Schuff Steel Company

420 S. 19th Avenue
P.O. Box 39670
Phoenix, Arizona 85069
U.S.A.
(602) 252-7787
Fax: (602) 251-0315
Web site: http://www.schuff.com

Public Company
Incorporated: 1976
Employees: 645
Sales: $138.2 million (1997)
Stock Exchanges: NASDAQ
Ticker Symbol: SHUF
SICs: 1791 Structural Steel Erection; 3441 Fabricated Structural Metal

Schuff Steel Company is one of the largest construction companies in the southwestern United States. The company is a rapidly growing, fully integrated fabricator and erector of structural steel for commercial and industrial construction projects such as high- and low-rise buildings and office complexes, hotels and casinos, convention centers, sports arenas, shopping malls, hospitals, dams, bridges, mines, and power plants. The company also specializes in the fabrication and erection of heavy steel plate, including large-diameter water pipe, water storage tanks, pollution control scrubbers, tunnel liners, pressure vessels, and a variety of customized projects. Other services offered include complete, turnkey steel construction, featuring engineering, detailing, shop fabrication, and field erection, which enables the company to pursue a fast track, design-as-they-go operating strategy. The company operates primarily in the southwestern United States, with a concentration in Arizona, Nevada, and southern California, as well as in South America and Mexico.

Through the First Decade: 1976-86

David Schuff had worked in the steel industry for a number of years. His son, Scott, worked during the summers with his father, beginning at the age of 13. After Scott’s graduation from high school in 1976, the father and son team founded Schuff Steel Company. The company was originally created to operate as a steel erector, and it outsourced the fabrication portion of its projects. The company was incorporated that year in Arizona.

In 1983 the company helped build the Kaiser Clinic in Los Angeles. The following year, major projects for the company included The Quality Royale Hotel (San Diego, California); and, in Arizona, Thunderbird Samaritan Hospital (Glendale); Valley Lutheran Hospital and Desert Samaritan Hospital (Mesa); Arizona State University’s Engineering Building (Tempe); and a test facility for Motorola (Chandler).

As the company grew, it began to integrate its services. To do so, in 1985, the company acquired its first fabrication facility, located in Phoenix. Major projects for 1985 included The Scottsdale Center (Scottsdale, Arizona); the Radisson Hotel Centennial (Mesa); a huge tower office complex at Central & Thomas Avenues (Phoenix); and a manufacturing facility for Fab 9 (Albuquerque).

Major projects in 1986 included a Southern California Edison facility (Irvine); the McKellar Research Center, the Intercontinental Hotel, and an International Rectifier building (San Diego) in California; a desalization plant (Yuma), Tucson’s City Center, AT&T’s Mesa Two Data Center and Hughes Helicopter’s ADC Building (Mesa), and the Biltmore Financial Center I and the Civic Plaza Expansion (Phoenix) in Arizona.

Almost Bust: 1987

In 1987 the company hit hard times. In a 1997 interview in the Business Journal, Scott Schuff said, “We were probably three hours away from going out of business. In a year-and-a-half, we lost $3.5 million.” The losses were attributed to a slump in the real estate market and a communications breakdown between project managers and top management, among other things. Schuff responded by beginning weekly project status meetings and diversifying the company’s markets and projects. Major projects for the year included, in California, McDonnell Douglas Building 58 and Building 5 (Long Beach); Plaza Alicante (Garden Grove); Hughes Research Laboratory (Malibu); Palomar Hospital (Escondido); Ralph’s Grocery Distribution Center (Los Angeles); a Nordstrom department store (Santa Ana); and Chesapeake Park Plaza and the Omni International Hotel (San Diego). Projects in Arizona included Broadway Proper Hilton Hotel (Tucson); Flagstaff Medical Center (Flagstaff); an SRP Service Center (Tolleson); Western Savings Financial Plaza (Mesa); and Western Savings Corp. Headquarters, Phoenix General Hospital, Camelwest Plaza, Talley Plaza, and Camel Point Urban Complex (Phoenix).

Concrete Growth: 1988-98

The company jumped forward again after its 1987 slump, with major projects in 1988 including a Veterans Administration Hospital and General Dynamics (San Diego); Jamboree Center II (Irvine); Scottsdale Princess Hotel (Scottsdale); and Mountain Bell Tower and the Interstate 17/Papago Interchange (Phoenix). The following year, the company built the Golden Nugget Hotel & Casino (Las Vegas); Waddell Dam Siphon Pipe; Riverside (in California) In-Patient Hospital; the San Diego Corporate Center; and SRP Information Systems Building and The Mercado (Phoenix).

In 1990 the company began doing earnest business in Las Vegas, working on the Holiday Casino expansion, the Flamingo Hilton, and the Holiday Riverboat. Work in Phoenix continued, with the Biltmore Fashion Center’s Phase III and Phoenix Plaza Tower’s Phase II construction commencing. In southern California, the company built Alvarado Hospital in San Diego and Western Digital LSI II in Irvine. The Pima County Office Building in Tucson and Scottsdale Fashion Square were among the company’s other large projects in Arizona that year.

