Giant Cement Holding, Inc. Business Information, Profile, and History

History of Giant Cement Holding, Inc.

Giant Cement Holding, Inc. is a holding company that manufactures portland and masonry cements. It was the 15th largest U.S. cement producer in 1996. The company also was mining, crushing, screening, and selling stones and gravel, known as aggregates, to the construction industry and marketing cement kiln dust, plus a customized blend of this dust and cement under the name "StableSorb," to solidify soil, wastes, and other materials. Its operations were located in the South Atlantic and Mid-Atlantic regions. In December 1996 Giant Cement entered into a letter of intent to acquire three lightweight aggregate manufacturing plants, five concrete block plants, and a drum-processing and fuel-blending facility from Solite Corp.

Giant Cement to 1983

American Improved Cements, the company that became Giant Cement, was one of the pioneers in the cement business. It was founded in 1883 in Pennsylvania's Lehigh Valley, an area with plentiful limestone deposits of a chemical composition ideally suited for making cement. A plant was erected at Egypt, which was on the line of the Ironton Railroad. The company's Union Cement was used to build the Johnstown Bridge, celebrated for withstanding the great flood of 1889 that destroyed the town, with great loss of life. American Improved Cements was one of the first companies to use rotary kilns to burn raw materials into clinker. It favored cheap pulverized bituminous coal as the fuel. To grind the clinkers into fine powder, the company installed the first iron mill of the Griffin type ever used for producing portland cement.

The company name became the American Cement Co. in 1912, but a year later it was incorporated as the Giant Portland Cement Co., a name taken from the company's Giant Cement brand. Giant Cement also included several subsidiary companies. Its gross revenues rose from $1.2 million in 1914 to $2 million in 1919, and its net operating revenues increased from $52,949 to $306,876. In 1920 it owned cement plants in Norfolk, Virginia, as well as Egypt, and cement lands in Egypt, Norfolk, and Jordan and Poughkeepsie in New York. Headquarters were situated in Philadelphia. The Norfolk plant and lands were disposed of in 1924. Giant Cement had annual capacity of about two million barrels in 1930.

The Great Depression took its toll on Giant Cement, which lost money during 1931-1935 and 1938-1939. In 1940 the company had net income of $55,535 on net sales of $1.2 million--the latter sum about the same as in 1914. The World War II years were also difficult, with deficits in 1943 and 1944 and revenues falling to $735,480 in 1944, presumably because of a lack of civilian construction. In 1947, however, Giant Cement acquired a cement company with a plant and limestone quarry in Harleyville, South Carolina. The New York properties were disposed of during this decade. Company sales rose to $5.4 million in 1950, and net income was a record $827,291 that year.

The 1950s were a prosperous decade for Giant Cement. Net sales and income grew every year except 1951, reaching $15.8 million and $4 million, respectively, in 1959. During the 1960s, however--a decade of excess capacity for the cement industry and hence falling prices--sales rarely, and income never, reached or passed the 1959 level. Nevertheless, the company was not only debt-free, in 1968 it had a highly favorable ratio of current assets to current liabilities of almost seven to one. The following year, however, Giant closed the Egypt plant rather than spend the costly sums needed to bring the facility into compliance with Pennsylvania's laws to control air pollution. This facility had been responsible for about one-third of the company's annual sales. Giant thereupon moved its headquarters to Columbia, South Carolina.

Giant Portland Cement, which changed its full name to Giant Portland & Masonry Cement Co. in 1977 to reflect its manufacture of masonry as well as portland cements, fared progressively worse as the 1970s continued. After earning a record $5.4 million on net sales of $17.9 million in 1972, its net income began to slide, falling below $1 million in two of the last three years of the decade. In 1980--the start of a severe recession--the company lost $909,000 on net sales of $27.2 million. Giant Cement lost money again in 1981 and was losing even more in September 1982, when it sold $3 million worth of preferred stock to Burt Sugarman, who thereby boosted his holdings in the firm to about 28 percent. In 1983 Giant's plant was converted from burning natural gas and oil to coal--just as oil prices were beginning a sharp drop after ten years of precipitous rises.

The Frenetic Sugarman Era: 1983-94

Sugarman took the helm of Giant Cement in April 1983. The company lost money again in 1983 and 1984 and suffered a bitter strike in late 1984 that resulted in major equipment damage, reducing the plant's annual capacity from 950,000 to 700,000 tons. Unfazed, Sugarman acquired Keystone Portland Cement Co. during 1984-1985 for about $20 million in stock and $7.8 million in cash. Incorporated in 1926, Keystone had a plant in Bath, Pennsylvania, with annual capacity of 3.3 million tons. The firm also was a pioneer in resource-recovery techniques in the U.S. cement industry. Sugarman told a reporter that one of the firm's attractions was its experience with the burning of solid wastes and solvents as an alternative fuel source. Keystone was also collecting revenue for disposing of industrial wastes. Sugarman quickly installed this technology in Giant's South Carolina facility, which began the limited use of waste as a fuel substitute in 1987.

