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 September 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
-------
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 October 31, 1994
- - --------------------------------------- -------------------------------
Common Stock, par value $0.01 per share 16,209,570
ROBERTSON-CECO CORPORATION
Form 10-Q
---------
For Quarter Ended September 30, 1994
------------------------------------
INDEX
=====
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets --
September 30, 1994 and December 31, 1993 . . . . . 3
Condensed Consolidated Statements of Operations
and Retained Earnings (Deficit) -- Three
and Nine Months Ended September 30, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows --
Nine Months Ended September 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. . . . . . . . 18
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 31
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 31
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ITEM 1. FINANCIAL STATEMENTS
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands, except share data)
(Unaudited)
September 30 December 31
1994 1993
----------- -----------
-- ASSETS --
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . $ 2,493 $ 15,666
Restricted Cash . . . . . . . . . . . . 2,553 3,138
Accounts and notes receivable, net. . . 56,499 58,062
-------- --------
Inventories:
Work in process . . . . . . . . . . . 7,388 6,851
Material and supplies . . . . . . . . 11,436 14,566
-------- --------
Total inventories . . . . . . . . . . 18,824 21,417
-------- --------
Other current assets. . . . . . . . . . 2,936 3,218
-------- --------
Total current assets. . . . . . . . . 83,305 101,501
-------- --------
PROPERTY - at cost . . . . . . . . . . . . 47,129 62,731
Less accumulated depreciation . . . . . 20,280 29,658
-------- --------
Property, net . . . . . . . . . . . . 26,849 33,073
-------- --------
ASSETS HELD FOR SALE . . . . . . . . . . . 1,139 4,289
-------- --------
EXCESS OF COST OVER NET ASSETS OF
ACQUIRED BUSINESSES - NET . . . . . . . 28,474 29,094
-------- --------
OTHER NON-CURRENT ASSETS . . . . . . . . . 12,688 13,866
-------- --------
TOTAL ASSETS. . . . . . . . . . . . . . $152,455 $181,823
======== ========
See Notes to Condensed Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
-------------------------------------------------
(In thousands, except share data)
(Unaudited)
September 30 December 31
1994 1993
----------- -----------
-- LIABILITIES --
CURRENT LIABILITIES:
Loans payable . . . . . . . . . . . . . $ 452 $ 1,054
Current portion of long-term debt . . . 259 390
Accounts payable, principally trade . . 24,711 36,480
Insurance liabilities . . . . . . . . . 10,155 11,225
Other accrued liabilities . . . . . . . 44,809 47,644
--------- ---------
Total current liabilities . . . . . . . 80,386 96,793
LONG-TERM DEBT, less current portion . . . 44,798 45,084
LONG-TERM INSURANCE LIABILITIES. . . . . . 14,980 14,770
LONG-TERM PENSION LIABILITIES. . . . . . . 16,441 16,881
RESERVES AND OTHER LIABILITIES . . . . . . 29,869 24,958
--------- ---------
TOTAL LIABILITIES. . . . . . . . . . . . . 186,474 198,486
--------- ---------
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) . . . . . . (197,485) (177,519)
Excess of additional pension
liability over unrecognized prior
service cost. . . . . . . . . . . . . (8,139) (8,139)
Deferred compensation . . . . . . . . . (751) (1,551)
Foreign currency translation
adjustments . . . . . . . . . . . . . (6,184) (8,341)
--------- ---------
Stockholders' equity (deficiency) . . (34,019) (16,663)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIENCY) . . . . . . . . . . $ 152,455 $ 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 Nine Months Ended
September 30 September 30
------------------- ------------------
1994 1993 1994 1993
-------- --------- -------- ---------
REVENUES:
Net product sales. . . . . . . . . . $ 74,772 $ 79,135 $204,741 $205,687
Construction and other services. . . 27,923 26,908 75,062 74,742
-------- -------- -------- --------
Total. . . . . . . . . . . . . . .102,695 106,043 279,803 280,429
-------- -------- -------- --------
COSTS AND EXPENSES:
Product costs. . . . . . . . . . . . 61,959 66,760 175,563 175,905
Construction and other services. . . 23,280 22,573 62,503 63,298
-------- -------- -------- --------
Cost of sales. . . . . . . . . . . 85,239 89,333 238,066 239,203
Selling, general and
administrative . . . . . . . . . . 13,565 16,188 39,446 45,559
Restructuring expense. . . . . . . . 2,078 - 3,125 -
-------- -------- -------- --------
Total. . . . . . . . . . . . . . .100,882 105,521 280,637 284,762
-------- -------- -------- --------
OPERATING INCOME (LOSS). . . . . . . . 1,813 522 (834) (4,333)
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense . . . . . . . . . . (1,255) (1,825) (3,556) (9,518)
Loss on businesses sold/held
for sale . . . . . . . . . . . . . (9,800) (9,700) (9,800) (9,700)
Other income (expense) - net . . . . (16) 188 489 411
-------- -------- -------- --------
Total. . . . . . . . . . . . . . .(11,071) (11,337) (12,867) (18,807)
-------- -------- -------- --------
LOSS FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR TAXES ON
INCOME . . . . . . . . . . . . . . . (9,258) (10,815) (13,701) (23,140)
PROVISION FOR TAXES ON INCOME. . . . . 115 63 265 125
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS . . . . . . . . . . . . . (9,373) (10,878) (13,966) (23,265)
