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Construction Firm Builds on Recent Success |
With Revival of Stock and Profit, Williams Industries Turns Attention to Heavy Debt Load By Maryann Haggerty |
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Frank E. Williams III |
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| Recently, though, the company has
had some good news. Last week it announced that in the year ended July 31 it turned a
profit. Its stock also has revived, closing at $3.37 ½ a share Friday, or about where it
was trading when the worst of the problems became apparent. "I think in 1995 we turned the company around," Williams said. The recovery isn’t complete. For one thing, the company still has plenty of debt to repay. "We still have some obstacles to overcome…" Williams said. "But if I had to put it all in a nutshell, I’d have to say we’re like that proverbial saying: We see the light at the end of the tunnel, and we don’t think it’s an oncoming freight train." Getting to this point wasn’t easy. To save the company Williams had to get rid of most of it, which reduced revenue and employment to a third of what they were in 1990. Williams Industries, which works on big construction projects such as bridges, was founded in 1960 by Frank E. Williams Jr., the father of the current president and chairman. In the 1980s the firm aggressively acquired other companies until it became a conglomerate with 27 operating subsidiaries. It borrowed heavily to do so, but the construction industry flourished in that decade. In the year ended July 31, 1990, its last profitable year before now, Williams Industries had about 1,000 employees, revenue of $119 million and earnings of $1.45 million. The company also had debt of more than $30 million. Then the bottom fell out of the construction market. Operations couldn’t pay down the debt, let alone make a profit. In 1991 Williams Industries defaulted on the bank loans that made up the biggest chunk of its debt."Those years were very, very difficult," Williams said of the time that followed. "I would not want to revisit those again. I would not want anyone to revisit them. It was very gut-wrenching." In 1993 Williams Industries’ management, with the aid of some consultants, came up with a plan to rescue the company. "The posture with the debt had become so significant we could no longer deal with it," Williams said. |
The plan was detailed, but
the concept was simple. Williams Industries would sell or close down all but a small group
of core businesses focused on fabricating and erecting steel. The money raised from
selling the subsidiaries or their assets would go to pay off the banks. In return for prompt payment, the banks agreed to forgive some of the money they were owed. Since then, Williams said, "We just followed the plan." Williams, 36, took over from his father in November 1994, after the stockholders elected a new board of directors with a majority of outside members. The Georgia Tech engineering graduate, who was raised in Northern Virginia, has worked for the family company since he attended Oakton High School.The younger Williams acknowledges that there were some rocky moments in the transition, but overall, he said, it has worked well and he has been given free rein to run the firm. His father maintains a seat on the board of directors, "But I wouldn’t say he tries to exert any more influence or be any more involved" than any other board member. Still, "He’s there to call." Some of the operations Williams Industries sold were profitable and others weren’t. For instance, the sale last November of the company’s Industrial Alloy Fabricators subsidiary was a tough decision, Williams said. The operation was making money, but the cash raised by the sale was necessary. In some cases, when Williams Industries couldn’t get the price it needed, it closed subsidiaries rather than sell them. The result was a company with just $32 million in revenue last year and fewer than 350 employees. But at the end of July, Williams Industries took a big step: It paid off $7.5 million in debt, as scheduled. The banks forgave another $6.6 million. After the company’s stock shot up, to a 52-week high of $3.75 a share in late August from about 69 cents a share the month before. Peter Karpoff is on the investment panel of the Alexandria Quaker Meeting, which bought a chunk of Williams Industries stock four years ago. "It’s been a bit of a disappointment to us, but we’re delighted that it has bounced back in recent months," he said. |
Karpoff said his congregation
decided to invest in the company because members thought the construction slump would end
much sooner than it did. As the stock languished, he and his fellow investors became
concerned that the problems had gotten so bad that the company could no longer effectively
compete for business. That worry has passed. "They really seem to have restored themselves from the precipice," he said. Renee Carret, a New York investment adviser whose clients own substantial stock in Williams Industries, said, "I’m definitely impressed with Frank III. I’m happy I stuck by him." "At this point, I would still have to say {the stock} is speculative, but I think it’s got good upside potential from here," Carret said. The company still has about $16 million in total debt, with a payment of $3.5 million due to the banks in December. It remains in default on some other loans. Because of this, the company’s auditors attached one of the grimmest possible opinions to its annual report issued last week: "These factors raise substantial doubt about the company’s ability to continue as a going concern." But Williams said he is confident he can cope with the debt. He now has three priorities, he said: Paying off the bank debt, making sure the operating companies are profitable and getting the stock relisted. And he is in no hurry to grow again. "I want to see strengthening of the bottom line and consistent black ink," he said. "Then we’ll think about increasing the revenue base." ADDITION BY SUBTRACTION In debt by more than $30 million in 1990, holder of 27 affiliated and subsidiary companies, Williams Industries Inc. began divesting itself of subsidiary operations and turned a loss into a profit. Today’s pared-down company has these eight active subsidiaries: · Construction · Financial Services |