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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
(Mark one)
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JULY 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
COMMISSION FILE NO. 0-8190
WILLIAMS INDUSTRIES, INCORPORATED
(Exact name of Registrant as specified in its charter)
VIRGINIA 54-0899518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2849 MEADOW VIEW ROAD
FALLS CHURCH, VIRGINIA 22042
(Address of principle executive offices) (Zip Code)
REGISTRANT'S PHONE NUMBER, INCLUDING AREA CODE:
(703) 560-5196
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.10 PAR VALUE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES (X) NO ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
YES (X) No ( )
Aggregate market value of voting stock held by non-affliates of the Registrant,
based on last sale price as reported on October 4, 1996.
$12,236,081
Shares outstanding at October 4, 1996.
2,576,017
The following document is incorporated herein be reference to the information
required by Part III of this report (information about officers and directors):
Proxy Statement Relating to Annual Meeting to be held on November 16, 1996.
ITEM 1. BUSINESS
A. GENERAL DEVELOPMENT OF BUSINESS
In the more than 25 years since Williams Industries, Inc. (the "Company") was
established to act as the parent of two sister companies established earlier,
the Company has had many diverse experiences. From its inception in 1970,
Williams Industries quickly became an industry leader, specializing in steel
erection and the rental of construction equipment.
Through the 1980s, the Company grew through the addition of subsidiaries and
affiliates operating in a wide range of industrial, commercial, institutional
and government construction markets. By the mid-1980s, the Company had grown
from the original steel erection company to a conglomerate with 27
subsidiaries and affiliates.
Williams Industries, Inc. is now a much smaller corporation than the
conglomerate of a few years ago, but the Company is close to achieving its
goals of debt repayment and consistent profitability of core operations.
During the past several years, Williams Industries, Inc. (the "Company") has
downsized and restructured in order to return to profitability and pay debt.
The core companies, Greenway Corporation, Piedmont Metal Products, Inc.,
Williams Bridge Company, Williams Equipment Corporation, and Williams Steel
Erection Company, Inc., represent the Company's business focus for the
foreseeable future. These companies, from an aggregate operating perspective,
are working to enhance the on-going value of Williams Industries, Inc. and to
establish a sound base for future growth.
Their efforts are being augmented by Construction Insurance Agency, Inc.,
Insurance Risk Management Group, Inc., and Capital Benefit Administrators,
Inc., which provide necessary services both for the core companies and
outside customers.
The final component is comprised of assets or companies that are not part of
the long range plans for Williams Industries, Inc. These companies or assets
are either being closed or sold. The proceeds of any asset sales are being
used to pay Bank Group debt.
Working within the Company's comprehensive long-range plan, management is
taking steps necessary to return the Company to operational profitability
through a combination of measures. These include: the removal of Bank Group
debt; the reduction of operating, and general and administrative costs;
expansion of market areas within the core businesses; and further
consolidation of corporate components as necessary.
In 1991, the Company defaulted on a loan and security agreement with its then
primary lenders (referred to as the "Bank Group" throughout this document).
At July 31, 1993, the balance owed on Bank Group debt was approximately $21
million plus interest. After a series of transactions involving the four
original primary lenders, the Bank Group now consists of NationsBank, N.A. and
the Federal Deposit Insurance Corporation, which own 82% and 18%, respectively,
of the outstanding Bank Group debt.
On September 14, 1993, the Company entered into a Debt Restructuring
Agreement providing for a discounted payoff of Bank Group notes together with
the issuance of Company stock in an amount which would depend upon the amount
of the discount allowed. The Company commenced to perform under the Debt
Restructuring Agreement, and during Fiscal Year 1994 the Company paid
approximately $2 million to the Bank Group, but was unable to meet the payment
schedule. At July 31, 1994, the balance owed on Bank Group notes was
approximately $20.5 million plus interest.
On November 30, 1994, the Company and the Bank Group entered into an Amended
and Restated Debt Restructuring Agreement, which modified the schedule of
payments and the amount and form of the equity to be issued. The Amended and
Restated Debt Restructuring Agreement provided for satisfaction of Bank Group
notes upon payment of $11.5 million after August 1, 1994, with approximately
$7.0 million to be forgiven if the Company paid $8 million by January 31, 1995
(the "Initial Discount"). Upon final satisfaction of Bank Group debt, the
Bank Group would receive a $500,000 convertible subordinated debenture which
would be convertible into approximately 18% of the outstanding stock of the
Company.
The Company and Bank Group subsequently agreed to a letter agreement dated
July 21, 1995, which extended the payment schedule through December 31, 1995,
and provided that if the Company paid $7.5 million by July 31, 1995, the Bank
Group would forgive $6.6 million, with the balance of the Initial Discount to
be allowed upon the payment of $8 million by September 30, 1995. The Company
paid $7.5 million by July 31, 1995 and received $6.6 million in debt
forgiveness in Fiscal Year 1995, which is reflected in the Fiscal Year 1995
Consolidated Financial Statements as Gain on Extinguishment of Debt. Due to
the substantial payments as well as the debt forgiveness, the balance owed on
Bank Group notes at July 31, 1995 had been reduced to approximately $8.3
million plus accrued interest of $484,000.
The Company also met the $8 million cumulative payment deadline, and received
the balance of the Initial Discount of $348,000 during the first quarter of
Fiscal Year 1996, which is reflected in Fiscal Year 1996 Consolidated
Financial Statements as Gain on Extinguishment of Debt. The Company continued
its efforts to pay the balance owed under the Agreement by December 31, 1995,
but was unable to meet the deadline.
The Company and Bank Group negotiated and entered into a Second Modification
to Amended and restated Debt Restructuring Agreement in February, 1996, which
provided for an extension of the payment schedule through April 30, 1996, in
consideration of increasing the payoff amount from $11.5 million to $11.65
million. Through July 31, 1996, the Company had paid approximately $8.3
million. While the formal agreement has expired, the Bank Group has taken no
action to accelerate the indebtedness nor to declare the Company in default,
and the Company continues diligently to pursue the final payoff and resolution
of Bank Group debt. At July 31, 1996, the balance owed on Bank Group notes
has been reduced to approximately $7.3 million plus accrued interest of $1.4
million.
Subsequent to July 31, 1996, the Company has made a proposal to the Bank
Group, which is presently under review. The proposal provides for an
extension of the payment schedule to March 31, 1997, in consideration of
increasing the payoff amount from $11.65 to $11.825 million with the final
payoff to come from an asset-based loan, an increase in the Company's
real estate loan discussed below, and the continued liquidation of the
assets of the Company's closed operations.
If the proposal to the Bank Group results in an agreement, the Company's core
companies would be free and clear of Bank Group debt and the Company would
receive a substantial portion of the balance of the debt forgiveness upon
closing of the asset-based loan. Management believes that the continued
liquidation of the John F. Beasley Construction Co., Williams Enterprises,
Inc., and Arthur Phillips & Co., Inc. assets will produce sufficient cash
within the proposed time for final payoff of Bank Group debt.
On September 14, 1993, the Company and certain of its subsidiaries entered
into a real estate loan with NationsBank, N.A. and executed a promissory note
for approximately $3.2 million. On January 31, 1994, the Company failed to
make a $26,000 monthly payment and subsequent monthly payments. These
failures are a default under the terms of that credit facility. No action to
accelerate this indebtedness has been taken by the lender, although by its
terms the debt was due and payable in full at July 31, 1995. As described in
Note 2 in the Notes to Consolidated Financial Statements, during Fiscal Year
1996 the Company sold a portion of the property securing this loan to the
Virginia Department of Transportation and approximately $2.25 million of the
proceeds were applied against this debt. At July 31, 1996, the principal
balance owed on this loan had been reduced to approximately $1.5 million, plus
accrued interest of approximately $100,000. NationsBank has indicated its
willingness to extend the term of this loan, and the Bank has also indicated
that it will consider increasing the amount of the loan in order to facilitate
the satisfaction of Bank Group debt.
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company's sctivities are divided into three broad categories: (1)
Construction, which includes industrial, commercial and governmental
construction and the construction repair and rehabilitation of bridges as
well as the rental, sale and service of heavy construction equipment; (2)
Manufacturing, which includes the manufacture of metal products; and (3)
other, which includes the insurance operations and parent company tranactions
with unaffliated parties. Financial information about these segments is
contained in Note 13 of the Notes to Consolidated Financial Statements. The
following table sets forth the percentage of total revenue attributable to these
categories for the fiscal periods indicated as restated to reflect discontinued
operations and the foregoing reclassification of segments:
Fiscal Year Ended July 31:
1996 1995 1994
Construction 54% 62% 61%
Manufacturing 34% 32% 37%
Other 12% 6% 2%
This mix has changed over the years as the Company continues to organize its
business into the most profitable configuration possible. While management
believes the Company's current structure is likely to be maintained for some
time going forwardm the percentages of total revenue are expected to change
as market conditions or new business warrant.
C. NARRATIVE DESCRIPTION OF BUSINESS
1. CONSTRUCTION
The Company specializes in structural steel erection, the installation of
architectural, ornamental and miscellaneous metal products, the installation
of precast and prestressed concrete products, the rental of construction
equipment and the rigging and installation of equipment for utility and
industrial facilities.
The steel, concrete and other materials used in the construction segment are
readily availabe. The Company owns a wide variety of construction equipment
and has little difficulty in having sufficient equipment to perform its
contracts. Most labor employed by this segment is obtained in the areas where
the particular project is located. The Company has not experienced any
significant labor difficulties.
The primary basis on which the Company is awarded construction contracts is
price, since most projects are awarded on the basis of competitive bidding.
While there are numerous competitors for commercial and industrial
construction in the Company's geographic areas, the Company remains as one of
the larger and more diversified companies in its areas of operations.
Although revenue derived from any particular customer fluctuates significantly,
in recent years no single customer has accounted for more than 10 % of
consolidated revenue.
a. Steel Construction
The Company engages in the installation of structural and other steel
products for a variety of buildings, bridges, highways, industrial facilities,
power generating plants and other structures.
