Volume 34, Number 11,  November 1999

INDUSTRY NEWS

Allstate Announces End of Contract for Safelite and Harmon

Allstate Insurance Company of Northbrook, IL, has notified both Safelite Glass Corporation of Columbus, OH, and Harmon Autoglass of Minneapolis, that it does not intend to renew its contract for network services with either company. The current contract, called a “Best Efforts Agreement,” requires that Allstate provide one year notice of its intent not to renew by October 21, 1999.
In a memo dated October 22, 1999, Safelite president and CEO, John Barlow, told company managers that Allstate does not plan to renew its contract with Safelite. Instead, according to Barlow, the insurer plans to enter into negotiations with LYNX Services for third party claims administration. Barlow said Allstate will continue to use Safelite to administer its glass claims until October 2000.
Though no one from Allstate would comment publicly at press time, the large insurer has had a number of meetings with LYNX Services from PPG during the last few months and is expected to move most, if not all, of its business to LYNX when the contract ends next year. LYNX officials would not comment on the prospect of future business, though they have confirmed that meetings with Allstate have and continue to take place.
There had been an intense effort by both Safelite and Harmon to keep the Allstate contract, which is one of the largest insurance contracts in the country. Sources who do not wish to be identified have told USGlass that the decision not to renew was based on a number of factors. Earlier this year, Allstate agreed to a pilot program with LYNX Services which actually allowed the insurer to monitor service, quality and satisfaction from all three companies.
Additionally, there is mounting concern over the ability of networks to do business in California, where a large percentage of Allstate’s insureds reside. The Bureau of Automotive Repair (BAR) which controls auto repair shops, including auto glass repair and replacement shops, in the state, is strictly enforcing rules that require insureds receive a copy of the invoice for work done that clearly delineates how much the consumer’s insurance company will pay for the work. Most agreements between networks and their subcontractors and the networks and insurance companies require that such pricing be kept
confidential.
Allstate officials also say privately that they are concerned about consumer choice and replacement part issues in light of the recent court decision against State Farm Insurance of Bloomington, IL (see October 1999 USGlass, Industry News). Working with a third party administrator allows consumers the ability to make such choices easily. “Consumers are becoming more aware of their power to choose and they want to use it,” said one official, “the State Farm decision has made it important that our customers feel comfortable with that ability to choose.”
Finally, there was the matter of “fit.” The original Allstate contract was developed by a team from Globe Glass and Mirror, which eventually merged with Windshields America to form Vistar. Vistar was acquired by Safelite nearly two years ago. “You have to remember,” said one source, “Allstate was extremely comfortable with the people at Globe and Vistar. For whatever reason–maybe just newness–that comfort level does not yet exist with Safelite.”
Safelite and Harmon may still do Allstate work even if claims are administered by LYNX. The program is expected to be designed in a manner similar to State Farm’s “Glass Central” program, through which insureds can specify the company they want to work on their car.
“What does this mean to us?” asked Barlow in his letter to managers. “It means we will earn Allstate business by selling Allstate agents and policyholders. Every agent wants their policy holder to have a positive claims experience–and we’re the company best prepared to give it to them! Every step of the process is important–from answering the phone quickly, to setting up a convenient appointment, to getting to that appointment on time and doing the job RIGHT the first time.”
In a short interview on October 25, Barlow discounted the notion that marketing directly to agents represented a change in strategy for his company. “I would not say that’s the case,” he said. “We sell and attempt to influence the decision-making process on a multiple levels, not just one.”
Barlow said that though “you never give up hope” he did not believe the agreement would be renewed. “A lot has changed since the original agreement was signed,” he said. “We’ll adapt.”


ASSOCIATIONS

BEMA Sponsors Annual Bath Enclosure Design Contest
It is time once again for the Bath Enclosure Manufacturers Association (BEMA) annual design awards. The contest will determine the best bath enclosure designs installed from January 1 to December 31, 1999. BEMA says each entry will be judged on the enclosure’s design difficulty and how it fits into the overall bathroom design. Awards will be presented at BEMA’s March 15-17, 2000 annual meeting in Las Vegas for installations up to $1,500 and more than $1,500. All entries must be received by January 8, 2000.

SIGMA and IGMAC To Explore Partnership
At its August summer meeting, the Chicago-based Sealed Insulating Glass Manufacturers Association (SIGMA) board of directors approved the idea of evaluating a partnership with the Insulating Glass Manufacturers Association of Canada (IGMAC). The proposed partnership would represent the sealed insulating glass industry in North America. If the IGMAC board of directors also votes to explore the partnership, a taskforce made up of members of both associations will study the issue for a year and a half before a final decision is made.
According to Mike McHugh, Sig-ma president, “We feel that the possibility to combine our efforts with those of IGMAC makes sense for increased growth and influence in the future.”
Frank Caporiccio, IGMAC president, said, “I feel this will only benefit the insulating glass industry in the future in North America.”