-------- -------- -------- --------
LOSS FROM DISCONTINUED OPERATIONS. . . (6,000) - (6,000) -
-------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEMS. . . . . . . . . . . . . . . . (15,373) (10,878) (19,966) (23,265)
-------- -------- -------- --------
EXTRAORDINARY GAIN ON DEBT EXCHANGE. . - 5,367 - 5,367
-------- -------- -------- --------
NET INCOME (LOSS). . . . . . . . . . . $(15,373) $ (5,511) $(19,966) $(17,898)
======== ======== ======== ========
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 Nine Months Ended
September 30 September 30
--- --------------------- ---------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
RETAINED EARNINGS (DEFICIT)
AT BEGINNING OF PERIOD . . . . $(182,112) $(168,970) $(177,519) $(156,583)
NET INCOME (LOSS). . . . . . . . . (15,373) (5,511) (19,966) (17,898)
--------- --------- --------- ---------
RETAINED EARNINGS (DEFICIT)
AT END OF PERIOD . . . . . . . $(197,485) $(174,481) $(197,485) $(174,481)
========= ========= ========= =========
NET INCOME (LOSS) PER
COMMON SHARE:
Continuing operations. . . . $ (.59) $ (1.16) $ (.89) $ (6.23)
Discontinued operations. . . (.38) - (.38) -
Extraordinary item . . . . . - .57 - 1.43
--------- --------- --------- ---------
NET INCOME (LOSS). . . . . . . $ (.97) $ (.59) $ (1.27) $ (4.80)
========= ========= ========= =========
DIVIDENDS PER SHARE:
Preferred Stock. . . . . . . . $ - $ - $ - $ .22
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING. . . . 15,773 9,402 15,773 3,752
========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(In thousands)
(Unaudited)
Nine Months
Ended September 30
-------------------
1994 1993
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) . . . . . . . . . . . . . . . $(19,966) $(17,898)
Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:
Depreciation and amortization. . . . . . . 3,963 5,218
Gain on debt exchange. . . . . . . . . . . - (5,367)
Loss on businesses sold/held for sale. . . 9,800 9,700
Amortization of discount on debentures
and debt issuance costs . . . . . . . . 936 704
Provisions for:
Bad debts and losses on erection
contracts . . . . . . . . . . . . . . 2,443 1,328
Rectification and other costs . . . . . 1,952 2,431
Restructuring expense . . . . . . . . . 3,125 -
Loss on discontinued operations . . . . 6,000 -
Changes in assets and liabilities, net
of divestitures:
(Increase) decrease in accounts and
notes receivable . . . . . . . . . . (9,908) 1,505
(Increase) decrease in inventories. . . 1,054 (4,296)
Decrease in restricted cash . . . . . . 546 18,306
Increase (decrease) in accounts
payable, principally trade. . . . . . (8,188) 230
Decrease in other current liabilities . (5,735) (14,202)
Net changes in other assets and
liabilities . . . . . . . . . . . . . (3,358) (986)
-------- --------
Net cash used for operating activities . . (17,336) (3,327)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . (3,070) (3,996)
Proceeds from sales of property, plant and
equipment. . . . . . . . . . . . . . . . . . 1,768 690
Proceeds from sales of assets held for sale . . 3,597 384
-------- --------
Net cash provided by (used for)
investing activities . . . . . . . . . . . $ 2,295 $ (2,922)
-------- --------
See Notes to Condensed Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-----------------------------------------------------------
(In thousands)
(Unaudited)
Nine Months
Ended September 30
--------------------
1994 1993
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) short-term
borrowings . . . . . . . . . . . . . . . . . $ 2,529 $ (768)
Payments on long-term debt. . . . . . . . . . . (868) (1,983)
Proceeds from long-term debt. . . . . . . . . . - 5,000
-------- -------
Net cash provided by financing
activities . . . . . . . . . . . . . . . . 1,661 2,249
-------- -------
Effect of foreign exchange rate changes
on cash. . . . . . . . . . . . . . . . . . . 207 (273)
-------- -------
Net decrease in cash and cash
equivalents. . . . . . . . . . . . . . . . (13,173) (4,273)
Cash and cash equivalents - beginning of
period . . . . . . . . . . . . . . . . . . 15,666 7,220
-------- -------
Cash and cash equivalents - end of period. . $ 2,493 $ 2,947
======== =======
SUPPLEMENTAL CASH FLOW DATA:
Cash payments made for:
Interest . . . . . . . . . . . . . . . . . $ 3,862 $ 1,649
======== =======
Income taxes . . . . . . . . . . . . . . . $ 5 $ 570
======== =======
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 September 30, 1994, and the results of operations
and cash flows for the periods presented. All adjustments recorded
during the period, other than the restructuring charges described
in Note 3, the loss on the proposed sale of the remaining U.S. and
European Building Products operations and provisions for costs
associated with the discontinued custom curtainwall operations,
both of which are described in Note 2, and the favorable settlement
of certain backcharge claims described in Note 6, 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. DISPOSITIONS AND BUSINESSES HELD FOR SALE
-----------------------------------------
During the quarter ended September 30, 1994, the Company recorded
a charge of $9.8 million in connection with its plan to sell its
remaining U.S. Building Products operation, the Cupples Products
Division (the "Cupples Division"), which manufactures curtainwall
systems, and its remaining European Building Products operations.
