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Tower erector rises from ruin: Once bankrupt, water tank firm grows into industry giant, acquires competitor

May 22, 2006

From the ashes of bankruptcy in 1986, an Avon-based firm has ascended to the top of an industry that might seem old-fashioned: building and maintaining water towers.

But the owners of Phoenix Fabricators and Erectors Inc. say new demand for their product, driven by factors as diverse as aesthetics and alternative fuels, promises to boost the firm's $80 million in annual sales as Phoenix grows from within and through acquisitions.

Phoenix this month acquired Sebree, Ky.-based Pittsburgh Tank and Tower Elevated, in a move that substantially increases its manufacturing capacity. Pittsburgh had $25 million in sales last year and added 85 employees to Phoenix's payroll, bringing its staff to 350. Phoenix officials declined to disclose the purchase price. Though they won't tip their hand, Phoenix principals said an even larger acquisition could happen in the coming year.

"This is a really good story for Indiana," said Chris Caniff, managing director for Indianapolisbased Periculum Capital Co., which advised Phoenix on its recent acquisition. "At a time when Indiana companies are being acquired and moving their headquarters out of state, this is a company that is acquiring others and growing right here."

Phoenix is one of only a handful of U.S. companies that builds, erects, moves and maintains elevated water towers. Company officials said the firm has about one-third of the U.S. market, which isn't limited to the small towns water towers are most often associated with.

In fact, corporate customers are becoming a larger target for Phoenix and its competitors. Industry sources said tanks for storage of alternative fuels, such as ethanol, is a burgeoning sector.

"With the growth in alternative fuels, that could be huge," said Phoenix President Jeff Short.

Started small

Phoenix was little more than a pipe dream in 1986, when six employees of Universal Tank and Iron Inc. decided they could run a better tank company and left the local firm to strike out on their own. When Universal declared bankruptcy later that year, Bill Bacon, Charlie Lakin, Mac McNees, Gene Rothgerber, Short and Brick Warren pooled their resources to buy out their former employer.

After several months working out of McNees' house and later at a makeshift office in a Brownsburg physician's examining room, Phoenix's six co-founders took back the Universal facility they helped grow.

Bacon and McNees have since retired,

and Tim Yohler has been added as partowner.

Meanwhile, revenue grew from $18 million in 1988 to $50 million in 2003 before stagnating when the economy dipped.

Bob Curry, president and owner of Danville-based Robert Curry & Associates, said Phoenix has grown by making the operation lean and efficient.

"This is a tough industry to survive in," said Curry, whose engineering company specializes in water systems. "I've known and worked with the principals of this company for more than 25 years. And no matter what they've encountered, they've always come through on projects for me."

Staying alive

It's a tough industry, even for a lean company like Phoenix, because of its traditional reliance on steel. In 2004, Phoenix was on the brink of ruin when steel prices skyrocketed, and China scarfed up most U.S. scrap steel.

"We've been buying Indiana steel a long time, so we called our Gary suppliers and told them if we don't get some steel, we're done," Short said. "Fortunately, through our long-standing relationships, our suppliers came through."

Occasionally loathed as eyesores, but often loved as landmarks, elevated water towers are used by small and mediumsize towns, big cities and large corporations, such as Wal-Mart.

Indianapolis has water towers spread throughout the city to help keep water pressure constant and ease peak-time demand, which equalizes pump operations and leads to energy savings. Chicago Bridge & Iron or its predecessor built most of Indianapolis' water towers. Phoenix officials said they'd like to do business with Indianapolis, but have yet to win a bid.

The towers, usually 140 to 180 feet high, store between 100,000 and 2 million gallons of liquid.

Because they operate by gravity, the towers are usually erected on high ground, often becoming one of the defining characteristics of a small town's skyline.

Going corporate

Phoenix builds water towers primarily for municipalities, but the recent acquisition allows them to move more into the fast-growing corporate realm, Short said. Pittsburgh's state-of-the-art facility gives Phoenix the ability to construct and erect composite tank systems.

The composite systems have concrete, instead of steel, bases and support structures. The stairwell to the top is in the interior of the structure and there is room for offices, storage and other facilities in the tower's base and shaft. The composite structures, while slightly more expensive than traditional steel water towers, are also seen as more aesthetically pleasing.

"Architectural aesthetics is becoming a bigger driving force in this industry, for corporate users, but also for municipalities who have elevated tanks in high visibility areas," said Alan Wiseman, an officer and instructor with the Indiana Section of the American Water Works Association. "With Phoenix's strong reputation in this industry, they should be able to build off this acquisition."

In the last 20 years, Wiseman said, increased demand for better fire protection from large corporations and the companies that insure them, has led to an increased demand for the elevated water towers-especially the composite tanks corporate clients tend to favor.

While Phoenix's local 45,000-squarefoot facility off Rockville Road just west of Indianapolis is near 90-percent capacity, the newly acquired Kentucky plant is below 50-percent capacity.

Phoenix officials think, with their history in the industry, they'll be able to grow the Kentucky operation faster than the 5-year-old company they purchased it from.

"This opens a whole new avenue for us, and doesn't put pressure on our existing markets," Warren said. "This acquisition is the perfect fit for us."

The acquisition, he said, also makes the local firm an international company with contracts for work in the Bahamas, Mexico and Iraq, among other places. Phoenix officials said the acquisition should boost revenue $30 million this year.

Phoenix is one of only three major elevated water tower makers remaining after years of consolidation. The others are Chicago Bridge & Iron Inc., with operations in Chicago and Houston, and Louisville-based Caldwell Tank Inc.

"There are a few mom-and-pops with a limited service area, but there are only three major players now," Short said. "That puts us in a very strong position."

Many water tower projects are awarded through a bid process. Curry said one thing that differentiates Phoenix is its ability to get projects done ahead of schedule.

Short said Phoenix can construct and erect a tower within 90 days if necessary. Most tanks are built and erected in six to 12 months. Phoenix does everything inhouse and constructs about 200 tanks annually.

"Our crews are on the road 45 weeks a year," Short said. "They literally run from one project to another."
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