SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual report ("Report") pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1996 (FEE REQUIRED)
Commission file number 1-10659
ROBERTSON-CECO CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 36-3479146
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5000 Executive Pkwy, Ste. 425, San Ramon, CA 94583
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 358-0330
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Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value, $0.01 per share New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $39,015,239 based upon the closing sales price of Registrant's
common stock on the New York Stock Exchange on March 24, 1997. (The value of
shares of common stock held by executive officers and directors of the
Registrant and their affiliates has been excluded.)
Indicate by check mark whether the 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
As of March 24, 1997, 16,110,618 shares of common stock of the Registrant
were outstanding.
Portions of the Registrant's definitive proxy statement for Registrant's
1997 annual meeting of stockholders to be filed with the Commission not later
than 120 days after the end of Registrant's fiscal year covered by this report
("Report") are incorporated by reference into Part III.
ROBERTSON-CECO CORPORATION
Table of Contents
PART I
Page
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 4.1 Executive Officers of the Registrant . . . . . . . 7
PART II
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Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . 8
Item 6. Selected Financial Data . . . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . 11
Item 8. Financial Statements and Supplementary Data . . . . 17
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . 40
PART III
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Item 10. Directors and Executive Officers of the Registrant 41
Item 11. Executive Compensation . . . . . . . . . . . . . . 41
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . 41
Item 13. Certain Relationships and Related Transactions . . 41
PART IV
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ITEM 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . 42
Signatures . . . . . . . . . . . . . . . . . . . . 43
ITEM 1. BUSINESS
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THE COMPANY
Robertson-Ceco Corporation (the "Company") was formed on November 8, 1990
by the merger (the "Combination") of H. H. Robertson, Inc. ("Robertson") and
Ceco Industries, Inc. ("Ceco Industries") with and into The Ceco Corporation
("Ceco"), a wholly-owned subsidiary of Ceco Industries, with Ceco continuing as
the surviving corporation under the name Robertson-Ceco Corporation. The
Combination was accounted for using the purchase method, with Robertson deemed
the acquiror.
After the Combination, the Company and its subsidiaries operated in four
business segments: (1) the Metal Buildings Group, which operates primarily in
North America and is engaged in the manufacture, sale and installation of pre-
engineered metal buildings for commercial and industrial users; (2) the Building
Products Group, which operated on a worldwide basis and was engaged in the
manufacture, sale and installation of non-residential building components,
including wall, roof and floor systems; (3) the Door Products Group which
operated primarily throughout the United States and was engaged in the
manufacture and distribution of metal, wood and fiberglass doors and frames for
commercial and residential markets; and (4) the Concrete Construction Group,
which operated throughout the United States and was engaged in the provision of
subcontracting services for forming poured-in-place, reinforced concrete
structures.
DIVESTITURES
During 1991, management began to develop and implement a series of
restructuring actions designed to improve the Company's operational performance
and liquidity. In connection with these restructuring initiatives, during the
first quarter of 1992, the Company sold its Door Products Group, certain
domestic Building Products businesses, and its Building Products subsidiary
located in South Africa.
In November 1993, the Company sold its Building Products subsidiary located
in the United Kingdom (the "U.K. Subsidiary"). During the fourth quarter of
1994, the Company sold its remaining U.S. Building Products operation, the
Cupples Products Division ("Cupples Division"), which manufactured curtainwall
systems, and commenced a plan to sell or dispose of its remaining European
Building Products operations. In 1995, the Company sold its subsidiaries
located in Holland and Spain. In 1996, the Company sold its subsidiary located
in Norway, and its Building Products operations located in Australia, Northeast
Asia and Southeast Asia (together the "Asia/Pacific Building Products
Operations"). The Canadian Building Products business is expected to be
divested in 1997. The decision to divest the Asia/Pacific and the Canadian
Building Products Operations represents a complete exit from the Building
Products business. On March 3, 1995, the Company sold the Concrete Construction
Group to a company which is controlled by the Company's Chief Executive Officer.
For accounting purposes, the Door Products Group, Concrete Construction
Group and the Building Products Group were each considered separate business
segments. Accordingly, the Company's Consolidated Statements of Operations were
reclassified to reflect these businesses as discontinued operations.
In addition to the sale of and exit from the businesses discussed above, a
series of other operational restructuring actions were taken during the past
several years, including downsizing the corporate office, closing excess metal
building plants and redistributing manufacturing operations and equipment from
closed operations, consolidating and improving capacity and cost effectiveness
at the remaining plants, reducing work force levels, and redefining management
and operating policies. Furthermore, significant financial restructuring
actions have been completed by the Company. (See "Managements Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements and notes thereto for the year ended December
31, 1996.)
METAL BUILDINGS GROUP
The ongoing operations of the Company now consist of the Metal Buildings
Group. The Metal Buildings Group consists of three pre-engineered metal
building companies: Ceco Building Systems, Star Building Systems, and H. H.
Robertson Building Systems (Canada). Pre-engineered metal buildings have
traditionally accounted for a significant portion of the market for
nonresidential low-rise buildings under 150,000 sq. ft. in size that are built
in North America. Historically aimed at the one-story small to medium building
market, the use of the product is expanding to large (up to 1 million sq. ft.),
more complex, and multi-story (up to 4 floors) buildings. The product provides
the customer with a custom designed building at generally a lower cost than
conventional construction and is generally faster to job completion from
concept.
The Company's metal building systems are manufactured at five U.S. plants
with one located in each of California, Mississippi, North Carolina and two in
Iowa. The Company has one plant outside of the U.S. located in Ontario, Canada.
The buildings are primarily sold through builder/dealer networks located
throughout the United States and Canada. In addition to sales in North America,
in recent years the Company has been selling its buildings to the Asian market.
Sales to the Asian market are made both through local unaffiliated dealers and
by Company salespersons.
The principal materials used in the manufacture of pre-engineered metal
buildings are hot and cold rolled steel products that are readily available from
many sources. The buildings consist of three components: primary structural
steel, secondary structural steel and cladding. The buildings are erected by
the dealer network supplemented by subcontractors and, in certain cases, by
Company erection crews.
The Company considers all aspects of its business to be highly competitive
and faces competition from many other manufacturers. Price, delivery and
service are the primary competitive features in this market. The Company's
business is both seasonal and cyclical in nature and, as a consequence, has
certain working capital needs which are characteristic of the metal buildings
industry. At a time of increased construction activity, the Company has a need
for increased working capital which historically has been funded by available
cash and short-term bank borrowings. Since the Company operates in the
industrial and commercial building sectors, primarily in North America, its
results are heavily influenced by the growth in such economies, interest rates
and credit available to builders, developers and the ultimate owners of the
Company's buildings.
SEASONALITY
The Company operates in the industrial and commercial building sectors with
substantially all of the Company's revenues concentrated in North America. The
Company's business is seasonal in nature and operating results are affected, in
part, by the severity of weather conditions.
CUSTOMERS
The Company serves a wide variety of customers, virtually all of which are
in the construction industry. There is no dependence upon a single customer,
group of related customers or a few large customers.
INVENTORY AND BACKLOG
Virtually all sales of pre-engineered metal buildings are for specific
projects, and the Company maintains a minimum inventory of finished products.
Shipments of pre-engineered metal buildings are generally made directly from the
manufacturing plant to the building sites. Most raw materials are steel-related
materials which are susceptible to price increases, especially during periods of
strong economic growth. Historically, the Company and the companies with which
it competes have been successful in passing on such price increases to
purchasers.
Due to the wide availability of the necessary raw materials and the
relatively short delivery lead times, the Company generally has been able to
minimize its risk with respect to price increases in the raw materials used to
manufacture its products. To the extent that the Company quotes a fixed-price
sales contract and has not locked in the related cost of the raw materials, the
Company is at risk for price increases in such raw materials. Additionally,
during times of declining demand, selling prices tend to be adversely affected
and the Company may not experience similar declines in material costs.
Backlog is determined based upon receipt of a contract or purchase order
from the customer. The Company reduces its backlog upon recognition of revenue.
At December 31, 1996, the backlog of unfilled orders believed to be firm for the
Company's Metal Buildings Group was approximately $72 million compared with a
corresponding Metal Buildings Group backlog of approximately $63 million at
December 31, 1995. Substantially all of the December 31, 1996 backlog is
expected to be executed in 1997.
PATENTS
The Company owns a number of patents with varying expiration dates
extending beyond the year 2000. None of these patents is believed to be a major
factor in the competitive position of the Company.
ENVIRONMENTAL CONTROLS
The Company's current and prior manufacturing activities have generated and
continue to generate materials classified as hazardous wastes. The Company
devotes considerable resources to compliance with legal and regulatory
requirements relating to (a) the use of these materials, (b) the proper disposal
of such materials classified as hazardous wastes and (c) the protection of the
environment. These requirements include clean-ups at various sites. The
Company's policy is to accrue environmental and clean-up related costs of a
non-capital nature when it is probable that a liability has been incurred and
such liability can be reasonably estimated. However, no assurance can be given
that discovery of new facts and the application of the legal and regulatory
requirements to those facts would not be material and would not change the
Company's estimate of costs it could be required to pay in any particular
situation (See "ENVIRONMENTAL MATTERS").
EMPLOYEES
At December 31, 1996, the Company employed approximately 1,400 persons
(excluding 135 employees at the Company's discontinued Building Products Group
operation) and was a party to collective bargaining agreements with labor unions
covering approximately 140 employees. Work stoppages are a possibility in
connection with the negotiation of collective bargaining agreements, although
the Company believes that its employee relations are generally satisfactory.
FOREIGN OPERATIONS
For the year ended December 31, 1996, the foreign operations of the Metal
Buildings Group accounted for 5.2% of the Company's revenues before inter-area
eliminations, and at December 31, 1996, foreign operations of the Metal
Buildings Group accounted for 5.2% of the Company's total assets (before
adjustments and eliminations). The Company's foreign business results in several
risks to the Company's financial condition and results of operations, but these
are not considered significant.
ITEM 2. PROPERTIES
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The Company owns and operates six manufacturing plants which produce the
products and materials sold by its Metal Buildings business. The listing below
identifies the locations of those facilities. The productive capacities of
these plants are considered adequate to serve the Company's business needs at a
volume at least equal to that achieved in 1996.
Monticello, Iowa Manufacturing Plant
Lockeford, California Manufacturing Plant
Mt. Pleasant, Iowa Manufacturing Plant
Rocky Mount, North Carolina Manufacturing Plant
Columbus, Mississippi Manufacturing Plant
Hamilton, Ontario, Canada Manufacturing Plant
ITEM 3. LEGAL PROCEEDINGS
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LAWSUITS
There are various proceedings pending against or involving the Company
which are ordinary or routine given the nature of the Company's existing and
prior businesses. While the outcome of the Company's legal proceedings cannot
be predicted with certainty, management does not expect that these matters will
have a material adverse effect upon the consolidated financial condition or
results of operations of the Company.
ENVIRONMENTAL MATTERS
The Company has completed its investigation of two owned disposal sites in
Beaver County, Pennsylvania formerly used by Robertson to dispose of plant
wastes from the Company's former Ambridge, Pennsylvania Building Products
manufacturing facility. The Company has submitted its reports of findings to
the Pennsylvania Department of Environmental Protection ("PDEP") and has
submitted work plans for remedial activities for both sites to the PDEP for its
consideration and approval. The Company also is in the process of finalizing a
Consent Order and Agreement to memorialize an agreed upon approach to remediate
these sites. In another matter, the Company received approval for a work plan
from the Illinois Environmental Protection Agency ("IEPA") for the closure of an
owned hazardous waste storage facility for electric arc furnace dust generated
from Ceco's former Lemont, Illinois steel mill facility. Environmental closure
at this site is substantially complete. A closure unit has been constructed and
a post-closure groundwater monitoring well system was installed and is currently
in operation.
The Company has recorded reserves in amounts which it considers to be
adequate to cover the costs which may be incurred in relation to these and other
environmental matters. However, no guarantee can be made that the relevant
governmental authorities will accept the remediation plans or actions proposed
by the Company or the position taken by the Company as to its legal
responsibilities and therefore that more costly remediation efforts will not be
required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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During the fourth quarter of the fiscal year covered by this report no
matter was submitted to a vote of security holders.
