UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended April 30, 2004
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 (IRS Employer
incorporation or organization) Identification No.)
8624 J.D. Reading Drive, Manassas, Virginia 20109
(Address of principal executive offices)
P.O. Box 1770, Manassas, VA 20108
(Mailing address of principal executive offices)
(703) 335-7800
(Registrant's telephone number, including area code)
Not Applicable
(Former names, former addresses and former fiscal year,
if change 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 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 whether the registrant is an accelerated
filer (as defined in Rule 126-2 of the Exchange Act).
Yes NO X
As of April 30, 2004, the Registrant had outstanding 3,631,978
shares of Common Stock.
WILLIAMS INDUSTRIES, INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED April 30, 2004
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets - April 30,
2004 and July 31, 2003
(Unaudited) 1
Condensed Consolidated Statements of Operations -
Three and nine months ended
April 30, 2004 and 2003 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows -
Nine months ended April 30, 2004 and 2003
(Unaudited) 3
Notes to Condensed Consolidated Financial
Statements (Unaudited) 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISKS 16
ITEM 4. CONTROLS AND PROCEDURES 16
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 18
ITEM 5. OTHER INFORMATION 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19
CERTIFICATIONS AND SIGNATURES 20
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands except share data)
ASSETS
-----------
April 30, July 31,
2004 2003
CURRENT ASSETS ---------- ----------
Cash and cash equivalents $ 708 $ 2,023
Restricted cash 978 51
Certificates of deposit 0 417
Accounts receivable, net 16,777 16,386
Inventory 4,242 3,421
Costs and estimated earnings in excess
of billings on uncompleted contracts 3,508 3,139
Prepaid and other assets 1,486 1,767
---------- ----------
Total current assets 27,699 27,204
---------- ----------
PROPERTY AND EQUIPMENT, AT COST 24,789 22,242
Accumulated depreciation (13,287) (12,160)
---------- ----------
Property and equipment, net 11,502 10,082
---------- ----------
OTHER ASSETS
Deferred income taxes 2,753 2,624
Other 353 600
---------- ----------
Total other assets 3,106 3,224
---------- ----------
TOTAL ASSETS $ 42,307 $ 40,510
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current portion of notes payable $ 2,757 $ 1,490
Accounts payable 6,548 5,410
Billings in excess of costs and estimated
earnings on uncompleted contracts 4,738 4,587
Deferred income 21 28
Other liabilities 3,291 4,416
---------- ----------
Total current liabilities 17,355 15,931
LONG-TERM DEBT
Notes payable, less current portion 8,128 7,570
---------- ----------
Total Liabilities 25,483 23,501
---------- ----------
MINORITY INTERESTS 178 187
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - 3,631,978 and 3,586,880
shares issued and outstanding 363 359
Additional paid-in capital 16,532 16,390
Accumulated (deficit) earnings (249) 73
---------- ----------
Total stockholders' equity 16,646 16,822
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 42,307 $ 40,510
========== ==========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands except earnings per share)
Three Months Ended Nine Months Ended
April 30, April 30,
2004 2003 2004 2003
REVENUE -------- -------- -------- --------
Construction $ 5,867 $ 3,909 $15,580 $13,921
Manufacturing 8,949 8,295 24,772 24,848
Other 51 45 160 168
-------- -------- -------- --------
Total revenue 14,867 12,249 40,512 38,937
-------- -------- -------- --------
DIRECT COSTS
Construction 3,825 2,574 10,329 10,127
Manufacturing 5,882 5,505 16,419 16,253
-------- -------- -------- --------
Total direct costs 9,707 8,079 26,748 26,380
-------- -------- -------- --------
GROSS PROFIT 5,160 4,170 13,764 12,557
-------- -------- -------- --------
EXPENSES
Overhead 2,396 2,106 6,551 6,079
General and administrative 1,920 1,972 5,674 6,032
Depreciation 499 451 1,478 1,272
Interest 157 145 491 457
-------- -------- -------- --------
Total expenses 4,972 4,674 14,194 13,840
-------- -------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES,