David Schuff turned over the company’s operations to Scott in 1991, naming the younger Schuff president and chief executive officer, while David remained as chairman. In the Las Vegas market, the company moved away from casino work for the year, constructing Hughes Center Buildings A and B and Valley Bankwest, but picked up a contract for the Flamingo Laughlin Hotel and Casino in that Colorado River city. Major engineering and construction projects included Roosevelt Dam’s lake tap, shaft, and tunnels; Sky Harbor International Airport Terminal 4 Parking Garage in Phoenix; and the Palo Verde Nuclear Plant Administration Buildings. Other major projects that year included the NEC Mega Line and Energy Center Buildings (Sacramento) and the Puritan Bennett Office Building (Carlsbad) in California; Smith’s Grocery Warehouse (Tolleson), The Shops at Arizona Center (Phoenix), and The Scottsdale Galleria in Arizona; and a cereal manufacturing plant in Albuquerque.

Major projects for 1992 included the Sharp Hospital’s Women’s Center (San Diego), Community Hospital of Chula Vista, and Kaiser Regional Data Center (Corona) in California; and McCarran Airport, the Sands Hotel & Casino Convention Center, and the Minami Tower, all in Las Vegas. Total revenue for the year reached $47 million, with a net income of $325,000. The following year, with projects like the Children’s Hospital (San Diego) and the Jet Propulsion Laboratory’s Observation Lab (Pasadena) in California, three major construction sites in Henderson, Nevada, Sierra Health Services in Las Vegas, and a solid waste station in Phoenix, the company’s total revenue for 1993 grew to $58.6 million.

In 1994 the company experienced more growth, building Barney’s of New York (Beverly Hills), an Anheuser Busch Plant (Ontario), and a Smith’s Grocery Distribution Center & Dairy facility (Riverside) in California; a Ramada Express (Laughlin), Gary’s Wild Wild West Casino (state line), and the rehabilitation of the Tropicana Hotel, the MGM Grand Hotel & Casino, and Boulder Station Hotel & Casino (Las Vegas) in Nevada; a blast simulator at White Sands (New Mexico), and the Incredible Universe superstore in Phoenix. Total revenue climbed another ten million, to $68.2 million, with a net income of $3.8 million.

The year 1995 brought the company more work in Las Vegas, as it built the Texas Gambling Hall, Arizona Charlie’s Casino, and the long-awaited Hard Rock Cafe Hotel. Skywest Airlines contracted the company to build a facility in Salt Lake City, Utah. California added a state compensation insurance fund building in Santa Ana and a NUMMI Bumper facility in Fremont. Arizona construction included the Salt River 21-inch-diameter siphon pipe (Mesa), Motorola’s Building 99 and Schreiber Foods’ warehouse (Tempe), SRP’s Navajo Maintenance Facility (Page), and the St. Joseph Medical Center (Phoenix). In October of that year the company received a $25 million contract from Intel Corp. for the steel erection work on the latter’s $1.4 billion chip fabrication facility in Phoenix, Arizona, moving Schuff to the top of the steel erector company rankings in the 1995 Top 600 Specialty Contractors List. The project required the fabrication of 10,000 tons of structural steel. Total revenue for 1995 moved forward to $62.1 million, with a net income of $2.5 million.

Big projects in 1996 included the Woodland Hills Theatre Complex, a Toyota distribution center (Ontario), and the Gates Computer Science Building (Palo Alto) in California; the Main-gate Center (Tucson); The Galleria at Sunset Mall (Henderson) and Sunrise Mountain View, the Howard Hughes Office Building, The Orleans Hotel & Casino, and the State of Nevada’s Department of Water & Power Poles facility (Las Vegas) in that state; and the Vandenburg Air Force Base Launch Complex. Total revenue for 1996 skyrocketed to $103.9 million, with a corresponding jump in net income to $10.1 million.

Company Perspectives:

Schuff Steel Company is a rapidly growing steel fabrication and erection company providing a fully integrated range of steel construction services, including design engineering, detailing, joist manufacturing, fabrication and erection, and the level of project management expertise necessary to accommodate fast track, “design-as-you-go” projects.

What About Barry and BOB?: 1997-98

In January 1997 the company acquired 100 percent of the outstanding capital stock of B & K Steel Fabrications, Inc., a steel fabricator headquartered in Gilbert, Arizona, for $1.2 million in cash and promissory notes. By July the company was one of the largest privately held companies in Arizona. On July 7, the company reincorporated in Delaware, shifting its status from an S Corporation. Schuff Steel completed an initial public offering, raising $16 million, which it used to purchase new equipment for its new Gilbert fabrication facility and to fund acquisitions. The stock began trading on the NASDAQ under the ticker symbol SHUF.