ITEM 4.1.EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The following table sets forth certain information regarding the executive
officers of the Company as of March 26, 1997.
Name Age Position
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Andrew G. C. Sage, II 71 Chairman
Michael E. Heisley 60 Chief Executive Officer and Vice
Chairman
E.A. Roskovensky 51 President and Chief Operating Officer
Ronald D. Stevens 53 Executive Vice President and Chief
Financial Officer
Mr. Andrew G. C. Sage, II is Chairman (since July 1993) of the Company.
Mr. Sage also served as President (from November 1992 until July 1993) and Chief
Executive Officer (from November 1992 until December 1993) of the Company. Mr.
Sage is also President of Sage Capital Corporation ("Sage Capital"), a general
business and financial management corporation specializing in business
restructuring and problem solving. Mr. Sage is a director of Computervision
Corporation, Fluid Condition Products and Tom's Foods, Inc.
Mr. Heisley is Chief Executive Officer and Vice Chairman (since December
1993) of the Company. Mr. Heisley is Chairman of the following companies:
Davis Wire Corporation (since 1991), a manufacturer of steel wire; Tom's Foods,
Inc. (since 1993), a manufacturer and distributor of snack foods; and
Nutri/System, L.P. (since 1993), a national weight maintenance company. He is
also a Chairman of the Executive Committee of Pettibone Corporation (since
1988), a diversified manufacturing company, and a director of Envirodyne, Inc.
(since 1994).
Mr. Roskovensky is President and Chief Operating Officer (since November
1994) of the Company. Prior to being elected President, Mr. Roskovensky served
the Company as President of the Company's Metal Buildings Group (from February
1994). He is also the President and Chief Executive Officer of Davis Wire
Corporation (from 1991), a manufacturer of steel wire. Prior to 1991, Mr.
Roskovensky was the President of USS - POSCO Industries (from 1986 to 1990), a
steel mill joint venture company between USX Corporation and Pohang Iron & Steel
of the Republic of Korea.
Mr. Stevens is Executive Vice President and Chief Financial Officer (since
October 1996) of the Company. Prior to being elected Chief Financial Officer,
Mr. Stevens was a Principal/Owner of Productivity Consulting Group, Inc. (from
January 1991 to October 1996).
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
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COMMON STOCK
The Company's Common Stock is listed for trading on the New York Stock
Exchange ("NYSE") under the symbol "RHH". The following table sets forth the
high and low sale prices per share of the Common Stock as reported on the NYSE
Composite Transaction Reporting System during the calendar periods indicated.
Under the terms of the Company's current credit facility, the Company's ability
to pay cash dividends is restricted. The Company did not pay cash dividends on
its Common Stock during the periods set forth below.
High Low
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Calendar 1995
First Quarter . . . . . . . . . . . . . $ 3 1/2 $ 2 3/4
Second Quarter . . . . . . . . . . . . 3 1/8 2 1/4
Third Quarter . . . . . . . . . . . . . 3 3/4 2 1/2
Fourth Quarter . . . . . . . . . . . . 7 1/8 3 5/8
Calendar 1996
First Quarter . . . . . . . . . . . . . $ 6 5/8 $ 5 1/8
Second Quarter . . . . . . . . . . . . 6 1/8 4 3/4
Third Quarter . . . . . . . . . . . . . 7 7/8 4 1/2
Fourth Quarter . . . . . . . . . . . . 8 7/8 7 3/4
There were approximately 2,418 holders of record of the Company's Common
Stock as of March 24, 1997. Included in the number of stockholders of record
are stockholders who held shares in "nominee" or "street" name. The closing
price per share of the Company's Common Stock on March 24, 1997, as reported
under the NYSE Composite Transaction Reporting System, was $7-1/8.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Set forth below are historical financial data for each of the five years in
the period ended December 31, 1996. These data have been derived from the
audited consolidated financial statements of the Company for such periods, some
of which are presented elsewhere herein. The following information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements and the notes thereto appearing elsewhere in this Report.
Statements of Operations Data (a):
(In thousands, except share data)
Year Ended December 31
-------------------------------------------------
1992 1993(b) 1994 1995 1996
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Net revenues . . . . . $187,465 $218,338 $251,584 $264,983 $255,893
Cost of sales . . . . . 162,918 188,892 213,948 218,285 201,478
-------- -------- -------- -------- --------
Gross Profit . . . . . $ 24,547 $ 29,446 $ 37,636 $ 46,698 $ 54,415
Selling, general and
administrative . . 38,310 32,982 31,910 30,844 27,549
Restructuring . . . . 2,798 - 2,075 - -
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Operating income (loss) $(16,561) $ (3,536) $ 3,651 $ 15,854 $ 26,866
Interest expense . . . (12,628) (9,545) (4,164) (4,335) (4,166)
Other income, net . . . 806 498 346 828 841
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Income (loss) from continuing
operations before income
taxes . . . . . . . . $(28,383) $(12,583)$ (167) $ 12,347 $ 23,541
Provision (credit) for taxes
on income . . . . . . - - - - (29,067)
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Income (loss) from
continuing operations $(28,383) $(12,583) $ (167) $ 12,347 $ 52,608
Discontinued operations (c) (42,762) (12,520) (21,593) (15,888) -
Extraordinary gain (loss) on
debt . . . . . . . . . - 5,367 - - (1,315)
Cumulative effect of
accounting change (d) - (1,200) - - -
-------- -------- -------- -------- --------
Net income (loss) . . . $(71,145) $(20,936) $(21,760) $ (3,541) $ 51,293
======== ======== ======== ======== ========
Earnings (loss) per common
share(d):
Continuing operations $ (32.43) $ (2.04) $ (.01) $ .77 $ 3.26
Discontinued operations (c) (48.57) (2.01) (1.37) (.99) -
Extraordinary item . - .86 - - (.08)
Cumulative effect of
accounting change (d) - (.20) - - -
-------- -------- -------- -------- --------
Net income (loss) per
common share . . . $ (81.00) $ (3.39)$ (1.38) $ (.22) $ 3.18
======== ======== ======== ======== ========
Weighted average number of
common shares outstanding (e) 880 6,217 15,808 16,007 16,122
======== ======== ======== ======== ========
Cash dividends declared per
common share . . . . . - - - - -
======== ======== ======== ======== ========
Balance Sheet Data (a)(b):
(Thousands)
December 31
--------------------------------------------------
1992 1993 1994 1995 1996
-------- ------- -------- -------- --------
Working capital
(deficiency) . . . . $(101,200) $ 4,708 $ 9,826 $ 88 $ 2,603
Total assets . . . . . 232,370 181,823 137,400 108,479 132,220
Long-term debt (current
portion) . . . . . . 67,420 390 134 - 7,455
Long-term debt (excluding
current portion) . . 1,426 45,084 43,421 40,530 20,000
Stockholders' equity
(deficiency) . . . . (34,189) (16,663) (35,693) (29,994) 26,244
======== ========= ======== ======== ========
(a) The consolidated statements of operations are reclassified to reflect the
operating results of the Door Products Group (measurement date was
December 1991; sale was consummated in February 1992), the Concrete
Construction Group (measurement date was December 1994; sale was
consummated in March 1995) and the Building Products Group (measurement
date was December 1995; execution of plans to exit the remaining
businesses are substantially complete), as discontinued operations.
Accordingly, the income and expense amounts of such business segments
prior to the respective measurement dates are reclassified as a single
line item within discontinued operations. For purposes of the
consolidated balance sheets, the net assets and liabilities of such
business segments, including any loss provisions, were recorded net as of
the measurement dates.
(b) The consolidated financial information as of and for the year ended
December 31, 1993, and for periods subsequent thereto, include the effects
of the Company's Exchange Offer which was consummated on July 14, 1993.
As a result of a default under the related indenture, the amount of
long-term debt (current portion) at December 31, 1992 includes
$63,347,000 related to the Company's 15.5% Discount Subordinated
Debentures due 2000. Additionally, in connection with the Company's
Exchange Offer, all future interest costs for the Company's 12% Senior
Subordinated Notes were capitalized and, as a result, the Company does not
record any interest expense related to the 12% Senior Subordinated Notes.
The Company's 15.5% Debentures and 12% Notes were redeemed in January 1997
in connection with a refinancing of the Company's long-term debt. (see
Note 9 of the Notes to Consolidated Financial Statements).
(c) Income (losses) from discontinued operations are reported net of income
tax expense (benefit) of $1,205,000, $9,000, $256,000, $(400,000), and $0,
during each of the years ended December 31, 1992, 1993, 1994, 1995, and
1996 respectively.
(d) In the fourth quarter of 1993, the Company adopted Statement of Accounting
Standards No. 112 "Employers' Accounting for Post Employment Benefits".
(See Note 17 of the Notes to Consolidated Financial Statements.)
(e) On July 23, 1993, a 1 for 16.5 reverse split of the Company's common stock
became effective. All common stock share amounts and per share data are
restated to reflect the reverse split.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Revenue for the year ended December 31, 1996 was $255.9 million, a
decrease of $9.1 million, or 3.4%, compared to 1995. The decrease in revenue 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 21.3% in 1996 compared to 17.6%
in 1995. This increase is primarily due to 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 $3.3 million,
or 10.7%, in 1996 compared to 1995. The decrease in selling, general and
administrative expenses is primarily a result of savings realized by the company
from the continuing efforts to reduce general and administrative costs and from
modifications made during 1996 and 1995 to certain defined benefit pension plans
and retiree medical programs. These were partially offset by higher costs
associated with implementation of new information systems and decentralization
initiatives.
Operating income during the year ended December 31, 1996 was $26.9
million, compared to $15.9 million during the same period in 1995. The increase
in operating income is the result of improved gross margins and lower selling,
general and administrative expenses.
Interest expense for the year ended December 31, 1996 was $4.2 million
compared to $4.3 million in 1995, a decrease of $.1 million.
Other income - net for each of the years ended December 31, 1996 and
December 31, 1995 was $.8 million.
During the third quarter of 1996, the Company reduced its deferred tax
asset valuation allowance from $42,769,000 to $11,769,000 resulting in a
$31,000,000 credit to Provision (benefit) for taxes on income. That decision
resulted from continued profitable quarterly results, substantial completion of
the Company's divestiture plan, realization of the benefits of certain
restructuring initiatives, successful implementation of cost containment
measures associated with trailing liabilities and other factors.
For the year ended December 31, 1996, income from continuing operations
was $52.6 million compared with $12.3 million in 1995.
On December 31, 1996, the Company prepaid its existing term loan with
Foothill Capital Corporation ("Foothill"), and the credit agreement with
Foothill was terminated. In connection with the prepayment, the Company
incurred a $300,000 prepayment penalty. This amount, plus $1,853,000 of
deferred fees and expenses, net of taxes of $838,000, has been included in the
Statements of Operations as extraordinary loss on debt redemption.
At December 31, 1996, the backlog of unfilled orders believed to be firm
was approximately $72 million compared to a backlog of approximately $63 million
at December 31, 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Revenue for the year ended December 31, 1995 was $265.0 million, an
increase of $13.4 million or 5.3% compared to 1994. The increase in revenue is
primarily a result of improved market conditions in the United States and
Canada. Additionally, revenues were affected by favorable weather conditions
during the first quarter of 1995.
The Company's gross margin percentage was 17.6% in 1995 compared to 15.0%
in 1994. The improvement in the gross margin percentage is largely due to
efficiencies resulting from higher levels of revenue, generally higher selling
prices for the Company's products, and actions taken by the Company to reduce
overhead. Selling, general and administrative expenses decreased by $1.1
million in 1995 compared to 1994. The decrease in selling, general and
administrative expenses is primarily a result of maintaining the level of
overall selling costs despite increased revenue, savings resulting from
headcount and other cost reduction initiatives, and lower costs associated with
the Company's post retirement medical programs. These were partially offset by
higher costs associated with implementation of new information systems and
decentralization initiatives.
