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, 1996
-------------
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File 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.)
5000 Executive Parkway, San Ramon, California 94583
- ----------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 510-358-0330
------------
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 November 01, 1996
- ----------------------------------- ---------------------------------
Common Stock, par value $0.01 per 16,082,618
share
ROBERTSON-CECO CORPORATION
Form 10-Q
---------
For Quarter Ended September 30, 1996
------------------------------------
INDEX
=====
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995 . . . . . 3
Condensed Consolidated Statements of Operations
and Retained Earnings (Deficit) -- Three and Nine
Months Ended September 30, 1996 and 1995 . . . . . 5
Condensed Consolidated Statements of Cash Flows --
Nine Months Ended September 1996 and 1995 . . . . . 7
Notes to Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 13
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 18
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 1. FINANCIAL STATEMENTS
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands, except share data)
(Unaudited)
September 30 December 31
1996 1995
------------ -----------
-- ASSETS --
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . $ 14,981 $ 9,668
Restricted cash . . . . . . . . . . . . - 209
Accounts and notes receivable, net . . . 29,213 25,261
-------- --------
Inventories:
Work in process . . . . . . . . . . . 4,605 4,880
Material and supplies . . . . . . . . 7,302 8,608
-------- --------
Total inventories . . . . . . . . . . 11,907 13,488
-------- --------
Businesses held for sale, net . . . . . - 4,000
Deferred taxes, current . . . . . . . . 6,918 -
Other current assets . . . . . . . . . . 2,028 1,871
-------- --------
Total current assets . . . . . . . . . 65,047 54,497
-------- --------
PROPERTY - at cost . . . . . . . . . . . . 42,694 39,632
Less accumulated depreciation . . . . . (19,802) (17,389)
-------- --------
Property, net . . . . . . . . . . . . 22,892 22,243
-------- --------
DEFERRED TAXES . . . . . . . . . . . . . . 24,082 -
-------- --------
EXCESS OF COST OVER NET ASSETS OF
ACQUIRED BUSINESSES - NET . . . . . . . 26,818 27,439
-------- --------
OTHER NON-CURRENT ASSETS . . . . . . . . . 4,762 4,300
-------- --------
TOTAL ASSETS . . . . . . . . . . . . . $143,601 $108,479
======== ========
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
1996 1995
------------ -----------
-- LIABILITIES --
CURRENT LIABILITIES:
Accounts payable, principally trade . . $ 13,861 $ 18,085
Insurance liabilities . . . . . . . . . 8,242 8,243
Other accrued liabilities . . . . . . . 22,136 28,081
--------- ---------
Total current liabilities . . . . . . . 44,239 54,409
LONG-TERM DEBT, less current portion . . . 39,206 40,530
LONG-TERM INSURANCE LIABILITIES . . . . . . 7,116 10,744
LONG-TERM PENSION LIABILITIES . . . . . . . 10,356 6,907
RESERVES AND OTHER LIABILITIES . . . . . . 23,150 25,883
--------- ---------
TOTAL LIABILITIES . . . . . . . . . . . . . 124,067 138,473
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, par value $0.01 per share 161 162
Capital surplus . . . . . . . . . . . . 172,164 172,350
Warrants . . . . . . . . . . . . . . . . 6,042 6,042
Retained earnings (deficit) . . . . . . (153,387) (202,820)
Excess of additional pension liability
over unrecognized prior service cost . (5,001) (5,001)
Deferred compensation . . . . . . . . . (138) (398)
Foreign currency translation
adjustments . . . . . . . . . . . . . (307) (329)
--------- ---------
Stockholders' equity (deficiency) . . 19,534 (29,994)
--------- ---------
TOTAL LIABILITIES AND STOCK-
HOLDERS' EQUITY (DEFICIENCY) . . . $ 143,601 $ 108,479
========= =========
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
--------------- ------------------
1996 1995 1996 1995
-------- -------- -------- --------
NET REVENUES . . . . . . . . . $ 70,433 $ 70,620 $191,281 $197,965
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales . . . . . . . 54,387 57,098 150,367 162,983
Selling, general and
