ALBUQUERQUE, N.M. -- Furr's Supermarkets here said last week it expects sales to be back on track by the end of March, less than two months after the 71-store chain filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Tom Dahlen, chairman, president and chief executive officer, told SN last week he is optimistic that sales will begin to grow within the next couple of weeks, now that Furr's has secured a debtor-in-possession facility of $33 million that will enable it to restock its store shelves.
He said the perimeter departments should be fully stocked by this week and the center-store sections by next week -- a week ahead of expectations.
Dahlen said store conditions had been declining for at least three months before the company filed a voluntary Chapter 11 petition on Feb. 8. One day later the court gave preliminary approval to the DIP loan that is enabling the company to restock its depleted shelves with merchandise.
The court is scheduled to give final approval on the loan March 2.
Dahlen said he is uncertain how long Furr's will operate under Chapter 11. "Our goal is to move through the process as quickly as possible," he told SN.
He said the Chapter 11 process will enable Furr's to facilitate a financial restructuring "that would eliminate the company's burdensome debt structure, secure a means for obtaining additional financing and enable Furr's to compete more effectively."
The DIP financing will last the company through the end of the second quarter, he added.
In letters to suppliers, customers and associates, Furr's emphasized that the filing does not mean the company will be going out of business.
"Chapter 11 means reorganization, not liquidation," Dahlen said in the letter to suppliers. "Chapter 11 gives us time to restructure and reduce our debt while we continue to do business and operate our stores.
"Our goal is to preserve and strengthen our business so we can compete successfully in the future."
Dahlen told SN that Furr's financial problems stemmed from the need to replace a $50 million revolving line of credit that was due to expire in December 2000. "The company started the process of replacing the credit line early in 1999," he said, "but the bank market in the last year or so has been as bad as it's been in the last 20 years.
"We felt we had adequate lead time and would be able to get a bank deal done by last January, or by August at the latest, but it took us until last Dec. 21 to finalize a deal -- and that deal had restrictive covenants attached that impacted the liquidity of the company and our ability to have sufficient cash to move forward.
"The bank deal was a four-year arrangement with a $70 million line of credit, but because the process of securing it had dragged on for so long, our cash needs were more than we could meet, despite increasing sales."
Dahlen said Furr's sales rose 3% in the first quarter of 2000, 5% in the second and 7% in the third, "but the cash required to run the business became more demanding, and without a bank deal, we were trying to operate within the $50 million line of credit, which made cash very tight.
"That became obvious at store level in October, and it kept getting worse. And obviously, without the issue of the bank credit line resolved, the logical course for vendors was to put credit limits on what we could buy and impose tighter terms."
Furr's sales ran slightly negative in the fourth quarter, Dahlen said, though he declined to be specific, and they have continued to run negative since the start of the first quarter in January, he added.
However, Furr's prospects are looking up, he said, with the company getting outstanding vendor support since the filing.
"We had a contingency plan in place at the time of the filing, with the goal of getting the stores fully stocked within four weeks, but we're ahead of that plan," Dahlen said. "We expect the perimeter departments to be fully stocked this week, though the center-store sections will take a little longer."
