McCarthy Building Companies, Inc.

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McCarthy Building Companies, Inc.

1341 North Rock Hill Road
St. Louis, Missouri 63124-1498
U.S.A.
Telephone: (314) 968-3037
Fax: (314) 968-4502
Web site: http://www.mccarthy.com

Private Company
Incorporated: 1907 as the McCarthy Lumber and
Construction Company
Employees: 2,000
Sales: $1.6 billion (2001 est.)
NAIC: 233320 Commercial and Institutional Building Construction; 233310 Manufacturing and Industrial Building Construction

McCarthy Building Companies, Inc. is one of the largest construction firms in the United States. The company operates out of seven full service offices that include its home base of St. Louis, Missouri and others in Phoenix, Dallas, Las Vegas, San Francisco, Sacramento, and Newport Beach, California. McCarthy handles a wide range of building projects, with specializations in hospital, parking structure, bridge, educational, biotech, and high-tech industrial construction. Majority ownership of the firm was transferred to its employees in 1991, with former CEO and chairman Michael McCarthy, a descendent of the company’s founder, retaining an interest of more than 40 percent. That interest was sold in 2002, making McCarthy one of the oldest employee-owned companies in the country.

19th Century Origins

McCarthy traces its roots to the year 1864, when Irish immigrant Timothy McCarthy founded a lumber company in Ann Arbor, Michigan. The small concern built farmhouses and barns around the Ann Arbor area for the next four decades, later also building some public and commercial structures. During this time McCarthy trained his sons John W. and Timothy, Jr., as carpenters, while their brother Charles became a skilled bricklayer.

In 1905 John W. McCarthy decided to move to Farmington, Missouri, to be near a woman he loved. Intent on carrying on the family line of business, he convinced his brothers to move down and join him. The siblings incorporated the transplanted company in 1907 under the name McCarthy Lumber and Construction Company, with John W. McCarthy named to the post of president. Following the incorporation, the firm began to branch out into a wider range of construction, including commercial projects and post offices.

Business grew beyond the Farmington area over the next decade, and in 1917 the company moved to the larger city of St. Louis, where it was renamed McCarthy Brothers Construction Co. The firm was now well established in its new home state, having been chosen to build the Missouri Building at the San Francisco World’s fair in 1916, with the construction crew traveling there by train. Many other projects were built in St. Louis and throughout Missouri during the 1920s and 1930s, including the court house in Farmington, completed in 1926. In 1934 the growing company moved its operations to a larger headquarters in St. Louis. A major contract of the decade was the post office and courthouse built in far-off Anchorage, Alaska, one of many federally-generated projects that helped the company weather the Great Depression.

The years of World War II saw McCarthy’s government work continue with construction of Army and Navy lock and canal projects in the Panama Canal Zone, as well as an air base at Coco Solo. Following the war the company continued to grow, taking on more out-of-state work in the 1950s. A major project of this decade was the Army Corps of Engineers’ Publications Center in St. Louis. In 1952 McCarthy also bought the Rock Hill Quarries Company, which provided a lucrative sideline for the firm.

An unusual project in 1961 brought McCarthy notice as a builder that could handle difficult projects and come up with creative solutions to the challenges they presented. The Priory Chapel, in St. Louis, featured two levels of interlocking curved concrete half-ovals, arrayed like petals of a flower, a difficult design which the company successfully executed. Other important jobs of the 1960s included the Queeny Tower and Barnes Hospital.

New Projects in the 1970s–80s

During this period the company was taking on considerably more work in the healthcare area, as well as beginning to design and build parking structures starting in 1969. In 1972 McCarthy formed a subsidiary called McBro to perform healthcare construction management. The firm was a pioneer in the development of the new concept of construction management, a team-based approach in which the builder served as an advocate for the owner when working with the architects and consultants, acting to ensure that a project was built to strict standards. The 1970s saw the firm become the national leader in healthcare and parking structure construction, with a separate parking structure design/build group formed to facilitate work in the latter category. McCarthy’s Rock Hill Quarries business was successfully converted into a landfill operation during the decade as well.

