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, 1998
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 I.R.S. Employer
of incorporation or organization) Identification No.
5000 Executive Parkway, Ste. 425, San Ramon, California 94583
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 925-543-7599
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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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The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $43,425,788 based upon the closing sales price of
Registrant's common stock on the New York Stock Exchange on March 16, 1999. (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
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 16, 1999, 16,096,550 shares of common stock of the
Registrant were outstanding.
Portions of the Registrant's definitive proxy statement for Registrant's
1999 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
Item 1. Business.................................................................................... 3
Item 2. Properties.................................................................................. 5
Item 3. Legal Proceedings........................................................................... 5
Item 4. Submission of Matters to a Vote of Security Holders......................................... 6
Item 4.1 Executive Officers of the Registrant........................................................ 6
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters....................................................................... 7
Item 6. Selected Financial Data..................................................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................. 10
Item 7A. Quantitative and Qualitative Discussions about Market Risk.................................. 14
Item 8. Financial Statements and Supplementary Data................................................. 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................................................... 33
PART III
Item 10. Directors and Executive Officers of the Registrant.......................................... 34
Item 11. Executive Compensation...................................................................... 34
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................................................ 34
Item 13. Certain Relationships and Related Transactions.............................................. 34
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K....................................................................... 35
Signatures.................................................................................. 36
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 acquirer.
After the Combination, the Company and its subsidiaries operated in
four business segments: (1) the Metal Buildings Group, which operated primarily
in North America and is engaged in the manufacture, sale and installation of
custom 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. During the fourth quarter of 1994, the Company
sold its remaining U.S. Building Products operation and the Cupples Products
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 and sold the Concrete
Construction Group to a company which is controlled by the Company's Chief
Executive Officer. In 1996, the Company sold its subsidiary located in Norway
and its Building Products operations located in Australia, Northeast Asia and
Southeast Asia. The Canadian Building Products business was closed in 1998.
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 Financial Statements 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 and financial restructuring actions were
taken during the past several years, including downsizing the corporate office,
closing or selling metal building plants and redistributing manufacturing
operations and equipment from closed operations, consolidating and improving
capacity and cost control at the remaining plants, reducing work force levels,
and redefining management and operating policies.
METAL BUILDINGS GROUP
Today, the operations of the Company consist solely of the Metal
Buildings Group. The Metal Buildings Group consists of three custom engineered
metal building operations: Ceco Building Systems, Star Building Systems, and H.
H. Robertson Building Systems (Canada). Custom engineered metal buildings
account 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 which generally is lower cost than conventional
construction and faster from concept to job completion.
The Company's metal building systems are manufactured at five U.S.
plants with one located in each of California, Mississippi and 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, the Company sells its buildings to the Asian market. Buildings
are distributed to the Asian Market through a network of domestic and
international builders.
The principal materials used in the manufacture of custom 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 builder/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 times of increased construction activity, the Company has a need
for increased working capital which is funded by available cash. Since the
Company operates in the industrial and commercial building sectors, primarily in
North America, the Company's 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 custom engineered metal buildings are for
specific projects, and the Company maintains a minimum inventory of finished
products. Shipments of custom 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 customers.
Due to the wide availability of 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, 1998, the backlog of unfilled orders believed to be
firm was approximately $69.3 million compared with $72.7 million at December 31,
1997. The December 31, 1998 backlog is expected to be executed in 1999.
PATENTS
The Company owns a number of patents with varying expiration dates
extending beyond the year 2000. None of these patents are believed to be a major
factor in the competitive position of the Company.
EMPLOYEES
At December 31, 1998, the Company employed approximately 1,450 persons
and was a party to collective bargaining agreements with labor unions covering
approximately 173 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.
ITEM 2. PROPERTIES
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The Company owns and operates six manufacturing plants. 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 1998.
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's current and prior manufacturing activities use materials
classified as hazardous substances and 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, (c) the protection of the environment, and (d) 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.
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 a former Building Products manufacturing facility. The Company has
completed its remedial efforts at one site and has recently submitted a Notice
of Intent to remediate the second site to the Pennsylvania Department of
Environmental Protection ("PDEP") pursuant to the Pennsylvania Land Recycling
and Environmental Remediation Standards Act (Act 2).
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
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The following table sets forth certain information regarding the
executive officers of the Company as of March 26, 1999.
Name Age Position
- ---- --- --------
Andrew G. C. Sage, II 73 Chairman
Michael E. Heisley, Sr. 62 Chief Executive Officer
E.A. Roskovensky 53 President and Chief Operating Officer
Ronald D. Stevens 55 Executive Vice President, Chief Financial
Officer and Secretary
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 American
Superconductor Corporation and Tom's Foods, Inc.
Mr. Heisley is Chief Executive Officer (since December 1993) of the
Company. Mr. Heisley is Chairman of the following companies: Davis Wire
Corporation (since 1991), a manufacturer of steel wire and Tom's Foods, Inc.
(since 1993), a manufacturer and distributor of snack food. Mr. Heisley is Chief
Executive Officer of The Heico Companies, L.L.C. (since 1979). He is also Chief
Executive Officer of Heico Holding Inc., formerly Pettibone Corporation, (since
1988), a diversified manufacturing company, and a director of Tom's Foods, Inc.
and 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.
Mr. Stevens is Executive Vice President and Chief Financial Officer
(since October 1996) and Secretary (since February 1999) 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 1998
First Quarter ....................... $ 11 $ 8 1/4
Second Quarter ....................... 11 9 3/16
Third Quarter ....................... 10 3/16 8 1/8
Fourth Quarter ....................... 8 5/8 7 1/4
Calendar 1997
First Quarter ....................... $ 8 1/8 $ 7 1/8
Second Quarter ....................... 8 1/2 7 1/4
Third Quarter ....................... 12 8
Fourth Quarter ....................... 11 7/8 8 3/4
There were approximately 2,175 holders of record of the Company's
Common Stock as of March 16, 1999. 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 16, 1999, as
reported under the NYSE Composite Transaction Reporting System, was $8-7/16.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Set forth below is historical financial data for each of the five years
in the period ended December 31, 1998. This data has 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.