On October 17, 1994, the Company entered into a letter of intent
(the "Cupples Letter of Intent") to sell its Cupples Division to
certain management, led by a member of the Company's Board of
Directors, for cash consideration of $.6 million and the assumption
of certain liabilities, to be adjusted for certain changes in
working capital, and the proceeds from certain asset sales
occurring between the sale balance sheet date and the closing date.
In addition, the Company has commenced negotiation of the sale of
its remaining European Building Products operations (the "European
Operations", together with the Cupples Division, the "Businesses
Held for Sale"). The operating results and cash flows of the
Businesses Held for Sale are included in the accompanying financial
statements for the three and nine months ended September 30, 1994
and 1993. During the quarters ended September 30, 1994 and 1993,
the Businesses Held for Sale recorded revenues and losses from
continuing operations of $7.8 million and $.6 million, and $9.9
million and $1.2 million, respectively. For the nine months ended
September 30, 1994 and 1993, these operations recorded revenues and
losses from continuing operations of $24.3 million and $4.7
million, and $31.8 million and $3.8 million, respectively.
At September 30, 1994, the assets and liabilities related to the
Businesses Held for Sale have been netted and presented within
other current liabilities in the accompanying Condensed
Consolidated Balance Sheet. The net assets of the Businesses Held
for Sale at September 30, 1994 consisted of the following:
September 30,
1994
-------------
(Thousands)
Accounts Receivable . . . . . . . . . . . . $12,273
Inventories . . . . . . . . . . . . . . . . 1,931
Property, Net . . . . . . . . . . . . . . . 3,171
Other Assets. . . . . . . . . . . . . . . . 857
Loans Payable and Debt. . . . . . . . . . . (3,369)
Accounts Payable. . . . . . . . . . . . . . (4,024)
Other Liabilities . . . . . . . . . . . . . (5,398)
-------
Total. . . . . . . . . . . . . . . . . . $ 5,441
=======
The components of the $9.8 million charge include the write-off of
net assets, provisions and expenses related to the sale of $3.2
million and a charge of $1.2 million related to the write-off of
the cumulative foreign currency translation adjustment which was
previously reported as a component of stockholders' equity in
accordance with SFAS No. 52.
During the quarter ended September 30, 1994 the Company recorded a
charge of $6.0 million reflecting estimated provisions for, and
costs associated with, rectification work and the resolution of
claims and disputes related to its discontinued custom curtainwall
operations.
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. In connection with the sale, the Company
recorded a charge of $9.7 million in the quarter ended September
30, 1993. The operating results and cash flows of the U.K.
Subsidiary are included in the accompanying financial statements
for both the three and nine months ended September 30, 1993 and are
excluded from the three and nine months ended September 30, 1994.
During the three and nine months ended September 30, 1993, the U.K.
Subsidiary recorded revenues and losses from continuing operations
of $8.1 million and $1.4 million, and $23.1 million and $4.4
million, respectively.
3. RESTRUCTURING MATTERS
---------------------
During the three and nine months ended September 30, 1994, the
Company recorded restructuring charges of $2.1 million and $3.1
million, respectively. The $2.1 million restructuring charge
recorded in the quarter ended September 30, 1994 relates primarily
to severance charges and overhead reduction measures recorded in
connection with the downsizing of the Company's corporate office.
The remaining 1994 restructuring charges reflect primarily the cost
of severances associated with workforce reductions at the Company's
Cupples Division recorded in the first quarter of 1994.
4. CREDIT AND LIQUIDITY
--------------------
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, incorporated certain
receivables, inventory and property, plant and equipment of the
Company's Canadian operations into the definition of the borrowing
base, 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 September 30, 1994, the
Borrowing Base was estimated to be $39.5 million and was used to
support the $5.0 million term loan and $29.0 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 unused availability under the Credit Facility of
$5.5 million at September 30, 1994.
In addition to the Credit Facility, borrowing arrangements are in
place at the Company's Asia/Pacific operation to assist in
supporting local working capital requirements and bonding programs.
The outstanding balance of such short-term loans payable at
September 30, 1994 was $.5 million. At September 30, 1994 the
Company had in place at its Asia/Pacific operation available unused
lines of credit of $.3 million and available letter of credit and
performance guarantee facilities of $3.0 million of which $2.4
million was outstanding.
At September 30, 1994, the Company had, on a worldwide basis,
excluding the Businesses Held for Sale (Note 2), outstanding
letters of credit and related guarantees of $30.2 million and
performance guarantees of $5.9 million. Of these amounts,
approximately $23.8 million support liabilities which are recorded
in the Company's balance sheet and $12.3 million relate primarily
to letters of credit and other performance guarantees issued to
support bonding programs.
5. OTHER CURRENT LIABILITIES
-------------------------
Other current liabilities consisted of the following:
September 30 December 31
1994 1993
------------ -----------
(Thousands)
Payroll and related benefits. . . . $12,399 $11,496
Warranty and backcharge reserves. . 3,473 4,634
Deferred revenues . . . . . . . . . 10,446 9,292
Reserves for restructuring. . . . . 5,982 6,039
Accrued interest. . . . . . . . . . 518 2,042
Other . . . . . . . . . . . . . . . 11,991 14,141
------- -------
Total . . . . . . . . . . . . . $44,809 $47,644
======= =======
6. 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's Concrete Construction Group
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 nine
months ended September 30, 1994. During the nine months ended
September 30, 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 during the second
quarter of 1993.
