UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1997
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 1-10659
ROBERTSON-CECO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3479146
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification No.
5000 Executive Parkway, Ste. 425, San Ramon, California 94583
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 510-358-0330
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 7, 1997
Common Stock, par value $0.01 per share 16,111,550
ROBERTSON-CECO CORPORATION
Form 10-Q
For Quarter Ended September 30, 1997
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets --
September 30, 1997 and December 31, 1996 . 3
Condensed Consolidated Statements of Operations --
Three and Nine Months Ended September 30, 1997 and 19965
Condensed Consolidated Statements of Cash Flows --
Nine Months Ended September 1997 and 1996 . 7
Notes to Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . 13
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 17
Signatures . . . . . . . . . . . . . . . . . . . . . . . 18
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 1. FINANCIAL STATEMENTS
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30 December 31
1997 1996
-- ASSETS--
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . $ 13,237 $ 12,225
Accounts and notes receivable, net . . . . . . . . 32,350 22,385
Inventories:
Work in process . . . . . . . . . . . . . . . 9,350 6,750
Material and supplies . . . . . . . . . . . . 6,130 9,067
Total inventories . . . . . . . . . . . . . . 15,480 15,817
Deferred taxes, current . . . . . . . . . . . . . 6,298 6,067
Other current assets . . . . . . . . . . . . . . . 522 810
Total current assets . . . . . . . . . . . . . 67,887 57,304
PROPERTY - at cost . . . . . . . . . . . . . . . . . . 48,194 43,101
Less accumulated depreciation . . . . . . . . . . (22,548) (20,147)
Property, net . . . . . . . . . . . . . . . . 25,646 22,954
DEFERRED TAXES . . . . . . . . . . . . . . . . . . . . 13,199 23,837
EXCESS OF COST OVER NET ASSETS OF
ACQUIRED BUSINESSES - Net . . . . . . . . . . . . 25,990 26,611
OTHER NON-CURRENT ASSETS . . . . . . . . . . . . . . . 1,133 1,514
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . $ 133,855 $ 132,220
See Notes to Condensed Consolidated Financial Statements
ITEM 1. FINANCIAL STATEMENTS
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
September 30 December 31
1997 1996
--LIABILITIES --
CURRENT LIABILITIES:
Current portion of long-term debt . . . . . . . . $ 5,000 $ 7,455
Accounts payable, principally trade . . . . . . . 17,864 12,578
Insurance liabilities . . . . . . . . . . . . . . 5,627 6,094
Other accrued liabilities . . . . . . . . . . . . 19,999 28,574
Total current liabilities . . . . . . . . . . . . 48,490 54,701
LONG-TERM DEBT, less current portion . . . . . . . . . 11,250 20,000
LONG-TERM INSURANCE LIABILITIES . . . . . . . . . . . . 7,586 8,349
LONG-TERM PENSION LIABILITIES . . . . . . . . . . . . . 1,678 2,231
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . 20,957 20,695
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . 89,961 105,976
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $0.01 per share . . . . . 161 161
Capital surplus . . . . . . . . . . . . . . . . . 178,256 178,256
Retained earnings (deficit) . . . . . . . . . . . (133,885) (151,527)
Deferred compensation . . . . . . . . . . . . . . (168) (195)
Foreign currency translation adjustments . . . . . (470) (451)
Stockholders' equity . . . . . . . . . . . . . 43,894 26,244
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY . . . . . . . . . $ 133,855 $ 132,220
See Notes to Condensed Consolidated Financial Statements
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
NET REVENUES . . . . . . $ 79,170 $ 70,433 $208,884 $191,281
COSTS OF SALES . . . . . 64,496 54,387 169,810 150,367
