Calloway’s Nursery, Inc.
Calloway’s Nursery, Inc.
4200 Airport Freeway, Suite 200
Fort Worth, Texas 76117
Telephone: (817) 222-1122
Fax: (817) 302-0031
Web site: http://www.calloways.com
Sales: $43.5 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: CLWY
NAIC: 444220 Nursery and Garden Centers
Calloway’s Nursery, Inc. is the largest lawn and garden retailer in Texas, the third-largest retail market in the United States. Calloway’s Nursery operates 17 stores in the Dallas-Fort Worth area and three Cornelius Nurseries stores in Houston. Supported by two growing operations, Miller Plant Farms and Turkey Creek Farms, the company positions itself to attract mid- to uppper-income customers, differentiating itself from discount chains by presenting an upscale image to consumers. The typical Calloway’s Nursery store consists of a 10,000-square-foot building, a 12,000-square-foot greenhouse, and a 40,000-square-foot outdoor nursery. Although configured somewhat differently, Cornelius Nurseries stores are roughly the same size as Calloway’s Nursery stores.
The garden center industry in Texas underwent significant change during the 1990s as competitors fought for market supremacy—or, at the very least, for survival. Some market participants buckled under the pressure exerted by mass-merchandise, discount chains such as Wal-Mart and Kmart, while other garden center firms consolidated their operations to improve their odds for survival. Caught in the midst of the pitched battle for the garden business of Texas was relative newcomer, Calloway’s Nursery.
Calloway’s Nursery was founded in 1986 by three former senior executives at Sunbelt Nursery Group. Formed in 1984, Sunbelt Nursery was created to help expand Pier 1 Imports’ Wolfe Nursery Inc. concept. Selected to lead the company toward such an objective were Jim Estill, Sunbelt Nursery’s president and chief executive officer; John Cosby, the company’s vice-president of corporate development; and John Peters, its vice-president of operations. Together, the three executives helped develop the company into a regional force with more than 100 stores in a five-state area. After a change in ownership at Sunbelt Nursery, the trio disagreed with the new owners about the future direction of the company. In March 1986, they formed Estill/Cosby Enterprises to facilitate the creation of their entry in the garden center market, Calloway’s Nursery.
Although Estill, Cosby, and Peters were veterans of the industry, they consulted the patriarch of the garden center industry in the Southwest, 65-year-old Sterling Cornelius, before starting out on their own. Sterling Cornelius’ father, Frank Cornelius, started the family nursery business in 1937, initially occupying a portable building that measured only slightly larger than 100 square feet. Except for a four-year stint in the U.S. Navy during World War II, Sterling Cornelius was employed by his father’s company from its start, witnessing the addition of Turkey Creek Farms, a nursery operation, in 1951 and the company’s development into a favorite among Houston’s lawn and garden enthusiasts. Estill, Cosby, and Peters solicited the help of Sterling Cornelius because, by their own admission, they wished to copy the operating strategy used by Cornelius Nurseries. “We saw an opportunity to create a different kind of nursery in Dallas-Fort Worth, and quite honestly, Cornelius was our pattern,” Estill remarked in a November 26, 1999 interview with Dallas Business Journal. “Cornelius was always the group in Houston that went after the upper-income customer, and there wasn’t anything like that in the Dallas-Fort Worth area.”
After Sterling Cornelius helped Estill, Cosby, and Peters develop a business plan, the effort to build a new chain of garden centers in the Dallas-Fort Worth area began in earnest. Cosby assumed responsibility for developing the company’s retail locations, including site selection and development, and lease and acquisition negotiations. Estill served as the company’s chief strategist, while Peters took responsibility for operations, distribution, administration, and human resources. In April 1987, the first Calloway’s Nursery store, located in Richardson, Texas, opened for business. Before the end of the month, two more stores opened, and before the end of the year the fledgling company opened its fourth store.
General Host Encourages 1991 IPO
Capital was scarce during the company’s first years in business, which led to the intervention of a financial partner in 1988. Stamford, Connecticut-based General Host Corp. invested $2 million in the Forth Worth company, obtaining an 80 percent stake in Calloway’s Nursery in return. After the infusion of cash, the company expanded, adding an average of nearly three new stores a year. General Host, meanwhile, waited for the right time to recoup its investment. In 1989, the company recorded a loss of $1.9 million, which was trimmed to a $545,000 loss the following year. Calloway’s Nursery posted its first annual profit in 1991, registering a $2 million gain that convinced executives at General Host the time was right for the Connecticut company to cash out.