Most of the Company's steel construction revenue is received on projects
where the Company is a subcontractor to a material supplier (generally a steel
fabricator) or another contractor. Labor in the steel construction segment is
primarily open shop. When the Company acts as the steel erection
subcontractor, it is invited to bid by the firm that needs the steel
construction services. Consequently, customer relations are important; however,
the Company is not dependent upon any single customer or contract.
The Company operates its steel erection business primarily in the
Mid-Atlantic area between Baltimore, Maryland and Norfolk, Virginia.
b. Concrete Construction
The Company erects structural precast and prestressed concrete for various
structures, such as multi-storied parking facilities and processing facilities,
and erects the concrete architectural facades for buildings. The concrete
erection service generates the bulk of its revenue from contracts with
non-affiliated customers, and the business is not dependent upon any
particular customer.
c. Rigging and Installation of Equipment
Much of the equipment and machinery used by utilities and other industrial
concerns is so cumbersome that its installation and preparation for use, and
to some extent its maintenance, requires installation equipment and skills not
economically feasible for those users to acquire and maintain. The Company's
construction equipment, personnel and experience are well suited for such
tasks, and the Company contracts for and performs those services. Since
management believes that the demand for these services, particularly by
utilities, is relatively stable throughout business cycles, it is aggressively
pusuing the expansion of this phase of its construction services.
d. Equipment Rental
The Company requires a wide range of heavy construction equipment in its
construction business, but not all of the equipment is in use at all times.
To maximize its return on investment in equipment, the Company rents equipment
to unaffiliated parties to the extent possible. Operating margins from rentals
are attractive because the direct cost of renting is relatively low. As a
result, the Company is aggressively pursuing the expansion of this phase of
its business.
2. Manufacturing
The Company manufactures metal products that are frequently used in projects
on which the Company is providing construction services. Products fabricated
include steel plate girders used in the construction of bridges and other
projects, and light structural metal products.
Facilities in this segment are predominately open shop. Management believes
that its labor relations in this segment are good.
Competition in this segment, based on price, quality and service, is intense.
Although revenue derived from any particular customer fluctuates significantly,
in recent years no single customer has accounted for more than 10% of
consolidated revenue.
a. Steel Manufacturing
The Company has two plants for the fabrication of steel plate girders and
other components used in the construction, repair and rehabilitation of
highway bridges and grade separations.
One of these plants, located in Manassas, Virginia, is a large heavy plate
girder fabrication facility and contains a main fabrication shop, ancillary
shops and offices totaling approximately 46,000 square feet, together with
rail siding.
The other plant, located on 17 acres in Richmond, Virginia, is a full service
fabrication facility and contains a main fabrication shop, ancillary shops and
offices totaling approximately 128,000 square feet.
Both facilities have internal and external handling equipment, modern
fabrication equipment, large storage and assembly areas and are American
Institute of Steel Construction, Category III, Fracture Critical Bridge Shops.
All facilities are in good repair and designed for the uses to which they are
applied. Since virtually all production at these facilities is for specific
contracts rather than for inventory or general sales, utilization can vary
from time to time.
b. Light Structural Metal Products
The Company fabricates light structural metal products at a Company-owned
facility in Bedford, Virginia. The Bedford plant is located on about 22 acres.
During Fiscal Year 1996, this subsidiary upgraded its facilities to enhance
its manufacturing capabilities, as well as its ability to finish product in
inclement weather.
3. General and Insurance
a. General
All segments of the Company are influenced by adverse weather conditions.
Accordingly, higher revenue typically is recorded in the first (August through
October) and fourth (May through July) fiscal quarters when the weather
conditions are generally more favorable. This variation is more pronounced
in the construction segment than in the manufacturing segment.
Management is not aware of any environmental regulations that materially
impact the Company's capital expenditures, earnings or competitive position.
Compliance with Occupational Safety and Health Administration (OSHA)
requirements may, on occasion, increase short-term costs (although in the
long-term, compliance may actually reduce costs through workers' compensation
savings); however, since compliance is required industry wide, the Company is
not at a competitive disadvantage, and the costs are built into the Company's
normal bidding procedures.
The Company employs between 250 and 500 employees, many employed on an hourly
basis for specific projects, the actual number varying with the seasons and
timing of contracts. At July 31, 1996, the Company had 319 employees.
b. Insurance
Liability Coverage
Liability coverage for the Company and its subsidiaries is provided by a
policy of insurance with limits of $1 million and a $2 million aggregate. The
Company also carries what is known as an "umbrella" policy which provides
limits of $4 million excess of the primary. The primary policy has a $25,000
deductible; however, it does provide first dollar defense coverage. If
additional coverage is required on a specific project, the Company makes those
purchases.
Workers' Compensation Coverage
Workers' compensation coverage is provided by several programs, depending on
the jurisdiction. In some states, the program is traditionally insured, while
in other states, self-funding mechanisms are used. Since 1987, the Company's
"loss modification factor" (a percentage increase or decrease to a standard
premium based primarily on an insured's previous claims experience) on its
workers' compensation insurance premiums declined from a high of 173% in 1986
to a low of 92% in 1992. The current loss modification factor is 95%.
management attributes this decline to the stregthening of safety and loss
control measures, education of management and emplpoyees of the importance of
compliance at all times with the corporate safety program, along with constant
monitoring of claims to minimize or eliminate costly frction between the
claimant and the Company. The Company strives to be in the forefront in
providing a safe work place fr its workers, but, because of the dangerous nature
of its business, injuries do occur. In those cases, the Company recognizes
the personal tragedy that can accompany those injuries and attempts to provide
comfort and individual consideration to the injured party and his or her family.
ITEM 2. PROPERTIES AND EQUIPMENT
At the end of Fiscal Year 1996, the Company owned approximately 82 acres of
industrial property, most of which is presently being utilized. Approximately
39 acres are near Manassas, in Prince William County, Virginia; 17 acres are
in Richmond, Virginia; 22 acres in Bedford County, in Virginia's Piedmont
section between Lynchburg and Roanoke; 2 acres are in Dallas, Texas; and 2
acres are in Muskogee, Oklahoma.
In the first quarter of Fiscal Year 1996, the Company sold eight of the ten
acres owned by the John F. Beasley Construction Company in Dallas, Texas.
Beasley, which is in Chapter 11 protection in the United States Bankruptcy
Court, Northern District of Texas, Dallas Division, sold approximately six
acres, together with certain other assets, to an investment group owned by
Frank E. Williams, Jr., and John M. Bosworth. Mr. Williams, Jr. is a current
director and former officer of the Company and the former chairman of Beasley.
Mr. Bosworth is the former president of the Beasley Building Division. Two
acres were sold to a neighboring property owner not affliated with the
Company. The sales prices were approved by the Bankruptcy Court. A provision
for the loss of approximately $260,00 from the sale of these assets was
recorded during the year ended July 31, 1995.
On February 19, 1996, the Company sold approximately 5.5 acres of its property
in Bedford, Virginia to an non-affiliated party for $50,000. After taxes and
costs associated with the sale were paid, the net proceeds of approximately
$48,000 were paid against Bank Group debt.
During the second quarter of Fiscal Year 1996, the Company accepted an offer
from the Virginia Department of Transportation to purchase some of the
Company's property in Prince William County for $2.6 million. The sale
resulted in a net gain of approximately $2.2 million, which was reflected in
second quarter results. The Company's present use of the property is not
significantly affected by the sale. Approximately $2.25 million of the
proceeds was used to reduce the outstanding principal and interest owed on the
Company's real estate loan.
The 2,400 square foot building housing the executive offices of the Company
is located on a 2 1/2 acre parcel owned by the Company, in Fairfax County,
Virginia. This parcel also includes a 9,000 square foot two story masonry
building and several smaller structures housing the Company's insurance
operations, its construction group headquarters, legal, accounting and data
processing functions. Portions of this complex also are rented to
non-affiliated third parties.
The Company owns numerous large cranes, tractors and trailers and other
equipment. Management believes the equipment is in good condition and is well
maintained. During Fiscal Year 1996, the Company has been upgrading its fleet,
both with new and used equipment. Expenditures for such equipment, including
amounts financed, totaled $2.8 million in Fiscal Year 1996. The availability
of used equipment at attractive prices varies primarily with the construction
industry business cycle. The Company attempts to time its purchases and sales
to take advantage of this cycle. All equipment is encumbered by security
interests.
ITEM 3. LEGAL PROCEEDINGS
Pribyla
The Company is a party to a claim for excess medical expenses incurred by Mr.
Eugene F. Pribyla, a former officer and shareholder of a subsidiary pursuant
to a stock purchase agreement. On February 10, 1994, judgment was awarded by
the District Court of Dallas, Texas, 134th Judicial District, in favor of Mr.
and Mrs. Pribyla against the Company and its wholly-owned subsidiary, John F.
Beasley Construction Company, in the principal amount of $2.5 million, plus
attorneys' fees of $135,000, for breach of contract. The Pribylas asserted
at trial that the stock purchase agreement, wherein Mr. Pribyla sold his
stock to the Company, provided a guarantee of a set level of health insurance
benefits, and that the plaintiffs were damaged when Beasley changed health
insurance companies.
The Company filed an appeal in the Texas Court of Civil Appeals, which
resulted in overturning the judgment against Beasley, but affirming the
judgment against the Company. The Company filed an Application for Writ of
Error to the Texas Supreme Court. During the fourth quarter of Fiscal Year
1996, the Texas Supreme Court granted the Writ of Error and scheduled oral
argument. This decision does not affect the judgment creditor's right to take
action to collect their judgment pending a decision by the Supreme Court, nor
does it necessarily indicate that the result will be favorable.
Commencing July 1, 1995 and continuing through the date of this filing, the
Company has made weekly forbearance payments to the judgment creditor under a
forbearance agreement. At present, settlement discussions are continuing, and
the agreement and a subsequent extension have expired, although payments are
continuing to be made and accepted on a "week to week" basis. Management
continues to believe that the original decision was in error and that the
ultimate outcome of the case will not have a material adverse impact on the
Company's finanical statement or results of operations.
