637 585,506
Trade 1,659,751 1,749,778
Other 128,182 302,445
Inventory 3,784,619 1,320,245
Costs and estimated earnings
in excess of billings on
uncompleted contracts 753,648 665,926
Notes receivable 32,106 33,706
Prepaid expenses 1,402,182 568,689
------------ ------------
Total current assets 17,782,627 14,454,797
------------
- ------------
PROPERTY AND EQUIPMENT, AT COST 19,155,307 19,066,486
Accumulated depreciation (9,839,666) (9,355,343)
------------ ------------
Property and equipment, net 9,315,641 9,711,143
------------
- ------------
OTHER ASSETS
Notes receivable 106,111 128,761
Investments in unconsolidated
affiliates 1,005,344 979,769
Deferred income taxes 2,060,000 2,240,000
Inventory 1,241,006 1,243,754
Other 613,951 354,971
------------ ------------
Total other assets 5,026,412 4,947,255
------------ ------------
TOTAL ASSETS $32,124,680 $29,113,195
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion
of notes payable $2,580,695 $1,947,618
Accounts payable 5,065,919 4,017,376
Accrued compensation and
related liabilities 634,307 760,620
Billings in excess of costs
and estimated earnings on
uncompleted contracts 3,369,067 1,885,069
Deferred income 245,028 306,000
Other accrued expenses 2,230,730 2,357,125
Income taxes payable 112,400 159,200
------------ ------------
Total current liabilities 14,238,146 11,433,008
------------ ------------
LONG-TERM DEBT
Notes payable,
less current portion 8,137,698 8,357,119
------------ ------------
Total Liabilities 22,375,844 19,790,127
------------ ------------
MINORITY INTERESTS 213,579 189,618
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - $0.10 par value,
10,000,000 shares authorized;
3,579,791 and 3,576,429 shares
issued and outstanding 357,979 357,643
Additional paid-in capital 16,398,816 16,385,704
Accumulated deficit (7,221,538) (7,609,897)
------------ ------------
Total stockholders' equity 9,535,257 9,133,450
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $32,124,680 $29,113,195
============ ============
See Notes To Condensed Consolidated Financial
Statements.
</TABLE>
</PAGE>
<TABLE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended January 31, 1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 388,359 $ (338,566)
Adjustments to reconcile net earnings
(losses) to net cash used in operating
activities:
Depreciation and amortization 632,146 611,056
Decrease in
allowance for doubtful accounts (66,710) (101,486)
Gain on extinguishment of debt - (809,000)
Gain on disposal of property,
plant and equipment (34,140) (777,045)
Decrease in deferred income taxes 180,000 7,000
Minority interest in earnings 25,361 20,574
Equity in (earnings)
losses of affiliates (59,100) 789,871
Dividend from unconsolidated affiliate 33,525 44,700
Changes in assets and liabilities:
Decrease in notes receivable 24,250 28,932
(Increase) decrease in
open contracts receivable (785,241) 1,210,396
Decrease in contract retainage 272,869 181,908
Decrease in trade receivables 101,026 274,950
Decrease (increase) in other receivables 146,263 (226,432)
(Increase) decrease in inventories (2,461,626) 493,115
Decrease (increase) in
costs and estimated earnings
related to billings on
uncompleted contracts (net) 1,396,276 (962,718)
Increase in prepaid expenses
and other assets (1,092,473) (683,011)
Increase (decrease)
in accounts payable 1,048,543 (417,774)
Decrease in accrued compensation
and related liabilities (126,313) (262,072)
Decrease in other accrued expenses (126,395) (2,040)
(Decrease) increase in deferred income (60,972) 359,995
(Decrease) increase in
income taxes payable (46,800) 44,000
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (611,152) (513,647)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property,
plant and equipment (381,754) (386,002)
Decrease in restricted cash 38,674 238,793
Proceeds from sale of property,
plant and equipment 179,250 1,859,159
Purchase of certificates of deposit (496,299) (202,589)
Maturities of certificates of deposit 302,589 200,308
----------- -----------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (357,540) 1,709,669
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 2,259,817 1,457,917
Repayments of notes payable (1,846,161) (3,280,298)
Issuance of common stock 13,448 50,464
Minority interest dividends (1,400) (4,500)
----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 425,704 (1,776,417)
----------- -----------
NET DECREASE IN CASH AND EQUIVALENTS (542,988) (580,395)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 1,384,339 1,867,144
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 841,351 $ 1,286,749
----------- -----------
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Income Taxes $76,800 $8,400
=========== ===========
Interest $468,584 $615,874
=========== ===========
See Notes To Condensed Consolidated Financial Statements
</TABLE>
</PAGE>
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1999
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated financial statements
have been prepared in accordance with rules established by the
Securities and Exchange Commission. Certain financial disclosures
required to present the financial position and results of
operations
in accordance with generally accepted accounting principles are
not
included herein. The reader is referred to the financial
statements
included in the annual report to shareholders for the year ended
July 31, 1998. The interim financial information included herein
is
unaudited. However, such information reflects all adjustments,
consisting solely of normal recurring adjustments which are, in
the
opinion of management, necessary for a fair presentation of the
financial position as of January 31, 1999 and the results of
operations for the three and six months ended January 31, 1999 and
1998, and cash flows for the six months ended January 31, 1999 and
1998.
Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during
the reporting period. Actual results could differ from those
estimates.
Basis of Consolidation - The condensed consolidated financial
statements include the accounts of the Company and all of its
majority-owned subsidiaries. All material intercompany balances
and
transactions have been eliminated in consolidation.
RECENT ACCOUNTING PRONOUNCEMENTS:
Effective August 1, 1998, the Company adopted Statement of
Financial Accounting Standards: Statement No. 130, "Reporting
Comprehensive Income" (SFAS 130). SFAS No. 130 establishes
standards for reporting and displaying comprehensive income and
its
components. There are no items that the Company is required to
recognize as components of comprehensive income.
SFAS 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", revises disclosure about pension and
other
postretirement benefit plans. It is required to be adopted in
Fiscal Year 1999 and has no impact on the company's financial
statements.
SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities", establishes accounting and reporting standards for
derivative instruments and for hedging activities. This standard
will be adopted in Fiscal 2000. The Company has not yet
determined
what the impact, if any, of implementing this standard will be.
1. INVENTORIES
Inventory consisted of the following:
January 31, July 31,
1999 1998
---------- ----------
Expendable tools
and equipment $ 805,318 $ 805,318
Supplies 350,647 351,664
Materials 3,869,660 1,407,017
---------- ----------
Total Inventory $5,025,625 $2,563,999
Less: Amount classified
as long-term 1,241,006 1,243,754
---------- ----------
$3,784,619 $1,320,245
---------- ----------
2. RELATED-PARTY TRANSACTIONS
Certain shareholders owning or controlling approximately 17%
of
the outstanding stock of the Company own controlling interest in
the
outstanding stock of Williams Enterprises of Georgia, Inc.
Billings
to this entity and its affiliates were approximately $272,000 and
$755,000 for the three and six months ended January 31, 1999 and
$214,000 and $394,000 for the three and six months ended January
31,
1998, respectively.
Certain shareholders owning or controlling approximately 17%
of
the outstanding stock of the Company own 100% of the stock of The
Williams and Beasley Company. Net billings from this entity were
approximately $23,000 and $127,000 during the three and six months
ended January 31, 1999 and $0 and $57,000 for the three and six
months ended January 31, 1998, respectively.
3. COMMITMENTS/CONTINGENCIES
A: PRECISION COMPONENTS CORPORATION: The Company received a
favorable decision in this case, and judgment in favor of the
Company was entered on March 4, 1998 by the Circuit Court for the
City of Richmond. The plaintiffs, Industrial Alloy Fabricators,
Inc. and Precision Components Corp., have perfected appeal to the
Supreme Court of Virginia, which was accepted on September 21,
1998.
The Virginia Supreme Court heard oral argument on February 23,
1999,
and a decision is pending. The suit, against Williams Industries,
Inc. and IAF Transfer Corporation, is for $300,000 plus interest
and
fees arising from a product liability claim against the Company.
Management believes the ultimate outcome will not have a material
adverse impact on the Company's financial position, results of
operations or cash flows.
B: General: The Company is party to various other claims
arising in the ordinary course of its business. Generally, claims
exposure in the construction services industry consists of workers
compensation, personal injury, products' liability and property
damage. The Company believes that its insurance accruals, coupled
with its liability coverage, is adequate coverage for such claims.
