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Declaration in Support Declaration of Lee Diercks

Declaration in Support Declaration of Lee Diercks

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Published by Chapter 11 Dockets
Declaration in Support Declaration of Lee Diercks
Declaration in Support Declaration of Lee Diercks

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Published by: Chapter 11 Dockets on Mar 25, 2013
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07/10/2013

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2021213-1
 
IN THE UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF DELAWARE
In re:NAMCO, LLC,
1
 Debtor.))))))))Chapter 11Case No. 13-
DECLARATION OF LEE DIERCKSIN SUPPORT OF CHAPTER 11 PETITION AND FIRST DAY MOTIONS
I, Lee Diercks, do hereby declare, under penalty of perjury, that:1.
 
I serve as a Chief Restructuring Officer of Namco, LLC (“NAMCO,” or the“Debtor”), a limited liability company duly organized under the laws of the State of Delaware. Ihave served in this capacity since March 15, 2013. I am also a partner of Clear Thinking Group,Ltd. (“Clear Thinking”). Clear Thinking provides financial and restructuring advisory andservices for distressed and bankrupt entities. Clear Thinking was engaged by NAMCO onMarch 6, 2013, the date I first began working closely with NAMCO.2.
 
Since March 7, 2013 and in my capacity as Chief Restructuring Officer, I havebeen extensively involved in the Debtor’s chapter 11 preparations and the events immediatelyleading up to the Debtor’s chapter 11 filing.3.
 
On March 24, 2013 (the “Petition Date”), the Debtor filed a voluntary petition(the “Petition”) for relief under chapter 11 of title 11 of the United States Code (the “BankruptcyCode”), to preserve and maximize the value of the Debtor’s chapter 11 estate. I submit this
1
The Debtor in this case, along with the last four digits of its federal tax identification number, is Namco, LLC(5145).
Case 13-10610 Doc 3 Filed 03/24/13 Page 1 of 25
 
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 declaration (the “Declaration”) in support of the Petition and the relief requested by the Debtor inthe various motions and applications (collectively, the “First Day Motions”) filedcontemporaneously herewith, and to provide an overview of NAMCO and its currentcircumstances. I have reviewed the Petition and First Day Motions, or have otherwise had theircontents explained to me, and it is my belief that the relief sought therein is essential to ensurethe uninterrupted operation of the Debtor’s business and the success of its chapter 11 case.4.
 
Except as otherwise indicated, the facts set forth in this Declaration are basedupon my personal knowledge, my review of relevant documents, information provided to me byemployees with responsibility for the relevant business and corporate matters addressed in theFirst Day Motions, or my opinion based upon experience, knowledge, and informationconcerning the Debtor and the industry in which it operates. I am authorized to submit thisDeclaration on behalf of the Debtor and if called upon to testify, I would testify competently tothe facts set forth herein. Any capitalized term not expressly defined herein shall have themeaning ascribed to that term in the relevant First Day Motion.
I. BackgroundA.
 
 The Debtor’s Business
5.
 
NAMCO is headquartered in Manchester, Connecticut. NAMCO was founded in1962 as a retailer of pools, pool accessories and other recreational equipment in the Northeastand Mid-Atlantic United States. NAMCO also owns and operates a chemical repackagingfacility in Manchester, and sells chemicals in NAMCOs retail stores, sells product on awholesale basis to distributors (under a different label), and through its website;www.namcopool.com. Due to its size and buying power, NAMCO is often able to offer thelowest prices in the markets it serves without compromising its margins. Additionally, many of NAMCO’s competitors are single location, low-volume retailers that are not able to offer product
Case 13-10610 Doc 3 Filed 03/24/13 Page 2 of 25
 
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 selection and customer service on par with NAMCO. NAMCO currently operates thirty-seven(37) full-line retail stores in ten states throughout the Northeast and Mid-Atlantic, with storesizes ranging from 11,000 to 60,000 square feet. Additionally, NAMCO has approximately190,000 square feet of office/distribution center space, and 40,000 square feet of space withrespect to a chemical re-packaging facility, located next to each other, in Manchester CT.6.
 
In December 2003, NAMCO was acquired by Whitney Equity Holdings Corp(“Whitney”) one of the country’s oldest private equity groups, from the Radocchia family. Inconnection with the purchase, NAMCO was organized in 2003 as a Delaware limited liabilitycompany. In the years following the transaction with Whitney, NAMCO has faced severaltransactional, operational and technological challenges; as outlined in the following timeline:2005: NAMCO completed the acquisition of Branch Brook Co., a New Jersey-based retailer of pool products and supplies for approximately $35M in January2005. The acquisition added six retail locations to the NAMCO platform andexpanded NAMCOs geographic coverage in the Mid-Atlantic. Significant timeand money was spent during 2005 to fully integrate the Branch Brook acquisition.2006: Following the acquisition of Branch Brook and departure of NAMCOsCEO, Stephen Radocchia, NAMCO hired a new CEO in late 2005 who launcheda corporate reorganization to create a more operationally-focused Company,which included the hiring of numerous, higher-level executives. In addition,NAMCO replaced approximately 20 store managers with a new layer of highly-compensated, middle managers who were deemed to have stronger operationalskills. During the transition period, NAMCOs CEO also made the decision tobegin work on upgrading NAMCOs existing point-of-sale (“POS”) system. As aresult of NAMCO’s cultural overhaul and the hiring of highly compensated seniorand middle management teams, NAMCO’s operating expenses increasedsignificantly in 2006.2007: Under the direction of the new NAMCO management team, the new POSsystem was unsuccessfully implemented in March 2007. Upon installation, it wasfound that the new system was not properly integrated and significant businessdisruptions were experienced as a result. The collapse of the POS system causedcustomer deliveries to be delayed or shipped incomplete; store replenishmentsystems to be disrupted; and customer relationships to be strained. Due to thetroubles encountered from the POS conversion, NAMCO lost significant revenueand incurred unnecessary additional expenses in 2007. Subsequently, an internal
Case 13-10610 Doc 3 Filed 03/24/13 Page 3 of 25

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