UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] Quarterly report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1994
--------------
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 Number 1-10659
-------
ROBERTSON-CECO CORPORATION
- - -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3479146
---------------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
222 Berkeley Street, Boston, Massachusetts 02116
- - ---------------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-424-5500
------------
Indicate by check mark whether 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1994
- - --------------------------------------- -------------------------------
Common Stock, par value $0.01 per share 16,287,581
-1-
ROBERTSON-CECO CORPORATION
Form 10-Q
---------
For Quarter Ended March 31, 1994
--------------------------------
INDEX
=====
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets --
March 31, 1994 and December 31, 1993. . . . . . . . .3
Condensed Consolidated Statements of Operations
And Retained Earnings (Deficit) -- Three
Months Ended March 31, 1994 and 1993. . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1994 and 1993. . . . . .7
Notes to Condensed Consolidated Financial
Statements. . . . . . . . . . . . . . . . . . . . . .9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 15
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 23
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 23
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-2-
ITEM 1. FINANCIAL STATEMENTS
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands, except share data)
(Unaudited)
March 31 December 31
1994 1993
------------ -----------
-- ASSETS --
CURRENT ASSETS:
Cash and cash equivalents. . . . . . $ 4,760 $ 15,666
Restricted cash. . . . . . . . . . . 2,525 3,138
Accounts and notes receivable, net . 53,413 58,062
-------- --------
Inventories:
Work in process . . . . . . . . . 9,654 6,851
Material and supplies . . . . . . 13,123 14,566
-------- --------
Total inventories . . . . . . . . 22,777 21,417
-------- --------
Other current assets . . . . . . . . 4,066 3,218
-------- --------
Total current assets. . . . . . . 87,541 101,501
-------- --------
PROPERTY - at cost . . . . . . . . . . . 64,015 62,731
Less accumulated depreciation. . . . 30,772 29,658
-------- --------
Property, net . . . . . . . . . . 33,243 33,073
-------- --------
ASSETS HELD FOR SALE . . . . . . . . . . 4,062 4,289
-------- --------
EXCESS OF COST OVER NET ASSETS OF
ACQUIRED BUSINESSES - NET. . . . . . 28,888 29,094
-------- --------
OTHER NON-CURRENT ASSETS . . . . . . . . 12,722 13,866
-------- --------
TOTAL ASSETS . . . . . . . . . . . . $166,456 $181,823
======== ========
See Notes to Condensed Consolidated Financial Statements.
-3-
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
-------------------------------------------------
(In thousands, except share data)
(Unaudited)
March 31 December 31
1994 1993
------------ -----------
-- LIABILITIES --
CURRENT LIABILITIES:
Loans payable. . . . . . . . . . . . . . $ 3,115 $ 1,054
Current portion of long-term debt. . . . 374 390
Accounts payable, principally trade. . . 26,524 36,480
Insurance liabilities. . . . . . . . . . 11,607 11,225
Other accrued liabilities. . . . . . . . 45,515 47,644
--------- ---------
Total current liabilities. . . . . . . . 87,135 96,793
LONG-TERM DEBT, less current
portion. . . . . . . . . . . . . . . . . . 45,043 45,084
LONG-TERM INSURANCE LIABILITIES. . . . . . . 13,961 14,770
LONG-TERM PENSION LIABILITIES. . . . . . . . 17,507 16,881
RESERVES AND OTHER LIABILITIES . . . . . . . 25,012 24,958
--------- ---------
TOTAL LIABILITIES. . . . . . . . . . . . . . 188,658 198,486
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, par value $0.01 per share. 162 163
Capital surplus. . . . . . . . . . . . . 172,505 172,682
Warrants . . . . . . . . . . . . . . . . 6,042 6,042
Retained earnings (deficit). . . . . . . (183,030) (177,519)
Excess of additional pension liability
over unrecognized prior service cost . (8,139) (8,139)
Deferred compensation. . . . . . . . . . (1,337) (1,551)
Foreign currency translation adjustments (8,405) (8,341)
--------- ---------
Stockholders' equity (deficiency). . . (22,202) (16,663)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIENCY) $ 166,456 $ 181,823
========= =========
See Notes to Condensed Consolidated Financial Statements.