Operating income during the year ended December 31, 1995 was $15.9
million, compared to $3.7 million during the same period in 1994. The increase
in operating income is the result of higher revenues, improved gross margins and
lower selling, general and administrative expenses. Additionally, during 1994,
the Company recorded a provision for restructuring of $2.1 million related to
severance and other overhead reduction measures.
Interest expense for the year ended December 31, 1995 was $4.3 million
compared to $4.2 million in 1994, an increase of $.1 million.
Other income - net for the year ended December 31, 1995 was $.8 million as
compared to $.3 million in 1994. The increase in other income is primarily the
result of higher interest income.
For the year ended December 31, 1995, income from continuing operations
was $12.3 million compared with a loss of $.2 million in 1994.
RESULTS OF DISCONTINUED OPERATIONS
In November 1993, the Company sold its Building Products subsidiary
located in the United Kingdom. During 1994, the Company sold its remaining U.S.
Building Products operation, Cupples Division, and commenced a plan to sell or
dispose of its remaining European Building Products operations. In 1995, the
Company developed a plan to divest of its remaining Building Products operations
which are located in the Asia/Pacific region and in Canada. The Asia/Pacific
operation was sold in 1996, and the Canadian Building Products Operations is
expected to be divested in 1997. In connection with the Company's plan to exit
its remaining Building Products Operations, the Company recorded a loss of $19.5
million in 1995. During 1995 and 1996, the Company sold its subsidiaries
located in Holland, Spain and Norway. In March, 1995, the Company sold its
Concrete Construction Group to an entity owned by a company which is controlled
by the Company's Chief Executive Officer. In connection with the Company's sale
of its Concrete Construction Group, the Company recorded a gain of $3.5 million.
For accounting purposes, the Concrete Construction Group and Building
Products Group were each considered a separate business segment. Accordingly,
the Company's Consolidated Statements of Operations are reclassified to reflect
these businesses as discontinued operations.
The following table summarizes the revenues, income/(loss) from
discontinued operations and gains/(losses) from the sale/disposal of the above
business segments during the two years ended December 31, 1994 and 1995:
Years Ended December 31
-------------------------
1994 1995
-------- --------
Revenues
Building Products Group . . . $ 60,186 $ 48,431
Concrete Construction Group . 69,686 11,088
-------- --------
$129,872 $ 59,519
======== ========
Discontinued operations
Income (loss) from discontinued
operations:
Building Products Group . . $ (7,382) $ (388)
Concrete Construction Group 5,189 505
Fixed price custom curtainwall (8,000) -
-------- --------
$(10,193) $ 117
======== ========
Gain (loss) on sale/disposal
of business segment:
Building Products Group . . $(11,400) $(19,455)
Concrete Construction Group - 3,450
-------- --------
$(11,400) $(16,005)
======== ========
Charges recorded during 1994 related to the Fixed Price Custom
Curtainwall business reflect primarily the settlement of contract disputes,
litigation and rectification costs associated with this business exited in 1988.
Income generated by discontinued Building Products operations during 1996 was
approximately $924,000, on revenues of $50,539,000, and was considered in the
original provisions recorded for their disposal in 1995.
ACCOUNTING CHANGES
In June, 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125, "Transfers of Assets and
Extinguishments of Liabilities", ("FAS 125"). This statement is effective for
periods after December 31, 1996. The Company will adopt this statement for the
period ending December 31, 1997. The Company believes that the adoption of FAS
125 will not have a material impact on the Company's financial statements.
LITIGATION AND ENVIRONMENTAL
There are various proceedings pending against or involving the Company
which are ordinary or routine given the nature of the Company's existing and
prior businesses. 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 be predicted with certainty, management does not expect these
matters will have a material adverse effect on the Consolidated Balance Sheet or
Statement of Operations.
During 1995, the Company resolved and settled disputed claims related to a
Building Products construction contract and a pre-engineered metal building
project. The outcome of these settlements did not have a material adverse
effect on the consolidated financial condition or results of operations of the
Company (see Note 13 of the Notes to Consolidated Financial Statements).
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 any loss in excess of the amounts accrued would be
material to the consolidated financial statements.
With respect to the environmental clean-up matters, the Company has
claimed coverage under its insurance policies for past and future clean-up costs
related to certain sites for which the Company believes it is indemnified under
its insurance policies. The insurer has refused to admit or deny coverage under
the Company's policies. As a result, the Company has filed a complaint against
the insurer seeking to recover the past and future clean-up costs. It is not
currently possible to predict the amount of timing of proceeds, if any, from the
ultimate resolution of this matter.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 1996, the Company generated
approximately $21.8 million of cash from its operating activities, a significant
increase from the past several years due to improved operating performance.
Operating uses of cash were primarily for seasonal working capital requirements
of the Company's business. During 1996, the Company aggressively followed an
early payment policy on certain raw material purchases in order to take
advantage of early payment discounts. Also during 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 $3.4 million on claims related to current operations.
During 1996 the Company spent approximately $9.8 million of cash on items
related to discontinued operations. Most significant of these expenditures
were: Worker's Compensation and General Liability claims - $2.2 million,
payments resulting from settlement of litigation (See Note 13 of the Notes to
Consolidated Financial Statements) - $1.3 million, and funding of defined
benefit plans - $1.8 million. Additionally, 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"). 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 $3.4 million on capital expenditures
during 1996 directed toward upgrading and improving manufacturing equipment.
Additionally, in May and November 1996, the Company paid semi-annual interest on
the 12% Senior Subordinated Notes which amounted to approximately $2.7 million.
On September 30, 1996, the Company sold the business and assets of its
Asia/Pacific operations. Upon closing of the sale, the Company received
approximately $1.6 million of cash, after adjustments.
The Company's primary source of liquidity during the year included cash
and equivalents and credit which was provided under a credit facility with
Foothill Capital Corporation. Availability under the credit facility was based
on a percentage of eligible accounts receivable and inventory, plus a base
amount (which base amount was being reduced by $166,667 per month and was
subject to reduction in the case of sales of certain property, plant, and
equipment). Amongst other credit requirements as cash collateral, the borrowing
base was used to support a $5.0 million term loan note which was required to be
outstanding pursuant to the terms of the Credit Facility. On December 31, 1996,
the Company replaced the Credit Facility with a new agreement (the "New Credit
Facility") with a consortium of banks. Under the terms of the new credit
facility, the lenders agreed to provide a term loan of up to $20,000,000, due
June 30, 2001. The lenders also agreed to provide a revolving credit and letter
of credit facility of $25,000,000 maturing December 31, 2001. Up to $20,000,000
of the revolving credit facility can be used to support outstanding letters of
credit. Availability under the revolving credit and letter of credit portion of
the new Credit Facility is based on a percentage of eligible (as defined in the
Credit Facility and subject to certain restrictions) accounts receivable and
inventory. At December 31, 1996, the Borrowing Base was estimated to be $26.2
million. At December 31, 1996, the borrowing Base was used to support $17.0
million of outstanding letters of credit (which are used primarily to support
insurance and bonding programs). The Company had unused availability under the
facility of $8.0 million at December 31, 1996. The letters of credit which are
supporting foreign credit facilities include a $2.0 million letter of credit
supporting the Company's former Asia/Pacific Building Products' operations
banking facility. The replacement of the Credit Facility with the New Credit
Facility was part of a comprehensive refinancing plan that included the
repayment of the $5.0 million term loan on December 31, 1996 as well as the
redemption of the 12% Senior Subordinated Notes (the "12% Notes") and the 15.5%
Discount Subordinated Debentures on January 15, 1997. These redemptions were
effected by the Company borrowing $20 million under the new term loan and the
utilization of $8 million of available cash. The Company's current liabilities
at December 31, 1996 include $8.1 million of capitalized future interest
payments on the 12% Notes which the Company will not be required to pay due to
the redemption of the 12% Notes. This amount, net of tax, will be extinguished
as an extraordinary credit in the Company's 1997 financial statements.
Accordingly, the Company's working capital position increased by $8.1 million on
January 15, 1997 due to the extinguishment.
As a result, primarily of the above, cash and cash equivalents increased
by $2.6 million during 1996.
OUTLOOK. During 1995, the management of the Company and the Board of
Directors determined that the best strategy for the Company was to operate
solely as a Metal Buildings business. This decision was based in part on the
operating success which the Company has achieved with its existing Metal
Building businesses, along with the long-term view of the value of the Metal
Building business and the cash and liquidity demands which would be required to
fund the ongoing operations of the non-Metal Buildings businesses. The Company
anticipates that demands on its liquidity and credit resources will continue to
be significant during 1997 and the next several years primarily as a result of
funding requirements associated with the trailing liabilities of sold and
discontinued businesses and financing costs. The Company expects to meet these
requirements through a number of sources, including operating cash generated by
the Company's Metal Buildings Group, available cash which was $12.2 million at
December 31, 1996, and availability under credit facilities. During the first
quarter of 1997, the Company reduced its letters of credit which were
outstanding at December 31, 1996 by $7.1 million reflecting primarily
reductions in the collateral required to support insurance and bonding programs.
The Company's liquidity projections are predicated on estimates as to the amount
and timing of the payment of the Company's trailing liabilities and expectations
regarding the operating performance of the Company's operations. In the event
the Company experiences significant differences as to the amount and timing of
the payment of the Company's trailing liabilities and/or the actual operating
results of the Company's operations, the Company may be required to seek
additional capital through new credit facilities, modification of existing
credit facilities, or through a possible debt or equity offering, or a
combination of the above. There can be no assurance, however, that such
additional capital would be available to the Company.
The Company may from time to time make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission and its reports to stockholders. This Annual
Report contains forward-looking statements made in good faith by the corporation
pursuant to these "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. In connection with these "safe harbor" provisions, the
Company identifies important factors that could cause actual results to differ
materially from those contained in any forward-looking statements made by or on
behalf of the Company. Any such statement is qualified by reference to the
following cautionary statements.
The Company's businesses operate in highly competitive markets and are
subject to changes in general economic conditions, intense competition, changes
in consumer preferences, foreign exchange rate fluctuations, the degree of
acceptance of new product introductions, the uncertainties of litigation, as
well as other risks and uncertainties detailed from time to time in the
Company's Securities and Exchange Commission filings.
Developments in any of these areas, which are more fully described
elsewhere in part I, item 1 - Business, and item 3 - Legal Proceedings, and in
part II, item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations on pages 11-16 of the Company's 1996 Annual Report to
stockholders, each of which is incorporated into this section by reference,
could cause the Company's results to differ materially from results that have
been or may be projected by or on behalf of the Company.
