5000 Executive Parkway
San Ramon, California 94583
Fax: (510) 244-6780
Sales: $255.9 million (1996)
Stock Exchanges: New York
SICs: 3442 Metal Doors, Sash & Trim; 3444 Sheet Metal Work
Robertson-Ceco Corporation, through its subsidiaries, is a leading manufacturer of pre-engineered metal buildings, marketed chiefly within North America. All other operations, such as manufacturing of wall, roof, and floor building components, were discontinued during the 1990s. The company was formed in 1990 by the merger of H.H. Robertson, Inc. and Ceco Indus-tries, Inc., a merger that followed several years of losses and attempted buyouts and involuntary takeovers. Turmoil continued through the early years of the new company, as reflected by repeated headquarters relocations within seven years—from Pittsburgh to Boston to San Ramon, California—and accompanying changes of management and employees. In the late 1990s the company was focusing on restoring profitability by cutting costs and concentrating on its core metal building operations.
Origins of the Company
The Robertson-Ceco Corporation was born in 1990 from the merger of two large building materials and construction companies, H. H. Robertson, Inc. of Pittsburgh, and Ceco Industries, Inc., of Oakbrook Terrace, Illinois. Both of these companies had had troubled histories during the 1980s, with buyout and hostile takeover attempts vying for management attention along with everyday business operations.
Ceco Industries had endured the death of its founder, C. Louis Mayer, after which a group led by senior management of the company, including Chairman Erwin Schulze and some of the founder’s family members, offered to buy the company from other shareholders in 1986, with plans to take the company private. However, the buyout initially failed because the stock prices mysteriously began to rise, causing speculation that there might be another bid in the works. A special committee of the board of directors then refused the offer made by the original group, but no offer from another party ever materialized. Eventually a price was agreed on with the original group and the company went private. However, Ceco also incurred $80 mil-lion in debt along with the privatization, a major burden even though profits remained healthy.
H.H. Robertson had an even more colorful time just prior to the merger. Beginning in 1983, Canadian corporate raider Samuel Belzberg began a campaign to take over the Pittsburgh company, but he underestimated the resistance he would encounter from the existing management and other shareholders. Robertson appointed a new president and CEO, James L. Davis, who hoped to increase profits by moving from expensive office projects to lower-cost construction projects. A successful antitrust suit also was launched against Belzberg in an attempt to stop a takeover. As Davis and Belzberg carried on their struggle, the company began to flounder. It tried to boost sales by making low bids on projects, and losses piled up. Robertson incurred losses of over $30 million in 1985 and, by 1986, its financial condition was so shaky that it could not obtain the construction bonding insurance necessary for bidding on projects.
Under pressure from the board, Davis opted for early retirement in 1986 and was replaced by Jack Hatcher, who immediately began to cut unprofitable operations and reduce overall operating costs. The company continued to operate at a loss until 1989, its first profitable period in six years. Along the way other crises arose, including a patent infringement suit and a strike. Belzberg’s company, First City Financial Corporation Ltd. of Vancouver, British Columbia, had become Robertson’s largest shareholder, and it initiated discussions of a merger with Ceco.
The transition was anything but smooth; a dissident share-holder group at Robertson bitterly opposed the terms of the merger, but the opposition largely dissipated after the death of the leader of the dissident group, Anthony Pedone, in mid-1990. Bolstered by a $40 million investment from Frontera SA, a Swiss investment company, Robertson and Ceco merged into Robertson-Ceco Corporation in 1990. Ceco chairman Schulze retired and served as a consultant; Robertson chairman Hatcher was chosen to head the new company, which would have headquarters in Robertson’s home city of Pittsburgh. Robertson agreed to assume Ceco’s debt, now grown to $85 million.
Restructuring and Management Changes Begin
Unfortunately, the merger did not have the anticipated results. A national recession within the construction industry led to major losses for the new company. It also remained laden with debt and was still engaged in a hodge-podge of business activities carried over from the time of the merger, even though some no longer were profitable. Its major business segments consisted of a Metal Buildings Group, which manufactured, sold, and installed pre-engineered commercial and industrial metal buildings throughout North America; a Building Products Group, which manufactured, sold, and installed non-residential building components (wall, roof, and floor systems), operating on a worldwide basis; a Door Products Group, which manufactured and distributed metal, wood, and fiberglass doors and frames for commercial and industrial use and operated throughout the United States; and a Concrete Construction Group, which provided subcontracted services for forming reinforced concrete structures, also operating throughout the United States.