4. EARNINGS PER SHARE
SFAS 128 "Earnings per Share", which became effective for
financial statement periods ending after December 15, 1997,
requires
that a reconciliation of the numerators and the denominators of
the
basic and diluted per-share computations for income from
continuing
operations be presented for each period for which the income
statement is presented. Diluted earnings per share for the three
and six months ended January 31, 1999 are not presented because
the
impact of the outstanding options was not dilutive. Diluted
earnings per share for the three and six months ended January 31,
1998 are not presented because the Company was in a loss position
and the assumed conversion of convertible debentures would have
been
antidilutive.
The objective of the Basic EPS is to measure the performance
of
an entity over the reporting period. Basic EPS is computed by
dividing the income available to common stockholders (the
numerator)
by the weighted average number of common shares outstanding (the
denominator) during the period. Shares issued during the period
and
shares reacquired during the period are weighted for the portion
of
the period they were outstanding.
5. SEGMENT INFORMATION
Effective August 1, 1998, the Company adopted SFAS 131,
"Disclosures about Segments of an Enterprise and Related
Information".
SFAS 131 establishes standards for the way that public
business
enterprises report information about operating segments in annual
financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports to issued shareholders. It also establishes standards for
related disclosures about products and services, geographic areas,
and major customers.
Information about the Company's operations in its operating
segments for the three months ended January 31, 1999 and 1998, is
as
follows:
<TABLE>
Three Months Ended Six Months Ended
January 31, January 31,
<CAPTION>
1999 1998 1999 1998
----------- ----------- -----------
- -----------
<S> <C> <C> <C> <C>
Revenues:
Construction $4,307,467 $3,705,875 $9,469,548 $7,574,276
Manufacturing 2,902,275 2,073,900 5,562,440 4,950,132
Other 304,393 306,805 592,463 626,737
----------- ----------- -----------
- -----------
7,514,135 6,086,580 15,624,451 13,151,145
----------- ----------- -----------
- -----------
Intersegment revenues:
Construction 422,205 352,674 893,093 533,205
Manufacturing 188,034 13,773 262,701 24,039
Other 130,859 87,752 266,153 177,570
----------- ----------- -----------
- -----------
Total 741,098 454,199 1,421,947 734,814
----------- ----------- -----------
- -----------
Consolidated revenues:
Construction 3,885,262 3,353,201 8,576,455 7,041,071
Manufacturing 2,714,241 2,060,127 5,299,739 4,926,093
Other 173,534 219,053 326,310 449,167
----------- ----------- -----------
- -----------
Total consolidated
revenues 6,773,037 5,632,381 14,202,504 12,416,331
----------- ----------- -----------
- -----------
Depreciation:
Construction 241,358 227,752 480,919 455,644
Manufacturing 48,573 37,636 96,153 74,775
Other 27,796 39,168 55,074 80,637
----------- ----------- -----------
- -----------
Total 317,727 304,556 632,146 611,056
----------- ----------- -----------
- -----------
Earnings before income
taxes, equity earnings
and minority interest:
Construction 224,405 937,312 554,253 1,672,426
Manufacturing 308,068 8,564 541,408
(51,780)
Other (189,849) (1,438,372) (530,341)
(1,898,367)
----------- ----------- -----------
- -----------
Total $ 342,624 $ (492,496) $ 565,320 $
(277,721)
----------- ----------- -----------
- -----------
Segment assets:
Construction $16,365,641 $15,484,551
Manufacturing 9,461,665 5,603,095
Other 6,297,374 6,811,170
-----------
- -----------
Total $32,124,680 $27,898,816
-----------
- -----------
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Overall activity in each of the company's construction
subsidiaries increased during the second quarter of Fiscal 1999 as
marketplace demands continued to be fueled by governmental and
commercial spending. The increased governmental spending on
infrastructure, particularly as it relates to bridge girders, is
expected to continue not only throughout the fiscal year but also
for several years hence.
The Company's operations continue to serve the industrial,
commercial and institutional construction markets. Each of the
Company's operating subsidiaries experienced increases in Revenues
for the three months ended January 31, 1999 as compared to the
three
months ended January 31, 1998, and improvement in profit margins
were also achieved.
Several of the Company's subsidiaries have been expanding
their
work force, with the most notable increase occurring at Williams
Bridge Company. Williams Bridge has not only increased its work
force by approximately 25% during the quarter ended January 31,
1999
but also is taking steps to increase capacity and efficiency
through
capital investments at both its Manassas and Richmond, Virginia
plants. Capital improvements are also occurring throughout the
corporation, including upgrades to the Company's fleet.