In August 1997 the company received a $6 million contract for the design and fabrication of 4,000 tons of structural steel for the expansion of an aluminum smelter facility owned by Aluar (Aluminios Argentinos) in Puerto Madryn, Argentina, a port city on the Atlantic Ocean, 400 miles south of Buenos Aires. The following month the company was awarded $15.7 million in new contracts for five steel fabrication and erection projects. Two of the projects were started in October 1997. The first was a subcontract to fabricate and erect the structural steel for an addition to a laboratory facility in Thousand Oaks, California, for Baxter International Inc., a large medical technology supplier. The second was to fabricate and erect the steel for the expansion of an existing manufacturing facility for Sony Corp. in San Diego. The third project, started in December 1997, called for the fabrication and erection of the 380,000-square-foot City Mills Mall in Orange, California, which required 1,200 tons of structural steel. In January 1998 erection began on eight 240-foot-long, 26-foot-deep trusses as part of the company’s contract for the fabrication and erection of steel for Bakersfield Arena, an ice hockey rink for the expansion of the Bakersfield Convention Center in California. The final and largest of the five projects, begun in mid-1998, had Schuff Steel providing the fabrication and erection of all the structural steel for a new U.S. Federal Building and Courthouse in downtown Phoenix, Arizona. The project required 3,100 tons of structural steel, which framed an atrium attached to an eight-story concrete frame building.

Exciting projects in 1997 included the Paris Hotel & Casino and the New York, New York Casino Coaster Platform in Las Vegas, as well as Sky Harbor International Airport’s Terminal 4 (Barry Goldwater Terminal) expansion. The major project of the year, however, was constructing the steel framework of the massive Bank One Ballpark, located in downtown Phoenix (lovingly referred to as BOB). A state-of-the-art baseball stadium, BOB featured a Schuff-built fully retractable roof and massive scoreboards and would become the home playing field for Major League Baseball’s 1998 expansion team, the Arizona Diamondbacks franchise. Total revenue for 1997 was $138.2 million, with a net income of $8.7 million.

In March 1998 the company began building a 50-story replica of the Eiffel Tower in a $14 million project at the Paris Hotel & Casino in Las Vegas. The project required more than 2,000 tons of structural and plate steel, 300,000 bolts, 264 flights of stairs, and approximately 180,000 man-hours for fabrication and erection. The tower was erected over the casino, with three of the four tower legs penetrating into the casino area. Each 28-foot square tower leg was fabricated in modules that were shipped to the project site for ground assembly prior to erection. The base is 193 feet square, with the tower rising 540 feet above ground and featuring restaurants and retail areas at the 104-foot elevation and an observation deck at the 460-foot level.

In June 1998 the company completed a private placement of $100 million. Net proceeds were used to repay debts and finance part of the acquisition of Addison Structural Services, Inc. The Albany, Georgia-based privately held company was purchased for approximately $59.4 million. The acquisition provided Schuff Steel with structural steel fabrication and erection services and capability for manufacturing short- and long-span joists, trusses, and girders for industrial and commercial projects; as well as fabrication facilities in Albany, Georgia, and Lockhart, Florida, and a joist manufacturing plant in Quincy, Florida.

In July 1998 the company and its subsidiaries were awarded five contracts worth more than $7.2 million, including a train station and parking structure in Millbrae, California; orange juice storage tanks in Florida; casino expansions in North Las Vegas and Reno, Nevada; a one million-square-foot liquor distribution center in Hialeah, Florida; a student center and library for Soka University in Aliso Viejo, California; and multiple-screen theaters in Cherry Hill, New Jersey and Fairfield, California.

Early in September of that year, the company completed the acquisition of Six Industries, Inc., a privately held company headquartered in Houston, Texas. The company and its subsidiaries were purchased for an aggregate price of $17.9 million in cash and promissory notes. The acquisition included: the Aitken, Inc. subsidiary, which manufactured strainers, filters, separators, and other types of measuring equipment used in the oil, gas, petrochemical, and pipeline industries, as well as provided a wide array of steel fabrication services and other related products to the oil, gas, and petrochemical industries; and The Rowell Welding Works, a division that manufactured pressure vessels and related fabrication for chemical and petrochemical plants, refineries and power plants, oilfields, water treatment, and aggregate handling facilities. The acquisition also included The Marauder Company, a division that fabricated structural steel for large industrial contractors in Houston and other locations situated near the Gulf of Mexico, and was also a key supplier of structural steel products to Fluor Daniel for petrochemical facilities. In addition, Marauder provided structural steel for other major international design firms. Wayne Harris, president and CEO of Six Industries, agreed to stay on to continue to manage Six’s day-to-day operations. The acquisition further expanded Schuff Steel’s geographic and market diversity, giving the company Marauder’s long-term relationships in the petrochemical market, access to profitable new industrial equipment markets, and additional fabrication capacity.

By the end of 1998, with 95 percent of the steel fabrication and erection industry being highly localized “Mom and Pop” shops, Schuff s unique position in the steel industry, its aggressive growth strategy, and its strong competitive advantages were expected to be key factors behind its continued financial and operational growth as it headed into the 21st century.