FDIC
The Company was party to a guaranty under which the FDIC claimed that the
Company was responsible for 50% of the alleged deficiencies on the part of
Atchison & Keller, Inc., the borrower. Suit was filed against the Company
for $350,000, but the FDIC accepted the Company's proposal to settle the
matter. In the settlement, the Company was to issue a $100,000 convertible
debenture under which the FDIC would receive 110,000 shares of unreigstered
stock. This settlement has not yet been formalized when a management change
occurred at the FDIC. The Company has requested that the FDIC seek approval
of a modification which would allow the Company to redeem the unregistered
shares for a number of registered shares which would depend on their value
at the time of issuance.
AIG
On March 25, 1994, the Company was sued by National Union Fire Insurance
Company of Pittsburgh, PA and American Home Assurance Company (members of the
AIG group of insurance companies), claiming the Company owed an aggregate total
of approximately $3.5 million for workers compensation premiums. The Company
answered the suits and demanded trail by jury, but the suits were withdrawn
without prejudice. The litigation was settled by the Company's paying $100,000
and signing a $1.0 million confessed judgment note, payable over three years.
The Company defaulted after making three payments and National Union then
obtained a judgment for approximately $950,000 plus interest from May 11, 1995.
During Fiscal Year 1996, a second settlement was reached. All obligations of
this settlement were satisfied during the fourth quarter. The settlement
resulted in a gain of $460,000 which was recorded during the fourth quarter of
Fiscal Year 1996. The gain is included in the Company's Consolidated
Financial Statements for the Year Ended July 31, 1996 as a Gain on
Extinguishment of Debt.
PRECISION COMPONENTS CORP.
Precision Components Corp. ("PCC"), the buyer of Industrial Alloy Fabricators'
("IAF") assets, contributed $300,000 to the settlement of a liability claim
against IAF. The Company was advised by counsel that the voluntary assumption
of this liability, which was not to be assumed by the buyer pursuant to the
agreement of sale, renders this payment not subject to reimbursement. PCC has
made demand upon the Company for reimbursement, which demand the Company
rejects. Management believes that the ultimate outcome of this matter will not
have a material adverse impact on the Company's financial position or results
of operations.
M&W
Subsequent to July 31, 1996, the Internal Revenue Service accepted the
Company's proposal to settle a dispute over a penalty assessed when the
Company's former Chairman, Frank E. Williams, Jr., was found to be a
"responsible party" for the unpaid trust fund taxes of a former unconsolidated
affliate, M&W Marine Services, Inc., which ceased operations in 1992. The
amount of the settlement has been accrued by the Company at July 31, 1996.
GENERAL
The Company is also party to various other claims arising in the ordinary
course of its business. Generally claims exposure in the construction
services industry consists of workers compensation, personal injury, product
liability and property damage. The Company believes that its insurance
liability accruals, coupled with its excess liability coverage, provide
adequate coverage for such claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year covered
by this report to vote of security holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The Company's Common Stock was traded on the NASDAQ's National Market System
under the symbol (WMSI) until its equity position no longer met NASDAQ
requirements for inclusion in that market. Subsequently, the Company's stock
has traded on the "bulletin boards" and will return to NASDAQ only when
it meets all of the requirements for market listing. The following table sets
forth the high and low sales prices for the periods indicated, as obtained from
market makers in the Company's stock.
8/1/94 11/1/94 2/1/95 5/1/95 8/1/95 11/1/95 2/1/96 5/1/96
10/31/94 1/31/95 4/30/95 7/31/95 10/31/95 1/31/96 4/30/96 7/31/96
$1.19 $0.81 $0.84 $1.00 $3.50 $4.00 $3.93 $5.25
$0.41 $0.69 $0.78 $0.75 $0.75 $2.12 $2.69 $2.50
The Company has paid no cash dividends in recent years. While it is the
directors' policy to have the Company pay cash dividends whenever feasible,
the Company's credit agreements prohibit cash dividends without the lenders'
permission. In addition, the need for cash in the Company's business
indicates that cash dividends will not be paid in the foreseeable future.
At September 20, 1996, there were 514 holders of record of the Common Stock.
ITEM 6. SELECTED CONSOLIDATED FINANICAL DATA
The following table sets forth selected financial data for the Company and
is qualified in its entirety by the more detailed financial statements,
related notes thereto, and other statistical information appearing elsewhere
in this report.
SELECTED CONSOLIDATED FINANCIAL DATA
(In millions, except per share data)
1996 1995 1994 1993 1992
Statements of
Operations Data:
Revenue:
Construction $16.1 $19.7 $27.9 $28.0 $42.9
Manufacturing 10.1 10.3 16.9 21.7 22.9
Other 3.5 1.8 0.8 0.9 1.1
Total Revenue $29.7 $31.8 $45.6 $50.6 $66.9
Gross Profit:
Construction $ 6.2 $ 5.2 $ 4.8 $ 3.5 $ 9.1
Manufacturing 2.9 3.9 4.2 5.4 8.2
Other 3.5 1.8 0.8 0.9 1.1
Total Gross
Profit $12.6 $10.9 $ 9.8 $ 9.8 $18.4
Expense:
Overhead $ 2.7 $ 3.0 $ 3.6 $ 3.9 $ 5.2
General and
Administrative 5.3 9.0 8.1 10.7 10.3
Depreciation 1.0 1.2 1.4 1.6 1.6
Interest 1.5 2.3 1.7 1.5 2.2
Total Expense $10.5 $15.5 $14.8 $17.7 $19.3
Profit (Loss) from
Continuing Opera-
tions $ 2.1 $(4.6) $(5.0) $(8.0) $(0.9)
Gain (Loss) from
Discontinued
Operations - 1.4 (4.6) (5.1) (0.9)
Extraordinary Item -
Gain on Ex-
tinguishment
of Debt 0.8 6.6 - - -
Net Earnings (Loss) $2.9 $3.4 $(9.6) $(13.1) $(1.8)
Earnings (Loss)
Per Share:
From Continuing
Operations $0.84 $(1.82) $(1.98) $(3.20) $(0.35)
From Discon-
tinued
Operations - 0.57 (1.80) (2.01) (0.38)
Extraordinary
Item 0.31 2.60 - - -
Earnings (Loss)
Per Share* $1.15 $1.35 $(3.78) $(5.21) $(0.73)
Balance Sheet Data
(at end of year):
Total Assets -
Continuing
Operations $28.0 $24.6 $38.4 $40.9 $48.9
Net (Liabilities)
Assets of Dis-
continued
Operations - - (1.0) 3.6 7.8
Long Term Obligations 5.8 2.9 5.0 17.2 2.4
Total Liabilities 30.1 29.7 46.3 42.7 41.9
Stockholders equity
(Deficiency
in assets) (2.2) (5.2) (8.7) 0.9 13.9
* No Dividends have been paid on Common Stock during the above period.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The evolution of Williams Industries, Inc. continues as the Company marked
more than a quarter-century of operation in the construction industry. While
there were times in recent years that the Company's financial condition was
less than desirable, the Company has nevertheless survived and has once again
returned to profitability.
From a structural point of view, Williams Industries, Inc. is now divided
into several components, based on the activities of the subsidiaries involved
and their status as it relates to the Company's long-range plan.
The parent, Williams Industries, Inc., with the guidance of the Company's
elected board of directors, provides overall direction and planning for the
corporation, as well as providing legal, administrative, and other services
to the corporation's subsidiaries.
The core companies, Williams Steel Erection Company, Inc., Williams Bridge
Company, Williams Equipment Corporation, Greenway Corporation, and Piedmont
Metal Products, Inc., represent the fundamental lines of business that are
the Company's focus for the foreseeable future. These companies, from an
operating perspective, are working to enhance the on-going value of Williams
Industries, Inc.
Their efforts are augmented by Construction Insurance Agency, Insurance
Risk Management, and Capital Benefit Administrators, which provide necessary
services both for the core companies and outside customers in the fields of
insurance, bonding, and loss control.
Working within the Company's comprehensive long-range plan, management has
been taking whatever steps necessary to return the Company to profitability
through a combination of measures. These include:
* The reduction of debt through the sale of assets, as discussed in Notes 1
and 2 in the Notes to Consolidated Financial Statements;
* The reduction of operating and general and administrative costs, as
discussed in the Fiscal Year 1996 Compared to Fiscal Year 1995 analysis later
in this Item;
* Expansion of market areas to take advantage of new opportunities in
traditional lines of business;
* Further consolidation of corporate components as necessary to increase
effectiveness and enhance profits;
* Updating equipment, as discussed at the end of Part I, Item 2, Property
and Equipment;
* Employing innovative methods, such as joint ventures with other members of
the construction industry, to obtain quality work.
General improvements in the overall construction marketplace have also
assisted the Company in returning to profitability.
As the accompanying results indicate, the Company has returned to
profitability. The repayment of Bank Group debt, as described in Note 1 to
the Consolidated Financial Statements, is the single most significant
objective for the Company in the short term. Once this is achieved, the
Company will continue its efforts to modernize equipment and expand its
marketplaces. Going forward, the core companies profits must be at a level
to sustain the parent operation and any auxiliary services, such as the
Williams Industries Insurance Trust.
Financial Condition
Background
Please refer to the discussions under "General Development of Business,"
commencing on Page 1 of this report, for background on the present financial
condition of the Company.
Bank Group Agreement
This subject is comprehensively discussed in Note 1, Business Conditions and
Debt Restructuring, of the Notes to Consolidated Financial Statements
elsewhere in this report.
Bonding
Due to the Company's financial condition in recent years, the Company has
limited ability to furnish payment and performance bonds for some of its
contracts. The Company has been able to secure bonds for some of its projects.
However, for the most part, the Company has been able to obtain work without
providing bonds. As the Company's financial situation has improved, so has
its ability to secure bonds. Management does not believe the Company lost any
work in Fiscal Year 1996 due to bonding concerns.
