Lehigh Portland Cement Company Business Information, Profile, and History

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History of Lehigh Portland Cement Company

Lehigh Portland Cement Company produces cements, concrete and concrete products, lightweight aggregates, and related construction materials and services. After 80 years of independent operation it was purchased by a German company, Heidelberger Zement A.G., in 1977. Heidelberger Zement, in 1995, placed under Lehigh's corporate umbrella the cement and construction materials operations in North America of the Belgian company Cimenteries CBR S.A., also a Heidelberger affiliate. This merger quadrupled Lehigh's revenues and made it the third largest cement producer in North America.

The Early Years, 1897-40

Lehigh Cement was founded in 1897 by six Allentown, Pennsylvania businessmen who invested $250,000 to construct a cement plant in nearby Ormrod. The Lehigh Valley of eastern Pennsylvania was admirably suited for the production of cement and became the center of the nation's cement industry because of its plentiful deposits of limestone containing approximately the correct mixture of minerals--except for gypsum--for grinding and burning directly into cement. In other regions, cement plants had to use a mixture of limestone, clay, sand, and sometimes blast-furnace slag and other materials to obtain the correct chemical composition.

Lehigh Cement established a second facility at West Coplay, followed by another plant in Ormrod. Since the company's cement was being shipped as far west as Kansas City, another plant was built in Mitchell, Indiana in 1902. The following year a third cement plant was constructed in Ormrod, and in 1906 a second, larger plant was built in Mitchell. Lehigh Cement built a plant in Fogelsville, Pennsylvania in 1907 and a Mason City, Iowa, facility--the company's first west of the Mississippi--in 1911. In 1914 the company moved into the Pacific Northwest by purchasing a two-year-old plant in Metaline Falls, Washington. In the same year Lehigh acquired three more cement facilities in New Castle, Pennsylvania. The company bought a mill in Fordwick, Virginia in 1915, an Oglesby, Illinois plant in 1916, and an Iola, Kansas plant in 1917.

Lehigh Cement's first president was Harry J. Trexler, a lumber dealer. Edward M. Young, another of the original founders and the proprietor of a family hardware business, succeeded Trexler as president in 1926. After his death in 1932, his son Joseph S. Young succeeded him as president and chief executive officer. Joseph Young's son William J. Young succeeded his father in these positions in 1964. He remained at the company until 1983, when he retired from his post as chairman of the board.

By 1920 Lehigh Cement was the nation's biggest cement company in terms of number of plants, with annual production of more than 12 million barrels of portland cement. The company moved into the South in 1923 by building one of the region's largest cement plants in Birmingham, Alabama. In 1925 Lehigh purchased four plants from cement companies: in Alsen, New York; Union Bridge, Maryland; and Bath and Sandt's Eddy, Pennsylvania. These acquisitions, and that of a Buffalo, New York facility in 1927 brought the company's empire to 21 plants in ten states. Lehigh Cement had net income of $5.9 million on net sales of $30.5 million in 1926. Business was declining even before the Great Depression, however, for in 1929 the company had net sales of only $19.3 million, and its net income had dropped to $2.7 million.

Cement prices in the United States reached a peak of $2.02 a barrel in 1930. Consumption fell from a high of 72 percent of capacity in 1928 to only 46 percent of capacity in 1931, when prices dropped to $1.15 a barrel. The cement industry as a whole lost $25 million that year. Lehigh Cement, the nation's second largest producer, still made a profit in 1931, but it lost nearly $2 million in 1932 and $592,000 in 1933. Subsequent years were profitable, even though net sales fell as low as $9 million in 1935. Joseph Young later told a reporter, "It was only by throwing eight plants overboard that we were able to ride out the storm of the Depression." The plants abandoned were one of the two in Mitchell, both Ormrod plants, the ones in West Coplay and Bath, and all three New Castle facilities.

Additions and Subtractions, 1940-76

Lehigh Cement's remaining plants had production capacity of 22 million barrels a year in 1940, or more than eight percent of total U.S. productive capacity. That year the company had net income of $2 million on net sales of $16.9 million. After World War II, revenues and profits rose rapidly, and without any growth in the number of plants and an actual drop in productive capacity to 21 million tons, Lehigh Cement had net income in 1950 of $6.6 million on net sales of $44.3 million. During the 1950s the company moved into the Southeast, adding cement plants in Miami and Bunnell, Florida.

Lehigh Cement's profits reached a zenith of $13.1 million in 1956, although sales volume continued, after 1958, to climb from the year's $75.8 million. Cement executives, including Joseph Young, contended that earnings were overstated because the high cost of maintenance was being carried in the capital-investment account rather than being charged to current expenses. These executives claimed that in spite of apparently good earnings, their firms were unable to recapture enough funds through depreciation to pay for replacement plants. Net income of $12.1 million on sales of $100.6 million in 1959 was far higher than Lehigh would again earn, at least as an independent company.

In 1955 Lehigh Cement was engaged in a $15 million project to triple the capacity of its Union Bridge, Maryland plant to three million barrels capacity. By 1960 the company's capacity had passed 31 million barrels. During the 1960s, however, the company chose to shut down rather than modernize some of its antiquated cement plants that dated back as far as the turn of the century. The facility at Sandt's Eddy was closed in 1962 and the one at Oglesby was closed in 1963. The Bunnell plant, which used coquila shells as its raw material, was phased out in 1965 and the Fordwick plant was phased out in 1968. The trend continued into the next decade, with Lehigh ending operations in Birmingham, Iola, and Fogelsville in 1971 and selling its Buffalo plant the same year. During the 1950s and 1960s, however, the company built terminals throughout the United States because of the need to shift from railroads to trucks for the transportation of its cement.

