Kelly-Moore Paints, which moved its Bay Area headquarters to Irving, Texas, last year, is temporarily ceasing operations at its Dallas-area paint manufacturing plant and furloughing about 700 employees across the nation as it seeks new investors to bankroll operations.
The company faces thousands of lawsuits seeking compensation for asbestos-related injuries received from its products made prior to their discontinuation in 1981. The company is dealing with cash-flow issues because of legal settlements related to those cases, as well as unpaid sales and use taxes and unpaid back rent, Kelly-Moore Paints said in a statement this week.
The company is actively seeking new investors to help facilitate a turnaround of what it calls "America’s largest independent paint company," including new funding sources or partnerships, according to the statement.
"I am saddened by having to furlough valued employees, and our sympathy goes out to each of them during what we hope will be a temporary, short-term absence while we seek new capital," CEO Charles Gassenheimer said in the statement. "This was an important and necessary step as we deal with pressing financial issues and try to preserve all our options."
Gassenheimer was not immediately available to CoStar News to discuss Kelly-Moore Paints' future further. Less than a year ago, Gassenheimer told CoStar News the company's relocation to Texas put the manufacturer closer to its so-called "engine" of the company, referring to the plant at 301 Hurst Blvd. in Hurst, Texas, a suburb near Irving.
"Our manufacturing facility in the Dallas area really is the engine of our company. It made sense to relocate our headquarters close to the engine of our business," Gassenheimer told CoStar News last year.
At the time of the relocation, Kelly-Moore Paints was offered $75,000 of economic incentives by the city of Irving on the condition the company employ at least 30 full-time employees with an average salary of $100,000. The headquarters office doesn't appear to be immediately affected by the company's temporary closure of the 350,000-square-foot manufacturing plant in Hurst.
Prior to being named CEO of Kelly-Moore Paints last year, Gassenheimer led Flacks Group's acquisition of the 77-year-old company. Flacks Group also purchased the Hurst manufacturing facility as part of the group. The new ownership inherited the ongoing legacy liabilities of the company's business, including the legal claims made against it.
In its statement, Kelly-Moore Paints added, "Through the cumulative cash drain caused by legal settlements and the cost of defending ever-continuing case filings, the company’s ability to reinvest in the business — including investments needed to address historical supply chain challenges that were exacerbated by the recent pandemic — has been severely constrained for an extended period of time."
The company has 157 retail stores in California, Nevada, Oklahoma and Texas, as well as dealer stores throughout the country. Most of its stores will remain open as it fulfills orders from its existing inventory, the company said.
For the Record
Houlihan Lokey is serving as Kelly-Moore Paints' financial adviser.