At the urging of General Host, Estill and his colleagues filed with the Securities and Exchange Commission in May 1991 for an initial public offering (IPO) of stock. The company planned to sell 3.2 million at an expected price of $6.50 per share. At the time of the stock offering, Calloway’s Nursery was generating $22 million in annual sales, a total derived from the company’s 11 retail stores, all of which were located in the Dallas-Fort Worth area. The company had been able to secure a place for itself in a fiercely competitive market, successfully competing against industry veterans such as Wolfe Nursery and the “big-box” discount chains by putting an emphasis on quality rather than price. The completion of the IPO gave Estill $6 million, proceeds he intended to use to pay off $1.7 million in long-term debt owed to General Host and to fund the company’s continued expansion. Following the IPO, Estill, with Cosby as his lieutenant, planned to open two new garden centers a year for the next five years. From its $2 million investment in 1988, General Host received a substantial profit, walking away from the IPO and its affiliation with Calloway’s Nursery with $24 million.
The years immediately following the company’s IPO were difficult ones. Calloway’s Nursery failed to deliver consistent financial growth after registering its first annual profit in 1991, although considering the recessive economic climate of the early 1990s it was not surprising that the company failed to impress. After posting a $2 million profit in 1991, the company recorded a $825,000 gain the following year before suffering a nearly $500,000 loss in 1993. Sales slipped as well, dropping from $28.8 million in 1992 to $28.2 million in 1993. “Nineteen-ninety-three was a difficult year for the nursery industry,” Estill explained in a December 3, 1993 interview with PR Newswire. “Calloway’s Nursery did not achieve the sales increases or profitable operating results that we would have liked,” he added. Despite the company’s anemic financial performance during the early 1990s, it did achieve great strides through expansion. In late 1993, the company opened its 17th store, the sixth new store opening since the company’s IPO. The opening of the new store in a north Dallas suburb marked the end of the company’s internal expansion during the 1990s. Physical growth in the future would be achieved solely through acquisition.
Acquisitions in the Late 1990s
One major problem challenging the company from 1993 forward was maintaining its stock of plants. National retailers such as Wal-Mart, Kmart, and The Home Depot flocked to the Dallas area, hoping to wrest control of the lucrative market away from independent chains. The massive stores purchased large amounts of plants and flowers, causing a drain on the supply that had previously fed Calloway’s Nursery’s demand. To ameliorate what potentially could put the company in a precarious position, Estill looked to secure his own supply of garden products. In mid-1997, Estill made his move, acquiring a nursery production facility near Tyler, Texas. Comprising more than 80 acres and more than 100 greenhouses, Miller Plant Farms was expected to provide Calloway’s Nursery with one-fifth of the living plants its chain of stores required.
Calloway’s Nursery’s next big move on the acquisition front occurred two years after Miller Plant Farms joined the company’s fold. In a bold proposition, Estill announced his intention to acquire two familiar garden center retailers. One of the companies was Wolfe Nursery, the concept he, Cosby, and Peters had presided over during the early 1980s. Sunbelt Nursery had filed for bankruptcy protection and was looking to liquidate its assets. The other company on Estill’s list was the Houston-based chain controlled by his mentor, Sterling Cornelius. By 1999, Cornelius was 77 years old and ready to retire. “I am up in the senior-citizen bracket now,” Cornelius explained in an August 14, 1999 interview with The Houston Chronicle. “We’ve had several offers before,” he continued, “but this seemed like the right time. These people [Calloway’s Nursery] have a good track record. They walk the high moral road. They are good people, and that’s why we are doing this.”
Our objective is to provide an unmatched level of retail excellence in the quality and variety of living plants and garden products we offer. We strive to consistently and dependably furnish quality products, information, presentation, and service. Our commitment to providing an exciting retail experience is grounded in the proven principles of traditional retail. We combine these principles with advanced technologies specially developed to ensure the success of our products. Our customers seek us out because of our demonstrated ability to dependably provide them with an unequaled shopping experience. We believe that gardening is a creative process, that landscaping adds value to a home and that gardening provides both pleasant diversion and environmental benefit.
