AMPAM's future is Open to Speculation

BY ROBERT P. MADER Of CONTRACTORs staff ROUND ROCK, TEXAS American Plumbing and Mechanical Inc. announced in mid-July that Robert C. Richey had rejoined the company and would manage single-family plumbing operations in California, Nevada and Arizona. He is also rejoining the struggling companys board of directors. AMPAM at the same time announced that it had hired the firm of Conway Del Genio Gries

BY ROBERT P. MADER

Of CONTRACTOR’s staff

ROUND ROCK, TEXAS — American Plumbing and Mechanical Inc. announced in mid-July that Robert C. Richey had rejoined the company and would manage single-family plumbing operations in California, Nevada and Arizona. He is also rejoining the struggling company’s board of directors.

AMPAM at the same time announced that it had hired the firm of Conway Del Genio Gries & Co. to perform financial and operational advisory services with respect to the company and its subsidiaries.

AMPAM was ranked as the country’s seventh largest mechanical contractor with revenues of $574.85 million in CONTRACTOR’s Book of Giants (May, pg. 38).

Richey had resigned as the company’s senior vice president and chief operating officer April 18, 2002. Because of a non-compete clause, he had been doing real estate development work in Placentia and Riverside, Calif., and Lake Havasu and Kingman, Ariz.

Richey had brought his RCR Cos. in Riverside into AMPAM as one of its founding companies.

“I am the largest shareholder of AMPAM and, under the current condition of AMPAM, obviously a concerned shareholder,” Richey said. “I would like to be part of the solution as part of repairing AMPAM.”

The single-family plumbing operations that he will oversee constitute one-third of the revenues of the company, he said.

Richey assumes the board seat previously held by Stephen Turner, who resigned as a member of AMPAM’s board but continues to serve as the president of AMPAM Atlas Plumbing in Virginia.

Commenting on the announcement, Chairman and CEO Robert Christianson said: “In addition to over 25 years of experience running his own company and the valuable knowledge and relationships that he has developed, Bob was a significant member of the group that formed AMPAM. I am confident that he can make a positive impact in our Western operations and believe Bob’s decision to rejoin the company reflects his confidence in AMPAM. We are all happy to have Bob back among our management team.”

Richey will rejoin a management team that has undergone significant changes.

At the end of May, AMPAM announced that Richard Pollard was not re-elected as an independent director at the annual meeting of stockholders and that David C. Baggett resigned from AMPAM’s board effective May 28 pursuant to the terms of his resignation agreement. Baggett announced that he was resigning as president and chief financial officer in April. Christianson assumed his duties.

In addition, Susan O. Rheney, Albert W. Niemi Jr. and Michael E. Workman resigned from AMPAM’s board at the end of May. The board of directors said it was looking for replacements “with appropriate industry and financial experience to appoint to the directorships left vacant by such resignations.”

The hiring of Conway Del Genio Gries & Co. leaves AMPAM open to speculation that all or part of the company may be sold or that bankruptcy may be in the offing. Treasurer Stephen M. Smith did not return phone calls from CONTRACTOR.

CDG is a New York-based financial advisory boutique specializing in restructuring, mergers and acquisitions, and crisis and turnaround management. CDG represents public and private companies, lenders and boards of directors. Mike Gries will lead the activities of the firm.

Gries served as chairman and chief restructuring officer of Encompass Services as it declared bankruptcy (February, pg. 1). Encompass sold off its commercial contracting operations and reorganized as a much smaller Residential Services Group based in Dayton, Ohio (June, pg. 8)

Richey said he did not believe that bankruptcy is a possibility.

“The only significance is that he is or they are the group that helped Encompass through their troubled times,” Richey said. “At this point I don’t think anybody knows.”

In the past 12 months the company has announced that it was closing several money-losing operations in California, Florida and Virginia and laying off 700 employees.

AMPAM may also be short of cash at this point. In a recent earnings announcement, the company said that as of April 30, after making the interest payment on the company’s senior subordinated notes, the company had borrowings under its credit facility of $76.9 million, outstanding letters of credit of $7 million and cash on hand of $6.1 million.

The company was out of credit, the announcement said.

“At the present time, the company is fully borrowed under the credit facility and all future cash flow requirements must be provided by operating activities,” according to the statement.