-4-
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND RETAINED EARNINGS (DEFICIT)
------------------------------------------
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31
------------------
1994 1993
-------- --------
REVENUES:
Net product sales . . . . . . . . . . . $ 56,818 $54,720
Construction and other
services . . . . . . . . . . . . . . 19,160 25,711
-------- --------
Total. . . . . . . . . . . . . . . . 75,978 80,431
-------- --------
COSTS AND EXPENSES:
Product costs . . . . . . . . . . . . . 51,101 48,629
Construction and other services . . . . 16,173 22,558
-------- --------
Cost of sales. . . . . . . . . . . . 67,274 71,187
Selling, general and
administrative. . . . . . . . . . . . 12,410 14,523
Restructuring expense . . . . . . . . . 900 -
-------- --------
Total. . . . . . . . . . . . . . . . 80,584 85,710
-------- --------
OPERATING INCOME (LOSS). . . . . . . . . . (4,606) (5,279)
-------- --------
OTHER INCOME (EXPENSE):
Interest expense. . . . . . . . . . . . (1,134) (3,581)
Other income (expense) - net. . . . . . 289 275
-------- --------
Total. . . . . . . . . . . . . . . . (845) (3,306)
-------- --------
LOSS BEFORE PROVISION FOR TAXES
ON INCOME. . . . . . . . . . . . . . . . (5,451) (8,585)
PROVISION FOR TAXES ON INCOME. . . . . . . 60 30
-------- --------
NET LOSS . . . . . . . . . . . . . . . . . $ (5,511) $ (8,615)
======== ========
See Notes to Condensed Consolidated Financial Statements.
-5-
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND RETAINED EARNINGS (DEFICIT) (CONTINUED)
------------------------------------------------------
(In thousands, except per share data)
(Unaudited)
Three Months
Ended March 31
----------------------
1994 1993
---------- ----------
RETAINED EARNINGS(DEFICIT)
AT BEGINNING OF PERIOD. . . . . . . . . $(177,519) $(156,583)
NET LOSS . . . . . . . . . . . . . . . . . (5,511) (8,615)
--------- ---------
RETAINED EARNINGS (DEFICIT)
AT END OF PERIOD. . . . . . . . . . . . $(183,030) $(165,198)
========= =========
NET LOSS PER COMMON SHARE. . . . . . . . . $ (.35) $ (9.85)
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING . . . . . . . 15,773 881
========= =========
DIVIDENDS PER PREFERRED STOCK SHARE. . . . $ - $ .11
========= =========
See Notes to Condensed Consolidated Financial Statements.
-6-
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(In thousands)
(Unaudited)
Three Months
Ended March 31
---------------------
1994 1993
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss . . . . . . . . . . . . . . . . . . . . . . $ (5,511)$ (8,615)
Adjustments to reconcile net loss to
net cash provided by (used for) operating
activities:
Depreciation and amortization. . . . . . . . . 1,315 1,371
Amortization of discount on debentures
and debt issuance costs. . . . . . . . . . . 308 90
Provisions for:
Bad debts and losses on erection
contracts. . . . . . . . . . . . . . . . 414 595
Rectification and other costs. . . . . . . 530 182
Restructuring expense. . . . . . . . . . . 900 -
Changes in assets and liabilities, net
of divestitures:
Decrease in accounts and notes
receivable . . . . . . . . . . . . . . . 4,956 13,371
(Increase) decrease in inventories . . . . (1,261) (2,307)
(Increase) decrease in restricted
cash . . . . . . . . . . . . . . . . . . 613 5,175
Increase(decrease) in accounts payable,
principally trade. . . . . . . . . . . . (10,027) (5,807)
Decrease in other current liabilities. . . (3,528) (5,647)
Net changes in other assets
and liabilities. . . . . . . . . . . . . (1,020) (1,716)
-------- --------
Net cash used for operating activities . . . (12,311) (3,308)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . (1,145) (795)
Proceeds from sales of property, plant and
equipment . . . . . . . . . . . . . . . . . . . 41 52
Proceeds from sales of assets held for sale. . . . 550 -
-------- --------
Net cash provided by (used for)
investing activities . . . . . . . . . . . $ (554) $ (743)
-------- --------
See Notes to Condensed Consolidated Financial Statements.
-7-
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-----------------------------------------------------------
(In thousands)
(Unaudited)
Three Months
Ended March 31
--------------------
1994 1993
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) short-term
borrowings . . . . . . . . . . . . . . . . . . $ 1,973 $ (161)
Payments on long-term debt borrowings . . . . . . (88) (384)
-------- --------
Net cash provided by (used for)
financing activities . . . . . . . . . . . . 1,885 (545)
-------- --------
Effect of foreign exchange rate changes on cash. . 74 -
-------- --------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . (10,906) (4,596)
Cash and cash equivalents - beginning of
period . . . . . . . . . . . . . . . . . . . 15,666 7,220
-------- --------
Cash and cash equivalents - end of period . . . $ 4,760 $ 2,624
======== ========
SUPPLEMENTAL CASH FLOW DATA:
Cash payments made for:
Interest . . . . . . . . . . . . . . . . . . $ 2,422 $ 424
======== ========
Income taxes . . . . . . . . . . . . . . . . $ - $ 570
======== ========
See Notes to Condensed Consolidated Financial Statements.