Financial Condition
The Company experienced improvement in financial performance
during the quarter ended January 31, 1999. When the revenues for
the quarter ended January 31, 1999 are compared with the revenues
of
the quarter ended January 31, 1998, revenues increased by
approximately 20 percent while direct costs declined slightly.
When
the six months ended January 31, 1999 are compared to the six
months
ended January 31, 1998, revenues increased by approximately 14%.
Gross profit increased substantially, by nearly 65 percent for the
quarter to quarter comparison and approximately 34% for the six
month comparison, resulting in a concomitant increase in earnings
and shareholders' equity. As of January 31, 1999, stockholder's
equity was $9,535,257, compared to $6,343,667 a year ago at
January
31, 1998, an increase of nearly 50%.
There was an increase in both current assets and current
liabilities. Current assets increased by approximately $3.3
million
from July 31, 1998. This increase is primarily attributable to
the
Company's increased manufacturing workload. The related purchase
of
raw materials in inventory represent approximately $2.5 million of
the increase. Additionally, prepaid expenses increased by
approximately $800,000 due to the Company's annual insurance
renewals.
Current liabilities increased by approximately $2.8 million
from July 31, 1998. The approximate $1 million increase in
accounts
payable and the approximate $1.5 million increase in billings in
excess of cost are primarily related to the Company's increase in
inventory.
As discussed in the Company's Form 10-K for the year ended
July
31, 1998, the Company has substantial net operating loss
carryforwards ("NOLs"). In accordance with generally accepted
accounting principles, the Company recognizes quarterly income tax
provisions at statutory rates for federal and state income taxes.
However, the Company is required on an annual basis to evaluate
the
probability of utilizing its NOLs and to recognize as income a
portion of the benefit which is likely to be utilized. The effect
of this process during the past two fiscal years has been to
substantially erase the quarterly tax provisions and to recognize
additional income tax benefits in the results for the fiscal
year.
Management believes, based on its internal projections and market
analysis, that the Company will recognize additional portions of
the
benefit of its NOLs at July 31, 1999.
The Company's improved financial condition is enabling it to
negotiate the terms and conditions of some of its current debt
agreements, which, when complete, should improve not only cash
flow,
but also the Company's ability to finance further capital
improvements and operational growth.
As of January 31, 1999, the Company is in compliance with all
of its debt covenants.
Bonding
The Company has a comprehensive bonding program, with $20
million available from Fidelity and Deposit Company of Maryland.
In
addition, the Company has in excess of $6 million bonded with its
workers' compensation underwriter. Although the Company's ability
to bond work is more than adequate, the Company has traditionally
relied on its superior reputation to acquire work and will
continue
to do so. However, the Company recognizes that, as it expands its
geographic range for providing goods and services, it will be
necessary to provide bonds to clients unfamiliar with the Company.
Liquidity
The Company's operations require significant amounts of
working
capital to procure materials for contracts to be performed over
relatively long periods, and for purchases and modifications of
heavy-duty and specialized fabrication equipment. Furthermore, in
accordance with normal payment terms, the Company's customers
often
will retain a portion of amounts otherwise payable to the Company
during the course of a project as a guarantee of completion of
that
project. To the extent the Company is unable to receive project
payments in the early stages of a project, the Company's cash flow
would be reduced, which could have an adverse effect on the
Company's cash flow.
As a result of the increased activity discussed elsewhere in
this document, the Company has been using cash to purchase
materials
and other "start-up" costs associated with construction lead
times.
For the six months ended January 31, 1999, the Company's
operations
used cash of $611,152 compared to $513,647 for the six months
ended
January 31, 1998.
Investing activities also used cash during the six months
ended
January 31, 1999. Expenditures for property, plant and equipment
continued to remain low as the Company has been updating its
assets
primarily though operating leases. Management believes that cost
efficient leasing instead of more traditional buying and/or
borrowing offers cash flow and balance sheet advantages. It
should
be noted, however, that the Company is anticipating capital
expenditures at several of its facilities in the near term.
Financing activities provided net cash as the Company
utilized
its line of credit and other borrowing instruments to facilitate
operations. The current portion of notes payable presents the
scheduled principal payments due within twelve months of January
31,
1999. This figure has risen since July 31, 1998 because of
several
factors. The Company's insurance renewals, with premiums payable
in
full at inception, occur on September 1 and December 1 annually.