The Company cautions that the foregoing list of important factors is not
exclusive. The Company does not undertake to update any forward-looking
statement that may be made from time to time by or on behalf of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
ROBERTSON-CECO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
For the Years Ended December 31
-------------------------------
1994 1995 1996
---- ---- ----
NET REVENUES . . . . . . . . . . . . . $251,584 $264,983 $255,893
COST OF SALES . . . . . . . . . . . . . 213,948 218,285 201,478
-------- -------- --------
GROSS PROFIT . . . . . . . . . . . . . $ 37,636 $ 46,698 $ 54,415
SELLING, GENERAL AND ADMINISTRATIVE . . 31,910 30,844 27,549
RESTRUCTURING . . . . . . . . . . . . . 2,075 - -
-------- -------- --------
OPERATING INCOME . . . . . . . . . . . $ 3,651 $ 15,854 $ 26,866
-------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense . . . . . . . . . . $ (4,164) $ (4,335)$ (4,166)
Other income - net . . . . . . . . . 346 828 841
-------- -------- --------
$ (3,818) $ (3,507)$ (3,325)
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE PROVISION (CREDIT) FOR TAXES ON
INCOME $ (167) $ 12,347 $ 23,541
PROVISION (CREDIT) FOR TAXES ON INCOME - - (29,067)
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (167) $ 12,347 $ 52,608
-------- -------- --------
DISCONTINUED OPERATIONS
Income (loss) from discontinued
operation $(10,193) $ 117 $ -
Loss on sale/disposal of business
segments (11,400) (16,005) -
-------- -------- --------
Loss from discontinued operations . $(21,593) $(15,888)$ -
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $(21,760) $ (3,541)$ 52,608
EXTRAORDINARY LOSS ON DEBT REDEMPTION . - - (1,315)
-------- -------- --------
NET INCOME (LOSS) . . . . . . . . . . . $(21,760) $ (3,541)$ 51,293
======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations . . . . . . . $ (01) $ .77 $ 3.26
Discontinued operations . . . . . . (1.37) (.99) -
Extraordinary item . . . . . . . . . - - (.08)
-------- -------- --------
NET INCOME (LOSS) . . . . . . . . . . . $ (1.38) $ (.22)$ 3.18
======== ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING . . . . . . . . . . . 15,808 16,007 16,122
======== ======== ========
See Notes to Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31
---------------------
1995 1996
---- ----
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . $ 9,668 $ 12,225
Restricted cash . . . . . . . . . . . . . . 209 -
Accounts and notes receivable, less allowance
for doubtful accounts: 1995, $1,302; 1996, $1,881 25,261 22,385
Inventories . . . . . . . . . . . . . . . . 13,488 15,817
Businesses held for sale, net . . . . . . . 4,000 -
Deferred taxes, current . . . . . . . . . . - 6,067
Other current assets . . . . . . . . . . . . 1,871 810
-------- --------
Total current assets . . . . . . . . . . . $ 54,497 $ 57,304
-------- --------
PROPERTY - AT COST
Land . . . . . . . . . . . . . . . . . . . $ 1,654 $ 1,654
Buildings and improvements . . . . . . . . . 9,925 9,934
Machinery and equipment . . . . . . . . . . 25,760 29,027
Construction in progress . . . . . . . . . . 2,293 2,486
-------- --------
$ 39,632 $ 43,101
Less accumulated depreciation . . . . . . . (17,389) (20,147)
-------- --------
Property - net . . . . . . . . . . . . . . $ 22,243 $ 22,954
-------- --------
EXCESS OF COST OVER NET ASSETS OF ACQUIRED
BUSINESSES, LESS ACCUMULATED AMORTIZATION:
1995, $5,085; 1996, $5,913 . . . . . . . . . $ 27,439 $ 26,611
DEFERRED TAXES, NON-CURRENT . . . . . . . . . . - 23,837
OTHER NON-CURRENT ASSETS . . . . . . . . . . . 4,300 1,514
-------- --------
Total assets . . . . . . . . . . . . . . . $108,479 $132,220
======== ========
See Notes to Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31
-----------------------
1995 1996
---- ----
LIABILITIES
CURRENT LIABILITIES:
Current portion of long-term debt . . . . $ - $ 7,455
Accounts payable, principally trade . . . 18,085 12,578
Insurance liabilities . . . . . . . . . . 8,243 6,094
Other accrued liabilities . . . . . . . . 28,081 28,574
--------- ---------
Total current liabilities . . . . . . . $ 54,409 $ 54,701
LONG-TERM DEBT, LESS CURRENT PORTION . . . . 40,530 20,000
LONG-TERM INSURANCE LIABILITIES . . . . . . . 10,744 8,349
LONG-TERM PENSION LIABILITIES . . . . . . . . 6,907 2,231
RESERVES AND OTHER LONG-TERM LIABILITIES . . 25,883 20,695
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY)
COMMON STOCK
Par value per share $.01
Authorized shares: 30,000,000
Issued shares: 1995 - 16,188,618; 1996
- 16,110,618 $ 162 $ 161
CAPITAL SURPLUS . . . . . . . . . . . . . . . 172,350 178,256
WARRANTS . . . . . . . . . . . . . . . . . . 6,042 -
ACCUMULATED DEFICIT . . . . . . . . . . . . . (202,820) (151,527)
EXCESS OF ADDITIONAL PENSION LIABILITY OVER
UNRECOGNIZED PRIOR SERVICE COST . . . . . (5,001) -
DEFERRED COMPENSATION . . . . . . . . . . . . (398) (195)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS . . (329) (451)
--------- ---------
Stockholders' equity (deficiency) . . . . $ (29,994) $ 26,244
--------- ---------
Total liabilities and stockholders'
equity (deficiency) . . . . . . . . . $ 108,479 $ 132,220
========= =========
See Notes to Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Years Ended December 31
-------------------------------
1994 1995 1996
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) . . . . . . . . . . . . . $(21,760) $(3,541)$ 51,293
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation . . . . . . . . . . . . . 4,525 3,863 3,272
Amortization . . . . . . . . . . . . . 2,079 2,102 2,140
Loss on sale/disposal of business segments 11,400 16,005 -
Provisions for:
Operating reserve and restructuring provisions 10,994 3,742 3,090
Discontinued operations . . . . . . . 8,000 - -
Changes in assets and liabilities :
(Increase) decrease in accounts and notes
receivable . . . . . . . . . . . . . . (8,930) (300) 1,933
(Increase) decrease in inventories . . 2,024 (2,152) (2,329)
Decrease in restricted cash . . . . . 660 2,269 209
Increase in deferred tax assets . . . - - (29,904)
Decrease in accounts payable . . . . . . (5,200) (2,247) (5,507)
Net changes in other assets and liabilities (3,140) (1,129) (2,410)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 652 $ 18,612 $ 21,787
-------- -------- --------
NET CASH USED FOR DISCONTINUED OPERATIONS $(12,089)$(20,048) $ (9,760)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures . . . . . . . . . . . $ (4,991)$ (5,468) $ (3,366)
Proceeds from sales of property, plant and equipment 1,701 348 -
Proceeds from sales of businesses . . . . . 807 8,000 1,600
Proceeds from sales of assets held for sale 3,764 515 -
-------- -------- --------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES $ 1,281 $ 3,395 $ (1,766)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on short-term borrowings . . . . . $ 2,242 $ 1,186 $ -
Payments on long-term debt borrowings . . . (80) - (5,000)
Payments of capitalized interest on 12% Notes - (1,352) (2,704)
-------- -------- --------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES $ 2,162 $ (166) $ (7,704)
-------- -------- --------
Effect of foreign exchange rate changes on cash $ 218 $ (15) $ -
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . $ (7,776)$ 1,778 $ 2,557
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 15,666 7,890 9,668
-------- -------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 7,890 $ 9,668 $ 12,225
======== ======== ========
SUPPLEMENTAL CASH FLOW DATA
Cash payments made for:
Interest . . . . . . . . . . . . . . . . $ 5,789 $ 4,550 $ 4,767
======== ======== ========
Income taxes . . . . . . . . . . . . . . $ 191 $ 16 $ -
======== ======== ========
See Notes to Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(In thousands)
Excess of
Additional
Pension Liability
Over Unrecognized Foreign
Retained Prior Currency
Common Capital Earnings Service Deferred Translation
Stock Surplus Warrants (Deficit) Cost Compensation Adjustments
BALANCE DECEMBER 31, 1993 . . . . . . . . . $163 $172,682 $6,042 $(177,519) $(8,139) $ (1,551) $(8,341)
Net loss for the year . . . . . . . . . . . (21,760)
Change in excess of additional
pension liability over
unrecognized prior service
cost . . . . . . . . . . . . . . . 148
Forfeitures under employee
plans, net . . . . . . . . . . . . . . . (2) (593) 569
Amortization of deferred
compensation . . . . . . . . . . . . . . . 474
Foreign currency translation
adjustments for the year . . . . . . . . . 896
Writedown from pending sale/
disposition of European
Operations . . . . . . . . . . . . . . . 1,238
---- -------- ------ -------- ------- ------ -------
BALANCE DECEMBER 31, 1994 . . . . . . . 161 172,089 6,042 (199,279) (7,991) (508) (6,207)
Net loss for the year . . . . . . . . . . . (3,541)
Change in excess of additional
pension liability over
unrecognized prior service
cost . . . . . . . . . . . . . . . 2,990
Issuances under employee
plans, net . . . . . . . . . . . . . . 1 261 (254)
Amortization of deferred
compensation . . . . . . . . . . . . . . 364
Foreign currency translation
adjustments for the year . . . . . . . . (47)
Writedown from pending sale/
disposition of Asia/Pacific
and Canadian Building
Products Operations . . . . . . . . . . 5,925
. . . . . . . . . . . . . . ---- -------- ------ -------- ------- ------- -------
BALANCE DECEMBER 31, 1995 162 172,350 6,042 (202,820) (5,001) (398) (329)
Net income for the year . . . . . . . . . 51,293
Change in excess of additional
pension liability over
unrecognized prior service
cost . . . . . . . . . . . . . . 5,001
Expiration of warrants . . . . . . . . . 6,042 (6,042)
Issuances (forfeitures)under
employee plans, net . . . . . . . . . . (1) (136) 65
Amortization of deferred
compensation . . . . . . . . . . . . . 138
Foreign currency translation
adjustments for the year . . . . . . . (122)
---- -------- ------ -------- ------- ------- -------
BALANCE DECEMBER 31, 1996 . . . . . . $161 $178,256 $ - $(151,527) $ - $ (195) $ (451)
==== ======== ====== ======== ======= ======= =======
See Notes to Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
1. NATURE OF BUSINESS
Robertson-Ceco Corporation (the "Company"), owns and operates three pre-
engineered metal building companies: Ceco Building Systems, Star Building
Systems, and H. H. Robertson Building Systems (Canada). The Company's pre-
engineered metal buildings are manufactured at plants in California, Iowa (two
separate plant locations), Mississippi, North Carolina, and in Ontario, Canada.
The buildings are sold primarily through builder/dealer networks located
throughout the United States and Canada in the industrial and commercial
building market. The buildings are erected by the dealer network supplemented
by subcontractors and, in certain cases, by Company erection crews.
2. SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and all subsidiaries. All significant intercompany balances and transactions
have been eliminated. Certain previously reported amounts have been
reclassified to conform to the 1996 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from these estimates.
Foreign Currency Translation
Asset and liability accounts of foreign subsidiaries are translated into
U.S. dollars at current exchange rates. Income and expense accounts are
translated at average rates. Any unrealized gains or losses arising from the
translation are charged or credited to the foreign currency translation
adjustments account included in stockholders' equity (deficiency). Foreign
currency gains and losses resulting from transactions are not material.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
using the last-in, first-out ("LIFO") method.
Property
Property is stated at cost. Depreciation is computed for financial
statement purposes by applying the straight-line method over the estimated lives
of the property. For income tax purposes, assets are generally depreciated
using accelerated methods.
Estimated useful lives used in computing depreciation for financial
statement purposes are as follows:
Land improvements . . . . . . . . . . 10-25 years
Buildings and building equipment . . 25-33 years
Machinery and equipment . . . . . . . 3-16 years
Income Taxes
The provision for income taxes is based on earnings reported in the
financial statements. Deferred tax assets, when considered realizable, and
deferred tax liabilities are recorded to reflect temporary differences between
the tax bases of assets and liabilities for financial reporting and tax
purposes.
Revenue
Revenue from product sales is recognized generally upon passage of title or
acceptance at a job site. Revenue from construction services is recognized
generally using the percentage-of-completion method which recognizes income
ratably over the period during which contract costs are incurred. A provision
for loss on construction services in progress is made at the time a loss is
determinable.
Insurance Liabilities
The Company is self-insured in the U.S. for certain coverages subject to
specific retention levels. Insurance liabilities consist of estimated
liabilities incurred but not yet paid.
Deferred Revenues
Billings in excess of revenues earned on construction contracts are
reflected in other accrued liabilities as deferred revenues.
Excess of Cost Over Net Assets of Acquired Businesses
The excess of cost over the net assets of acquired businesses relates to the
Company's acquisitions of its Ceco and Star metal buildings businesses. Such
costs are being amortized on a straight-line basis over a period of 40 years.
Management periodically reviews the carrying value to determine whether facts
and circumstances exist which would indicate that the assets are impaired.
Cash and Cash Equivalents
As used in the consolidated statements of cash flows, cash equivalents
represent those short-term investments that can be easily converted into cash
and that have original maturities of three months or less.
