A new start

A new company has emerged from the wreckage of a failed partnership at Horning Construction LLC.
The multimillion-dollar business resurfaced this year as Holdsworth Klimowski Construction LLC, marking a new beginning for the successful construction firm.
After a dispute over buyout terms, Jeffrey Horning left Horning Construction Co. Inc., the commercial building firm he founded in 1984. His partners, Ted Holdsworth II, now president, and Robert Klimowski, now executive vice president, have been running Horning Construction LLC without him.
Holdsworth, in an interview, indicated there were troubles between the partners and Horning. Court records attest to that.
Horning left the firm in May 2006. Calls made to Horning and his attorneys for this story were not returned.
“I don’t really know (what he’s doing now). He’s retired. He’s dabbling in some development stuff,” Holdsworth said. “It wasn’t an amicable split. Since we bought his third out, I haven’t had any contact with him.”
Holdsworth did not disclose the details of the deal, but court documents reveal details of wrangling over the buyout terms.
The papers are part of a petition Horning filed in 2006 to dissolve Horning Construction LLC, following a breakdown in negotiations between Horning and his partners.
Holdsworth, a former project manager at Allied Builders Inc., joined Horning Construction Co. in 2001 and helped Horning double its revenues by 2004, court documents state. Klimowski was at the firm from its early beginnings in 1988.
State Supreme Court documents dated March 21, 2006, state Klimowski first discussed becoming a partner in 2001 when Horning approached him about forming a limited liability company.
In 2001, the corporation had logged $10 million to $15 million in annual sales, and Horning was having trouble shouldering the successful business alone, court documents state.

A move to split

In his 2006 petition, Horning requested dissolution on grounds Klimowski despised him, Holdsworth resented him and that neither man trusted Horning.
In the documents, Horning is quoted: “It is Klimowski and Holdsworth’s intention to defeat an involuntary dissolution and make my remaining time with Horning LLC so unbearable that I will relent and give them, for a pittance, the remainder of the company for which they have paid nothing to date.”
Holdsworth and Klimowski joined Horning Construction LLC six years ago, each as one-third partners, though the trio never determined a formal operating agreement.
In absence of an agreement, court documents show Horning made an offer to sell the company to his partners in 2005, but they rejected it, deeming it unfair.
Horning wanted to retire under a buyout that would pay him $358,000 for 12 years with 2.5 percent yearly escalators, court documents state. According to Holdsworth’s version of events in the petition, Horning said he would shut the business if the other partners did not agree to the deal.
The partners looked for other alternatives but none were chosen. According to Horning’s version of events, the documents state:
“As a result of the inability to agree on a sales proposal, the relationship between the three of them has deteriorated to the point that they cannot work together. He asserts that the animosity is ‘palpable.’ (Horning) maintains that this status has reached a critical stage because they cannot put together competitive bids on projects because of this strain.”
Horning’s court petition included a letter from Klimowski to demonstrate the partner’s animosity.
Horning wanted the court to appoint a temporary receiver to handle the firm’s business affairs while it was in the process of dissolving.
The partners opposed Horning’s petition and asked the judge that Horning be “enjoined from engaging in activities inimical to the LLC’s interests, which respondents characterize as a breach of fiduciary duties to the LLC.”
Horning, they claimed, had tried to thwart the company’s business and recruit some of its 40 employees to head a new firm he was organizing, Horning Inc.
Each side contended the other was not pulling its weight. Affidavits from employees were filed along with court documents to support the allegations. Holdsworth acknowledged Horning’s behavior was disruptive to the business, the documents state.
The partners stated that revenues topped $25 million by 2005, after Horning Construction LLC began doing business in March 2002. The two partners contended they were responsible for some 73 percent of the company’s 2004 gross profits and 80 percent of its 2005 gross profits, court documents state.
Because of the company’s success and its continued ability to meet all of its financial obligations, Holdsworth and Klimowski claimed there was no reason to dissolve it.
Dissolving the company, they said, would only jeopardize the livelihood of Horning’s employees.
Holdsworth and Klimowski added they were not trying to freeze Horning out of the business and that he continued, in 2006, to receive his $120,000 annual salary, which they said was greater than their own salaries.
The company, they claimed, was not deadlocked and still could run by majority rule, and as such should not be dissolved.
Horning’s petition and Holdsworth and Klimowski’s counterclaims were dismissed in March 2006 by Judge Kenneth Fisher, who wrote that while one might sympathize with Horning’s plight, he failed to provide an operating agreement that gave him fair exit rights in “the event of future disharmony.”
“Despite the petitioner’s stated frustration with the failure of the members to reach terms of an operating agreement through the LLC until he unsuccessfully proposed a buyout to respondents in 2005, the company’s most successful year,” Fisher stated. “Only then did he seek dissolution. The company continues to thrive in the ups and downs of the construction business.”

The future

A generally weak national economy is affecting current business at Holdsworth Klimowski Construction, the new firm that emerged from Horning Construction.
Holdsworth declined to reveal annual revenues but did say business was up approximately 10 percent in 2007, but that business in 2008 is expected to stay flat.
The firm splits its business into public and private work, 60 percent and 40 percent respectively.
“That mix has stayed the same over the last four or five years,” Holdsworth said. “We’re kind of part of the new direction, the new name, the new company. We’re not trying to eliminate or cut back on the public work, but we’re looking to increase the private side a little bit.”
Much of the company’s public work is done at schools in outlying areas such as Avoca, Perry, Batavia, Waterloo and Seneca Falls. The firm constructed the new pool and classroom addition in Brighton and now is working in the Rush-Henrietta Central School District.
With the exception of school projects, public bid work recently has slowed, Holdsworth said, which is one reason for the focus on building private work.
“I think there’s a little less competition than in the public bid work. It’s repeat business, and we have a big theme of building relationships, which in the public side, it’s more competitive-the low number wins,” he said.
Manufacturing firm Getinge USA Inc. in Henrietta is a current client and one with which Holdsworth Klimowski Construction has built a lasting relationship.
“In the late ’90s, we did a front-entrance upgrade and probably about a $5 million project for them,” he said. “Now we’re over there again doing $3 million or $4 million worth of work for them now. Over that 10-year period we go over and do little things for them here and there. We’d like more clients like that.”
In that direction, the company is working now to re-brand itself with a new Web site, scheduled for completion in the first half of this year. With its marketing efforts, Holdsworth said, the company has a fresh focus.
“With the new name, we want to be a friendlier company. I think my partner and I have a good reputation in the industry. We’re honest; we’re fair. We do what we say we’re going to do. We’re going to work with you, not against you,” he said.
“I think that’s a huge shift in the company from the past–we’re more team-oriented.”
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03/07/08 (C) Rochester Business Journal