AND MINORITY INTERESTS 188 (504) (430) (1,283)
INCOME TAX PROVISION (BENEFIT) 56 (151) (129) (385)
-------- -------- -------- --------
EARNINGS (LOSS) BEFORE
MINORITY INTERESTS 132 (353) (301) (898)
Minority interests (13) (3) (20) (14)
-------- -------- -------- --------
NET EARNINGS (LOSS) $ 119 $ (356) $ (321) $ (912)
======== ======== ======== ========
NET EARNINGS (LOSS) PER
COMMON SHARE - BASIC $ 0.03 $(0.10) $(0.09) $(0.25)
======== ======== ======== ========
NET EARNINGS (LOSS) PER
COMMON SHARE - DILUTED $ 0.03 $(0.10) $(0.09) $(0.25)
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
BASIC AND DILUTED 3,631,156 3,576,172 3,604,803 3,573,470
--------- --------- --------- ---------
See Notes To Condensed Consolidated Financial Statements
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
Nine Months Ended
April 30,
2004 2003
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 154 $ 581
NET CASH USED IN INVESTING ACTIVITIES (3,409) (2,739)
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,940 329
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,315) (1,829)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,023 3,380
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 708 $1,551
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income Taxes $ 20 $ 178
======== ========
Interest $ 486 $ 455
======== ========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
April 30, 2004
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 April 30, 2004, as well as the results of its operations for the three
and nine months ended April 30, 2004 and 2003, respectively, and cash flows
for the nine months ended April 30, 2004 and 2003, respectively. Operating
results for the quarter and nine months ended April 30, 2004 are not
necessarily indicative of the results expected for the full fiscal year. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on form 10-K for
the year ended July 31, 2003.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations to
account for its stock option plans. The Company grants options for common
stock at an option price equal to the fair market value of the stock on the
date of grant. Accordingly, the Company does not record stock-based
compensation expense for these options. The Company's stock option plans are
more fully described in the Company's Annual Report on Form 10-K for fiscal
year ended July 31, 2003.
Since there are no grants during the nine months ended April 30, 2004
and all prior grants were fully vested as of July 31, 2003, there is no
effect on net earnings, net earnings per basic common share and net earnings
per diluted common share, as if compensation cost for all options had been
determined based on the fair market value recognition provision of a
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation" as amended by SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure." The table below shows
the effect the stock options would have had if the Company had chosen the
fair value method.
Three Months Ended Nine Months Ended
April 30, April 30,
------------------- -------------------
2004 2003 2004 2003
AS REPORTED -------- -------- -------- --------
- ------------------------------------
Net Earnings (Loss) $119 $(356) $(321) $(912)
(in thousands)
Net Earnings (Loss) Per Common
Share Basic and Diluted $0.03 $(0.10) $(0.09) $(0.25)
Stock-based compensation
Net of tax (in thousands) - (11) - (11)
PRO-FORMA
- ------------------------------------
Net Earnings (Loss) $119 $(367) $(321) $(923)
(in thousands)
Net Earnings (Loss) Per Common
Share Basic and Diluted $0.03 $(0.10) $(0.09) $(0.25)
2. RELATED-PARTY TRANSACTIONS
Mr. Frank E. Williams, Jr., who owned or controlled approximately 40%
of the Company's stock at April 30, 2004, and is a director of the Company,
also owns controlling interests in the outstanding stock of Williams
Enterprises of Georgia, Inc. and Structural Concrete Products, LLC.
Additionally, Mr. Williams, Jr. owns a substantial interest in Bosworth
Steel Erectors, Inc. Revenue earned and costs incurred with these entities
during the three and nine months ended April 30, 2004 and 2003 are reflected
below. Amounts receivable and payable to these entities at April 30, 2004
and July 31, 2003 are also reflected below.