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 September 30, 1994, the amount
of the outstanding letter of credit which was put in place by the
purchaser was $2.8 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. In February 1995, the
Company is required to issue a substitute letter of credit to
replace the remaining outstanding letter of credit of the
purchaser.
7. 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"). On November 9, 1993, the Company
sold its U.K. Subsidiary (Note 2) and during the quarter ended
September 30, 1994, the Company developed a plan to sell its
Cupples Division and its European Operations (Note 2). The
following pro forma information shows the results of the Company as
if the Exchange Offer, the sale of the U.K. Subsidiary, and the
proposed sales of the Cupples Division and the European Operations
occurred at the beginning of the periods presented. Such amounts
exclude the $5.4 million extraordinary gain recorded in connection
with the Exchange Offer during the third quarter of 1993 and losses
on sales of businesses recorded during the third quarters of 1993
and 1994 in connection with the sale of the U.K. Subsidiary and the
proposed sale of the Businesses Held for Sale, respectively. These
results are not necessarily indicative of what results would have
been if such transactions had occurred at the beginning of the
periods presented and are not necessarily indicative of the
financial condition or results of operations for any future date or
period.
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
(Thousands, except (Thousands, except
per share data) per share data)
(Pro Forma) (Pro Forma)
Revenue . . . . . . . . . $94,853 $88,020 $255,468 $225,529
======= ======= ======== ========
Income (loss) from
continuing operations. . $ 1,030 $ 1,976 $ 546 $ 1,118
======= ======= ======== ========
Loss from discontinued
operations . . . . . . . $(6,000) $ - $ (6,000) $ -
======= ======= ======== ========
Net income (loss) . . . . $(4,970) $ 1,976 $ (5,454) $ 1,118
======= ======= ======== ========
Primary earnings per
share data:
--------------------
Net income (loss) per
common share from
continuing operations. . $ .06 $ .18 $ .03 $ .10
======= ======= ======== ========
Net income (loss) per
common share from
discontinued
operations . . . . . . . $ (.37) $ - $ (.37) $ -
======= ======= ======== ========
Net income (loss)
per common share . . . . $ (.31) $ .18 $ (.34) $ .10
======= ======= ======== ========
Weighted average
number of common
shares outstanding . . . 16,209 11,062 16,245 11,059
======= ======= ======== ========
Fully diluted earnings
per share data:
----------------------
Net income (loss) per
common share from
continuing operations. . $ .06 $ .16 $ .03 $ .10
======= ======= ======== ========
Net income (loss) per
common share from
discontinued opera-
tions. . . . . . . . . . $ (.37) $ - $ (.37) $ -
======= ======= ======== ========
Net income (loss)
per share. . . . . . . . $ (.31) $ .16 $ (.34) $ .10
======= ======= ======== ========
Weighted average
number of common
shares outstanding . . . 16,209 12,436 16,245 11,059
======= ======= ======== ========
The income from continuing operations and net income (loss) for the
three and nine months ended September 30, 1994 which is shown
above, includes restructuring charges of $2.1 million and $2.2
million, respectively (Note 3). As indicated in Note 6, the net
income (loss) from continuing operations for the nine months ended
September 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.
Additionally, the net income (loss) for the three and nine months
ended September 30, 1994 includes charges related to discontinued
operations of $6.0 million (Note 2). Also, as described in Note 6,
the income from continuing operations and net income for the nine
months ended September 30, 1993 includes a credit of $1.8 million
related to the favorable settlement of certain lease obligations
which was recorded by the Company in the second quarter of 1993.
8. SUBSEQUENT EVENT
----------------
On November 3, 1994, the Company entered into a letter of intent
(the "Concrete Letter of Intent") to sell its Concrete Construction
Group (the "Concrete Division"), to an entity which is controlled
by the Company's Chief Executive Officer (the "Buyer"), for total
consideration consisting of $11.5 million of cash, a $3.0 million
interest bearing promissory note payable over three years and the
assumption of certain liabilities. The cash consideration to be
received will be adjusted for certain changes in the Concrete
Division's balance sheet occurring between the sale measurement
date and the closing date. The sale of the Concrete Division, if
consummated, is expected to close in the fourth quarter of 1994 and
will result in a book gain. The Concrete Letter of Intent is
contingent upon, among other things, the negotiation and execution
of a definitive agreement (the "Definitive Agreement") for the
purchase and sale of the Concrete Division on or before November
30, 1994 and obtaining necessary consents of third parties. If a
Definitive Agreement cannot be reached by November 30, 1994, and
the parties do not mutually agree to extend the date, the Concrete
Letter of Intent will terminate by its terms.
The accompanying financial statements include the assets,
liabilities and operating results of the Concrete Division as of
and for the three and nine month periods ended September 30, 1994
and 1993. The operating results of the Concrete Division during
the three and nine months ended September 30, 1994 and 1993 were as
follows:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
(Thousands) (Thousands)
Revenue . . . . . . . .$18,847 $16,672 $49,044 $45,431
======= ======= ======= =======
Net Income. . . . . . .$ 1,120 $ 1,491 $ 3,397 $ 2,347
======= ======= ======= =======
As indicated in Note 6, the net income for the nine months ended
September 30, 1994 includes a credit of $1.2 million related to the
settlement of certain backcharges and other claims.