Liquidity
The Company continues to have improved operating results. The operating
activities provided net cash of approximately $475,000 during the year ended
July 31, 1996. These funds, together with net cash provided by the sale of
assets, were used to pay debt. In addition, the core companies have been
generating cash to pay their bills on a current basis and, in many instances,
have been paying off debt incurred in prior years. As discussed in Note 1 to
the Consolidated Financial Statements, the Company is presently negotiating
with an asset-based lender, its Bank Group and its real estate lender to
secure funds necessary to retire its remaining Bank Group debt. Management
believes that ongoing operations will provide te cash necessary to finance
day-to-day operations and to service its other debt.
Operations
1. Fiscal Year 1996 Compared to Fiscal Year 1995
While both Fiscal Years 1996 and 1995 were profitable, comparisons are
complicated due to significant one time events. In Fiscal Year 1995, the
Company recorded $8.2 million in gains from the extinguishment of debt
compared to $800,000 in Fiscal Year 1996. Fiscal Year 1996 profitability was
achieved through a combination of factors, not the least significant of which
was the $2.2 million gain on the sale of assets which is included in "Revenue:
Other" in the Consolidated Statement of Operations for the year ended July 31,
1996. After elimination of the $2.2 million gain on the sale, total revenue
actually decreased by approximately 7%, while gross profit increased from
34.3% to 37.8%.
The revenue decline is a direct result of the cessation of operations of
certain subsidiaries, most notably: John F. Beasley Construction Company,
Williams Enterprises, Inc. and Industrial Alloy Fabricators, Inc. In Fiscal
Year 1995, these operations accounted for revenue of approximately
$11.5 million and losses of $3.25 million, compared to revenue of
approximately $280,000 and losses of $300,000 in Fiscal Year 1996.
While the Company's consolidated revenue in 1996 was down from 1995, but the
revenues of the core companies each improved, some, such as Williams Steel
Erection Company, Inc. and Williams Bridge Company, by more than 50%. On
aggregate, the five core companies increased revenue by approximately 39% from
1995 to 1996. Management views this improvement as highly significant,
particularly considering the Winter of 1996 was one of the worst in history.
Another area of contrast from 1995 to 1996 is in expenses. Consolidated
expenses declined from $15.5 million in Fiscal Year 1995 to $10.5 million in
Fiscal Year 1996. This decline is also primarily the result of the Company's
decision to cease operations of the previously mentioned subsidiaries.
Management believes that all the core companies will benefit from the
improvements in the construction marketplace which are occurring in all the
Company's traditional market areas.
The Company's backlog of work continues to be strong, with more than $19
million believed to be firm as of July 31, 1996. During the year, the Company
decided to improve its ability to obtain work by forming joint ventures on
projects that would normally require too great a commitment of the Company's
assets such as capital, equipment and personnel. The first of these joint
venture arrangements was with a local company on a large arena in the
Washington, D.C. metropolitan area. The joint venture was succesful in
obtaining a contract of approximately $6 million for the erection of the
structural steel on the arena. It is anticipated more such joint venture
arrangements will be considered as an option on projects of similar size,
both in the contruction and manufacturing segments of the business.
2. Fiscal Year 1995 Compared to Fiscal Year 1994
The Company continued its restructuring and downsizing, not only to reduce
debt but also so enhance profitability. Revenues decreased from $45.7 million
in 1994, to $31.9 million in 1995, a 30% decline. However, the Company
experienced an increase in gross profit from 21.5% in 1994, to 34.3% in 1995.
The decline in manufacturing revenues, from $16.9 million in 1994 to $10.3
million in 1995, was primarily a result of the sale of Industrial Alloy
Fabricators. The proceeds of this sale were used to pay Bank Group debt.
Another factor contributing to the decline in manufacturing revenue was the
downsizing at Williams Bridge Company. This downsizing was done in response
to what is believed to be a temporary decline in the marketplace that Williams
Bridge serves. To offset the impact of the overall, albeit temporary, decline
in the steel marketplace, Williams Bridge expanded its geographic base of
operations to include Pennsylvania and New Jersey. Subsequent to July 31,
1995, Williams Bridge Company saw an increase in business in traditional
market areas, especially in Maryland and Virginia.
Construction revenues also decreased, from $27.9 million in 1994 to $19.7
million in 1995, due to the Company's decision to cease the operations of the
John F. Beasley Construction Company and Williams Enterprises in order to stop
continuing losses, and the Company's ultimate sale of the assets of the
Beasley Bridge Division. For Fiscal Year 1995, Beasley's losses due to
operations, reserves, and write-offs from the sale of assets were
approximately $4 million.
Core operations, with the exception of Williams Bridge, however, returned to
profitability despite declining revenue levels. Pre-tax profit for the core
operations, on aggregate, went from a combined loss of $274,000 in 1994, to a
combined profit of $1.0 million in 1995. Overall backlog also improved.
With the sale of Beasley, management believed that most of the negative
influences to the Company's balance sheet from an operating company perspective
were gone, as evidenced by the discontinuation and/or sale of other operations
such as Concrete Structures, Inc., Williams Marine Construction Corp., and
Williams Miscellaneous Metals Group.
In addition to the operational improvements, the Company's Balance Sheet also
improved from Fiscal Year 1994 to Fiscal Year 1995. Notes payable decreased
from $27.5 million at July 31, 1994, to $16.4 million at July 31, 1995. This
was a direct result of having sold the operations mentioned above and paying
the proceeds to the Company's Bank Group.
3. Fiscal Year 1994 Compared to Fiscal Year 1993
Overall revenues dropped from 1993 to 1994, but the core companies of Williams
Industries (Williams Steel Erection Company, Inc., Williams Bridge Company,
Williams Equipment Corporation, Greenway Corporation, and Piedmont Metal
Products, Inc.), taken as a unit, actually experienced a 10.5% increase in
revenue. This increase was significant for several reasons, primarily in that
it confirmed the proper identification of long-term business decisions
indicated in the Company's business plan. Additionally, these increases in core
businesses came in a year when severe weather impacted the construction industry
in many of the Company's traditional markets.
The decline in manufacturing revenue resulted from the Company's decision to
sell the assets or dramatically reduce the operations of several companies in
this line of business. The assets of Creative Iron Works, Inc., Harbor Iron,
Inc., and Union Iron Works Company, which had been operating as the combined
entity of Williams Miscellaneous Metals, were sold and the proceeds used to
pay bank debt. The Company's former concrete manufacturing facility in
Davidsonville, Maryland was closed during the fiscal year and was sold
subsequent to year end on September 30, 1994. The loss from the sale of these
assets was reflected in the financial statements as of July 31, 1994.
Industrial Alloy Fabricators, Inc. experienced a significant drop in revenues
from $12.8 million in 1993, to $8.2 million in 1994. This decrease was
attributed to a declining marketplace, particularly in relation to one
customer that had previously comprised a substantial portion of Industrial
Alloy's business. This company became one of the assets for sale by Williams
Industries.
Other companies considered for sale or closing, John F. Beasley Construction
Company and Williams Enterprises, Inc., also experienced declines in revenue.
Beasley's decline, from $13.9 million to $9.6 million, was attributed to the
drop in Beasley's building division activities. The building division
previously had a number of projects, such as the San Antonio Alamo Dome and
the Denver Airport, in progress, but due to the substantial losses of this
operation no additional work was bid.
While the Company experienced an overall decline in revenue from $50.6
million in 1993 to $45.6 million in 1994, a drop of 9.9%, gross profit
increased from 19.4% to 21.5%. In addition, the Company cut expenses by
approximately 16%, from $17.7 million in 1993, to $14.8 million in 1994.
ITEM 8. WILLIAMS INDUSTRIES, INCORPORATED CONSOLIDATED FINANICAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 1996, 1995 AND 1994.
(See pages which follow)
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
None.
PART III
Pursuant to General Instruction G(3) of Form 10-K, the information required
by Part III (Items 10, 11, 12 and 13) is hereby incorporated by reference to
the Company's definitive proxy statement to be filed with the Securities and
Exchange Commission, pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934, in connection with the Company's Annual
Meeting of Shareholders scheduled to be held November 16, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The following documents are filed as a part of this report:
1. Consolidated Financial Statements of Williams Industries, Incorporated and
Independent Auditors Report.
Report of Deloitte & Touche LLP.
Consolidated Balance Sheets as of July 31, 1996 and 1995.
Consolidated Statements of Operations for the Years Ended July 31, 1996,
1995 and 1994.
Consolidated Statements of Stockholders' Equity (Deficiency in Assets) for
the Years Ended July 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the Years Ended July 31, 1996, 1995
and 1994.
Notes to Consolidated Financial Statements for the Years Ended July 31, 1996,
1995 and 1994.
(All included in this report in response to Item 8.)
2. (a) Schedules to be Filed by Amendment to this Report.
Report of Deloitte & Touche LLP re: Schedules
Schedule II - Valuation and Qualifying Accounts for the Years Ended July 31,
1996, 1995, and 1994 of Williams Industries, Incorporated.
(b) Exhibits:
(3) Articles of Incorporation and By-laws. Incorporated by reference to
Exhibits 3(a) and 3(b) of the Company's 10-K for the fiscal year ended July
31, 1989.
(21) Subsidiaries of the Registrant (see table below).
(c) No reports on Form 8-K were filed during the last fiscal quarter of the
period covered by this report.
