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, 2005
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
At April 30, 2005, the Registrant had outstanding 3,649,535
shares of Common Stock
WILLIAMS INDUSTRIES, INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED April 30, 2005
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets - April 30,
2005 (Unaudited) and July 31, 2004 1
Condensed Consolidated Statements of Operations -
Three and Nine months ended April 30, 2005 and 2004
(Unaudited) 2
Condensed Consolidated Statements of Cash Flows -
Nine months ended April 30, 2005 and 2004
(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 17
ITEM 4. CONTROLS AND PROCEDURES 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 19
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 20
ITEM 5. OTHER INFORMATION 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 20
CERTIFICATIONS AND SIGNATURES 21
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands except share data)
ASSETS
April 30, July 31,
2005 2004
CURRENT ASSETS --------- ---------
Cash and cash equivalents $ 213 $ 1,343
Restricted cash - 1,003
Accounts receivable, net 15,888 17,458
Inventory 9,676 5,133
Costs and estimated earnings in excess
of billings on uncompleted contracts 2,242 1,161
Prepaid and other assets 3,089 1,413
--------- ---------
Total current assets 31,108 27,511
--------- ---------
PROPERTY AND EQUIPMENT, AT COST 26,914 24,601
Accumulated depreciation (14,901) (13,486)
--------- ---------
Property and equipment, net 12,013 11,115
--------- ---------
OTHER ASSETS
Deferred income taxes - 3,089
Other 275 419
--------- ---------
Total other assets 275 3,508
--------- ---------
TOTAL ASSETS $43,396 $42,134
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of notes payable $10,341 $ 5,390
Accounts payable 6,361 8,099
Billings in excess of costs and estimated
earnings on uncompleted contracts 10,142 3,633
Deferred income 12 19
Other liabilities 2,318 3,391
--------- ---------
Total current liabilities 29,174 20,532
--------- ---------
LONG-TERM DEBT
Notes payable, less current portion 3,531 5,229
--------- ---------
Total Liabilities 32,705 25,761
--------- ---------
MINORITY INTERESTS 197 180
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock -3,649,535 and 3,633,655 shares
issued and outstanding 365 363
Additional paid-in capital 16,594 16,537
Accumulated deficit (6,465) (707)
--------- ---------
Total stockholders' equity 10,494 16,193
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $43,396 $42,134
========= =========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($000 omitted)
Three Months Ended Nine Months Ended
April 30, April 30,
2005 2004 2005 2004
REVENUE -------- -------- -------- --------
Construction $ 4,702 $ 5,867 $14,245 $15,580
Manufacturing 7,335 8,949 22,711 24,772
Other 88 51 226 160
-------- -------- -------- --------
Total revenue 12,125 14,867 37,182 40,512
-------- -------- -------- --------
DIRECT COSTS
Construction 3,110 4,102 10,021 11,160
Manufacturing 6,147 6,016 18,255 16,822
-------- -------- -------- --------
Total direct costs 9,257 10,118 28,276 27,982
-------- -------- -------- --------
GROSS PROFIT 2,868 4,749 8,906 12,530
-------- -------- -------- --------
EXPENSES
Overhead 1,606 2,048 4,861 5,505
General and administrative 1,734 1,857 5,328 5,486
Depreciation 509 499 1,562 1,478
Interest 247 157 635 491
-------- -------- -------- --------
Total expenses 4,096 4,561 12,386 12,960
(LOSS) EARNINGS BEFORE INCOME TAXES,
MINORITY INTERESTS AND
EXTRAORDINARY ITEM (1,228) 188 (3,480) (430)
INCOME TAX PROVISION (BENEFIT) 2,589 56 3,089 (129)
-------- -------- -------- --------
(LOSS) EARNINGS BEFORE MINORITY
INTEREST AND EXTRAORDINARY ITEM (3,817) 132 (6,569) (301)
Minority interest (5) (13) (17) (20)
-------- -------- -------- --------
(LOSS) EARNINGS BEFORE
