Stock Building Supply accumulated an $8.5 million net loss in its first 25 days under Chapter 11 reorganization as selling, general, and administrative expenses more than wiped out its gross profit, the company reported.
In its first monthly operating report filed late Monday with the U.S. Bankruptcy Court in Wilmington, Del., Stock said it racked up net sales of $123.9 million between May 6, when it filed for Chapter 11 protection from creditors, through May 31. After accounting for $96.3 million in cost of goods, that left it with a $27.6 million gross profit. But Raleigh, N.C.-based Stock--America's second-biggest LBM operation--recorded $32.2 million in selling, general, and administrative expenses during that period, plus $2.4 million in restructuring expenses and $2.4 million in depreciation expenses. Those charges were largely responsible for the company's $8.5 million net loss.
The report also said that of the company's $278.4 million in accounts receivables, $97.7 million--about 13% of its entire assets--are past due 61 to 90 days. Another $26.2 million are past due 31-60 days, while $57.9 million are one to 30 days past due. As for accounts payable (i.e., what Stock owes to others), $96.7 million of the $103.7 million total are current, the company said.
The latest losses continue the shedding of red ink at Stock, which until May 5 was controlled by Britain's Wolseley Plc. Wolseley reported in late May 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 roughly $172 million. Stock said revenues shrank 30% from the year-earlier period, but it didn't give a number.
The troubles led Wolseley on May 5 to sell a 51% interest Stock to the Gores Group, a private equity firm based in Los Angeles. On May 6, as part of Wolseley's deal with Gores, Stock filed for protection from creditors under Chapter 11 of U.S. bankruptcy laws.
Stock filed for Chapter 11 in large part to get the bankruptcy court to cancel hundreds of leases that Stock had on facilities it had already closed or intended to close. Stock shut about 165 facilities between mid-2006 and mid-2009, racking up $430 million in restructuring and impairment costs related to those closures in the fiscal year ended July 31, 2008. Wolseley said it ran up $235 million in exceptional costs relating to Stock's cuts in the nine months ended April 30. Since then it has made plans to close nearly 150 other facilities (see map and spreadsheet compiled by ProSales.) Its financial report for May lists on its balance sheet $146.8 million worth of liabilities "subject to compromise," which a footnote said "represents reserves for closed stores and includes reserves relating to leases, property taxes, and other miscellaneous items."
Stock hasn't said how many locations it it will close, but it has said it envisioned the company's payroll shrinking from roughly 7,200 on May 6 to about 5,000. Court filings also indicate that 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. (Editor's Note: All but the fiscal 2009 numbers were taken from Stock documents; 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.
On June 15, U.S. Bankruptcy Judge Mary Walrath gave preliminary approval to Stock's reorganization plan, which calls for the dealer to break another 60 leases besides the 200 that she rejected in May.
Stock has said it prefers to sell any facilities it closes, and press reports and information relayed to ProSales indicates that independent dealers across the country are examining potential purchases of Stock yards.