Operations Data (a):
(In thousands, except per share data)
Year Ended December 31
------------------------------------------------------------------------
1994 1995 1996 1997 1998
------------ ------------ ----------- ------------- ------------
Net revenues ......................... $ 251,584 $264,983 $255,893 $288,151 $294,802
Cost of sales .......................... 213,948 218,285 201,478 233,284 234,913
---------- -------- -------- ------- --------
Gross profit .......................... $ 37,636 $ 46,698 $ 54,415 $ 54,867 $ 59,889
Selling, general and
administrative...................... 31,910 30,844 27,549 24,126 24,651
Restructuring ...................... 2,075 - - - -
---------- -------- -------- ------- --------
Operating income .................... $ 3,651 $ 15,854 $ 26,866 $ 30,741 $ 35,238
Interest expense ...................... (4,164) (4,335) (4,166) (1,659) (1,062)
Other income, net .................... 346 828 841 904 1,990
---------- -------- -------- ------- --------
Income (loss) from continuing
operations before income
taxes ................................ $ (167) $ 12,347 $ 23,541 $ 29,986 $ 36,166
Provision (credit) for taxes
on income (c) ........................ - - (29,067) 11,200 13,647
---------- -------- -------- ------- --------
Income (loss) from
continuing operations ............... $ (167) $ 12,347 $ 52,608 $ 18,786 $ 22,519
Discontinued operations (b) ........... (21,593) (15,888) - - -
Extraordinary gain (loss) on
debt ................................. - - (1,315) 4,568 -
---------- -------- -------- ------- --------
Net income (loss) ..................... $ (21,760) $ ( 3,541) $ 51,293 $ 23,354 $ 22,519
========= ========= ========= ======== ========
Basic/Diluted earnings (loss) per common share:
Continuing operations .............. $ (.01)$ .77 $ 3.28 $ 1.17 $ 1.40
Discontinued operations (b) .......... (1.37) (.99) - - -
Extraordinary item ................... - - (.08) .28 -
---------- -------- -------- ------- --------
Net income (loss) per
common share ..................... $ (1.38)$ (.22) $ 3.20 $ 1.45 $ 1.40
=========== ========== ========= ======== =========
Weighted average number of
common shares outstanding ............. 15,808 15,932 16,017 16,056 16,060
=========== ========== ========= ======== =========
Cash dividends declared per
common share ....................... - - - - -
=========== ========== ========= ======== =========
Balance Sheet Data (a):
(Thousands)
December 31
---------------------------------------------------------------------
1994 1995 1996 1997 1998
------------ ----------- ---------- ----------- -----------
Working capital ....................... $ 9,826 $ 88 $ 2,603 $ 35,127 $ 51,063
Total assets ....................... 137,400 108,479 143,914 143,544 149,991
Long-term debt (current
portion) ....................... 134 - 7,455 5,000 -
Long-term debt (excluding
current portion)...................... 43,421 40,530 20,000 10,000 -
Stockholders' equity
(deficiency) ....................... (35,693) (29,994) 26,244 49,746 71,972
=========== ========== ========== ========= =========
(a) The consolidated statements of income are reclassified to reflect the
operating results of the Concrete Construction Group (measurement date
was December 1994) and the Building Products Group (measurement date
was December 1995) as discontinued operations. Accordingly, the income
and expense amounts of such business segments prior to the respective
measurement dates are classified 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) Losses from discontinued operations are reported net of income tax
expense (benefit) of $256,000 and $(400,000) in 1994 and 1995,
respectively.
(c) In the third quarter of 1996, the Company recorded tax assets of $31
million, or $1.93 per share, reflecting future benefits of the
Company's net operating loss carryforwards and other tax timing
differences. Had 1996 been reported with a full tax provision, income
from continuing operations before extraordinary gain/(loss) would have
been approximately $14.4 million, or $.89 per share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS:
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Revenues for 1998 were $294.8 million compared to $288.2 million a
year ago, a 2.3% increase. The Company entered 1998 with a strong backlog, and
order inflow continued at an excellent level throughout the year reflecting
continued good industry conditions. Weather conditions in the winter months
delayed shipments until later in the year. Beginning late in the second quarter
and throughout the third quarter, the Company was operating at or near capacity
at most plants preventing shipments from catching up with the losses due to
delays earlier in the year. Fourth quarter volumes were higher than normal as
our deliveries continued their catch up from earlier. Revenue gains were
experienced in each market of the business except the West Coast and Canada. A
slowdown in the Canadian economy caused revenues in this location to decline
approximately 7% from 1997. Tariffs in the Far East continue to reduce the
amount of export business for the West Coast operation, and the California
construction economy is still catching up with growth rates experienced in the
rest of the Company's regions.
Favorable revenue mix and lower discounts to customers caused gross
margins to increase from 19.0% last year to 20.3% in 1998. In 1997, the Company
had higher revenue from products that are supplied to customers but manufactured
by others, which generally provide lower margins to the Company, but are
necessary to meet competitive demands. In 1997, there were also higher revenues
from erection and subcontract activities where the margins are not as high.
Operating margins improved from 10.7% in 1997 to 12.0% in 1998.
Selling, general, and administrative ("S,G & A") costs remained steady at 8.3%
of revenues in 1997 and 1998.
Income before taxes further improved in 1998 from 1997 as a result of
reduced interest expense and increased interest income. Interest expense
declined $.6 million from 1997 due to lower interest rates in 1998 combined with
lower debt balances as the term loan was paid in full in September 1998. The
Company experienced higher interest income reflecting higher average cash
balances.
For the year, income before taxes was $36.2 million compared to $30.0
million in 1997. This represents a 20.6% increase between years resulting from
favorable revenue mix, lower discounts to customers, increased interest revenue,
and reduced borrowing expenses. Pretax income increased to 12.3% of revenues
compared to 10.4% last year. The effective tax rate was somewhat higher because
of lower Canadian income on which no tax has been recognized due to past
operating losses.
Net income in 1997 includes an extraordinary item related to the debt
refinancing. The Company recorded a $4.6 million credit eliminating the
previously recorded accrued interest on the 12% debentures that were redeemed in
January 1997.
At December 31, 1998 the backlog of unfilled orders believed to be
firm was approximately $69.3 million compared to $72.7 million at December 31,
1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Revenues for 1997 were $288.2 million compared to $255.9 million in
1996, a 12.6% increase. The increase in revenues was essentially equal to the
growth rate experienced by the metal buildings' industry overall. The Company
entered 1997 with a strong backlog, and order inflow continued at an excellent
level throughout the year. Additionally, the Company benefited from the first
full year of utilization of plant capacity additions made over the previous two
years. Revenue gains were experienced in each market of the business except the
West Coast. New tariffs in the Far East reduced the amount of export business
for that operation, and the California construction economy continued to catch
up with growth rates in the rest of the Company's regions. Competitive pricing
experienced in all regions partially reduced the revenue benefits from increased
volumes. Several competitors added capacity over the previous two years, and
their efforts to fill their plants resulted in a difficult pricing environment.
This affected the Company's margins as discussed below.
