CalMat Co.

1891–1984

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.

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.

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.

That year it lost $620,259 on net sales of $4.3 million.

1968–1988

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.

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.

1941–1992

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 Barron'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 ready-mix 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.

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.

1988–1996

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.