administrative . . . . . . 6,792 8,056 19,995 24,207
-------- -------- -------- --------
Total . . . . . . . . . . 61,179 65,154 170,362 187,190
-------- -------- -------- --------
OPERATING INCOME . . . . . . . 9,254 5,466 20,919 10,775
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense . . . . . . (1,043) (1,096) (3,066) (3,277)
Other income (expense)-net . 213 103 578 413
-------- -------- -------- --------
Total . . . . . . . . . . (830) (993) (2,488) (2,864)
-------- -------- -------- --------
INCOME BEFORE PROVISION FOR
TAXES ON INCOME . . . . . . . 8,424 4,473 18,431 7,911
PROVISION (BENEFIT) FOR TAXES
ON INCOME . . . . . . . . . . (31,200) - (31,000) -
-------- -------- -------- --------
INCOME - CONTINUING OPERATIONS 39,624 4,473 49,431 7,911
DISCONTINUED OPERATIONS:
Income (loss) from
discontinued operations . . - 281 - (661)
Gain on sale of business
segment . . . . . . . . . . - - - 3,450
-------- -------- -------- --------
Income (loss) from discontinued
operations . . . . . . . . . . - 281 - 2,789
-------- -------- -------- --------
NET INCOME . . . . . . . . . . $ 39,624 $ 4,754 $ 49,431 $ 10,700
======== ======== ======== ========
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
-------------------- -------------------
1996 1995 1996 1995
--------- --------- ---------- ----------
RETAINED EARNINGS (DEFICIT)
AT BEGINNING OF PERIOD . . . $(193,011) $(193,333) $(202,818) $(199,279)
NET INCOME . . . . . . . . 39,624 4,754 49,431 10,700
--------- --------- --------- ---------
RETAINED EARNINGS (DEFICIT)
AT END OF PERIOD . . . . . $(153,387) $(188,579) $(153,387) $(188,579)
========= ========= ========= =========
NET INCOME PER COMMON SHARE:
Continuing Operations . . $ 2.46 $ .28 $ 3.07 $ .49
Discontinued Operations - .02 - .18
--------- --------- --------- ---------
NET INCOME . . . . . . . . . $ 2.46 $ .30 $ 3.07 $ .67
========= ========= ========= =========
SHARES USED IN INCOME
PER SHARE CALCULATION . . . 16,126 15,970 16,123 15,956
========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(In thousands)
(Unaudited)
Nine Months Ended
September 30
-----------------------
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . $ 49,431 $ 10,700
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization . . . . . 3,255 3,012
Amortization of discount on debentures
and debt issuance costs . . . . . . . 954 927
Deferred income taxes . . . . . . . . . (31,000) -
Gain on sale of business segment . . . . - (3,450)
Provisions for:
Bad debts and losses on erection
contracts . . . . . . . . . . . . . 462 559
Rectification and other costs . . . . 977 1,411
Changes in assets and liabilities, net
of divestitures:
(Increase) decrease in accounts and
notes receivable . . . . . . . . . . (2,190) (1,465)
(Increase) decrease in inventories . . 1,581 (462)
(Increase) decrease in restricted cash 209 2,153
Increase (decrease) in accounts
payable, principally trade . . . . (4,224) (2,129)
Increase (decrease) in other current
liabilities . . . . . . . . . . . . (8,175) 8,882
Net changes in other assets and
liabilities . . . . . . . . . . . . (1,509) (15,781)
-------- --------
Net cash provided by operating
activities . . . . . . . . . . . . . . 9,771 4,357
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . (3,184) (3,715)
Proceeds from sales of property, plant
and equipment . . . . . . . . . . . . . . - 188
Proceeds from sales of businesses . . . . . - 8,000
Proceeds from assets held for sale . . . . 50 515
-------- --------
Net cash provided by (used for)
investing activities . . . . . . . . . $ (3,134) $ 4,988
-------- --------
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
------------------------
1996 1995
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) short-
term borrowings . . . . . . . . . . . . . $ - $ 840
Proceeds from long-term borrowings . . . . - 219
Payments on long-term borrowings . . . . . - (139)
Payments of capitalized interest on 12%
Notes . . . . . . . . . . . . . . . . (1,324) -
-------- --------
Net cash provided by (used for)
financing activities . . . . . . . . . (1,324) 920
-------- --------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . 5,313 10,265
Cash and cash equivalents - beginning
of period . . . . . . . . . . . . . . 9,668 7,890