-8-
ROBERTSON-CECO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- - ----------------------------------------------------------------
1. BASIS OF PRESENTATION
---------------------
In the opinion of Robertson-Ceco Corporation (the "Company"),
the accompanying unaudited condensed consolidated financial
statements contain all adjustments necessary to present fairly
the financial position as of March 31, 1994, and the results of
operations and cash flows for the periods presented. All
adjustments recorded during the period, other than the
restructuring charge described in Note 2 and the favorable
settlement of certain backcharge claims described in Note 5,
consisted of normal recurring adjustments. Certain previously
reported amounts have been reclassified to conform to the 1994
presentation.
On July 23, 1993, a 1 for 16.5 reverse split (the "Reverse
Split") of the Company's common stock became effective. All
common stock share amounts and per share data presented herein
are restated to reflect the Reverse Split.
2. CREDIT, LIQUIDITY AND RESTRUCTURING MATTERS
-------------------------------------------
On April 28, 1994, the Company entered into an agreement (the
"Amendment") with Foothill Capital Corporation, the current
lender under the Company's domestic credit facility (the "Credit
Facility"), which under its terms, amended the Company's
existing domestic credit facility by temporarily increasing the
Company's maximum availability under the facility by $10 million
from the current level of $35 million to $45 million through
June 30, 1994 and expanded the definition of the borrowing base
(upon which availability is determined) to include certain
assets of the Company's Canadian operations. Under the terms of
the Amendment, the Company has a one time option of extending
the increase in the maximum availability to $45 million through
November 30, 1994 and to $40.0 million through December 31,
1994.
Availability under the terms of the Credit Facility is based on
a percentage of eligible (as defined and subject to certain
restrictions) accounts receivable and inventory, plus a base
amount (which base amount is reduced by $166,667 per month and
is subject to reduction in the case of sales of certain
property, plant and equipment, including assets held for sale),
plus the amount provided by the Company as cash collateral, if
any, less the amount of $5.0 million required to be outstanding
under the term loan (each together the "Borrowing Base"). At
March 31, 1994, the Borrowing Base was $28 million and was used
-9-
to support $30.7 million of outstanding letters of credit which
were used to support primarily the Company's workers'
compensation and bonding programs. As of April 30, 1994,
including the effect of the Amendment, the amount of the
Borrowing Base was estimated to be $31.4 million and was used to
support $28.9 million of letters of credit.
At March 31, 1994, the Company had, on a worldwide basis,
outstanding letters of credit and bank guarantees of $36.9
million and performance guarantees of $2.6 million. Of these
amounts, approximately $24.5 million support liabilities which
are recorded in the Company's balance sheet and $15 million
relate primarily to letter of credit and other bank guarantees
which are issued to support bonding programs.
During the first quarter of 1994, the Company recorded a
restructuring charge of $.9 million, reflecting primarily the
cost of severances associated with specific workforce reductions
at the Company's Building Products Group.
Outlook
-------
Bookings and backlog at the Company's Metal Buildings Group,
Concrete Construction Group and the Company's Asia/Pacific
Building Products operations showed improvement throughout 1993
and have continued to improve in the first quarter of 1994. On
a worldwide basis, adjusted for the effects of the sold U.K.
Subsidiary, the Company's backlog at March 31, 1994 increased
$40 million or 30% over the same period in 1993 and increased
$20 million or 13% over December 31, 1993. The Company's North
American and certain of the Company's European Building Products
operations continue to be adversely affected by weak market
conditions and severe competition and as a result are, at least
in the near term, expected to continue to experience declines in
revenue and incur operating losses. At each of the Building
Products businesses which continue to operate unprofitably, the
Company is evaluating various alternatives including potential
sales and divestitures and has been and is continuing to
implement restructuring and other actions.
The Company expects that demands on its liquidity and credit
resources will continue to be significant throughout most of
1994 as a result of the anticipated funding required for working
capital and bonding requirements and funding requirements for
restructuring programs, nonrecurring cash obligations and
trailing liabilities associated with sold and discontinued
businesses. The Company expects to meet these requirements
through availability under domestic and foreign credit
facilities, and to a lesser extent, through proceeds from asset
sales. In addition, the Company is currently taking steps to
-10-
preserve its cash and maximize its availability under its
existing Credit Facility, including deferral of certain pension
contributions and may consider restricting acceptance of certain
projects which require bonding and thereby decrease the
Company's credit availability. As a result of the current
outlook for the U.S. and Asia/Pacific construction markets which
is expected to continue to improve at least in the near term,
along with the existing growth which has occurred in the
Company's backlog, the Company is currently considering various
options to improve its credit availability and liquidity,
including potential sales or divestitures of existing businesses
and restrictions on business growth or a combination of the
above.