Estill’s ambitious plan promised to triple the size of Calloway’s Nursery and to expand the company’s geographic scope considerably, adding properties in Austin, San Antonio, and Houston to its established presence in the Dallas-Fort Worth area. The acquisitions did not go ahead as planned, however. In July 1999, one month after the acquisitions were announced, Calloway’s Nursery terminated its plan to acquire the Wolfe Nursery chain, explaining that it lacked the financial resources to complete both acquisitions. Forced to chose only one of the candidates, Estill opted for Cornelius Nurseries. In late 1999, the acquisition, valued at between $15 million and $20 million, was completed, giving Calloway’s Nursery control of four Cornelius Nurseries garden centers in Houston, a 160-acre nursery production operation named Turkey Creek Farms, and two wholesale distribution centers, one in Houston, the other in Austin.
Calloway’s Nursery exited the 1990s as the largest garden center retailer in Texas. The Texas market, ranked as the third largest in the country, generated an estimated $1.6 billion in sales in 1999, a total that excluded the sales recorded by mass merchandisers, who did not separately report nursery product sales. As they had for more than a decade, retailers such as Lowe’s, The Home Depot, and Wal-Mart represented a formidable force in the market, presenting Estill and Calloway’s Nursery’s management team with a perennial threat. To distinguish itself from the discount retailers, the company unveiled a prototype store before the end of the 1990s. The store’s design was expected to be the model for the future, as the company sought to strengthen its image as an upscale retailer.
Calloway’s Nursery’s new flagship store, located in southwest Fort Worth, was designed to replicate a historic Texas homestead. Measuring 100,000 square feet, the Stonegate store featured a greenhouse decorated with garden benches and pottery, wandering landscaped paths, and a courtyard with a fountain. The merchandise differed from the traditional selection found at a discount retailer as well, including items such as pots imported from Vietnam, China, and Malaysia. The store also sold potting soil with added sulfur and iron, which the soil found in the Dallas-Fort Worth area required. The Stonegate store did not offer a precise blueprint for future store design—a store in McKinney, Texas, for example, featured a scaled-down replica of Monticello in the nursery—but its essence as an upscale, specialty retail location provided a direction the company opted to pursue in the 21st century.
As Estill and his team planned for the future, there was cause for celebration and concern. In August 2000, the company reported the most profitable fiscal quarter in its history, posting $3.2 million in the third quarter. During the first nine months of 2001, however, the company reported a loss of $1.15 million, partly because of losses stemming from its wholesale business. In response, Calloway’s Nursery sold its wholesale operation, comprising distribution centers in Austin and Houston, to Coppell, Texas-based Landmark Nurseries. The divestiture was completed in October 2001. With the drag on its profits removed, Calloway’s Nursery looked forward to consistent financial growth in the years ahead and to maintaining its lead in the lucrative Texas market.
Miller Plant Farms, Inc.; Calloway’s Nursery of Texas, Inc.; Cornelius Nurseries, Inc.
Wal-Mart Stores, Inc.; Kmart Corporation; The Home Depot, Inc.
- Three former executives at Sunbelt Nursery Group form Calloway’s Nursery.
- The first Calloway’s Nursery store opens in Richardson, Texas.
- General Host Corp. invests $2 million in Calloway’s Nursery, gaining an 80 percent stake in the company.
- Calloway’s Nursery converts to public ownership.
- Miller Plant Farms, a nursery production operation, is acquired.
- Calloway’s Nursery acquires Cornelius Nurseries.
- Calloway’s Nursery divests its wholesale business.
Bond, Helen, “Metroplex’s Fertile Market Has Calloway’s Eyeing IPO; Upscale Nursery Chain Plans More Growth Around,” Dallas Business Journal, May 31, 1991, p. 2.
“Calloway’s Nursery Announces Acquisition of Nursery Production Facility,” Business Wire, July 28, 1997.
Elder, Laura, “Calloway’s Closes on Cornelius Nurseries Purchase,” Houston Business Joournal, September 24, 1999, p. 10A.