EXTRAORDINARY ITEM $(3,822) $ 119 $(6,586) $ (321)
EXTRAORDINARY ITEM
Gain on extinguishment of debt - - 828 -
-------- -------- -------- --------
NET (LOSS) EARNINGS $(3,822) $ 119 $(5,758) $ (321)
======== ======== ======== ========
NET (LOSS) EARNINGS
PER COMMON SHARE:
BASIC:
(Loss) earnings
before extraordinary item (1.05) 0.03 (1.81) (0.09)
Extraordinary item - - 0.23 -
-------- -------- -------- --------
(LOSS) EARNINGS PER COMMON SHARE:
BASIC $ (1.05) $ 0.03 $ (1.58) $ (0.09)
======== ======== ======== ========
DILUTED:
(Loss) earnings
before extraordinary item (1.05) 0.03 (1.81) (0.09)
Extraordinary item - - 0.23 -
-------- -------- -------- --------
(LOSS) EARNINGS PER COMMON SHARE:
DILUTED $ (1.05) $ 0.03 $ (1.58) $ (0.09)
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING: BASIC AND DILUTED 3,649,535 3,631,156 3,641,171 3,604,803
--------- --------- --------- ---------
See Notes To Condensed Consolidated Financial Statements
WILLIAMS INDUSTRIES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
Nine Months Ended
April 30,
2005 2004
--------- ---------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES $ (2,985) $ 154
NET CASH USED IN INVESTING ACTIVITIES (1,457) (3,409)
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,312 1,940
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,130) (1,315)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,343 2,023
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 213 $ 708
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income Taxes $ 6 $ 20
========= =========
Interest $ 600 $ 486
========= =========
See Notes To Condensed Consolidated Financial Statements.
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2005
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, 2005 and July 31, 2004, the results of
its operations for the three and nine months ended April 30,
2005 and 2004, and its cash flows for the nine months ended
April 30, 2005 and 2004, respectively. Operating results for the
three and nine months ended April 30, 2005 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, 2004.
The Company applies Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB No. 25)
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, 2004.
On January 20, 2005, the Company issued a total of 30,000
common stock options to its non-employee directors (6,000 shares
per director) at a price of $4.10 a share. The Company continues
to use the intrinsic method of valuing stock options, and as
prescribed by APB No. 25, it does not expense the value of stock
options. The following table shows the effect as if compensation
cost for all options had been determined based on the fair
market value recognition provisions of 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."
Three Months Ended Nine Months Ended
April 30, April 30,
2005 2004 2005 2004
-------- -------- -------- --------
AS REPORTED
Net (Loss) Earnings $(3,822) $ 119 $(5,758) $ (321)
(in thousands)
Net (Loss) Earnings Per Common
Share Basic and Diluted $ (1.05) $0.03 $ (1.58) $ (0.09)
Stock-based compensation - - (43) -
(in thousands)
PRO-FORMA
Net (Loss) Earnings $(3,822) $ 119 $(5,801) $ (321)
(in thousands)
Net (Loss) Earnings Per Common
Share Basic and Diluted $(1.05) $0.03 $ (1.59) $ (0.09)
2. RELATED-PARTY TRANSACTIONS
Mr. Frank E. Williams, Jr., who owned or controlled
approximately 45% of the Company's stock at April 30, 2005, 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, 2005
and 2004 are reflected below. Amounts receivable and payable to
these entities at April 30, 2005 and July 31, 2004 are also
reflected below.
The balances below include the balances previously reported
as the estate of F. Everett Williams. During the quarter ended
April 30, 2005, the probate proceedings were concluded and the
notes were transferred to Frank E. Williams, Jr.
