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 June 30, 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
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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 July 31, 1994
- - --------------------------------------- ----------------------------
Common Stock, par value $0.01 per share 16,209,573
ROBERTSON-CECO CORPORATION
Form 10-Q
---------
For Quarter Ended June 30, 1994
-------------------------------
INDEX
=====
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets --
June 30, 1994 and December 31, 1993. . . . . . . . 3
Condensed Consolidated Statements of Operations
And Retained Earnings (Deficit) -- Three
and Six Months Ended June 30, 1994 and 1993. . . . 5
Condensed Consolidated Statements of Cash Flows --
Six Months Ended June 30, 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 4. Submission of Matters to a Vote of Security Holders . . 23
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 23
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ITEM 1. FINANCIAL STATEMENTS
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands, except share data)
(Unaudited)
June 30 December 31
1994 1993
----------- -----------
-- ASSETS --
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . $ 611 $ 15,666
Restricted Cash . . . . . . . . . . . . 3,272 3,138
Accounts and notes receivable, net. . . 67,031 58,062
-------- --------
Inventories:
Work in process . . . . . . . . . . . 6,763 6,851
Material and supplies . . . . . . . . 11,882 14,566
-------- --------
Total inventories . . . . . . . . . . 18,645 21,417
-------- --------
Other current assets. . . . . . . . . . 3,262 3,218
-------- --------
Total current assets. . . . . . . . . 92,821 101,501
-------- --------
PROPERTY - at cost . . . . . . . . . . . . 63,950 62,731
Less accumulated depreciation . . . . . 30,957 29,658
-------- --------
Property, net . . . . . . . . . . . . 32,993 33,073
-------- --------
ASSETS HELD FOR SALE . . . . . . . . . . . 1,493 4,289
-------- --------
EXCESS OF COST OVER NET ASSETS OF
ACQUIRED BUSINESSES - NET . . . . . . . 28,684 29,094
-------- --------
OTHER NON-CURRENT ASSETS . . . . . . . . . 13,184 13,866
-------- --------
TOTAL ASSETS. . . . . . . . . . . . . . $169,175 $181,823
======== ========
See Notes to Condensed Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
-------------------------------------------------
(In thousands, except share data)
(Unaudited)
June 30 December 31
1994 1993
----------- -----------
-- LIABILITIES --
CURRENT LIABILITIES:
Loans payable . . . . . . . . . . . . . $ 3,870 $ 1,054
Current portion of long-term debt . . . 348 390
Accounts payable, principally trade . . 28,136 36,480
Insurance liabilities . . . . . . . . . 12,047 11,225
Other accrued liabilities . . . . . . . 46,693 47,644
--------- ---------
Total current liabilities . . . . . . . 91,094 96,793
LONG-TERM DEBT, less current portion . . . 45,044 45,084
LONG-TERM INSURANCE LIABILITIES. . . . . . 13,795 14,770
LONG-TERM PENSION LIABILITIES. . . . . . . 16,435 16,881
RESERVES AND OTHER LIABILITIES . . . . . . 23,871 24,958
--------- ---------
TOTAL LIABILITIES. . . . . . . . . . . . . 190,239 198,486
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, par value $0.01 per
share . . . . . . . . . . . . . . . . 162 163
Capital surplus . . . . . . . . . . . . 172,336 172,682
Warrants. . . . . . . . . . . . . . . . 6,042 6,042
Retained earnings (deficit) . . . . . . (182,112) (177,519)
Excess of additional pension
liability over unrecognized prior
service cost. . . . . . . . . . . . . (8,139) (8,139)
Deferred compensation . . . . . . . . . (1,137) (1,551)
Foreign currency translation
adjustments . . . . . . . . . . . . . (8,216) (8,341)
--------- ---------
Stockholders' equity (deficiency) . . (21,064) (16,663)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIENCY) . . . . . . . . . . $ 169,175 $ 181,823
========= =========
See Notes to Condensed Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND RETAINED EARNINGS (DEFICIT)
------------------------------------------
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- ---------
REVENUES:
Net product sales . . . . . . . . $ 73,151 $71,832 $129,969 $126,552
Construction and other
services. . . . . . . . . . . . 27,979 22,123 47,139 47,834
-------- ------- -------- --------
Total . . . . . . . . . . . . . 101,130 93,955 177,108 174,386
-------- ------- -------- --------
COSTS AND EXPENSES:
Product costs. . . . . . . . . . 62,503 60,516 113,604 109,145
Construction and other
services. . . . . . . . . . . . 23,050 18,167 39,223 40,725
-------- ------- -------- --------
Cost of sales . . . . . . . . . 85,553 78,683 152,827 149,870
Selling, general and
administrative. . . . . . . . . 13,471 14,848 25,881 29,371
Restructuring expense . . . . . . 147 - 1,047 -
-------- ------- -------- --------
Total . . . . . . . . . . . . . 99,171 93,531 179,755 179,241
-------- ------- -------- --------
OPERATING INCOME (LOSS). . . . . . 1,959 424 (2,647) (4,855)
-------- ------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense. . . . . . . . . (1,167) (4,112) (2,301) (7,693)
Other income (expense) - net. . . 216 (52) 505 223
-------- ------- -------- --------
Total . . . . . . . . . . . . . (951) (4,164) (1,796) (7,470)
-------- ------- -------- --------
INCOME (LOSS) BEFORE PROVISION
FOR TAXES ON INCOME . . . . . . . 1,008 (3,740) (4,443) (12,325)
PROVISION FOR TAXES ON INCOME. . . 90 32 150 62
-------- ------- -------- --------
NET INCOME (LOSS). . . . . . . . . $ 918 $(3,772) $ (4,593) $(12,387)
======== ======= ======== ========
See Notes to Condensed Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND RETAINED EARNINGS (DEFICIT) (CONTINUED)
------------------------------------------------------
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
--- --------------------- ---------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
RETAINED EARNINGS (DEFICIT)
AT BEGINNING OF PERIOD. . . . $(183,030) $(165,198) $(177,519) $(156,583)
NET INCOME (LOSS). . . . . . . 918 (3,772) (4,593) (12,387)
--------- --------- --------- ---------
RETAINED EARNINGS (DEFICIT)
AT END OF PERIOD. . . . . . . $(182,112) $(168,970) $(182,112) $(168,970)
========= ========= ========= =========
NET INCOME (LOSS) PER
COMMON SHARE. . . . . . . . . $ .06 $ (4.35) $ (.29) $ (14.19)
========= ========= ========= =========
DIVIDENDS PER SHARE:
Preferred Stock . . . . . . . $ - $ .11 $ - $ .22
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING . . 16,229 881 15,773 881
========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(In thousands)
(Unaudited)
Six Months
Ended June 30
------------------
1994 1993
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) . . . . . . . . . . . . . . . $ (4,593) $(12,387)
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation and amortization. . . . . . . 2,651 3,412
Amortization of discount on debentures
and debt issuance costs . . . . . . . . 619 180
Provisions for:
Bad debts and losses on erection
contracts . . . . . . . . . . . . . . 1,894 833
Rectification and other costs . . . . . 1,224 1,435
Restructuring expense . . . . . . . . . 1,047 -
Changes in assets and liabilities, net
of divestitures:
(Increase) decrease in accounts and
notes receivable. . . . . . . . . . . . (8,329) 5,441
(Increase) decrease in inventories. . . 3,020 (3,003)
(Increase) decrease in restricted cash. (134) 15,210
Decrease in accounts payable,
principally trade . . . . . . . . . . (8,680) (1,187)
Decrease in other current liabilities . (4,317) (13,663)
Net changes in other assets and
liabilities . . . . . . . . . . . . . (3,335) 2,597
-------- --------
Net cash used for operating activities . . (18,933) (1,132)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . (1,923) (2,353)
Proceeds from sales of property, plant and
equipment. . . . . . . . . . . . . . . . . . 210 349
Proceeds from sales of assets held for sale . . 3,014 -
-------- --------
Net cash provided by (used for)
investing activities . . . . . . . . . . . $ 1,301 $ (2,004)
-------- --------
See Notes to Condensed Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-----------------------------------------------------------
(In thousands)
(Unaudited)
Six Months
Ended June 30
-------------------
1994 1993
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) short-term
borrowings . . . . . . . . . . . . . . . . . $ 2,600 $ (550)
Payments on long-term debt borrowings . . . . . (150) (1,333)
Proceeds from long-term borrowings. . . . . . . - 5,000
-------- -------
Net cash provided by financing
activities . . . . . . . . . . . . . . . . 2,450 3,117
-------- -------
Effect of foreign exchange rate changes
on cash. . . . . . . . . . . . . . . . . . . 127 (191)
-------- -------
Net decrease in cash and cash
equivalents. . . . . . . . . . . . . . . . (15,055) (210)
Cash and cash equivalents -beginning of
period . . . . . . . . . . . . . . . . . . 15,666 7,220
-------- -------
