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, 2000
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
3,589,206
Number of Shares of Common Stock Outstanding at January 31, 2000
</PAGE>
<PAGE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($000 Omitted)
ASSETS
January 31 July 31
2000 1999
--------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 1,495 $ 1,145
Restricted cash 17 61
Certificates of deposit 754 738
Accounts receivable, net 14,259 11,481
Inventory 1,786 2,290
Costs and estimated earnings in
excess of billings on
uncompleted contracts 1,760 1,481
Prepaid and other expenses 1,466 641
--------- ---------
Total current assets 21,537 17,837
--------- ---------
PROPERTY AND EQUIPMENT, AT COST 16,223 16,215
Accumulated depreciation (8,968) (8,529)
--------- ---------
Property and equipment, net 7,255 7,686
--------- ---------
OTHER ASSETS
Investments in unconsolidated
affiliates 1,024 1,048
Deferred income taxes 3,839 3,944
Other 1,591 1,750
--------- ---------
Total other assets 6,454 6,742
--------- ---------
TOTAL ASSETS $ 35,246 $ 32,265
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of notes payable $ 2,272 $ 1,411
Accounts payable 5,342 4,868
Billings in excess of costs and
estimated earnings on
uncompleted contracts 3,579 2,222
Deferred income 295 348
Other liabilities 2,812 3,123
--------- ---------
Total current liabilities 14,300 11,972
LONG-TERM DEBT
Notes payable, less current portion 7,787 7,397
--------- ---------
Total Liabilities 22,087 19,369
--------- ---------
MINORITY INTERESTS 235 235
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - 3,589,206 and
3,587,877 issued and outstanding 359 359
Additional paid-in capital 16,429 16,424
Accumulated deficit (3,864) (4,122)
--------- ---------
Total stockholders' equity 12,924 12,661
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 35,246 $ 32,265
========= =========
See Notes To Condensed Consolidated Financial Statements.
<PAGE>
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(000 0mitted)
(Unaudited)
Three Months Ended Six Months Ended
January 31, January 31,
2000 1999 2000 1999
REVENUE --------- --------- --------- ---------
Construction $ 3,786 $ 2,203 $ 5,877 $ 5,294
Manufacturing 4,705 2,715 9,504 5,300
Sales and service 1,785 1,682 3,528 3,282
Other 220 228 404 411
--------- --------- --------- ---------
Total revenue 10,496 6,828 19,313 14,287
--------- --------- --------- ---------
DIRECT COSTS
Construction 2,843 1,394 4,134 3,509
Manufacturing 3,187 1,512 6,507 3,005
Sales and service 1,044 897 2,113 1,804
--------- --------- --------- ---------
Total direct costs 7,074 3,803 12,754 8,318
--------- --------- --------- ---------
GROSS PROFIT 3,422 3,025 6,559 5,969
--------- --------- --------- ---------
EXPENSES
Overhead 1,158 922 2,194 1,812
General and administrative 1,643 1,206 3,005 2,515
Depreciation 287 318 578 632
Interest 218 236 431 445
--------- --------- --------- ---------
Total expenses 3,306 2,682 6,208 5,404
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES,
EQUITY EARNINGS AND
MINORITY INTERESTS 116 343 351 565
INCOME TAX PROVISION 35 131 109 211
--------- --------- --------- ---------
EARNINGS BEFORE EQUITY EARNINGS
AND MINORITY INTERESTS 81 212 242 354
Equity earnings (loss)
and minority interest (11) 3 16 34
--------- --------- --------- ---------
NET EARNINGS $ 70 $ 215 $ 258 $ 388
========= ========= ========= =========
EARNINGS PER COMMON SHARE-BASIC $ 0.02 $ 0.06 $ 0.07 $ 0.11
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING: BASIC 3,588,158 3,577,069 3,588,018 3,576,749
--------- --------- --------- ---------
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NET CASH USED IN OPERATING ACTIVITIES $ (779) $ (611)
NET CASH USED IN INVESTING ACTIVITIES (104) (358)
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,233 426
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 350 (543)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,145 1,384
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,495 $ 841
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income Taxes $ 53 $ 77
========= =========
Interest $ 423 $ 469
========= =========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2000
1. INTERIM FINANCIAL STATEMENTS
This document includes unaudited interim financial statements that
should be read in conjunction with the Company's latest audited annual
financial statements. However, in the opinion of management, these
financial statements contain all adjustments consisting only of normal
recurring items necessary for a fair presentation of the Company's
financial position as of January 31, 2000 and 1999, as well as the
results of its operations for the three and six months ended January
31,
2000 and 1999, and cash flows for the six months then ended.