After more than a century in operation, McCarthy remained in the hands of its founding family. Melvin McCarthy had served as president during many of the postwar years, with a number of other family members including Merryl McCarthy, Timothy R. McCarthy, John E. McCarthy, and Francis F. McCarthy having also taken roles at the firm during the period. When Melvin died in 1976, his son Michael M. McCarthy took over as president.

As work around the country became more a part of McCarthy’s business, setting up offices in other cities became a necessity. The first of these was opened in Phoenix, Arizona, in 1979, and more followed in other major cities including Washington, D.C., Boston, Tampa, Houston, Seattle, San Francisco, Dallas, Houston, Las Vegas, and Kansas City. In the 1980s the company began to take on new areas of work, beginning with bridge and civil construction jobs, and then, starting in 1985, high-tech and industrial projects. A milestone was achieved in 1986 when McCarthy did a billion dollars worth of business for the fist time. The firm was now operating with its first non-McCarthy family president, Roger H. Burnet, who took over the job from Michael M. McCarthy in 1984, though the latter remained CEO and board chairman.

1990s: Employee Ownership

The company’s stock, which had been held by the McCarthy family since its founding, was opened to the firm’s employees in 1996. Michael McCarthy, who was the only family member to retain a stake in the firm, held on to about 45 percent of the company. Commenting on his motivation for the move, McCarthy later told the St. Louis Dispatch, “When employees have a significant amount of stock, the business becomes much more fun for them and they get a much more visceral feeling about their participation and the possibility of their being able to make a real contribution … we set a goal to be the best builder in America, which is a very serious goal for us. If we have any chance (to accomplish that goal), we have to have all of our people staying with us and be well trained and all focused on the same goals. Ownership is a part of that.”

By this time the company’s out-of-state offices included several full-service divisions which themselves were growing into leading building companies in their states. These included McCarthy’s Phoenix, Seattle, Dallas, and Irvine, California, locations. In 1991 the company bought SDL, a Bellevue, Washington, contracting firm which was later named SDL McCarthy. The late 1980s and early 1990s also saw McCarthy’s areas of expertise growing again to include semiconductor, bio-pharmaceutical, educational, research and development, and general manufacturing construction projects. During this period the company merged its healthcare, parking, and bridge divisions with the full-service regional offices. Noteworthy projects of the era included the $24 million Salk Institute for Biological Studies in La Jolla, California, and the David Axelrod Laboratory, a $45 million research facility in Albany, New York.

Another change of leadership took place in 1995 when Roger Burnet retired and Michael D. Hurst was named president and chief operating officer. Hurst had worked for McCarthy for 24 years. In the late 1990s the company also began looking at other areas of building to develop specializations in. A study of current trends revealed that the demand for construction of kindergarten through 12th grade schools was almost triple the size of the healthcare market. In 1999 McCarthy executives decided to form a new division, the Educational Services Group, to seek work in this area. Initially accounting for only about 2 percent of McCarthy’s revenues, the company projected that K-12 projects could reach one-fifth to one-quarter of its business in less than a decade.

The same year that this division was created Michael McCarthy turned over the CEO duties to Michael D. Bolen, retaining the role of board chairman. Bolen had started as a carpenter at the firm in 1978, later moving up to supervisory positions and then serving as vice-president of operations and president of the firm’s Pacific Division. He had a degree in engineering from the U.S. Air Force Academy and a graduate degree in guidance and counseling from the University of Northern Colorado.

Company Perspectives:

Truth. Integrity. Passion. Sure, they’re old-fashioned words and old-fashioned concepts, but they are ones that our clients appreciate the most. McCarthy is a customer-focused, national, entrepreneurial and diversified business with broad regional construction capabilities. Using the latest information and management technology, we provide total project services from initial concepts through planning, financing, design, procurement, construction, maintenance, operation and ownership. But what sets us truly apart is that once we are selected, we make a binding commitment that runs far deeper than contractual obligations. It’s a human commitment that goes above and beyond ordinary expectations. Tools, training and opportunity for growth. An environment that encourages innovation. Challenging career opportunities. Exceptional financial rewards. Sense of family. A zealous commitment to safety.

