Design House put on block - Brief Article

Home Channel News, Nov 20, 2000

Home decorating products distributor files bankruptcy

Design House, the supplier of millwork and other home decorating products based in Germantown, Wis., has been put up for sale by its owners, who placed the company into receivership by filing for protection from creditors under a Chapter 11-like statute in Wisconsin.

The company informed its customers of its Oct. 30 filing -- known as Chapter 128 under Wisconsin bankruptcy law -- and attempted to assure them that its actions "will not in any way disrupt the flow of product. We will continue to operate as we have in the past." The company has negotiated financing through a lender, the First Star division of BankOne, to keep its business operating during the sell-off period, according to Todd Witte, Design House's senior vp and general manager. Witte declined to state the amount of the line of credit.

Witte said that the company's longtime principal owners, the Butter family, had taken the advice of an outside consulting firm brought in to sell off Design House that the best way for the family to maximize the value of its assets would be to file for bankruptcy protection. He declined to identify the consulting firm.

Witte said that it was unlikely that Design House -- which owns a manufacturing facility and wood-turning plant in Canada, and a plastics plant and import distribution company in Wisconsin -- would be sold to a single buyer. "The owners would probably get the highest value for the company by selling it in segments," said Witte, who has been running the company after Kevin Keenen, its president and CEO, resigned last month.

The bankruptcy filing represents a stunning reversal for a company that, only two years before, appeared to be on the brink of becoming a major multi-product distributor to the home improvement industry.

In the 18 months between mid-1996 and the end of 1997, Design House had made four acquisitions, which added $25 million in new business to its operations. Those acquired companies included door hardware maker Gainsborough Hardware-USA, Canadian specialty wood products manufacturer Spindaleer, Beverly Hills Fan & Lighting and door maker Emco Wood Products.

Large home improvement retailers like Lowe's and Home Depot at one time accounted for 45 percent of Design House's revenue, which reached a peak of $70 million in 1998. Witte said that Design House's sales in 2000 would be between $64 million and $65 million and admitted that profitability has been a problem. "We've been having a tough time of it this year, and I think that is one of the reasons why the owners wanted to sell the business."