The net assets of the Concrete Division as of September 30, 1994
consisted of the following:
September 30,
1994
-------------
(Thousands)
Accounts Receivable . . . . . . . . . . . . $16,805
Property, Net . . . . . . . . . . . . . . . 4,337
Other Assets. . . . . . . . . . . . . . . . 1,367
Accounts Payable. . . . . . . . . . . . . . (1,763)
Deferred Revenues . . . . . . . . . . . . . (8,001)
Other Liabilities . . . . . . . . . . . . . (4,675)
-------
Total. . . . . . . . . . . . . . . . . . $ 8,070
=======
The backlog of the Concrete Division at September 30, 1994 and
September 30, 1993 was $49.4 million and $49.1 million,
respectively.
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. 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.
During the quarter ended September 30, 1994, the Company developed a
plan to sell its remaining U.S. Building Products operation, the Cupples
Products Division (the "Cupples Division") and its remaining European
Building Products operations (the "European Operations", together with
the Cupples Division, the "Businesses Held for Sale"). The operating
results of the Businesses Held for Sale are included in the Company's
statements of operations and cash flows for the three and nine months
ended September 30, 1994 and 1993. The assets and liabilities of the
Businesses Held for Sale have been netted and presented within other
current liabilities in the Company's September 30, 1994 balance sheet.
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 nine months ended September 30, 1993 and are excluded for
the three and nine months ended September 30, 1994.
Overview of Results of Operations
- - ---------------------------------
Revenues for the three months ended September 30, 1994 were $102.7
million, a decrease of $3.3 million or 3.2% from the three months ended
September 30, 1993. On a year-to-date basis, revenues in 1994 were
$279.8 million, a decrease of $.6 million or .2% compared to the same
period of 1993. The decreases in revenue for the three and nine months
ended September 30, 1994 are primarily due to the exclusion of the sold
U.K. Subsidiary from 1994 results and lower sales volumes at remaining
Building Products Group locations, offset in part by higher sales
volumes at the Company's Metal Buildings and Concrete Construction
Groups.
The Company's gross margin percentage was approximately 17.0% during the
third quarter of 1994 compared with 15.8% during the third quarter of
1993. On a year-to-date basis, the gross margin percentage was 14.9% in
1994 compared with 14.7% in 1993. The increase is primarily due to
improved margins at the Metal Buildings Group offset in part by reduced
margins at the Building Products Group. The year-to-date 1994 operating
results include a $1.2 million credit to costs and expenses recorded in
the first quarter of 1994 by the Company's Concrete Construction Group,
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 $2.6 million
in the third quarter of 1994 compared to the same quarter of 1993. On
a year-to-date basis, 1994 selling, general and administrative expenses
decreased by $6.1 million compared to the same period of 1993. The
results for the nine months ended September 30, 1993 include a credit to
selling, general and administrative expenses of $1.8 million related to
the settlement of outstanding lease obligations which was recorded
during the second quarter of 1993. The results for the three and nine
months ended September 30, 1994 exclude the selling, general and
administrative expenses of the sold U.K. Subsidiary which were $2.1
million and $6.7 million, respectively, for the three and nine month
periods ending September 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 $.5 million in the third
quarter of 1994 compared with 1993 and $1.2 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 nine months ended
September 30, 1994, the Company recorded restructuring charges of $2.1
million and $3.1 million, respectively. The $2.1 million restructuring
charge recorded in the quarter ended September 30, 1994 relates
primarily to severance charges and overhead reduction measures recorded
in connection with the downsizing of the Company's corporate
headquarters. The remaining 1994 restructuring charges reflect
primarily the cost of severances recorded in the first quarter of 1994
in connection with workforce reductions at the Company's Cupples
Division.
As further discussed below, during the third quarter of 1994, the
Company recorded a charge of $9.8 million in connection with its plan to
sell its Cupples Division and its European Operations. During the third
quarter of 1993, the Company recorded a charge of $9.7 million related
to the sale of its U.K. Subsidiary.
Losses from continuing operations were $9.4 million for the quarter
ended September 30, 1994 compared with losses from continuing operations
of $10.9 million for the third quarter of 1993. On a year-to-date
basis, losses from continuing operations were $14.0 million in 1994
compared with $23.3 million in 1993.
The results for the three and nine months ended September 30, 1994,
include a charge of $6.0 million reflecting estimated provisions for,
and the costs associated with, rectification work and resolution of
claims and disputes related to the Company's discontinued custom
curtainwall operations.
The results for the three and nine months ended September 30, 1993
include an extraordinary gain of $5.4 million from the exchange of the
Company's 15.5% Discount Subordinated Debentures due 2000.
The Company incurred net losses during the three and nine month periods
ended September 30, 1994 of $15.4 million and $20.0 million,
respectively, compared with net losses of $5.5 million and $17.9
million, respectively, during the three and nine months ended September
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 $6.1 million or 10.1% in the
third quarter of 1994 compared to the same period in 1993. On a year-
to-date basis, Metal Buildings Group revenues increased by $27.2
million or 17.4% 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 $2.7 million or 91.4% in the
third quarter of 1994 compared to the same quarter of 1993. Operating
income at the Metal Buildings Group was $5.7 million and $3.0 million,
respectively, in the quarters ended September 30, 1994 and 1993.