GROSS PROFIT . . . . . . 14,674 16,046 39,074 40,914
SELLING, GENERAL AND
ADMINISTRATIVE . . . 5,748 6,792 17,395 19,995
OPERATING INCOME . . . . 8,926 9,254 21,679 20,919
OTHER INCOME (EXPENSE):
Interest expense . . . (388) (1,043) (1,294) (3,066)
Other income - net . . 144 213 483 578
(244) (830) (811) (2,488)
INCOME BEFORE INCOME TAXES 8,682 8,424 20,868 18,431
INCOME TAXES . . . . . . 3,103 (31,200) 7,794 (31,000)
INCOME BEFORE EXTRAORDINARY
ITEM . . . . . . . . . 5,579 39,624 13,074 49,431
EXTRAORDINARY GAIN ON DEBT
REDEMPTION . . . . . . - - 4,568 -
NET INCOME . . . . . . . $ 5,579 $ 39,624 $ 17,642 $ 49,431
See Notes to Condensed Consolidated Financial Statements
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
RETAINED EARNINGS (DEFICIT)
AT BEGINNING OF PERIOD . . . . . . . . $ (139,464) $ (193,011) $ (151,527)$ (202,818)
NET INCOME . . . . . . . . . . . . . . . 5,579 39,624 17,642 49,431
RETAINED EARNINGS (DEFICIT)
AT END OF PERIOD . . . . . . . $ (133,885) $ (153,387) $ (133,885)$ (153,387)
INCOME PER COMMON SHARE:
Income before Extraordinary Item . . . $ .35 $ 2.46 $ .82 $ 3.07
Extraordinary Item . . . . . . . . . . $ - $ - $ .28 $ -
NET INCOME . . . . . . . . . . . . . $ .35 $ 2.46 $ 1.10 $ 3.07
SHARES USED IN INCOME
. . . . . . . . PER SHARE CALCULATION 16,092 16,126 16,089 16,123
See Notes to Condensed Consolidated Financial Statements
ROBERTSON-CECO CORPORATION
CONSENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before extraordinary item . . . . . . . . . . . . . . $ 13,074 $ 49,431
Adjustments to reconcile income before extraordinary
item to net cash provided by (used for)
operating activities:
Depreciation and amortization . . . . . . . . . . . . . 3,355 4,209
Deferred income taxes . . . . . . . . . . . . . . . . . 7,794 (31,000)
Changes in assets and liabilities, net of divestitures:
Increase in accounts and notes receivable . . . . . (10,018) (2,190)
Decrease in inventories . . . . . . . . . . . . . . 337 1,581
Increase (decrease) in accounts payable . . . . . . 5,286 (4,224)
Net changes in other assets and liabilities . . . . 164 (1,459)
NET CASH PROVIDED BY OPERATING
ACTIVITIES . . . . . . . . . . . . . . . . . . . . . 19,992 16,348
NET CASH USED FOR DISCONTINUED
OPERATIONS . . . . . . . . . . . . . . . . . . . . . (1,804) (6,577)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net . . . . . . . . . . . . . . . . . . (5,357) (3,134)
NET CASH USED FOR INVESTING ACTIVITIES $ (5,357) $ (3,134)
See Notes to Condensed Consolidated Financial Statements
ROBERTSON-CECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30
1997 1996
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term borrowings . . . . . . . . . . . . . . $ (11,481) $ -
Payment of capitalized interest on 12% Notes . . . . . . . . (338) (1,324)
NET CASH USED FOR FINANCING ACTIVITIES . . . . . . . . . (11,819) (1,324)
NET INCREASE IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . 1,012 5,313
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . 12,225 9,668
CASH AND CASH EQUIVALENTS -
END OF PERIOD . . . . . . . . . . . . . . . . . . . $ 13,237 $ 14,981
SUPPLEMENTAL CASH FLOW DATA:
Cash payments made for:
Interest . . . . . . . . . . . . . . . . . . . . . . $ 1,587 $ 2,861
Income taxes . . . . . . . . . . . . . . . . . . . . $ - $ -
See Notes to Condensed Consolidated Financial Statements
ROBERTSON-CECO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of the management of Robertson-Ceco Corporation (the
"Company"), the accompanying unaudited Condensed Consolidated Financial
Statements contain all adjustments necessary to present fairly the
financial position as of September 30, 1997 and the results of operations
and cash flows for the periods presented. All adjustments recorded during
the period consisted of normal recurring adjustments. Certain previously
reported amounts have been reclassified to conform to the 1997
presentation.