The price pressures experienced in the first three quarters along with
an unfavorable product mix caused gross margins to decline from 21.3% in 1996 to
19.0% in 1997. Margins began to improve toward the end of 1997 as companies in
the industry were operating at or near capacity, but this improvement was not
enough to make up for the margin points lost in the early part of the year. In
1997, the Company also had higher revenue from products that are supplied to
customers but manufactured by others, which are generally at a lower margin to
the Company and are necessary to meet competitive demands. There were also
higher revenues from erection and subcontract activities where the margins are
not as high.
Despite the gross margin decline, operating margins improved from
10.5% in 1996 to 10.7% in 1997. S,G & A costs declined to 8.4% of revenues in
1997 from 10.8% in 1996. In 1997, the Company realized a full year's benefit
from the relocation of the corporate office in 1996 and reduced relocation and
other transitional costs. In 1997, there were additional savings in salary and
benefit costs due to reduced corporate staff. The costs of post retirement
plans, which continue despite the plans being frozen or scaled back, declined by
$.6 million. In addition, several major systems efforts of the past few years
concluded, and, correspondingly, development costs were reduced.
A major factor in the improved pretax results in 1997 was the
substantial reduction in interest and other financing costs achieved during the
year. These costs were down $2.5 million from 1996. This was a result of the
debt refinancing completed in January 1997, with a new revolving credit and term
loan agreement significantly lowering borrowing and letter of credit costs. The
Company also changed its surety bonding source, reducing bonding costs. Total
borrowings were reduced by approximately $12 million during the year.
For the year, pretax income was $30.0 million compared to $23.5
million in 1996. This represented a 27.4% increase between years resulting from
increased revenues, reduced S, G & A costs and reduced borrowing expenses.
Pretax income increased to 10.4% of revenues compared to 9.2% in 1996.
In the third quarter of 1996, the Company recorded tax assets
reflecting the future tax benefits of the Company's net operating loss
carryforwards and tax timing differences. Thus, 1996 had a net tax credit of
$29.1 million representing this tax benefit partially offset by a provision for
taxes in the last quarter of 1996. Throughout 1997, the results have reflected a
full tax charge at the Company's effective tax rate on income. This results in
income before extraordinary items declining from $52.6 million in 1996 to $18.8
million in 1997. However, had 1996 been reported with a full tax charge as in
1997, income before extraordinary items for that year would have been
approximately $14.4 million, or $.89 per share.
Net income for each year reflects an extraordinary item related to the
debt refinancing. In 1996, a $1.3 million net charge was recorded to write-off
the remaining deferred debt issuance costs and prepayment penalties on a portion
of the debt. In 1997, the Company recorded a $4.6 million credit eliminating the
previously recorded accrued interest on the 12% debentures that were redeemed in
January 1997.
At December 31, 1997 the backlog of unfilled orders believed to be
firm was approximately $72.7 million compared to $72.1 million at December 31,
1996.
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 or
prior businesses. The Company has recorded liabilities for 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 Company's consolidated financial
statements.
The Company has been identified as a potentially responsible party by
Federal and state authorities for clean-up at various waste disposal sites. The
Company has engaged appropriate third parties to perform feasibility studies and
assist in estimating the cost of investigation and remediation. Although it is
difficult to reasonably quantify future environmental expenditures, the Company
has accrued environmental and clean-up costs of a non-capital nature when it is
both probable that a loss has been incurred and the amounts can be reasonably
estimated. As of December 31, 1998, the Company recorded reserves for
environmental matters of approximately $5.3 million. Based upon currently
available information, including the reports from 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 entitled to
defense and indemnification 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 disposition of this matter.
LIQUIDITY AND CAPITAL RESOURCES
During 1998, the Company generated approximately $41.8 million in cash from its
operating activities compared to $30.5 million in 1997. A major part of this
increase was the $6.2 million increase in pretax income. The Company paid no
cash income taxes in 1998 and 1997. Good cash collections coupled with a
decrease in inventory on hand also contributed to the increase in cash.
Depreciation was up slightly from the prior year reflecting capital expenditures
made in the last few years.
The Company's available net operating losses for Federal income tax purposes
will be utilized during 1999. In 1999 and future years, the Company expects to
pay Federal income taxes. The sheltering of the Company's income through loss
carryforwards generated cash of $13.6 million and $11.2 million in 1998 and
1997, respectively.
Expenditures related to discontinued operations were consistent in 1997 and
1998. Most of the cash flow in both years was related to payments on cleanup of
environmental sites and resolving worker's compensation and general liability
cases from sold businesses. Expenditures for these matters are dependent on
several factors including construction activity at the cleanup sites and the
ability to settle litigation on favorable terms. The Company's reserves for
these matters are approximately $25 million. Management will continue to pursue
settlement of these matters where possible and where favorable resolution can be
accomplished.
Cash spent for additions to the Company's plant and equipment was $5.1 million.
Some expenditures at existing plants were delayed pending further analysis
related to the Company's new Tennessee plant. These expenditures will be made in
1999 and subsequent years along with additional spending to improve productivity
at the Company's existing plants. We expect 1999 capital expenditures to be at
higher levels than the Company has experienced in the last several years.
Available cash was used to eliminate the Company's term debt in 1998.
Approximately $8.4 million of letters of credit were outstanding at December 31,
1998, most of which related to the Company's self insurance programs. Also,
approximately $1.5 million of performance and other bonds were outstanding.
Should there be a need for additional liquidity, the Company has available a $15
million revolving credit agreement of which a maximum of $12 million can be used
to support letters of credit.
YEAR 2000
The "Year 2000" issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Specifically,
computational errors are a known risk with respect to dates after December 31,
1999. The Company has assessed its computer equipment and business computer
systems and is in the process of assessing its manufacturing equipment and
facilities with embedded systems to prepare for the Year 2000.
Management believes the modifications of its business computer systems will be
completed in adequate time to enable proper processing of transactions relating
to the Year 2000 and beyond. The anticipated date of completion of these
modifications is May 1999. Expenditures for this process approximate $2.0
million to date, and the Company has budgeted an additional $.7 million for
completion. Until the assessment of manufacturing equipment and facilities has
been completed, it is impossible to determine, with any degree of certainty, the
timetable for completion of potential modifications or related costs. However,
preliminary observations of equipment and facilities which could create an
element of Year 2000 risk indicate that costs of possible modifications would
not be material and would be completed in adequate time to minimize any
significant Year 2000 risks.
