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Stock Building Supply announced today it has emerged from Chapter 11, saying it had satisfied all remaining concerns raised in court during its nearly two months under federal bankruptcy-law protection. Stock, the No. 2 LBM company on this year's ProSales 100, said its remaining 100 locations will focus on serving single and multifamily homebuilders and remodelers in 19 markets across the country.
"We are emerging with the strongest balance sheet and financial foundation of any of our competitors," Stock president Joe Appelmann said in a statement. "We are refocused on our core markets and well-positioned for the upturn in the housing market."
Those core markets are: the Washington, D.C., area; Paradise, Pa.; Richmond, Va.; Raleigh-Durham, Charlotte and Winston-Salem/Greensboro, N.C.; Greenville and Columbia, S.C.; Atlanta; Austin, Amarillo, Houston, Lubbock and San Antonio, Texas; Albuquerque, N.M.; Salt Lake City and Southern Utah; Spokane/Northern Idaho, and Los Angeles. Stock also said will continue to operate its commercial, flooring and roofing business units.
Stock filed for Chapter 11 bankruptcy on May 6, one day after Wolseley Plc sold 51% control of the Raleigh, N.C.-based dealer to The Gores Group, a private equity firm based in Las Angeles. During its time in bankruptcy, Stock won court approval to reject more than 250 leases, most of them for properties it has closed since mid-2006.
Stock, which had more than 17,000 employees at its peak and roughly 7,200 workers in May, also took steps to reduce its payroll toward its intended goal of roughly 5,000 workers. It declined to say how many employees it has now. At the same time, Stock cut the number of facilities it had on May 6 roughly in half, to 100, and eliminated an undisclosed number of headquarters and administrative staff. In all, Stock departed 32 markets, the company said.
There have been reports that various companies might try to buy some of the units slated for closure. Stock on Tuesday deferred comment on that possibility, although in the past it has said it preferred to sell closed locations whenever possible.
While the revived Stock will continue to pursue the professional builder/remodeler community, company officials said Stock will emphasize a deeper, broader, more integrated relationship with those customers. It said it will do this by seeking to sell a larger number of products to each customer, rather than just one or two core offerings. For example, Stock said it will roll out what it described as a tracking system that will give customers real-time ability to track the location and expected delivery time for their orders.
The services to be offered will vary according to market needs, Stock said. For instance, Stock plans to do installed sales and have showrooms, but not necessarily in every market. On the other hand, Stock will push "the sense of empowerment we are giving each market with respect to decisions related to the customer experience," a Stock spokesman said.
"To some extent, we are really trying to drive attention on what made Stock successful in the past: a relentless focus on our customers," Sean Smith, Stock's vice president of sales, told ProSales in an interview. "In the short term, we have the benefit of having moved quickly through the process. We believe the financial stability we have achieved through the process combined with the investments made by Gores, sets us apart. Unfortunately, a lot of our competition is on the front end of what is likely to not be as clean as a process as we were able to go through.
"In the long term," Smith continued, "we fundamentally believe that the investments we made historically in making our associates the most knowledgeable in the industry will pay off." Builders have lost a lot of experienced people in recent years, he noted, so the knowledge base that Stock employees can offer will make them ever more valuable to customers.
"We believe the decisions made over the past several weeks have put the company on a path for success," said Timothy Meyer, Stock's chairman and managing director of The Gores Group. "The proactive steps Stock has taken to address the issues facing our business and the entire homebuilding industry will eliminate uncertainty about our future, an uncertainty that many of our competitors continue to face." Stock noted that Gores has invested $75 million in the company and put in place a $150 million undrawn bank credit facility.
According to court filings, Stock predicts its net sales will slide from $5.29 billion in the year ended July 31, 2006, to $3.46 billion in the 12 months ended July 2008, to roughly $2.11 billion this fiscal year and then to $1.02 billion in fiscal 2010. Meanwhile, Stock's operating profit/loss story is seen as swinging from a $199.6 million profit in the year ended July 31, 2006, to a $743.9 million loss in fiscal 2008, a $242 million loss this fiscal year and a $79.4 million loss in the fiscal year ending July 31, 2010. (Editor's Note: The fiscal 2009 figures are ProSales estimates based on reports of Stock's nine-month performance through April 30 combined with Stock's projections for the final five weeks of the fiscal year ending July 31.)
Even with those types of reductions, based on the latest ProSales 100 listing, Stock still would rank among the 10 biggest building material dealers in the United States.
The projections then call for sales to reach $1.33 billion in fiscal 2011, $1.96 billion in 2012 and $2.31 billion in fiscal 2013. Meanwhile, the operating income line is forecast to swing from losses of $37.4 million in 2010 and $22.9 million in 2011 to a profit of $16.6 million in the year ended July 31, 2012, and $77.9 million in fiscal 2013.