Cash and cash equivalents - end of period. . $ 611 $ 7,010
======== =======
SUPPLEMENTAL CASH FLOW DATA:
Cash payments made for:
Interest . . . . . . . . . . . . . . . . . $ 3,396 $ 909
======== =======
Income taxes . . . . . . . . . . . . . . . $ 3 $ 567
======== =======
See Notes to Condensed Consolidated Financial Statements.
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 June 30, 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 May 18, 1994, the Company entered into an agreement (the
"Amendment") with Foothill Capital Corporation, the current lender
under the Company's domestic credit facility (together with the
Amendment, the "Credit Facility"), which under its terms, amended
the Company's domestic credit facility by increasing the Company's
maximum availability under the facility by $10 million from the
previous level of $35 million to $45 million, and extended the term
of the facility to May 18, 1999. There were no other significant
changes in the overall structure of the Company's domestic credit
facility resulting from the Amendment.
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 June 30, 1994, the
Borrowing Base was estimated to be $37.6 million and was used to
support a $5.0 million term loan and $29.5 million of outstanding
letters of credit and related guarantees which were used to support
primarily the Company's workers' compensation and bonding programs.
The Company had availability under the Credit Facility of $3.1
million at June 30, 1994.
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 June 30,
1994 was $3.9 million. At June 30, 1994 the Company had in place
at its international locations unused lines of credit of $.2
million and letter of credit and performance guarantee facilities
of $7.4 million of which $4.5 million was outstanding.
At June 30, 1994, the Company had, on a worldwide basis,
outstanding letters of credit and related guarantees of $30.7
million and performance guarantees of $8.4 million. Of these
amounts, approximately $24.3 million support liabilities which are
recorded in the Company's balance sheet and $14.8 million relate
primarily to letters of credit and other performance guarantees
issued to support bonding programs.
During the three and six months ended June 30, 1994, the Company
recorded restructuring charges of $.1 million and $1.0 million,
respectively, 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
continued to improve throughout the first six months of 1994. On
a worldwide basis, adjusted for the effects of the sold United
Kingdom subsidiary (the "U.K. Subsidiary"), the Company's backlog
at June 30, 1994 increased $18.8 million or 11.5% over June 30,
1993 levels and increased $30.1 million or 19.9% over December 31,
1993 levels. 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 and negative operating cash flow. At each of the Building
Products businesses which continue to operate unprofitably, the
Company is evaluating various alternatives including asset sales
and divestitures, potential liquidation of such businesses, and has
been and is continuing to implement restructuring and other cost
reduction actions.
The Company expects that demands on its liquidity and credit
resources will continue to be significant throughout the remainder
of 1994 as a result of the anticipated funding requirements for
working capital and bonding requirements, capital expenditure
programs, as well as 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, earnings from operations, and to a lesser extent,
through proceeds from asset sales. In addition, the Company is
currently taking steps and evaluating other alternatives to
preserve cash and maximize credit availability under the Credit
Facility. Such steps include temporary postponement of certain
capital expenditure programs, sales of real estate, sales of excess
equipment at the Company's Building Products Group and restrictions
on acceptance of certain projects which require substantial bonding
commitments in the near term which decrease the Company's credit
availability. Due to the current outlook for the U.S. and
Asia/Pacific construction markets, which are expected to continue
to improve at least in the near term, along with the growth in the
Company's backlog, the Company is currently considering various
options to improve its liquidity and credit availability, including
potential sales or divestitures of existing businesses,
restrictions on business growth or a combination of the above.