While the Company believes that its efforts will adequately address its internal
Year 2000 concerns, there are key risk factors associated with the Year 2000
that the Company cannot directly control, primarily the readiness of its
customers, key suppliers, public infrastructure suppliers and other vendors. The
Company is in the process of communicating with key third parties to assess
their Year 2000 readiness. Because the market for the Company's products is
comprised of numerous customers with a variety of sizes and levels of
sophistication, the noncompliance with Year 2000 of any one would not have a
detrimental impact on the Company's financial position or results of operations.
Based upon the Company's findings relating to the compliance status of its
significant suppliers, the Company will establish contingency plans which will
involve identification of alternative sources of supply, development of business
resumption plans, and evaluation of alternative manual processes. Actions may be
as simple as locating an alternative material vendor who is Year 2000 compliant,
or as complex as curtailing operations in one or more locations due to lack of
electrical power.
The Company cannot predict the likelihood of a significant disruption of its
customers' or suppliers' businesses or of the economy as a whole, any of which
could have a material adverse impact on the Company.
This is a Year 2000 Readiness Disclosure Statement within the meaning of the
Year 2000 Information and Readiness Disclosure Act (P.L.105 - 271).
"SAFE HARBOR" PROVISIONS
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 on Form 10-K contains forward-looking statements made in good faith by
the Company 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, raw material pricing, competition,
changes in customer 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 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
inclusive. 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 7A. QUANTITATIVE AND QUALITATIVE DISCUSSIONS ABOUT MARKET RISK
----------------------------------------------------------
Not Applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
ROBERTSON-CECO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
For the Years Ended December 31
-------------------------------------------
1996 1997 1998
NET REVENUES ............................................. $255,893 $288,151 $294,802
COST OF SALES ............................................ 201,478 233,284 234,913
--------- --------- ---------
GROSS PROFIT ............................................. 54,415 54,867 59,889
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ............. 27,549 24,126 24,651
--------- --------- ---------
OPERATING INCOME .......................................... 26,866 30,741 35,238
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense .................................... (4,166) (1,659) (1,062)
Other income - net .................................. 841 904 1,990
--------- --------- ---------
(3,325) (755) 928
--------- --------- ---------
INCOME BEFORE PROVISION (CREDIT) FOR TAXES ON INCOME ...... 23,541 29,986 36,166
PROVISION (CREDIT) FOR TAXES ON INCOME (29,067) 11,200 13,647
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM ......................... 52,608 18,786 22,519
EXTRAORDINARY GAIN (LOSS) ON DEBT REDEMPTION .............. (1,315) 4,568 -
---------- --------- ---------
NET INCOME ............................................ $ 51,293 $ 23,354 $ 22,519
========= ========= ========
BASIC/DILUTED EARNINGS PER COMMON SHARE
INCOME BEFORE EXTRAORDINARY ITEM........................... $ 3.28 $ 1.17 $ 1.40
EXTRAORDINARY ITEM ....................................... (.08) .28 -
---------- --------- ---------
NET INCOME ........................................... $ 3.20 $ 1.45 $ 1.40
========= ========= ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING ..................................... 16,017 16,056 16,060
========= ========= ========
See Notes to Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31
--------------------------
1997 1998
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................................................... $ 19,461 $ 38,203
Accounts and notes receivable, less allowance
for doubtful accounts: 1997, $1,690; 1998, $1,795 ........................... 28,249 29,878
Inventories .................................................................... 13,702 11,518
Deferred taxes, current ........................................................ 15,688 4,476
Other current assets ........................................................... 557 621
-------- ---------
Total current assets ....................................................... 77,657 84,696
-------- ---------
PROPERTY, PLANT AND EQUIPMENT - AT COST:
Land .......................................................................... 1,654 1,654
Buildings and improvements ..................................................... 11,136 11,550
Machinery and equipment ........................................................ 33,037 38,309
Construction in progress ....................................................... 3,581 1,596
-------- ---------
49,408 53,109
Less accumulated depreciation .................................................. (22,902) (25,900)
-------- ---------
Property, Plant and Equipment - net ......................................... 26,506 27,209
-------- ---------
EXCESS OF COST OVER NET ASSETS OF ACQUIRED
BUSINESSES, LESS ACCUMULATED AMORTIZATION:
1997, $6,741; 1998, $7,569 ..................................................... 25,783 24,955
DEFERRED TAXES, NON-CURRENT ......................................................... 12,329 12,373
OTHER NON-CURRENT ASSETS ............................................................ 1,269 758
-------- ---------
Total assets ............................................................... $143,544 $149,991
======== ========
See Notes to Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31
----------------------------------
1997 1998
----------- --------------
LIABILITIES
CURRENT LIABILITIES:
Current portion of long-term debt ............................................ $ 5,000 $ 0
Accounts payable ............................................................. 13,209 11,340
Accrued payroll and benefits ................................................. 7,525 8,137
Other accrued liabilities .................................................... 16,796 14,156
---------- ----------
Total current liabilities ................................................ 42,530 33,633
LONG-TERM DEBT, LESS CURRENT PORTION .............................................. 10,000 -
DEFERRED INCOME TAXES ............................................................. 5,891 5,830
OTHER LONG-TERM LIABILITIES ....................................................... 35,377 38,556
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
COMMON STOCK
Par value per share $.01
Authorized shares: 30,000,000
Issued and outstanding shares: 1997 - 16,111,550; 1998 - 16,096,550 ......... 161 161
CAPITAL SURPLUS ................................................................... 178,256 178,233
ACCUMULATED DEFICIT ............................................................... (128,173) (105,654)
DEFERRED COMPENSATION ............................................................. (160) (105)
ACCUMULATED OTHER COMPREHENSIVE INCOME ............................................ (338) (663)
----------- ----------
Stockholders' equity ......................................................... 49,746 71,972
---------- ----------
Total liabilities and stockholders' equity ............................... $ 143,544 $ 149,991
========= =========
See Notes to Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Years Ended December 31
---------------------------------------------
1996 1997 1998
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before extraordinary item .............................................. $ 52,608 $ 18,786 $ 22,519
Adjustments to reconcile income before extraordinary item to net
cash provided by operating activities:
Depreciation ............................................................ 3,272 3,660 4,152
Amortization ............................................................ 2,140 933 1,071
Changes in assets and liabilities :
(Increase) decrease in accounts and notes receivable ................... 2,876 (5,864) (1,629)
(Increase) decrease in inventories ..................................... (2,329) 2,115 2,184
(Increase) decrease in deferred tax assets ............................ (29,067) 11,200 13,647
Increase (decrease) in accounts payable ................................ (5,507) 631 (1,869)
