Back from the brink
BOISE — It’s one of the nation’s most storied companies, with achievements around the world. It helped build Hoover Dam and the San Francisco Bay Bridge.
But in 1995, Morrison Knudsen Corp. stood on the brink of ruin after misguided efforts to diversify beyond construction and engineering. Now, nine years later, after two trips through bankruptcy court and bearing the new name of Washington Group International, the company is bigger and more diverse — within the business it knows best — and regaining its reputation.
“When you get back to your knitting, you can focus on your core business and spread out from there,” said Philadelphia-based business consultant John Reddish. “They’re coming back.”
Sweeping dams, long power transmission lines and huge industrial plants are still part of the company’s portfolio, which also includes destroying weapons of mass destruction, cleaning up and managing radioactive waste and even analyzing isotopes protecting and powering the Mars rovers.
But shipbuilding, railroad and transit car manufacturing and real estate development, businesses that helped land the company in bankruptcy, are gone.
Three and a half years after emerging from its second trip through Chapter 11 protection, the company is profitable. It reported earnings of $13.07 million in the first quarter, up 2.2 percent from a year earlier, after recording a 6.6 percent gain, to $47 million, in 2003. Revenue for the quarter was up 14.7 percent to $754.2 million, while full-year revenue of $2.5 billion was down nearly a a third due to the completion of several large projects.
Wall Street appears satisfied with the company’s progress — Washington Group’s stock is currently trading at about $31 a share, midway through its 52-week range of $21.74 to $40.20. Its market capitalization is currently about $800 million.
“This is a company that has a pretty darn good resume,” said Sanjay Shrestha, an analyst with First Albany Corp. “Does the company have enough to take it to the next level? What I’ve seen out of bankruptcy, they are kicking on all cylinders.”
Although it had a solid reputation in construction and engineering, Morrison Knudsen moved into real estate and shipbuilding in the 1980s, hoping to gain some protection from the vagaries of its core businesses. But both new ventures went sour in a matter of years.
Then William Agee, the former Bendix chairman, was hired as CEO in 1988, and moved Morrison into another losing direction, building railroad cars. The big shift into rail mass transit he expected never happened.
Agee’s personal extravagance and aloof management style contributed to his ouster in 1995. Morrison Knudsen ended up in bankruptcy court for the first time, and was rescued by Washington Construction Group, which paid $380 million for the company in 1996; the combined business was renamed Washington Group International.
Stephen Hanks, then the chief financial officer and now Washington Group’s CEO, has overseen Morrison Knudsen’s return to its roots.
“Were the problems of the early 1990s a wake-up call? Absolutely,” Hanks said. “Did they refocus us on what we’re good at? Absolutely.”
Washington Group’s chairman is Montana construction magnate Dennis Washington, whose much smaller company bailed Morrison Knudsen out of bankruptcy.
The evolving company has also expanded into power, government and industrial processing fueled by the technological expertise the new acquisitions provided. It offered the cyclical balance Washington sought — government work to pick up the slack in times when heavy construction is down and energy contracts in times when sluggish economies rein in industrial projects.
Washington Group has 27,000 employees worldwide, operating in more than 30 countries. Its many overseas projects have included destroying weapons of mass destruction in Russia and Ukraine and contracts to rebuild Afghanistan and Iraq.
Its roots go back 92 years to Harry Morrison and Morris Knudsen. Their regional construction company gained the national stage when Morrison organized the joint venture and oversaw construction of Hoover Dam. The San Francisco Bay Bridge followed as did the Grand Coolee Dam, the largest private enterprise hydroelectric project for the Aluminum Co. of Canada and the Trans-Alaska Pipeline.
The projects were big and made a difference in the way people lived. In 1954, Time Magazine called Harry Morrison the one builder in history who had done the most to change the face of the earth.
“The name Morrison really carried a lot of weight,” said 27-year-veteran Keith Prince, a former executive vice president fired by Agee as the company began its slide in 1991.
The company now has more than 100 people in Iraq overseeing hundreds of millions of dollars in reconstruction work.
Morrison was drawn to Iraq in part by oil and natural gas. Hanks expects more than $100 billion to be spent over the next decade to convert natural gas from the region into a liquid that can be shipped elsewhere.