Operating income increased by $4.4 million or 71.0% in the nine months
ended September 30, 1994 versus the comparable period in 1993. On a
year-to-date basis, operating income was $10.5 million in 1994 compared
with $6.2 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
- - -----------------------
During the third quarter of 1994, the Company recorded a charge of $9.8
million in connection with its plan to sell its Cupples Division, which
manufactures curtainwall systems, and its remaining European Operations.
The decision to sell these businesses was based both on the lack of a
strategic importance of such businesses and on the poor operating
performance of such businesses which was not expected to improve in the
foreseeable future. On October 17, 1994, the Company entered into a
letter of intent (the "Cupples Letter of Intent") to sell its Cupples
Division to certain management, led by a member of the Company's Board
of Directors, for cash consideration of $.6 million and the assumption
of certain liabilities, to be adjusted for certain changes in working
capital, and the proceeds from certain asset sales occurring between the
sale balance sheet date and the closing date. In addition, the Company
has commenced negotiation of the sale of its European Operations.
The following table outlines the operating results of the Building
Products Group; the individual operating results of the sold U.K.
Subsidiary and the Businesses Held for Sale; and the pro forma operating
results of the Building Products Group excluding the sold U.K.
Subsidiary and the Businesses Held for Sale for the three and nine
months ended September 30, 1994 and 1993.
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
(Thousands) (Thousands)
Revenues
- - --------
Building Products Group. . .$16,983 $28,318 $48,292 $78,411
Less impact of:
Sold U.K. Subsidiary. . . . - 8,148 - 23,148
Businesses Held for
Sale . . . . . . . . . . 7,841 9,875 24,335 31,752
------- ------- ------- -------
Pro Forma Building
Products Group. . . . . . .$ 9,142 $10,295 $23,957 $23,511
======= ======= ======= =======
Operating Income (Loss)
- - -----------------------
Building Products Group. . .$ (787) $(2,067) $(5,443) $(7,140)
Less impact of:
Sold U.K. Subsidiary. . . . - (1,278) - (3,861)
Businesses Held for
Sale . . . . . . . . . . (405) (1,381) (4,312) (3,675)
------- ------- ------- -------
Pro Forma Building
Products Group. . . . . . .$ (382) $ 592 $(1,131) $ 396
======= ======= ======= =======
Operating Income (Loss)
Excluding Restructuring
Expense
- - -------------------------
Building Products Group. . .$ (787) $(2,067) $(4,393) $(7,140)
Less impact of:
Sold U.K. Subsidiary. . . . - (1,278) - (3,861)
Businesses Held for
Sale . . . . . . . . . . (405) (1,381) (3,412) (3,675)
-------- ------- ------- -------
Pro Forma Building
Products Group. . . . . . .$ (382) $ 592 $ (981) $ 396
======= ======= ======= =======
Building Products Group revenues decreased by $11.3 million or 40.0% in
the third quarter of 1994 compared to the same period in 1993. On a
year-to-date basis, 1994 revenues decreased by $30.1 million or 38.4%
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 and lower revenue levels at
the Businesses Held for Sale. Excluding the effect of the sold U.K.
Subsidiary and the Businesses Held for Sale, revenues in the three
months ended September 30, 1994 decreased $1.2 million from the
comparable period of 1993. This decrease is primarily due to lower
revenue levels at the Company's Canadian operation, offset in part by
higher revenue levels at the Company's Asia/Pacific operations.
Excluding the effect of the sold U.K. Subsidiary and the Businesses Held
for Sale, revenues in the nine months ended September 30, 1994 increased
$.4 million from the comparable period of 1993. The increase in revenue
is due to higher revenue levels at the Company's Asia/Pacific operations
offset in part by lower revenue levels at the Company's Canadian
Building Products operation.
For the quarter ended September 30, 1994, the Building Products Group
recorded an operating loss of $.8 million compared with an operating
loss of $2.1 million in the third quarter of 1993. On a year-to-date
basis, the operating losses were $5.4 million and $7.1 million in 1994
and 1993, respectively. The operating losses in the quarters ended
September 30, 1994 and 1993 include operating losses of the Businesses
Held for Sale of $.4 million and $1.4 million, respectively. The
operating losses in the nine months ended September 30, 1994 and 1993
include operating losses of the Businesses Held for Sale of $4.3 million
and $3.7 million, respectively. The operating losses for the nine
months ended September 30, 1994 include restructuring charges of $1.0
million related primarily to workforce reductions at the Cupples
Division. The operating losses in the three and nine months ended
September 30, 1993 includes operating losses of the sold U.K. Subsidiary
totalling $1.3 million and $3.9 million, respectively. Exclusive of the
effect of the Businesses Held for Sale, the sold U.K. Subsidiary, and
restructuring charges, operating losses of the Building Products Group
were $.4 million and $1.0 million, respectively, in the three and nine
months ended September 30, 1994 compared with operating income of $.6
million and $.4 million, respectively, in the three and nine months
ended September 30, 1993. The decrease in quarterly and year-to-date
profitability, as adjusted, is primarily a result of lower sales levels
at the Company's Canadian operation and declining gross margins at the
Company's Asia/Pacific operations due in part to the effect of increased
competition on pricing. Additionally, operating results at the
Asia/Pacific operations have been adversely affected by increases in
selling, general and administrative expenses which are associated with
the Company's plan to expand its Far East markets.
