AMPAM Files for Chapter 11 Bankruptcy
The Round Rock, Texas-based AMPAM, which employs more than 5,500 people in 35 operations in 18 states, made the announcement Oct. 13 and said it expected to file a reorganization plan by the end of November. The proposed financial restructuring plan, which must be approved by the bankruptcy court, would convert all of the company's subordinated debt into preferred stock and would significantly reduce annual cash interest payments.
Robert Nagel, executive vice president, said AMPAM originally had a strategy of becoming a publicly held company when it commenced operations in April 1999 following the acquisition of 10 leading regional plumbing and mechanical contractors that performed contracting services in 24 states.
"In the past year or so, we have found that this was unattainable for a variety of reasons, including adverse conditions in the general economy, capital markets and the business challenges in our commercial operations," Nagel said. "Because we were unable to become a public company, the corporate capital structure became unworkable."
Before making the decision to file for bankruptcy protection, AMPAM officials "fully evaluated all of our options concerning our corporate capital structure," Nagel said. "The primary purpose for taking this step [bankruptcy] was to alleviate the financial strain imposed as a result of our current capital structure in a quick and efficient manner. The bankruptcy process will enable us to execute daily operations and support our customers and vendors on a business-as-usual basis."
This past summer, AMPAM lost all four of its independent board members a few weeks after David Baggett resigned as president, chief operating officer and chief financial officer.
In July, AMPAM announced that Robert C. Richey had rejoined the company and would manage single-family plumbing operations in California, Nevada and Arizona, and would also rejoin the company's board of directors. Richey, AMPAM's largest shareholder, had resigned as the company's senior vice president and chief operating officer in April 2002. He had brought his RCR Companies of Riverside, Calif., into AMPAM as one of its founding companies.
Since the summer of 2002, AMPAM has announced that it was closing several money-losing operations in California, Florida and Virginia. This past summer, the company also began looking for a buyer for its commercial plumbing businesses, located in Ohio and San Diego. In addition, AMPAM was penalized $800,000 by a creditor for failing to repay a $76.9 million line of credit in full by July 31.
Because AMPAM has public debt, it files quarterly reports with the U.S. Securities and Exchange Commission. It suffered a $54.7 million loss on revenues of $575 million in fiscal 2002.
Through the first six months of 2003, AMPAM recorded $290 million in revenues, exceeding the previous year's performance, according to Nagel, who said the restructuring would likely have only a minimal impact on the company's core businesses. "This year, we've not only seen a significant growth in revenue from our single-family operations of 10 percent, but our multifamily operations produced an increase of 5 percent despite a period of stagnation in the multifamily housing market."
Nagel added, "We will concentrate on our core strengths, residential plumbing and HVAC, contracting specifically in the area of single-family and multifamily residential new construction." He said he did not anticipate any type of company-wide layoffs.