Net changes in other assets and liabilities ............................ (2,206 (974) 1,736
----------- ----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................................ 21,787 30,487 41,811
----------- ----------- ----------
NET CASH USED FOR DISCONTINUED OPERATIONS ................................ (8,160) (2,915) (2,935)
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .......................................................... (3,366) (7,267) (5,134)
----------- ----------- ----------
NET CASH USED FOR INVESTING ACTIVITIES ................................... (3,366) (7,267) (5,134)
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings ............................................ - 20,000 -
Payments on long-term debt .................................................... (5,000) (32,731) (15,000)
Payments of capitalized interest on 12% Notes ................................. (2,704) (338) -
----------- ----------- ----------
NET CASH USED FOR FINANCING ACTIVITIES ................................... (7,704) (13,069) (15,000)
----------- ----------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............................... 2,557 7,236 18,742
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD .......................... 9,668 12,225 19,461
----------- ----------- ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD ................................ $ 12,225 $ 19,461 $ 38,203
========== ========= ==========
SUPPLEMENTAL CASH FLOW DATA Cash payments made for:
Interest .................................................................. $ 4,767 $ 1,936 $ 882
========== ========= ==========
Income taxes ............................................................. $ - $ - $ -
========== ========= ==========
See Notes to Consolidated Financial Statements
ROBERTSON-CECO CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Excess of
Additional
Pension Liability
Over Unrecognized Accumulated
Retained Prior Other
Common Capital Earnings Service Deferred Comprehensive
Stock Surplus Warrants (Deficit) Cost Compensation Income
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)
Net income for the year .................. 23,354
Amortization of deferred
compensation .......................... 35
Foreign currency translation
adjustments for the year ................. 113
BALANCE DECEMBER 31, 1997 161 178,256 - (128,173) - (160) (338)
Net income for the year .................. 22,519
Issuances (forfeitures) under employee
plans, net .............................. (23) 23
Amortization of deferred
compensation ........................... 32
Foreign currency translation
adjustments for the year ................. (325)
BALANCE DECEMBER 31, 1998 $ 161 $178,233 $ - $(105,654) $ - $ (105) $ (663)
======== ======== ========== ========= ========== ======= =========
See Notes to Consolidated Financial Statements.
ROBERTSON-CECO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
1. NATURE OF BUSINESS
Robertson-Ceco Corporation (the "Company"), owns and operates three
custom engineered metal building operations: Ceco Building Systems, Star
Building Systems, and H. H. Robertson Building Systems (Canada). The Company's
custom engineered metal buildings are manufactured at plants in California, Iowa
(two separate plant locations), Mississippi, North Carolina, and Ontario,
Canada. The buildings are sold primarily through builder networks located
throughout the United States and Canada in the industrial and commercial
building market. The buildings are erected by the builder 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. Intercompany balances and transactions have been
eliminated. Certain previously reported amounts have been reclassified to
conform to the 1998 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,
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses during the reporting period. Actual results may differ
from these estimates.
Comprehensive Income
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS No. 130") was issued in June 1997 with adoption
required for fiscal years beginning after December 31, 1997. SFAS No. 130
requires the presentation of an additional income measure (termed "comprehensive
income"), which adjusts traditional net income for certain items that previously
were only reflected as direct charges to equity (such as minimum pension
liabilities and foreign currency translation adjustments). The dollar amount of
the Company's adjustments required by SFAS No. 130 is not significant so there
is not a significant difference between "traditional" net income and
comprehensive income.
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. 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
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.
Warranty costs are accrued at the time of revenue recognition.
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 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.
Earnings per Common Share
Basic earnings per share is based on the weighted average outstanding
shares of the Company's common stock. Diluted earnings per share includes the
dilutive effect of outstanding warrants to purchase common stock and restricted
stock, if the effect is not anti-dilutive.
3. CASH AND RELATED MATTERS
Cash and cash equivalents consisted of the following:
December 31
----------------------
1997 1998
---- ----
(thousands)
Cash .................................... $ 4,188 $ -
Time deposits ............................ 15,273 38,203
--------- ---------
$ 19,461 $ 38,203
========= =========
4. ACCOUNTS RECEIVABLE
The Company grants credit to its customers, substantially all of which
are involved in the construction industry. Accounts receivable included unbilled
retainages of $1.0 million and $.5 million, at December 31, 1997 and 1998,
respectively. There were no retainages due beyond one year at December 31, 1998.
5. INVENTORIES
Inventories consisted of the following:
December 31
------------------------
1997 1998
---- ----
(thousands)
Work in process ........................ $ 5,327 $ 4,121
Materials and supplies ................. 8,375 7,397
--------- ---------
$13,702 $11,518
At December 31, 1997 and 1998, all inventories were valued on the LIFO
method. The FIFO value of these inventories was approximately $0.1 million and
$0.6 million greater than their LIFO value at December 31, 1998 and 1997,
respectively.
6. OTHER LIABILITIES
December 31
--------------------------
1997 1998
---- ----
(thousands)
Other accrued liabilities consisted of the following:
Reserves related to sold or discontinued businesses -
Insurance liabilities......................................... $ 2,785 $ 928
Environmental .............................................. 1,750 1,750
Warranty claim settlement .................................. 1,000 1,000
Other ....................................................... 936 845
----------- -----------
6,471 4,523
---------- ----------
Warranty and backcharges .................................... 3,338 2,607
Deferred revenue................................................ 524 500
Accrued interest................................................ 60 -
Other ......................................................... 6,403 6,526
---------- ----------
$ 16,796 $ 14,156
======== ========
December 31
---------------------------
1997 1998
---- ----
(thousands)
Other long-term liabilities consisted of the following:
Reserves related to sold or discontinued businesses -
Insurance liabilities......................................... $ 3,453 $ 6,225
Environmental .............................................. 4,792 3,572
Warranty claim settlement .................................. 3,000 2,000
Dispositions.................................................. 2,469 3,973
Other ....................................................... 5,993 4,915
----------- ----------
19,707 20,685
---------- ---------
Warranty and backcharges .................................... 1,745 2,399
Other ..................................................... 13,925 15,472
---------- ---------
$ 35,377 $ 38,556
========= ========
See Note 11 regarding contingencies.
7. DEBT
Long-term debt consisted of the following:
December 31
----------------------------
1997 1998
(thousands)
Term Loan Note ............................................... $ 15,000 $ -
Less current portion .................................. 5,000 -
---------- ------------
$ 10,000 $ -
========= =============
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 million, due
June 30, 2001, which was paid in full in September 1998. At that date, the
Company also reduced the amount available under the revolving credit and letter
of credit facility from $25 million to $15 million maturing December 31, 2001.