3. DISPOSITIONS
------------
On November 9, 1993, the Company sold its 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 both the
three and six months ended June 30, 1993 and are excluded from the
three and six months ended June 30, 1994. During the three and six
months ended June 30, 1993, the U.K. Subsidiary recorded revenues
and losses from continuing operations of $7.4 million and $1.6
million, and $15.0 million and $3.0 million, respectively.
4. OTHER CURRENT LIABILITIES
-------------------------
Other current liabilities consisted of the following:
June 30 December 31
1994 1993
----------- -----------
(Thousands)
Payroll and related benefits. . . . . $12,377 $11,496
Warranty and backcharge reserves. . . 4,293 4,634
Deferred revenues . . . . . . . . . . 10,509 9,292
Reserves for restructuring. . . . . . 4,071 6,039
Accrued interest. . . . . . . . . . . 262 2,042
Other . . . . . . . . . . . . . . . . 15,181 14,141
------- -------
Total . . . . . . . . . . . . . . $46,693 $47,644
======= =======
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.
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, during the first
quarter of 1994 the Company received $1.7 million of cash and
recorded a $1.2 million credit to Costs and Expenses - Construction
& Other Services which is reflected in the Condensed Consolidated
Statement of Operations for the six months ended June 30, 1994.
During the three months and six months ended June30, 1993, the
Company recorded a credit to Selling, General and Administrative
Expenses of $1.8 million as a result of the settlement of certain
lease obligations.
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.
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.
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 June 30, 1994, the amount of
the outstanding letter of credit which was put in place by the
purchaser was $2.9 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.
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 three and six
months ended June 30, 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
January 1, 1994, no adjustments are required to the 1994 amounts.
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
(Thousands) (Thousands)
(Pro Forma) (Pro Forma)
Revenue . . . . . . . .$101,130 $86,597 $177,108 $159,386
======== ======= ======== ========
Net Income (Loss) . . .$ 918 $ 876 $ (4,593) $ (3,382)
======== ======= ======== ========
Net Income (Loss)
per Common Share . . .$ .06 $ .08 $ (.29) $ (.31)
======== ======= ======== ========
As mentioned in Note 5, the net income (loss) for the three and six
months ended June 30, 1993 includes a credit of $1.8 million related
to the favorable settlement of certain lease obligations, and net
income (loss) for the six months ended June 30, 1994 includes a
credit of $1.2 million related to the settlement of certain
backcharge and other claims which was recorded by the Company in the
first quarter of 1994.
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 United Kingdom 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 three and six months ended June 30, 1993 and are excluded for the
three and six months ended June 30, 1994.
Overview of Results of Operations
- - ---------------------------------
Revenues for the three months ended June 30, 1994 were $101.1 million,
an increase of $7.2 million or 7.6% over the three months ended June 30,
1993. The increase in revenues for the quarter ended June 30, 1994
reflects higher sales volumes at the Company's Metal Buildings, Concrete
Construction and remaining Building Products Groups, offset in part by
the exclusion of the U.K. Subsidiary from 1994 results. On a year-to-
date basis, revenues in 1994 were $177.1 million, an increase of $2.7
million or 1.6% compared to the same period of 1993. The increase in
year-to-date revenues reflects higher sales volume at the Company's
Metal Buildings and Concrete Construction Groups, offset in part by
lower revenues at the Buildings Products Group primarily due to the
exclusion of the U.K. Subsidiary from 1994 results.
The Company's gross margin percentage was approximately 15.4% during the
second quarter of 1994 compared with 16.3% during the second quarter of
1993. On a year-to-date basis, the gross margin percentage was 13.7% in
1994 compared with 14.1% in 1993. The reduction is primarily due to
increased competition and pressure on selling prices at the Company's
Building Products operations. The year-to-date 1994 operating results
include a $1.2 million credit to costs and expenses recorded in the
first quarter of 1994 resulting from the settlement of backcharges and
other claims relating to a project which was substantially complete in
1989.
