Pittsburgh Brewing's Woes Mount
Iron City producers seeks relief from pension responsibilities
Pittsburgh Brewing, best known for producing Iron City beer, warns that it needs help with a pension plan covering about 530 current and former employees. However, vice chairman Joseph Piccirilli denied the company is in danger of going out of business.
He said his main goal is to protect jobs by investing in the brewery’s future, adding that sales of IC Light are up and the company received worldwide attention when it introduced its new aluminum bottles.
The company told the federal Pension Benefit Guaranty Corp. it has lost $1.2 million from operations over the last three years despite $1 million in cost reductions and concessions from lenders and government agencies.
If the Pension Benefit Guarantee Corporation were to pick up the tab for 530 current and former employees, the brewery could make needed improvements. Those improvements include replacing a 45-year-old kegging system, as well as a 65-year-old boiler that is used to power the company’s production line.
The brewer, which began brewing Iron City beer 140 years ago, hasn’t made nearly $900,000 in required contributions to the pension plan since October. The plan has a deficit of more than $5.6 million.
The pension plan in question covers salaried and hourly workers and pays about $1.6 million in benefits annually. Benefits were frozen when two plans were merged in 1995. Currently, the plan has enough money to pay about 70 cents for each $1 of benefits owed workers.
The brewery produced 372,000 barrels of beer in 2004, down from 450,000 in 2001.
The following article was the start of all this talk… It appeared about two weeks ago in the Pittsburgh Post-Gazette. Its just a little more detailed.
Pittsburgh Brewing says it’s in deep trouble
Tells PBGC it will go under unless it can drop pensions
Wednesday, June 29, 2005
By Len Boselovic, Pittsburgh Post-Gazette
Pittsburgh Brewing, whose Iron City beer has been a staple of Pittsburgh life for more than 140 years, is warning it will go out of business unless it is allowed to terminate a pension plan covering about 530 current and former employees.
The company has told the federal Pension Benefit Guaranty Corp. it has lost $1.2 million from operations over the last three years despite $1 million in cost reductions and forbearance by lenders, government agencies and others who have granted concessions to save it.
The assistance included $4.6 million of debt that was wiped clean, an 82-cent on the dollar settlement on long overdue water bills and state aid last year that was the only money Pittsburgh Brewing invested in its aging plant.
“Unless the plan is terminated, [Pittsburgh Brewing Co.] will be unable to continue in business,” lawyers for the brewery told PBGC officials in a letter dated April 29.
The warnings were made in documents Pittsburgh Brewing filed with the PBGC in April to justify pulling the plug on its pension plan. The Post-Gazette obtained them under the federal Freedom of Information Act.
The agency provided the brewery’s six-page case for terminating the plan as well as annual pension plan reports. It did not provide annual financial statements. The brewery told the agency it does not have audited financial statements because it cannot afford the $65,000 annual cost of hiring an auditor.
The Lawrenceville brewer, which employs about 250, hasn’t made nearly $900,000 in required contributions to the pension plan since October. The plan has a deficit of more than $5.6 million.
Most companies file for bankruptcy in order to jettison their pension obligations. Pittsburgh Brewing is taking a different tack by trying to make a case based on financial distress.
Vice Chairman Joseph Piccirilli, who led the group of investors who purchased the brewery at a 1995 bankruptcy auction, believes that if Pittsburgh Brewing goes into bankruptcy, it won’t emerge as an operating company. Vendors have warned they won’t extend credit to the company if it seeks bankruptcy protection, the company said.
The pension plan in question covers salaried and hourly workers and pays about $1.6 million in benefits annually. Benefits were frozen when two plans were merged in 1995. Currently, the plan has enough money to pay about 70 cents for each $1 of benefits owed workers.
Additional quarterly pension contributions of $455,000 are required next month and again in October.
Pittsburgh Brewing’s pension shortfall is a drop in the bucket for the PBGC, which is facing a $23 billion deficit from the unfunded pensions of airlines, steelmakers and other troubled companies.
The brewery said lenders won’t finance $4 million in much-needed plant improvements because of the underfunded pension plan. The projects include replacing a 45-year-old keg system and $1.5 million to replace a 65-year-old boiler, which generates steam that powers equipment.
The company said it was recently fined $300,000 because the boiler doesn’t meet pollution control requirements. More fines will be imposed if the boiler isn’t replaced within 18 months, the company said.
The brewery also did not mention tax liens for unpaid unemployment compensation taxes. According to Allegheny County court documents, the state’s Department of Labor and Industry is seeking $120,500 that was due for the first quarter. A similar lien was filed by the agency last year.
In making its case, the brewery blames previous owners for many of Pittsburgh Brewing’s problems.
Piccirilli’s group purchased the company for more than $31 million, including the assumption of more than $18 million in debt. The documents say Piccirilli provided $7 million of the $13.6 million cash required for the purchase and related costs.
Which in turn prompted this in the “Letters to the Editor” column:
Brewer just needs to produce a tasty beer
I have little sympathy for Pittsburgh Brewing Company and its latest dilemma (“Brewer Says It’s In Deep Trouble: Tells PBGC It Will Go Under Unless It Can Drop Pensions,” on June 29).
In the past few years, three very good brew pubs in the Strip District have gone out of business, so why should the purveyor of Iron City beer receive any special consideration?
It is not the only Pittsburgh brewery. Penn Brewery on the North Side has been in operation for almost 20 years and makes some of the best beer in this part of the country. Church Brew Works, located in a beautiful restored building only a few hundred feet away from Iron City, continues to turn out great food and beer. And East End Brewing, a very new, very small Pittsburgh brewery that locals may have noticed recently at bars around town is brewing up some quality beer as well. (And it’s not all dark, heavy stuff. Just try it!)
For Pittsburgh Brewing Company to survive, it will just have to realize that the only “gimmick” that will work in the long run is producing quality, tasty beer.
SEAN McGUINNESS
Plum