Three Months Ended Nine Months Ended
April 30, April 30,
------------------- -------------------
2004 2003 2004 2003
(in thousands) -------- -------- -------- --------
Revenue $70 $177 $377 $2,124
Billings to entities $27 $499 $260 $1,077
Costs and expenses incurred $174 $160 $574 $1,168
Balance Balance
April 30, July 31,
2004 2003
-------- --------
Accounts receivable $1,254 $1,680
Costs and estimated earnings in excess of
billings on uncompleted contracts - 9
Accounts Payable $150 $303
Billings in excess of costs and estimated
earnings on uncompleted contracts 8 290
The Company is obligated to the estate of F. Everett Williams, a
former director of the Company, for a Demand Note Payable of approximately
$88,000. The note, at 10% simple interest, is not secured. The Company
recognized interest expense for the three and nine months ended April 30,
2004 and 2003 as follows:
Three Months Ended Nine Months Ended
April 30, April 30,
2004 2003 2004 2003
(in thousands) -------- -------- -------- --------
Interest Expense $2 $2 $7 $7
Balance Balance
April 30, July 31,
2004 2003
-------- --------
Note Payable $88 $88
Accrued interest payable $71 $64
The Company is obligated to the Williams Family Limited Partnership,
under a lease agreement for real property with an option to purchase. The
partnership is controlled by individuals who own, directly or indirectly,
approximately 44% of the Company's stock. The lease, which has an original
term of five years and an extension option for five years, commenced
February 15, 2000. The lease contains an option to purchase up to ten acres
at the "original pro-rata cost" of $567,500. The Company pays annual lease
payments of approximately $56,000 plus real estate taxes of approximately
$5,000 per year. The Company recognized lease expenses, including related
real estate tax expense, for the three and nine months ended April 30, 2004
and 2003 as follows:
Three Months Ended Nine Months Ended
April 30, April 30,
2004 2003 2004 2003
(in thousands) -------- -------- -------- --------
Lease Expense $14 $14 $59 $42
Balance Balance
April 30, July 31,
2004 2003
-------- --------
Account Payable $96 $37
Mr. George Pocock, an officer of the Company, owns a controlling
interest in Construction Insurance Agency (CIA). The Company sold its
interest in CIA to Mr. Pocock in 2001 and recorded a note receivable
related to the sale. The note bears interest at 7.5%, is secured by the
CIA stock and is due in monthly installments of $2,374, including principal
and interest, with a final payment of $138,812 due on October 31, 2005. The
balance due on the note at April 30, 2004 and July 31, 2003 was $163,037
and $174,860, respectively. Costs incurred with CIA, for insurance premiums
and brokerage fees, for the three and nine months ended April 30, 2004 and
2003 are reflected below. In addition, balances payable at April 30, 2004
and July 31, 2003 are also reflected below.
Three Months Ended Nine Months Ended
April 30, April 30,
2004 2003 2004 2003
(in thousands) -------- -------- -------- --------
Costs incurred $70 $62 $172 $185
Balance Balance
April 30, July 31,
2004 2003
-------- --------
Accounts Payable $86 $44
Directors Frank E. Williams, Jr. and Stephen N. Ashman are shareholders
and directors of a commercial bank from which the Company obtained a
$240,000 note payable on December 23, 2002. The note is payable in sixty
equal monthly payments of principal of $4,000 plus interest at 5.75% or
the current Prime rate, whichever is greater. The note, which replaced an
existing current note payable that had a higher interest rate and payment,
was negotiated at arms length under normal commercial terms. Interest
expensed for the three and nine months ended April 30, 2004 and 2003 is
reflected below. In addition, the balance outstanding at April 30, 2004
and July 31, 2003 is also reflected below.
Three Months Ended Nine Months Ended
April 30, April 30,
2004 2003 2004 2003
(in thousands) -------- -------- -------- --------
Interest Expense $3 $3 $9 $4
Balance Balance
April 30, July 31,
2004 2003
-------- --------
Note Payable $176 $212
The Company's independent directors pre-approve related party
contracts and agreements.