2. TAXES ON INCOME
During the third quarter 1996, the Company reduced the deferred tax asset
valuation allowance from $43,000,000 to $12,000,000, resulting in a
$31,000,000 credit to income taxes. Under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," the Company is
required to recognize the portion of its deferred tax asset which it
believes will more likely than not be realized. Management believes that
the Company will be able to realize the unreserved portion of its deferred
tax asset through future earnings. Accordingly, beginning in the third
quarter of 1996, the Company began recognizing income tax expense at
appropriate rates on its pre-tax income. However, cash payments for
Federal income taxes are not expected to be made until the end of fiscal
year 1998. Management will continue to evaluate the level of its deferred
tax valuation allowance at each balance sheet date and adjust the valuation
reserve as warranted by changes in the Company's expected future
profitability, amounts and timing of payments related to its trailing
liabilities, or other events which might affect the realization of the
Company's deferred tax asset.
3. DISPOSITIONS
On September 30, 1996, the Company sold its Asia/Pacific Building Products
operation for approximately $1,600,000. Pursuant to the sale, the Company
will maintain a $2,000,000 letter of credit until December 31, 1997, in
support of the Asia/Pacific Building Products Operation's credit facility.
The Buyer is obligated to reimburse the Company for any amounts drawn on
the letter of credit. Additionally, the Company indemnified the Buyer for
certain liabilities of the sold business and agreed to continue to supply
product at a fixed margin for a period of two years.
Income generated by discontinued Building Products Operations was
considered in the original provisions recorded for their disposal. Income
generated by discontinued Building Products Operations during the three
months and nine months ended September 30, 1996 was approximately $385,000,
on revenues of $13,973,000, and $907,000, on revenues of $46,175,000,
respectively. These amounts were considered in the original provisions
recorded for their disposal in 1995. For the three and nine months ended
September 30, 1997, operating results for Building Products were not
material.
4. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
September 30 December 31
1997 1996
(Thousands)
. . . . . . . . . . . . . . . . . . . . . . . .
Payroll and related benefits . . . . . . . . . . . . . . $ 5,374 $ 6,163
Warranty and backcharge
reserves . . . . . . . . . . . . . . . . . . . . . 3,503 3,704
Deferred revenues . . . . . . . . . . . . . . . . . . . 1,138 1,271
Capitalized future interest
payments, current portion . . . . . . . . . . . . . - 8,113
Other . . . . . . . . . . . . . . . . . 9,984 9,323
$ 19,999 $ 28,574
5. DEBT
On December 31, 1996, the Company prepaid its term loan with Foothill
Capital Corporation ("Foothill"), and the credit agreement with Foothill
was terminated.
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 ratio of debt to earnings before taxes, interest,
depreciation and amortization. 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 September 30, 1997, the borrowing base was approximately
$32.0 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.
In December 1996, the Company called for redemption on January 15, 1997,
the amounts outstanding on the 12% Senior Subordinated Notes ("12%
Notes") and the 15.5% Subordinated Debentures ("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 was classified as long-term with the remainder
reflected in current liabilities. The total amount of future interest
payments on the 12% Notes, most of which the Company was not required to
pay when the 12% Notes were redeemed, was also reflected as a current
liability at December 31, 1996. Accordingly, in connection with the
redemption of the 12% Notes and 15.5% Debentures in January, the Company
recorded a gain of $4.6 million, net of taxes of $2.9 million, in the first
quarter of 1997.
As of September 30, 1997, the Company had outstanding letters of credit of
approximately $10.3 million used principally to support insurance and
bonding programs.