-------- --------
Cash and cash equivalents - end of
period . . . . . . . . . . . . . . . . $ 14,981 $ 18,155
======== ========
SUPPLEMENTAL CASH FLOW DATA:
Cash payments made for:
Interest . . . . . . . . . . . . . . . $ 2,861 $ 2,238
======== ========
Income taxes . . . . . . . . . . . . . $ - $ -
======== ========
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, 1996 and the results of operations and cash flows for the
periods presented. All adjustments recorded during the period consisted of
normal recurring adjustments, except for the adjustment to the deferred tax
valuation allowance (Note 2). The Condensed Consolidated Statement of
Operations for the three and nine months ended September 30, 1995 has been
reclassified to reflect the sale of the Concrete Construction Group and the
Building Products Group as discontinued operations (Note 3). Certain
other previously reported amounts have been reclassified to conform to the
1996 presentation.
2. TAXES ON INCOME
---------------
During the three months ended September 30, 1996, the Company earned $8,424,000
of income before provision for taxes on income, its third consecutive profitable
quarter. Also during the quarter, the Company sold its Asia/Pacific subsidiary,
thus substantially completing its divestiture plan. Because of these
achievements, along with the continued improvement in the Company's backlog,
realization of the benefits of certain restructuring initiatives, and successful
implentation of cost containment measures associated with trailing liabilities,
management reduced the Company's deferred tax asset valuation allowance from
$43,000,000 to $12,000,000, resulting in a $31,000,000 credit to Provision
(benefit) for taxes on income. The remaining deferred tax valuation reserve
represents managements estimate of unrealizable tax benefits associated
primarily with foreign operations. Under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", the Company is required to
recognize the portion of its deferred tax asset which it believes will more
likely than not be realized. Management believes that the Company will be able
to realize the unreserved portion of its deferred tax asset through future
earnings. Management will continue to evaluate the level of its deferred tax
valuation allowance at each balance sheet date and adjust the valuation reserve
as warranted by changes in the Company's expected future profitability, amounts
and timing of payments related to its trailing liabilities, or other events
which might affect the realization of the Company's deferred tax asset.
3. DISPOSITIONS
------------
On March 3, 1995, the Company sold its Concrete Construction business (the
"Concrete Construction Group") to Ceco Concrete Construction Corp., a newly
formed company owned by an entity controlled by the Company's Chief
Executive Officer. During the fourth quarter of 1995, the Company decided
to divest of its remaining Building Products operations which are located
in Australia, Northeast Asia and Southeast Asia (the "Asia/Pacific Building
Products Operations") and in Canada (the "Canadian Building Products
Operations"). In connection with the decision to divest the Asia/Pacific
and Canadian Building Products Operations, the Company recorded a charge of
$19,455,000 in the fourth quarter of 1995.
On September 30, 1996, the Company sold its Asia/Pacific Building Products
operation. Pursuant to the sale, the buyer caused the payment of approximately
$1,600,000 which was classified as Accounts and notes receivable at September
30, 1996. Pursuant to the terms of the sale, for a period of one year, the
Company will be required to maintain the $2,000,000 letter of credit, which was
in place at September 30, 1996, in support of the Asia/Pacific Building Products
Operation's credit facility. The Buyer is obligated to reimburse the Company
for any amounts drawn on the letter of credit. Additionally, the Company
remains liable to indemnify the Buyer for certain liabilities of the sold
business. In connection with the sale, the Company agreed to continue to supply
products to the Asia/Pacific Building Products operation at a fixed margin for a
period of two years.
