Corrpro Companies, Inc.
Corrpro Companies, Inc.
Sales: $139.6 million (1997)
Stock Exchanges: New York
SICs: 8711 Engineering Services; 8731 Commercial Physical & Bio Research; 7389 Business Services, Not Elsewhere Classified; 1796 Installation Erection of Building Equipment 3599 Industrial Machinery, Not Elsewhere Classified; 1389 Oil & Gas Field Services, Not Elsewhere Classified; 3629 Electrical Industrial Apparatus, Not Elsewhere Classified; 3679 Electronic Components, Not Elsewhere Classified
Corrpro Companies, Inc. is a world leader in corrosion control technology and innovation. Headquartered in Medina, Ohio, and located in more than 50 strategically placed offices worldwide, Corrpro provides a broad range and comprehensive line of quality corrosion control engineering services, systems, equipment and monitoring services, and products to highly diverse markets such as the infrastructure, environmental, and energy markets located throughout the world. Some other markets include defense equipment, marine vessels, marine piers, offshore rigs, crude oil lines, gas processing facilities, tank farms, power stations, airports, reinforced concrete bridges, water treatment plants, pulp and paper mills, parking garages, natural gas distribution facilities, service stations, oil refineries, petrochemical plants, transit systems, and water distribution systems. The company’s corrosion control products and services include cathodic protection system design, chemical injection system design, contract research, corrosion control materials, corrosion engineering, corrosion monitoring system design, corrosion surveys, customized monitoring and testing software, electrochemical testing, environmental studies, failure analyses, infrastructure condition surveys, internal corrosion monitoring equipment and services, laboratory simulation testing, leak detection surveys, material selection, non-intrusive ultrasonic monitoring, protective coating evaluation, natural marine testing, pre-construction surveys, process safety management program design, turnkey installation, ultrasonic B-Scan inspection, and water quality testing.
A U.S. Department of Commerce study estimated that, in the U.S. alone, the total cost of corrosion-related degradation exceeds $230 billion annually. Unlike many of its competitors, who concentrate on discrete segments of the corrosion protection business, the company offers a broad spectrum of services to the corrosion protection market. Corrpro’s overall strategy is to build a worldwide integrated corrosion control company with a technological base. In addition to providing engineering, research and analytical services that assist customers in assessing corrosion problems and developing appropriate methods of corrosion control, the company designs, manufactures, installs and services cathodic protection systems and equipment. The company pursued that strategy aggressively in the late 1990s, building a staff of highly trained corrosion control professionals and over 130 corrosion engineers.
Corrpro began acquiring companies in 1987. The acquisitions included D. Foley Pipeline Services Limited, Corrosion Engineering and Research Company (CERCO) and, in 1988, PSG Corrosion Engineering Inc. and its subsidiary Ocean City Research Corp. Prior to 1990, the company’s operations focused primarily on corrosion engineering and construction services. Around that time, the company reexamined its strategy and began focusing on the continued expansion of its presence in the domestic and international corrosion control markets through internal growth and selected acquisitions of companies or product lines that provide complementary products, services, or technologies and that can be effectively integrated into its operations, especially those with an emphasis on engineering and construction. In 1990, the company acquired Harco Technologies Corporation. This acquisition enabled the company to expand its operations in the manufacture and supply of products used in cathodic protection systems and helped contribute to the 98 percent increase in the company’s revenues for that year. However, Corrpro experienced considerable difficulties integrating Harco’s operations with its own, running into duplication of staffing, services, and office locations, as well as incompatible operating philosophies and organizational structures. In 1992, the company restructured its operations, closing overlapping offices, eliminating redundant staff positions, and improving management and control systems in order to more effectively assess the company’s performance and improve accounts receivable collection and inventory level assessments, as well as establish minimum pricing policies. This allowed the full incorporation of Harco and contributed to a substantial improvement of the company’s operating results.
In 1993, more changes were made as the company redesigned its organizational structure to provide for enhanced management reporting and accountability. Some of the changes included monthly budgeting and forecasting with weekly updates, daily cash monitoring, monthly individual productivity reporting, “on-time” material shipment tracking, daily monitoring of inventory purchasing cost variances, improved employee performance reviews and implementation of customer-centered quality programs and evaluation questionnaires which allowed the company to identify problems and take prompt corrective actions. In April of the same year, the company acquired Commonwealth Seager Holdings Limited, an Alberta, Canada-based corporation and provider of a wide range of corrosion control products, engineering services, and equipment doing business as Commonwealth Seager Group. Because Commonwealth Seager manufactures products such as rectifiers for cathodic protection systems and certain types of anodes which Corrpro did not previously manufacture, this acquisition enhanced the company’s ability to provide a wider range of products and services to pipelines and expanded manufacturing capabilities, as well as increasing its Canadian customer base.
