Western Tool Supply Files for Ch. 11 Bankruptcy Protection

Western Tool Supply, Salem, OR, filed for Ch. 11 bankruptcy protection on June 9, 2009, in Oregon Bankruptcy Court, attributing the company's tight position to an "acute shortage of operating cash, together with long-term leases that no longer reflected a market rate in a rapidly-declining commercial real estate market."

According to a June 10 filing, submitted to the court by President Kevin Kiker, the distributor of tools, fasteners and related parts to contractor customers has seen sales drop "precipitously" in 2009. Gross sales in 2007 were $67.5 million, and in 2008 fell to $50.8 million. No figure was provided for year-to-date sales in 2009.

Kiker founded Western Tool in February 1982, operating out of his garage in Jefferson, OR, according to the filing. In June 1982, he moved the business to a small storefront location in Albany, OR, and expanded in the following years to multiple markets nationwide, including several stores in California and on the East Coast.

At its peak, the distributor had 61 stores in 13 states through U.S., and additional locations in Canada. Canada's locations were named House of Tools; the Canadian unit filed for bankruptcy in that country in May 2009, according to a separate court filing.

Due to declining sales, Western Tool has closed less profitable locations; as of the bankruptcy filing, Western Tool operated 32 stores. It reduced its headcount from 174 on Jan. 1, 2009, to 98 as of June 9, 2009.

The goal of the Ch. 11 filing, according to Kiker, is to preserve cash, stabilize operations, get out of unprofitable leases, and utilize the resources available under the Bankruptcy Code.

The reorganization strategy includes closing remaining East Coast stores and warehouses, terminating the leases of underperforming stores in California and the Pacific Northwest, reducing staff, evaluating the company's marketing strategy and implementing other necessary changes. The company expects to emerge from Ch. 11 bankruptcy protection "as a lean, but profitable, business entity," according to the filing.

Western Tool Supply has no affiliation with Western Tool & Supply based in Livermore, CA.

Other recent housing market-related bankruptcies:
Building Materials Holding Corp.
Stock Building Supply
ORCO Construction Supply