3. SEGMENT INFORMATION
Information about the Company's operations, in its operating segments,
for the three and nine months ended April 30, 2004 and 2003 is as follows
(in thousands):
Three Months Ended Nine Months Ended
April 30, April 30,
2004 2003 2004 2003
-------- -------- -------- --------
Revenues:
Construction $6,874 $4,419 $18,031 $15,391
Manufacturing 8,954 8,323 24,876 25,108
Other 234 188 667 666
-------- -------- -------- --------
16,062 12,930 43,574 41,165
-------- -------- -------- --------
Intersegment revenues:
Construction 1,007 510 2,451 1,470
Manufacturing 5 28 104 260
Other 183 143 507 498
-------- -------- -------- --------
1,195 681 3,062 2,228
-------- -------- -------- --------
Consolidated revenues:
Construction 5,867 3,909 15,580 13,921
Manufacturing 8,949 8,295 24,772 24,848
Other 51 45 160 168
-------- -------- -------- --------
Total Consolidated
Revenues $14,867 $12,249 $40,512 $38,937
-------- -------- -------- --------
Earnings (loss) before income taxes
and minority interest:
Construction $336 $(107) $521 $(675)
Manufacturing 361 121 407 745
Other (509) (518) (1,358) (1,353)
-------- -------- -------- --------
Total $188 $(504) $ (430) $(1,283)
-------- -------- -------- --------
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 nine
months ended April 30, 2004, one customer, in the manufacturing segment,
accounted for 17% of total revenue and 28% of manufacturing revenue. While
no customer in the construction segment accounted more than 10% of total
revenues, two customers accounted for 17% and 13% of construction revenue.
There was no single customer that accounted for more than 10% of
consolidated revenues for the nine months ended April 30, 2003.
4. INVENTORIES
Materials inventory consists of structural steel, steel plates and
galvanized steel coils. Cost of materials inventory is accounted for using
either the specific identification or the average cost method. The cost of
supplies inventory is accounted for using the first-in, first-out, (FIFO)
method. No significant amount of inventory is included in contracts in
process.
5. PURCHASE OF ASSETS
During the nine months ended April 30, 2004, the Company purchased
Property and Equipment, for use in its operations, for approximately $2.9
million, including $1.9 million for five cranes the Company had previously
leased. Approximately $2.3 million of the Property and Equipment purchases
were financed at prevailing rates, with the balance being paid out of
operating cash.
6. RECLASSIFICATIONS
Certain Balance Sheet and Statement of Operations items for prior
periods have been reclassified to conform to current period classifications.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
- -------
The subsidiaries of Williams Industries, Inc. provide specialized
services and products for the construction industry. They operate in the
commercial, industrial, governmental and infrastructure construction markets,
with the operating components divided into construction and manufacturing
segments. The services provided include: steel, precast concrete and
miscellaneous metals erection and installation; crane rental; rigging;
fabrication of welded steel plate girders and rolled beams, "stay-in-place"
bridge decking, and light structural and other metal products.
The Company continues to experience the impact of significant price
increases in all types of steel, such as steel plate, steel beams and
galvanized steel coil. Steel prices have risen by more than 70% since June
2003, with a sharp spike of more than 60% since January 2004. There are a
number of market conditions causing these increases including the weak U.S.
dollar, a shortage of raw materials (scrap steel and coke) in North America,
and reduced capacity in the steel manufacturing industry as a result of the
recent wave of consolidations.
The Company has been notified by suppliers of steel plate and
galvanized steel coils that they will not be honoring existing contractual
price agreements, with surcharges being assessed in amounts determined by
the supplier at the time of shipment. Suppliers have imposed product
allocations which limit the availability of materials.
In its report for the quarter ended January 31, 2004, the Company
reported that it had serious concern whether it should formalize the award
of a contract, valued at approximately $22 million, to fabricate, deliver and
erect more than 14,650 tons of steel for the Springfield Interchange Project
in Virginia. Discussions with the contractor and the owner have resulted in
an agreement whereby the company expects to move forward with the work, and
to be reimbursed for a substantial portion of the escalation in steel cost.