(21) Table of Subsidiaries:
State of
Name Incorporation
Arthur Phillips & Company, Inc.* MD
John F. Beasley Construction Company* TX
Greenway Corporation MD
IAF Transfer Corporation* VA
Piedmont Metal Products, Inc. VA
Williams Bridge Company VA
Williams Enterprises, Inc.* DC
Williams Equipment Corporation DC
Williams Industries Insurance Trust VA
Capital Benefit Administrators, Inc. VA
Construction Insurance Agency, Inc. VA
Insurance Risk Management Group, Inc. VA
Williams Steel Erection Company, Inc. VA
* not active
WILLIAMS INDUSTRIES, INCORPORATED CONSOLIDATED BALANCE SHEETS AS OF JULY 31, 1996 AND 1995
1996 1995
ASSETS
Cash and cash equivalents $ 1,300,867 $ 819,735
Accounts and notes
receivable (Note 3) 11,109,854 9,176,176
Inventories 2,169,353 2,421,687
Costs and estimated
earnings in excess of
billings on uncompleted
contracts (Note 6) 620,199 845,303
Investments in unconsolidated
affiliates (Notes 11) 1,986,300 1,925,300
Property and equipment, net
of accumulated
depreciation and
amortization (Note 8) 9,452,326 8,487,569
Prepaid expenses and other
assets 1,372,853 918,336
TOTAL ASSETS $28,011,752 $24,594,106
LIABILITIES
Notes payable (Note 9) $15,142,321 $16,366,920
Accounts payable 6,561,815 6,778,550
Accrued compensation,
payroll taxes and
amounts withheld from employees 853,923 596,895
Billings in excess of
costs and estimated
earnings on uncompleted
contracts (Note 6) 2,231,188 948,429
Other accrued expenses 5,219,248 4,957,421
Income taxes payable
(Note 10) 96,000 50,000
Total Liabilities 30,104,495 29,698,215
Minority Interests 131,371 136,832
COMMITMENTS AND
CONTINGENCIES (NOTE 14)
STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
Common stock - $0.10 par
value, 10,000,000
shares authorized;
2,576,017 and 2,539,017
shares issued and
outstanding (Note 12) 257,602 253,902
Additional paid-in capital 13,147,433 13,095,153
Retained (deficit) (15,629,149) (18,589,996)
Total stockholders' equity
(deficiency in assets) (2,224,114) (5,240,941)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIENCY IN ASSETS) $28,011,752 $24,594,106
See notes to consolidated financial statements.
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JULY 31, 1996, 1995 and 1994
1996 1995 1994
REVENUE:
Construction $16,131,534 $19,672,459 $27,915,021
Manufacturing 10,062,367 10,336,748 16,921,361
Other 3,473,475 1,841,335 849,616
Total revenue 29,667,376 31,850,542 45,685,998
DIRECT COSTS:
Construction 9,934,174 14,501,397 23,114,637
Manufacturing 7,097,194 6,419,359 12,727,566
Total direct
costs 17,031,368 20,920,756 35,842,203
GROSS PROFIT 12,636,008 10,929,786 9,843,795
EXPENSES:
Overhead 2,674,133 2,975,690 3,642,173
General and
administrative 5,310,514 9,015,059 8,098,008
Depreciation 984,662 1,252,557 1,425,500
Interest 1,510,985 2,301,661 1,697,733
Total expenses 10,480,294 15,544,967 14,863,414
PROFIT (LOSS) BEFORE
INCOME TAXES, EQUITY
EARNINGS AND MINORITY
INTERESTS 2,155,714 (4,615,181) (5,019,619)
INCOME TAXES
(NOTE 10) 62,500 50,000 34,300
PROFIT (LOSS) BEFORE
EQUITY EARNINGS AND
MINORITY INTERESTS 2,093,214 (4,665,181) (5,053,919)
Equity in
earnings (loss)
of unconsoli-
dated affiliates 83,350 66,060 (45,268)
Minority interest
in consolidated
subsidiaries (23,717) (11,480) 74,265
PROFIT (LOSS) FROM
CONTINUING OPERATIONS 2,152,847 (4,610,601) (5,024,922)
DISCONTINUED
OPERATIONS
(NOTES 2 & 7)
Gain on extin-
guishment of
debt - 1,605,516 -
Estimated (loss)
on disposal of
discontinued
operations - (168,974) (4,547,196)
PROFIT (LOSS) BEFORE
EXTRAORDINARY ITEM 2,152,847 (3,174,059) (9,572,118)
EXTRAORDINARY ITEM
(NOTES 1 & 14)
Gain on extin-
guishment of
debt 808,000 6,609,000 -
NET PROFIT (LOSS) $ 2,960,847 $ 3,434,941 $(9,572,118)
PROFIT (LOSS) PER
COMMON SHARE:
Continuing
operations $ 0.84 $(1.82) $(1.98)
Discontinued
operations - 0.57 (1.80)
Extraordinary
item 0.31 2.60 -
PROFIT (LOSS) PER
COMMON SHARE $ 1.15 $1.35 $(3.78)
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY (DEFICIENCY IN ASSETS)
YEARS ENDED JULY 31, 1996, 1995 and 1994
Additional Retained Common Paid-In Earnings Stock Capital
(Deficit) Total
BALANCE,
AUGUST 1, 1993 $252,223 $13,058,347 $(12,452,819) $ 857,751
Issuance of
stock 1,304 36,806 - 38,110
Net (loss)
for the year - - (9,572,118) (9,572,118)
BALANCE,
JULY 31, 1994 253,527 13,095,153 (22,024,937) (8,676,257)
Issuance of
stock 375 - - 375
Net profit
for the year - - 3,434,941 3,434,941
BALANCE,
JULY 31, 1995 253,902 13,095,153 (18,589,996) (5,240,941)
Issuance of
stock 3,700 52,280 - 55,980
Net profit
for the year - - 2,960,847 2,960,847
BALANCE,
JULY 31, 1996 $257,602 $13,147,433 $(15,629,149) $(2,224,114)
WILLIAMS INDUSTRIES, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 1996, 1995 and 1994
1996 1995 1994
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net profit(loss) $2,960,847 $3,434,941 $(9,572,118)
Adjustments to recon-
cile net profit(loss)
to net cash provided
by operating
activities:
Depreciation and
amortization 984,662 1,252,557 1,425,500
Gain on extin-
guishment of debt (808,000) (6,609,000) -
(Gain) loss on
disposal of pro-
perty, plant
and equipment (2,323,496) 143,598 (705,202)
Minority interests
in earnings
(losses) 23,717 11,480 (74,265)
Equity in
(earnings) losses
of affiliates (83,350) 66,060) 45,268
Gain on extin-
guishment of debt
of discontinued
operations - (1,605,516) -
Estimated loss on
disposal of
discontinued
operations - 168,974 4,547,196
Changes in assets
and liabilities:
(Increase) decrease
in accounts and
notes receivable (1,933,678) 7,034,643 (879,189)
Decrease (increase)
in inventories 252,334 1,020,863 (186,393)
Decrease in costs
and estimated
earnings related
to billings on
uncompleted con-
tracts (net) 1,507,863 1,185,250 1,738,842
(Increase) decrease
in prepaid expenses
and other assets (454,517) 240,267 516,404
Increase (decrease)
in net liabilities
of discontinued
operations - 521,562 (189,587)
(Decrease) increase
in accounts payable (216,735) (1,688,523) 1,950,844
Increase (decrease)
in accrued compensa-
tion, payroll taxes,
and accounts with-
held from employees 257,028 (232,131) (395,680)
Increase (decrease)
in other accrued
expenses 261,827 (1,037,808) 1,292,802
Increase (decrease) in
income taxes payable 46,000 15,000 (4,053)
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES 474,502 3,790,097 (489,631)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Expenditures for
property, plant and
equipment (924,581) (485,424) (507,015)
Proceeds from sale
of property, plant
and equipment 3,389,348 3,912,668 958,475
Purchase of minority
interest (22,900) (659,798) -
Minority interest
dividends 6,278) 10,584) (36,093)
Dividend from uncon-
solidated affiliate 22,350 6,258 447
Proceeds from sale
of unconsolidated
affiliate - - 85,000
NET CASH PROVIDED BY
INVESTING ACTIVITIES 2,457,939 2,763,120 500,814
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from
borrowings 1,308,134 1,107,114 785,437
Repayments of notes
payable (3,815,423) (7,499,346) (1,506,956)
Issuance of common
stock 55,980 375 38,110
NET CASH USED IN
FINANCING ACTIVITIES (2,451,309) (6,391,857) (683,409)
NET INCREASE
(DECREASE) IN CASH
AND EQUIVALENTS 481,132 161,360 (672,226)
CASH AND EQUIVALENTS,
BEGINNING OF YEAR 819,735 658,375 1,330,601
CASH AND EQUIVALENTS,
END OF YEAR $1,300,867 $ 819,735 $ 658,375
SUPPLEMENTAL DISCLO-
SURES OF CASH FLOW
INFORMATION (NOTE 16)
See notes to consolidated financial statements.
WILLIAMS INDUSTRIES, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1996, 1995 AND 1994
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Consolidation - The consolidated financial statements include the
accounts of the Company and all of its majority-owned subsidiaries. All
material intercompany balances and transactions have been eliminated in
consolidation.
Unconsolidated Affiliates - The equity method is utilized when the Company,
through ownership percentage, membership on the Board of Directors or through
other means, meets the requirement of significant influence over the operating
and financial policies of an investee.
The Company's investment in S.I.P. Inc. of Delaware is carried on the equity
method. The cost method of accounting is used for Atlas Machine & Iron Works,
Inc. since the Company cannot exert significant influence over its operating
and financial policies.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and Amortization - Property and equipment is depreciated for
financial statement purposes on the straight-line basis and for income tax
purposes using both straight-line and accelerated methods. Ordinary
maintenance and repairs are expensed as incurred while major renewals and
improvements are capitalized. Upon the sale or retirement of property and
equipment, the cost and accumulated depreciation are removed from the
respective accounts and any gain or loss is recognized.
Earnings (Losses) Per Share - Earnings (loss) per share are based on the
weighted average number of shares outstanding during the year.
Revenue Recognition - Contract income is recognized for financial statement
purposes using the percentage-of-completion method. This means that the
revenue numbers include that percentage of the total contract price that the
cost of the work completed to date bears to the estimated final cost of the
contract. When a loss is anticipated on a contract, the entire amount of the
loss is provided for in the current period. Contract claims are recorded at
estimated net realizable value (see Note 4).
Contract income is determined for income tax purposes using the percentage-
of-completion, capitalized cost (PCCM) method.
Overhead - Overhead includes variable, non-direct costs such as shop
salaries, consumable supplies, and vehicle and equipment costs incurred to
support the revenue generating activities of the Company.
Inventories - Inventory of equipment held for resale is valued at cost, which
is less than market value, as determined on a specific identification basis.