3. DISPOSITIONS
------------
On November 9, 1993, the Company sold its United Kingdom
subsidiary (the "U.K. Subsidiary") which operated as part of the
Company's Building Products Group. The operating results and
cash flows of the U.K. Subsidiary are included in the
accompanying financial statements for the three months ended
March 31, 1993 and excluded from the three months ended March
31, 1994. During the three months ended March 31, 1993, the
U.K. Subsidiary recorded revenues and losses from continuing
operations of $7.6 million and $(1.4) million, respectively.
4. OTHER CURRENT LIABILITIES
-------------------------
Other current liabilities consisted of the following:
March 31 December 31
1994 1993
------------ -----------
(Thousands)
Payroll and related benefits. . . . . $10,824 $11,496
Warranty and backcharge reserves. . . 4,747 4,634
Deferred revenues . . . . . . . . . . 9,965 8,892
Reserves for restructuring. . . . . . 5,455 6,039
Accrued interest . . . . . . . . . . 414 2,042
Other . . . . . . . . . . . . . . . . 14,110 14,541
------- -------
Total. . . . . . . . . . . . . . . $45,515 $47,644
======= =======
-11-
5. COMMITMENTS AND CONTINGENCIES
-----------------------------
Several contracts related to the discontinued custom curtainwall
operations continue to be the subject of litigation. In one of
the actions, the owner and the general contractor for the
project have claimed the Company and Federal Insurance Company,
as issuer of a performance bond in connection with the Company's
work, are liable for $29.9 million in excess completion costs
and delay damages due to the Company's alleged failure to
perform its obligations under its subcontract. The Company has
taken action to enforce a $5.0 million mechanic's lien against
the building and seeks to recover more than $10.0 million in
costs and damages caused by the general contractor's breach of
the subcontract with the Company.
The Company filed suit in state court in Iowa against the owner,
general contractor and a subcontractor seeking payment of
amounts owed to the Company and other damages in connection with
a pre-engineered metal building project in Anchorage, Alaska.
The general contractor subsequently filed suit in state court in
Alaska against a number of parties, including the Company and
its surety, alleging against the Company breach of contract,
breach of implied warranties, misrepresentation and negligence
in connection with the fabrication of the building and seeking
damages in excess of $10.0 million. The Company believes that
it is entitled to payment under its contract and that it has
meritorious defenses against the claims of the general
contractor.
There are various other proceedings pending against or involving
the Company which are ordinary or routine given the nature of
the Company's business. The Company has recorded a liability
related to litigation where it is both probable that a loss will
be incurred and the amount of the loss can be reasonably
estimated. While the outcome of the Company's legal proceedings
cannot at this time be predicted with certainty, management does
not expect that these matters will have a material adverse
effect on the consolidated financial condition or results of
operations of the Company.
In February of 1994, the Company settled certain backcharge and
other claims related to a project which was substantially
complete in 1989. In connection with this settlement, the
Company received $1.7 million of cash and recorded a $1.2
million credit to Costs and Expenses - Construction & Other
Services in the Condensed Consolidated Statement of Operations
for the three months ended March 31, 1994. Additionally, in May
of 1994, the Company resolved and settled certain claims against
the Company related to a curtainwall project located in Texas.
The outcome of these settlements did not have a material adverse
-12-
effect on the Company's Condensed Consolidated Statement of
Operations for the three months ended March 31, 1994.
The Company has been identified as a potentially responsible
party by various federal and state authorities for clean-up at
various waste disposal sites. While it is often difficult to
reasonably quantify future environmental related expenditures,
the Company has engaged various third parties to perform
feasibility studies and assist in estimating the cost of
investigation and remediation. The Company's policy is to accrue
environmental and clean-up related costs of a non-capital nature
when it is both probable that a liability has been incurred and
that the amount can be reasonably estimated. Based upon
currently available information, including the reports of third
parties, management does not believe that the reasonably
possible loss in excess of the amounts accrued would be material
to the consolidated financial statements.
The Company did not make its scheduled interest payments on its
15.5% Subordinated Debentures, due 2000, which were due on May
31, 1992, November 30, 1992, May 31, 1993 and November 30, 1993,
and consequently was in default under the indenture. On
February 15, 1994, the Company paid all past due interest,
including interest on past due interest which in the aggregate
approximated $1.8 million, thereby curing the event of default
under the indenture.
