McDonald Distributors Of Florida To Liquidate

Oct. 24, 2003
McDonald Distributors of Florida Inc., an independent electrical distributor in Fort Lauderdale, Fla., run by the Pokey family, is going out of business after 47 years. The company has filed an assignment for the benefit of creditors. The liquidation is expected to be completed by the end of November.

McDonald Distributors of Florida Inc., an independent electrical distributor in Fort Lauderdale, Fla., run by the Pokey family, is going out of business after 47 years. The company has filed an assignment for the benefit of creditors. The liquidation is expected to be completed by the end of November.

According to Phil VonKahle, an advisor to Michael Moecker Associates Inc., Pembroke Pines, Fla., who has the assignment, cash flow was the reason the company chose to no longer operate. At closing, the company’s total assets were approximately $5.4 million. Total liabilities were about $5.5 million.

McDonald Distributors had been struggling with high debt for several years and fought its way to profitability about two years ago. However, the company’s average monthly accounts receivables did not meet its average accounts payable.

“Over the years, between margins getting tighter and tighter and everybody trying to get their share of the pie, the company had suffered a lot of debt service over the years,” said VonKahle. “With gross margins getting smaller and smaller, the company had performed an operational turnaround two years ago in which it became profitable and got back on its feet.”

But VonKahle said when Allen-Bradley started requiring all of its distributors to pay for materials twice a month through wire transfer instead of the monthly payments that had been standard procedures, the company decided to close down.

He added, “Their average accounts receivable was 43, which was very good in my opinion as far as collecting money in 43 days, but you have to pay for it in 30. That 13 days of float didn’t make sense to hold on anymore and that’s really what drove it.”

Instead of choosing bankruptcy, McDonald Distributors chose to wind down the business by paying off the vendors and assigning everything else for the benefit of creditors. VonKahle said an assignment for the benefit of creditors is less costly than Chapter 11 or Chapter 7 cases.

Under the plan, secured creditors will be paid first, followed by other creditors. The largest creditors, he said, are the banks for the mortgage of the building and the credit lines.

Industry sources were saddened to hear the company was closing.