Because of favorable rates available on premium finance and in
order
to match cash flow more closely with revenue, the Company
typically
finances its insurance premium over the policy term. This caused
the current portion of notes payable to increase by approximately
$1
million between July 31, 1998 and January 31, 1999. The asset
side
of the balance sheet reflects a corresponding increase in "prepaid
expense." The Company expects this amount to follow an annual
pattern of fluctuation, decreasing somewhat from year to year as
the
Company continues its efforts to reduce overall debt and to
refinance existing debt at more favorable rates and terms.
Going forward, management believes that operations will
generate sufficient cash to fund activities. However, as revenues
increase, it may become necessary to increase the Company's credit
facilities to handle short term cash requirements. Management,
therefore, is focusing on the proper allocation of resources to
ensure stable growth. Certain items that are not easily leased
are
being obtained through capitalized loans, which then become part
of
the Company's real property.
Operations
The quarter ended January 31, 1999 was strong due to a
combination of events and circumstances. The mild winter in the
Company's traditional geographic work areas, coupled with
increased
spending at all levels of government as well as in the commercial
sector, caused the Company's overall revenues to increase by
approximately 20 percent from the prior year's quarter.
This increase was spread throughout the Company's operating
subsidiaries, but it was most apparent at Williams Bridge Company
where revenues in the quarter increased by more than 40 percent
over
the prior period. Direct costs declined because of several jobs
in
which the customer provided materials and also because of improved
labor efficiency and lower costs of materials in general.
Improvements in profit margins varied by subsidiary, but
generally costs were in keeping with expectations and budgets.
During the quarter ended January 31, 1999, Williams Bridge
Company hired a number of former employees of an out-of-business
competitor to handle the increased backlog. The former competitor
officially ceased operations as of November 1, 1998 and Williams
Bridge took advantage of the opportunity to hire a highly trained
work force. The elimination of this competitor in the marketplace
also has been beneficial to improving overall margins in bidding.
Williams Bridge Company currently is dealing almost
exclusively
with governmental projects, which are increasing as the states
spend
money allocated and appropriated from the various federal
infrastructure programs approved by Congress in recent years. As
of
January 31, 1999, Williams Bridge Company had the highest backlog,
more than $18 million, in the subsidiary's history. It is
expected
that this subsidiary will continue to benefit from increased
government spending directly or indirectly related to the federal
Transportation Efficiency Act for the 21st Century (TEA21) for
several more years.
Williams Steel Erection Company, Greenway Corporation,
Williams
Equipment Corporation and Piedmont Metal Products continue to work
for diverse customers in the industrial, commercial, and
governmental markets.
1999 Quarter Compared to 1998 Quarter
For the three months ended January 31, 1999, the Company had
net earnings of $214,802 or $0.06 per share. These earnings
compare to a prior year's loss of $475,622 or $0.16 per share for
the comparable quarter in Fiscal 1998. However, these comparisons
cannot be taken in a vacuum. While the quarter ended January 31,
1999 was indeed a good one from an operating perspective, the
quarter ended January 31, 1998 contained a number of one time
events
which contributed to the loss. The most significant one time
event
in the prior year was the Company's write off of approximately
$800,000 of its investment in an unconsolidated affiliate.
Other exceptional events in the quarter ended January 31,
1998
included: The gain of approximately $204,000 recognized on the
Company's sale of its headquarters' property in Falls Church,
Virginia; the recognition of a $809,000 Gain on Extinguishment of
Debt from the reversal of accounts payable due to the liquidation
of
a former subsidiary; and a net increase of approximately $500,000
in
reserves for litigation settlements.
The Condensed Consolidated Statements of Earnings for the
three
months ended January 31, 1999 reflect a reduction in G&A expense
of
approximately $237,000 resulting from the reduction of a reserve
established for potential sales and use tax liability, which was
settled during the quarter.
Revenue at Greenway Corporation, Piedmont Metal Products,
Williams Bridge Company, Williams Equipment Corporation, and
Williams Steel Erection Company increased when compared to the
second quarter of Fiscal 1998. With the exception of Williams
Steel
Erection Company, each of these subsidiaries also experienced an
increase in gross profit and an increase in pre-tax profit.
Williams Steel Erection Company, ironically, was somewhat a
victim of its success. The subsidiary had a number of jobs in
process simultaneously and the company had to work a great deal of
unanticipated overtime. The overtime costs, which were necessary
to
meet commitments to customers, were directly responsible for a
portion of the reduced profits. Increases in overhead occurred as
a
result of the increased workload and a couple of projects did not
meet margin expectations.