Up to $12 million 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 December 31, 1998,
the borrowing base was approximately $29.4 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 issuance of additional debt, amongst other matters.
Under the terms of the Company's debt agreement, $32.8 million was available for
dividends or repurchase of stock at December 31, 1998. The Company is in
compliance with the provisions of the Credit Agreement.
On December 31, 1996, the Company prepaid its existing term loan and that
credit agreement was terminated. In connection with the prepayment, the Company
incurred a $.3 million prepayment penalty. This amount, plus $1.9 million of
deferred fees and expenses, net of taxes of $.8 million, is recorded as
extraordinary loss on debt redemption.
On January 15, 1997, the amounts outstanding on the Senior Subordinated
Notes and Subordinated Debentures were redeemed utilizing proceeds from
borrowing under the new term loan in the Credit Agreement plus available cash.
In connection with the redemption of the Notes and Debentures, the Company
recorded a gain of $4.6 million, net of taxes of $2.9 million.
At December 31, 1998, the Company had outstanding performance and
financial bonds of $1.5 million, 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. As of December 31, 1998, the
Company had outstanding letters of credit of $8.4 million used principally to
support insurance and bonding programs.
8. RENTAL AND LEASE INFORMATION
The Company leases certain facilities and equipment under operating
leases. Total rental expense was $942,000, $721,000 and $695,000 for 1996, 1997
and 1998, respectively.
Future minimum rental commitments under operating leases at December 31,
1998 are as follows (thousands):
1999 ........................................ $ 776
2000 ........................................ 639
2001 ........................................ 404
2002 ........................................ 377
2003 ........................................ 313
---------
$ 2,509
9. FAIR VALUE OF 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 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, 1998
due to the relatively short maturity of these financial instruments.
10. TAXES ON INCOME
Year Ended December 31
--------------------------------------------------
1996 1997 1998
---- ---- ----
(thousands)
Income before provision for taxes on income:
Domestic ............................... $ 22,436 $ 27,733 $ 34,496
Foreign ................................ 1,105 2,253 1,670
---------- --------- --------
$ 23,541 $ 29,986 $ 36,166
========= ========= ========
Provision for taxes on income:
Current taxes:
Federal .................................. $ - $ - $ -
State...................................... - - 398
Foreign .................................. - - -
--------- --------- --------
- - 398
--------- --------- --------
Deferred Taxes:
Federal .................................. (25,408) 9,472 11,513
State...................................... (3,659) 1,728 1,736
Foreign .................................. - - -
--------- --------- --------
(29,067) 11,200 13,249
--------- --------- --------
Total provision (credit) for taxes ......... $ (29,067) $ 11,200 $ 13,647
========== ========= ========
A reconciliation between taxes computed at the U.S. statutory Federal
income tax rate and the provision (credit) for taxes on income reported in the
Consolidated Statements of Income follows:
Year Ended December 31
--------------------------------------------
1996 1997 1998
---- ---- ----
(thousands)
Tax provision at U.S. statutory rate................. $ 8,239 $ 10,495 $ 12,658
Net operating loss benefit........................... (387) (788) (585)
Research and development tax credit carryforward..... - - (183)
Benefit attributable to utilizing
temporary differences ............................ (7,198) - -
State taxes ......................................... 915 1,123 1,387
Revision of prior year estimates and
other changes in valuation allowance ............. (31,000) - -
Other non-deductible expenses ..................... 364 370 370
------------ ---------- ---------
Provision (credit) for taxes on income............... $ (29,067) $ 11,200 $ 13,647
============ ========== =========
The following is a summary of the significant components of the Company's
net deferred tax asset at December 31, 1997 and 1998:
1997 1998
------- -------
(thousands)
Deferred tax assets:
Insurance liabilities............................................... $ 5,082 $ 4,724
Pension liabilities ................................................ 688 379
Warranties and backcharges ......................................... 2,849 2,491
Other expenses not currently deductible ........................... 8,936 8,380
Operating loss carryforwards ..................................... 12,276 2,192
Limited operating loss carryforwards .............................. 6,213 6,125
Unrealized loss on sale/disposal of businesses...................... 4,247 4,247
---------- ---------
Total tax assets .................................................... 40,291 28,538
--------- ---------
Deferred tax liabilities:
Accelerated depreciation ......................................... (4,059) (3,997)
Lifo inventory ................................................... (1,832) (1,833)
---------- ----------
Total tax liabilities ............................................... (5,891) (5,830)
---------- ---------
Deferred tax asset valuation allowance .......................... (12,274) (11,689)
--------- ---------
Net deferred tax asset .......................................... $ 22,126 $ 11,019
========= =========
During the third quarter 1996, the Company reduced its deferred tax
asset valuation allowance by $31 million resulting in a credit to taxes on
income. That decision resulted from continued profitable quarterly results,
successful implementation of cost containment measures and other factors.
Management believes that the Company will be able to realize the remaining
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 or other events.
At December 31, 1998, the Company had U.S. tax net operating loss
carryforwards of approximately $136 million. Use of the loss 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 carryforward is restricted to an aggregate
potential availability of $17.5 million.
At December 31, 1998, the Company had net operating loss carryforwards
at its Canadian subsidiary of approximately $6.3 million which expire in the
years 1999 and 2000. A valuation allowance has been recorded for the entire
amount of the deferred tax assets attributable to the Canadian net operating
loss and other Canadian temporary differences. The reduction in the valuation
allowance is related to the portion of the Canadian net operating loss utilized
in 1998.
11. COMMITMENTS AND CONTINGENCIES
There are various proceedings pending against or involving the Company
which are ordinary or routine given the nature of the Company's business. The
Company has recorded a liability related to litigation where it is both probable
that a loss has been incurred and the amount of the loss can be reasonably
estimated.
The Company continues to be liable for obligations associated with sold
or discontinued businesses prior to their sale or disposition including
liabilities arising from Company self-insurance programs, unfunded pensions,
warranty and rectification claims, environmental clean-up matters, and
unresolved litigation. 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 adverse 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, 1998, the Company
recorded reserves of approximately $5.3 million, representing the best estimate
of management and the third parties 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 adverse 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 entitled to
defense and indemnification under the policies. The insurer has refused to admit
or deny coverage. 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.
12. 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, 1998, there were 1,080,000 shares under
the Long-Term Incentive Plan available for grant.
During 1996, 93,000 restricted shares were forfeited and 15,000
restricted shares were issued with a vesting period of 5 years. During 1998,
15,000 restricted shares were forfeited. At December 31, 1998, 34,000 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, a
component of stockholders' equity. Deferred compensation expense is amortized
over the period benefited.