Three Months Ended Nine Months Ended
April 30, April 30,
2005 2004 2005 2004
(in thousands) -------- -------- -------- --------
Revenue $ 239 $ 70 $ 742 $ 377
Billings to entities $ 259 $ 27 $ 811 $ 260
Costs and expenses incurred $ 67 $1 76 $ 108 $ 581
Balance Balance
April 30, July 31,
2005 2004
-------- --------
Accounts receivable $ 787 $ 650
Costs and estimated earnings in excess of
billings on uncompleted contracts $ - $ -
Notes Payable $ 553 $ 188
Accounts Payable $ 238 $ 77
Billings in excess of costs and estimated
earnings on uncompleted contracts $ 135 $ -
Accrued Interest Payable $ 95 $ 73
The Company is obligated to the Williams Family Limited
Partnership (WFLP) under a lease agreement for real property
with an option to purchase. The partnership is controlled by
individuals who own, directly or indirectly, approximately 49%
of the Company's stock. The lease, which had an original term of
five years and an extension option for five years, commenced
February 15, 2000. The original term was extended one year to
February 15, 2006. The lease contains an option to purchase up
to ten acres at the "original pro-rata cost" of $567,500. The
Company currently pays annual lease payments of approximately
$43,000.
During the nine months ended April 30, 2005, the Company
borrowed $1,050,000 from the partnership and repaid $222,000.
Lease and interest expense for the three and nine months ended
April 30, 2005 and 2004 is reflected below. Additionally, at
April 30, 2005 and July 31, 2004, Notes Payable, Accounts
Payable, representing lease payments, and Accrued Interest
payable are reflected below.
Three Months Ended Nine Months Ended
April 30, April 30,
2005 2004 2005 2004
(in thousands) -------- -------- -------- --------
Lease Expense $ 11 $ 14 $ 23 $ 59
Interest Expense $ 7 $ - $ 13 $ -
Balance Balance
April 30, July 31,
2005 2004
-------- --------
Notes Payable $ 928 $ 100
Accounts Payable $ 138 $ 116
Accrued Interest Payable $ 13 $ -
The Company sold its interest in Construction Insurance
Agency (CIA) to George R. Pocock, a former officer of the
Company, 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, 2005
and July 31, 2004 was $146,205 and $158,946, respectively. Costs
incurred with CIA, for insurance premiums and brokerage fees,
for the three and nine months ended April 30, 2005 and 2004 are
reflected below. In addition, balances payable at April 30, 2005
and July 31, 2004 are also reflected below.
Three Months Ended Nine Months Ended
April 30, April 30,
2005 2004 2005 2004
(in thousands) -------- -------- -------- --------
Costs incurred $ 240 $ 70 $ 367 $ 172
Balance Balance
April 30, July 31,
2005 2004
-------- --------
Accounts Payable $ 127 $ 109
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 expense for the three and nine months ended
April 30, 2005 and 2004 is reflected below. The balance
outstanding at April 30, 2005 and July 31, 2004 is also
reflected below.
Three Months Ended Nine Months Ended
April 30, April 30,
2005 2004 2005 2004
(in thousands) -------- -------- -------- --------
Interest Expense $ 3 $ 3 $ 9 $ 9
Balance Balance
April 30, July 31,
2005 2004
-------- --------
Note Payable $ 128 $ 164
Directors
At April 30, 2005, the Company owed the non-employee
members of the Board of Directors $58,000 for director and
consulting fees.
3. SEGMENT INFORMATION
Information about the Company's operations for the three
and nine months ended April 30, 2005 and 2004 is as follows (in
thousands):
Three Months Ended Nine Months Ended
April 30, April 30,
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Construction $ 5,443 $ 6,874 $16,589 $18,031
Manufacturing 8,560 8,954 25,538 24,876
Other 242 234 701 667
-------- -------- -------- --------
14,245 16,062 42,828 43,574
-------- -------- -------- --------
Intersegment revenues:
Construction 741 1,007 2,344 2,451
Manufacturing 1,225 5 2,827 104
Other 154 183 475 507
-------- -------- -------- --------
2,120 1,195 5,646 3,062
-------- -------- -------- --------
Consolidated revenues:
Construction 4,702 5,867 14,245 15,580
Manufacturing 7,335 8,949 22,711 24,772
Other 88 51 226 160
-------- -------- -------- --------
Total Consolidated Revenues $12,125 $14,867 $37,182 $40,512
-------- -------- -------- --------
(Loss) earnings before income
taxes, minority interest
and extraordinary item:
Construction $ 221 $ 336 $ 64 $ 521
Manufacturing (1,035) 361 (2,279) 407
Other (414) (509) (1,265) (1,358)
-------- -------- -------- --------
Total $(1,228) $ 188 $(3,480) $ (430)
-------- -------- -------- --------
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,
2005, two customers, in the manufacturing segment, accounted for
28% and 15% of total consolidated revenue, and 46% and 25% of
manufacturing revenue, while two customers in the construction
segment accounted 16% and 11% of construction revenue. For the
nine months ended April 30, 2004, one customer in the
manufacturing segment accounted for 17% of total consolidated
revenue and 28% of manufacturing revenue. Two customers in the
construction segment accounted for 17% and 13% of construction
revenue.
