A federal bankruptcy judge today rejected more than 200 leases that Stock Building Supply has entered into over the years and now needs to get out from under as part of its recent ownership change and revival plan. Meanwhile, Stock's former majority owner said America's No. 2 LBM operation incurred an operating loss of $172 million in the first nine months of its fiscal year on a 30% drop in revenue.
In Wilmington, Del., Judge Mary F. Walrath found no objection to virtually all the leases that Stock wants to reject. See map and spreadsheet.) She reserved action until June 15 on only a couple of properties where there are questions over whether fuel storage tanks have been properly drained, capped and possibly removed under local environmental laws.
Getting the leases rejected was a key condition set by the Gores Group, a private equity firm based in Los Angeles, when it bought a 51% interest in Stock from Wolseley Plc on May 5 and entered into a joint-venture agreement with the British giant. Stock closed roughly 165 facilities between mid-2006 and mid-2009. Stock said in Chapter 11 filings that restructuring and impairment costs related to those closures totaled $430 million in the fiscal year ended July 31, 2008. Today, Wolseley said it ran up $235 million in exceptional costs relating to Stock's cuts in the nine months ended April 30.
Also earlier today in London, Wolseley reported that in the first nine months of its fiscal year--i.e., from Aug. 1, 2008, through April 30--Stock incurred a trading loss of 108 million pounds sterling, or $172 million at current exchange rates. That compares with a trading loss of $158 million in the year-earlier period, but the newer number excludes $32 million in losses by Stock's construction division, which Wolseley is retaining. Stock said revenues shrank 30% from the year-earlier period, but it didn't give a number.
Since its Chapter 11 filing, Stock has been closing locations across the United States. As ProSalesreported May 27, Stock most recently revealed it will close all but one of its roughly 17 locations in Florida as well as locations in Virginia, Wisconsin, and Indiana.
In its filings, Stock said that as of May 5 it had 7,220 employees at nearly 200 locations nationwide; that's down sharply from the approximately 17,000 employees and 360 locations it had at its peak a few years before. It said it expected as part of its Chapter 11 reorganization to drop to about 5,000 employees and close an undisclosed number of properties.
Aside from rejecting the leases, Walrath also approved a request to let Stock pay sales commissions exceeding the usual federal limit of $10,950. She also approved--after learning that various objections were resolved--a motion barring utility companies from cutting off service while Stock is under Chapter 11 protection.
Walrath's next hearing on Stock will take place at 4 p.m. ET June 15.