Volume 36, Number 2, February 2001

ContractGlazing

Flour City Considers Acquisition of Builders Federal Group

Flour City International Inc. of Kingsport, Tenn., has signed a non-binding agreement with the Builders Federal Group, which provides a 60-day exclusivity period for the company to evaluate the potential acquisition of Hong Kong-based Builders Federal Group. Under the terms of the agreement, representatives from Flour City will meet with members of the Builders Federal management team to perform preliminary due diligence during this 60-day exclusivity period. However, Flour City added, the company is not yet certain whether it will reach a definitive agreement with Builders Federal, although it does hope to do so.

Investigation of Ironworkers Union Continues
Since last months indictment of James Cole, general secretary of the Ironworkers Union (see related story, January 2001, USGlass, page 23.) speculation has risen that union president Jack West may be the next target of investigation.

The 18-count indictment against Cole was made public January 2, 2001, stating that Cole used the union’s money for personal expenses. According to court documents, Cole did not report $20,000 in union disbursements to West in 1996-1998. Presently, officials are trying to find out if West used union funds to gain favor with former Washington D.C. police chief Larry D. Soulsby. Neither West or Soulsby have been charged, but sources say West is still under investigation.

lour City International of Kingsport, Tenn. recently announced increases in both its fourth-quarter and October 31, 2000 year-end earnings. “The past year has been yet another unparalleled year of growth for the company,” said Edward M. Boyle, president. “I attribute the tremendous growth in revenue, our significant improvement in net income and five consecutive quarters of profitability to a solid business plan, a strong multi-continent infrastructure and a focused, cohesive management team,” he added.

The company’s financial statement says fourth-quarter earnings rose 59 percent to $22.8 million compared to 1999’s fourth-quarter earnings of $14.4 million. Net income for the fourth quarter saw a 21 percent improvement at $889,000, or earnings per share of 17 cents on a diluted basis, compared to $718,000 or 14 cents per share on a diluted basis
in 1999.

In addition, revenue for the October 31 period was $70.3 million, a $25.3 million increase in revenue and 56 percent improvement over revenue of $44.4 million reported for the 1999 fiscal year. The company’s net income for 2000 was $2.6 million, or net earnings of 47 cents on a diluted basis, compared with a $2.2 million net loss in 1999.

Johnson K. Fong, vice president and chief financial officer, also said the company’s contract backlog was $110,700 million compared to 1999’s backlog of $108.900 million.

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Texas Subcontractor Liable for Promise It Can’t Keep
Treble damages are in order due to a steel fabricator promising to deliver material for several building projects and failing to meet those deadlines, said a Corpus Christi, Texas-judge in federal district court. Judge H.W. Head Jr. said the misrepresentations of CMC Steel Fabricators conducting business as Safety Steel Service of Victoria, Texas, for Harrop Construction Co. of Houston “was devastating.” Judge Head is expected to award Harrop $2.2 million in compensatory damage and $6.5 million in punitive damages, plus attorney fees.

According to the January 15, 2001 issue of Engineering News Record, Harrop was forced to close its doors in 1996 after the fabricator, a subsidiary of Dallas-based Commercial Metals Co., was late delivering the metal for three projects. Safety Steel claimed in 1994 and 1995 that it had the capacity to produce the steel in accordance with Harrop’s schedules, when in fact they knew they could not, said Head.

California Subcontractors Gain Protection for State Jobs
The American Subcontractors Association of California (ASAC) has won 100 percent payment bond protection for subcontractors with the codification of California’s “Little Miller Act,” AB 2557. Under the amended law, enacted by Gov. Gray Davis on September 27, statutory payment bonds will be equal to contract value for state-funded construction work. Although AB 2557 was in place before in California, the new amendment further protects subcontractors.

“The Little Miller Act was amended so that it contained more favorable wording to the extent that if the subcontractors conduct work for the state of California, they’ll have greater financial protection in the case that there’s a default in the contract,” said David Mendes of the American Subcontractors Association.

In order to codify the act, the American Subcontractors Association of California cited the Federal Miller Act, which provides such protection to contractors working for the federal government.

New Prompt Pay Law Sweeps Across Arizona
Ten years of campaigning for prompt payment laws in Arizona recently ended with Gov. Jane Dee Hull signing the “Contractors’ Bill of Rights” into legislation (S.B. 1549). According to the American Subcontractors Association (ASA), the law was modeled after a ‘Contractor’s Bill of Rights’ written by Richard Usher, ASA of Greater Phoenix government relations committee chairman of Usher & Hill Insurance & Surety in Phoenix.

“S.B. 1549 is the most significant construction payment legislation since federal prompt payment for subcontractors,” said Usher.
ASA president Floyd Warkol added, “Subcontractors in Arizona can celebrate this law as a milestone in the history of the state’s construction industry. Victory on so many different fronts at once is highly unusual and highly welcome.”

USG