In 1994, Corrpro acquired a number of companies. The first was in January. Good-All Electric Inc., a wholly owned subsidiary of Valmont Industries Inc. located in Fort Collins, Colorado, which manufactures power supplies for cathodic protection systems and battery chargers, was acquired for $3.1 million in cash. The company acquired, in March, for $4 million, UCC Corporation, another Alberta, Canada-based company and provider of corrosion engineering and coating services and equipment. In addition to providing cathodic protection consulting engineering to customers in the oil, gas, and petrochemical industries, UCC also developed significant experience in the use of coatings in corrosion control applications and provided in-situ coating of storage tanks and other containment vessels. Also in March, Corrpro acquired, for $14.6 million, The Wilson Walton Group Limited, a United Kingdom-based provider of cathodic protection products and services for the international marine, offshore, and industrial markets, with six other offices located throughout Europe, Asia, and the Middle East. Wilson Walton also developed tank venting, electrolytic descaling, and remote monitoring systems for sale to customers in the marine market. Rohrback Cosasco Systems Inc., a Santa Fe Springs, California-based company, was also acquired in 1994 for approximately $8.5 million.
These and other acquisitions expanded Corrpro’s customer base and the range of its services. CERCO and Ocean City enhanced Corrpro’s specialization in corrosion control services for municipal water and transit authorities. Harco provided manufacturing capabilities for corrosion control materials and equipment. Good-All’s established presence in the rectifier market further expanded Corrpro’s Canadian customer base and increased its manufacturing capabilities. UCC’s experience with protective coatings helped expand the company’s presence in the overall market of corrosion control products and services. Wilson Walton’s specialization in corrosion protection in the marine and offshore markets expanded Corrpro’s customer base and increased its presence in a significant segment of the worldwide corrosion control market and furthered its manufacturing capabilities due to Wilson Walton’s presence in the markets of zinc, aluminum, and cast iron anodes, antifouling systems and tank venting systems.
Corrpro Companies, Inc. ’s mission is to provide innovative, quality and cost-effective solutions to its customers for the preservation of the world’s energy resources, infrastructure and environment. The company provides a complete corrosion protection source for all types of structures found in diverse environments throughout the world. Comprised of the largest group of dedicated corrosion control professionals, state-of-the-art research and testing laboratories, along with materials production facilities, the company has the strength to meet virtually any corrosion-related need. Using this strength, the company accomplishes its goals through progressive engineering, advanced research and a broad range of products and services.
Within the corrosion control market, Corrpro has a specialty in the design, manufacture, and application of concrete cathodic protection systems. Cathodic protection is an electrochemical process designed to prevent corrosion problems in new steel-reinforced concrete structures and mitigate the corrosion process in existing structures. The major cause of corrosion in such structures is the presence of salt resulting from the application of de-icing salts, exposure to sea water, or the use of salt-contaminated sand in the original concrete mix. When steel bars in concrete corrode, the formation of rust causes high internal pressures. Tensile stresses are exerted on the surrounding concrete and cracks develop, leading to subsurface fractures and delaminations. Cathodic protection has been determined by the U.S. Federal Highway Administration to be the only rehabilitation technique able to prevent further corrosion in such structures regardless of the salt content in the concrete. Cathodic protection of reinforced concrete structures has also been endorsed by the American Concrete Institute, AASHTO-AGC-ARTBA Task Force 29, and the National Association of Corrosion Engineers (NACE). Structures commonly protected against corrosion by the cathodic protection process include above- and underground storage tanks, offshore platforms, ships, electric power plants, bridges, oil and gas pipelines, parking garages, transit systems, and water and wastewater treatment equipment. However, since the cathodic protection process is only effective in certain applications, the cathodic protection market is a relatively small component of the overall market for corrosion protection products and services.
The company believes that its ability to provide corrosion engineering and research significantly enhances its cathodic protection business, since involvement in the engineering process allows Corrpro to make customers, consultants, engineers, and governmental entities involved in a project aware of the applications and benefits of cathodic protection. Corrpro also plans to pursue its global marketing efforts in order to increase the awareness of the benefits of cathodic protection among potential customers.
In June 1997, the company entered into a definitive purchase agreement to acquire Cathodic Protection Services Company (CPSC) from Offshore Logistics Inc. and Curran Holdings Inc. for $15 million in cash. CPSC, headquartered in Houston, Texas, provides materials and services for the evaluation, design, installation, and maintenance of cathodic protection systems. Operating primarily in the energy industry, CPSC also provides extensive field service operations and construction experience. With 10 offices located primarily in the Southwestern United States and with annual revenues of $30 million in 1997, the acquisition strengthens Corrpro’s full turnkey construction area. With little overlapping of CPSC and Corrpro customers, the acquisition also allows the company the opportunity to introduce its extensive engineering-related capabilities to a batch of new customers. Offshore owned 75 percent of CPSC; Curran held the remaining 25 percent.
