Menard wins a round in tax court
The U.S. Tax Court in Washington, D.C., has ruled that John Menard, owner of Menard’s home improvement chain, still owes the federal government $5.7 million in back taxes — minus approximately $200,000.
According to the Associated Press and other news outlets, U.S. Tax Court Judge Paige Marvel reduced Menard’s tax burden by modifying one of her earlier court rulings in the executive’s long-running battle with the Internal Revenue Service.
In 2005, the IRS prevailed in its claim that Menard had been paid too high a salary in 1998, when he made $20.6 million as the company’s CEO. At the time, Judge Marvel ruled that only $7 million of that money should count as salary. She arrived at that figure by comparing Menard’s salary to that of the chief executives of Home Depot and Lowe’s, the number one and two home improvement retailers. Menard’s is the third largest retailer in the home channel.
The balance of $20.6 million was considered a dividend, which is not deductible like salaries and other business expenses. This makes Menard subject to an additional $5.9 million in back taxes plus penalties. Since then, Menard’s attorneys have argued that he and his company should get credit for a Medicare tax paid on salaries, and Judge Marvel agreed. After some adjustments, she cut Menard’s tax burden by $200,000 in a Feb. 21 ruling.
But Menard’s battle with the IRS is far from over. The founder of the Menards chain of more than 209 Midwestern stores still has to settle tax cases for five other years involving the same issues. Much depends on the resolution of the 1998 case, which can be appealed through the federal tax court system.
In 2007, Forbes magazine named John Menard as the 44th richest person in the United States, with assets estimated at $7.3 billion.
Sales down 5.6 percent at Trex in fourth quarter
Winchester, Va.-based Trex, manufacturer and distributor of decking, railing, fencing and trim products, reported a net loss of $40.1 million for the fourth quarter compared with a loss of $13.8 million for the same quarter in 2006. Net sales for the quarter were $30.3 million, down 5.6 percent from $32.1 million from the same quarter in 2006.
For the year, the company reported a net loss of $75.9 million, compared to net income of $2.3 million in 2006. In sales for the full year, the company reported $328.9 million, down 2.3 percent from $336.9 million in 2006.
“We are extremely disappointed with 2007 financial results, which were burdened with charges stemming from poor control over manufacturing operations, quality and fixed asset management,” said president and CEO Ronald Kaplan, who joined the company as chief executive on Jan. 7. The company recently cut salaried work force by approximately 30 people, according to Trex.
“Nevertheless, Trex’s steady sales illustrate our success in improving product quality, the strength of the Trex brand and the expansion of our distribution network,” he added. “We are pleased with the company’s sales performance considering the soft market conditions and overall downturn in the building materials industry.”
Lumberyard sues city over boardwalk project
With the sluggish housing market making headlines, even some lumberyards cashing in on the commercial sector can’t catch a break.
According to (New York) Newsday, a Baltimore lumber company has sued the beachside city of Ocean City, N.J., for $1.2 million for canceling a huge order of tropical rainforest wood for a seaside boardwalk project.
Louis J. Grasmick Lumber filed the suit in U.S. District Court, according to the article, against the city for allegedly refusing to pay for the wood even though some of the wood already has been installed on the boardwalk.
Environmental groups, including “Friends of the Rainforest,” also have protested the project, saying the city had pledged “never to use tropical hardwoods on its boardwalk again.” The city’s mayor’s office received more than 50,000 e-mails urging the local government to cancel the contract on environmental grounds, according to the newspaper.
The city did not cite the environmental complaints for terminating the contract, but rather “lengthy delays in delivery” and “uncertainty” as to when the wood would arrive.
The lumberyard said the delays were due to factors beyond its control, including supplier shipping delays and an accident in which a company truck overturned.