Stock Building Supply told a bankruptcy court today that it expects that the version of Stock it wants to see emerging from Chapter 11 bankruptcy will make only one-third as many sales as it did just a year ago and won't turn a profit until 2013. It also asked the court to reject more than 60 additional leases while it's in Chapter 11, some of them in states where it hasn't made previous closure plans.
The projections came as Stock continued to shut its Mountain West operations, confirming today it will exit Colorado and Wyoming. It also set up an e-mail address -- firstname.lastname@example.org -- for buyers interested in acquiring any of the nearly 90 properties that America's No. 2 lumberyard has said it will shutter in the days since it got a new 51% owner and filed for Chapter 11 bankruptcy protection.
Based on a notice filed today and another submitted May 6 to U.S. Bankruptcy Court in Wilmington, Del., Stock in essence predicts that 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: 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.
The projections 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.
The drop in sales and, ultimately, return to profit reflect the results Stock expects in part as a result of reducing the workforce by around one-third, to 5,000 employees, and closing scores of facilities around the country. Late today, for instance, Stock filed a notice in U.S. Bankruptcy Court calling for the court to reject several dozen more leases on properties where it had a variety of properties. Some of them are in states such as California, Massachusetts, New Mexico and Michigan, where to date it hasn't made any indications it would close facilities. Some of the properties don't even show up on Stock's website of facilities, suggesting the company held leases but weren't actively using the property. Click here for a list of those and other properties previously announced.
Over the past month, Stock has made what it says is a series of strategic cuts in its facility count. For example, Stock's sole Wyoming property, slated to close June 30, is in Evanston, 80 miles from the Salt Lake City market, where Stock intends to keep properties. Stock's web map for Colorado lists 11 operations in the state, all in Denver except for one in Alamosa, but a Stock spokesperson today said the closures also will include a facility in Colorado Springs that's not on the map.
The new departures come on the heels of Stock announcements that it is shutting operations in Idaho and Utah, its only Montana facility, its last dozen posts in Minnesota and Wisconsin and yards in the mid-Atlantic.
Stock spokespeople also have confirmed the company is looking to sell any of the locations it has closed as well as some for which it hasn't announced closures--yet. For instance, Stock is believed to be holding discussions to sell operations in Illinois, Indiana and Connecticut, as well as some of the western and mid-Atlantic facilities it is shutting. The creation of email@example.com represents one part of that effort.
Last week, on May 28, a federal bankruptcy judge rejected more than 200 leases that Stock 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 Stock 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 showing the leases.) 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. Last week, Wolseley said it ran up $235 million in exceptional costs relating to Stock's cuts in the nine months ended April 30.
Also last week, 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.
Aside from rejecting the leases, Walrath also approved a request to let Stock pay sales commissions exceeding the usual federal limit of $10,950. In addition, Walrath 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.