Lukens Inc. History

Address:

50 South First Avenue
Coatesville, Pennsylvania 19320-0911
U.S.A.

Telephone: (610) 383-2504
Fax: (610) 383-3324

Public Company
Incorporated: 1890 as Lukens Iron & Steel Co.
Sales: $947 million
Employees: 3,600
Stock Exchanges: New York Boston Chicago Pacific Philadelphia
SICs: 3312 Steel Works, Blast Furnaces (Including Coke Ovens) and Rolling Mills; 6719 Offices of Holding Companies, Nec

Company History:

Lukens Inc. is a holding company with subsidiaries that manufacture carbon-, alloy-, and clad-steel plates and stainless-steel sheet, strip, plates, hot band, and slabs. It owns the oldest continuously operating steel mill in the United States. In 1995 its subsidiary Lukens Steel Co. ranked as one of the three largest domestic producers of plate steel and the largest domestic producer of alloy plate, while its Washington Steel Corp. specialized in the manufacture and marketing of stainless-steel sheet, strip, plate, hot band, and slabs. Washington Specialty Metals Corp., the company's third principal subsidiary, was a leading distributor of flat-rolled stainless steel. Over a five-year period ending in 1993, Lukens ranked fourth in profitability among 24 public steel corporations, earning an annual average of 14.8 percent on equity.

The origins of Lukens go back to the early days of the Republic. By 1793 a young Quaker, Isaac Pennock had established the Federal Slitting Mill south of present-day Coatesville, Pennsylvania, to produce iron rods and strips. In 1810 Pennock and another Quaker, Jesse Kersey, established the Brandywine Iron Works and Nail Factory on the site of what is now Coatesville. By 1817 Pennock had purchased Kersey's interest in this facility and leased it to his son-in-law, Dr. Charles Lloyd Lukens. The following year this mill became the first in the United States to manufacture boiler plate--high-quality iron essential to the making of steam boilers. It soon established a fruitful and enduring association with the shipbuilding industry, providing plates for the first iron-hulled vessel built in America, an early river steamboat.

After Lukens died in 1825 his widow, Rebecca, took over the business while rearing her young children. She thus became the first woman in the United States engaged in the iron industry and was the first female chief executive officer of an industrial company. She not only saved the mill from the threat of bankruptcy, but also made it the nation's chief manufacturer of boiler plate. Boiler plate from the mill was conveyed as far as England, where it was used to build some of the first railway locomotives. Later two sons-in-law of Rebecca Lukens, Abram Gibbons, Jr., and Dr. Charles Huston, became active in the firm, which became Gibbons & Huston in 1849. A new, steam-powered mill was built in 1870 and another mill added in 1890 that was believed to have been the largest mill in the United States at the time. The company began turning out steel as opposed to iron products in 1881.

Gibbons & Huston was renamed Charles Huston & Sons in 1881 and Lukens Iron & Steel in 1890, when it converted from a family partnership to a corporation. After Huston died in 1897, one son, Abram Francis Huston, succeeded him as president, while the other, Charles Lukens Huston, became works manager. During this period the firm became one of the largest producers of open-hearth steel and steel plates in the eastern United States. Sales offices were opened in Baltimore, Boston, Cincinnati, New Orleans, and New York. A massive new steam-driven mill built in 1903 could produce plates up to 136 inches wide, making it the largest plate mill in the United States. In 1917 and 1918 this was exceeded by a 204-inch facility, the world's largest plate mill. Expanded to 206 inches in 1919 and still in regular operation in 1990, it remained the largest plate mill in the world for more than 40 years.

The company was reorganized and reincorporated in 1917 as the Lukens Steel Co., with a greatly expanded capital structure of 270,000 shares of common and preferred stock. Abram F. Huston was succeeded as president in 1925 by his son-in-law Robert W. Wolcott. (In 1984 descendants of Charles Huston still owned 30 percent of the common stock.) The early 1920s were a period of retrenchment for Lukens after the high level of orders during World War I. The company lost money in 1922, 1924, and 1925. This was followed by a return to prosperity, and in fiscal 1929 Lukens posted net income of $876,563 on sales of nearly $20.4 million.

The Great Depression brought on a new period of economic struggle. Steel production fell from 446,774 tons in 1930 to 165,731 in 1932. Lukens lost money in the fiscal years 1931, 1935, and 1938, and probably also in 1932 and 1933, when it did not publish financial reports. The company survived this period by cost reductions, intensive sales efforts, additional services to companies such as partial fabrication before shipment, and innovative programs. In 1937 Lukens reached an agreement with the Steel Workers' Organizing Committee under which the company recognized union members for the purpose of negotiating agreements relating to wages, hours, benefits, and work rules.

