Florida Extruders International Inc. Files for Chapter 11May 2nd, 2011 by DWM Magazine
Florida Extruders International Inc., (FEI) based in Sanford, Fla., filed for Chapter 11 Bankruptcy in the U.S. District Court in the Middle District of Florida on April 25. The company cites a multitude of reasons for the filing, from Chinese imports of aluminum extrusions to building code changes in Florida that promoted a market shift toward vinyl windows.
The company, formed in 1989, describes itself as a vertically integrated manufacturing and distribution business. This includes re-melting and casting of its own raw material, extruding aluminum, fabricating parts, powder-coat finishing, warehousing and exporting.
Additionally, the company manufactures patio enclosure extrusions sold to stocking distributors and to specialty licensed contractors, sells custom or proprietary aluminum shapes; and offers standard color, custom color and contract powder-coat finishing.
Court documents reveal the growth of the company before its decline. Revenues in 1989 were $2,800,000 and reached $24,600,000 in 1995. In 1995, the company began shipping aluminum windows and sliding glass doors under the trade name Milestone®. “The company became the second largest manufacturer of these products in Florida and was recognized nationally by the industry numerous times as one of the largest residential window producers in the country,” according to court documents.
Through the next ten years, the company underwent a vast expansion program. Total revenue in 2005 reached $124,500,000, and the company had just under 1,000 employees. The window business accounted for $78,100,000 or 63 percent of these sales.
While the company realized only a slight downturn in revenue to $118,900,000 in 2006, the second half was far worse. As the residential home building industry in Florida collapsed, by 2010 revenues had plummeted by 74 percent to $30,600,000.
Court documents cited a chain of events, including market conditions, financial issues and inadequate supply, leading up to the filing. These include:
• Chinese imports of aluminum extrusions caused market disruptions in Florida Since 2005, this affected all of the markets served resulting in sales and margin erosion resulting in unfilled capacity. In particular, patio extrusions sold to distributors in 2000 were $19,900,000 or 68 percent of the total. In 2005, sales to this market had declined by 49 percent to $10,195,000 or only 24 percent of the total sales of this product line;
• The new residential housing industry has been decimated by excessive inventory caused by mortgage defaults, short sales, and much lower appraisals resulting in lower selling prices of existing homes;
• The state of the housing market and the buying pressures exerted by financially-troubled builders resulted in lower window selling prices although the company had incurred uncontrollable increases in material and operating costs that it could not recover;
• Florida has progressively changed its energy code to higher performance standards resulting in many of the national and regional production builders opting for vinyl windows;
• The home improvement industry was harmed by changes in consumer credit ratings and manufacturers of certain items eliminating inventory financing arrangements to their dealers;
• Suppliers were also affected by the declining economy and market conditions causing them to reduce their credit terms and restrict customer purchases; and
• Many of the company’s customers have slowed their payments, gone out of business or just refuse to pay, contributing to the company’s severe cash flow problem.
Court documents note that as a result of the adverse conditions the company has been unable to obtain adequate funding to pay its suppliers within their terms. It has also affected the company’s ability to purchase materials to meet their customer’s production requirements.
According to the court documents, the company closed in February 2011 due to the factors listed above. All of its distribution centers were closed as of December 2009. “It was determined that due to the state of the industry that they were too costly to continue to operate,” according to court documents.
The company’s annual gross revenue in 2009 was approximately $35,558,559; approximately $30,643,375 in 2010; and approximately $4,796,329 through April 21, 2011.
Court documents show that the company may owe approximately the following amounts to the following classes of creditors: taxes and other certain unsecured priority debts $792,000; secured creditors: $13,423,000; unsecured creditors: $2,721,000.
FEI currently has 26 employees. As of the petition date, its accrued payroll obligations are approximately $27,000 in gross wages for the pre-petition period beginning April 18, 2011, and ending April 24, 2011. FEI is current on its payroll tax obligations. The company owes approximately $8,875.51 for March 2011 sales taxes that were due on April 20, 2011.
At the present time, the company’s level of debt is currently unsustainable and it has been unable to restructure its debts outside of bankruptcy, according to court documents. With the cooperation of its largest secured creditor, Wells Fargo Bank (who will fund operating shortfalls), the company will quickly submit a liquidating plan to sell all or substantially all of its assets to the highest bidder on a going concern basis through the Chapter 11 process. The company believes this sale will ultimately provide all parties in interest significantly more through its plan of reorganization than they would otherwise realize in the event of a liquidation.
Representatives of Florida Extruders International have not responded to DWM’s request for comment at press time.