13. RETIREMENT BENEFITS
The Company amended its U.S. defined benefit pension plan, effective
January 1, 1995, so that active salaried employees ceased 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.
Benefits which are provided under the Company's defined benefit pension plan are
primarily based on years of service and the employee's compensation. Plan assets
of the Company's defined benefit plan are invested in broadly diversified
portfolios of government obligations, mutual funds, stocks, bonds and fixed
income securities.
Currently, the Company's funding policy is to make payments to its
defined benefit plan as required by minimum funding standards of the Internal
Revenue Code.
Net pension income of the defined benefit pension plan was:
Year Ended December 31
------------------------------------------
1996 1997 1998
---- ---- ----
(thousands)
Service cost-benefits earned during the year .............. $ 63 $ 26 $ -
Interest cost on projected benefit obligation ............. 3,766 3,724 3,613
Expected return on assets .................................. (4,301) (4,429) (4,393)
Recognized actuarial loss................................... 51 - -
Net amortization and deferral ............................. 47 47 47
---------- ----------- -------------
Net pension income ......................................... $ (374) $ (632) $ (733)
========== ========= ==========
The following table reconciles the Company's benefit obligation for the
defined benefit pension plan from the beginning of the year to the end of the
year:
1997 1998
------- -------
(thousands)
Benefit obligation at beginning of year ................................. $ 52,345 $ 51,328
Service cost ........................................................... 26 -
Interest cost ........................................................... 3,724 3,613
Actuarial loss .......................................................... 1,536 2,166
Benefits paid .......................................................... (6,303) (6,667)
--------- ----------
Benefit obligation at end of year ....................................... $ 51,328 $ 50,440
========= =========
The following table reconciles the change in plan assets of the
Company's defined benefit pension plan from the beginning of the year to the end
of the year:
1997 1998
------- -------
(thousands)
Fair value of assets at beginning of year ............................... $ 51,756 $ 51,274
Actual return on plan assets ........................................... 5,821 6,484
Benefits paid ........................................................... (6,303) (6,667)
--------- ----------
Fair value of assets at end of year ...................................... $ 51,274 $ 51,091
======== =========
The following table sets forth the funded status and statement of
financial position of the Company's defined benefit pension plan:
1997 1998
------- -------
(thousands)
Fair value of assets at end of year ..................................... $ 51,274 $ 51,091
Benefit obligation at end of year ....................................... 51,328 50,440
-------- ---------
Funded status ......................................................... (54) 651
Unrecognized actuarial gain ............................................. (610) (536)
Unrecognized prior service cost ......................................... 134 105
Unrecognized net obligation ............................................. 85 68
----------- ------------
Net prepaid/(accrued) benefit cost ...................................... $ (445) $ 288
========= ==========
Actuarial assumptions used for the Company's defined benefit pension
plan were as follows:
Year Ended December 31
-----------------------------------
1996 1997 1998
---- ---- ----
(thousands)
Assumed discount rate .................................. 7.25% 7.25% 7.0%
Assumed rate of compensation increase .................. - - -
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 currently. Plan
assets of the defined contribution plan are invested in a variety of fixed
income and equity funds. Expense related to the Company's defined contribution
plan was:
Year Ended December 31
---------------------------------
1996 1997 1998
---- ---- ----
(thousands)
$ 881 $ 1,067 $ 1,134
======= ======== ========
14. 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
-----------------------
1997 1998
---- ----
(Thousands)
Accumulated Postretirement Benefit Obligation ("APBO"):
Retired employees .................................................... $ (1,704) $ (1,231)
======== =========
Unfunded accumulated benefit obligation in
excess of plan assets .............................................. $ (1,704) $ (1,231)
Unrecognized gain .................................................... (4,163) (3,830)
Unrecognized transition obligation ................................... 5,202 4,389
----------- ----------
Accrued postretirement benefit cost ................................. $ (665) $ (672)
========= =========
Weighted average discount rate used in determination of APBO ......... 7.25% 7.0%
======== ========
The following table reconciles the Company's benefit obligation for
postretirement medical and life insurance plans from the beginning of the year
to the end of the year:
1997 1998
------- ----------
(thousands)
Benefit obligation at beginning of year ........................ $ 2,236 $ 1,704
Interest cost ................................................... 133 102
Actuarial gain ................................................. (167) -
Benefits paid.................................................... (498) (575)
-------- ---------
Benefit obligation at end of year ............................... $ 1,704 $ 1,231
======== =========
Net periodic postretirement benefit cost for 1996, 1997 and 1998 included
the following components:
Year Ended December 31
-----------------------------------
1996 1997 1998
---- ---- ----
(thousands)
Interest cost ................................................. $ 195 $ 133 $ 102
Amortization of net obligation ................................ 1,261 776 813
Recognized actuarial gain ..................................... (328) (330) (333)
-------- -------- -------
Postretirement benefit cost...................................... $ 1,128 $ 579 $ 582
======== ====== =======
Weighted average discount rate used in
determination of APBO ........................................ 7.25% 7.25% 7.0%
======= ======== ======
For measurement of the net periodic postretirement benefit cost and the
APBO, a 9.75% annual rate of increase in the per capita cost of covered health
care benefits was assumed for the year 1996-1997; the rate was assumed to
decline to 7.5% for the year 1997-1998, and then to decline uniformly to 5.75%
by 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
resulting in decreased costs. Due to the elimination of post-65 health coverage
in 1995, the medical trend rate assumption has an immaterial impact on results.
15. RELATED PARTY TRANSACTIONS
The Company paid $240,000 during each of the years ended 1996, 1997 and
1998, to an affiliated company of the Company's Chief Executive Officer for
manufacturing and certain other consulting services.
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial data is summarized as follows:
(in thousands, except per share data):
First Second Third Fourth
----- ------ ----- ------
1998
Revenue .......................................... $ 62,488 $ 74,217 $ 78,281 $ 79,816
Cost of sales .................................... 50,827 58,221 61,808 64,057
Net income ....................................... 3,508 6,519 6,285 6,207
Net income per common share ...................... $ .22 $ .41 $ .39 $ .39
========= ========= ======== ========
1997 (a)
Revenue .......................................... $ 59,998 $ 69,716 $ 79,170 $ 79,267
Cost of sales .................................... 49,059 56,255 64,496 63,474
Income before extraordinary item ................. 3,160 4,335 5,579 5,712
Extraordinary gain on debt redemption ............ 4,568 - - -
Net income ....................................... 7,728 4,335 5,579 5,712
Income per share from continuing operations ...... $ .20 $ .27 $ .35 $ .35
Net income per common share ...................... $ .48 $ .27 $ .35 $ .35
========= ========= ======== =========
(a) During the first quarter of 1997, the Company recorded a $4.6 million
credit, net of taxes of $2.9 million, reflecting the elimination of the
previously recorded accrued interest on the 12% debentures that were redeemed in
January 1997.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Robertson-Ceco Corporation:
We have audited the accompanying consolidated balance sheets of Robertson-Ceco
Corporation, a Delaware Corporation, and subsidiaries as of December 31, 1998
and 1997 and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1998. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Robertson-Ceco Corporation and
subsidiaries as of December 31, 1998 and 1997 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
San Francisco, California
February 12, 1999
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 18, 1999, 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 6 of this Report under the heading "EXECUTIVE OFFICERS
OF THE REGISTRANT".