Selling, general and administrative expenses decreased by $1.4 million
in the second quarter of 1994 compared to the same quarter of 1993. On
a year-to-date basis, 1994 selling, general and administrative expenses
decreased by $3.5 million compared to the same period of 1993. The
results for the three and six months ended June 30, 1993 include a
credit to selling, general and administrative expenses of $1.8 million
related to the settlement of outstanding lease obligations. The results
for the three and six months ended June 30, 1994 exclude the selling,
general and administrative expenses of the sold U.K. Subsidiary which
were $2.2 million and $4.5 million, respectively, for the three and six
month periods ending June 30, 1993. Excluding the effect of the $1.8
million credit recorded in 1993 and the sold U.K. Subsidiary, selling,
general and administrative expenses decreased $.9 million in the second
quarter of 1994 compared with 1993 and $.8 million on a year-to-date
basis in 1994 compared to 1993. The decrease is primarily due to cost
reduction initiatives implemented in 1993 and 1994, offset in part by
higher selling and advertising costs at the Company's Metal Buildings
Group and the Company's Asia/Pacific Building Products operations
supporting higher levels of revenues.
As further discussed below, during the three and six months ended June
30, 1994, the Company recorded restructuring charges of $.1 million and
$1.0 million, respectively, reflecting primarily the cost of severances
associated with specific workforce reductions at the Company's Building
Products Group.
Net income (loss) during the three and six month periods ended June 30,
1994 was $.9 million and ($4.6) million, respectively, compared with
$(3.8) million and $(12.4) million, respectively, during the three and
six months ended June 30, 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 $9.9 million or 17.7% in the
second quarter 1994 compared to the same period in 1993. On a year-to-
date basis, Metal Buildings Group revenues increased by $21.1 million or
22.1% over the same period of 1993. The increases reflect primarily
improved market conditions in the U.S. Operating income at the Metal
Buildings Group increased by $1.5 million or 49.9% in the second quarter
of 1994 compared to the same quarter of 1993. Operating income at the
Metal Buildings Group was $4.6 million and $3.1 million, respectively,
in the quarters ended June 30, 1994 and 1993. Operating income
increased by $1.5 million or 46.0% in the six months ended June 30, 1994
versus 1993. On a year-to-date basis, operating income was $4.8 million
in 1994 compared with $3.3 million in the same period of 1993.
Operating income was favorably affected by higher sales volumes, offset
in part by higher selling and advertising costs associated with higher
sales levels.
Building Products Group
- - -----------------------
Building Products Group revenues decreased by $4.1 million or 17.5% in
the second quarter of 1994 compared to the same period in 1993. On a
year-to-date basis, 1994 revenues decreased by $18.8 million or 37.5%
compared to the same period of 1993. The decreases in revenue are
primarily a result of excluding the revenues of the sold U.K. Subsidiary
from the Company's 1994 operating results. The U.K. Subsidiary recorded
revenue of $7.4 million and $15.0 million, respectively, during the
three and six months ended June 30, 1993. Excluding the effect of the
sold U.K. Subsidiary, revenues in the quarter ended June 30, 1994
increased $3.3 million from the comparable period of 1993. This
increase is primarily due to higher revenue levels at the Company's
European and Asia/Pacific operations offset, in part, by lower revenue
levels at the Company's Canadian operations. Excluding the effect of
the sold U.K. Subsidiary, revenues in the six months ended June 30, 1994
decreased $3.8 million from the comparable period of 1993. This
decrease is primarily due to lower revenue levels at the Company's
European and Canadian operations, offset in part by higher revenue
levels at the Company's Asia/Pacific operations.
