Have you'll seen this?
From the RB board
BAD NEWS: ALU FIRE WAS ARSON!!
Travelers Faces $110 Mln Claim in Allou Health Warehouse Arson
2002-11-07 00:04 (New York)
Travelers Faces $110 Mln Claim in Allou Health Warehouse Arson
Brentwood, New York, Nov. 7 (Bloomberg) -- Travelers Property
Casualty Corp. faces a $110 million claim from Allou Health Care
Inc. after a fire in September destroyed nearly half of the health
and beauty product distributor's inventory in a Brooklyn
warehouse.
``That fire was intentionally set and it's under
investigation,'' said David Billig, spokesman for the New York
City Fire Department. It was the largest-ever arson loss in the
state, according to the New York State Arson Board.
Allou's fire claim would amount to about 11 cents a share for
Travelers, or more than a quarter of the 37 cents that analysts
expect the insurer to earn in the fourth quarter. Travelers, the
third largest business insurer in the U.S., confirmed issuing the
policy. Spokesman Keith Anderson declined further comment. He
wouldn't say if Traveler's had shared the potential liability with
other insurers.
``I'm sure they're not happy about it, but I doubt Travelers
kept that risk all for themselves,'' said Jim Glickenhaus, general
partner in Glickenhaus & Co., which manages about $1 billion and
owned 631,349 Travelers shares on Sept. 30.
David Shamilzadeh, Allou's president and chief financial
officer, said he has no idea who set the fire. ``It certainly
wasn't us,'' he said in an interview. ``Certainly we don't have a
motive.'' Shamilzadeh said he expects to be contacted by arson
investigators.
It was Allou's second fire loss in three years. In 1999, the
company filed an insurance claim for more than $11 million for a
fire in its Brentwood, New York headquarters. Allou collected $6.8
million in insurance benefits for that fire from Yasuda Fire &
Marine Insurance Co., now called Sompo Japan Insurance Inc. in
Tokyo, according to filings with the U.S. Securities and Exchange
Commission.
Probe Still Open
Sergeant George White of the Suffolk County Police
Department's arson squad said his unit investigated Allou's 1999
fire and estimated damage at $50,000. The cause remains
undetermined, and the department's investigation remains open, he
said. White said the investigation would have been closed if the
department concluded the fire was an accident.
The National Fire Protection Association, a non-profit
organization that does research and training in fire safety,
estimates that in 98 percent of arson fires there are no
convictions.
More than 150 firemen fought the latest blaze for eight hours
on the night of Sept. 25. Sergeant Kevin Hughes, a spokesman for
the New York City Police Department's bureau of fire
investigation, said several fires were set at the Noll Street
warehouse.
``With the grace of God, no one was injured,'' Shamilzadeh
said. ``We didn't even have one incident of smoke inhalation. I'm
very grateful for that.''
The fire wasn't declared under control until 8:20 a.m. the
next morning. Two hours later, the company issued a press release
saying the total loss of inventory in Brooklyn, amounting to 45
percent of the company's inventory, was fully insured.
Investors Reassured
In the year before the fire, Allou's shares more than doubled
to a high of $8.50 on June 5 from a low of $3.40 on Nov. 5, 2001.
Shares fell 18 percent, or 90 cents, on Sept. 26, the day of the
fire, to $4.15.
Shamilzadeh reassured investors in a conference call after
the close of trading on Oct. 1 that because the destroyed
inventory was insured at sales price, rather than cost, the
company expected to get about $110 million from Travelers. The
next day, shares closed at $5.08, 3 cents higher than the day
before the fire. Allou shares fell 14 cents to $4.65 in trading on
American Stock Exchange at 4:15 p.m. New York time yesterday.
Mom and Sons Realty LLC, which owned the Brooklyn warehouse
40 miles west of Brentwood, is owned by the Jacobs family, which
holds 59 percent of the voting stock in Allou. Shamilzadeh said
the location and ownership of the warehouse was not disclosed in
SEC filings ``because it was an arms length transaction.''
``This is material information that investors would want to
know,'' said Alan Bromberg, professor of securities law at
Southern Methodist University.
Reached Credit Limit
Victor Jacobs, Allou's chairman, didn't return a telephone
call requesting comment. Neither did his sons Herman, the chief
executive, nor Jack, the executive vice president.
As of June 30, Allou had borrowed $199.9 million on its $200
million credit line from lenders led by Citigroup Inc.'s Citibank
unit and Congress Financial Corp., a unit of Wachovia Corp. based
in Charlotte, according to SEC filings.
Travelers was owned by Citigroup until March, when Citigroup
sold about 20 percent of the insurance company. In August,
Citigroup distributed about 70 percent of Travelers to its
shareholders.
Allou reported earnings of more than $29 million over the
past five years, while its cash flow from operations was negative,
exceeding $100 million. Shamilzadeh said the company spends money
to increase inventory so that sales can grow.
`Very Tight'
``I don't think that the nature of the business that we're in
lends itself to a cash flow positive operation,'' Shamilzadeh
said. He said Allou's cash situation has been ``very tight'' for
the past 13 years, and remains so. He expects the company to earn
$1 a share in the fiscal year ending March 31, compared with 91
cents in fiscal 2002.
Shamilzadeh, Allou's chief financial officer since 1990, told
investors in the conference call five days after the September
fire that he'd never dealt with fire insurance before.
``I have absolutely no experience in dealing with insurance
companies,'' Shamilzadeh repeated in an interview.
Allou didn't issue a press release after the 1999 fire at its
headquarters. The company sought to collect more than $11 million
from its insurer, according to Allou's 1999 annual report.
``I didn't realize that the magnitude of the fire was $11
million,'' said Shamilzadeh, who signed the 1999 annual report as
chief financial officer, chief accounting officer and director.
``That went completely over my head. I thought it was like
$50,000.''
--David Evans in Brentwood, New York at 323-782-4241 or
davidevans@bloomberg.net through the Princeton newsroom. Editors:
Neumann, Henkoff, *Siler. |