The decision to divest the Asia/Pacific and the Canadian Building Products
Operations represents the Company's complete exit from the Building
Products business. For accounting purposes, the Concrete Construction
Group and the Building Products Group were each considered a separate
business segment. Accordingly, the Company's Consolidated Statements of
Operations have been reclassified to reflect these businesses as
discontinued operations. For purposes of the December 31, 1995
Consolidated Balance Sheet, the assets and liabilities of the Canadian
Building Products Operations are netted and classified as assets held for
sale - current.
The following table summarizes the revenues and income/(losses) of the
Company's businesses which have been accounted for as discontinued
operations.
Three Nine
Months Ended Months Ended
September 30, September 30,
1995 1995
------------- -------------
(Thousands)
Revenues
Building Products Group . $ 12,661 $ 29,938
Concrete Construction
Group . . . . . . . . . - 11,088
-------- --------
Total . . . . . . . . . $ 12,661 $ 41,026
======== ========
Discontinued operations
Income (loss) from
discontinued operations
Building Products Group $ 281 $ (1,166)
Concrete Construction
Group . . . . . . . . - 505
-------- --------
Total . . . . . . . . . $ 281 $ (661)
======== ========
Gain (loss) on sale/disposal
of business segment
Building Products Group . $ - $ -
Concrete Construction
Group . . . . . . . . . - 3,450
-------- --------
Total . . . . . . . . . $ - $ 3,450
======== ========
4. OTHER CURRENT LIABILITIES
-------------------------
Other current liabilities consisted of the following:
September 30 December 31
1996 1995
----------- -----------
(Thousands)
Payroll, pension and related
benefits . . . . . . . . . . . . $ 5,555 $10,378
Warranty and backcharge
reserves . . . . . . . . . . . . 3,540 3,854
Deferred revenues . . . . . . . . 1,842 1,450
Reserves for restructuring . . . . 566 753
Accrued interest . . . . . . . . 3,407 2,821
Other . . . . . . . . . . . . . . 7,226 8,825
------- -------
Total . . . . . . . . . . . . . . $22,136 $28,081
======= =======
5. COMMITMENTS AND CONTINGENCIES
-----------------------------
There are various 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 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 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 the
amount can be reasonably estimated. Based upon currently available
information, including the reports of third parties, management does not
believe that the resolution of these matters will have a material adverse
effect on the consolidated financial statements.
In connection with the settlement of a construction contract dispute, on
March 3, 1995 the Company entered into an agreement which provides that if
(i) at least 30% of the ownership of the common stock of the Company is not
held jointly by the current Chairman of the Company, who currently controls
approximately 1.7% of the outstanding common stock and the current Chief
Executive Officer and Vice Chairman of the Company, who currently controls
approximately 55.83% of the outstanding common stock and (ii) either or
both do not continue as Chief Executive Officer and/or Chairman of the
Company, the Company will be required to make immediate payment of the
remaining unpaid settlement amount which was $5,250,000 at September 30,
1996, rather than the scheduled $250,000 quarterly payments.
At September 30, 1996, the Company had outstanding performance and
financial bonds of $19,900,000, which generally provide a guarantee as to
the Company's performance under contracts and other commitments and are
collateralized in part by letters of credit which were issued under the
Company's credit facility. The outstanding bond amounts above include
approximately $16,800,000 of performance bonding related to businesses
which were previously sold or are pending disposition (see Note 3).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Revenues for the third quarter of 1996 were $70.4 million, a decrease of $.2
million or .3% compared to the third quarter of 1995. On a year-to-date basis,
revenues were $191.3 million in 1996, compared to $198.0 million in 1995, a
decrease of $6.7 million or 3.4%. The decrease in year-to-date revenues is
primarily the result of severe weather conditions in early 1996, and a lower
backlog of orders at the beginning of 1996. The Company's gross margin
percentage was approximately 22.8% in the third quarter of 1996 compared to
19.1% during the same period in 1995. The gross margin percentage was 21.4% and
17.7% during the nine months ended September 30, 1996 and 1995, respectively.