ACQUISITIONS/MERGERS

Norton to Acquire Furon
Norton Company of Valley Forge, PA, a subsidiary of Compagnie de Saint-Gobain, has announced its plan to acquire Laguna Niguel, CA-based Furon Company. Furon manufactures products from polymer materials. Norton will purchase outstanding Furon shares at $25.50 per share, a price 56 percent above the September 17th closing price of $16.31 per share. Norton expects to spend $472 million purchasing the shares and $29 million to cancel outstanding options. In addition, the company will assume $116 million in net financial debt. The combined companies will have 5,500 employees and are expected to have sales of $830 million in the 1999 calendar year.
“This acquisition marks a major step in our growth strategy,” said Robert C. Ayotte, executive vice president of Norton and president of Saint-Gobain’s performance plastics business unit. He also said, “Furon’s impressive line of products, strong cash flow, and management expertise will perfectly complement and add value to Norton’s current operations.”
Norton’s tender offer to purchase all outstanding Furon shares began on September 24th and finished at the end of October. Furon said its board of directors unanimously recommended that shareholders accept the offer. A condition of the acquisition is that Norton obtain at least 90 percent of Furon’s outstanding shares. If more than 50 percent and less than 90 percent of the shares are acquired, Norton can reduce the shares it holds to 49.99 percent and later pursue a merger with Furon.


COMPANIES

Arch America Forms Business Relationship with Safety 1st Company
Arch America Co. of NJ, a holding company that includes Accu-Weld and Ultra Hardware, has established a business relationship with Safety 1st, a manufacturer of child care and home security products. Accu-Weld and Safety 1st plan to develop replacement windows and door systems to protect homes. Ultra Hardware will become the exclusive manufacturer of Safety 1st’s hardware products and will distribute all of Safety 1st’s products.

Missouri Valley Glass Moves Headquarters
Missouri Valley Glass Co. of Earth City, MO, will soon move its headquarters to St. Charles, MO. The company has leased half of a 30,240 square-foot office/warehouse building in the Elm Point Business Park being developed by the Bakewell Corporation.


INTERNATIONAL

PPG Obtains Majority Interest in Bellaria
PPG Industries Italian subsidiary, Italia S.r.l., based in Milan, Italy, has acquired a 60 percent interest in Bellaria S.p.A. of Felizzano, Italy. Bellaria currently has 70 employees and annual sales of $15 million.
According to Michael A. Ludlow, PPG vice president of industrial coatings, “Acquiring a majority position in Bellaria is an efficient course to establish an immediate, significant powder coatings presence for PPG in Europe, while broadening our technology and product capabilities. Building a plant and qualifying products for a substantial European customer base could easily take 24 months.”



ANNIVERSARIES

PPG Ohio Glass Plant Celebrates 40 Years
PPG Industries’ largest glass tempering plant, located in Crestline, OH, opened 40 years ago. Today, the company’s 500 employees primarily produces automotive windows, automotive glass replacement parts and windows for vans, trucks, construction equipment and tractors.
“We have evolved into a state of the art automotive glass plant,” said plant manager David Kimble. “I see us continuing to move forward as a strong force in the automotive industry.”


QUALITY

Wausau Earns Hurricane-Resistant Rating
Florida’s Dade County has certified Wausau Window and Wall System’s 3250T Series window as hurricane-resistant. According to the company, its 3250T Series aluminum fixed and project-out window with access sash features two layers of laminated glass. An energy-efficient, thermal option for lower heating, cooling and maintenance costs is also available.


EXPANSIONS

Abrasive Technology Completes Growth
Abrasive Technol-ogy Inc. of Wester-ville, OH, has recently completed the expansion of its headquarters and the construction of its new manufacturing facility in Elgin, IL. The size of the company headquarters was increased by 40,000 square feet of manufacturing and office space and includes new advanced telecommunications and manufacturing computer systems.
The new manufacturing plant is 40,800 square feet in size replacing the 22,000-square-foot plant built in the 1930s. The facility incorporates advanced telecommunications and manufacturing computer systems with connections to all company plants worldwide.


TRAINING

BOMA Selected to Offer “Top Gun” Training
The Building Owners and Managers Association International (BOMA) of Washington, DC, has been selected by the General Services Administration (GSA) to offer its BOMA Top Gun: Asset, Financial and Technology Skills for Today’s Property Manager program to public sector employees. It is a 21/2 day program that covers topics including how to apply financial skills to compare and analyze space and leases, how to value leaseholds and sublease interests, how to analyze the value of company versus owner leasing and how to align strategic plans with financial objectives


FINANCIAL

Apogee Reports Disappointing Results; Auto Glass To Blame
Apogee Enterprises Inc. of Minneapolis, is reporting net earnings from continuing operations of $4.9 million or $0.18 per diluted share in the second quarter of fiscal year 2000, down from $7.6 million or $0.27 per diluted share during the same period last year.
The company’s president and chief executive officer, Russell Huffer, said, “Apogee’s second quarter performance was very disappointing, and was primarily due to difficult industry pressures in auto glass.”
In the glass technologies segment, net sales rose 12 percent to $88.3 million. Profits from Viracon and Tru Vue were offset by lower profits at Wausau and an operating loss at Viratec to reduce operating income 8 percent to $4.5 million. The company believes recent expansions were a factor in this decline.
Sales in glass services increased 2 percent to $132.5 million. Distribution price pressures and a soft retail demand contributed to the 44 percent decrease in operating income to $6.0 million. The company says it has taken steps to improve performance.