The equipment rental and rigging companies, Greenway
Corporation and Williams Equipment Corporation, both experienced
dramatic improvements in their results for the quarter when
compared
to the prior year's period. The improvement is attributable to
the
mild winter and the fact that a number of industrial customers
took
the opportunity during the holiday season to do routine
maintenance
requiring cranes and rigging.
As stated earlier, the Company's manufacturing subsidiaries,
Piedmont Metal Products and Williams Bridge Company, both produced
better earnings in the second quarter of Fiscal 1999 than in the
comparable quarter of Fiscal 1998. A combination of factors,
including the ability to work more efficiently due to the addition
of computerized burning equipment as well as the addition of more
trained personnel, influenced the change at Williams Bridge
Company.
This subsidiary now has the ability to buy materials more
competitively. Piedmont Metal Products also produced higher
pre-tax
earnings, which when considered as a percentage increase was
actually higher than that achieved by Williams Bridge Company.
As the Condensed Consolidated Statements of Earnings shows,
overall construction revenue grew from $3,353,201 in the three
months ended January 31, 1998 to $3,885,262 in the comparable
quarter of Fiscal 1999. Manufacturing revenue expanded from
$2,060,127 in the second quarter of Fiscal 1998 to $2,714,241 in
the
second quarter of Fiscal 1999.
The Company's subsidiaries continue to diversify both their
geographic marketplaces as well as their customer base. It is
anticipated that this trend will continue.
Six Months Ended January 31, 1999 Compared to Six Months Ended
January 31, 1998
As noted in the quarter to quarter comparisons above, there
were a number of unusual events in the second quarter of Fiscal
1998
which influence the six month comparisons.
In addition to the previous information, it should be noted
that while revenues improved universally when the six months ended
January 31, 1999 are compared to the six months ended January 31,
1998, the manufacturing segment experienced a significant cost
decline while construction segment costs increased. This,
fundamentally, is a factor of the difference in material costs in
the manufacturing segment, which declined, and the labor costs in
the construction segment, which increased. Gross margins in both
segments, however, increased.
It should also be noted that the construction revenues for
the
six months ending January 31, 1998 included approximately $409,000
in revenue due to the sale of equipment. The comparable six month
period in this fiscal year did not have any equipment sales.
Backlog
Despite the fact that the Company produced increased revenues
during the quarter ended January 31, 1999, the Company's backlog
nevertheless continued to increase. Backlog at January 31, 1999
was
$29.2 million as compared to $21.8 million at January 31, 1998 and
$21.7 million at July 31, 1998. As stated earlier, this is due in
large part to the increases occurring in the manufacturing
subsidiaries, particularly Williams Bridge Company. Construction
backlog remains consistent with a combination of smaller projects
rather than traditionally higher profit "mega" jobs. Most of the
backlog will be completed within the next 12 months if contract
schedules are followed. Management believes that the level of
work
is sufficient to allow the Company to have adequate work
throughout
Fiscal 1999.
Management
Management, using the Company's updated strategic plan as a
guideline, is focusing on long-range growth and acquisition, while
simultaneously working on issues relating to profitability in
existing activities. Expansion of the Company's traditional
market
areas is already occurring. It is anticipated that this trend
will
continue. Management is also focusing on several non-operating
issues, such as refinancing its credit facilities at more
favorable
rates and in developing a comprehensive marketing program to
attract
strong institutional investors for the Company's stock, possibly
as
part of a "micro-cap" infrastructure fund.
Safe Harbor for Forward Looking Statements
The Company is including the following cautionary statements
to
make applicable and take advantage of the safe harbor provisions
within the meaning of Section 27A of the Securities Act of 1933
and
Section 21E of the Securities Exchange Act of 1934 for any forward-
looking statements made by, or on behalf of, the Company in this
document and any materials incorporated herein by reference.
Forward looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance and
underlying assumptions and other statements which are other than
statements of historical facts. Such forward-looking statements
may
be identified, without limitation, by the use of the words
"anticipates," "estimates," "expects," "intends," and similar
expressions. From time to time, the Company or one of its
subsidiaries individually may publish or otherwise make available
forward-looking statements of this nature. All such
forward-looking
statements, whether written or oral, and whether made by or on
behalf of the Company or its subsidiaries, are expressly qualified
by these cautionary statements and any other cautionary statements
which may accompany the forward-looking statements. In addition,
the Company disclaims any obligation to update any forward-looking
statements to reflect events or circumstances after the date
hereof.