In the past, the Company's bridge operations have been
positively influenced by the federal government's spending on infrastructure
under various programs, including the Transportation Equity Act for the 2lst
Century (TEA-21). Congress and the administration have been at an impasse
over the reauthorization. Congress, through an emergency resolution, voted
again to extend the current program, at 2003 expenditure levels for an
additional 60 days, to June 30, 2004. This represents the third extension
since the original expiration of September 30, 2003. In the event this
program is not reauthorized, infrastructure spending at the state level will
continue to be depressed, reducing the potential for work in the Company's
manufacturing segment. Because of the uncertainty associated with the bill's
passage, the Company is currently evaluating all of its options as it relates
to the manufacturing segment.
The Company had the option to renew the lease of its Bessemer, Alabama
facility for a second three-year period through September 30, 2007, which it
did not exercise. However, the Company is continuing to pursue discussions
with the landlord regarding short-term extensions of the lease. If the
Company chooses to allow the lease to expire on September 30, 2004, the
Company would be required to pay $500,000 to the landlord to purchase the
plant's equipment. The Company would incur costs to relocate that equipment
as well as additional equipment the Company acquired for that plant.
Management is continuing to review the plant's operations in order to
develop a contingency plan.
Material Changes in Financial Condition
- -----------------------------------------
For the nine months ended April 30, 2004, the following changes
occurred:
The Company's Restricted Cash increased by $927,000 as Certificates of
deposits of $300,000, recorded as unrestricted at July 31, 2003, have been
classified as restricted to secure a letter of credit related to the
Company's previous workers' compensation insurance carrier. In addition, the
Company used $542,000 in operating cash to purchase certificates of deposit
and transferred a $101,000 certificate of deposit to secure letters of credit
related to the Company's current workers' compensation program. The Company
transferred $59,000 of operating cash to restricted cash, designated to pay
the Company's Industrial Revenue Bond on its Richmond facility, while paying
$75,000 to make the annual payment on that note.
The Company's Certificates of deposit declined $417,000 by the transfer
to restricted cash of $401,000 and the redemption of $16,000 for use in
operations.
Accounts Receivable increased by approximately $391,000 as more jobs
were started during the spring.
Inventory increased $821,000 as the Company purchased materials for its
bridge projects, mainly the Woodrow Wilson Bridge near Washington, DC. The
Company has inventory on hand to meet immediate needs but may face shortages
due to higher steel prices and delivery delays from the steel mills as
discussed above.
Prepaid expenses and other assets decreased $281,000 as the Company
expensed its insurance cost for the period.
Property and Equipment, at Cost increased approximately $2.5 million as
the Company purchased five previously leased cranes for approximately $1.9
million and purchased additional operating assets and made plant improvements
of $1 million. The Company sold or wrote off fully depreciated assets with an
original cost of $400,000.
Deferred income taxes increased $129,000 due to losses incurred during
the period. It is anticipated that additional tax benefits will be utilized
in the Company's remaining quarter.
At April 30, 2004, the Company had about $4.6 million in variable rate
notes payable. Total Notes Payable increased approximately $1.8 million
during the nine months ended April 30, 2004. The Company borrowed
approximately $3.8 million, of which $2.3 million was used to fund equipment
purchases, $753,000 was used to fund insurance financing and $741,000 was
used to fund short-term operations. The Company repaid $2 million related to
short term borrowings, mainly from operations.
Accounts Payable increased $1.1 million. In the manufacturing segment,
payables increased approximately $400,000 on the purchase of steel for
future projects. The additional $700,000 increase is due to the increase in
work being performed in the construction segment.
Billings In Excess of Costs and Estimated Earnings on Uncompleted
Contracts, and Costs and Estimated Earnings in Excess of Billings,
decreased a net amount of approximately $218,000 as a result of a mix of
contracts in process.
Other Liabilities decreased $1.1 million as the company made payments
on its workers' compensation program of $750,000 and paid sales taxes.
Stockholders' Equity decreased by $176,000 to $16.6 million. The
decline is due to the Company's net loss of approximately $321,000. During
the nine-months ended April 30, 2004, officers and directors exercised
options to buy 27,652 shares of stock for approximately $96,000. The
Company issued 10,359 shares of stock as directors' compensation, for
$37,000. Finally, employees purchased 7,087 shares under the Company's
employee stock purchase plan for approximately $12,000.