Gordon, Frances, “Growing Pains,” Dallas Business Joiurnal, August 17, 2001, p. 56.
Halkias, Maria, “Calloway’s Won’t Buy Wolfs,” Dallas Morning News, July 20, 1999, p. 12D.
Hassell, Greg, “Calloway’s Prunes Its Acquisition List; Firm Won’t Buy Wolfe, but Cornelius Deal Still Expected to Blossom,” The Houston Chronicle, August 14, 1999, p. 2.
“In the South,” National Home Center News NewsFax, November 5, 2001, p. 1.
Taylor, Lisa, “Making Calloway’s Garden Grow,” Dallas Business Journal, November 26, 1999, p. 43.
—Jeffrey L. Covell
3200 San Fernando Road
Los Angeles, California 90065
Fax: (213) 258-5920
Web site: http://www.calmat.com
Incorporated: 1891 as California Portland Cement Co.
Sales: $407.2 million (1996)
Stock Exchanges: New York Midwest Pacific
SICs: 1442 Construction Sand and Gravel; 2951 Asphalt Paving Mixtures and Blocks; 3273 Ready-Mixed Concrete; 6512 Operators of Nonresidential Buildings; 6531 Real Estate Agents and Managers; 6552 Land Subdividers and Developers, Except Cemeteries
CalMat Co. is a major producer, manufacturer, distributor, and seller of construction materials: aggregates (crushed rock, sand, and gravel), hot-mix asphalt, and ready-mixed concrete in California, Arizona, and New Mexico. It also owns, leases, and manages industrial and office buildings, owns and leases undeveloped real property, and sells real property. The company was established in 1984 by the merger of California Portland Cement Co. and Conrock Co.
Predecessor Companies to 1950
California Portland Cement Co., based in Los Angeles, was founded in 1891. It began operating in San Diego County in 1926. The company was paying dividends by 1927 and continued paying them throughout the Great Depression. In 1947, the year it began selling a minority of its common stock to the public, California Portland Cement was manufacturing and selling Portland, plastic, and oil-well cements under the trade name Colton. It also was manufacturing scale rock, sand, and lime products. It owned a deposit of limestone and siliceous materials, along with a cement mill and lime mill, near Colton, California, and raw-materials deposits in other locations. The company added a second cement plant at Rillito, Arizona, (near Tucson) in 1948.
Consolidated Rock Products Co., also based in Los Angeles, was incorporated in 1929 to consolidate the business and properties of Reliance Rock Co. with Union Rock Co. and its subsidiaries. These predecessors had been engaged in business as far back as 1909. The combined company and its subsidiaries manufactured, sold, and distributed crushed rock, gravel, and sand for use in construction. In 1930 it owned and operated 23 producing plants in southern California, plus sand, gravel, and rock deposits, a private railroad, four warehouses, and more than 225 automatic self-dumping motor trucks. That year it lost $620,259 on net sales of $4.3 million. Consolidated Rock Products continued to lose money throughout the decade. Its sales dropped as low as $1.5 million in 1934, and it was in bankruptcy between 1935 and 1938. The company returned to profitability in 1941, but the initial reorganization plan apparently failed to resolve all its problems, for it was again in bankruptcy during 1944–45.
Growth and Development, 1950–1984
California Portland Cement added a third plant at Mojave, California, in 1956. Despite profit downturns in 1952 and 1958, net income rose steadily through the decade, coming to nearly $7.3 million in both fiscal 1959 and 1960. In 1961 the company formed a subsidiary, Arizona Sand & Rock Co., to manufacture prestressed concrete and ready-mixed concrete in Phoenix as well as to excavate rock and sand. During the early 1960s California Portland Cement completed a new $23.6-million unit at Colton. At the end of 1964, when it was one of the three biggest cement producers in the West, the company had capacity of 14 million barrels of cement, of which 6.5 million barrels were at Mojave, 4.5 million at Colton, and the remaining 3 million at Rillito. In fiscal 1965 the firm had net income of $6.7 million on revenues of $40.3 million.