In a landmark development, clad plate was introduced to the product line in 1930. The cladding process, which involves permanent bonding of two or more different types of metal, soon became an important segment of Lukens' business. The applications of clad are practically limitless where protection against rust, corrosion, and abrasion are required and the use of a solid plate of nickel or stainless steel would be impractical and cost-prohibitive. Lukens now offers the most complete line of clad steels in the industry.

In 1940 Lukens was able to resume the payment of dividends, which had been suspended for two decades (except for 1927). Debt had been reduced and plant improvements were being made in preparation to meet demand arising from World War II. During the war the U.S. Navy constructed a finishing mill that Lukens then leased and operated. Lukens turned out battleship armor for the navy and light tank armor, antiaircraft-gun bases, and other fabricated steel parts for the U.S. Army. Average employment reached a record high of 6,166 in 1944, when a liberty ship was named for Rebecca Lukens. After an initial postwar slowdown, Lukens earned a record profit of $2.8 million in 1947, with net sales of $61.5 million and production of 578,461 tons of steel in 1948, both company records. Wolcott was succeeded as president by Charles Lukens Huston, Jr., a fifth-generation descendant of the company's founder, in 1949.

Military orders were also important for Lukens in the 1950s. The company supplied keel plates and other components for the aircraft carriers Saratoga and Forrestal and steel for the Nautilus, the first atomic-powered submarine. It supplied plates for the hull, flight deck, and plane launchers of the navy's first nuclear-powered carrier, the Enterprise. The navy completed an armor-plate plant at Lukens in 1956. Lukens also supplied eye bars to anchor the cable of the Verrazano-Narrows Bridge in New York harbor, plates for the Throgs Neck and Walt Whitman bridges in New York City and Philadelphia, respectively, and fabricated materials for the Savannah, the world's first atomic-powered commercial ship.

Lukens turned a profit during every year of the decade. Its greatest production of steel was 763,679 tons in 1953. Net sales reached a peak of $130.5 million in 1957 and net income a high of $10.2 million in the same year. A new steel-making facility, centered around a 100-ton electric furnace, was completed in 1958. By 1960 the Coatesville tract covered 725 acres and included 3.25 million square feet of floor space.

During the 1960s Lukens took part in other high-profile projects. The arched column supports for New York City's World Trade Center, begun in 1968, were fabricated from the company's plate steel. Lukens provided the steel for a specially designed ice-crushing bow installed in the Manhattan. This oil tanker, the largest built in the United States at that time, made a historic voyage through the Northwest Passage across Canada's Arctic to Alaska's Prudhoe Bay in 1969. A year earlier Lukens had purchased Natweld Steel Products, Ltd., of Toronto to serve the Canadian market as a subsidiary renamed Canadian Lukens, Ltd. In 1969, when the parent company earned $7.2 million in net income on net sales of $145.2 million, steel production reached 897,000 tons.

In 1970 Lukens completed construction of a $12.8-million strand-casting facility that shortened the process of producing steel slabs and reduced handling costs. Five years later, now equipped with four massive electric furnaces, it phased out the last of its antiquated open-hearth furnaces. A new line of low-sulphur, high-purity steels of exceptional toughness and ductility was introduced in 1977. In 1974 Lukens produced a record 958,000 tons of raw steel and had record net sales of $283.4 million. That year Charles Lukens Huston, Jr., retired as chairman of the board, bringing an end to the family's continuous leadership of the firm since its founding by Isaac Pennock in 1810.

After posting a record net income of $12.9 million in 1978, Lukens began suffering from the economic problems of the late 1970s and early 1980s: double-digit inflation, high energy and employment costs, and high interest rates. In addition, the steel industry was grappling with greater competition from other metals and materials and from cheaper steel imports. Net income as a percentage of sales dropped from 4.2 percent in 1978 to 1.3 percent in 1980. U.S. plate sales--the heart of the company's business--dropped 11 percent in 1980 and 8 percent in 1981.

Under president and chief executive officer W. R. Wilson, Lukens began to move into other lines of business. In 1981 the company paid $66 million for General Steel Industries Inc., which, in addition to steel, produced crushing and conveying machinery, reflective highway signs, and protective coatings for oil and gas pipelines. Also in 1981, Lukens purchased a 3.6-mile stretch of track and switching yard from the Consolidated Rail Corp. (Conrail), incorporating it as a subsidiary called the Brandywine Valley Railroad Co.

In 1982 Wilson announced that Lukens planned to make two small acquisitions each year and one large acquisition every three years, with nonsteel revenue to reach half of all company annual revenue by 1989. That year the company removed "steel" from its name, becoming simply Lukens Inc. To reduce costs, the company reduced its work force by 22 percent between January and September 1982 and cut the pay of salaried employees by 10 percent. Lukens was able to make a profit of $1.5 million in 1982 while other steelmakers were incurring heavy losses in that recessionary year. In 1983, however, the company lost $14 million, its first plunge into the red since 1938.