6. COMMITMENTS AND CONTINGENCIES
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 (the "Concrete Note"), 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 1.6% of the outstanding
common stock, and the current Chief Executive Officer of the Company, who
currently controls approximately 62% 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
$4,250,000 at September 30, 1997.
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 that 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 September 30, 1997, the Company has recorded reserves of approximately
$6.6 million, representing management's 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.
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues for the third quarter of 1997 were $79.2 million, an increase of $8.7
million, or 12.4%, compared to the third quarter of 1996. On a year-to-date
basis, revenues were $208.9 million in 1997, compared to $191.3 million in 1996,
an increase of $17.6 million, or 9.2%. The increase in quarterly and year-to-
date revenue is due to increased volume during all three quarters of 1997,
compared to 1996, offset by a slight deterioration in prices realized in 1997
for the Company's products. Volume in the metal buildings' market continues
strong in 1997. However, additional industry capacity put in place in late 1996
and early 1997, has negatively impacted prices. The Company's gross profit
decreased as the gross margin percentage declined to 18.5% in the third quarter
of 1997 compared to 22.8% during the same period in 1996, and to 18.7% for the
nine months ended 1997 compared to 21.4% for the same period ended 1996. This
decline in gross margin results from competitive pricing pressure in the metal
buildings' market, increased steel prices, factory overtime to meet demand and
unfavorable revenue mix.
Selling, general and administrative expenses decreased by $1.0 million in the
third quarter of 1997 compared to the same quarter of 1996. On a year-to-date
basis, selling, general and administrative expenses have decreased $2.6 million
from the nine month period ended September 30, 1996. These reductions reflect
savings realized by the Company from continuing efforts to reduce general and
administrative costs and from reduced benefit costs related to retirees. The
decrease in gross profit dollars partially offset by reductions in selling,
general and administrative expenses resulted in operating income of $8.9 million
and $21.7 million during the three and nine months ended September 30, 1997,
respectively, compared to operating income of $9.3 million and $20.9 million
during the three and nine months ended September 30, 1996, respectively.
Interest expense for the three and nine months ended September 30, 1997 was $.4
million and $1.3 million, respectively, compared to $1.0 million and $3.1
million for the three and nine months ended September 30, 1996, respectively.
This reduction results from the Company's refinancing of its long term debt in
late 1996 and early 1997 which resulted in lower total debt, substantially
reduced interest rates and lower debt issue cost amortization.
During the third quarter of 1996, the Company reduced the deferred tax asset
valuation allowance from $43,000,000 to $12,000,000, resulting in a $31,000,000
credit to income taxes. Under SFAS No. 109, "Accounting for Income Taxes", the
Company is required to recognize the portion of its deferred tax asset which it
believes will more likely than not be realized. Management believes that the
Company will be able to realize the unreserved portion of its deferred tax asset
through future earnings. Management will continue to evaluate the level of its
deferred tax valuation allowance at each balance sheet date and adjust the
valuation reserve as warranted by changes in the Company's expected future
profitability, amounts and timing of payments related to its trailing
liabilities, or other events which might affect the realization of the Company's
deferred tax asset. Throughout 1997, the Company has recorded a tax provision
on its earnings at its anticipated effective tax rate. Most of this represents
a non-cash charge against earnings as the Company has available previously
recorded net operating losses to offset federal taxes payable during 1997.
Because of tax loss carryforwards, the Company does not expect it will become
subject to cash Federal income taxes until late 1998.
Income before extraordinary item was $5.6 million and $13.1 million during the
three and nine months ended September 30, 1997 compared to $39.6 million and
$49.4 million for the same periods in 1996, respectively. The adjustment to the
deferred tax asset allowance described above and the increase in the provision
for income taxes between periods is the principal reason for these declines.
Net income during the three and nine months ended September 30, 1997 was $5.6
million and $17.6 million, respectively, compared with $39.6 million and $49.4
million, for the three and nine months ended September 30, 1996, respectively.