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Information concerning executive compensation, other than the report of the
compensation committee and the performance graph, 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 18,
1999, 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 18, 1999, 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 18, 1999, 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:
(a)1. Consolidated Financial Statements of Robertson-Ceco
Corporation.
Consolidated Statements of Income for the three
years ended December 31, 1998. 15
Consolidated Balance Sheets at December 31, 1997 and
1998. 16
Consolidated Statements of Cash Flows for the three
years ended December 31, 1998. 18
Consolidated Statements of Stockholders' Equity
for the three years ended December 31, 1998. 19
Notes to Consolidated Financial Statements, including
Selected Quarterly Financial Data as required by Item
302 of Regulation S-K. 20
Report of Independent Public Accountants 32
(a)2. Financial Statement Schedules for the Three Years
Ended December 31, 1998.
SCHEDULE II - Valuation and Qualifying Accounts All other
schedules are omitted because they are not
applicable or not required. 37
Report of Independent Public Accountants on Financial
Statement Schedules: 39
(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 46.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
December 31, 1998.
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 1999.
ROBERTSON-CECO CORPORATION
By /s/ Patrick G. McNulty
------------------------------
Patrick G. McNulty
Corporate 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, 1999. 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, Sr. /s/ Andrew G. C. Sage, II
- ------------------------------ ------------------------------
Michael E. Heisley, Sr. 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, Chief
and Director Financial Officer and Secretary
/s/ Frank A. Benevento /s/ Stanley G. Berman
- ------------------------------ ------------------------------
Frank A. Benevento Stanley G. Berman
Director Director
/s/ Gregg C. Sage /s/ Stanley H. Meadows
- ------------------------------ ------------------------------
Gregg C. Sage Stanley H. Meadows
Director Director
/s/ Patrick G. McNulty /s/ Michael E. Heisley, Jr.
- ------------------------------ ------------------------------
Patrick G. McNulty Michael E. Heisley, Jr.
Corporate Controller Director
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, 1998:
Deducted from Asset Accounts:
Allowance for
Doubtful Accounts............... $ 1,690 $ 220 $ - $ 115 (b) $ 1,795
========= ========= ========= ========= ==========
Not Deducted from Asset Accounts:....
Reserves for Discontinued
Operations(e)(g) .............. $ 5,272 $- $ - $ 1,018 (c) $ 4,254
========= ======== ======== ========= =========
2,419 (d)
Insurance liabilities - current . $ 5,754 $ 7,808 $ - $ 7,892 (c) $ 3,251
========= ======= ======== ========= =========
Insurance liabilities - long-term $ 7,331 $ (158) $ - $ (2,419)(c) $ 9,592
========= ======= ======== ========= =========
(800)(d)
Other-current (f)................. $ 5,602 $ 2,150 $ - $ 3,682 (c) $ 4,870
========= ======= ======== ========= =========
Other-noncurrent (g) ............ $ 9,245 $- $ - $ 800 (d) $ 8,445
========= ======= ======== ========= =========
YEAR ENDED DECEMBER 31, 1997:
Deducted from Asset Accounts:
Allowance for
Doubtful Accounts ............ $ 1,881 $ 450 $ - $ 641 (b) $ 1,690
========== ======= ======== ========= =========
Not Deducted from Asset Accounts:
Reserves for Discontinued
Operations (e)(g $ 6,273 $- $ - $ 1,001 (c) $ 5,272
========== ======= ======== ========= =========
(1,225)(d)
$ 6,094 $ 6,525 $ - $ 8,090 (c) $ 5,754
========= ======= ======== ========= =========
Insurance liabilities - current
1,225 (d)
Insurance liabilities - long-term $ 8,349 $- $ - $ (207)(c) $ 7,331
========= ======= ======== ========= =========
(1,328)(d)
Other-current (f) ................ $ 5,473 $ 1,881 $ - $ 3,080 (c) $ 5,602
========= ======= ======== ========= =========
Other-noncurrent (g) ............. $ 10,573 $- $ - $ 1,328 (d) $ 9,245
======== ======= ======== ======== =========
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
========= ======== ========= ======== =========
Not Deducted from Asset Accounts:
Reserves for Discontinued
Operations (e)(g).............. $ 7,613 $- $ - $ 1,340 (c) $ 6,273
========= ======== ========= ======== =========
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 (d) $ 10,573
========= ======== ========= ======== =========
NOTES:
(a) Represents recovery of accounts receivable previously written off as
uncollectable.
(b) Accounts receivable written off as uncollectable.
(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 Public Accountants on
Financial Statement Schedules
To the Board of Directors
of Robertson-Ceco Corporation:
We have audited in accordance with generally accepted auditing standards, the
1998, 1997 and 1996 consolidated financial statements of Robertson-Ceco
Corporation included in this Form 10-K and have issued our report thereon dated
February 12, 1999. Our audit was made for the purpose of forming an opinion on
those statements taken as a whole. The schedules listed in the index above are
the responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commissions rules and are not part of
the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements
referred to above and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
San Francisco, California
February 12, 1999
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 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 ...................................................
4.2 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 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 ...................................................
10.3 Registration Rights Agreement dated May 17, 1993 by and among the Registrant
and Sage RHH referred to in Exhibit 4.2 above ..................................................
10.4 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 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 ................................
10.9 Credit agreement dated December 31, 1996 (as amended) by and between the Registrant
and the various financial institutions and Bank of America as agent for the lenders as filed as
Exhibit 2.1 to the Registrants Report on Form 10-K for the year ended December 31, 1997
(File No. 1-10659) and incorporated herein by reference thereto ................................
11 Statement re: Computation of Earnings Per Common Share .........................................41
21 List of subsidiaries of Registrant .............................................................43
23.1 Consent of Arthur Andersen LLP .................................................................44
27 Financial Data Schedule