Global Fastener News

Questron Files for Bankruptcy

John Wolz

Stockholders are not likely to receive any money after Questron Technology Inc. declared bankruptcy.
�The company believes that the purchase price payable in the proposed sale transaction will be insufficient to cover all of the company liabilities and, therefore, the company�s stockholders will not receive any distribution upon completion of the bankruptcy proceedings.�
Many in the fastener industry � including those who sold their distributorships to Questron � hold stock, which now is probably worthless.
Questron announced February 4, 2002, it has filed for Chapter 11 bankruptcy and signed an agreement with QTI Acquisition Corp. providing for QTI�s acquisition of substantially all of Questron�s assets.\
Subsequently Questron has been delisted from the Nasdaq stock market. Trading Questron stock can continue on �pink sheets� published by the National Quotation Bureau LLC, but even Questron encouraged �anyone contemplating purchasing its securities to proceed cautiously and only after a careful review of publicly available information.�
The asset sale is subject to customary closing conditions and bankruptcy court auction and approval.
QTI is a newly formed company owned and organized by an affiliate of Sun Capital Partners Inc. Sun Capital, specialist in leveraged buyouts, will gain Questron�s assets for the senior debt.
Questron CEO Dominic Polimeni said the bankruptcy filing �protects the value of Questron�s business for the benefit of Questron�s creditors and will help ensure that our customers continue to receive uninterrupted service through the sale process and thereafter.�
Polimeni said Questron has sufficient cash to finance operations, including post-petition trade and employee obligations.
Sun Capital vice president Steven Liff said, �We are excited about investing in a business that is well positioned in its industry. With our capital infusion and operational expertise, the business should have sufficient liquidity and ongoing support to take advantage of revenue growth and to continue to provide excellent service to its strong customer base.�
QTI will assume the $81.5 million in debt and leases, customer contracts and other agreements. QTI will employ all of Questron�s employees at the closing.
Boca Raton, FL-based Questron started with Quest Electronic Hardware, the fastener division of Arrow Electronics, where Polimeni was once corporate counsel.
No Surprise
CIBC World Markets, which has followed Questron, said the �bankruptcy result should come as no real surprise to shareholders. Questron had deferred substantial debt repayments since summer.�
CIBC noted that stockholders aren�t the only losers. Debt totals about $115.4 million, with vendors owed another $11.2 million.
Even before the bankruptcy suppliers had already been questioning providing product to the company, and the �onus is now on Questron to prove it is creditworthy in its new setup,� according to CIBC�s analysis.
�Presumably Sun Capital will pony up capital to enable growth, but it also is no doubt seeking cash flow from the model,� CIBC suggested. �The combination might yield greater focus for a model which, frankly, we always liked.�
The Questron bankruptcy �places attention on Pentacon Inc.,� CIBC added. Pentacon conducts �the same sort of business� and �has been similarly struggling with its leverage.�
In 1997 Questron acquired Jim Taylor�s new Scottsdale, AZ-based Integrated Material Systems Inc. with a goal of growing to a $200 million fastener distributor within five years. Taylor was retained to help acquire fastener distributorships.
Since 1997 Questron acquisitions include Fas-Tronics Inc., Fortune Industries Inc., Capital Fasteners Inc., Action Threaded Products, Olympic Fasteners & Electronic Hardware, B&G Supply Company and RSD Sales Company Inc.
Approximately 20% of Questron stock is owned by CEO Dominic Polimeni and investor Joan Gubitosi.
Questron�s revenue, profits and margins declined steadily over the past year, while short-term debt mounted. Total liabilities stood at $132 million at the end of the third quarter of 2001.

Questron at a Glance
Headquarters: 6400 Congress Ave., Ste. 200A, Boca Raton, FL 33487. Tel: 561 241-5251 Fax: 561 241-2866 Web: questrontechnology.com
2000 Revenue: $161.6 million
1999 Revenue: $108.9 million
Questron Technology supplies fasteners and C class products and provides inventory logistics management to manufacturers through subsidiaries Questron Distribution Logistics (QDL) and Questron Aerospace Logistics (QAL).
CEO Dominic Polimeni and investor Joan Gubitosi (spouse of president Bob Gubitosi) own about 20% of Questron.
Key executives: chairman and CEO Dominic Polimeni; president and CFO Bob Gubitosi; executive vice president and logistics president Doug Zadow; regional vice president Philip Schwiebert; aerospace vice president Malcolm Tallmon; vice president and IMS president Jim Taylor; controller Chris Polimeni.
Auditors: Ernst & Young LLP
Employees: 486
�2002 FastenerNews.com