Volume 13, Issue 5 - June 2012

Focus on Dealers
Distribution News

Lumber Products
Files Chapter 11

Lumber Products based in Tualatin, Ore., has filed a voluntary petition for Chapter 11 Bankruptcy in U.S. Bankruptcy Court District of Oregon. According to court documents the company’s estimated number of creditors is between 1,000 and 5,000 and assets are estimated to be between $10 million and $50 million. Estimated liabilities are also between $10 million and $50 million.

A number of door companies are listed among the companies 20 highest creditors. These include Lemieux Doors, which is owed $2,075,723.64, as well as Masonite, $1,024,286.47. Others among the 20 highest creditors are Columbia Forest Products, $1,833,117.25; Simpson Door, $974,338.78; Therma-Tru, $685,724.80; Bright-wood Corp., $242,988.58; Endura Products Inc., $209,808.64 and Kwikset, $138,147.71.

According to court documents, Lumber Products estimates that some funds will be available for distribution to unsecured creditors.

During the past eight years, Lumber Products has also operated as Lumber Products Holdings and Management Co/; Sunrise Wood Products Inc.; Lumber Products Washington Inc.; Millwork & Components Inc.; Components & Millwork Inc.; Wood Window Distributors Inc.; D & J Wood Resources Inc.; and Brady International Hardwoods Co.

The company has ten locations throughout Oregon, Washington, Idaho, Montana, Utah, Arizona and New Mexico.

EPA Fines Violators of the RRP Rule
The U.S. Environmental Protection Agency (EPA) announced three enforcement actions for violations of the Lead Renovation, Repair and Painting Rule (RRP) and other lead rules.

One case was previously reported by DWM magazine, and involved Colin Wentworth, a rental property owner who was responsible for building operation and maintenance. Wentworth allegedly violated the rule, as his workers had not received any training under the rule and he had failed to apply for firm certification with the EPA.

On March 20, 2012, Valiant Home Remodelers, a New Jersey window and siding company, agreed to pay $1,500 to resolve violations from failing to follow the RRP rule during a window and siding replacement project at a home in Edison, N.J. Valiant Home Remodelers failed to contain renovation dust, contain waste, and train workers on lead-safe work practices, according to the EPA.

On February 21, 2012, Johnson Sash and Door, a home repair company located in Omaha, Neb., agreed to pay a $5,558 penalty for failing to provide the owners or occupants of housing built prior to 1978 with an EPA-approved lead hazard information pamphlet or to obtain a written acknowledgement prior to commencement of renovation activities at five homes. The complaint also alleged that Johnson failed to obtain initial certification prior to performing renovations at these residences.

Tales from a Survivor
How does a company reach its half-century mark when it’s competing with big box stores that cut prices, when gas prices are at record highs and when overall it’s still a tough market, plain and simple? DWM asked Anthony J. Martorana, Sr., CEO and founder of Madison Township Lumber and Supply Co. Inc. based in Matawan, N.J., that very question. He should know, as the company is celebrating 50 years in business this year. But that doesn’t mean things are easy for him. In fact, the company isn’t planning any special celebrations.

“Normally, we would do customer appreciation events but, quite frankly, with the way business has been we have cut back,” says Martorana. “We used to do cable ads—a lot of our expenditures had to be put off and anyone else who doesn’t tell you the truth about this is dreaming.”

Still, DWM thinks this is a milestone to be celebrated so we asked him a few more questions about his 50 years in business and the challenges he has faced along the way.

But first a little background on the company that distributes lumber, millwork, windows, hardware and paint throughout all of New Jersey. Martorana, Sr., runs the company with his wife Louise Ann, chief financial officer, and son Anthony, Jr. vice-president sales and operations.

DWM: What has made your company successful for 50 years?
Martorana: I never try to leave the core principles of my company. I have diversified throughout the years and there were times when we did everything. There were some things that didn’t work but we never left the parts of the business that we started on. A lot of times people get carried away and they venture into other things that are not related to their core business. At times it was difficult not to venture into other things. We had the opportunity to go into partnership with builders but I wanted to stay and maintain my longevity.

DWM: Why have many of your competitors gone out of business?

Martorana: The biggest reason is they become far removed from the day-to-day operations. What you have today you don’t necessarily have tomorrow and a lot of these companies got carried away in the good years and they tended to get detached from the basic day-to-day and you can never do that. Some consider me an oddity because I have my hands in everything.

DWM: What has been most challenging in the millwork and window industries specifically?
Martorana:
The millwork is not so much of a problem as we are able to maintain a foothold with interior doors and mouldings. The real problem has been windows. We always had Andersen and they jumped in with Home Depot and that caused a problem with their pricing. People could go to Home Depot and get it cheaper. A lot of times you can quote the job, but if Home Depot quoted it also they would always drop it, even if it was at peanuts to begin with. That’s one of the disadvantages of big boxes to independents like my company. This happened before the downturn and we were able to sustain our businesses but then the downturn came and this had more of an effect. It was only a matter of time and eventually I switched to another vinyl window manufacturer.

DWM: What is it like working with your son? How has he handled these difficult times?
Martorana:
I have always tried to tell him that what you have today doesn’t mean it will be what you have tomorrow. Young people tend to get overconfident as they haven’t been through hard times as I have been. It is important to keep yourself level as things can change on a dime.

At times it is sticky when you have family in business. He had his hands burned a few times, and sometimes I have to bite my tongue and walk away.

The business has really gone 360 so many times—It’s really unbelievable. Being a person entering the twilight of my career, that is tough to swallow and change is hard.

DWM: Do you have plans to retire?
Martorana:
I don’t know I would ever fully retire. Right now I have to stick it out. Things are below toilet level right now. There is business but it’s like a 2 when it should be a 7 or 8. I have been through a lot of ups and down but this has been really crushing.

Builders First Source Reports First-Quarter Sales Increase Compared to Year Before
In reporting its results for the first quarter ended March 31, 2012, sales for Builders First Source were $219.4 million compared to $162.8 million last year, an increase of $56.6 million or 34.7 percent. According to the company, the increase was primarily due to increased sales volume as commodity prices for lumber and lumber sheet goods were, on average, comparable over these same periods.

The company says it also recorded $0.2 million of income tax expense in the first quarter of 2012 compared to a slight income tax benefit in the first quarter of 2011. The company recorded an after-tax, non-cash valuation allowance of $7.0 million and $8.1 million, in 2012 and 2011, respectively, which it says was related to its net deferred tax assets.

Loss from continuing operations in the current quarter was $19.1 million, or 20 cents loss per diluted share, compared to $21.1 million, or 22 cents loss per diluted share, in the first quarter of 2011. Excluding the fair value adjustment for stock warrants and the tax valuation allowance, the company says its loss from continuing operations per diluted share was 11 cents for the current quarter. For the first quarter of 2011, its loss from continuing operations was 13 cents per diluted share, excluding transaction costs and the tax valuation allowance.

The company reported a net loss for the first quarter of 2012 was $19.2 million, or 20 cents loss per diluted share, compared to a net loss of $21.2 million, or 22 cents loss per diluted share, in the first quarter of 2011.

In other news, the company also opened a new distribution facility in Jarrell, Texas, that will primarily serve the greater Austin market. The facility is situated on 8.2 acres and includes a 40,000-square foot warehouse with an additional 6,000 square feet of office space. Its product offerings will include structural and related building products, such as lumber, trusses, panels, doors, windows, millwork and more.


DWM

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