The Company's bridge girder subsidiary is dependent upon
one supplier of rolled steel plate. The Company maintains good
relations with the vendor, generally receiving orders on a
timely basis at reasonable cost for this market. If the
relationship with this vendor were to deteriorate or the vendor
were to go out of business, the Company would have trouble
meeting production deadlines in its contracts, as the other
major supplier of steel plate has limited excess production
available to "new" customers.
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 three months ended April 30, 2005, the Company
purchased Property and Equipment, for use in its operations, for
approximately $250,000.
6. RECLASSIFICATIONS
Certain Balance Sheet and Statement of Operations items for
the 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 reported a loss of $3.8 million for the quarter
ended April 30, 2005. Included in the loss was a $2.6 million
increase in the allowance against the Company's deferred income
tax asset. Due to the Company's continued losses in the current
year and its history of losses for the past three years, the
Company increased the valuation allowance on its deferred tax
asset to make the value of the asset zero. In evaluating the
Company's ability to recover its deferred tax asset, the Company
considered all available positive and negative evidence
including its past operating results, the existence of
cumulative losses in the most recent fiscal years and its
forecast of future taxable income. In determining future taxable
income, the Company utilized estimates, including the amount of
state and federal pre-tax operating income, the reversal of
temporary differences and the implementation of feasible and
prudent tax planning strategies. These estimates require
significant judgments consistent with the plans and estimates
the Company uses to manage the underlying businesses.
On an operational basis, the Company lost $1.2 million for
the three months ended April 30, 2005. While the Company's
construction segment was profitable, producing a $221,000 profit
before income taxes and minority interest, the Company's
manufacturing segment continues to be impacted by the high price
of steel, which has increased by as much as 100% over the past
eighteen months. The Company's bridge subsidiaries are working
primarily on jobs where contracts were awarded prior to the
rapid price increases. These cost increases have reduced the
segment's gross margins over the past year. The manufacturing
companies continue to pursue recovery of the additional cost of
steel from customers where possible. The manufacturing segment
was also affected by its ability to hire qualified, dependable
labor.
The Company's manufacturing subsidiaries continue to be
negatively impacted by the lack of infrastructure legislation.
The Transportation Equity Act for the 21st Century (TEA 21),
which expired in September 2003, was again extended for the
sixth time to July 4, 2005. Until new infrastructure legislation
is passed, the states will continue to delay long-term roads
projects and therefore limit the segment's ability to obtain new
contracts at higher margins.
The Company's financial results were also impacted by the
costs associated with claims in its workers_ compensation
program. The Company expensed the cost of claims of
approximately $150,000 for the three months ended April 30,
2005. For the three months ended April 30, 2004, the Company
recognized a reduction in its workers_ compensation expense of
approximately $200,000.
The Company has begun documenting its controls and
procedures as required by Section 404 of the Sarbanes-Oxley Act
(SOX 404), which requires the documentation and testing of
internal controls within the operating entities. The Company is
considered a non-accelerated filer under SOX 404. Although
management believes that the controls, currently existing, are
sufficient for the accurate reporting of financial information,
the Company has contracted with an outside consulting firm to
assist in this effort. The Company anticipates that the cost
will be substantial and will negatively impact its results of
operations for the year ending July 31, 2006. On March 2, 2005,
the Securities and Exchange Commission extended the compliance
dates for non-accelerated filers. The Company will be required
to be in compliance with SOX 404 by its year ending July 31,
2006.