California Portland Cement’s net income fell from its 1959 peak to as low as $5.7 million in fiscal 1967. During the latter years of the decade it began correcting this situation by branching into new fields. The company founded Spancrete of California, a manufacturer of prestressed concrete hollow-cored slabs and rectangular beams at Irwindale, California, in 1966. It formed Colton Industrial Park Co., a developer of properties not required for cement operations, in 1969, and Calport Financial Corp. to finance, develop, and construct low-cost housing in 1970. In 1969 it acquired 54 percent of State Exploration Co. (later renamed Statex Petroleum, Inc.), an oil-and-gas exploration company. Net income topped the previous 1959 peak in 1969 and reached $9.5 million on sales of $64.8 million in fiscal 1971.
By 1950 Consolidated Rock Products was producing cement and cement blocks and ready-mixed concrete as well as rock, sand, and gravel, and its railway had been replaced by a conveyor plant. By 1968 the company was southern California’s top supplier of a broad range of basic construction materials. It had a network of 48 plants and service yards. Consolidated Rock Products earned $2.9 million on sales volume of nearly $50 million that year. It renamed itself Conrock Co. in 1972.
California Portland Cement branched into a new field in 1974, when it incorporated the Soldier Creek Coal Co. This company mined coal in two Utah counties, part of which California Portland Cement used in two cement plants. By 1980, in addition to its other facilities, the company had cement bulk transfer terminals in Phoenix and at Santa Fe Springs, Fremont, and Stockton in California. In 1979 Martin Marietta Corp., a major aerospace, construction materials, and chemical concern, offered to buy the Dan Murphy Foundation’s holdings in California Portland Cement for about $62 million. This charitable foundation, formed by the heirs of the company, declined the offer. Its holdings in the firm then represented about 30 percent of the common stock outstanding but by 1988 had shrunk to about 14 percent.
A lawsuit in 1980 alleged that California Portland Cement and about 50 others conspired to fix cement prices and restrain competition between the beginning of 1968 and the end of 1976. The company denied any illegal activity or liability. Nevertheless, California Portland Cement paid a $6.5 million settlement for the litigation pending in a U.S. district court in Arizona and a related state court action.
California Portland Cement had record net sales of $218.5 million and record net income of $22.7 million in fiscal 1981. The following year was not as good, however, and in fiscal 1983 the company lost $1.8 million on sales reduced to $161.1 million. By then its long-term debt had climbed to $89 million, much of it to pay for a $112-million modernization of the Mojave plant.
By 1980 Conrock was southern California’s largest asphalt producer as well as its leading sand and gravel miner. It operated 54 plants and 4 landfills and also hundreds of motor trucks and many miles of conveyor belt. The company, which according to one reckoning owned 6,828 acres and rented 3,176 more, had entered real-estate development through a subsidiary handling an additional 1,848 acres. Net sales came to $134.8 million and net income to $7.5 million in 1983. By this time California Portland Cement held 28 percent of its stock.
Merger and Divestments, 1984–1990
In 1984 California Portland Cement and Conrock merged, with California Portland shareholders assuming 57 percent of the combined company and Conrock shareholders the remaining 43 percent. William Jenkins, president of Conrock, became chairman and chief executive officer of the combined company, which took the name CalMat Co. The merger made CalMat the largest supplier of concrete, asphalt, and gravel in California, Nevada, and Arizona. Many observers saw the transaction as a bonanza for California Portland Cement shareholders by allowing them a stake in Conrock’s real-estate holdings at far below market value. Of CalMat’s $331.7 million in 1984 revenue, aggregates and ready-mixed concrete came to 48 percent, cement to 47 percent, and properties to 5 percent. The next year properties again accounted for 5 percent of revenue but 20 percent of profit.
The drop in oil prices during the early 1980s had made Statex Petroleum a losing proposition, and in 1985 CalMat sold it for $19.3 million. Soldier Creek Coal was sold the same year to a subsidiary of Sun Co. for about $22 million in cash. Also that year, CalMat sold its cogeneration and electrical generating facilities at its Colton plant for $54.6 million to Trust Co. Bank, which leased it back to CalMat for 15 years. The proceeds for these sales helped CalMat earn a record $44.1 million on record revenue of $605.9 million in 1986, and to reduce its long-term debt to $30 million.