For the nine months ended April 30, 2004, the Company had a decrease of
$1.3 million in cash. The Company generated $154,000 from operations. The
Company had a net increase in cash from financing activities of $1.9 million,
borrowing $3.8 million of long-term debt, repaying $2 million against debt
and issuing stock for $145,000. The Company used $3.4 million for investing
activities, which consisted primarily of property and equipment purchases of
$2.9 million, and the purchase of certificates of deposit of $500,000, as
restricted cash, for security on its workers' compensation program.
The Company was not in compliance with its earnings covenant with
Wachovia Bank related to its Industrial Revenue Bond for its Richmond
facility. The Company owes approximately $930,000 on its notes payable to
Wachovia at April 30, 2004. These notes are reported in the "Current
portion of note payable" at April 30, 2004 due to the current expiration
of the related Letter of Credit on January 7, 2005.
Management believes that operations will generate sufficient cash to
fund the Company's activities and service its debt, subject to the
contingencies discussed relating to the supply and cost of steel materials
and costs associated with the Bessemer, Alabama lease, should the Company
not renew it. It may become necessary to increase the Company's credit
facilities to handle these contingencies.
Material Changes in Results of Operations
- ----------------------------------
Three Months Ended April 30, 2004 Compared to
Three Months Ended April 30, 2003
For the quarter ended April 30, 2004, the Company reported increases
in revenues, gross profit and earnings when compared to the quarter ended
April 30, 2003.
The Company had a net profit of $119,000, or $0.03 per share, on total
revenue of $14.9 million for the quarter ended April 30, 2004 as compared
to a net loss of $356,000, or $0.10 per share, on total revenue of $12.2
million for the quarter ended April 30, 2003.
Revenues and gross profit increased in both the manufacturing segment
and construction segments. In the manufacturing segment, revenues increased
$654,000, approximately 8%, and gross margins increased from 33.6% to 34.2%.
Work on the Woodrow Wilson Bridge contract mainly contributed to the
increased revenue. A press, used to form decking, was vandalized in March in
our Wilmington, Delaware plant. This caused a reduction in production at
that plant. The machine should be repaired by early June 2004. Spot material
shortages, due to delivery delays from steel suppliers, have also contributed
to reduced production. Construction segment revenues increased 50% while its
gross margin increased from 34.2% to 34.8%. The increase in revenues is
related to the Company's commencement of work on jobs which had been delayed
due to weather, as well as better performance in equipment rental.
Overhead increased $290,000. The increase is due to payroll costs
related to wage scale work in the construction segment. General and
Administrative expenses decreased slightly. Depreciation expense increased
$48,000 due to purchases of assets during the year ended July 31, 2003 and
the nine months ended April 30, 2004. Interest expense increased slightly,
reflecting higher borrowings.
Nine Months Ended April 30, 2004 Compared to
Nine Months Ended April 30, 2003
The Company recorded a net loss of $321,000, or $0.09 per share, on
revenues of $40.5 million for the nine months ended April 30, 2004, as
compared to a net loss of $912,000, or $0.25 per share, on revenues of $38.9
million for the nine months ended April 30, 2003.
In the manufacturing segment, while revenues declined slightly, gross
profit declined $242,000. Gross margins declined from 35% to 34% as the
segment dealt with labor shortages, material shortages and equipment
problems.
Revenues increased 12% in the construction segment from $13.9 million
to $15.6 million. Gross profit increased by $1.5 million as gross margins
increased from 27% to 34%.
Overhead increased $472,000 due to payroll costs related to wage scale
work on government contracts. General and Administrative decreased $358,000
due to various cost savings when the two periods are compared. Depreciation
increased $206,000 due to purchases of assets in the year ended July 31,
2003 and the nine months ended April 30, 2004. Interest expense increased
slightly.
BACKLOG
At April 30, 2004, the Company's backlog was approximately $61 million.
