Celotex Corp., a building materials manufacturer forced into bankruptcy protection six years ago by asbestos-related lawsuits, said Thursday that it has reorganized and is ready to grow.
Tampa-based Celotex, one of Tampa Bay's largest companies, filed for Chapter 11 bankruptcy protection in October 1990. The case, which eventually totaled $17-billion in asbestos-related claims from 350,000 people, is one of the biggest bankruptcy cases ever.
In discussing the bankruptcy settlement Thursday, company CEO Dennis Ross said the key to the company's future is a unique arrangement that protects Celotex from future asbestos claims or litigation.
Under a court-approved plan effective May 30, Celotex will be owned by a trust that will assume all of the company's asbestos-related liabilities. Though trusts often immediately liquidate a company, Celotex's trust has substantial incentives to see the company grow.
"To say that there hasn't been some trepidation about the company's future around here for the past few years would be an understatement," Ross said. "Now that we're unfettered, we're ready to expand and acquire and build on the substantial inherent value in this company."
Celotex is already one of Tampa Bay's largest companies. It had $700-million in sales last year and has posted record profits for the past two years.
The company's biggest business is in roofing shingles, insulation and coatings. Other products include foam insulation, acoustical ceilings, fiberboard and gypsum manufactured at 26 plants nationwide.
Celotex, which was part of Tampa-based Walter Industries until 1988, has 3,000 employees, including 350 in Tampa Bay. In addition to its headquarters in Tampa, Celotex owns the Center for Applied Engineering, a research and development lab in St. Petersburg.
Celotex inherited its asbestos liability when it acquired another building materials company in 1972. The new trust has sufficient assets to pay existing asbestos-related claims over the next five years, Ross said. Also, the trust will reap significant tax benefits if it holds the company for at least five years.
The upshot, said Ross, is that Celotex's new owner is a "patient investor," with a vested interest in seeing its asset increase in value.
"An incredible combination of circumstances came together to make this arrangement possible," said Ross, who has been head of Celotex since 1995. "If they hadn't, we probably would have been forced to sell the company."
Instead, Ross is ready to drive Celotex to greater heights.
"The settlement will give us access to operating capital and permit us to grow through expansions and acquisitions," Ross said. "It will allow us to be a player on the same grounds as our competitors, though we will have no asbestos liability as many of our competitors do."
Ross said it was premature to say how fast Celotex might grow or how growth might affect its employment in Tampa Bay.
Celotex's board will include Ross as well as eight directors chosen by the court-appointed trustees. Ross speculated that in five years, the trust might decide either to sell Celotex to a third party or take it public.
Celotex's unique trust arrangement was made possible due to a law passed in 1994 as asbestos manufacturers and claimants struggled to ensure that future asbestos claimants receive their fair share of any payments.
The legislation is framed on Ross' office wall along with a pen from President Clinton.
It can take up to 20 years for the symptoms of asbestos poisoning to appear. Experts expect most potential victims to be identified within the next 10 to 15 years, though claims could stretch well beyond that.
Since corporate liability for asbestos poisoning was upheld by the courts in 1982, the use of the material has been dramatically reduced.
Celotex's trust, which has assets valued at between $1.4-billion and $2.5-billion, has liabilities estimated at $17-billion. According to the plan _ which was approved overwhelmingly by the claimants _ the trust will pay claimants 12 cents on the dollar. As required by the law, that amount will be adjusted by the trustees to ensure funds are available into the future.
Celotex's trust was established with about $700-million in liquid assets, including a contribution by Celotex's former parent company, Walter Industries. But Ross emphasized that Walter, a public company, is separate from Celotex.
Two of Celotex's subsidiaries have Walter in their names, but that will be eliminated when the reorganization takes effect this spring.
"Going forward, all our operations will be known as Celotex," Ross said.
AT A GLANCE
Headquarters: 4010 Boy Scout Boulevard, Tampa
President/CEO: Dennis M. Ross
Business: Manufacturer and marketer of building materials at 26 plants nationwide
1996 Sales: $700-million
1996 net income: not disclosed
Employees: 3,000 nationwide, 350 in Tampa Bay
Comments: Celotex is a privately held company that filed for Chapter 11 reorganization in October, 1990. Under the company's reorganization plan, which becomes effective May 30, 100 percent of the stock in Celotex will be owned by a trust that assumes all asbestos-related liabilities and obligations of Celotex.