In 1986 CalMat acquired Coast Asphalt Inc., the remaining half-interest in Industrial Asphalt, a joint-venture partnership producing asphalt paving materials. The other half-interest partner, Huntmix, Inc., had been acquired by the company between 1983 and 1985. This enabled CalMat to become the largest commercial supplier of hot-mix asphalt west of the Mississippi. Just before the end of 1986, CalMat announced the sale of Valley Reclamation Inc. to Waste Management Inc. for $61.3 million. Formerly a Conrock subsidiary, Valley Reclamation was a solid-waste company operating a 200-acre landfill in the San Fernando Valley area of Los Angeles. In 1987 CalMat sold a 100-acre parcel of land in Orange, California, for $12 million.
CalMat’s fortunes continued to advance during this period despite heavy competition in the cement business from low-priced Mexican imports, which had come to account for about one-quarter of the southern California market. In 1987 it garnered net income of $78.1 million on revenues of $602 million, for a very handsome 19.3-percent return on equity. In December 1987 it agreed in principle to sell most of its developed commercial and industrial real-estate properties to Shidler Group for $112 million. One of these developments was an office and hotel complex in Mission Valley, an area near San Diego where the company owned about 100 acres of prime real estate. Although talks ended in March 1988 with no agreement reached, CalMat said it had not changed its plan to sell all of its real estate—developed and undeveloped—in Los Angeles, San Diego, and Phoenix, and to focus on its core business of mining and producing asphalt, concrete, rock, and sand. The value of the company’s real estate in California was estimated at $350 million to $500 million.
New Zealand investor Ronald A. Brierley, holder of 19 percent of CalMat’s shares through a Hong Kong investment firm, offered $40 a share, or nearly $ 1 billion, for the company in March 1988. To avert a takeover, CalMat announced that it intended to sell its cement and real-estate operations and distribute the estimated $800 million in proceeds to shareholders. Under the restructuring, CalMat would retain its concrete, asphalt, and aggregate operations, which in 1987 generated 72 percent of its total sales. In July 1988 Brierley reluctantly ended his takeover bid, agreeing to sell his 19-percent stake in CalMat to Japan’s largest cement maker, Onoda Cement Co. for $41.75 a share, or $242 million. CalMat offered Onoda the option to buy in two years its California Portland Cement Co. unit, including the Mojave and Colton plants, and 13 ready-mix concrete plants in the Los Angeles area, for $310 million in stock. This deal angered some holders of CalMat stock. One indignant shareholder, economist Benjamin E. Stein, wrote in Barren’s “It is difficult to escape the conclusion that CalMat’s management sold a valuable asset at far below full value primarily to get a worrisome corporate raider and greenmailer [Brierley] off its back.” The value of CalMat’s stock subsequently declined from a record $46 a share.
Onoda exercised its option in 1990. In the transaction CalMat also received $68 million in cash, and Onoda’s cement subsidiary assumed $18 million in CalMat debt. The cement subsidiary had accounted for about 15 percent of CalMat’s $29 million in profit during the first half of 1990, but it had the company’s narrowest profit margins. CalMat retained 74 readymix concrete plants and 37 crushed-stone plants and about 34,000 acres in real estate. It had added to its holdings in 1988 by acquiring two rock and sand production plants and four ready-mix concrete batch plants, plus certain land equipment, from Sundt Corp. of Tucson for about $19 million in 1988. In 1990 it sold its 190,000-square-foot Carroll Center industrial park in San Diego County for $15.7 million.
A Difficult Environment, 1991–1996
CalMat’s asphalt operation, Industrial Asphalt, had grown from a single plant in Sun Valley, California, in 1941, to 39 plants in three states by 1992. In 1991 it produced 8.2 million tons of asphalt and accounted for $170 million in sales, about 46 percent of CalMat’s total. The company’s production of aggregate—sand and gravel, the basic components of concrete and asphalt—included about 2 million tons of building materials out of its San Bernardino, California, plant alone. This plant was making 18 products out of the sand and gravel, including washed plaster sand—used in roofing tile and stucco—and washed and unwashed concrete sand and large-size gravel.