In 2000 the firm’s Texas division acquired the assets and contracts of the Houston office of Concrete Pavers, Inc. of Evansville, Indiana. The move was expected to give McCarthy the ability to offer lower bids on civil transportation contracts, which had previously required subcontracting of the paving work. The shrinking U.S. economy was causing a drop in construction projects, and the company made the decision to close its money-losing Bellevue and Portland offices in late 2001.

McCarthy continued to work on many important projects as it celebrated its fifth year of employee ownership. Completed work included the $615 million Hollywood& Highland entertainment/retail complex in Hollywood, which incorporated a new theater that would house the Academy Awards; a $110 million correctional facility in Bonne Terre, Missouri; a $57 million corporate laboratory and learning center in St. Louis; a $44 million psychology center at the University of Texas; and numerous hospitals, parking structures, and building expansions in California, Arizona, New York, Illinois, and other states. The company also had many projects still on the drawing board including a $100 million office building and a $92 million jail in Phoenix; a $60 million biotechnology studies building at Rensselaer Polytechnic Institute in Troy, New York; an $80 million mixed-use development project in Beaverton, Oregon; a $132 million infectious diseases laboratory for the Centers for Disease Control and Prevention in Atlanta; a $90 million Hornet jet fighter manufacturing plant for the Boeing Company in St. Louis; and many others around the country. McCarthy did not focus solely on large projects; some were budgeted at less than $500,000, including a modernization of a K-12 school in Long Beach, California, expected to cost $350,000, and a $181,000 office tenant improvement in Kirkland, Washington.

With a proud history of more than 138 years behind it, McCarthy continued to grow and add to its legacy. The firm’s reputation for quality and its multiple fields of specialization, including the latest high-tech, biotech, and education facilities, were keeping its schedule full with no end in sight. In 2002, the last remaining family interest in McCarthy, held by Chairman Michael McCarthy, was sold back to the company. Press releases proudly noted that “At the conclusion of this ownership transition, McCarthy will become one of the nation’s oldest, 100 percent employee-owned construction firms with majority ownership via an employee stock ownership plan (ESOP).” Michael McCarthy would step into the role of chairman emeritus, while Mike Bolen, McCarthy’s CEO, retained that position and took on the role of chairman of the board as well.

Principal Subsidiaries

McCarthy Holdings, Inc.; McCarthy Building Companies, Inc.; McCarthy Properties, LLC.

Principal Operating Units

Institutional; Commercial; Healthcare Facilities; Industrial/Clean Manufacturing; Heavy/Civil; Parking Structures.

Principal Competitors

Bechtel Group, Inc.; Turner Corporation; Peter Kiewit Sons Inc.; Swinerton Inc.

Key Dates:

1864:: Timothy McCarthy founds a lumber business in Ann Arbor, Michigan.
1905:: Firm moves to Farmington, Missouri.
1907:: Company is incorporated as McCarthy Lumber and Construction Co.
1917:: Company moves to St. Louis and name is changed to McCarthy Brothers Construction Co.
1934:: Company moves to larger site in St. Louis.
1940s:: McCarthy builds U.S. military facilities in Panama Canal Zone during World War II.
1952:: Company acquires Rock Hill Quarries Company.
1969:: Company begins performing parking structure construction jobs nationwide.
1972:: McBro subsidiary is formed to provide healthcare construction management.
1979:: The first McCarthy regional office is opened in Phoenix.
1986:: Company reAlizés its first billion dollar year.
1996:: McCarthy creates employee stock-ownership plan, giving employees partial ownership in the company.
1999:: Education Services Group is formed to specialize in K-12 school construction.
2002:: Chairman Michael McCarthy sells his remaining stake, making the company 100 percent employee-owned.