The costs of materials and supplies are accounted for as assets for financial
statement purposes. These costs are written off when incurred for Federal
income tax purposes. The items are taken into account in the accompanying
statements as follows:
1996 1995
Equipment held for resale $ 42,786 $ 72,786
Expendable construction
equipment and tools at
average cost, which does
not exceed market value 801,039 879,417
Materials, structural steel,
metal decking, and steel
cable at lower of cost or
estimated market value 927,038 1,113,364
Supplies at lower of cost or
estimated market value 398,490 356,120
$2,169,353 $2,421,687
Allowance for Doubtful Accounts - Allowances for uncollectible accounts and
notes receivable are provided on the basis of specific identification.
Income Taxes - The Company and certain of its subsidiaries file a
consolidated Federal income tax return. The provision for income taxes has
been computed under the requirements of SFAS No. 109, "Accounting for Income
Taxes". The adoption of SFAS No. 109, effective August 1, 1993, did not have
a material impact on the financial statements. Under SFAS No. 109, deferred
tax assets and liabilities are determined based on the difference between the
financial statement and the tax basis of assets and liabilities, using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
The Company does not provide for income taxes on the undistributed earnings
of affiliates since these amounts are intended to be permanently reinvested.
The cumulative amount of undistributed earnings on which the Company has not
recognized income taxes is approximately $1,011,000.
Cash and Cash Equivalents - For purposes of the Statements of Cash Flows, the
Company considers all highly liquid instruments with original maturities of
less than three months to be cash equivalents. Included in cash and cash
equivalents at July 31, 1996 and 1995 were $400,000 and $100,000, respectively,
that are restricted to collateralize certain obligations of the Company.
Reclassifications - Certain reclassifications of prior years' amounts have
been made to conform with the current year's presentation.
1. BUSINESS CONDITIONS AND DEBT RESTRUCTURING
The Company had diversified and experienced significant growth during the
1980s, and, as a consequence, its operating results were erratic and it had a
substantial increase in its debt. When, beginning about 1990, the industry
in which it operated experienced serious economic difficulties, the Company's
operations suffered dramatically, and, as a result, it reported operating
losses during the fiscal years ended July 31, 1991 to 1994. These factors
impacted the Company's cash flow and it was unable to repay its bank debt as
discussed in the following paragraphs:
Bank Group Debt
In November 1991, the Company's credit agreement with its then primary
lenders, collectively known as the "Bank Group" expired. Since then, the
Company has been working to repay the related debt. The balance of the debt
was approximately $21 million at July 31, 1993. In September 1993, the
Company entered into a Debt Restructuring Agreement with the Bank Group.
Since that time, a series of agreements and modifications have been reached
between the Company and the lenders and the debt has been substantially reduced,
as discussed below, through a combination of asset sales (See Note 2) and debt
forgiveness.
The September 1993 Debt Restructuring Agreement provided for a discounted
payoff of Bank Group debt together with the issuance of Company stock in an
amount which would depend upon the amount of the discount allowed. The
Company attempted to perform under the Agreement, but was unable to meet the
required payment schedule. At July 31, 1994, the remaining balance on Bank
Group debt was approximately $20.5 million plus interest.
On November 30, 1994, the Company and the Bank Group entered into an Amended
and Restated Debt Restructuring Agreement, which modified the schedule of
payments and the amount and form of the equity to be issued. The amended
Agreement provided for satisfaction of Bank Group debt upon payment of $11.5
million after August 1, 1994, with $6.957 million to be forgiven if the
Company paid $8 million by January 31, 1995 (the "Initial Discount"). Upon
final satisfaction of Bank Group debt, the Bank Group would receive a $500,000
convertible subordinated debenture which would be convertible into approximately
18% of the outstanding stock of the Company.
The Company and Bank Group subsequently agreed to a letter agreement dated
July 21, 1995, which extended the payment schedule through December 31, 1995,
and provided that if the Company paid $7.5 million by July 31, 1995, the Bank
Group would forgive $6.6 million, with the balance of the Initial Discount to
be allowed upon the payment of $8 million by September 30, 1995. The Company
paid $7.5 million by July 31, 1995 and received $6.6 million in debt
forgiveness in Fiscal Year 1995, which is reflected in the Consolidated
Statement of Operations for the year ended July 31, 1995 as Gain on
Entinguishment of Debt. Due to the substantial payments as well as the debt
forgiveness, the balance owed on Bank Group debt at July 31, 1995 had been
reduced to approximately $8.3 million plus accrued interest of $484,000.
The Company also met the $8 million threshold, and it received the balance of
the Initial Discount of $348,000 during the first quarter of Fiscal Year 1996.
This amount is included in the Consolidated Statements of Operations for the
year ended July 31, 1996 as Gain on Extinguishment of Debt. The Company
continued its efforts to pay the balance owed under the Agreement by December
31, 1995, but was unable to meet the deadline.
The Company and Bank Group negotiated and entered into a Second Modification
to Amended and Restated Debt Restructuring Agreement in February, 1996, which
provided for an extension of the payment schedule through April 30, 1996, in
consideration of increasing of the payoff amount from $11.5 million to $11.65
million. Through July 31, 1996, the Company had paid approximately $8.3
million. While the formal agreement expired on April 30, 1996, the Bank Group
has taken no action to accelerate the indebtedness nor to declare the Company
in default, and the Company continues to pursue the final payoff and resolution
of Bank Group debt. At July 31, 1996, the balance owed on Bank Group debt had
been reduced to approximately $7.3 million plus accrued interest of $1.4
million.
Subsequent to July 31, 1996, the Company has made a proposal to the Bank
Group, which is presently under review by the Bank Group. The proposal
provides for an extension of the payment schedule in consideration of
increasing the payoff amount from $11.65 to $11.825 million, with the final
payoff to come from an asset-based loan, an increase in the Company's existing
real estate loan discussed below, and the continued liquidation of the assets
of the Company's closed operations by March 31, 1997.
A replacement asset-based lender, who is acceptable to the Bank Group, has
been identified, and management is now working to meet all of the terms and
conditions required by the replacement lender. If the proposal to the Bank
Group results in an agreement, the Company would receive a substantial portion
of the balance of the debt forgiveness upon payment of a portion of the
remaining Bank Group debt with the proceeds from the asset-based loan.
Management believes that the proceeds from an increase in the real estate loan
and continued liquidation of the assets of closed operations will produce
sufficient cash within the proposed March 31, 1997 deadline for final payoff
of Bank Group debt.
Real Estate Loan
On September 14, 1993, the Company and certain of its subsidiaries entered
into a real estate loan with NationsBank, N.A. and executed a promissory note
for approximately $3.2 million. On January 31, 1994, the Company failed to
make a $26,000 monthly payment and subsequent monthly payments. These
failures are a default under the terms of that credit facility. No action to
accelerate this indebtedness has been taken by the lender, although by its
terms the debt was due and payable in full at July 31, 1995. As decribed in
Note 2, during the year ended July 31, 1996, the Company sold a portion of the
property securing this loan to the Virginia Department of Transportation and
approximately $2.25 million of the proceeds were applied against this debt.
At July 31, 1996, the principle balance owed on this loan had been reduced to
approximately $1.5 million, plus accrued interest of approximately $100,000.
NationsBank has indicated its willingness to extend the term of this loan and
has also indicated that it will consider increasing the amount of the loan in
order to facilitate the satisfaction of the Bank Group debt.
Industrial Revenue Bond
The Company also has debt secured by property in Richmond, Virginia. In
September 1987, the Company was granted an Industrial Revenue Bond (IRB) by
the City of Richmond not to exceed $2 million for the purpose of acquiring
land and facilities located in the City.
The Company for the past several years has not been in compliance with
certain of the covenants contained in the IRB, generally relating to the
Company's overall financial condition. As of July 31, 1996, approximately
$1.6 million was still owed on this debt. A portion of the property covered by
the IRB is now leased to a non-affiliated third party and the rent is paid
directly against the IRB. No action to accelerate the obligation has been
taken by the lender. The Company has a contract with a separate non-affliated
third party to sell an office building which is part of the complex securing
the IRB. The proceeds of this sale will be used to reduce the IRB debt.
Management's Plans
As discussed above, the Company has a proposal pending with the Bank Group
and its real estate lender, is negotiating with an asset-based lender, and is
continuing to liquidate the remaining assets of closed operations. The
Company believes it will be able to retire the Bank Group debt with the
proceeds of these transactions and receive substantial debt forgiveness in the
year ending July 31, 1997.
Further, during the year ended July 31, 1996, the Company has continued to
accrue interest on the total remaining Bank Group debt, which interest amounted
to approximately $800,000, and incurred additional costs of approximately
$327,000 in connection with the closing down of the operations of John F.
Beasley Construction Company. Had the Company not incurred these costs and
had it incurred interest only on the reduced debt it expects to carry in the
future assuming the successful completion of the debt restructing discussed
above, the Company would have reported an operating profit for the year ended
July 31, 1996. Assuming continued favorable market conditions in the
construction industry, the Company expects to relaize operating profits and
to generate sufficient cash flow from those profits in the future to service
its anticipateed significantly reduced debt.
Accordingly, the accompanying financial statements do not include any
adjustments that might be necessary if the Company were unable to continue as
a going concern.
2. DISPOSITION OF ASSETS
In the first quarter of Fiscal Year 1996, the Company sold eight of the ten
acres owned by the John F. Beasley Construction Company in Dallas, Texas.
Beasley, which is in Chapter 11 protection in the United States Bankruptcy
Court, Northern District of Texas, Dallas Division, sold approximately six
acres, together with certain other assets, to an investment group owned by
Frank E. Williams, Jr., and John M. Bosworth. Mr. Williams, Jr. is a current
director and former officer of the Company and the former President of the
Beasley Building Division. Two acres were sold to a neighboring property
owner not affliated with the Company. The sales prices were approved by the
Bankruptcy Court. A provision for the loss of $260,000 from the sale of these
assets was recorded during the year ended July 31, 1995.
During the quarter ended January 31, 1996, the Company sold miscellaneous
small tools and consumables owned by Williams Enterprises to a non-affiliated
buyer for approximately $75,000. The proceeds were used to pay Bank Group
debt.
On February 19, 1996, the Company sold approximately 5.5 acres of its
property in Bedford, Virginia to a non-affiliated party for $50,000. After
taxes and costs associated with the sale were paid, the net proceeds of
approximately $48,000 were paid against Bank Group debt.