2. RELATED-PARTY TRANSACTIONS
Certain shareholders owning or controlling approximately 34% of
the
outstanding stock of the Company own controlling interests in the
outstanding stock of Williams Enterprises of Georgia, Inc., 100% of
Williams and Beasley Company, and 100% of Structural Concrete Products,
LLC. Each of these entities did business with the company during the
quarter.
Billings to Williams Enterprises of Georgia, Inc. and its
affiliates were approximately $130,000 and $358,000 for the three and
six months ended January 31, 2000 and $272,000 and $755,000 for the
three and six months ended January 31, 1999.
Net billings from Williams and Beasley Company during the three
and
six months ended January 31, 2000 were approximately $75,000 and
$82,000
respectively. Billings from Williams and Beasley Company during the
three and six months ended January 31, 1999 were approximately $23,000
and $127,000.
Billings to Structural Concrete Products, LLC were approximately
$87,000 and $118,000 for the three and six months ended January 31,
2000. Billings to this entity were insignificant during the three and
six months ended January 31, 1999. Billings from Structural Concrete
Products, LLC to the Company were approximately $1,440,000 and
$1,440,000 for the three and six months ended January 31, 2000.
Billings from this entity were insignificant during the three and six
months ended January 31, 1999.
3. COMMITMENTS/CONTINGENCIES
As reported in the Company's quarterly filing for October 31,
1999,
the company had entered into an agreement to purchase approximately 17
acres of unimproved real estate adjoining its Prince William County,
Virginia properties from an unaffiliated third party for $567,500.
Given the Company's desire to limit borrowing at this time, the
Board of Directors accepted an offer from Director Frank E. Williams,
Jr., acting on behalf of the Williams Family Limited Partnership, to
acquire the property and lease it to the Company with an option to
purchase the majority of the property back for the original pro-rata
cost. Given the interest of Mr. Williams, Jr. and Company CEO Frank
E.
Williams, III, in the Williams Family Limited Partnership, this
transaction was discussed and authorized by the board without the
participation of Mr. Williams, Jr. or Mr. Williams, III.
Management feels this transaction will enable the Company to
preserve its options to develop the property for expansion of its
manufacturing and other operations. The Company intends to move ahead
with the development of the property.
Subsequent to January 31, 2000, the Williams Family Limited
Partnership acquired the property and executed the lease/option
agreement with the Company. The initial lease term is for five years,
with an extension option. The base annual rent calculation will be
based on the capitalized cost of the property times the Williams Family
Limited Partnership's costs of funds (margin rate) plus one percent,
adjusted quarterly. Payments will be made on a monthly basis.
4. SEGMENT INFORMATION
Information about the Company's operations in its operating
segments for the three and six months ended January 31, 2000 and 1999
is
as follows (in thousands):
Three Months Ended Six Months Ended
January 31, January 31,
2000 1999 2000 1999
-------- -------- -------- --------
Revenues:
Construction $ 4,140 $ 2,464 $ 6,459 $ 5,880
Manufacturing 4,725 2,903 9,590 5,563
Sales and Services 1,901 1,843 3,760 3,589
Other 356 359 666 677
-------- -------- -------- --------
11,122 7,569 20,475 15,709
Intersegment revenues:
Construction 354 261 582 586
Manufacturing 20 188 86 263
Sales and Services 116 161 232 307
Other 136 131 262 266
-------- -------- -------- --------
626 741 1,162 1,422
Consolidated revenues:
Construction 3,786 2,203 5,877 5,294
Manufacturing 4,705 2,715 9,504 5,300
Sales and Services 1,785 1,682 3,528 3,282
Other 220 228 404 411
-------- -------- -------- --------
Total Consolidated Revenues: 10,496 6,828 19,313 14,287
Earnings before income taxes,
equity earnings and
minority interest:
Construction 181 109 438 492
Manufacturing 200 281 551 541
Sales and Services 31 61 120 62
Other (296) (108) (758) (530)
-------- -------- -------- --------
Total $ 116 $ 343 $ 351 $ 565
5. INVENTORIES
Inventory consisted of the following (in thousands):
January 31 July 31
2000 1999
---------- ----------
Expendable tools
and equipment $ 794 $ 806
Supplies 272 277
Materials 1,877 2,383
---------- ----------
Total Inventory $ 2,943 $ 3,466
Less: Amount classified
as long term (Included
in Other Assets - Other) 1,157 1,176
---------- ----------
$ 1,786 $ 2,290
---------- ----------
6. YEAR 2000 ISSUE UPDATE
The Company did not experience any significant malfunctions or
errors in its operating or business systems when the date changed from
1999 to 2000. Based on operations since January 1, 2000, the Company
does not anticipate any impact on its on-going business as a result of
the "Year 2000" issue. Although minor problems, such as those related
to customers or suppliers' systems, could occur, the Company is not
aware of any significant Year 2000 or similar problems that have arisen
for its customers and suppliers. The Company's expenditures for Year
2000 readiness were minimal and part of an overall system review and
upgrade.
