Twenty-four months ago, PlyMart, the pro dealer based in Norcross, Ga., was operating at a $400 million annual sales rate. Right now, in an Atlanta market whose building permits are only 25 percent of what they were eight months ago, PlyMart's business has shrunk to where it expects to generate only $120 million this year, and possibly a lot less if market conditions don't improve soon.
Randy Mahaffey, PlyMart's chairman and co-owner, tells BUILDER Online this morning that his company has more than $20 million in accounts receivables that are more than 90 days in arrears. Mahaffey assumes that a good number of the builders and contractors that owe PlyMart money--which he says ranges from 400 to 600--are either on the brink themselves or have gone out of business. (David Ellis, executive director of the Greater Atlanta HBA, says that while he's not seeing evidence of wholesale bankruptcies among builders in his area, "a lot of them are pushing the envelope, and are just holding on.")
As a result, PlyMart has been cutting its operations to the bone. It has reduced its workforce to 500 in January, from 1,100 18 months ago. It has consolidated its specialty division--which installs such products as shower doors, locksets, garage doors, and shelving--into two facilities from six. And it has "mothballed" five of its 11 lumberyards, says Mahaffey.
PlyMart is in a market that is in the midst of considerable dealer volatility. Two weeks ago, Wheeler's, a once-thriving pro dealer based in Rome, Ga., petitioned for bankruptcy protection under Chapter 11. ProBuild, the industry's largest pro dealer chain, has closed at least four Atlanta-area yards following its recent acquisitions of two local companies, Williams Brothers Lumber and Jasper Lumber. Home Depot recently announced it had laid off 10 percent of the 5,000 people who work in its Atlanta corporate headquarters.
Right now, PlyMart's biggest problem is cash flow, or the lack of it. Mahaffey confirmed that his yards generated only $8 million in sales last month. He, his brother Rick, and Ken Southerland, whom the dealer promoted in November to president and COO, pumped "several million dollars" of their own money into the company in December. "We just can't keep doing that," says Mahaffey. Employees have taken pay cuts ranging from 10 percent to 20 percent. "What I'm most proud of is the fact that we've been able to get through this so far. There have been a ton of people who have made extraordinary sacrifices." He didn't discount the possibility that the company might need to go through another round of manpower cuts.
PlyMart has hired two more collection agencies to handle its receivables delinquencies. It is also looking for ways to monetize its inventory quicker; for example, Mahaffey says that the company is giving serious thought to photographing its entire millwork stock and offering it for sale, at discounted prices, over the Internet.
"We have no silver bullet; if we did we would have fired it already," says Mahaffey. However, he still thinks there's a chance his company can skirt bankruptcy and get through this rough period. His company has a "good relationship" with its lenders, Bank of America and Wachovia. It is also asking vendors for relief. "We have worked our relationships 360 degrees, and that has paid dividends," Mahaffey says. "We've drawn a flat line for this year, and we can get through this if we get some of our things, like receivables and inventory, in order."
Learn more about markets featured in this article: Atlanta, GA.