Due to the continuing delay of Congress in passing new transportation
funding, the bridge manufacturing companies have seen fewer jobs on which
they could bid. Until the new transportation act is funded, many road jobs
will be delayed, impairing the Company's ability to maintain backlog at an
acceptable level.
Approximately $36 million of the backlog is expected to be completed
within the next twelve months. Management believes that the level of work
is sufficient to allow the Company to have adequate work into Fiscal 2005.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Material Price Risks
The Company is subject to abnormal steel price increases in its current
market as discussed in the introduction to Item 2, Management's Discussion
and Analysis of Financial Condition and Results of Operations.
The Company does not enter into derivative financial instruments for
trades, speculation, or other purposes that would expose it to market risk.
Interest Rate Risk
The Company's cash equivalents and restricted cash, invested in
interest-bearing instruments, are presented at fair market value on the
Company's balance sheets. The Company's exposure to market risks for changes
in interest rates relate primarily to these investments and current and long-
term debt.
Item 4. Controls and Procedures
As of April 30, 2004, an evaluation was performed under the supervision
and with the participation of the Company's management, including the Chief
Executive Officer (CEO) and Controller, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures. Based on
that evaluation, the Company's management, including the CEO and Controller,
concluded that the disclosure controls and procedures were effective as of
April 30, 2004. There have been no significant changes in the Company's
internal controls over reporting that occurred during the period covered by
the quarterly report, that have materially affected or are reasonably likely
to affect, internal controls over financial reporting.
Disclosure controls and procedures are the Company's controls and
procedures that are designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act, is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files under the Exchange Act
are accumulated and communicated to management, including the principal
executive officers and principal financial officer, as appropriate to allow
timely decisions regarding required disclosure.
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
the availability of such financing, and the outlook for future 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 and
other expense accruals, coupled with its primary and excess liability
coverage, provide adequate coverage for such claims or contingencies.
The Company and its subsidiary Williams Equipment Corporation are
defendants in a suit pending in Prince William County, Virginia, by SunTrust
Leasing Corporation("STL"). In the suit, STL contends that the Company
defaulted on the lease of a crane and that STL is entitled to recover
approximately $1.1 million. The Company has retained counsel and intends
vigorously to defend the action based on what management believes are
excessive demands and other errors and omissions by STL. Trial is scheduled
for July 19, 2004, but the Company does intend to pursue a settlement whereby
the Company will acquire the crane for a negotiated sum which would be
financed from a third party lender. While a negative outcome would adversely
affect the Company's financial position, cash flows, and results of
operations, Management believes that the case can be concluded by settlement
or at trial without a material adverse impact upon financial position, cash
flow, or results of operations.
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
During the quarter ended April 30, 2004, the Company's Audit Committee
received proposals from and interviewed three accounting firms to perform the
ongoing audit work for the Company. With the approval of the Audit Committee,
the Board of Directors of the Company approved the dismissal of the Company's
former auditors, Aronson & Company and the engagement of McGladrey & Pullen,
LLP to perform the Company's audit.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 31.1 Section 302 Certification for
Frank E. Williams, III
Exhibit 31.2 Section 302 Certification for
Christ H. Manos
Exhibit 32.1 Section 906 Certification for
Frank E. Williams, III and
Christ H. Manos
Exhibit 99 Press release announcing
April 30, 2004 quarterly earnings
(b) Reports on Form 8-K
(1) March 17, 2004, amended March 26, 2004,
amended March 31, 2004
Item 4. Changes in Registrant's Certifying Accountant.
Announcing the dismissal of Aronson & Company
Item 7. Financial Statements and Exhibits
Accountant's letter from Aronson & Company
(2) April 2, 2004
Item 4. Changes in Registrant's Certifying Accountant.
Announcing the engagement of McGladrey & Pullen, LLP as
the Company's principal independent accountants.
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:
June 8, 2004 Williams Industries, Incorporated
-----------------------------------
Registrant
/s/ Frank E. Williams, III
-----------------------------------
Frank E. Williams, III
Chairman of the Board, President,
Chief Executive Officer,
Chief Financial Officer
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