Material Changes in Financial Condition
- ---------------------------------------
For the nine months ended April 30, 2005, the following
changes occurred:
The Company's Cash and Cash Equivalents and Restricted Cash
decreased $2.1 million. The Company used $1 million, mainly
certificates of deposit, to fund its payments on its prior
years' workers' compensation policies. The additional $1.1
million was used to fund Company operations.
Accounts Receivable decreased approximately $1.6 million
mainly on its billings for raw materials, and fabricated and/or
delivered product for the Company's bridge girder company.
Inventory increased $4.5 million as the Company purchased
steel plate and galvanized steel coils to produce its work,
mainly on the I95/395/495 Springfield Interchange Project in
Virginia and the Virginia approach to the Woodrow Wilson Bridge
near Washington, DC. The Company believes it has adequate
inventory on hand to meet current needs.
Prepaid expenses and other assets increased $1.7 million as
the Company, through cash payments and notes payable, pre-paid
its vehicle, equipment, general liability, umbrella and workers_
compensation insurance policies. These insurance costs are
expensed over the life of the policies, which is generally one
year.
Property and Equipment increased approximately $2.3
million. The Company purchased two previously leased cranes for
$2 million, financing the cranes at competitive market rates.
Deferred income taxes decreased $3.1 million during the
nine months ended April 30, 2005. Due to the Company's continued
losses in the current year and its history of losses for the
past three years, the Company increased the valuation allowance
on its deferred tax assets to make the value of the asset zero.
In evaluating the Company's ability to recover its deferred tax
assets, the Company considered all available positive and
negative evidence including its past operating results, the
existence of cumulative losses in the most recent fiscal years
and its forecast of future taxable income. In determining future
taxable income, the Company utilized estimates, including the
amount of state and federal pre-tax operating income, the
reversal of temporary differences and the implementation of
feasible and prudent tax planning strategies. These estimates
require significant judgments consistent with the plans and
estimates the Company uses to manage the underlying businesses.
At April 30, 2005, the Company had approximately $5.4
million in variable rate notes payable. Total Notes Payable
increased $3.3 million during the nine months ended April 30,
2005. The Company borrowed approximately $6.8 million, of which
$1.9 million was used to fund equipment purchases, $2.6 was used
to fund insurance premiums, $841,000 refinanced the notes
related to the Company's Industrial Revenue Bond (IRB) and $1.5,
from related party transactions, was used to fund short-term
operations. The Company repaid $3.6 million related to short-
term borrowing, $841,000 from the refinancing of the IRB
mentioned above, and the $2.8 million from funds from
operations.
Accounts Payable decreased $1.7 million as the Company
mainly paid material suppliers for inventory purchases for its
bridge projects in northern Virginia.
Billings In Excess of Costs and Estimated Earnings on
Uncompleted Contracts net of Costs and Estimated Earnings in
Excess of Billings, increased $5.4 million as a result of
material billings for the Company's two major bridge projects,
where the Company can bill ahead for material purchases.
Other Liabilities decreased by $1.1 million mainly from the
write-off of $828,000 related to debt on which the statute of
limitations had run. The Company also made payments on payroll
related liabilities, including accrued severance liabilities
related to the close down of its Bessemer, Alabama plant.
Stockholders' Equity decreased $5.7 million to $10.5
million related to the Company's loss for the nine-month period.
For the nine months ended April 30, 2005, the Company used
net cash of $1.1 million. $3 million was used in operations,
$6.8 million was provided from new debt borrowings and the
issuance of stock, while the Company paid back $3.6 million
against borrowings in financing activities. The Company used
$1.4 million for investing activities consisting of property and
equipment purchases of $2.4 million while it used restricted
cash of $1 million to fund operational liabilities related to
the reimbursement of workers' compensation related losses.