Concrete Construction Group
- - ---------------------------
Concrete Construction Group revenues in the third quarter of 1994
increased $2.2 million or 13.0% in relation to the third quarter of
1993. On a year-to-date basis, revenues increased by $3.6 million or
8.0% 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 nine months ended September 30, 1994, the Concrete
Construction Group reported operating income of $1.5 million and $3.8
million, respectively, compared with operating income of $1.5 million
and $2.4 million, respectively, in the three and nine months ended
September 30, 1993. Third quarter 1994 operating results were favorably
affected by higher revenues offset by slightly lower margins. 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 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 September 30, 1994, the backlog of unfilled orders believed to be
firm for the Company, excluding the Businesses Held for Sale, which had
a combined backlog at September 30, 1994 of approximately $18.0 million,
was approximately $160.1 million. On a comparable basis, excluding the
Businesses Held for Sale, which had a combined backlog at September 30,
1993 of approximately $17.1 million, the order backlog was approximately
$137.2 million at September 30, 1993. Excluding the backlog of the
Businesses Held for Sale, approximately $5.2 million of the September
30, 1994 backlog is expected to be performed after one year.
Other Income (Expense)
- - ----------------------
Interest expense for the three months ended September 30, 1994 and 1993
totalled $1.3 million and $1.8 million, respectively. Interest expense
for the nine months ended September 30, 1994 and 1993 was $3.6 million
and $9.5 million, respectively. The decrease in interest expense is
primarily due to the completion of the exchange offer (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 nine months ended September 30, 1993 would have been
reduced by $.4 million and $6.4 million, respectively.
As discussed above, during the quarter ended September 30, 1994 the
Company recorded a charge of $9.8 million in connection with its
decision to sell its Cupples Division and its European Operations. The
Company recorded a loss of $9.7 million during the quarter ended
September 30, 1993 related to the sale of its U.K. Subsidiary.
Other income (expense) - net for the quarters ended September 30, 1994
and 1993 totalled $(16,000) and $188,000, respectively, and $489,000 for
the nine months ended September 30, 1994 compared with $411,000 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 nine months ended September 30, 1994, the Company used
approximately $17.3 million of cash to fund its operating activities.
Of this amount, approximately $4.5 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
Exchange Offer which was completed in July of 1993, $1.4 million was
paid in connection with certain legal settlements, $4.4 million was used
to fund the operating activities of the Businesses Held for Sale, 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 and corporate headquarters.
Operating cash flow during the nine months ended September 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 nine months ended September 30, 1994, the
Company spent approximately $3.1 million on capital expenditures, most
of which were directed toward upgrading and improving manufacturing
equipment and data processing systems at the Company's Metal Buildings
Group. Cash proceeds from sales of property, plant and equipment and
assets held for sale were $1.8 million and $3.6 million, respectively,
for the nine months ended September 30, 1994. Cash provided by
financing activities during the period consisted primarily of short-term
borrowings of $2.5 million ($2.2 million of which related to the
Businesses Held for Sale) which were 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 $13.2 million during
the period from December 31, 1993 to September 30, 1994. At September
30, 1994, the Company had $2.5 million of unrestricted cash and cash
equivalents. The $2.5 million of unrestricted cash and cash equivalents
consisted of $2.0 million of cash located at foreign subsidiaries
(excluding the Businesses Held for Sale) which is available to fund
local working capital requirements and $.5 million of cash located in
the U.S. Under the terms of the Company's domestic credit facility, the
Company had available unused credit of $5.5 million at September 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, incorporated certain receivables,
inventory, and property, plant and equipment of the Company's Canadian
operation into the definition of the borrowing base, 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 September 30,
1994, the Borrowing Base was $39.5 million and was used to support the
$5.0 million term loan and $29.0 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 the Company's Asia/Pacific operations to assist in supporting local
working capital requirements and bonding programs. The outstanding
balance of such short-term loans payable at September 30, 1994 was $.5
million. At September 30, 1994 the Company had in place at its
Asia/Pacific operations available unused lines of credit of $.3 million
and available letter of credit and performance guarantee facilities of
$3.0 million of which $2.4 million was outstanding.
At September 30, 1994, the Company had, on a worldwide basis, excluding
the Businesses Held for Sale, outstanding letters of credit and related
guarantees of $30.2 million and performance guarantees of $5.9 million.
Of these amounts, approximately $23.8 million support liabilities which
are recorded in the Company's balance sheet and $12.3 million relate
primarily to letters of credit and other performance guarantees issued
to support bonding programs.
Outlook
- - -------
As a result primarily of the funding requirements for working capital
growth and capital expenditures programs at the Company's Metal
Buildings and Concrete Construction Groups, operating losses at certain
of the Businesses Held for Sale, and funding required for trailing
liabilities and restructuring programs, the Company's existing liquidity
situation remains very tight. Additionally, a significant and
increasing portion of the Company's credit availability is being
utilized to provide letters of credit as collateral to support bonding
requirements, primarily at the Company's Concrete Construction Group.