For the quarter ended June 30, 1994, the Building Products Group
recorded an operating loss of $1.3 million compared with an operating
loss of $2.6 million in the second quarter of 1993. On a year-to-date
basis, the operating losses were $4.7 million and $5.1 million in 1994
and 1993, respectively. The operating losses for the three and six
months ended June 30, 1994 include restructuring charges of $.1 million
and $1.0 million, respectively. The restructuring charges relate
primarily to workforce reductions at the Company's U.S. operation. The
operating loss in the three and six months ended June 30, 1993 includes
operating losses of the sold U.K. Subsidiary totalling $1.4 million and
$2.6 million, respectively. Exclusive of the effect of the
restructuring charges and the sold U.K. Subsidiary, operating losses of
the Building Products Group were $1.2 million and $3.7 million,
respectively, in the three and six months ended June 30, 1994 compared
with $1.1 million and $2.5 million, respectively, in the three and six
months ended June 30, 1993. The increase in year-to-date operating
losses are primarily a result of weak market conditions, lower revenues
and program losses at the Company's North American and European
operations.
Concrete Construction Group
- - ---------------------------
Concrete Construction Group revenues in the second quarter of 1994
increased $2.4 million or 16.6% in relation to the second quarter of
1993. On a year-to-date basis, revenues increased by $1.4 million or
5.0% compared to the same period of 1993. The increase in revenues
reflects primarily the impact of improved market conditions in the U.S.
For the three and six months ended June 30, 1994, the Concrete
Construction Group reported operating income of $1.2 million and $2.3
million, respectively, compared with operating income of $1.1 million
and $.9 million, respectively, in the three and six months ended June
30, 1993. The 1994 year-to-date operating results include a $1.2
million credit to costs and expenses which was recorded in the first
quarter of 1994 as a result of a settlement of backcharge and other
claims relating to a project which was substantially complete in 1989.
Exclusive of the $1.2 million credit, year-to-date operating income
increased $.2 million compared with the same period of 1993. The
quarterly and year-to-date improvement in operating income is primarily
the result of increased revenue levels and restructuring actions which
have included, among other things, workforce reductions and closure and
consolidation of certain sales offices and supply yards, offset in part
by adverse weather conditions which affected the first quarter of 1994.
Backlog of Orders
- - -----------------
At June 30, 1994, the backlog of unfilled orders believed to be firm for
the Company's ongoing businesses was approximately $181.5 million. On
a comparable basis, adjusted for the sale of the U.K. Subsidiary, which
had a backlog at June 30, 1993 of approximately $18.9 million, the order
backlog was approximately $162.7 million at June 30, 1993.
Approximately $7.3 million of the June 30, 1994 backlog is expected to
be performed after one year.
Other Income (Expense)
- - ----------------------
Interest expense for the three months ended June 30, 1994 and 1993
totalled $1.2 million and $4.1 million, respectively. Interest expense
for the six months ended June 30, 1994 and 1993 was $2.3 million and
$7.7 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 three months and six months
ended June 30, 1993 would have been reduced by $3.0 million and $6.0
million, respectively. Other income (expense) - net for the quarters
ended June 30, 1994 and 1993 totalled $.2 million and $(.1) million,
respectively, and $.5 million for the six months ended June 30, 1994
compared with $.2 million for the comparable period of 1993.
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 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.
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 six months ended June 30, 1994, the Company used
approximately $18.9 million of cash to fund its operating activities.
Of this amount, approximately $2.9 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, $.9 million was
paid in connection with certain legal settlements, 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 1994 reflect
primarily the funding associated with working capital requirements,
including the funding of the Company's year-to-date operating loss and
payments made to improve vendor accounts payable aging at the Company's
Metal Buildings Group. Operating cash flow during the six months ended
June 30, 1994 included the receipt of a $1.7 million settlement payment
in February of 1994 for a backcharge claim related to a job which was
substantially complete in 1989.
In addition, during the six months ended June 30, 1994, the Company
spent approximately $1.9 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 $2.6 million which was provided under
foreign credit facilities to assist in funding local working capital
requirements and year-to-date operating losses. As a result, primarily
of the above, unrestricted cash and cash equivalents decreased by $15.6
million during the period from December 31, 1993 to June 30, 1994. At
June 30, 1994, the Company had $.6 million of unrestricted cash and cash
equivalents primarily located at foreign subsidiaries which is available
to fund local working capital requirements. Under the terms of the
Company's domestic credit facility, the Company had available credit of
$3.1 million at June 30, 1994.
