A federal bankruptcy court today scheduled a hearing April 2 to consider a bid by Stock Building Supply to acquire National Home Centers, the Arkansas-based dealer that entered Chapter 11 last December and that last week reported its net loss for January increased nine-fold to $4.3 million.
Springdale, Ark.-based National--the No. 26 dealer on last year's ProSales 100, with $144.7 million in revenue in 2008--had been planning to sell three branches (and its website home page was advertising racking for sale) when Stock entered into an agreement with National under which Stock will be a "stalking horse" bidder for National's assets under Section 363 of Chapter 11. That section of the bankruptcy laws allows for the sale of assets free of liens and other claims.
While Stock has a good chance of winning National, it won't know for certain until U.S. Bankruptcy Judge Ben Barry conducts his hearing at bankuptcy court in Fayetteville, Ark., on April 2. It's possible that an outsider may top Stock's bid, as happened last year when ORCO Construction ended up being sold to a different company than had been planned. (Story)
National's latest operating report showed the company sank deeper into red ink even though sales rose to $7.2 million in January from $6.9 million the month before. The cost of materials was one reason why; it jumped to $6.3 million from December's $4.9 million, shrinking January's gross profit to $837,314 vs. December's $2 million.
In addition, operating expenses more than doubled to $4.3 million in January from $2 million in December. Of that, $1.4 million represents a reserve set up for the uncollectable portion of a life insurance premium, and $867,361 was booked to write off leaseholds at closing facilities.
The amount of accounts receivables on Jan. 31 dropped to $10.5 million from Dec. 31's $12.8 million. Of that $10.5 million, 9.1% is at least 91 days past due, up from 8.5% as of Dec. 31.
Stock, the second-biggest LBM dealer in last year's ProSales 100, spent much of 2009 in Chapter 11, emerging last July 1 as a much smaller company focused on 19 markets and annual revenue of about $1 billion. Stock has stressed in several recent announcement that it and its 51% owner, The Gores Group LLC, were looking to grow the company.