During the quarter ended April 30, 2005, the Company
refinanced its debt related to its Industrial Revenue Bond on
its Richmond, Virginia property. The new note, for approximately
$841,000 was financed at the prime rate of interest plus 3
percent, with monthly payments of $8,000 through August 2005, at
which time the balance on the note is payable in full. This note
is reported in the "Current portion of notes payable" at April
30, 2005.
The Company's line of credit with United Bank of
approximately $2.5 million matured on May 5, 2005. The Company
subsequently received a Notice of Loan Defaults dated May 12,
2005. As a result of the Notice, the debts to United Bank,
aggregating approximately $7 million, have been accelerated and
are now due and payable in full. The Company is continuing to
pursue discussions with the lender to forbear from taking
collection actions under the loan documents, which would likely
cause considerable disruption to the Company's business and cash
flows in the event the Bank chooses to attempt to exercise such
remedies.
The Company believes, as revenues increase, raw material
prices increase or suppliers restructure payment terms, it will
be necessary to increase the Company's credit facilities to
handle short-term cash requirements.
Material Changes in Results of Operations
- -----------------------------------------
Three Months Ended April 30, 2005 Compared to
Three Months Ended April 30, 2004
The Company reported a decrease in revenues and gross
profit and an increase in its net loss when compared to the
quarter ended April 30, 2004.
The Company reported a net loss of $3.8 million, or $1.05
per share, on total revenue of $12.1 million for the quarter
ended April 30, 2005 as compared to 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.
Included in the loss was a $2.6 million reduction in the
Company's deferred income tax asset. Due to the Company's
continued losses in the current year and its history of losses
for the past three years, the Company increased the valuation
allowance on its deferred tax assets to make the value of the
asset zero.
In the manufacturing segment, revenues decreased $1.6
million, gross profit decreased $1.7 million and gross profit
percentage decreased from 32.8% in the quarter ended April 30,
2004 to 16.2% in the quarter ended April 30, 2005. The revenue
decrease is partially attributed to the closing of the Bessemer,
Alabama plant, which had contributed approximately $1 million in
revenue in 2004. The additional decline can be attributed to the
difficulty in maintaining a competent, dedicated workforce in
its plants. The Company continues to work on its two largest
contracts, which were bid prior to the steel crisis. The
increased cost of materials on these jobs has lowered the gross
profit percentages significantly. The Company continues to
pursue recovery for many of the material price increases. The
segment also incurred an additional $153,000 for workers
compensation claims for prior year policies. The segment's loss
before income taxes and minority interest was approximately $1
million in 2005 compared to a profit of $361,000 in 2004. The
Company continues to make arrangements to sell the remaining
inventory and plant equipment at the Bessemer, Alabama plant and
does not anticipate losses on the sale of these assets.
Construction segment revenues declined $1.2 million when
the two quarters are compared. While gross profit decreased
$173,000, the gross profit percentage increased from 30% in 2004
to 34% in 2005. Delays by customers on jobs and some weather
delays due to rain contributed to the decline in work. Earnings
before income taxes, minority interest and extraordinary item
declined $115,000.
Overhead decreased $442,000 related to the Company's shut
down of its Bessemer, Alabama plant during the quarter ended
January 31, 2005, and to the decrease in work in the
construction segment. General and Administrative expenses
decreased $123,000 related to various factors including reduced
salaries and professional fees. Depreciation expense increased
$10,000. Interest expense increased $90,000 on higher interest
rates on more debt.
Nine Months Ended April 30, 2005 Compared to
Nine Months Ended April 30, 2004
Revenue and gross profit declined contributing to the
increase in the loss for 2005 when compared to 2004.
The Company had a net loss of $5.8 million, or $1.58 per
share, on total revenue of $37 million for the nine months ended
April 30, 2005 as compared to a net loss of $321,000, or $0.09
per share, on total revenue of $40.5 million for the nine months
ended April 30, 2004. The Company had loss of $6.6 million or
$1.81 per share before recognizing extraordinary income of
$828,000 on the write off of debt.
Included in the loss was a $3.1 million reduction in the
Company's deferred income tax asset. Due to the Company's
continued losses in the current year and its history of losses
for the past three years, the Company increased the valuation
allowance on its deferred tax assets to make the value of the
asset zero.