Stock-based Compensation
The Company applies Accounting Principles Board Opinion 25 "Accounting for
Stock Issued to Employees" (APB 25) and related interpretations in accounting
for its stock-based compensation plan, as permitted by the Financial Accounting
Standards Board's Opinion No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation". SFAS No. 123 defines a "fair value" based method of accounting
for arrangements by which employees receive shares of stock or other equity
instruments of the employer and encourages, but does not require, entities to
adopt that method of accounting for their employee stock compensation plans.
SFAS 123 requires certain proforma disclosures of the difference between
compensation cost included in net income and the related cost measured by the
fair value method if such differences are material. For the years ended
December 31, 1995 and 1996 APB 25 compensation costs recorded by the Company
approximated compensation cost accounted for under the "fair value" based
method.
Earnings (Loss) per Common Share
Earnings (loss) per common share is based on the weighted average number of
common shares and common share equivalents outstanding during each period.
Warrants to purchase common stock and restricted stock are included in the
weighted average share computations if the effect is not antidilutive.
3. DIVESTITURES
On December 27, 1994, the Company sold the business and assets of its
Cupples Products Division (the "Cupples Division"), which manufactured
curtainwall systems, to a newly formed company owned by a member of the
Company's Board of Directors, for $800,000 cash and the assumption of certain
liabilities by the purchaser. Pursuant to the terms of the sale agreement, the
Company transferred certain contingent future rights to receive up to $900,000
of the proceeds, if any, relating to a curtainwall project which was in progress
and subsequently paid this amount.
During 1994, the Company decided to dispose of its remaining European
Building Products Operations. These operations were sold during 1995 and 1996.
The impact of the ultimate dispositions on the financial statements was not
significant.
On March 3, 1995, the Company sold the business and assets of its Concrete
Construction business (the "Concrete Construction Group") to Ceco Concrete
Construction Corp., ("Ceco Concrete"), a newly formed company owned by an entity
controlled by the Company's Chief Executive Officer. The consideration
consisted of $11,500,000 of cash, adjusted to reflect an as of sale date of
October 1, 1994, a $3,000,000 interest bearing promissory note payable in three
equal annual installments, with interest at 7% (the "Concrete Note"), and the
assumption of certain liabilities by the purchaser. Upon the closing of the
sale, the Company received $8,000,000 of cash, after adjustments.
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 Operations") and in Canada (the
"Canadian Building Products Operations"). In connection therewith, the Company
recorded a charge of $19,455,000, which included the write-off of $5,925,000 of
foreign currency translation adjustment, to reduce the carrying value of the
operations to their estimated net realizable value. On September 30, 1996, the
Asia/Pacific operations were sold for $1,600,000. Under the terms of sale, the
Company will be required to maintain a $2,000,000 letter of credit for one year
from the date of sale to support the operation's credit facility. The buyer is
obligated to reimburse the Company for any amounts drawn on this letter of
credit. Additionally, the Company has agreed to indemnify the buyer for certain
liabilities of the sold business and to supply products at a fixed margin for a
period of two years.
The decision to divest the Asia/Pacific Operations and the Canadian Building
Products Operations represents a 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 reflect these
businesses as discontinued operations. For the December 31, 1995 Consolidated
Balance Sheet, the assets and liabilities of the unsold discontinued operations
are netted and classified as assets held for sale - current. Assets held for
sale were immaterial at December 31, 1996.
The components of net assets held for sale - current are as follows:
December 31
----------------
1995
----
(Thousands)
Accounts and notes receivable, net . $ 15,439
Inventories . . . . . . . . . . . . . 6,446
Property, net . . . . . . . . . . . . 1,924
Prepaid pensions . . . . . . . . . . 5,527
Other assets . . . . . . . . . . . . 2,784
Loans payable and debt . . . . . . . (1,544)
Accounts payable . . . . . . . . . . (4,767)
Other liabilities . . . . . . . . . . (8,279)
Provisions to reduce net assets to estimated
net realizable value . . . . . . . (13,530)
--------
$ 4,000
========
The following table summarizes the revenues and results of the Company's
businesses which have been accounted for as discontinued operations. Income
(loss) from discontinued operations are net of tax expense/(benefit) of $256,000
and $(400,000) during 1994 and 1995, respectively. Income generated by
discontinued Building Products operations during 1996 was approximately by
$924,000, on revenues of $50,539,000, and was considered in the original
provisions recorded for their disposal.
Years Ended December 31
-----------------------
1994 1995
---- ----
(Thousands)
Revenues
Building Products Group . . . . . $ 60,186 $ 48,431
Concrete Construction Group . . . 69,686 11,088
--------- ---------
$ 129,872 $ 59,519
========= =========
Discontinued operations
Income (loss) from discontinued
operations
Building Products Group . . . $ (7,382) $ (388)
Concrete Construction Group . 5,189 505
Fixed price custom curtainwall (8,000) -
-------- --------
$(10,193) $ 117
======== ========
Gain (loss) on sale/disposal of business
segment
Building Products Group . . . . . $(11,400) $(19,455)
Concrete Construction Group . . . - 3,450
-------- --------
$(11,400) $(16,005)
======== ========
Several of the contracts from the Company's discontinued fixed-price custom
curtainwall operation have been the subject of various disputes and litigation
relating to performance, scope of work and other contract issues. The charges
recorded in 1994 relate to costs incurred to provide for the settlement of
contract disputes, litigation and rectification costs.
4. RESTRUCTURING ACTIONS
The Company recorded restructuring charges of $2,075,000 in 1994. These
charges relate primarily to the downsizing of operations and the termination of
approximately thirty-six employees, substantially all of whom had been
terminated as of December 31, 1994.
The amounts accrued and charged against the restructuring reserves during
each of the years ended December 31, 1995 and 1996 are as follows:
Reclassi-
1996 fication of
Balance Provision Businesses Balance
Dec. 31 and 1996 Sold/Held Dec. 31
1995 Adjustments Charges For Sale 1996
------- ----------- ------- ----------- -------
(Thousands)
Employee terminations $ 549 $ 250 $ (786) $ - $ 13
Other . . . . . . . 991 (250) (507) - 234
------ ------ ------- ----- ------
$1,540 $ - $(1,293) $ - $ 247
====== ====== ======= ===== ======
Reclassi-
1995 fication of
Balance Provision Businesses Balance
Dec. 31 and 1995 Sold/Held Dec. 31
1994 Adjustments Charges For Sale 1995
------- ----------- ------- ----------- -------
(Thousands)
Employee terminations $2,404 $ (511) $(1,251) $ (93) $ 549
Other . . . . . . . 198 600 (541) 734 991
------ ------ ------- ----- ------
$2,602 $ 89 $(1,792) $ 641 $1,540
====== ====== ======= ===== ======
5. CASH AND RELATED MATTERS
Cash and cash equivalents consisted of the following:
December 31
------------------
1995 1996
---- ----
(Thousands)
Cash . . . . . . . . . . . . . . . . . . . $ 241 $ -
Time deposits . . . . . . . . . . . . . . . 9,427 12,225
------- -------
$ 9,668 $12,225
======= =======
On December 31, 1995 the Company had $209,000 of restricted cash serving as
remaining collateral on an equipment lease pertaining to a sold business. All
obligations were met in February, 1996. Therefore, the Company did not have any
restricted cash at December, 1996.
6. ACCOUNTS RECEIVABLE
The Company grants credit to its customers, substantially all of which are
involved in the construction industry. At December 31, 1995 and 1996, the
Company's accounts receivable due from customers located outside of the United
States totaled $4,018,000 and $2,680,000, respectively. Accounts receivable
included unbilled retainages of $465,000 and $658,000, respectively, at December
31, 1995 and 1996. There were no retainages due beyond one year at December 31,
1996.
7. INVENTORIES
Inventories consisted of the following:
December 31
------------------
1995 1996
---- ----
(Thousands)
Work in process . . . . . . . . . . . . . . $ 4,880 $ 6,750
Materials and supplies . . . . . . . . . . 8,608 9,067
------- -------
$13,488 $15,817
======= =======
At December 31, 1995 and 1996, all inventories were valued on the LIFO
method. The LIFO value for those inventories approximated their FIFO value at
December 31, 1995 and 1996.
8. OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following:
December 31
------------------
1995 1996
---- ----
(Thousands)
Payroll and related benefits . . . . . . . $10,378 $ 6,163
Warranty and backcharge reserves, current
portion 3,854 3,704
Deferred revenues . . . . . . . . . . . . . 1,450 1,271
Reserves for restructuring, current portion 753 247
Accrued interest . . . . . . . . . . . . . 117 67
Capitalized future interest payments,
current portion . . . . . . . . . . . . . 2,704 8,113
Other . . . . . . . . . . . . . . . . . . . 8,825 9,009
------- -------
$28,081 $28,574
======= =======
9. DEBT
Long-term debt consisted of the following:
December 31
------------------
1995 1996
---- ----
(Thousands)
Term Loan Note . . . . . . . . . . . . . . $ 5,000 $ -
12% Senior Subordinated Notes due November 1999:
Face amount . . . . . . . . . . . . . 22,535 22,535
Capitalized future interest payments,
long-term . . . . . . . . . . . . . 10,817 8,113
15.5% Discount Subordinated Debentures due
November 2000 . . . . . . . . . . . . . . 4,882 4,920
------- -------
43,234 35,568
Less current portion of principal not
refinanced . . . . . . . . . . . . . - 7,455
Less current portion of capitalized interest
payable . . . . . . . . . . . . . . . 2,704 8,113
------- -------
$40,530 $20,000
======= =======
At December 31, 1996, the Company had outstanding performance and financial
bonds of $10,238,000, 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. The outstanding bond amounts above include approximately
$7,725,000 of performance bonding related to businesses which were previously
sold or are pending disposition (see Note 3).
Interest on the 12% Senior Subordinated Notes ("12% Notes") is payable semi-
annually on May 31 and November 30 of each year. Interest accruing on the 12%
Notes through and including May 31, 1995 was payable, at the Company's option,
in cash or additional 12% Notes and after May 31, 1995 is payable in cash. The
Company elected to pay all interest which was due on the 12% Notes through and
including the May 31, 1995 payment in additional notes. The 12% Notes were to
mature on November 30, 1999. Interest on the 15.5% Subordinated Debentures
("15.5% Debentures") is payable quarterly. Indebtedness under the 12% Notes is
senior to the 15.5% Debentures.
In accordance with SFAS No. 15, all future interest payments due on the 12%
Notes were recorded as part of long-term debt in connection with an Exchange
Offer in 1993. As a result, the Company deferred the related economic gain and
has not recorded any interest expense related to the 12% Notes in its
Consolidated Statement of Operations. Cash paid for interest on the 12% Notes
was $1,352,000, and $2,704,000 in 1995 and 1996, respectively. No cash was paid
for interest in 1994 on the 12% Notes.
On December 31, 1996, the Company prepaid its existing term loan with
Foothill Capital Corporation ("Foothill"), and the credit agreement with
Foothill was terminated. In connection with the prepayment, the Company
incurred a $300,000 prepayment penalty. This amount, plus $1,853,000 of
deferred fees and expenses, net of taxes of $838,000, has been included in the
Statements of Operations as extraordinary loss on debt redemption.
Also on December 31, 1996, the Company entered into a new credit agreement
("Credit Agreement") with a group of banks. Under the terms of the Credit
Agreement, the lenders agreed to provide a term loan of up to $20,000,000, due
June 30, 2001. The lenders also agreed to provide a revolving credit and letter
of credit facility of $25,000,000 maturing December 31, 2001. Up to $20,000,000
of the revolving credit facility can be used to support outstanding letters of
credit. Interest on the loans under the Credit Agreement is based on the prime
or the Eurodollar rate plus a factor which depends on the Company's debt to
earnings before taxes, interest, depreciation and amortization ratio. In
addition, the Company pays a commitment fee on the unused amounts of the credit
facility. Availability under the revolving credit facility is based on eligible
accounts receivable and inventory. As of December 31, 1996, the borrowing base
was approximately $26.2 million. As collateral under the Credit Agreement, the
Company has granted the lenders a security interest in all of the assets of the
Company and its Restricted Subsidiaries. The Credit Agreement contains certain
financial covenants restricting dividend payments, repurchase of stock and the
issuance of additional debt, amongst other matters. The Company is in
compliance with the provisions of the Credit Agreement. Under the terms of all
of the Company's debt agreements, no amounts were available for dividends or
repurchase of stock at December 31, 1996.