Forward-looking statements made by the Company are subject to
risks and uncertainties that could cause actual results or events
to
differ materially from those expressed in, or implied by, the
forward-looking statements. These forward-looking statements may
include, among others, statements concerning the Company's revenue
and cost trends, cost reduction strategies and anticipated
outcomes,
planned capital expenditures, financing needs and availability of
such financing, and the outlook for future construction activity
in
the Company's market areas. Investors or other users of forward-
looking statements are cautioned that such statements are not a
guarantee of future performance by the Company and that such
forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those
expressed in, or implied by, such statements. Some, but not all
of
the risks and uncertainties, in addition to those specifically set
forth above, include general economic and weather conditions,
market
prices, environmental and safety laws and policies, federal and
state regulatory and legislative actions, tax rates and policies,
rates of interest and changes in accounting principles or the
application of such principles to the Company.
Dependence Upon Key Personnel
The Company's success depends on the continued services of
the
Company's senior management and key employees as well as the
Company's ability to attract additional members to its management
team with experience in the construction industry. The unexpected
loss of the services of any of the Company's management or other
key
personnel, or its inability to attract new management when
necessary, could have a material adverse effect on the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company believes that there have been no material changes
in exposure to market risks during the second quarter of Fiscal
1999
from those set forth in the Company's Annual Report filed with the
Commission on Form 10 K for the year ended July 31, 1998.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Precision Components Corp.
The Company received a favorable decision in this case, and
judgment in favor of the Company was entered on March 4, 1998 by
the Circuit Court for the City of Richmond. The plaintiffs,
Industrial Alloy Fabricators, Inc. and Precision Components Corp.,
perfected an appeal to the Supreme Court of Virginia, which was
accepted on September 21, 1998. The Virginia Supreme Court heard
oral argument on February 23, 1999, and a decision is pending.
The suit, against Williams Industries, Inc. and IAF Transfer
Corporation, is for $300,000 plus interest and fees arising from a
product liability claim against the Company. Management believes
the ultimate outcome will not have a material adverse impact on
the Company's financial position, results of operations or cash
flows.
General
The Company is party to various other claims arising in the
ordinary course of its business. Generally, claims exposure in
the construction services industry consists of workers
compensation, personal injury, products' liability and property
damage. The Company believes that its insurance accruals, coupled
with its excess liability coverage, is adequate coverage for such
claims.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Year 2000
The Company has developed a plan to assure that its computers
are Year 2000 compliant and has begun implementation of the plan.
The plan calls for the conversion efforts to be completed by the
end
of the Fiscal Year ending July 31, 1999. The Year 2000 issues
result from some computer programs being written using two digits
rather than four to define applicable years. The maximum total
cost
of the conversion project is estimated to be $200,000 and will be
funded through operating cash flows and financing.
Management believes that direct Year 2000 exposure in its
industry is relatively low, with indirect exposure coming from
possible temporary disruptions in external sources such as the
financial services, insurance and public utility sectors. Because
any problems are likely to occur during the winter when
construction
activity is relatively low, the Company believes that adequate
resources will be available to address any problems that may occur.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
WILLIAMS INDUSTRIES, INCORPORATED
March 5, 1999 /s/ Frank E. Williams, III
Frank E. Williams, III
President, Chairman of the
Board
Chief Financial Officer
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 1,783,007
<SECURITIES> 0
<RECEIVABLES> 11,171,065
<ALLOWANCES> (1,144,000)
<INVENTORY> 3,784,619
<CURRENT-ASSETS> 17,782,627
<PP&E> 19,155,307
<DEPRECIATION> (9,839,666)
<TOTAL-ASSETS> 32,124,680
<CURRENT-LIABILITIES> 14,238,146
<BONDS> 10,718,393
0
0
<COMMON> 357,979
<OTHER-SE> 9,177,278
<TOTAL-LIABILITY-AND-EQUITY> 32,124,680
<SALES> 0
<TOTAL-REVENUES> 14,202,504
<CGS> 0
<TOTAL-COSTS> 8,318,762
<OTHER-EXPENSES> 4,659,224
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 444,632
<INCOME-PRETAX> 565,320
<INCOME-TAX> 210,700
<INCOME-CONTINUING> 388,359
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 388,359
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
