Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, June 16, 1994 TAG: 9407080064
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: SANDRA BROWN KELLY and STEPHEN FOSTER STAFF WRITERS
DATELINE: LENGTH: Medium
BS&T owner Richard Walters said a few days ago that he couldn't attract customers unless he could buy new merchandise and would close the stores immediately if his request to bankruptcy court to use sales revenue was denied.
"We're fighting for our lives," said Walters' attorney, Tom Dickinson. He also pointed out that if the stores weren't able to stay open and had to liquidate their inventory, the unsecured creditors "won't see a dime."
The stores filed for reorganization under Chapter 11 bankruptcy protection in April.
Judge Ross Krum made his ruling over objections from NationsBank, the stores' largest creditor. The bank's attorney, William Terry, estimated the bookstores are losing thousands of dollars each month and said they are being kept open at the bank's expense.
Revenue used to buy merchandise lowers the amount BS&T can pay on its $500,000 secured loan with NationsBank. BS&T, which has more than 20 stockholders, owes another $400,000 in unsecured debt, including thousands due to suppliers of books and recordings.
According to Terry, BS&T's record-keeping was so sloppy that from the time of December's financial statement to April when another was compiled, Walters' estimate of the value of his inventory declined $200,000, and his estimate of liabilities increased $400,000.
Walters attributed the wide discrepancies to faulty accounting, but Terry said the numbers - including figures that showed sales dropping from $2.4 million in 1992 to $2.1 million and $1.3 million in the next two years - show "a company out of control."
"The problem is the business really doesn't know where it is," Terry said.
Krum said he was struck by Walters' testimony that he was so removed from the business that he couldn't give a better estimate of the value of his stock. He ordered Walters to provide the court with a detailed financial report on June's business activity at a hearing set for July 13. He said the court then will decide if the use of revenue can continue for another month.
Krum also suggested Walters hire an inventory company to put a value on the stores' stock, and he said Walters needed to look for a long-term "infusion of cash."
Walters spent two hours testifying, during which he revealed a history of sloppy bookkeeping, unrecorded invoices and a special money problem caused by an employee dismissed in 1989, when Walters took over management of the company's financial records.
In an interview, Walters said he left too much of his business to others and was "too trusting with creative people who were young." He refused to comment further about the employee who was fired because of problems with record-keeping.
He portrayed himself as an owner out of the loop of daily accounting and of bill-paying, until last year.
"It was quite opaque to me," he said. "Without my knowledge, many things were inaccurately entered or were not entered at all. I didn't even know that they were not posting invoices from sometime in the fall on."
Walters said he now personally reviews financial transactions and stands firmly behind the accuracy of the inventory estimates and sales projections he presented to the court. He also said he has cut the number of employees to a manageable, more responsible number.
At one time the stores employed 37 people. It now has fewer than 10 workers.
"Now I have a much more dedicated crew ... and I don't have anyone with any bad habits," he said.
He said the stores' accounting has especially improved since last September when he began giving the businesses the "hands-on" attention he gave his business when he first opened it.
Walters opened the Blacksburg store in 1965, when he was 21, and the Roanoke store in 1986.
"It's been my life," he said.
"Books and music enrich life so much," he said. "This may sound corny, but I believe books and music save souls. I believe in these two products."
by CNB