In 1992 CalMat announced an agreement to acquire substantially all the assets of The Jamieson Co., a major producer of aggregates located in Pleasanton, California. CalMat paid $34 million for the production facility—which included exclusive rights to mine in excess of 100 million tons of reserves—mining equipment, and related real estate. This acquisition increased CalMat’s holdings in northern California, where it was also operating a number of asphalt plants, including one located on the property being acquired. At the close of the year the company took a $9.9 million pretax, noncash charge to earnings. As a result, the firm recorded a net loss of $10.5 million for the year. Because of the Jamieson acquisition, the use of company funds to retire 8 million shares of common stock—mostly in connection with the disposition of the cement business—and accounting changes, CalMat’s long-term debt now had reached $117 million, or 27 percent of the firm’s total capitalization.
When California’s economy went sour in the early 1990s, CalMat was hard hit with its revenues declining from $422 million in 1990 to $342 million in 1992, and not increasing greatly in the next three years. The value of the stock fell below $17 a share in 1993, 1994, 1995, and 1996. Between 1990 and early 1994 the work force was reduced by 11 percent. About the only bright spot was the properties division, which accounted for 35 percent of profits in 1992 on only 4 percent of revenues.
In the summer of 1995 unionized operating engineers initiated a strike at 33 CalMat building-materials plants in southern California, objecting to a request that they take a 25 percent pay cut. Three months later the strike had cost the company more than $2.1 million and cut its sales by about 25 percent. Also in 1995, CalMat was hurt by record rainfall and related flooding in California and lower real-estate gains. Taking a $26.5-million writeoff, CalMat ended the year with a net loss of $21.4 million on revenues of $370.3 million. In 1996 the company fared better, earning $9.3 million on $407.2 million in revenues. Its long-term debt was $98 million in mid-1996.
At the end of 1996 CalMat was operating aggregates-processing plants at 32 locations, hot-mix asphalt plants at 35 locations, and ready-mix concrete batch plants at 25 locations. It also operated 14 asphalt recycling systems and 10 landfills and had a fleet of about 375 trucks mixing concrete from aggregates, cement, water, and other materials as well as paving machines and specialty paving equipment.
CalMat also owned or leased 36,000 acres of land operated by its properties division. Reclaimed post-mining properties were typically subdivided into lots and developed by the company or sold in lot parcels to developers once necessary zoning and permits were obtained. CalMat was the master developer of Rio Valley West, the first major project started in San Diego in a decade. Construction began in 1995 on the 94.5-acre development, whose value was estimated at $175 million. Nevertheless, CalMat had decided to discontinue its business of developing industrial and office buildings as part of its 1988 restructuring. It sold 35 industrial and office buildings between 1988 and 1996 and was intending to dispose of its remaining commercial and industrial developments, except for certain industrial buildings related to its mining and production operations.
CalMat Co. of Arizona; CalMat Co. of Central California; CalMat Co. of New Mexico; CalMat Land Co.; CalMat Properties Co.
Construction Materials Division; Properties Division.
Bradsher, Keith, “A Reluctant Brierly Will Sell Holdings in CalMat to Japanese,” Los Angeles Times, July 21, 1988, pp. 1D–2D.
Brammer, Rhonda, “Diamond’s Gems,” Barren’s, May 16, 1994, p. 18.
Campanella, Frank W., “Sunny Skies and Brisk Building Spur Consolidated Rock Results,” Barren’s, September 2, 1968, p. 20.
“Consolidated Rock Products Enjoys Right Mix for Gain in Profits,” Barren’s, January 4, 1971, pp. 23, 28.
Elliott, Suzanne, “Road to Riches May Be Paved with Asphalt,” San Bernardino County Sun, February 3, 1993.
Gellene, Denise, “Investor Offers $998 Million to Acquire CalMat,” Los Angeles Times, March 24, 1988, pp. 1D, 13D.
Sanchez, Jesus, “CalMat Swaps Its Cement Unit for Stock,” Los Angeles Times, October 2, 1990, p. 8D.
Schwab, Dave, “Rio Vista West Offers Two Firsts for County,” San Diego Business Journal, March 14, 1994, p. 1.
Stein, Benjamin J., “The CalMat Maneuver,” Barren’s, September 12, 1988, pp. 13, 37–39.
Whitehair, John, “Cal-Mat Has Concrete Plans for the Future,” San Bernardino County Sun, September 13, 1992.
——, “CalMat: Strike Is Costly,” San Bernardino County Sun, October 31, 1995, p. 8B.