Based on current projections, the Company anticipates its bonding
requirements for its Concrete Construction Group will increase
dramatically in the fourth quarter of 1994, thereby placing additional
strain on the Company's liquidity.
In view of the Company's existing liquidity situation, along with the
projected working capital and capital expenditure needs for the
Company's existing businesses and the anticipated additional bonding
requirements relating primarily to the Concrete Construction Group, the
Company hired an outside investment banking firm to explore the
possibility of selling the Company's Concrete Construction Group. On
November 3, 1994, the Company entered into a letter of intent (the
"Concrete Letter of Intent") to sell its Concrete Construction Group to
an entity which is controlled by the Company's Chief Executive Officer
(the "Buyer") for total consideration consisting of $11.5 million of
cash, a $3.0 million promissory note payable over three years and the
assumption of certain liabilities. The cash consideration to be
received will be adjusted for changes in the Concrete Division's balance
sheet occurring between the sale measurement date and the closing date.
The sale of the Concrete Division, if consummated, is expected to close
in the fourth quarter of 1994 and will result in a book gain. The
Concrete Letter of Intent is contingent upon, among other things, the
negotiation and execution of a definitive agreement (the "Definitive
Agreement") for the purchase and sale of the Concrete Division on or
before November 30, 1994 and obtaining necessary consents of third
parties. If a Definitive Agreement cannot be reached by November 30,
1994, and the parties do not mutually agree to extend the date, the
Concrete Letter of Intent will terminate by its terms.
The proceeds from the sale of the Concrete Division are expected to be
used primarily in funding working capital requirements and capital
expenditures initiatives at the Company's Metal Buildings Group and
Asia/Pacific Building Products operations, and to provide for the
Company's substantial funding requirements associated with trailing
liabilities related to sold and discontinued businesses and
restructuring programs. Additionally, the sale of the Concrete Division
will also improve liquidity by decreasing related letter of credit
collateral requirements associated with the Concrete Division's bonding
needs.
Upon the completion of the sales of the Businesses Held for Sale and the
proposed sale of the Concrete Division, the Company's remaining core
businesses will consist of the Metal Buildings Group which has sales and
operations primarily throughout North America and, to a lesser extent,
the Far East, and the Building Products Group which has sales and
operations primarily throughout the Asia/Pacific region and, to a lesser
extent, Canada.
On a pro forma basis, assuming that the Company had completed its
Exchange Offer at the beginning of January 1993, and that the sale of
the U.K. Subsidiary, the proposed sales of the Cupples Division,
European Operations and the Concrete Division had occurred at the
beginning of the periods presented, the operating results for the
Company's ongoing businesses would be as follows:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
(Thousands, except (Thousands, except
per share data) per share data)
(Pro Forma) (Pro Forma)
Revenue. . . . . . . . . . . $76,006 $71,348 $206,424 $180,098
======= ======= ======== ========
Income (loss) from
continuing
operations . . . . . . . . $ (90) $ 485 $ (2,851)$ (1,229)
======= ======= ======== ========
Loss from discontinued
operations . . . . . . . . $(6,000) $ - $ (6,000)$ -
======= ======= ======== ========
Net income (loss). . . . . . $(6,090) $ 485 $ (8,851)$ (1,229)
======= ======= ======== ========
Net income (loss) per
common share from
continuing operations. . . $ (.01) $ .04 $ (.18)$ (.11)
======= ======= ======== ========
Net income (loss) per
common share from
discontinued
operations . . . . . . . . $ (.38) $ - $ (.38)$ -
======= ======= ======== ========
Net income (loss) per
common share . . . . . . . $ (.39) $ .04 $ (.56)$ (.11)
======= ======= ======== ========
Weighted average number
of common shares
outstanding. . . . . . . . 15,773 11,062 15,773 11,059
======= ======= ======== ========
Backlog (as of
September 30, 1994 and
1993). . . . . . . . . . . $110,625 $ 88,103
======== ========
The income from continuing operations and net income (loss) for the
three and nine months ended September 30, 1994 which is shown above,
includes restructuring charges of $2.1 million and $2.2 million,
respectively. Additionally, the net income (loss) for the three and
nine months ended September 30, 1994 includes charges related to
discontinued operations of $6.0 million. Also, the income from
continuing operations and net income (loss) for the nine months ended
September 30, 1993 includes a credit of $1.8 million related to the
favorable settlement of certain lease obligations which was recorded by
the Company in the second quarter of 1993.
In the event that the sale of the Concrete Division, as contemplated, is
not consummated, the Company expects that it will be required to take
additional actions to improve its liquidity including the possible
curtailment in the growth of existing businesses, possible sales and
divestiture of businesses or a possible equity or debt offering.
Additionally, as a result of the operating losses incurred in 1994 by
the Company's Asia/Pacific and Canadian Building Products operations,
the Company is assessing the future market potential of these operations
while continuing to implement previous restructuring actions, and is
evaluating the need for further restructuring and cost reduction
measures at these operations to properly size these businesses to
current operating levels.
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 6 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 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 third
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
Executive Vice President and
Chief Financial Officer
November 14, 1994
- - -----------------
ROBERTSON-CECO CORPORATION
EXHIBIT INDEX
--------------------------
EXHIBIT 11 - Computation of Earnings (Loss) Per Common Share