In connection with the sale of the Company's Door Business and
certain of the Company's U.S. Building Products businesses which
took place in the first quarter of 1992, the Company entered
into a Letter of Credit and Reimbursement Agreement and an
Escrow Agreement, whereby the purchaser provided the Company
with a letter of credit to guarantee certain of the Company's
workers' compensation and general insurance liabilities and the
Company placed certain funds in escrow. At March 31, 1994, the
amount of the outstanding letter of credit which was put in
place by the purchaser was $3.0 million and the amount held in
escrow by the Company was $1.6 million. Under the terms of the
current agreement with the purchaser, the Company will have
access to certain of the escrow cash based upon certain
conditions, including reductions in the face amount of the
letter of credit either through replacement of the purchaser's
letter of credit by the Company or reductions in the letter of
credit requirements which will occur through reduction of the
underlying obligations. On February 2, 1994, based upon the
Company's partial reduction and replacement of $1.2 million of
the face amount of the purchaser's letter of credit, the Company
was granted access to $1.1 million of cash which was recorded as
restricted (current) at December 31, 1993.
-13-
6. PRO FORMA FINANCIAL INFORMATION
-------------------------------
On July 14, 1993, the Company completed an exchange offer for
$63.7 million principal amount of the Company's 15.5%
Subordinated Debentures, due 2000, and 500,000 shares of the
Company's Preferred Stock (the "Exchange Offer"), and on
November 9, 1993, the Company sold its U.K. Subsidiary (Note 3).
The following pro forma information shows the effect of the
Exchange Offer and the sale of the U.K. Subsidiary on the
operating results of the first quarter of 1993, assuming that
such transactions had occurred on January 1, 1993. These
results are not necessarily indicative of what results would
have been if such transactions had occurred on January 1, 1993
and are not necessarily indicative of the financial condition
or results of operations for any future date or period. Since
both of these transactions occurred prior to the beginning of
the first quarter of 1994, no adjustments are required to the
first quarter of 1994.
Three Months Ended
March 31
---------------------
1994 1993
--------- --------
(Pro forma)
(Thousands)
Revenue. . . . . . . . . . . . . . . $75,978 $72,789
======= =======
Net Loss from Continuing
Operations. . . . . . . . . . . . $(5,511) $(4,258)
======= =======
Net Loss Per Common Share. . . . . . $ (.35) $ (.39)
======= =======
-14-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
RESULTS OF OPERATIONS
- - ---------------------
During the past several years, Robertson-Ceco Corporation (the
"Company") has been adversely affected by the worldwide recession
in the construction industry and as a result has incurred
significant operating losses and has experienced severe liquidity
problems. To address these problems the Company has developed and
either implemented or is in the process of implementing a number of
operational and financial restructuring plans for the Company,
including reducing operating costs to meet current and expected
levels of demand, liquidating or divesting of operations which do
not meet the Company's strategic direction or where the amount of
cash required to restructure the business exceeds the expected
return within a reasonable period of time, and investing in
remaining businesses, where appropriate, to realize their
potential. In addition, there are currently a number of
restructuring programs which are ongoing and under consideration
including further reductions in work force levels and
rationalization and restructuring through sales, redistribution or
closure of businesses and facilities.
The Company operates primarily in the construction and commercial
building sectors with a significant portion of the Company's
revenues concentrated in North America and Europe. As a result,
the Company considers its businesses to be seasonal in nature and
operating results during the first quarter of each year are
affected, in part, by the severity of weather conditions.
On November 9, 1993, the Company sold its U.K. Subsidiary (the
"U.K. Subsidiary") which operated as part of the Company's Building
Products Group. The operating results of the sold U.K. Subsidiary
are included in the Company's statements of operations and cash
flows for the quarter ended March 31, 1993 and are excluded for the
quarter ended March 31, 1994.
Overview of Results of Operations
- - ---------------------------------
Revenues for the first quarter of 1994 of $76.0 million decreased
$4.5 million or 5.5% from the first quarter of 1993. The decrease
reflects the exclusion of the U.K. Subsidiary from the 1994
operating results, lower sales volumes at the Company's Building
Products Group and Concrete Construction Group, offset in part by
higher sales volumes at the Company's Metal Buildings Group. The
Company's gross margin percentage was approximately 11.5% in both
the first quarter of 1994 and 1993. The 1994 operating results
-15-
include a $1.2 million credit to costs and expenses resulting from
the settlement of backcharges and other claims relating to a
project which was substantially complete in 1989, which was offset
by lower margins in the Company's Building Products Group.
Selling, general and administrative expenses decreased by $2.1
million in the first quarter of 1994 compared to the same quarter
of 1993 primarily as a result of excluding the sold U.K. Subsidiary
from the 1994 operating results. Excluding the effect of the sold
U.K. Subsidiary, selling, general and administrative costs
increased $.2 million in the first quarter of 1994 compared with
1993. The increase represents primarily higher selling and
advertising costs at the Company's Metal Buildings Group, offset in
part by reduced operating costs in the Company's Building Products
and Concrete Construction Groups.
As further discussed below, during the first quarter of 1994, the
Company recorded a restructuring charge of $.9 million reflecting
primarily the cost of severances associated with workforce
reductions at the Company's Building Products Group.