7. SUBSEQUENT EVENT
Subsequent to January 31, 2000, the Company closed a transaction
with a former partner in which the Company acquired clear title to a
five-acre parcel adjoining its other properties in Prince William
County, Virginia. This settlement concludes the affairs of a formerly
50%-owned subsidiary, Commercial Manufacturing Partnership.
Item 2. Management's Discussion and Analysis
Financial Condition and Results of Operations
General
The Company's operations serve the industrial, commercial and
institutional construction markets, primarily in the Mid-Atlantic
region
of the United States. Operating activity varied throughout the
quarter
as individual subsidiaries dealt with different customer bases in
providing highly specialized services. In general, each of the
Company's subsidiaries was busy, but with different types of customers.
The Company continues to benefit greatly from increased
governmental spending on infrastructure, particularly as it relates to
bridge girders. The Company's manufacturing revenues improved as a
consequence of this spending. The trend of increasing manufacturing
revenues, which became significant in Fiscal 1999, is expected to
continue for several years as funding for infrastructure programs is
scheduled to continue for at least five years.
Construction revenues also increased during the quarter, due
primarily to the start of several major projects which had been delayed
in the first quarter.
Sales and services segment revenues were comparable to those of a
year ago, but costs, due in part to manpower shortages and weather,
increased significantly during the second quarter of Fiscal 2000.
The synergistic efforts of the Company's subsidiaries are
considered to be in the Company's best, long-term interest. Marketing
efforts are taking place to expand the Company's customer base in all
areas. Management believes this will help smooth out slow downs in
any
one segment of its business going forward.
One problematic area in both the manufacturing and construction
subsidiaries has been the ability to hire and retain qualified
personnel. However, since this trend affects the entire construction
industry, management does not believe that this problem creates a
competitive disadvantage. Nevertheless, aggressive steps, such as
improvements to the Company's training and benefit programs, are being
taken to assure that the Company maintains its quality labor pool.
Financial Condition
The Company's overall financial condition continues to improve.
Net working capital increased by $1,372,000 from $5,865,000 at Fiscal
Year end, July 31, 1999, to $7,237,000 at January 31, 2000.
Stockholder's Equity increased $75,000 during the quarter, due to
earnings and additional paid-in capital from the Employee Stock
Purchase
Plan.
Direct costs, when viewed as a percentage of revenue, increased in
most areas. Like its competitors, the Company experienced increased
costs in fuel and in raw materials, such as steel, due to overall
increases in the marketplace. However, a considerable portion of the
Company's increase in direct costs is attributed to labor costs,
including overtime necessary to keep major projects on schedule.
Management continues to take aggressive measures to overcome this
difficulty.
The Company's accounts receivable have increased by 23%, going
from
$11,521,000 at Fiscal Year end, July 31, 1999 to $14,259,000 at January
31, 2000, solely as a result of the volume of work being produced.
Changes in notes payable are also directly related to the Company's
increased activity. In keeping with the significant amount of
manufacturing in the quarter, inventory has declined as work was
produced.
The Company's current portion of Notes Payable has increased due
to
financing of insurance premiums for the coming year. The Company
traditionally finances its general liability, automotive and heavy
equipment, and worker's compensation insurance premiums, with the
worker's compensation program portion of the debt being the most
significant. The Company's financial statements have historically
shown
the financing for the worker's compensation program as occurring in the
second quarter of the fiscal year.
Long-term debt has increased due to higher workloads and activity
requiring borrowing against the Company's line of credit and sources of
funds.
Operations
Revenues for the quarter ended January 31, 2000 totaled
$10,496,000
or $3,668,000 higher than for the quarter ended January 31, 1999. This
represents a 54% increase in total revenue over the prior year. Unlike
the first quarter of Fiscal 2000 where only manufacturing revenues
increased, both construction and manufacturing revenues increased in
the
quarter ended January 31, 2000. Construction revenues went from
$2,203,000 to $3,786,000. Manufacturing revenues increased by
$1,990,000, from $2,715,000 to $4,705,000. Sales and Service revenues
also increased slightly.
Gross profit increased by 13%, from $3,025,000 for the quarter
ended January 31, 1999 to $3,422,000 for the quarter ended January 31,
2000. However, the overall gross profit percentage decreased when
compared to the same quarter in Fiscal 1999.
General and administrative expenses increased approximately 36% to
$1,643,000 in Fiscal 2000 from $1,206,000 in the comparable quarter in
Fiscal 1999. While some of this increase is attributable to routine
costs associated with the higher revenue levels, it should be noted
that
the comparable period for Fiscal 1999 contained a one-time sales tax
adjustment of approximately $237,000, which reduced expenses in that
period and added to pre-tax profit.
