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Letter to the Editor
This article originally appeared in the June, 2000 Issue of INSIGHT
July 2000 Investment Update
First, Safelite Glass filed under Chapter 11. Safelite had, earlier in the year, lost most of the Allstate referral contract account and had been stumbling. While this filing is obviously not good for Safelite, independent glass shops, OE dealers, and collision repairers may find the Market a little more attractive.
Safety Kleen was the second to file this month, their stock dropping from a high of over $19 to 63 cents when trading was suspended on June 9th after Safety Kleen filed for protection under Chapter 11.
Safety Kleen had dropped dramatically when it was revealed that the "earnings" posted for the last year were more a figment of the imagination than reality. Management of Safety Kleen has been replaced, and the 41 percent owner Laidlaw, a Canadian waste management and school bus operator, has also seen their stock drop in parallel with Safety Kleen.
Right now all the key players in both companies are blaming each other and departed employees. Only time will tell if this billion-dollar-plus company will survive in any form.
In the meantime, all of the stockholders, including yours truly, who bought at $1.25, figuring it couldn’t go any lower, have for all intents and purposes lost their equity.
The third shoe to drop is of course CARA Collision and Glass, founded by Randy McPherson, former founder and president of ABRA Auto Body and Glass. This month’s INSIGHT, on page four, covers the story in detail. Suffice it to say that CARA’s involuntary bankruptcy filing will wipe out most, if not all, of the value of notes and stock held by shop owners who sold their operations to CARA over the time of its existence.
The lesson to be learned, unfortunately, for consolidators, is that if as an owner you are selling, get all you can in cash, and then protect yourself by collateralizing the loan with the shop’s equipment and also get personal guarantees on the notes from key officers or investors in the consolidator organization.
Looking at the rest of stocks within the industry, there isn’t much good news. The major gainers on a YTD basis slipped a little this month, with Sherwin-Williams, for example, dropping to $22.50 as this is being written. PPG and DuPont both show a significant drop from the beginning of the year. The only real winners have been Insurance auto Auctions, Earl Scheib, and what is left of the old Binks operation, now called Sames Corporation.
-Charles Baker-
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