Only six Lehigh Cement plants still remained--one each in Florida, Indiana, Iowa, Maryland, New York, and Washington. The company spent $9 million to expand its Union Bridge facility, which on completion in 1970 accounted for 30 percent of Lehigh's productive capacity. The company had begun in the mid-1960s, however, to look to other fields for growth. Lehigh purchased four concrete firms--two in Florida, one in Virginia, and one in Kentucky--during 1965 and 1966 and in 1968 it acquired a Florida manufacturer of low-cost bedroom furniture and a Georgia manufacturer of carpets, rugs, and yarns.

Lehigh Cement lost $7.5 million in 1970 because it took a one-time extraordinary loss of $8.9 million to close plants. It sold its 11 Virginia concrete plants to Florida Rock Industries Inc. in 1972, following an order by the Federal Trade Commission directing it to divest itself of the 17 Virginia and Kentucky plants. The company used about $13 million of the proceeds to buy back shares of its own stock at a price well below book value. In 1974 Lehigh Cement completed the FTC-ordered divestiture by selling its six Kentucky concrete plants.

Lehigh Cement's net earnings reached a comfortable $10 million in 1972 and $10.8 million in 1973 but slumped the following two years. The home furnishings sector of the company, never more than marginally a source for profit, became a heavy loser in these years, and the cement and concrete businesses were also hurt by a slump in home building, especially in Florida. In 1976, Lehigh Cement's last year as an independent operation, the company sold the Georgia rug, carpet, and yarn business to its executives. It also closed its Florida cement and aggregate plants and the seven Florida concrete plants, thereby ending operations in the Southeast. These operations had accounted for 26 percent of company sales in 1975 but had lost $3.8 million before taxes and corporate overhead.

Subsidiary of German Company, 1977-97

After receiving $23.4 million in cash for the Florida facilities, Lehigh Cement took an after-tax loss of $1.2 million. It earned $6.1 million on sales of $119.5 million in 1976, its last full year of independent operation. Portland-Zementwerke Heidelberg A.G., a unit of the German building-materials company Heidelberger Zement A.G., purchased Lehigh Cement in 1977 for $85 million in cash. This was later described as a "rock-bottom price." Lehigh was not considered an attractive acquisition because several of its kilns were more than 50 years old and small by industry standards.

Through Heidelberger Zement, Lehigh Cement in 1980 acquired the Universal Atlas Cement division of U.S. Steel Corp. The sale price was said to be substantially more than $100 million. Universal Atlas, whose origins went back to 1889, had annual sales estimated at between $120 million and $150 million at the time of purchase. The combined capacity of Lehigh and Universal Atlas represented seven percent of the U.S. market, second only to the share held by Lone Star Industries Inc.

Lehigh Cement sold Universal Atlas's Hannibal, Missouri cement plant in 1981 to a newly formed, foreign-owned concern, Continental Cement Co. The sale was required under a FTC consent order that settled charges that Lehigh's purchase of Universal Atlas had violated federal antitrust law. Lehigh was also required to sell three distribution terminals and was barred for ten years from buying cement plants or terminals in five Midwestern states without prior FTC approval.

In 1982 Lehigh Cement purchased Alpha Portland Industries Inc.'s plant in Cementon, New York, for about $11.6 million. This plant was closed in 1993. Also in 1982, Lehigh acquired Medusa Cement Corp.'s plant in York, Pennsylvania. At the end of 1985 Lehigh had cement plants in Leeds, Alabama; Mitchell, Indiana; Mason City, Iowa; Independence, Kansas; Union Bridge, Maryland; Cementon, New York; York, Pennsylvania; Waco, Texas; and Metaline Falls, Washington. It also had a plant for lightweight aggregates in Woodsboro, Maryland. The Independence plant was disposed of soon after. The Metaline Falls facility was sold in 1989 to Lafarge Corp., a French-owned firm. Lehigh and Centex Corp. founded a joint venture in 1986 to make specialty cement products at the Waco plant.

In 1991 Lehigh Cement acquired Houston-based Koy Industries, Inc. and Gulf Coast Stabilized Materials Co., Inc. C.O.D., Koy Industries' primary operating subsidiary, had seven ready-mix plant locations with 50 mixer trucks. Gulf Coast was producing and selling cement-treated base material. Also that year, Lehigh Cement left the quarters in downtown Allentown that had been serving as its corporate offices since its founding. In its new location the firm installed a boardroom table made from its flagship special product, Lehigh White Cement, made in York. Composed of this material and marble aggregate, the 26-foot-long, 5,500-pound table top was finely ground after casting to produce an attractive, highly polished, durable, terrazzo surface.

By 1995 Lehigh had fallen to eighth place in U.S. cement production. The addition of the Cimenteries CBR enterprise, however, greatly broadened the company's scope. CBR had acquired Genstar's Corp. cement and construction materials operations on the West Coast and in western Canada in 1986 for $327.5 million. Its facilities included cement plants in Redding and Tehachapi, California, and Edmonton, Alberta. Lehigh also was beginning a $200 million modernization and expansion of its Union Bridge plant in 1998.

Lehigh Cement's furniture division in Marianna, Florida was of minor importance to the company, but in 1991 it was increasing its plant capacity by 30 percent with the acquisition of two buildings on more than 13 acres adjacent to its corporate headquarters. The division said its entry into the occasional table business in April 1991 had been more successful than originally anticipated, and that its August shipments had set a new monthly record. Lehigh Furniture, which maintained showrooms in High Point, North Carolina and Tupelo, Mississippi, had estimated sales of $40 million in 1995 but was said to be losing money when it was sold the following year (and filed for bankruptcy protection in 1997). The buyer was P.A. Inds., a holding company for several industrial manufacturing concerns.