The net loss was $(5.5) million for the first quarter of 1994
compared with a net loss $(8.6) million for the first quarter of
1993.
The following sections highlight the Company's operating results on
a segment basis and provide information on non-operating income and
expenses.
Metal Buildings Group
- - ---------------------
Metal Buildings Group revenues increased by $11.2 million or 28% in
the first quarter 1994 compared to the same period in 1993. The
increase reflects primarily improved market conditions in the U.S.
Operating income at the Metal Buildings Group was $.2 million in
both the first quarter of 1994 and 1993. Operating profits during
the first quarter of 1994 were negatively affected by higher
material costs and higher selling and advertising costs associated
in part with the development of international markets and higher
sales levels.
Building Products Group
- - -----------------------
Building Products Group revenues decreased by $14.7 million or 55%
in the first quarter of 1994 compared to the same period in 1993.
The revenue decline is a result of excluding the sold U.K.
Subsidiary which recorded $7.6 million of revenue during the first
quarter of 1993, weak market conditions and pressure on selling
prices at the Company's U.S., Canadian and European operations.
-16-
For the quarter ended March 31, 1994, the Building Products Group
recorded an operating loss of $(3.3) million compared with an
operating loss of $(2.5) million in the first quarter of 1993. The
1994 operating loss includes a restructuring charge of $.9 million,
reflecting primarily workforce reductions at the Company's U.S.
operation which were taken to size the division to expected levels
of demand. The 1993 operating loss includes operating losses of
$(1.2) million attributable to the sold U.K. Subsidiary. Exclusive
of the 1994 restructuring charge and the operating losses of the
sold U.K. Subsidiary, the first quarter operating losses of the
Building Products Group would have been $(2.4) million in 1994
compared with $(1.3) million in 1993. The increase in operating
losses is primarily a result of the weak market conditions and
lower revenues at the Company's U.S., Canadian and European
operations.
Concrete Construction Group
- - ---------------------------
Concrete Construction Group revenues in the first quarter of 1994
decreased $.9 million or 7% in relation to the first quarter of
1993. The decline in revenues reflects primarily the impact of
adverse weather conditions which hindered and delayed the execution
of certain projects. For the quarter ended March 31, 1994, the
Concrete Construction Group reported operating income of $1.1
million compared with an operating loss of $(.3) million in the
same period of 1993. The operating results for the first quarter
of 1994 include a $1.2 million credit to costs and expenses as a
result of a settlement of backcharge and other claims relating to
a project which was substantially complete in 1989. Exclusive of
this $1.2 million credit, the loss for the first quarter of 1994
would have been $(.1) million compared with the $(.3) million loss
in the first quarter of 1993. The improvement is primarily the
result of restructuring actions which have included, among other
things, workforce reductions and closure and consolidation of
certain sales offices and supply yards.
Backlog of Orders
- - -----------------
At March 31, 1994, the backlog of unfilled orders believed to be
firm for the Company's ongoing businesses was approximately $172
million. On a comparable basis, adjusted for the sale of the U.K.
Subsidiary, which had a backlog at March 31, 1993 of approximately
$19 million, the order backlog was approximately $132 million at
March 31, 1993. Approximately $12 million of the March 31, 1994
backlog is expected to be performed after one year.
-17-
Other Income (Expenses)
- - -----------------------
Interest expense for the quarter ended March 31, 1994 and 1993
totalled $1.1 million and $3.6 million, respectively. The decrease
in interest expense is primarily due to the completion of the
exchange offer, which was effective July 14, 1993, offset, in part,
by interest expense associated with the Company's domestic credit
facility which was funded on May 3, 1993. On a pro forma basis,
assuming that the Company's exchange offer for its 15.5%
Subordinated Debentures, due 2000, had occurred on January 1, 1993,
reported interest expense for the quarter ended March 31, 1993
would have been reduced by $3.0 million.
Other income (expense) - net for the quarters ended March 31, 1994
and 1993 totalled $.3 million.
Litigation
- - ----------
Several contracts related to the Company's discontinued custom
curtainwall operations continue to be the subject of litigation. In
one of the actions, the owner and the general contractor for the
project have claimed the Company and Federal Insurance Company, as
issuer of a performance bond in connection with the Company's work,
are liable for $29.9 million in excess completion costs and delay
damages due to the Company's alleged failure to perform its
obligations under its subcontract. The Company has taken action to
enforce a $5.0 million mechanic's lien against the building and
seeks to recover more than $10.0 million in costs and damages
caused by the general contractor's breach of the subcontract with
the Company.
