Kitchen & Bath Design News

JUN 2019

Kitchen & Bath Design News is the industry's leading business, design and product resource for the kitchen and bath trade.

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Closure of Market Icon Wood-Mode Reverberates Through the Industry Images of winning projects from Wood-Mode's 75th Anniversary design competition. The doors of the Wood-Mode showroom at Chicago's Merchandise Mart. The company closed on May 14, 2019. KREAMER, PA — The abrupt, unexpected closure of Wood-Mode is sending reverberations through the kitchen and bath industry, its ripple effect impacting dealers, designers, consumers, sales reps and others on virtually all levels of the industry's supply chain. The sudden closure of the iconic, 77-year-old cus - tom-cabinet manufacturer on May 14, 2019 dealt a blow to approximately 1,000 laid-off workers and created a shroud of sadness, chaos and uncertainty among com- munity officials and the company's extensive network of dealers, many of whom have multiple projects in the manufacturing pipeline (see related Editorial, Page 5). Cabinet orders in various stages of production have been left, at least temporarily, in a state of limbo. Suppliers are reportedly coping with unpaid invoices. Consumers left in the lurch are wondering about the uncertain status of their projects. Hundreds of dealers in the U.S., Canada and South America, many of whom have had long-term, exclusive relationships with Wood-Mode, were left pondering the fate of their own businesses – some con- templating potential closure, others scrambling to find new cabinet vendors. Most were simply lamenting the fact that Wood-Mode, for decades an industry pioneer and long considered the gold standard for custom cabi- netry in America, is apparently out of business. "Wood-Mode has been a yardstick by which an in- dustry has been measured," said Alan Zielinski, a past president of the National Kitchen and Bath Association and a long-time Wood-Mode dealer with Better Kitch- ens, Inc. in Niles, IL. "I was heading to an industry event in California, and when I got off the plane, my phone just lit up with the news." Zielinski, whose connection to the company goes back more than 50 years to his father's ownership of Better Kitchens, said his immediate focus is on six projects in production with Wood-Mode, including one order in transit from the factory. From there it's the question of what to do with several other completed orders that are ready to be submitted. According to Zielinski, other dealers he spoke with also had many orders in the pipeline, expressing the sense that the closure was not about a lack of demand. "Looking at this from a 35,000-foot standpoint, may- be there is the opportunity for someone to come in and purchase it now, or perhaps give it a shot of financing to get it started back up again. However, if that does not occur, then we have to evaluate what products we want to represent as quickly as possible so we can continue paying our bills and look to our survivability in the in- dustry," said Zielinski, who visited Wood-Mode last fall for training. "Being part of Wood-Mode was being part of a family. We had family at the factory. We had family in the production area. We had family in the offices." Wood-Mode employees were notified of the abrupt closure via a hand-delivered letter, and were escorted from the company's 1.3-million-sq.-ft. Kreamer, PA fa- cility by state, county and local police. Administrative employees were permanently laid off, while production workers were reportedly being laid off in phases, so that select cabinet orders could be completed. FINANCIAL CHALLENGES Employees and cabinet industry insiders had long been aware that Wood-Mode was experiencing financial challenges. Employees in recent years had faced salary cuts, elimination of bonuses, cash-flow shortfalls and a variety of cost-cutting moves, according to a former corporate executive. There were also periodic layoffs and early retirements at the company, which once em- ployed more than 2,000 people. Several employees interviewed by local media said the company was still receiving a steady flow of cabinet orders, but was having difficulty paying bills. In 2017, SSG Capital Advisors, a Pennsylvania-based investment firm, was retained to assist Wood-Mode with a multi-tiered financial package that enabled the company to restructure existing debt and generate liquidity to support ongoing operations and future ini- tiatives. A financial turnaround team was also put in place to assist with operations. In the midst of all this, rumors about a potential closure had been circulating for months, although many people believed the rumors were simply conjecture. Still, most people did not anticipate that the pri- vately-held company would shut its doors so abruptly, particularly amidst fleeting hopes that the iconic brand would somehow be able to continue operations. Over the past several months – and intensifying during the weeks prior to the company's closure – Wood-Mode officials said they had been seeking financing and other options, including an injection of capital and a potential transaction that would have en- abled the company to continue operations, according to V.P./Human Relations David Scarr. Those efforts collapsed, however, when an un- identified party with which the company had entered into a letter of intent to acquire the business "decided abruptly to not proceed with the transaction," Scarr said. Several days later, Wood-Mode learned that its prime lender was "unwilling to provide normal funding" that would have enabled the company to continue op- erations while seeking other potential buyers, including one that submitted a letter of intent days before the closure, Scarr added. As a result, he said, Wood-Mode was left "with no choice but to make the difficult deci- sion to wind down its operations." "After 77 years of business, the company and own- ership truly regret the impact of this action to our employees, the community and our loyal customers and suppliers," Wood-Mode said in a prepared statement. "We are extremely appreciative of everyone's commit- ment and service to Wood-Mode throughout the years." Wood-Mode management issued no additional comment. And it remained uncertain – as of press time for Kitchen & Bath Design News – whether the company could possibly be spared through either an acquisition or an injection of financing. Even Pennsylvania officials, who'd been working with Wood-Mode on its financial challenges, were report- edly caught unaware that the company was closing, until the state received a certified letter on the day of closure. Literally days earlier, Pennsylvania Gov. Tom Wolf, accompanied by an entourage of state, county and local officials, toured the Wood-Mode factory to tout job-training programs being offered by the firm. 14 Kitchen & Bath Design News • June 2019 INDUSTRY UPDATE NOTEWORTHY DEVELOPMENTS IMPACTING THE KITCHEN AND BATH MARKET Continued pg. 16

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