In December 1996, the Company called for redemption on January 15, 1997, the
amounts outstanding of the 12% Notes and 15.5% Debentures. The 12% Notes and
15.5% Debentures were redeemed on that date utilizing proceeds from borrowing
under the new term loan in the Credit Agreement plus available cash.
Accordingly, $20,000,000 of the Company's long-term debt at December 31, 1996
has been classified as long-term with the remainder reflected in current
liabilities. The total amount of future interest payments on the 12% Notes has
also been reflected as a current liability. This amount, net of taxes, will be
reflected as an extraordinary credit in the Company's 1997 financial statements.
As of December 31, 1996, the Company had outstanding letters of credit of
approximately $17 million used principally to support insurance and bonding
programs.
10. RENTAL AND LEASE INFORMATION
The Company leases certain facilities and equipment under operating leases.
Total rental expense charged to the Consolidated Statements of Operations for
continuing operations on operating leases was $1,604,000, $1,708,000 and
$1,489,000 for 1994, 1995 and 1996 respectively.
Future minimum rental commitments under operating leases at December 31,
1996 are as follows:
(Thousands)
1997 . . . . . . . . . . . . . . . . . . . $1,224
1998 . . . . . . . . . . . . . . . . . . . 894
1999 . . . . . . . . . . . . . . . . . . . 145
2000 . . . . . . . . . . . . . . . . . . . 125
2001 . . . . . . . . . . . . . . . . . . . 75
------
$2,463
======
The above excludes amounts payable under escalation clauses as the
escalation amounts are not determinable.
11. FINANCIAL INSTRUMENTS
The Company enters into various types of financial instruments in the normal
course of business. The estimated fair value of amounts are determined based on
available market information and, in certain cases, on assumptions concerning
the amount and timing of estimated future cash flows and assumed discount rates
reflecting varying degrees of perceived risk. Accordingly, the fair values may
not represent actual values of the financial instruments that could have been
realized as of year end or that will be realized in the future. Fair value for
cash and cash equivalents approximates carrying value at December 31, 1996 due
to the relatively short maturity of these financial instruments. Due to the
Company's redemption of the 12% Notes and the 15.5% Debentures completed on
January 15, 1997, the fair value of these financial instruments approximated
their carrying value at December 31, 1996.
12. TAXES ON INCOME
<CAPTION
Year Ended December 31
---------------------------------
1994 1995 1996
---- ---- ----
(Thousands)
Income (loss) from continuing operations
before provision for taxes on income:
Domestic . . . . . . . . . . . $ (1,008) $ 11,184 $ 22,436
Foreign . . . . . . . . . . . . 841 1,163 1,105
-------- -------- --------
$ (167) $ 12,347 $ 23,541
======== ======== ========
A reconciliation between taxes computed at the U.S. statutory federal income
tax rate and the provision for taxes on income from continuing operations
reported in the Consolidated Statements of Operations follows:
Year Ended December 31
---------------------------------
1994 1995 1996
---- ---- ----
(Thousands)
Tax provision (credit) at U.S. statutory
rate . . . . . . . . . . . . . . . $ (58) $ 4,321 $ 8,239
Differences between foreign and
domestic tax rates . . . . . . . 25 35 -
Net operating loss benefit . . . . (320) (442) (387)
Benefit attributable to utilizing
temporary differences . . . . . . (7) (4,272) (7,198)
State tax . . . . . . . . . . . . . - - 915
Reduction of deferred tax valuation
allowance . . . . . . . . . . . . - - (31,000)
Other non-deductible expenses . . . 360 358 364
-------- -------- -------
Provision for taxes on income . . . $ - $ - $(29,067)
======== ======== ========
Due to the fact that the Company has a tax net operating loss for the year ended
December 31, 1996, the entire provision for taxes on income is deferred.
The following is a summary of the significant components of the Company's
net deferred tax asset (liability) at December 31, 1995 and 1996:
1995 1996
---- ----
(Thousands)
Deferred tax assets:
Insurance liabilities . . . . . . . . . $ 7,385 $ 5,614
Interest on 12% Senior Subordinated Notes 4,208 3,156
Pension liabilities . . . . . . . . . . 2,183 790
Warranties, backcharges and job loss
provisions . . . . . . . . . . . . . . 3,180 3,172
Other expenses not currently deductible 15,194 12,692
Operating loss carryforwards . . . . . . 13,565 14,728
Limited operating loss carryforwards . . 1,225 1,225
Unrealized loss on sale/disposal of
businesses . . . . . . . . . . . . . . 8,147 4,247
-------- ---------
Total tax assets . . . . . . . . . . 55,087 45,624
-------- ---------
Deferred tax liabilities:
Accelerated depreciation . . . . . . . . (3,851) (3,950)
Other items . . . . . . . . . . . . . . (1,269) -
-------- ---------
Total tax liabilities . . . . . . . . (5,120) (3,950)
-------- ---------
Deferred tax asset valuation allowance (49,967) (11,769)
-------- ---------
Net deferred tax asset (liability) . $ - $ 29,905
======== =========
During the third quarter, 1996, the Company reduced its deferred tax asset
valuation allowance by $31,000,000 resulting in a credit to Provision (credit)
for taxes on income. That decision resulted from continued profitable quarterly
results, substantial completion of the Company's divestiture plan, realization
of the benefits of certain restructuring initiatives, successful implementation
of cost containment measures associated with trailing liabilities and other
factors. 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 than likely 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.
At December 31, 1996, the Company had U.S. net operating loss carryforwards
of $33,159,600 for tax reporting purposes which are available to offset future
income without limitation. The U.S. net operating loss carryforwards expire in
the years 2008 through 2011. In addition, the Company has U.S. tax net
operating loss carryforwards of $140,249,000, as well as a general business
credit carryforward of $1,000,000, which use is limited due to a "Change in
Ownership," as defined in Section 382 of the Internal Revenue Code. The
Company's ability to utilize such carryforwards and credits is restricted to an
aggregate potential availability of $3,500,000, with an annual limitation of
approximately $250,000 through the year 2008. Additionally, these carryforwards
could be used to offset income generated by the sale of certain assets.
Additionally, at December 31, 1996, the Company had net operating loss
carryforwards at its Canadian subsidiary of approximately $10,186,000 which
expire in the years 1998 through 2000.
13. CONTINGENT LIABILITIES AND COMMITMENTS
On March 3, 1995, the Company and its surety, Federal Insurance Company
("Federal"), entered into an agreement (the "Federal Agreement") under which
Federal agreed to hold the Company harmless from certain claims pending in
connection with one of the Company's former Fixed Price Custom Curtainwall
projects. Under the terms of the Federal Agreement, Federal assumed control of
the litigation and will also be the beneficiary of any affirmative claim which
the Company may receive. As consideration for Federal's obligations, the
Company assigned to Federal the $3,000,000 interest bearing promissory note
received from the Company's sale of the Construction Group, and agreed to pay
Federal $1,000,000 per year, in equal quarterly installments, for seven years
without interest commencing March 24, 1995. As security for the payment
obligations to Federal, the Company granted to Federal a security interest in
all of the Company's assets and the purchaser delivered a financial guarantee
insurance policy securing payment of the Concrete Note. The Federal Agreement
provides that (i) at least 30% of the ownership of the common stock of the
Company must be held jointly by the current Chairman of the Company, who
currently controls approximately 4.9% of the outstanding common stock and the
current Chief Executive Officer and Vice Chairman of the Company, who currently
controls approximately 55.9% of the outstanding common stock and (ii) either or
both must continue as chief executive officer and/or chairman of the Company.
In the event such common stock ownership and executive officers are not
maintained, the Company will be required to make immediate payment of the
remaining unpaid settlement amount which was $5,000,000 at December 31, 1996.
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.
The Company continues to be liable for liabilities associated with sold or
discontinued businesses (see Note 3) prior to the sale or disposition including,
in certain instances, liabilities arising from Company self-insurance programs,
unfunded pension liabilities, warranty and rectification claims, severance
obligations, environmental clean-up matters, and unresolved litigation arising
in the normal course of the former business activities. Management has made
estimates as to the amount and timing of the payment of such liabilities which
are reflected in the accompanying consolidated financial statements. Given the
subjective nature of many of these liabilities, their ultimate outcome cannot be
predicted with certainty. However, based upon currently available information,
management does not expect the ultimate outcome of such matters will have a
material effect on the consolidated financial statements.
The Company has been identified as a potentially responsible party by
various state and Federal authorities for clean-up and monitoring costs at waste
disposal sites related to discontinued operations. Due to various factors, it
is difficult to estimate future environmental related expenditures. The Company
has engaged third parties to perform feasibility studies and assist in
estimating the cost of investigation and remediation. At December 31, 1996, the
Company has recorded reserves of approximately $7 million, representing
management and the third parties' best estimate of future costs to be incurred.
The majority of these expenditures are expected to be incurred in the next five
years. Although unexpected events could have an impact on these estimates,
management does not believe that additional costs that could be incurred would
have a material effect on the consolidated financial statements.
With respect to the environmental clean-up matters, the Company has claimed
coverage under its insurance policies for past and future clean-up costs related
to certain sites for which the Company believes it is indemnified under its
insurance policies. The insurer has refused to admit or deny coverage under the
Company's policies. As a result, the Company has filed a complaint against the
insurer seeking to recover the past and future clean-up costs. It is not
currently possible to predict the amount or timing of proceeds, if any, from the
ultimate resolution of this matter.
14. INCENTIVE PLANS, WARRANTS
Long-Term Incentive Plan
The Company's Long-Term Incentive Plan, (the "Incentive Plan"), as amended
and restated, provides for the grant of both cash-based and stock-based awards
to eligible employees of, and persons or entities providing services to the
Company and its subsidiaries and provides for one-time, automatic stock awards
to non-employee members of the Board of Directors. Under the Incentive Plan,
the Company may provide awards in the form of stock options, stock appreciation
rights, restricted shares, performance awards, and other stock based awards.
Currently up to 1,400,000 shares of common stock are issuable under the
Incentive Plan, subject to appropriate adjustment in certain events. Shares
issued pursuant to the Incentive Plan may be authorized and unissued shares, or
shares held in treasury. Awards may be granted under the Incentive Plan
through March 19, 2001, unless the plan is terminated earlier by action of the
Board of Directors. At December 31, 1996, there were 1,056,000 shares under the
Long-Term Incentive Plan which were available for grant.
On December 22, 1993, the Company granted awards (the "1993 Awards") of
564,000 restricted shares of the Company's common stock to certain executive
officers and key employees. The awards are designed to incentivize management
in a manner which would enhance shareholder value by tying vesting provisions to
achievement of performance targets representing increases in the average market
value of the Company's common stock. The accelerated vesting provisions include
comparison of future share prices to a pre-determined base price (each measured
on a 60-day average basis), cumulative market value appreciation targets over a
three year period, and a requirement of continued employment with the Company
except in certain specific circumstances. The base price for the 1993 Awards
was $3.41 per share. The 1993 Awards also provide that if performance targets
are not achieved by August 10, 1996, all unvested shares not forfeited will vest
automatically on August 10, 2003, provided the holder is still an employee of
the Company as defined in the plan. The performance targets were not achieved
by August 10, 1996. The 1993 Awards provide for immediate vesting if a change
in the control of the Company occurs, as defined.
During 1994, 203,000 restricted shares from the 1993 Awards were forfeited
as a result of employee terminations and 140,000 restricted shares of the 1993
Awards were vested pursuant to the provisions of an employment agreement between
the Company and a former president.
During 1995, 140,000 restricted shares were issued of which one-third of
the shares vested on the date of the grant, the second one-third vested on
November 1, 1995, and the remaining one-third vested on November 1, 1996. Also
during 1995, 2,052 shares were issued to a director and 88,000 restricted shares
from the 1993 Awards were forfeited as a result of employee terminations.