The increase in the Company's gross margin is primarily a result of lower
material costs, reduced costs associated with various employee benefit plans and
insurance programs and certain other cost reduction initiatives which have been
implemented by the Company.
Selling, general and administrative expenses decreased by $1.3 million in the
third quarter of 1996 compared to the same quarter of 1995. During the nine
months ended September 30, 1996, selling general and adminstrative expenses
decreased by $4.2 million compared to the same period a year ago. These
reductions reflect savings realized by the Company from the continuing efforts
to reduce general and administrative costs and from modifications made during
1995 to certain defined benefit pension plans and retiree medical programs. The
increase in gross profit and reductions in selling, general and administrative
expenses resulted in operating income of $9.3 million and $20.9 million during
the three and nine months ended September 30, 1996, respectively, compared to
operating income of $5.5 million and $10.8 million during the three and nine
months ended September 30, 1995, respectively.
Interest expense for the three and nine months ended September 30, 1996 was $1.0
million and $3.1 million, respectively, compared to $1.1 million and $3.3
million for the three and nine months ended September 30, 1995, respectively.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 15
"Accounting by Debtors and Creditors for Troubled Debt Restructurings" all
future interest payments which are due on the Company's 12% Notes are recorded
as long term debt, except for the current portion which is classified as accrued
interest payable. As a result, the Company does not record interest expense
related to the 12% Notes. If the Company had not capitalized all future
interest payments on its 12% Notes, interest expense would have been increased
by $.7 million during each of the quarters ended September 30, 1995 and 1996,and
$2.0 million during the nine month periods ended September 30, 1995 and 1996.
During the three months ended September 30, 1996, the Company earned $8,424,000
of income before provision for taxes on income, its third consecutive profitable
quarter. Also during the quarter, the Company sold its Asia/Pacific subsidiary,
thus substantially completing its divestiture plan. Because of these
achievements, along with the continued improvement in the Company's backlog,
realization of the benefits of certain restructuring initiatives, and successful
implentation of cost containment measures associated with trailing liabilities,
management reduced the Company's deferred tax asset valuation allowance from
$43,000,000 to $12,000,000, resulting in a $31,000,000 credit to Provision
(benefit) for taxes on income. The remaining deferred tax valuation reserve
represents managements estimate of unrealizable tax benefits associated
primarily with foreign operations. Under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", the Company is required to
recognize the portion of its deferred tax asset which it believes will more
likely than not be realized. Management believes that the Company will be able
to realize the unreserved portion of its deferred tax asset through future
earnings. Management will continue to evaluate the level of its deferred tax
valuation allowance at each balance sheet date and adjust the valuation reserve
as warranted by changes in the Company's expected future profitability, amounts
and timing of payments related to its trailing liabilities, or other events
which might affect the realization of the Company's deferred tax asset.
Income from continuing operations, which reflects the reduction in the deferred
tax asset valuation allowance, was $39.6 million during the third quarter of
1996 compared to $4.5 million during the same period of 1995. On a year-to-date
basis, income from continuing operations was $49.4 million in 1996, compared to
$7.9 million during the nine month period ended September 30, 1995.
Net income during the three and nine months ended September 30, 1996 was $39.6
million and $49.4 million, respectively, compared with $4.8 million and $10.7
million during the three and nine months ended September 30, 1995, respectively.
These increases result from the previously discussed deferred tax asset
adjustment, the Company's continuing cost reduction efforts and better
realization on revenues.