Although the Company has been using its credit facilities to fund
operations during the quarter, interest expense nevertheless declined
by
$18,000 for the quarter ended January 31, 2000 when compared to the
quarter ended January 31, 1999. This is due to payments made during
the intervening year as well as the fact that the Company's new credit
facilities with United Bank are at a lower rate of interest than prior
borrowings.
Three Months Ended January 31, 2000 Compared to Three Months Ended
January 31, 1999
Net income for the quarter declined by $145,000 or 67%. On a per
share basis, net earnings declined by $0.04 per share when compared to
the second quarter of Fiscal 2000. This change is due to the
combination of increased expenses in the quarter ended January 31, 2000
and the one-time adjustment made in Fiscal 1999.
Manufacturing revenues continue to grow at a rapid pace, with a
73%
increase for the three months ended January 31, 2000 when compared to
the same period in Fiscal 1999. Costs, however, grew at an even higher
rate, increasing by 12% as a percentage of revenue for the segment.
These costs are due mainly to increased labor costs and the increase in
the price of steel. Management is working to expand the segment's
labor pool and is developing other strategies to reduce the overtime
costs that significantly impacted profit margins in the quarter. In
addition, steps are being taken to vary the mix of work in the
Company's
shops, thereby allowing higher profit jobs to be produced
simultaneously
with more cost intensive complex projects.
Revenues in the construction segment also improved as a number of
projects, which had been delayed for a variety of reasons, began. Cash
flows, however, were impacted by initial operating costs on several
major jobs, as well as by weather delays. This is part of the normal
course of the construction business and not viewed as a negative in
terms of long-term profitability.
In the sales and services segment, however, inclement weather in
the Company's traditional market areas caused Greenway Corporation and
Williams Equipment Corporation, the company's two crane rental and
rigging subsidiaries, to have to work substantial overtime to meet
commitments to customers. Since much of this segment's work, like that
of its competitors, is done on a lump sum basis, these costs will not
translate to earnings in a later quarter.
The change in the equity earnings of an unconsolidated affiliate
was caused by failure of the affiliate to meet revenue projections
during the quarter. This is not anticipated to pose any long-term
detriment to the Company's investment.
Six Months Ended January 31, 2000
Compared to Six Months Ended January 31, 1999
For the six months ended January 31, 2000, the Company had net
earnings of $258,000 or $0.07 per share on revenue of $19,313,000
compared to net earnings of $388,000 or $0.11 per share on revenue of
$14,287,000 for the six months ended January 31, 1999. As mentioned
earlier, the six month profit for the period ended January 31, 1999
contained a one-time sales tax adjustment of approximately $237,000,
which reduced expenses in that period and added to pre-tax profit.
When that exceptional item is removed, profits increased in Fiscal 2000
by comparison.
Much of the increase in revenues can be attributed to the
manufacturing segment, whose revenue increased by 79%. The segment,
however, continues to experience significant costs, influencing
anticipated profit margins. Gross profit margins in the manufacturing
segment have declined by approximately 11% percent when the six months
January 31, 2000 are compared to the six months ended January 31,
1999.
This decline is due to overtime expense coupled with a higher price of
steel.
BACKLOG
Backlog at January 31, 2000 was $31.1 million as compared to $34.1
million at October 31, 1999. Both the manufacturing and construction
operations have produced substantial revenues while simultaneously
maintaining high backlogs. The maintenance of these levels of activity
is viewed as significant. Most of the backlog will be completed within
the next 12 months if contract schedules are followed. Management
believes that the level of work is sufficient to allow the Company to
have adequate work throughout Fiscal 2000 and into Fiscal 2001.
Management believes that if this backlog can be maintained, the Company
will be able to achieve consistently profitable results.
Management
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, particularly in terms of inventory expansion
for
major fabrication projects. Management, therefore, is focusing on the
proper allocation of resources to ensure stable growth.
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.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
General
The Company is party to various 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, are
adequate coverage for such claims.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule.
(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 9, 2000 /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-31-2000
<CASH> 2,226,000
<SECURITIES> 0
<RECEIVABLES> 15,425,000
<ALLOWANCES> (1,113,000)
<INVENTORY> 1,786,000
<CURRENT-ASSETS> 21,537,000
<PP&E> 16,223,000
<DEPRECIATION> (8,968,000)
<TOTAL-ASSETS> 35,246,000
<CURRENT-LIABILITIES> 14,300,000
<BONDS> 10,059,000
0
0
<COMMON> 359,000
<OTHER-SE> 12,565,000
<TOTAL-LIABILITY-AND-EQUITY> 35,246,000
<SALES> 0
<TOTAL-REVENUES> 19,313,000
<CGS> 0
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<INCOME-PRETAX> 351,000
<INCOME-TAX> 109,000
<INCOME-CONTINUING> 242,000
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