The Company filed suit in state court in Iowa against the owner,
general contractor and a subcontractor seeking payment of amounts
owed to the Company and other damages in connection with a pre-
engineered metal building project in Anchorage, Alaska. The
general contractor subsequently filed suit in state court in Alaska
against a number of parties, including the Company and its surety,
alleging against the Company breach of contract, breach of implied
warranties, misrepresentation and negligence in connection with the
fabrication of the building and seeking damages in excess of $10.0
million. The Company believes that it is entitled to payment under
its contract and that it has meritorious defenses against the
claims of the general contractor.
There are various other proceedings pending against or involving
the Company which are ordinary or routine given the nature of the
Company's business. The Company has recorded a liability related to
litigation where it is both probable that a loss has been incurred
and the amount of the loss can be reasonably estimated. While the
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outcome of the above matters cannot at this time be predicted with
certainty, management does not expect that these matters will have
a material adverse effect on the consolidated financial condition
or results of operations of the Company.
In May 1994, the Company resolved and settled certain claims
related to a curtainwall project located in Texas. The outcome of
these settlements did not have a material adverse effect on the
Company's condensed consolidated statement of operations in the
period ended March 31, 1994.
Environmental Matters
- - ---------------------
The Company has been identified as a potentially responsible party
by various federal and state authorities for clean-up at various
waste disposal sites. While it is often extremely difficult to
reasonably quantify future environmental related expenditures, the
Company has engaged various third parties to perform feasibility
studies and assist in estimating the cost of investigation and
remediation. The Company's policy is to accrue environmental and
clean-up related costs of a non-capital nature when it is both
probable that a liability has been incurred and that the amount can
be reasonably estimated. Based upon currently available
information, including the reports of third parties, management
does not believe that the reasonably possible loss in excess of the
amounts accrued would be material to the consolidated financial
statements.
Liquidity and Capital Resources
- - -------------------------------
During the quarter ended March 31, 1994, the Company used
approximately $12.9 million of cash, including amounts which were
previously restricted, to fund its operating activities. Of this
amount, approximately $1.6 million was used to fund restructuring
activities, $.8 million was used to pay investment banking and
other professional fees incurred in connection with the Company's
debt exchange offer which was completed in July of 1993, and $1.8
million was used to pay past due interest on the Company's 15.5%
Subordinated Debentures, thereby curing the default which existed
under such securities. The remaining uses of operating cash during
the first quarter of 1994 reflect primarily the funding associated
with working capital requirements, including the funding of the
first quarter operating loss and payments made to improve vendor
accounts payable aging at the Company's Metal Buildings Group.
Operating cash flow during the first quarter of 1994 included the
receipt of a $1.7 million settlement payment in February of 1994
for an old backcharge claim related to a job which was
substantially complete in 1989.
-19-
In addition, during the first quarter of 1994, the Company spent
approximately $1.1 million on capital expenditures, most of which
were directed toward upgrading and improving manufacturing
equipment and data processing systems at the Company's Metal
Building Group. Cash provided by financing activities during the
period consisted primarily of short-term borrowings of $2.0 million
which was provided under foreign credit facilities to assist in
funding local working capital requirements and first quarter
operating losses. As a result, primarily of the above,
unrestricted cash and cash equivalents decreased by $10.9 million
during the period from December 31, 1993 to March 31, 1994. At
March 31, 1994, the Company had $4.8 million of unrestricted cash
and cash equivalents which consisted of $1.3 million of cash and
short-term investments located at foreign subsidiaries which is
available to fund local working capital requirements and $3.5
million of cash located in the U.S. which is available for general
business purposes.
On April 28, 1994, the Company entered into an agreement (the
"Amendment") with Foothill Capital Corporation, the current lender
under the Company's domestic credit facility (the "Credit
Facility"), which under its terms, amended the Company's existing
domestic credit facility by temporarily increasing the Company's
maximum availability under the facility by $10 million from the
current level of $35 million to $45 million through June 30, 1994
and expanded the definition of the borrowing base (upon which
availability is determined) to include certain assets of the
Company's Canadian operations. Under the terms of the Amendment,
the Company has a one time option of extending the increase in the
maximum availability to $45 million through November 30, 1994 and
to $40.0 million through December 31, 1994.
Availability under the terms of the Credit Facility is based on a
percentage of eligible (as defined and subject to certain
restrictions) accounts receivable and inventory, plus a base amount
(which base amount is reduced by $166,667 per month and is subject
to reduction in the case of sales of certain property, plant and
equipment, including assets held for sale), plus the amount
provided by the Company as cash collateral, if any, less the amount
of $5.0 million required to be outstanding under the term loan
(each together the "Borrowing Base"). At March 31, 1994, the
Borrowing Base was $28.0 million and was used to support $30.7
million of outstanding letters of credit which were used to support
primarily the Company's workers' compensation and bonding programs.
