Elgin Butler Brick Company

History

Originally called Butler Brick Company, the firm was founded in 1873 five miles east of Elgin, Texas. Irish immigrant bricklayer Michael Butler discovered clay pits at the site shortly after the Texas and New Orleans Railroad arrived there in 1871. The community that grew up around it came to be known as Butler, a company town with a company store and brick houses for employees who farmed on the side.

The town's population reached about 150 and the company also mined clay from a site now in the Zilker Park soccer fields in Austin. The clay was transported in buckets hung from mule-drawn lines to kilns on the site of the present-day Austin High School. Another plant was located farther down the Colorado River at the site of the Zachary Scott Theatre. In 1912 the firm acquired the Austin Brick Company, and in 1965 it acquired its chief competitor, Elgin Standard Brick Company. The company supplied bricks for the Texas State Capitol, 80 percent of the brick structures at the University of Texas at Austin, fireplaces in many Austin residences, and many other brick buildings in Austin. Brick from the firm was also used for the façade of the United States Embassy in Mexico City. The company maintained offices in Austin and Elgin from approximately 1910, and was family-owned and operated until 2005 when it was sold to outsiders.

Sale of Company by the Butler Family

In December 2005, the Butler family sold the company to Matthew Galvez (an 81% shareholder) and James Nichols (a 19% shareholder) in a transaction financed by Frost Bank with a Small Business Administration guarantee on a portion of the acquisition financing. Around the time of the transfer, the primary products manufactured and sold by Elgin-Butler were glazed brick and large structural brick for use in school construction, transportation terminals such as subway stations and airports, stadiums, food processing plants, jails, multi-unit housing, restaurants, and other commercial uses. Elgin-Butler also made fire brick, fireplace liners and glazed thin-brick at its plant in Elgin, Texas. Following the sale of the company, Elgin-Butler’s subsidiaries, McIntyre Tile Company, Inc. and Trikeenan Tile Works, also manufactured glazed thin brick, and art tile at their respective plants in Healdsburg, California and Hornell, New York. McIntyre and Trikeenan’s glazed thin brick and art tile were almost exclusively used in commercial applications.

At the time of the December 2005 sale, Elgin-Butler was distressed in large part due to a defaulted loan made by Wells Fargo. The proceeds of that loan were to be used to automate clay extrusion operations and install a grinding and screening plant for clay mining purposes. These initiatives were completed after further investment by the new buyers with funds generated by subsequent operations. At the time of the sale, plant utilization had fallen to approximately 40%, annual plant revenues had decreased to below $5 million, and the company was unable to meet the demands of critical vendors. The buyers of the company selected Frost to replace the Wells Fargo loan of $4.5 million and also provide an additional $4 million line of credit secured by inventory and accounts receivable. The buyers retained various members of the Butler family, including the President, the plant manager, the Vice President of Sales, and various administrative and purchasing personnel.

Post-Acquisition

From 2005 to 2010, the number of company employees increased from approximately 75 to 200. Initial successes following the 2005 acquisition caused plant utilization to spike to 100% with significant customer order backlogs.

Notwithstanding these initial successes, the company faced declining demand for its products beginning in 2011. Public funding for infrastructure projects decreased and many important projects that the Company had expected to move forward were postponed or cancelled. The largest market for the Elgin-Butler products had been Chicago's construction of schools and subways stations, but revenues from the Chicago market dropped from a high of approximately $4 million in 2010 to approximately $1.2 million in 2013. Similarly, Elgin-Butler’s revenue from the Houston market dropped from a high of $1.5 million in 2010 to $300,000 in 2013. Revenues from the Dallas market dropped from a high of $1 million to around $200k, and New York City revenues dropped to $100,000 in 2012 from a high of $1.5 million. Overall, between 2010 and 2013, the Company experienced an approximate 35% decline in revenues with a 70% drop from its top three distributors. As a high fixed cost “process” operation, the company was unable to cut costs fast enough to keep it above breakeven. During 2013, it experienced negative EBITDA of $322,000 and receivables dropped below $600,000 which strained the company's ability to support its debt and employee costs. Most employee benefits were cancelled during 2013, including health insurance which had been partially funded by the Company.

In conjunction with the onset of these revenue declines, in July 2011, an old computer sparked a fire which caused a subsidiary's plant to burn to the ground. During the two-year period when the plant was being rebuilt, subsidiary McIntyre Tile Company, Inc.'s shipments declined by approximately 75%, and the company lost key employees and a large portion of its customer base. It also lost a number of contracts which provided for its products to be used by large customers such as Panera Restaurants.

From 2011 to 2013, more than one-third of the company’s approximately 200 employees were permanently laid off. Discretionary spending was eliminated—including health insurance, certain marketing, advertising, travel and other employment-related costs.

Bankruptcy

In 2014, Elgin-Butler filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Western District of Texas. The case number 14-11180-tmd.