Another $100,000 was paid to the Bank Group from the net proceeds of the
February 1996 sale of a Company-owned crane.
During the second quarter of Fiscal Year 1996, the Company sold certain of
its real estate in Prince William County, Virginia, for $2.6 million. The
sale resulted in a net gain of approximately $2.2 million, which is included
in "Revenue: Other" in the Consolidated Statement of Operations for the Year
Ended July 31, 1996.
Prior to Fiscal Year 1996, the Company had a number of significant asset
sales, including the following:
* On September 30, 1994, the Company sold its Davidsonville, Maryland
facility for $1,053,000. A provision for the loss of approximately $500,000
from the sale of this asset was recorded during the year ended July 31, 1994.
The net proceeds were paid to the Bank Group.
* The assets of Industrial Alloy Fabricators, Inc. were sold during October
1994 for $3.6 million. As of the closing, the 20% of Industrial Alloy
Fabricators' common stock that had not been owned by the Company was redeemed
for consideration of $660,000, reflecting the pro-rata consideration paid for
the assets, discounted for costs associated with the transaction, and
negotiated with the minority shareholders. The net proceeds of the transaction,
$2,830,000, were paid to the Bank Group after deducting brokerage commission
and costs of $110,000. After taking into account the redemption and the
costs of the sale, the Company recognized a gain on the sale of approximately
$800,000 during the year ended July 31, 1995.
* In January, 1995, the Company sold its 97% stock ownership in Concrete
Structures Inc. for $975,000, of which $650,000 was paid in cash, which was
paid to the Company's Bank Group, and $325,000 in a note. This sale was made
to a group headed by Mr. Arthur V. Conover, III, a former officer, director
and employee of the Company. Mr. James W. Liddell, also a former officer,
director and employee, is an investor in the group. The Company recognized a
gain of approximately $253,000 on the sale.
* During 1995, the Company and its subsidiary, Williams Marine Construction
Corp., entered into an agreement with First Tennessee Equipment Finance
Corporation, the holder of the mortgage on Williams Marine's floating crane,
the Atlantic Giant, whereby the security documents were modified to provide
for the prompt sale of the asset, without further recourse against Williams
Marine or the Company, for payment of the note secured by the asset. In
exchange for a release from any further liability under the security documents,
the Company issued an interest bearing convertible subordinated debenture in
the amount of $100,000, which is due August 1, 1998. The debenture is
convertible into common shares of the Company at the ratio of $1.43 per common
share, including principle and interest outstanding at the time of conversion.
As a Consequence of the settlement agreement, Williams Marine realized a gain in
the amount of approximately $1,606,000, which was included as a gain on
extinguishment of debt in discontinued operations for the year ended July 31,
1995.
* On June 1, 1995, John F. Beasley Construction Company and its subsidiary,
Beasley Construction Company, filed for Chapter 11 protection in the United
States Bankruptcy Court, Northern District of Texas, Dallas Division.
On July 18, 1995, the Bankruptcy Court approved the sale of the assets of the
Bridge Division of Beasley to Traylor Brothers, Inc. for $2,001,000. The
final sales price was determined through sealed bids received in open court.
The assets sold consisted of the Beasley real estate located in Ballard County,
Kentucky, and the Beasley equipment and other personal property used in the
repair and construction of bridge superstructures. After expenses and certain
"hold-backs" or escrowed funds, net proceeds of $1,554,000 were used to pay the
Company's Bank Group debt. The Company realized a loss of approximately
$974,000 on the sale of the Bridge Division assets.
* The majority of the assets of three other Company-owned subsidiaries were
sold during the year ended July 31, 1994, and proceeds used to pay Bank Group
debt.
3. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following at July 31:
1996 1995
Accounts Receivable:
Contracts:
Open accounts $8,645,575 $7,623,950
Retainage 689,144 1,159,510
Trade 1,396,207 1,231,923
Contract claims 886,647 154,362
Employees 66,176 63,025
Other 155,026 351,972
Allowance for
doubtful accounts (953,921) (1,633,566)
Total accounts receivable $10,884,854 $8,951,176
Notes receivable 225,000 225,000
Total accounts and
notes receivable $11,109,854 $9,176,176
Included in the above amounts at July 31, 1996 was approximately $1,090,000
that was not expected to be received within one year.
4. CONTRACT CLAIMS
The Company maintains procedures for review and evaluation of performance on
its contracts. Occasionally, the Company will incur certain excess costs due
to circumstances not anticipated at the time the project was bid. These costs
may be attributed to delays, changed conditions, defective engineering or
specifications, interference by other parties in the performance of the
contracts, and other similar conditions for which the Company claims it is
entitled to reimbursement by the owner, general contractor, or other
participants. These claims are recorded at the estimated net realizable
amount after deduction of estimated legal fees and other costs of collection.
5. RELATED-PARTY TRANSACTIONS
Certain shareholders owning 16.5% of the outstanding stock of the Company own
67.49% of the outstanding stock of Williams Enterprises of Georgia, Inc.
Intercompany billings to and from this entity and other affiliates were not
significant.
The subsidiaries of the Company paid health insurance premiums into an
independent trust whose trustees are officers of the parent and/or subsidiary
companies. At July 31, 1996, the Company had net accounts and notes payable
of $112,695 to the trust.
As discussed in Note 2, the Company has sold certain assets to individuals
who are former employees, directors, and officers of the Company.
6. CONTRACTS IN PROCESS
Comparative information with respect to contracts in process consists of the
following at July 31:
1996 1995
Expenditures on uncompleted
contracts $ 9,843,412 $ 9,759,914
Estimated earnings thereon 3,639,762 2,835,791
13,483,174 12,595,705
Less: Billings
applicable thereto (15,094,163) (12,698,831)
$(1,610,989) $ (103,126)
Included in the accompanying
balance sheet under
the following captions:
Costs and estimated earnings
in excess of billings
on uncompleted contracts $ 620,199 $ 845,303
Billings in excess of costs
and estimated earnings
on uncompleted contracts (2,231,188) (948,429)
$(1,610,989) $ (103,126)
Billings are based on specific contract terms that are negotiated on an
individual contract basis and may provide for billings on a unit price,
percentage of completion or milestone basis.
7. DISCONTINUED OPERATIONS
During the year ended July 31, 1993, the Company decided to cease doing
business in several business lines: fabrication of architectural, ornamental
and miscellaneous metal products, production of precast and prestressed
concrete products, and the construction of marine facilities.
8. PROPERTY AND EQUIPMENT
Property and equipment consists of the
following at July 31:
1996 1995
Accumulated Accumulated
Cost Depreciation Cost Depreciation
Land and
buildings $ 6,481,875 $1,934,541 $ 7,384,122 $ 1,884,803
Automotive
equipment 1,421,168 1,061,706 1,374,096 1,175,561
Cranes and
heavy
equipment 8,033,555 4,668,602 6,856,841 5,349,977
Tools and
equipment 716,701 625,015 807,370 769,387
Office furni-
ture and
fixtures 561,580 477,737 38,335 524,961
Leased proper-
ty under
capital
leases 740,000 124,500 740,000 50,500
Leasehold
improve-
ments 860,217 470,669 989,316 547,322
$18,815,096 $9,362,770 $18,790,080 $10,302,511
9. NOTES AND LOANS PAYABLE
Notes and loans payable consist of the following at July 31:
1996 1995
Collateralized:
Loans payable to Bank Group;
collateralized by receivables,
inventory, equipment,
investments, and real estate;
interest at prime plus 2%;
currently payable $ 7,247,386 $ 8,240,899
Installment obligations;
collateralized by real estate;
interest at prime plus 1.5%,
currently payable 1,530,852 3,166,072
Obligations under capital leases;
collateralized by leased
property; interest at prime
plus 1% to 15% payable in
varying monthly or
quarterly installments; 546,781 671,522
Installment obligations;
collateralized by machinery
and equipment; interest at
prime plus 1% to 18.5%;
payable in varying monthly
or quarterly installments
of principal and interest
through 2006. 2,590,656 428,242
Industrial Revenue Bond;
collateralized by a letter
of credit which in turn is
collateralized by real estate;
principal payable in varying
monthly installments through
2008. 1,562,600 1,596,057
Demand notes; collateralized by
certificates of deposit;
interest at 6.5%. 300,000 -
Unsecured:
Lines of credit, interest
at prime to prime plus
1% to 10%. 767,220 794,544
Installment obligations with
interest at prime plus 1% to
17%; due in varying monthly
installments of principal
and interest through 1998. 496,826 1,369,584
Convertible subordinated
debenture;
interest at 10% to prime
plus 1.5%; principal
payable in 1998;
convertible to common stock
of the Company at the ratio
of $1.43 per common share. 100,000 100,000
$15,142,321 $16,366,920
Contractual maturities of the above obligations at July 31, 1996 are as
follows:
Year Ending July 31 Amount
1997 $9,360,896
1998 857,550
1999 530,541
2000 553,997
2001 372,788
2002 and after 3,466,549
See Note 1 for additional information concerning the loans payable to the
Bank Group, installment obligations collateralized by real estate and the
Industrial Revenue Bond.
The carrying amounts reported above for notes and loans payable, other than
the loans payable to the Bank Group and installment obligations collateralized
by real estate, approximate their fair value based upon interest rates for
debt currently available with similar terms and remaining maturities. Because
of the ongoing Bank Group negotiations regarding debt repayment and
forgiveness, and real estate refinancing, it is not practical to determine a
fair value for these financial instruments at July 31, 1996.
10. INCOME TAXES
The provision for income taxes represents primarily a current state income
tax provision related to states where the Company cannot file a consolidated
return.
At July 31, 1996, the Company has net operating loss carryforwards of
approximately $15 million to reduce future federal tax liabilities through
2011. In addition, there is a capital loss carryforward of $2.7 million.
The differences between the tax provision calculated at the statutory federal
income tax rate and the actual tax provision for each year are shown in the
table directly below.
