Canac Kitchens moves into ex-LesCare plant.

Canac Kitchens of Toronto is gearing up for business at the former North Carolina plant of bankrupt LesCare Kitchens Inc.

The wholly-owned Kohler Co. subsidiary, which bills itself as the largest supplier of frameless cabinets in North America, last month started hiring some of the more than 400 people it expects to employ within the next three years at an average wage of $14 an hour. Canac plans a $19.7 million investment at the 310,000-square-foot plant, situated on 30 acres in Statesville.

Canac bought the plant plus equipment, for a reported $7.1 million in April. LesCare, which filed for bankruptcy earlier this year, operated it for less than two years.

Open-Armed Welcome for Canac

Leaders in North Carolina and the area around Statesville, where imports have cut heavily into furniture industry employment, welcomed Canac with kind words and nearly $800,000 in incentives. The One North Carolina Fund, which exists to help attract businesses to the state, made a grant of $250,000 based on expected employment and investment. Iredell County offered $342,780 in incentives and the City of Statesville anted $187,150 on the same basis.

"We're delighted. This is like a No. 1 draft choice for us," McKay said.

"Canac's decision to locate in Statesville means 400 new jobs for 400 hard-working North Carolinians," Gov. Mike Easley said.

North Carolina's vast pool of unemployed furniture workers was one of the reasons LesCare gave for locating its plant in a former Statesville furniture plant in early 2003. (See Wood & Wood Products August 2003.)

LesCare officials told W&WP then that it had hired 120 people and invested $20 million in renovations and new machinery, including a $6 million Cefla flat-line finishing system. In that same report, James Lestorti, who co-owns LesCare with brother, Louis, said the company had $109.7 million in sales in 2002, before investing in the Statesville facility. The 60-year-old company then moved its headquarters from Waterbury, CT, to Statesville and scaled back operations at its plants in Waterbury and Southington, CT.

LesCare's Struggles

But financial trouble was brewing. According to documents flied in federal bankruptcy court, eight months after the May 1 startup in Statesville, independent auditors Kass & Jaffe of White Plains, NY, wrote, "The company is in technical default on bank loan covenants and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern."

The auditors based their Dec. 31, 2003, opinion on a 2003 net loss of $4,061,342, the fact that current liabilities exceeded current assets by $9,244,459 and total liabilities exceeded total assets by $30%256, plus uncertainties the company faced regarding its loan agreements.

The company, which, like Canac, was offered city and county incentives in Statesville, never met the employment and investment goals necessary to collect them.

"Our incentives were pay as you go. They have to meet certain things and then they're eligible for certain things," said Jeff McKay of the Greater Statesville Development Corporation. The money was never paid out.

As creditors' lawsuits mounted, LesCare dosed the Statesville plant in late 2004, then ceased its Southington and Waterbury operations in January of 2005. Creditors forced the company into Chapter 7 involuntary bankruptcy, which was changed to Chapter 11 bankruptcy, allowing reorganization.

The Waterbury Republican-American quoted LesCare officials as saying previously that the company's finances had been stretched by investments in North Carolina, a distribution deal that faltered, and by investments by affiliates in building a Pond Place medical complex in Prospect, CT.

Papers filed with the court showed LesCare experienced a 2003 net loss of $4.1 million on sales of $31.8 million and a loss the first six months of 2004 of $2.6 million on sales of $13.9 million. Assets were listed as $13.5 million and liabilities as $16.3 million.

Bankruptcy proceedings continue in the New Haven, CT, court. Two calls to Barry Feigenbaum, the Hartford-based attorney representing LesCare, were not returned. Phones were unlisted at the addresses given for both Lestorti brothers in court papers.

LesCare's Web site remained active as of June 1, but made no reference to the company's financial struggles.

LesCare was formed by the Lestorti brothers' father, Louis A. Lestorti Sr., in 1945. It began making high-pressure laminate cabinets, but branched out into hardwood cabinets.