During 1996, 93,000 restricted shares from the 1993 Awards were forfeited
as a result of employee terminations and 15,000 restricted shares were issued
with a vesting period of 5 years. At December 31, 1996, 55,000 unvested
restricted shares were outstanding.
The fair market value of the restricted shares, based on the market price
at the date of the grant, is recorded as deferred compensation, as a component
of stockholders' equity, and deferred compensation expense is amortized over the
period benefited.
Warrants
During 1996, all warrants to purchase common stock of the Company expired.
15. RELATED PARTY TRANSACTIONS
During 1994, the Company agreed to pay $222,000 to a company affiliated
with the Company's Chief Executive Officer for the services of an individual who
served as President of the Company's Metal Buildings Group during the period
from February 1994 through November 3, 1994 and as President and Chief Operating
Officer of the Company from November 3, 1994 through December 31, 1994. The
Company also agreed to pay to another affiliated company of the Company's Chief
Executive Officer $260,000, $274,000 and $240,000 during 1994, 1995 and 1996,
respectively, for manufacturing and certain other consulting services. Pursuant
to a consulting agreement with a company affiliated with the Company's Chairman,
the Company paid $200,000 in 1994 for financial and operational restructuring
services. In connection with the sale of the Cupples Division, the consulting
agreement with that company was terminated.
The Company has an employment agreement and severance payment plan with one
of its executive officers. This agreement generally provides for salary
continuation for a specified number of months under certain circumstances.
16. RETIREMENT BENEFITS
Historically, the Company provided retiree benefits to substantially all of
its U.S. and certain of its foreign employees under various defined benefit
pension plans. In connection with it's restructuring initiatives, the Company
amended its U.S. defined benefit pension plan, effective January 1, 1995, so
that active salary employees will cease to accrue future benefits after that
date. Additionally, effective April 1, 1996, the plan was further amended so
that certain U.S. active hourly employees who are not part of a collective
bargaining agreement will cease to accrue future plan benefits. As a result of
the plan amendments pertaining to the salary and hourly employees discussed
above, the Company recorded curtailment losses of $465,000 in 1994 and $300,000
in 1995.
Benefits which are provided under the Company's defined benefit pension
plans are primarily based on years of service and the employee's compensation.
Plan assets of the Company's defined benefit plans are invested in broadly
diversified portfolios of government obligations, mutual funds, stocks, bonds
and fixed income and equity securities.
Currently, the Company's funding policy is to make payments to its defined
benefit plans as required by minimum funding standards of the Internal Revenue
Code.
Net pension cost of defined benefit pension plans was:
Year Ended December 31
-------------------------------
1994 1995 1996
---- ---- ----
(Thousands)
Service cost-benefits earned during the year $ 699 $ 241 $ 63
Curtailment loss and special termination
benefits from sale of the Cupples Division
and termination of future benefit accruals
for salaried and hourly employees . . 738 300 -
Interest cost on projected benefit obligation 4,305 4,195 3,766
Actual return on assets . . . . . . . . 463 (8,622) (6,854)
Net amortization and deferral . . . . . (3,642) 5,700 2,651
------- ------- -------
Net pension cost (income) . . . . . . . $ 2,563 $ 1,814 $ (374)
======= ======= =======
The above net pension cost includes the pension expense related to certain
employees of the Cupples Division and Concrete Construction Group (see Note 3).
The amount of net pension expense which was allocated to the Cupples Division
and Concrete Construction Group for the years ended 1994, 1995 and 1996 was
$365,000, $70,000 and $0, respectively.
The following table sets forth the aggregate funded status of the Company's
defined benefit pension plans:
December 31
-----------------------
1995 1996
---- ----
(Thousands)
Actuarial present value of benefit obligation:
Vested benefit obligation . . . . . . . . . $ 56,312 $ 51,494
Non-vested benefit obligation . . . . . . . 893 851
-------- --------
Accumulated benefit obligation . . . . . . . 57,205 $ 52,345
Excess of projected benefit obligation over
accumulated benefit obligation . . . . . . - -
-------- --------
Projected benefit obligation . . . . . . . . . 57,205 52,345
Plan assets at fair value . . . . . . . . . . . 48,653 51,756
-------- --------
Projected benefit obligation in excess of
plan assets . . . . . . . . . . . . . . . . (8,552) (589)
Unrecognized net (gain) loss . . . . . . . . . 5,195 (368)
Remaining unrecognized net transition obligation 121 103
Adjustment required to recognize minimum liability (5,316) -
-------- --------
Net prepaid (accrued) pension cost recognized in the
Consolidated Balance Sheets . . . . . . . . . $ (8,552) $ (854)
======== ========
Actuarial assumptions used for the Company's defined benefit plans were as
follows:
Years Ended December 31
-------------------------------
1994 1995 1996
---- ---- ----
Assumed discount rate . . . . . . 8.25% 7.25% 7.25%
Assumed rate of compensation increase 5.0 - -
Expected rate of return on plan assets 9.0 9.0 9.0
Certain U.S. salaried and hourly employees, who are not part of a collective
bargaining agreement, are covered by a defined contribution plan which provides
for contributions based primarily on compensation levels. The Company funds its
contributions to the defined contribution plan as accrued. Plan assets of
defined contribution plans are invested in bank funds. Expense related to the
Company's defined contribution plan was:
Years Ended December 31
-------------------------------
1994 1995 1996
---- ---- ----
(Thousands)
$ 608 $ 655 $ 881
====== ====== ======
17. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors postretirement medical and life insurance plans that
cover a closed group of eligible retirees and their dependents. None of the
plans are funded, nor do they have any plan assets.
The following table sets forth the funded status reconciled with the amount
recognized in the Company's Consolidated Balance Sheets.
December 31,
----------------------
1995 1996
------- --------
(Thousands)
Accumulated Postretirement Benefit Obligation
("APBO"):
Retired employees . . . . . . . . . . . . $ (3,116) $ (2,236)
======== ========
Unfunded accumulated benefit obligation in
excess of plan assets . . . . . . . . . $ (3,116) $ (2,236)
Unrecognized net (gain)/loss . . . . . . (4,565) (4,243)
Unrecognized transition obligation . . . 7,238 5,978
-------- --------
Accrued postretirement benefit cost
recognized in the Consolidated Balance
Sheets . . . . . . . . . . . . . . . . $ (443) $ (501)
======== ========
Weighted average discount rate used in
determination of APBO . . . . . . . . 7.25% 7.25%
======== ========
Net periodic postretirement benefit cost for 1994, 1995 and 1996 included
the following components:
Year Ended December 31,
----------------------------
1994 1995 1996
------ ------ ------
(Thousands)
Interest cost . . . . . . . . . . . . $1,413 $ 320 $ 195
Net amortization and deferral . . . . 1,542 1,541 933
------ ------ ------
Net periodic postretirement benefit
cost . . . . . . . . . . . . . . . $2,955 $1,861 $1,128
====== ====== ======
Weighted average discount rate used in
determination of APBO . . . . . . . 7.25% 8.25% 7.25%
====== ====== ======
For measurement of the net periodic postretirement benefit cost and the
APBO, a 0% annual rate of increase in the per capita cost of covered health care
benefits was assumed for the year 1995-1996; the rate was assumed to increase to
9.75% for the year 1996-1997, and then to decline uniformly to 5.75% by the year
2001-2002. The rate was assumed to be 5.25% for the year 2002-2003 and to
remain at that level thereafter. During 1995, the Company amended its plans to
eliminate health care coverage for participants age 65 and over and redesigned
existing plans to include, beginning during 1996, various managed care health
care programs and increased participant premiums. Decreases in the APBO and in
the net periodic postretirement benefit cost from 1994 to 1995 reflect these
amendments. Due to the elimination of post-65 health coverage in 1995, the
medical trend rate assumption has an immaterial impact on results.
18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial data is summarized as follows:
First Second Third Fourth
----- ------ ----- ------
1996 (a)(c)
Revenue . . . . . . . . . . . $56,972 $63,876 $70,433 $64,612
Cost of sales . . . . . . . . 46,081 49,899 54,387 51,111
Income (loss) from continuing
operations . . . . . . . . 3,262 6,545 39,624 3,177
Extraordinary loss on debt
restructuring . . . . . . . - - - (1,315)
Net income (loss) . . . . . . 3,262 6,545 39,624 1,862
Income (loss) per share from
continuing operations . . . $ .20 $ .41 $ 2.46 $ .20
Net income (loss) per common share $ .20 $ .41 $ 2.46 $ .12
1995 (a)(b)
Revenue . . . . . . . . . . . $60,927 $66,418 $70,620 $67,018
Cost of sales . . . . . . . . 51,422 54,463 57,098 55,302
Income (loss) from continuing
operations . . . . . . . . 1,178 2,260 4,473 4,436
Net income (loss) . . . . . . 4,527 1,419 4,754 (14,241)
Income (loss) per share from
continuing operations . . . $ .07 $ .14 $ .28 $ .28
Net income (loss) per common share $ .28 $ .09 $ .30 $ (.89)
(a) The quarterly financial data presented reflects the Building Products
Group and the Concrete Construction Group as discontinued operations.
(b) During the first quarter of 1995, the Company recorded a gain on
sale/disposal of business segment of $3,450,000 which related to the sale of the
Concrete Construction Group and, during the fourth quarter of 1995, the Company
recorded a $19,455,000 loss on sale/disposal of business segment to write-down
the carrying value of the Asia/Pacific and Canadian Building Products Operations
to their estimated net realizable values.
(c) During the third quarter of 1996, the Company reduced its deferred tax asset
valuation allowance from $42,769,000 to $11,769,000 resulting in a $31,000,000
credit to Provision (credit) for taxes on income. That decision resulted from
continued profitable quarterly results, substantial completion of the Company's
divestiture plan, realization of the benefits of certain restructuring
initiatives, successful implementation of cost containment measures associated
with trailing liabilities and other factors. (See Note 12.) During the fourth
quarter of 1996, the Company prepaid its term loan with Foothill Capital
Corporation terminating its credit agreement. In connection with this
prepayment deferred fees and expenses totaling $1,315,000, net of taxes of
$838,000, were recorded as extraordinary loss on debt redemption
Independent Auditors' Report
To the Board of Directors and
Stockholders of Robertson-Ceco Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity (deficiency) and
of cash flows present fairly, in all material respects, the financial position
of Robertson-Ceco Corporation and its subsidiaries (the "Company") at December
31, 1996 and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Francisco, California
February 13, 1997
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
(a) Information concerning the Registrant's directors is incorporated by
reference to the section entitled "Election of Directors" in the
registrant's definitive proxy statement for the Annual Meeting of
Stockholders to be held on May 20, 1997, to be filed pursuant to
Regulation 14A.
(b) Information concerning executive officers of the Registrant is set forth
in Item 4.1 of Part I page 7 of this Report under the heading "EXECUTIVE
OFFICERS OF THE REGISTRANT".
ITEM 11.EXECUTIVE COMPENSATION
----------------------
Information concerning executive compensation is incorporated by reference to
the section entitled "Executive Compensation" in the registrant's definitive
proxy statement for the Annual Meeting of Stockholders to be held on May 20,
1997, to be filed pursuant to Regulation 14A.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Information concerning security ownership of certain beneficial owners and
management is incorporated by reference to the section entitled "Security
Ownership" in the registrant's definitive proxy statement for the Annual Meeting
of Stockholders to be held on May 20, 1997, to be filed pursuant to Regulation
14A.
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Information concerning certain relationships and related transactions is
incorporated by reference to the section entitled "Certain Relationships and
Related Transactions" in the registrant's definitive proxy statement for the
Annual Meeting of Stockholders to be held on May 20, 1997, to be filed pursuant
to Regulation 14A.
PART IV
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
PAGE NO.