As part of Corrpro’s changing objectives and strategies in the 1990s, the company reviewed each of its operations in order to determine how each fit in with the company overall. As a result of the process, the company decided in 1997 to divest itself of substantially all of the assets of its noncore business units. In March, the company sold some of these assets from an operation it maintained in Lafayette, Louisiana, for approximately $2.5 million and, despite “significant operational improvements” in 1995 and 1996, the company also decided to put up for sale its CorrTherm foundry operation located in Belle Chase, Louisiana, due to lack of volume and revenue levels. CorrTherm was formed in November 1994 through the combination of the operations of Thermal Reduction Company (TRC) and American Corrosion Services Inc. (ACS). The company had purchased substantially all of the assets of TRC for approximately $10 million in October 1994 and purchased ACS in November of the same year for approximately $5 million. By 1996, the company was considered the U.S. market share leader in rectifiers, a key power supply component in cathodic protection systems and the worldwide leader in the maritime cathodic protection market, corrosion monitoring systems, and the manufacturing of anodes for cathodic protection systems.
Some of the projects the company has completed include the design and installation of cathodic protection for the submerged interior of 17 waste purification units at the Occoquan Treatment Plant of the Fairfax County Water Authority at Annandale, Virginia, and for 16 condenser water boxes at the Morgantown Generating Station for Potomac Electric Power Company at Newburg, Maryland; developed plantwide cathodic protection standards for all underground piping and tank bottoms at the Marathon Refinery at Garyville, Louisiana; and conducted an engineering study for corrosion control of four million square feet of concrete parking deck surface at the World Trade Center for the Port Authority of New York and New Jersey.
Fiscal 1997 marked a year of change for Corrpro as the company reevaluated itself and set the objective to better utilize the company’s engineering strength and focus its efforts on growing the engineering, and construction portion of the business. Five areas considered ’ ’hot’’ markets on which the company will focus its engineering and construction segments include underground and aboveground tanks, reinforced concrete structures, ultrasonic inspection services, coatings engineering and inspection and pipeline integrity services.
The company’s primary objective, however, in the late 1990s, was the enhancement of profitability through gross profit improvements, operating expense reductions, and better working capital management. In line with this objective, the company showed good growth over a three-year period, moving from $118 million to $127 million to $139 million from 1995 through 1997, respectively, providing an annual growth rate of approximately 10 percent. Several minor setbacks included lawsuits in which PSG Corrosion Engineering, a subsidiary of the company, was a codefendant. One, in 1992 with two other parties in California, regarded liability for a water pipeline rupture in January 1990; a second, in 1994 with 100 unnamed parties in California, regarded a fire service pipeline rupture which occurred in 1992 and a third, in 1997, was a shareholder class-action lawsuit settlement in the amount of $6.1 million which was filed after the company announced its earnings for fiscal 1995.
The company intends to continue pursuing the development of new corrosion protection technologies and new applications for existing technologies, meeting its financial objectives and streamlining and focusing its product lines and services. With increasing global awareness of infrastructure issues and the need to protect existing and new capital assets from deterioration and as more and more companies continue to realize that it is more cost-effective to protect a structure from corrosion than it is to replace one that has failed, the company, as the worldwide leader in corrosion control and with a well-developed international reputation for engineering and technical expertise, believes it will be provided with significant opportunities to expand its presence in existing markets and to enter new markets.
Cathodic Protection Services Company; Corrpro Canada; D. Foley Pipeline Services Ltd.; Alcoke Distributors Ltd.; Commonwealth Pipeline Services Ltd.; Engineered Ceramic Products Inc.; General Castings Inc.; RTS Electronics Manufacturing Ltd.; Corrosion Engineering and Research Company; CorrTherm Inc.; American Corrosion Services Inc.; Thermal Reduction Company; Durichlor 51 Anode Company; Good-All Electric Inc.; Harco Arabia; Harco de Mexico; Harco Europe; Harco Pacific; Harco Technologies Corporation; Harco Waterworks CP; PSG Corrosion Engineering Inc.; Rohrback Cosasco Systems Inc.; UCC Corporation; CSI Coating Systems Inc.; United Corrosion Consultants Ltd.; Wayne Broyles Cathodic Systems Inc.; The Wilson Walton Group Limited (U.K.).
”Accord Is Set to Acquire Cathodic Protection Services,” Wall Street Journal, June 6, 1997, p. B4(W)/B4(E).
“Corrpro Companies, Inc.,” Wall Street Journal, December 31, 1996,p. 10(W)/12(E).
“Corrpro Cos.,” Wall Street Journal, August 1, 1996, p. B10(W)/B9(E).
“Corrpro Cos. to Buy Rack Shares,” Wall Street Journal, November 26, 1996, p. C22(W)/C22(E).
“Corrpro Cos. to Settle Class-Action Lawsuit Brought by Holders,” Wall Street Journal, October 18, 1996, p. B16(A).
—Daryl F. Mallett