Revenues in the manufacturing segment declined $2.1 million
while the gross profit decreased $3.5 million. The gross profit
percentage declined to 19.6% in 2005 compared to 32.1% in 2004.
Steel price increases were a major contributor to the lower
percentages. The Company continues to pursue recovery for the
material price increases. Also contributing to the lower gross
profit were costs associated with the close down of operations
in the Bessemer, Alabama plant. The plant was projected to cease
operations October 31, 2004 but the close down was not completed
until the end of the second quarter. The segment's loss before
income taxes, minority interest and extraordinary item increased
$2.7 million from 2004 to 2005. Included in the loss were costs
totaling $301,000 related to workers' compensation insurance
claims.
Construction segment revenues declined $1.3 million. Gross
profit, which includes $341,000 of additional workers'
compensation claims expense from accidents on jobs, declined
approximately $200,000 while the gross profit percentage
increased slightly from 28.4% in 2004 to 29.6% in 2005. Profit
before income taxes, minority interest and extraordinary item in
the segment decreased $457,000. Depreciation expense increased
due to the purchase of cranes. Interest expense increased due to
increased borrowings for cranes as well as other operational
needs. Customers delaying the start of jobs have limited the
amount of work the segment could perform.
Overhead decreased $644,000 related to the Company's close
down of its Bessemer, Alabama plant and to the decrease in work
in the construction segment. General and Administrative expenses
decreased $158,000 due to various reduced costs. Depreciation
expense increased $84,000 due to the purchase of cranes.
Interest expense increased $144,000 from higher interest rates
on increased debt outstanding.
BACKLOG
At April 30, 2005, the Company's backlog was $50.3 million,
which is a decrease of approximately $11 million from April 2004
and $10 million from July 31, 2004. Due to the continuing delay
of Congress in passing new transportation funding, 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
adequate backlog.
Approximately $37 million of the backlog will 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 2006.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
Interest Rate Risk
The Company's cash equivalents and restricted cash,
invested in interest-bearing instruments, are presented at fair
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, 2005, an evaluation was performed under the
supervision and with the participation of the Company's
management, including 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 January 31, 2005. There have
been no significant changes in the Company's internal controls
or in other factors that could April 30, 2005.
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.
The Company has begun documenting its controls and
procedures as required by Sarbanes-Oxley Section 404, which
requires the documentation and testing of internal controls
within the its operating entities. Although management believes
that the controls, currently in place, are sufficient for the
accurate reporting of financial information, the Company has
contracted with an outside consulting firm to assist in this
effort. The Company anticipates that the cost will be
substantial and will have a negative impact on its financial
results for the year ending July 31, 2006.
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.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults Upon Senior Securities
During the quarter ended April 30, 2005, the Company
refinanced its debt related to its Industrial Revenue Bond on
its Richmond, Virginia property. The new note, for approximately
$849,000 was financed at the prime rate of interest plus 3
percent, with monthly payments of $8,000 through August 2005, at
which time the balance on the note is payable in full. This note
is reported in the "Current portion of notes payable" at April
30, 2005.
The Company's line of credit with United Bank of
approximately $2.5 million matured on May 5, 2005. The Company
subsequently received a Notice of Loan Defaults dated May 12,
2005. As a result of the Notice, the debts to United Bank,
aggregating approximately $7 million, have been accelerated and
are now due and payable in full. The Company is continuing to
pursue discussions with the lender to forbear from taking
collection actions under the loan documents, which would likely
cause considerable disruption to the Company's business and cash
flows in the event the Bank chooses to attempt to exercise such
remedies. These notes are reported in "Current portion of notes
payable" at April 30, 2005.
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
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 dated
June 14, 2005
(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:
June 14 , 2005 Williams Industries, Incorporated
---------------------------------
Registrant
/s/ Frank E. Williams, III
---------------------------------
Frank E. Williams, III
Chairman of the Board, President,
Chief Executive Officer,
Chief Financial Officer