Within a year after the merger, Robertson-Ceco stock values had plunged, and losses of almost $125 million were recorded in 1991. Robertson-Ceco entered into a $135 million agreement with a Canadian company, United Dominion Industries, to sell its operations that manufactured wall products, industrial clad-ding and accessories, and similar products. Hatcher, while remaining chairman of the board of directors, resigned as president and CEO and was replaced by John O’Malley, a Massachusetts executive with international management consulting experience. O’Malley immediately announced a move of corporate headquarters to Boston, along with a downsizing of management and staff, consolidation of operations, and closing of some of the company’s manufacturing facilities.
In early 1992, the company sold some of its domestic building products operations and its South African building products subsidiary. After the company defaulted on its loan payments in mid-1992, a major debt restructuring was announced under which debt holders would be given a 90 percent share of the company. Suddenly a new face appeared: investment banker Andrew Sage II, a former president of investment firm Lehman Brothers, bought up over one-third of Robertson-Ceco’s common stock in late 1992. Sage, noted for his involvement in major corporate turnarounds, was in a prime position to force a major restructuring of Robertson-Ceco.
Rapid Divestitures and More Management Changes
With the involvement of Sage as a major shareholder, more changes at Robertson-Ceco began. A total management change-over occurred once again, with Sage becoming chairman in July 1993, temporary president (November 1992-July 1993) and temporary CEO (November 1992-December 1993), Michael E. Heisley becoming CEO and vice-chairman in December 1993, and E.A. Roskovensky becoming president and chief operating officer in November 1994. Building products operations in Great Britain were sold in 1993, and late the following year, the company sold its Cupples Products Division, which manufactured curtainwall systems, to a newly formed company owned by its board of directors. Management also decided to dispose of its remaining European building product operations (located in Holland, Spain, and Norway), which were gradually sold off during the next two years. Other cost-cutting measures continued, such as downsizing the corporate office, redistributing manufacturing operations, and reducing work force levels.
In 1995 another business operation, the Ceco Concrete Division, was sold for $14.5 million to Pettibone Corporation, a newly-formed company controlled by CEO Heisley. Building products operations in Australia, Asia, and Canada also were discontinued. These divestitures marked the company’s complete exit from the building products business, and operations were then focused on the remaining metal buildings operations.
This restructuring had an immediate positive impact on Robertson-Ceco’s financial condition. Revenues rose from $251.58 million in 1994 to $265 million in 1995. A net loss of $21.76 million in 1994 fell to a net loss of $3.54 million in 1995.
1990s Operations and Future Outlook
As of 1996 Robertson-Ceco concentrated its efforts solely on the metal buildings business, which had remained successful. This operation consisted of three pre-engineered metal building companies: Ceco Building Systems; Star Building Systems; and H.H. Robertson Building Systems (Canada). Al-though sales of metal buildings traditionally had been aimed at the one-story small/medium building market, Robertson-Ceco was expanding into larger and multistory buildings, with custom design possibilities.
These metal building systems were manufactured at five plants within the United States (two in Iowa, and one each in California, Mississippi, and North Carolina), plus one plant in Ontario, Canada. Sales were made primarily through builder/dealer networks in the United States and Canada. Some sales were made to the Asian market, through local unaffiliated dealers and by sales staff employed by the company itself. The principal materials used in manufacturing these buildings were hot and cold rolled steel products, and the buildings had three components: primary structural steel; secondary structural steel; and cladding.
In mid-1996 Robertson-Ceco moved its corporate headquarters once again, this time from Boston to San Ramon, California. According to the company’s 1996 annual report, the move was undertaken in order to incur lower occupancy costs. however, the move also initiated a major personnel housecleaning. Key management figures remained (Sage, Heisley, and Roskovensky), but most of the existing corporate staff chose not to move cross-country. An almost completely new staff, described by the report as bringing an “operationally oriented viewpoint” to the company, was in place by early 1997, with the most notable executive addition being that of Ronald D. Stevens as chief financial officer and executive vice-president following the move to California.
Along with the relocation, Robertson-Ceco’s management renegotiated a new credit agreement under which it financed a loan of $20 million and had access to a revolving loan of another $25 million. The agreement enabled Robertson-Ceco to repay an outstanding $5 million note and to redeem other notes. It also would significantly lower financing costs for 1997 and the years beyond, hopefully allowing the company to get out from under the burden of carryover debt that had plagued it since its first days when the debt of Ceco Industries was assumed. One advantage of the remaining carryover losses was that Robertson-Ceco most likely would not incur any federal income tax liability for several years.
In the 1996 annual report, Chairman Sage and CEO Heisley strongly emphasized their commitment to focusing on the metal buildings business and on cost reduction in all operations. Specific strategies mentioned were improving plant efficiency, undertaking additional administrative streamlining, and enhancing the company’s computer systems.