On May 18, 1994, the Company entered into an agreement (the
"Amendment") with Foothill Capital Corporation, the current lender under
the Company's domestic credit facility (together with the Amendment, the
"Credit Facility"), which under its terms, amended the Company's
domestic credit facility by increasing the Company's maximum
availability under the facility by $10 million from the previous level
of $35 million to $45 million, and extended the term of the facility to
May 18, 1999. There were no other significant changes in the overall
structure of the Company's domestic credit facility resulting from the
Amendment.
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 June 30, 1994,
the Borrowing Base was $37.6 million and was used to support a $5.0
million term loan and $29.5 million of outstanding letters of credit and
related guarantees which were used to support primarily the Company's
workers' compensation and bonding programs.
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 June 30, 1994 was $3.9 million. At
June 30, 1994 the Company had in place at its international locations
unused lines of credit of $.2 million and letter of credit and
performance guarantee facilities of $7.4 million of which $4.5 million
was outstanding.
At June 30, 1994, the Company had, on a worldwide basis, outstanding
letters of credit and related guarantees of $30.7 million and
performance guarantees of $8.4 million. Of these amounts, approximately
$24.3 million support liabilities which are recorded in the Company's
balance sheet and $14.8 million relate primarily to letters of credit
and other performance guarantees issued to support bonding programs.
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 continued to improve
throughout the first six months of 1994. On a worldwide basis, adjusted
for the effects of the sold U.K. Subsidiary, the Company's backlog at
June 30, 1994 increased $18.8 million or 11.5% over June 30, 1993 levels
and increased $30.1 million or 19.9% over December 31, 1993 levels. 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 and negative operating cash flow. At each of the
Building Products businesses which continue to operate unprofitably, the
Company is evaluating various alternatives including asset sales and
divestitures, potential liquidation of such businesses, and has been and
is continuing to implement restructuring and other cost reduction
actions.
The Company expects that demands on its liquidity and credit resources
will continue to be significant throughout the remainder of 1994 as a
result of the anticipated funding requirements for working capital and
bonding requirements, capital expenditure programs, as well as 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, earnings from operations, and to
a lesser extent, through proceeds from asset sales. In addition, the
Company is currently taking steps and evaluating other alternatives to
preserve cash and maximize credit availability under the Credit
Facility. Such steps include temporary postponement of certain capital
expenditure programs, sales of real estate, sales of excess equipment at
the Company's Building Products Group and restrictions on acceptance of
certain projects which require substantial bonding commitments in the
near term which decrease the Company's credit availability. Due to the
current outlook for the U.S. and Asia/Pacific construction markets which
are expected to continue to improve at least in the near term, along
with the growth in the Company's backlog, the Company is currently
considering various options to improve its liquidity and credit
availability, including potential sales or divestitures of existing
businesses, restrictions on business growth or a combination of the
above.
PART II
OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
Information describing certain of the Company's legal
proceedings and environmental matters is included in Part I,
Item 1, in Note 5 to the "Notes to the Condensed Consolidated
Financial Statements," and in Part I, Item 2, in 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 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting (the "Annual Meeting") of
Stockholders was held on May 3, 1994. The matter voted on was
fully described in the Company's Proxy Statement dated April 5,
1994 (the "Proxy Statement"), as filed with the Commission on
April 6, 1994. At the Annual Meeting, the matter of the
election of three directors each to serve as Class I directors
for a term of three years was voted upon. Each of such three
directors was elected as follows: Mary Heidi Hall Jones
(14,159,218 votes for and 24,576 votes withheld), Frank A.
Benevento, II (14,146,945 votes for and 36,850 votes withheld)
and Leonids Rudins (14,159,619 votes for and 24,176 votes
withheld). There were no abstentions or broker non-votes with
respect to the election of any of such directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Earnings (Loss) per Common
Share, filed herewith.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the second
quarter of 1994 or through the date of this filing.
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: John C. Sills
------------------------------
John C. Sills
Vice President and Controller
(Principal Accounting Officer)
August 12, 1994
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