Despite the damage to its Harleyville plant, Giant Cement emerged from the 1984 strike as the low-cost producer in its market. The firm, which was reorganized in 1985 as a holding company with the name Giant Group Ltd., turned in its first profit of the decade that year, earning net income of $3.6 million on net revenues of $69.5 million. Long-term debt had reached $78.6 million, but the company had $75.4 million in its coffers at midyear and had accumulated about $20 million in tax credits from its losing years.

Sugarman used Giant Group's cash stash to make a profit of $3.2 million in 1985 by buying and selling Ply-Gem Industries Inc. stock. Speculation in TRE Corp. stock enabled the company to earn $14.7 million from the sale of investments the following year. With an extraordinary tax credit of $6.8 million, Giant Group's net income reached a fat $21.4 million. In 1987 Sugarman took a position in Media General Inc. and a large share in Rally's Inc., an unprofitable chain of drive-in restaurants. A resident of Los Angeles with a long-standing interest in show business, he also paid $26 million for about 24 percent of Barris Industries, Inc., producer of TV game shows like "The Gong Show" and "The Dating Game." Giant Group had net income of $5 million that year.

Giant Group's operating income of $7.9 million and investment income of $2.9 million in 1988 could not overcome its $10 million in interest expenses and $4 million in losses by its affiliates.

The company lost $8.5 million that year. Sugarman avoided another loss in 1989 by making $7.6 million on the sale of the company's Barris stock. Giant Group's long-term debt reached $109 million that year. Sugarman lost a bitter proxy fight for Media General, but in exchange for selling his shares he received cash and a California newsprint print and recycling operation. In 1990 Sugarman sold these enterprises--now named Golden State Newsprint Co. and Pacific Recycling Co.--for $96 million in cash, a net gain of $14.9 million for the company. This was Sugarman's last big score, however. Pinched by recession, cement sales slipped in 1991 and 1992, and Giant Group lost money both years. The cement business recovered in 1993, but the company lost money because of interest expenses and Rally's continued deficits.

Giant Cement Holding, 1994-96

Sugarman sold the cement business in 1994 in a public offering that raised $131.6 million for his firm. The new company, Giant Cement Holding, Inc., was the 15th largest cement producer in the United States and had a long-term debt of only $8.6 million. Its units would have posted a $5.1 million net profit for 1993 if they had been on their own. Revenues rose from $90.8 million in 1994 to $100.2 million in 1995 and $110.2 million in 1996, with resource-recovery services, as opposed to cement sales, accounting for about 13 percent of the total. Net income rose from $9.2 million in 1994 to $12.7 million in 1995 and $15.4 million in 1996. Long-term debt was $10.3 million in March 1997.

Just before the end of 1996 Giant Cement agreed to purchase Solite Corp., a leading producer of construction materials, for 1.3 million shares of stock and the assumption of about $18 million in debt. Solite, which was to become a Giant subsidiary, was making concrete blocks and lightweight aggregate material, similar to cement in construction, in five states. It was also recovering industrial waste, which it used as fuel to fire its kilns. The acquisition included eight plants in Virginia and North Carolina, an Alabama hazardous-waste processing plant, and Oldover Corp., a Virginia hazardous-waste trucking firm. Not included in the purchase were certain other Solite operations, including lightweight aggregate plants in Kentucky and New York, that were to be formed into an independent company.

In 1996 Giant Cement was selling cement to more than 500 customers in Georgia, South Carolina, North Carolina, and Virginia (through the Giant plant) and Pennsylvania, New York, New Jersey, Connecticut, Delaware, and Maryland (through the Keystone plant). About 85 percent of the cement was being sold in bulk, primarily to ready-mix and concrete-products manufacturers, with the remainder sold in individually packed bags, primarily to building materials dealers. It was also selling waste-derived fuels as well as using them for about half of its own fuel usage.

Giant Cement owned the Giant plant and quarry in Harleyville as well as about 2,100 acres of land on which these facilities were located. It owned a plant and quarries in the Bath, Pennsylvania, area, as well as about 1,000 acres of land on which these facilities were located. The company's manufacturing facilities had an annual rated clinker capacity of about 1.4 million tons and an annual rated cement-grinding capacity of 1.7 million tons. Giant Cement also operated a distribution facility on its land in Durham, North Carolina, and rented warehouse space in Atlanta, Durham, and Charlotte, North Carolina. Corporate headquarters were being leased in Summerville, South Carolina. Keystone's offices were being leased in Bath. The company's largest stockholders in 1997 were the Prudential Insurance Co. (11.9 percent) and Wellington Management Co. (10.4 percent).

Principal Subsidiaries: GCHI Investments, Inc.; Giant Cement Company, Inc.; Giant Cement NC, Inc.; Giant Resource Recovery Company, Inc.; Keystone Cement Company, Inc; Solite Corp.