1996 1995 1994
Tax at statutory
federal rate 733,000 $(1,549,000) $(1,707,000)
State income taxes 129,000 (273,000) (303,000)
Change in valuation
reserve (799,500) 1,872,000 2,044,300
Actual income tax
provision 62,500 $ 50,000 $ 34,300
The primary components of temporary differences which give rise to the
Company's net deferred tax asset are shown in the following table.
As of July 31, 1996
Deferred tax assets:
Reserves and other contingencies $1,259,448
Purchase accounting adjustment 162,112
Net operating loss & capital loss
carryforwards 7,061,028
Valuation reserve (8,002,776)
Total deferred tax assets 479,812
Deferred tax liability:
Inventories (479,812)
Net deferred tax asset $________0
11. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Investments in unconsolidated affiliates consist of the following at July 31:
1996 1995
Investment valued using the
Equity Method:
S.I.P., Inc. of Delaware
(formerly Bridge and Paving
Services, Inc.) (42.5%
owned) $ 975,629 $ 914,629
Investment valued using the
Cost Method:
Atlas Machine and Iron
Works, Inc. (36.6% owned) 1,010,671 1,010,671
$1,986,300 $1,925,300
12. COMMON STOCK OPTIONS
On October 20, 1990, the Company granted 33,000 Incentive Stock Options to
key employees at $5.75 per share. None of these options were exercised within
the five year limitation of the grant and all have now expired. The Company
currently has no outstanding stock options granted to employees.
13. INDUSTRY INFORMATION
Information about the Company's operations in different industries for the
years ended July 31, is as follows:
1996 1995 1994
Revenue:
Construction $18,121,379 $20,837,043 $29,353,269
Manufacturing 10,287,072 10,615,342 17,495,075
Other 3,473,475 1,841,335 849,616
31,881,926 33,293,720 47,697,960
Inter-company
revenue:
Construction (1,989,845) (1,164,584) (1,438,248)
Manufacturing (224,705) (278,594) (573,714)
Consolidated
revenue $29,667,376 $31,850,542 $45,685,998
Operating profits
(losses):
Construction $1,682,454 $(2,589,691) $(1,178,667)
Manufacturing 120,788 1,029,452 (396,365)
Consolidated
operating
profit (loss) 1,803,242 (1,560,239) (1,575,032)
General corporate
income
(expenses) 1,863,457 (753,281) (1,746,854)
Interest expense (1,510,985) (2,301,661) (1,697,733)
Corporate profit
(loss) before
income taxes $2,155,714 $(4,615,181) $(5,019,619)
Identifiable
assets:
Construction $14,303,853 $11,845,023 $21,109,338
Manufacturing 6,342,351 5,617,867 9,469,644
General
corporate 7,365,548 7,131,216 7,861,831
Total identifiable
assets $28,011,752 $24,594,106 $38,440,813
Capital additions:
Construction $2,880,325 $1,192,022 $ 387,238
Manufacturing 113,651 25,499 91,675
General
corporate 21,295 7,903 28,102
Total capital
additions $3,015,271 $1,225,424 $507,015
Depreciation:
Construction $660,250 $872,236 $903,933
Manufacturing 137,922 166,833 297,604
General corporate 186,490 213,488 223,963
Total
depreciation $984,662 $1,252,557 $1,425,500
The Company and its subsidiaries operate principally in two segments within
the construction industry; construction and manufacturing. Operations in the
construction segment involve structural steel erection, installation of steel
and other metal products, installation of precast and prestressed concrete
products, and the leasing and sale of heavy construction equipment.
Operations in the manufacturing segment involve fabrication of steel plate
girders and light structural metal products.
Operating profit is total revenue less operating expenses. In computing
operating profit (loss), the following items have not been added or deducted:
general corporate expenses, interest expense, income taxes, equity in the
earnings (loss) of unconsolidated investees, minority interests and
discontinued operations.
Identifiable assets by industry are those assets that are used in the Company's
operations in each industry. General corporate assets include investments, some
real estate, and sundry other assets not allocated to segments.
While the Company bids and contracts directly with the owners of structures
to be built, the majority of revenue has historically been derived from
projects on which it is a subcontractor of a material supplier or other
contractor. Where the Company acts as a subcontractor, it is invited to bid
by the firm seeking construction services; therefore, continuing favorable
business relations with those firms that frequently bid on and obtain contracts
requiring such services are important to the Company. Over a period of years,
the Company has established such relationships with a number of companies.
Revenues derived from any particular customer fluctuate significantly, and
during a given fiscal year, one or more customers may account for 10% or more
of the Company's consolidated revenues through individual, competitively bid
contracts. During the years ended July 31, 1996, 1995, and 1994, no single
contract accounted for more than 10% of consolidated revenue, and the Company
is not dependent upon any particular customer.
14. COMMITMENTS AND CONTINGENCIES
Industrial Revenue Bond
In conjunction with the Industrial Revenue Bond agreement entered into by the
Company during 1988, the Company is liable to the bond trustee for a letter of
credit of approximately $2.1 million. The letter of credit may be drawn upon
to pay principal to a maximum of $2,000,000 with interest to a maximum of
$110,959 if the Company defaults. The letter of credit expires on March 15,
1998, or 135 days after the bonds are paid in full.
Pribyla
The Company is a party to a claim for excess medical expenses incurred by Mr.
Eugene F. Pribyla, a former officer and shareholder of a subsidiary pursuant
to a stock purchase agreement. On February 10, 1994, judgment was awarded by
the District Court of Dallas, Texas, 134th Judicial District, in favor of Mr.
and Mrs. Pribyla against the Company and its wholly-owned subsidiary, John F.
Beasley Construction Company, in the principal amount of $2.5 million, plus
attorneys' fees of $135,000, for breach of contract. The Prbylas asserted at
trial that the stock purchase agreement, wherein Mr. Pribyla stock his stock
in the Bealsey company to the Company, provided a guarantee of a set level of
health insurance benefits, and that the plaintiffs were damaged when Beasley
changed health insurance companies.
The Company filed an appeal in the Texas Court of Civil Appeals, which
resulted in overturning the judgment against Beasley, but affirming the
judgment against the Company. The Company filed an Application for Writ of
Error to the Texas Supreme Court. During the fourth quarter of Fiscal Year
1996, the Texas Supreme Court granted the Writ of Error and scheduled oral
argument. This decision does not affect the judgment creditor's right to take
action to collect their judgment pending a decision by the Supreme Court, nor
does it necessarily indicate that the result will be favorable.
Commencing July 1, 1995 and continuing through the date of this filing, the
Company has made weekly forbearance payments to the judgment creditor under
a forbearance agreement. At present, settlement discussions are continuing,
and the agreement and a subsequent extension have expired, although payments
are continuing to be made and accepted on a "week to week" basis. Management
continues to believe that the original decision was in error and that the
ultimate outcome of the case will not have a material adverse impact on the
Company's financial statement or results of operations.
On September 15, 1996, Mr. Pribyla died. Management, on the advice of
counsel, believes that Mr. Pribyla's death will have no adverse impact on the
continuing litigation.
FDIC
The Company was party to a guaranty under which the FDIC claimed that the
Company was responsible for 50% of the alleged deficiencies on the part of
Atchison & Keller, Inc., the borrower. Suit was filed against the Company for
$350,000, but the FDIC accepted the Company's proposal to settle the matter.
In the settlement, the Company was to issue a $100,000 convertible debenture
under which the FDIC would receive 110,000 shares of unregistered stock. This
settlement had not yet been formalized when a managment change occurred at the
FDIC. The Company has requested that the FDIC seek approval of a modification
which would allow the Company to redeem the unregistered shares for a number
of registered shares which wuold depend on their value at the time of
issuance.
AIG
On March 25, 1994, the Company was sued by National Union Fire Insurance
Company of Pittsburgh, PA and American Home Assurance Company (members of the
AIG group of insurance companies), claiming the Company owed an aggregate
total of approximately $3.5 million for workers compensation premiums. The
Company answered the suits and demanded trail by jury, but the suits were
withdrawn without prejudice. The litigation was settled by the Company's
paying $100,000 and signing a $1.0 million confessed judgment payable over
three years. The Company defaulted after making three payments and National
Union then obtained a judgment for approximately $950,000 plus interest from
May 11, 1995. During Fiscal Year 1996, a second settlement was reached. All
obligations of this settlement were satisfied during the fourth quarter. The
settlement resulted in a gain of $460,000 which was recorded during the fourth
quarter of Fiscal Year 1996. The gain is included in the Company's
Consolidated Financial Statements for the Year Ended July 31, 1996 as a Gain
on Extinguishment of Debt.
General
The Company is also party to various other claims arising in the ordinary
course of its business. Generally, claims exposure in the construction
services industry consists of workers compensation, personal injury, products'
liability and property damage. The Company believes that its insurance trust
accruals, coupled with its excess liability coverage, is adequate coverage for
such claims.
Leases
The Company leases certain property, plant, and equipment under operating
lease arrangements that expire at various dates through 2008. Rent expense
approximated $90,300, $75,900 and $75,900 for the years ended July 31, 1996,
1995, and 1994, respectively. Minimum future rental commitments are as follows:
Year ending July 31, Amount
1997 $ 278,000
1998 281,000
1999 237,000
2000 205,000
2001 205,000
thereafter 1,419,000
$2,625,000
15. FOURTH QUARTER RESULTS - FISCAL YEAR 1996
During the fourth quarter of Fiscal Year 1996, the Company had a pre-tax
profit of approximately $1.0 million. Of this amount, approximately $460,000
was attributable to a Gain on Extinguishment of Debt (Note 14) and $358,000
attributable to a year-end adjustment which reduced insurance expense.
16. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the year ended July 31, 1996, the Company entered into four financing
agreements to acquire assets with a cost of $2,090,690.
During the year ended July 31, 1995, the Company issued a note payable for
$1.0 million to settle an accrued expense amount owed. In addition, the
Company entered into two capital lease transactions to acquire assets with
an aggregate cost of $740,000.
1996 1995 1994
Cash paid during
the year for:
Income taxes $ 16,500 $ 19,500 $ 38,353
Interest $1,062,171 $2,080,069 $2,119,713