Second Quarter and Six-Month Fiscal 2000 and Fiscal 1999 Comparisons
(Amounts in thousands, except per share data and percentages)
    Second Quarter Ended    % Chg     Six-Months Ended    %Chg
    8/28/99    8/29/98         8/28/99    8/29/98
   
Net sales (1)    $ 218,450    $ 208,167    5%     $ 429,573    $398,544    8%
Net earnings per share – diluted    $ 0.50    $0.33     52%    $ 0.67    $ 0.47     43%
—Earnings from continuing operations    $ 0.18    $ 0.27    (36)%    $ 0.34    $ 0.43     (21)%
—Earnings from discontinued operations    $ 0.33    $ 0.05    497%    $ 0.33    $ 0.04     725%
Average shares outstanding – diluted    27,876     27,812    —    27,811     27,797    —
Operating income (loss)    $ 11,225    $ 14,891     (25)%    $ 21,364    $ 24,393     (12)%
—Glass Technologies    $ 4,536    $ 4,911     (8)%    $ 8,555    $ 9,027     (5)%
—Glass Services    $ 5,952    $ 10,562     (44)%    $ 13,298    $ 15,766     (16)%
—Corporate and other    $ 737 %    (582)     N/A    $ (489)    $ (400)     (22)%
EBITDA (2)    $19,557    $ 21,161    (8)%     $ 38,070    $ 37,388    2%

(1) Net sales for fiscal 1999 were restated to reflect the reporting of discontinued operations.
(2) EBITDA: Earnings before interest, taxes, depreciation and amortization.

Lilly Releases Third Quarter Results
Lilly Industries Inc. of Indianapolis, IN, has released its results for the third quarter, which ended August 31, 1999. Sales were $169.5 million, up 6 percent in the same period last year. The company is reporting net income at $8.7 million and its diluted earnings per share at $.37, about the same as last year.
In the first nine months of this year, Lilly’s sales increased 5 percent to $487 million, up from $461.9 last year. Net income also increased 6 percent to $23.9 million or $1.02 per diluted share, up from $22.5 million or $.96 per diluted share last year.
Douglas W. Huemme, Lilly’s chairman and chief executive officer, said, “We are pleased with our sales momentum over the past two quarters. Our investments in quality people and infrastructure to support our customers globally are paying off. However, lower operating margins are not an acceptable permanent result. We have implemented programs to restore operating margins, including reductions in employment, plant rationalization, supply chain initiatives and price increases.” He also said, “We expect fourth quarter earning per share to show improvement from last year, and we expect another record year for sales and earnings.”

JPS Pension Plan to Buy JPS Stock
The retirement pension plan for Greenville, SC-based JPS Industries Inc., a manufacturer of extruded urethanes, polypropylenes and mechanically-formed glass substrates, has approved spending up to $2.5 million to purchase JPS common stock. This is in addition to the one million shares the plan has already purchased. According to the company, the purchase was authorized after the current asset allocation for the plan was reviewed and it will give the plan more flexibility to make purchases in the future.
JPS says the purchase will not affect the company’s earnings per share.

Flour City Announces Third-Quarter Financials
Flour City International Inc. of Johnson City, TN, has announced its third quarter financial results. The company’s net loss was $1.8 million or $0.29 per diluted share, compared to the net income of $0.9 million or $0.16 per diluted share last year. In this quarter, revenues were $11 million, an increase of 10 percent versus the $10 million earned in the same quarter last year. The company says results for this quarter were negatively affected by a $2 million reserve created out of the
uncertainty in collecting payment for its Empire Towers project in Thailand. Without this reserve, the company says it would have posted a net income of $0.2 million or $0.3 per diluted share.
John W. Tang, chairman and chief executive officer of Flour City, said, “While we are not satisfied with our financial results we are encouraged by continued revenue growth and expansion on a global basis.” He also said, “The world-wide construction market is strong and our recent management reorganization has positioned us to capitalize on opportunities both domestically and internationally and build on our reputation as a leader in the custom curtainwall industry.”
The company also released results for the nine months ending July 31, 1999. Its revenues increased 40 percent to $30.6 million, up from $23.4 million for the same period last year. The net loss for this period was $2.9 million or $0.47 per share compared to $3.1 million or $0.64 last year.
The company further announced that its board of directors has approved the repurchase of 500,000 shares of the company’s common stock. According to Tang, “the approval of the share repurchase program by the board of directors confirms its confidence in the future of the company.”

Corrections
The location of Billco Manufacturing was misstated in the September issue. Billco is located in Zelienople, PA.
The information relating to the 10-inch bottom rail code requirements should be clarified. The 10-inch height is measured from the floor to the top of the stop. Offset from the face of the rail to the stop may not exceed 1/16-inch.
We regret the errors. 

 


USG

Copyright 1999 Key Communications, Inc. All rights reserved. No reproduction of any type without expressed written permission.