The nine months ended September 30, 1997 include a $4.6 million extraordinary
credit, net of income taxes, representing the reduction in accrued interest
costs on the Company's 12% Notes resulting from the redemption of these Notes in
January 1997.
Backlog of Orders
At September 30, 1997, the backlog of unfilled orders believed to be firm was
approximately $92.1 million compared to a backlog of $79.1 million at September
30, 1996 and $72.1 million at December 31, 1996.
Litigation
There are various proceedings pending against or involving the Company which are
ordinary or routine given the nature of the Company's business. The Company has
recorded a liability related to litigation where it is both probable that a loss
has been incurred and the amount of the loss can be reasonably estimated. While
the outcome of the Company's legal proceedings cannot at this time be predicted
with certainty, management does not expect that these matters will have a
material adverse effect on the consolidated financial condition or results of
operations of the Company.
Environmental Matters
The Company'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 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 change the Company's estimate of costs it could be required to pay in any
particular situation. Based upon currently available information, including the
reports of third parties, management does not believe resolution of these
matters will have a material adverse effect on the consolidated financial
statements.
Liquidity and Capital Resources
During the nine months ended September 30, 1997, the Company generated
approximately $20.0 million of cash from its operating activities, compared to
$16.3 million for the same period ended 1996. Operating cash flow in 1997
increased due to higher income and timing differences on collection of
receivables and settlement of payables.
During the first quarter of 1996, the Company spent $1.9 million of cash in
connection with a drawn letter of credit which was associated with the Company's
former U.K. subsidiary. In January, 1997, the Company was paid $.9 million in
connection with this drawn letter of credit and the sale of certain other
rights. Additional uses of cash towards discontinued operations in the first
nine months of 1996 included contributions of $1.2 million to the Company's
defined benefit pension plans. 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. Accordingly, the Company has not made and
does not expect to make any payments to the pension plan in 1997.
The Company spent approximately $5.4 million on capital expenditures during the
first nine months of 1997 directed toward upgrading and improving manufacturing
equipment.
In December, 1996, the Company called for redemption on January 15, 1997 the
amounts outstanding on 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 of $7.8
million. Additionally, per the terms of the new Credit Agreement, the Company
paid down $3.75 million of debt during the nine months ended September 30, 1997.
See Note 5.
At September 30, 1997, the Company had $13.2 million of unrestricted cash and
cash equivalents.
The Company maintains a credit facility (the "Credit Facility") which supports
both the Company's U.S. and Canadian operations, and which, under its terms, has
maximum availability of $45.0 million and expires on December 31, 2001.
Availability under the $25 million revolving credit portion of the Credit
Facility is based on a percentage of eligible accounts receivable and inventory.
At September 30, 1997, the Borrowing Base was estimated to be $32.0 million. As
collateral under the Credit Facility, the Company has granted the lenders a
security interest in all of the assets of the Company and its Restricted
Subsidiaries. The Company had unused availability under the Credit Facility of
$14.7 million at September 30, 1997. During the first nine months of 1997, the
Company reduced its letters of credit by $6.7 million to $10.3 million.
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
Quarterly 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 business operates in a highly competitive market and is 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 in the
Company's filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K for the year ended December 31, 1996, 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.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Information describing certain of the Company's legal proceedings and
environmental matters is included in Part 1, Item 1, in Note 6 to the
"Notes to Condensed Consolidated Financial Statements," and in Part 1,
Item 2, in Management's Discussion and Analysis of Financial Condition
and Results of Operations under the captions "Litigation" and
"Environmental Matters," and is hereby incorporated by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Earnings per Common Share, filed
herewith.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROBERTSON-CECO CORPORATION
-------------------------------------------------
(Registrant)
By:/s/ Patrick G. McNulty
-----------------------------
Patrick G. McNulty
Controller
November 10, 1997
ROBERTSON-CECO CORPORATION
EXHIBIT INDEX
EXHIBIT 11 - Computation of Earnings Per Common Share
EXHIBIT 27 - Financial Data Schedule