In 1984 Lukens returned to profitability, earning net income of $4.7 million on sales of $416.4 million. Wilson was credited with reducing company costs by $50 million over four years, mainly by dismissing nearly half the white-collar salaried staff. A capital-improvement program had doubled steelmaking productivity. Also in 1984, Lukens settled a 13-year-old lawsuit by agreeing to pay 1,300 black employees $2.5 million in damages and agreeing to set a goal to fill at least 18 percent of its hourly and salaried positions with black workers.

Lukens lost $4.2 million in 1985 but earned an $8.7 million profit in 1986 and enjoyed net earnings of $21.7 million in 1987 on sales of $505.2 million. Its stock moved that year from a low of 14 to a high of 58, registering the largest percentage gain on the New York Stock Exchange. Also in 1987, the corporate structure was reorganized, with the formation of a new holding company, Lukens Inc., incorporated in Delaware. Lukens Steel Co. became its wholly owned subsidiary. In 1988 Lukens did even better than the previous year, earning $33.4 million on sales of $605.3 million. Closing its third record year in a row, in 1989 Lukens earned $41.5 million on sales of $644.9 million.

Military orders were one reason for Lukens's turnaround. The company was providing alloy plate steel for such projects as the army's Abrams tank and the navy's Aegis class cruiser, ballistic-missile submarines, and aircraft carriers. In 1988 Lukens won the largest single order in its history, a $74 million contract to supply carbon and military alloy plate over five years for use in the construction of two Nimitz-class nuclear aircraft carriers, the largest warships in the world. The company enjoyed its fourth consecutive year of record profits in 1990, earning $44.1 million.

The financial health of Lukens encouraged the United Steelworkers to launch a walkout in October 1991 by more than 1,200 workers at the company's unionized Coatesville plant. The union sought to eliminate a common industry practice known as contracting out, under which nonunion workers are hired to perform duties not directly tied to making steel. The strikers did not gain their objective, as salaried employees kept the mill running at 85 percent of normal operations during the 105-day walkout.

To broaden its presence in the lucrative stainless-steel market, Lukens purchased Washington Steel Corp. in 1992 for $273.7 million. The acquisition gave Lukens enough volume to justify building a sophisticated new rolling mill adaptable to stainless and carbon products. This new system, called Steck Mill Advanced Rolling Technology (SMART), was installed at Conshohocken, Pennsyvlania. It began operation in 1995 and was capable of producing stainless coil plate up to 102 inches wide, compared to the prior limit of 60 inches. For customers, this meant fewer welds, saving hundreds of dollars per ton of steel.

Meanwhile Lukens sold its Canadian subsidiary in 1988 and its GSI Engineering subsidiary in 1989, and was in the process of divesting its remaining nonsteel businesses. In 1994, under a new chairman and CEO, R.W. Van Sant, who had been installed in January 1992, Lukens divested Flex-O-Lite, producer of highway safety products and its related Services and Materials Co. division (acquired in 1986). Also in that year, Lukens sold its Ludlow-Saylor division, the South Central Railroad Co. (acquired in 1990), and Cathodic Protection Services Co. (purchased in 1985). In 1995 it sold Energy Coatings Co. to Dresser Industries Inc. The sale of these six industrial-products units brought Lukens more than $70 million and completed its divestiture process.

In 1995 Lukens Steel Group was producing raw steel from an electric-arc furnace at the Coatesville plant, with about 70 percent of production continuously cast into slabs at this facility. Rolling and fabrication facilities were located at this plant and another in Conshohocken, Pennsylvania. The steel group also had a fabrication facility in Newton, North Carolina.

The Washington Stainless Group included Washington Steel Corp.'s melting, continuous casting, and hot-rolling facilities in Houston, Pennsylvania, and rolling and finishing facilities in Washington, Pennsylvania, and Massillon, Ohio. The Washington Specialty Metals Corp. had fabrication and distribution facilities in Wheeling and Carolstream, Illinois, and Lawrenceville, Georgia. There were additional distribution centers in Carrollton, Texas; Youngsville, North Carolina; Tampa, Florida; Brampton, Ontario; and Vaudreuil, Quebec.

Of Lukens's net sales of $947 million in 1994, Lukens Steel Group and Washington Stainless Group each accounted for roughly half of the total. Net earnings came to $22.2 million. Shipments totaled 711,800 tons in 1993, and long-term debt came to $209.7 million in September 1994.

Principal Subsidiaries: Allegheny Ore & Iron Co.; Brandywine Valley Railroad Co.; Lukens Development Corp.; Lukens Management Corp.; Lukens Steel Co.; Washington Specialty Metals Corp.; Washington Specialty Metals Inc.; Washington Steel Corp.

Lukens Inc. History

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