The following documents are filed as part of this Report
Report:
(a)1. Consolidated Financial Statements of Robertson-Ceco
Corporation. 17
Consolidated Statements of Operations for the three
years ended December 31, 1996. 17
Consolidated Balance Sheets at December 31, 1995 and
1996. 18
Consolidated Statements of Cash Flows for the three
years ended December 31, 1996. 20
Consolidated Statements of Stockholders' Equity (Defic-
iency) for the three years ended December 31, 1996. 21
Notes to Consolidated Financial Statements, including
Selected Quarterly Financial Data as required by Item
302 of Regulation S-K. 22
Independent Auditors' Reports.
Price Waterhouse LLP 39
(a)2. Financial Statement Schedules for the Three Years
Ended December 31, 1996.
SCHEDULE II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable or not required. 44
Report of Independent Accountants on Financial Schedules
Price Waterhouse LLP - as of and for the years ended
December 31, 1994, 1995 and 1996. 46
(a)3. List of Exhibits.
Exhibits filed or incorporated by reference in
connection with this Report are listed in the
Exhibit Index starting on page 47.
(b) Reports on Form 8-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the city of San
Ramon, California, on this 26th day of March 1997.
ROBERTSON-CECO CORPORATION
By /s/ Patrick G. McNulty
--------------------------------
Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and as of the
26th day of March, 1997. Each person whose signature appears below hereby
authorizes each of Andrew G. C. Sage, II, Elmer A. Roskovensky and Ronald D.
Stevens and appoints each of them singly his or her attorney-in-fact, each with
full power of substitution, to execute in his name, place and stead, in any and
all capacities, any or all further amendments to this Report and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, making such further changes in this
Report as the Company deems appropriate.
SIGNATURE
/s/ Michael E. Heisley /s/ Andrew G. C. Sage, II
- ---------------------------------- -------------------------------
Michael E. Heisley Andrew G. C. Sage, II
Chief Executive Officer and Director Chairman and Director
(Principal Executive Officer)
/s/ Elmer A. Roskovensky /s/ Ronald D. Stevens
- ---------------------------------- -------------------------------
Elmer A. Roskovensky Ronald D. Stevens
President and Chief Operating Officer Executive Vice President and Chief
and Director Financial Officer
/s/ Frank A. Benevento /s/ Stanley G. Berman
- ---------------------------------- -------------------------------
Frank A. Benevento Stanley G. Berman
Director Director
/s/ Mary Heidi Hall Jones /s/ Kevin E. Lewis
- ---------------------------------- -------------------------------
Mary Heidi Hall Jones Kevin E. Lewis
Director Director
/s/ Leonids Rudins /s/ Gregg C. Sage
- ---------------------------------- -------------------------------
Leonids Rudins Gregg C. Sage
Director Director
/s/ Stanley H. Meadows /s/ Patrick G. McNulty
- ---------------------------------- -------------------------------
Stanley H. Meadows Patrick G. McNulty
Director Controller
ROBERTSON-CECO CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Thousands)
==================================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE ----------------------- BALANCE
AT CHARGED TO CHARGED TO AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996:
Deducted from Asset
Accounts:
Allowance for
Doubtful Accounts $ 1,302 $ 945 $ 241 (a) $ 607 (b) 1,881
======= ======= ======= ======= =======
Reserves for Discon-
tinued Operations
(g) $ 7,613 $ - $ - $ 1,340 (c) $ 6,273
======= ======= ======= ======= =======
Not Deducted from Asset
Accounts:
Insurance liabilities
- current $ 8,243 $ 6,385 $ - $ 8,534 (c) $ 6,094
======= ======= ======= ======= =======
Insurance liabilities
- long-term $10,744 $ - $ - $ 2,395 (d) $ 8,349
======= ======= ======= ======= =======
Other-current (f) $ 6,445 $ 2,147 $ - $ 3,119 (c) 5,473
======= ======= ======= ======= =======
Other-noncurrent (g) $11,383 $ - $ - $ 810 (c) 10,573
======= ======= ======= ======= =======
YEAR ENDED DECEMBER 31,
1995:
Deducted from Asset
Accounts:
Allowance for
Doubtful Accounts . . . . $ 1,143 $ 732 $ 87 (a) $ 500 (b)
160 (e) 1,302
======= ======= ======= ======= =======
Reserves for Disco-
tinued Operations
(g) . . . . . . . . . $12,309 $ $ $ 4,696 (c) $ 7,613
======= ======= ======= ======= =======
Not Deducted from Asset
Accounts:
Insurance liabilities
- current . . . . . . . . . $ 8,365 $ 9,561 $ 5,975 $15,191 (c) $ 8,243
467 (d)
======= ======= ======= ======= =======
Insurance liabilities
- long-term . . . . . . . . $15,084 $ $ $ 4,340 (d) $10,744
======= ======= ======= ======= =======
Other-current (f) . . . . $ 6,827 $ 3,281 $ 2,373 $ 5,454 (c)
166 (d)
416 (e) 6,445 (h)
======= ======= ======= ======= =======
Other-noncurrent (g) . . . . $11,028 $ $ 1,800 $ 1,304 (d) $
141 (e) 11,383
======= ======= ======= ======= =======
ROBERTSON-CECO CORPORATION SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Continued)
(Thousands)
================================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE ----------------------- BALANCE
AT CHARGED TO CHARGED TO AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1994:
Deducted from Asset
Accounts:
Allowance for
Doubtful Accounts . . . . . $ 3,255 $ 692 $ 13 (a) $ 729 (b)
2,088 (e) $ 1,143
======= ======= ======= ======= =======
Reserves for Discon-
tinued Operations
(g) . . . . . . . . . . $ 5,246 $ 8,000 $ 166 $ 1,103 (c) 12,309
======= ======= ======= ======= =======
Not Deducted from
Asset Accounts:
Insurance liabilities
- current . . . . . . . . . . $11,225 $14,908 $ 331 $18,099 (c) $ 8,365
======= ======= ======= ======= =======
Insurance liabilities
- long-term . . . . . . . . . $14,770 $ $ 332 $ 18 (d) $15,084
======= ======= ======= ======= =======
Other-current (f) . . . . . $12,568 $ 8,397 $ 1,311 (d) $10,818 (c)
3,834 (e)
797 (d) $ 6,827 (h)
======= ======= ======= ======= =======
Other-noncurrent (g) . . . . . $13,616 $ $ 36 (d) $ 2,624 (d) $11,028
======= ======= ======= ======= =======
NOTES:
(a) Represents recovery of accounts receivable previously written off as
uncollectible.
(b) Accounts receivable written off as uncollectible.
(c) Represents charges to the accounts for their intended purposes.
(d) Represents transfer of reserves.
(e) Represents reserves of sold/held for sale businesses.
(f) The reserves are included in the caption "Other Accrued Liabilities" in the
Consolidated Balance Sheets.
(g) Current reserves are included in the caption "Other Accrued Liabilities"
and non-current reserves are included in the Caption "Reserves and Other
Long-Term Liabilities" in the Consolidated Balance Sheets.
(h) The reserves include warranty and backcharge reserves, reserves for
restructuring, environmental and job loss reserves included in the caption
"Other Accrued Liabilities" in the Consolidated Balance Sheets. See Notes
to Consolidated Financial Statements.
Report of Independent Accountants on
Financial Statement Schedules
To the Board of Directors
of Robertson-Ceco Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 13, 1997 appearing on page 38 of the 1996 Annual Report on Form
10-K of Robertson-Ceco Corporation also included an audit of the Financial
Statement Schedule which is as of and for the years ended December 31, 1994 ,
1995 and 1996 listed in Item 14(a) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Francisco, California
February 13, 1997
Exhibit Index
Exhibit Sequential
No. Description Page No.
3.1 Registrant's Second Restated Certificate of Incorporation,
effective July 23, 1993, filed as Exhibit 3 to Registrant's
report on Form 8-K dated July 14, 1993 (File No. 1-10659),
and incorporated herein by reference thereto . . . .
3.2 Bylaws of Registrant, effective November 8, 1990, and as
Amended on November 12, 1991, August 27, 1992 and December
16, 1993, filed as Exhibit 3.2 to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993
(File No. 1-10659), and incorporated herein by reference
thereto . . . . . . . . . . . . . . . . . . . . . . .
4.1 Amended and Restated Stockholders Agreement dated as of
July 12, 1990 by and among the principal stockholders of
Ceco Industries, Inc., H.H. Robertson Company and Registrant
(formerly known as The Ceco Corporation) filed as Exhibit 4.2
to Registration Statement of The Ceco Corporation on Form S-4,
Registration Statement No. 33-37020, and incorporated
herein by reference thereto . . . . . . . . . . . . .
4.2 Registration Rights Agreement dated May 17, 1993 by and
among the Registrant and Sage RHH filed as Exhibit 10.27
to the Registrant's Registration Statement on Form S-4,
Registration Statement No. 33-58818, and incorporated
herein by reference thereto . . . . . . . . . . . . .
4.3 Registration Rights Agreement dated December 14, 1993 by
and among the Registrant and Heico Acquisitions, Inc. filed
as Exhibit 4.14 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 (File No. 1-10659),
and incorporated herein by reference thereto . . . .
10.1 1986 Stock Option Plan of H.H. Robertson Company (a
predecessor of Registrant), as adopted and approved by H.H.
Robertson Company's shareholders on May 6, 1986, as amended
by H.H. Robertson Company's Board of Directors on March 24,
1987 and as further amended by H.H. Robertson Company's
Board of Directors on February 22, 1989, filed as Exhibit
19 to the report of H.H. Robertson Company on Form 10-Q of
H.H. Robertson Company for the quarter ended September 30,
1989, (File No. 1-5697), and incorporated herein by
reference thereto . . . . . . . . . . . . . . . . . .
10.2 Employment Agreement between Registrant and Andrew G. C.
Sage, II dated July 15, 1993 filed as Exhibit 10.23 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 (File No. 1-10659), and incorporated herein
by reference thereto . . . . . . . . . . . . . . . .
10.3 Amended and Restated 1991 Long Term Incentive Plan, filed as
Exhibit 4.1 to Registrant's Form S-8 Registration Statement
No. 33-51665 dated December 22, 1993, and incorporated
herein by reference thereto . . . . . . . . . . . . .
10.4 Agreement by and among Registrant, Capella Investments
Limited and H. H. Robertson (U.K.) Limited dated November 9,
1993, filed as Exhibit 2.1 to the Registrant's report on
Form 8-K dated November 22, 1993, and incorporated herein
by reference thereto . . . . . . . . . . . . . . . .
10.5 Registration Rights Agreement dated May 17, 1993 by and among
the Registrant and Sage RHH referred to in Exhibit 4.2 above
10.6 Registration Rights Agreement dated December 14, 1993 by and
among the Registrant and Heico Acquisitions, Inc. referred
to in Exhibit 4.3 above . . . . . . . . . . . . . . .
10.7 Asset Purchase Agreement, dated December 27, 1994 by and
between Cupples Products, Inc. and the Registrant filed as
Exhibit 2.1 to Registrant's Report on Form 8-K dated December
27, 1994 (File No. 1-10659), and incorporated herein by
reference thereto . . . . . . . . . . . . . . . . . .
10.8 Agreement for Purchase and Sale of Assets dated March 3, 1995
by and between the Registrant and Ceco Concrete Construction
Corp. filed as Exhibit 2.1 to Registrant's Report on Form 8-K
dated March 3, 1995 (File No. 1-10659), and incorporated
herein by reference thereto . . . . . . . . . . . . .
10.9 Settlement Agreement dated March 3, 1995 by and between the
Registrant and Federal Insurance Company filed as Exhibit 10.43
to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 1-10659) and incorporated herein by
reference thereto . . . . . . . . . . . . . . . . . .
10.10 Agreement for Purchase and Sale of Shares by and among the
Registrant Bruco International, Inc. and H.H. Robertson
Asia/Pacific Pte Ltd dated September 27, 1996 filed as Exhibit 2 to
Registrant's Report on FORM 10-K dated September 30, 1996
(File NO. 1-10659) and incorporated herein by reference thereto
11 Statement re Computation of Earnings (Loss) Per Common Share
21 List of subsidiaries of Registrant . . . . . . . . .
23.1 Consent of Price Waterhouse LLP . . . . . . . . . . .
27 Financial Data Schedule . . . . . . . . . . . . . . .