Kitchen & Bath Design News

AUG 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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Wood-Mode Fate Uncertain Despite PA Builder's Acquisition Bid KREAMER, PA — Wood-Mode may have found its much-anticipated White Knight, after all – or the iconic, 77-year-old custom-cabinet manufacturer may yet be destined for extinction. By mid-July, the company's fate was virtually im- possible to predict. Nearly eight weeks after the sudden closure of the fi- nancially troubled company rocked the kitchen and bath industry, a Middleburg, PA businessman announced early last month that he is working on a deal to acquire Wood-Mode's name and corporate assets, with an eye toward reopening the company's Kreamer, PA factory on a limited basis by mid-August. Bill French, owner of Professional Building Systems of PA, a manufacturer of custom modular homes, post- ed a notice on the "Wood-Mode Friends" Facebook page that he had secured an agreement in principle to purchase the company from owners Robert and Brooks Gronlund, and that he expected an agreement with Wood-Mode's prime lender, New York-based Great Rock Capital, to be finalized no later than July 19. French was quoted last month as saying that he hoped to have Wood-Mode's factory up and running within weeks after the acquisition was complete. As of the deadline for this month's issue of Kitchen & Bath Design News, however, the potential acquisition had yet to be finalized, casting Wood-Mode's fate in doubt even amidst the apparently legitimate glimmer of hope that the company can somehow be saved. "Over the next few weeks we will begin to offer jobs to Wood-Mode employees, a few positions at a time," French wrote on the 1,400-member Facebook page. "I look forward to working with many of you to build a successful company." French, who did not reply to an inquiry from KBDN, was quoted as saying that he is optimistic his acquisition bid will be successful, and that he made the tentative deal public in advance of its completion to allay the concerns of former Wood-Mode employees, who have faced se- vere hardship in the wake of the mid-May closure. Wood-Mode employed 938 people at the time of its shutdown. At its height, prior to the 2008 recession, the company's payroll included approximately 2,000 employ- ees, many with work histories spanning 20+ years and encompassing several generations of family members. Stunned employees, assured by former management that Wood-Mode would be spared from closure, were notified of the abrupt shutdown shortly before being es- corted from the company's 1.3-million-sq.-ft. facility by state, county and local police. They were notified shortly afterward that their benefits had been terminated. French said that hiring 200 workers would be a realistic benchmark in the months ahead, and that a workforce of up to 500 employees could potentially be achieved in reopening the Wood-Mode factory. As of mid-July, phone calls were reportedly being made to former employees to gauge the availability of potential labor, the status of which is yet unknown. At least two former Wood-Mode executives were said to have ac- cepted offers to be part of French's management team. Ever since Wood-Mode's closure, former employees have been buzzing about the situation at public and private meetings, in media interviews and on social media, expressing a wide range of emotions – among them a sense of betrayal, bitterness, frustration and nostalgia – as questions continue to swirl about the contributing factors that led to the apparent demise of what had been one of the industry's most highly re- spected cabinet brands. Although Wood-Mode said that its notice of closure was legal pursuant to conditions set forth in the Worker Adjustment and Retraining Notification (WARN) Act, there have also been accusations that the company failed to comply with the federal statute, which requires companies of Wood-Mode's size to provide employees with 60 days warning prior to plant closures. Lawsuits filed by several former Wood-Mode employees charge that the company violated WARN by failing to provide workers with the requisite 60-day written termination notice. The lawsuits seek class-action status and the payment of wages, vacation time and benefits for the 60 days, as per the WARN act. Wood-Mode, in response to the lawsuits, has con- tended that providing the 60-day notice would have precluded it from being able to sell the company or obtain the capital needed to continue operations. The company has also claimed that it falls under exceptions to the WARN Act that permit faltering companies fac- ing unforeseeable business circumstances to act as it did. It claims that in closing the plant, it acted lawfully, in good faith and without malice or reckless indifference to employees' protected rights. Neither Robert Gronlund, who served as Wood- Mode's chairman/CEO, nor his son, Brooks, the company's president and COO, have commented pub- licly since Wood-Mode's closure, which continues to reverberate through the kitchen and bath industry, as dealers, sales reps, suppliers and former employees attempt to cope with the fallout. GLIMMER OF HOPE Wood-Mode's closure, while sudden and unexpected, had been foreshadowed for several years. Indeed, ever since the 2008 recession, Wood-Mode had experi- enced significant financial challenges, leading to salary cuts, elimination of bonuses, cash-flow shortfalls and a range of cost-cutting moves. The company had also been steadily downsizing, and two years ago secured a multi-million-dollar financing package enabling it to restructure debt and generate liquidity while operating under the bailiwick of a financial-turnaround team. In recent months, Wood-Mode had been seeking additional financing and other options, including a potential acquisition that would have enabled it to con- tinue operations, company officials said. Those efforts collapsed in May, the company claimed, when at least one prospective buyer backed away and Wood-Mode learned that its prime lender was unwilling to provide the necessary funding to move forward. Company spokesman David Scarr, Wood-Mode's v.p./human resources, announced at that time that the company had no choice but to abruptly shutter its factory, blind- siding employees, suppliers and government officials, as well as Wood-Mode's extensive network of U.S., Ca- nadian and South American dealers, many of whom had long-term, exclusive relationships with the company. While no less than a dozen prospective buyers reportedly made inquiries into potentially acquiring Wood-Mode's assets in the wake of the company's shutdown, it seemed increasingly likely as the weeks went by – and none of the acquisition inquiries bore fruit – that Wood-Mode was moving toward extinction. French's announcement regarding a potential acquisi- tion, in contrast, has provided a palpable glimmer of hope that the company can yet be saved. Although relatively unknown in kitchen and bath industry circles, French is a prominent figure among homebuilders. His company, founded in 2000, is one of the largest modular manufacturers on the East Coast, producing more than 1,000 custom modular homes, schools, dormitories and other light-commercial struc- tures per year, according to the company's website. French, in 2016, was also one of 23 lesser-known can- didates who paid $1,000 to the state of New Hampshire for a chance to participate in a televised forum and have his name placed on the ballot in the New Hampshire Democratic presidential primary. BID SPARKS ATTENTION But while French's bid for a presidential nomination drew only limited support, his bid to acquire Wood- Mode has captured more than casual attention, particularly in hard-hit Snyder County, PA, where Wood-Mode had been a major employer. However, even if French is successful in his acquisi- tion bid, the jury remains out on whether Wood-Mode can truly be resurrected – and, if so, whether the reviv- ified company could be anything more than a shadow of its former self. Founded during World War II, Wood-Mode established a stellar, decades-long reputation as a custom-cabinet innovator known for its quality, customer service, crafts- manship and loyal, long-term dealer base. As a privately held firm, the company's finances remain shielded from public scrutiny, but Wood-Mode, at its height, reportedly The doors of the Wood-Mode showroom at Chicago's Merchandise Mart. The company closed on May 14, 2019. 14 Kitchen & Bath Design News • August 2019 INDUSTRY UPDATE NOTEWORTHY DEVELOPMENTS IMPACTING THE KITCHEN AND BATH MARKET

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