As of April 30, 1994, including the effect of the Amendment, the
amount of the Borrowing Base was estimated to be $31.4 million and
was used to support $28.9 million of letters of credit.
Subject to certain documentation and other requirements, an outside
commercial bank has provided a commitment to Foothill Capital
Corporation to participate in the Credit Facility which would
thereby extend the maximum availability to $45 million through the
-20-
term of the Credit Facility which extends into 1998.
In addition to the Credit Facility, borrowing arrangements are in
place at certain international locations to assist in supporting
local working capital requirements and bonding programs. The
outstanding balance of such short-term loans payable at March 31,
1994 was $3.1 million. At March 31, 1994 the Company had in place
at its international locations unused lines of credit of $.2
million and letter of credit and guarantee facilities of $7.4
million of which $4.9 million was outstanding.
Outlook
- - -------
Bookings and backlog at the Company's Metal Buildings Group,
Concrete Construction Group and the Company's Asia/Pacific Building
Products operations showed improvement throughout 1993 and have
continued to improve in the first quarter of 1994. On a worldwide
basis, adjusted for the effects of the sold U.K. Subsidiary, the
Company's backlog at March 31, 1994 increased $40 million or 30%
over the same period in 1993 and increased $20 million or 13% over
December 31, 1993. The Company's North American and certain of the
Company's European Building Products operations continue to be
adversely affected by weak market conditions and severe competition
and as a result are, at least in the near term, expected to
continue to experience declines in revenue and incur operating
losses. At each of the Building Products businesses which continue
to operate unprofitably, the Company is evaluating various
alternatives including potential sales and divestitures and has
been and is continuing to implement restructuring and other
actions.
The Company expects that demands on its liquidity and credit
resources will continue to be significant throughout most of 1994
as a result of the anticipated funding required for working capital
and bonding requirements and funding requirements for restructuring
programs, nonrecurring cash obligations and trailing liabilities
associated with sold and discontinued businesses. The Company
expects to meet these requirements through availability under
domestic and foreign credit facilities, and to a lesser extent,
through proceeds from asset sales. The Company is currently taking
steps to preserve its cash and maximize its availability under its
existing Credit Facility, including deferral of certain pension
contributions and may consider restricting acceptance of certain
projects which require bonding and thereby decrease the Company's
credit availability. As a result of the current outlook for the
U.S. and Asia/Pacific construction markets which is expected to
continue to improve at least in the near term, along with the
existing growth which has occurred in the Company's backlog, the
Company is currently considering various options to improve its
credit availability and liquidity, including potential sales or
-21-
divestitures of existing businesses and restrictions on business
growth or a combination of the above.
-22-
PART II
OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
Two separate, but related lawsuits had been filed by or
against the Company in connection with a $2.4 million
subcontract performed by the Company's Cupples Products
Division ("Cupples") for the supply and erection of custom
curtainwall on a commercial office building project known
as the 3DI Tower in Houston, Texas. In one such action,
Harvey Construction Company ("Harvey"), the general
contractor, filed suit in federal court in Houston
asserting claims for the owner/developer of the project as
well as attempting to enforce a $4.0 million state court
judgement against Cupples by virtue of certain indemnity
provisions in the subcontracts (Harvey Construction Co. v.
Robertson Ceco Corp.). In a separate action, Cupples
sought a declaratory judgement that it was not liable
under the indemnity provisions or for any of the
owner/developer's claims that were assigned to Harvey
(Cupples Products Division of Robertson Ceco Corp. v.
Harvey Construction Co.). In the second action, Harvey
had filed a counterclaim seeking to enforce the state
court judgement as well as the assigned claims. Other
than demanding indemnity for the $4.0 million state court
judgement, Harvey's counterclaims sought unspecified
damages. In early May 1994, the Company entered into an
agreement with Harvey, and certain other parties to the
lawsuits, which resolved and settled the outstanding
claims. The outcome of these settlements did not have a
material adverse effect on the Company's Condensed
Consolidated Statement of Operations for the three months
ended March 31, 1994.
Information describing certain of the Company's legal
proceedings and environmental matters is included in Item
1. Financial Information in Note 5 to the "Notes to the
Condensed Consolidated Financial Statements" and Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations under the captions
"Litigation" and "Environmental Matters" and is hereby
incorporated by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Earnings (Loss) per
Common Share, filed herewith.
-23-
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the
first quarter of 1994 or through the date of this
filing.
-24-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ROBERTSON-CECO CORPORATION
--------------------------
(Registrant)
By: /s/ John C. Sills
-----------------------------
John C. Sills
Vice President and Controller
(Principal Accounting Officer)
May 13, 1994
- - ------------
-25-
ROBERTSON-CECO CORPORATION
EXHIBIT INDEX
--------------------------
EXHIBIT 11 - Computation of Earnings (Loss) Per Common
Share
-26-