Backlog of Orders
- -----------------
At September 30, 1996, the backlog of unfilled orders believed to be firm for
the Company's ongoing Metal Buildings Group was approximately $79.1 million
compared to a backlog of $75.6 million at September 30, 1995 and $63.1 million
at December 31, 1995.
Litigation
- ----------
There are various 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 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.
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 the amount can be reasonably estimated. Based
upon currently available information, including the reports of third parties,
management does not believe resolution of these matters will have a material
adverse effect on the consolidated financial statements.
Liquidity and Capital Resources
- -------------------------------
During the nine months ended September 30, 1996, the Company generated
approximately $9.8 million of cash from its operating activities. Uses of
operating cash flow were primarily requirements for trailing liabilities
associated with sold and discontinued businesses and seasonal working capital
requirements at the Company's Metal Buildings Group. During the first nine
months of 1996, the Company's policy was to aggressively close and settle
outstanding worker's compensation and general liability claims and in connection
therewith the Company spent approximately $4.3 million during the period. Also
during the first nine months of 1996, the Company aggressively followed an early
payment policy on certain raw material purchases in order to take advantage of
early payment discounts.
During the first quarter of 1996 the Company spent $1.9 million in connection
with a drawn letter of credit which was associated with the Company's former
U.K. subsidiary (the "U.K. Letter of Credit"). Additionally, the Company
contributed $1.8 million to its defined benefit pension plans during the nine
months ended September 30, 1996. Effective June 30, 1996, the Company merged
its three remaining defined benefit plans into a single defined benefit plan to
reduce the anticipated funding requirements during the next several years and to
reduce plan administrative expenses.
The Company spent approximately $3.2 million on capital expenditures during the
first nine months of 1996 directed toward upgrading and improving manufacturing
equipment. Additionally, in May 1996, the Company paid semi-annual interest on
the 12% Senior Subordinated Notes which amounted to approximately $1.4 million.
Unrestricted cash and cash equivalents increased by $5.3 million during the
period from December 31, 1995 to September 30, 1996. At September 30, 1996, the
Company had $15.0 million of unrestricted cash and cash equivalents.
The Company maintains an asset based credit facility (the "Credit Facility")
which supports both the Company's U.S. and Canadian operations, and which, under
its terms, has maximum availability of $45.0 million and expires on May 18,
1999. Availability under the Credit Facility is based on a percentage of
eligible accounts receivable and inventory, plus a decreasing base amount plus
the amount provided by the Company as cash collateral, if any, less the amount
of $5.0 million required to be outstanding under a term loan (each together the
"Borrowing Base"). At September 30, 1996, the Borrowing Base was estimated to
be $27.1 million used to support the $5.0 million Term Loan Note and $16.7
million of outstanding letters of credit used to support insurance programs,
bonding programs, certain foreign credit facilities and other financial
guarantees. The Company had unused availability under the Credit Facility of
$5.4 million at September 30, 1996. During the first nine months of 1996, the
Company reduced its letters of credit by $8.8 million.
PART II
OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
Information describing certain of the Company's legal proceedings and
environmental matters is included in Part 1, Item 1, in Note 4 to the
"Notes to Condensed Consolidated Financial Statements," and in Part 1,
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) Exhibit 27 - Financial Data Schedule.
(c) Reports on Form 8-K:
On October 15, 1996, the Company filed a report of form 8-K
reporting the sale of its Asia/Pacific Buildings Products
Operations to Bruce International, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROBERTSON-CECO CORPORATION
--------------------------
(Registrant)
By: /s/ Ronald D. Stevens
-----------------------------
Ronald D. Stevens
Executive Vice President
And Chief Financial Officer
November 8,1996
- ---------------
ROBERTSON-CECO CORPORATION
EXHIBIT INDEX
--------------------------
EXHIBIT 11 - Computation of Earnings (Loss) Per Common Share
EXHIBIT 27 - Financial Data Schedule