In the mid-1990s, it appeared that the management’s approach might be working. Boosted by a $31 million tax credit in 1996, Robertson-Ceco finally experienced an encouraging year. While its 1996 revenues of almost $256 million were slightly lower than the $265 million of 1995, they were a huge improvement over the $187.5 million of 1992. Perhaps more importantly, Robertson-Ceco reported net income of $51.3 million in 1996, rather than the losses of several previous years (a bleak $71 million net loss in 1992, $21 million in 1993, $21.76 million in 1994, and $3.54 million in 1995).
Early 1997 brought more good news for the company. Its income in the first quarter of the year increased 54 percent over the same quarter in 1996, from $3.3 million to $5.1 million (although a substantial portion of this increase could be attributed to the redemption of some company debt under its new credit agreement). In a corporate press release dated April 24, 1997, President and Chief Operating Officer E.A. Roskovensky attributed the increase to “the strong demand in the metal buildings market and to the aggressive cost cutting actions taken over the past few years.” He also mentioned the benefits of the debt refinancing, which lowered interest expense by $500,000 million in the first quarter of 1997 alone. A further encouraging sign was the size of the current backlog plus the level of new orders. Roskovensky did add a cautionary note, saying that the company’s performance for the remainder of the year (and presumably for future years as well) would be “heavily influenced by general economic activity and the trend in interest rates.”
Robertson-Ceco should continue to be strongly influenced by the executive officers and directors serving in 1997, who collectively controlled almost two-thirds of the common stock shares. CEO Heisley alone held almost 56 percent, enough to forestall any future takeover attempts.
Ceco Dallas Company; Ceco Houston Company; Ceco San Antonio Company; M C Durham Company; M C Windsor Company; Meyerland Company; Robertson-Ceco Industries, Inc.; Star Construction Company; Star Building Systems, Inc.; H.H. Robertson, Inc. (Canada).
“The Belzbergs Start a Fight,” Business Week, April 29, 1985.
“Ceco Bid to Go Private Falls Apart,” Cram’s Chicago Business, May 26, 1986, p. 82.
“Ceco Industries Gets Buyout Offer,” New York Times, April 16, 1986, p. 4.
“Chief Retiring at Robertson,” New York Times, September 22, 1986, p. D8.
Cotter, Wes, “Robertson Chief Climbs Aboard in Midst of Reorganization,” Pittsburgh Business Times, December 9, 1991, p. 6.
“H.H. Robertson Stock Declines at News of Pedone Death,” Metal-working News, August 27, 1990, p. 27.
“It’ll Be Robertson-Ceco Following Acquisition,” Chicago Tribune, July 27, 1990, p. 3.
Miles, Gregory L., “This Time the Belzbergs Picked a Lemon,” Business Week, April 11, 1988, p. 96.
O’Connor, Matt, “Ceco Industries Buyout Offer is Pulled Back,” Chicago Tribune, May 24, 1986, p. 7.
Olson, Thomas, “Turnaround Pro Buys Up Rob-Ceco,” Pittsburgh Business Times, October 19, 1992, p. 1.
“Robertson-Ceco Closes Sale of Its Ceco Concrete Division,” Business Wire, March 3, 1995.
“Robertson-Ceco Corp.; Robertson-Ceco Consented to Provide Its Debt Holders With a 90% Stake in the Firm,” Wall Street Journal (Eastern ed.), August 3, 1992, p. B3.
“Robertson-Ceco Leaving Pittsburgh; Headed for Boston,” Pittsburgh Press, February 29, 1992, p. A6.
“Robertson, Ceco Merge,” Pittsburgh Business Times, June 4, 1990, p. 18.
“Robertson-Ceco Reports 54% Increase in Pre-Tax Earnings,” Business Wire, April 24, 1997.
“Robertson-Ceco Reports Fourth Quarter Results of Operations,” Business Wire, February 14, 1997.
Rossi, Cathy, “$40 Million Swiss Capital Spurs Robertson, Ceco Merger,” Metalworking News, May 28, 1990, p. 4.
Rothman, Matt, et al., “How H.H. Robertson Is Fending Off the Belzbergs,” Business Week, May 6, 1985, p. 77.
“Sharp Rise for Ceco’s Stock; Action Follows Board Approval of Going Private,” Chicago Tribune, September 3, 1986, p. 3.
Zapf, Karen, “Robertson-Ceco’s Stock Continues Dip After 10 Years of Turmoil and Trouble,” Pittsburgh Business Times, January 6, 1992, p. 16.