VIRGINIA BEACH
It started in a New York housewife's kitchen 57 years ago. It could end in a Delaware courtroom.
On Wednesday, five days after Lillian Vernon Corp. laid off half its year-round work force, the catalog and Internet retailer filed for Chapter 11 bankruptcy protection in Delaware.
The company, which became a retailing icon by selling low- cost personalized gifts and gadgets, has determined that "a sale or orderly wind down of the debtors' business is in the best interest of all stakeholders," said Robert J. Eveleigh, its chief financial officer, in the bankruptcy filing.
The filing was not a surprise. Last week, the chief executive of Lillian Vernon said the bankruptcy track was a possibility.
"I was very sad to hear the news today," said Lillian Vernon, through her oldest son Fred Hochberg, who spoke with his mother Wednesday. Vernon, 80, founded the company as a newlywed in 1951 and was its chairman when it was sold five years ago.
"The Lillian Vernon company was a great American success story," she said. "Only in America could a young woman immigrant build a public company and a brand known to millions of consumers."
The company asked Wednesday for court approval to hire a liquidator to help it conduct a going-out-of-business sale to pay off debts. T he company already is advertising a sale on its Web site, offering as much as 85 percent off dozens of products.
It also has employed an investment banking firm to explore selling the company, which now has about 189 employees based mostly in Virginia Beach.
Slowing sales and increasing costs over the past decade have led to the bankruptcy, the company said in court documents filed in U.S. Bankruptcy Court in Wilmington, Del. Also contributing were the "significant" quarterly rent payments for its 870,000-square-foot distribution center off Lynnhaven Parkway. Lillian Vernon's headquarters and customer call center are at that site.
An increasingly weak retail environment is proving to be the breaking point not only for Lillian Vernon but other retailers as well. The Sharper Image Corp., another retailer, which has one store in Hampton Roads at MacArthur Center in downtown Norfolk, filed for bankruptcy on Tuesday.
In its filing, Lillian Vernon listed assets and debt of between $1 million and $100 million. It estimates that it owes money to between 5,001 and 10,000 creditors.
Six affiliates of Lillian Vernon - including Lillian Vernon International Ltd., The Corporate Solution Inc. and Rue de France Inc. - also are seeking Chapter 11 bankruptcy protection. Lillian Vernon is asking the court to jointly administer the cases.
Among local companies owed money in a 112-page listing are The Virginian-Pilot, Food Lion store 1333 in Virginia Beach and Forbes Candies Inc.
The 30 largest unsecured creditors are owed $11.6 million. The top four unsecured creditors are Smart Post, which is owed $2.2 million; Direct Holdings Worldwide, a former owner of Lillian Vernon, which is owed $1.4 million; Gift (VA) LLC, $1.1 million; and FedEx Corp., $990,360.
Lillian Vernon also said it owes about $15.5 million to secured lender Wachovia Bank, and roughly $7.5 million to investors.
The company is so crunched for cash that it is unsure whether it will be able to keep its lights on. The retailer is asking the court to prevent utility companies from shutting off electric, gas, sewer, water and telephone/data service. The company's monthly utility bill averages about $130,000, according to the filing.
The company has "insufficient available cash to meet ongoing obligations necessary to run their business, accomplish their business goals and effect their reorganization," Eveleigh wrote. "As a result, the debtors urgently need credit and additional capital to continue their business and operations."
Sun Capital Partners Inc., a Boca Raton, Fla.-based private investment group, bought Lillian Vernon in May 2006. Shortly after the acquisition, the retailer's headquarters was moved from White Plains, N.Y., to the Virginia Beach distribution center that it has operated since 1988. Richard A. Hurwitz, Sun Capital's spokesman, did not return a call for comment Wednesday.
Over the years, Lillian Vernon Corp. grew to become one of Virginia Beach's largest corporate citizens. Vernon gave up control of the then-publicly-held company in 2003, when it was sold to two companies that formed a partnership called Direct Holdings Worldwide.
Recent years have been difficult financially for the retailer. Lillian Vernon has lost money every year since 2000, Michael D. Muoio, its chief executive, said on Friday. It had sales of $156.7 million in its fiscal year that ended in June, he said.
After Muoio took over leadership in June 2006, he pledged to restore the company. Muoio did not return calls for comment Wednesday.
"I told her the day I joined the company that every fiber in my brain and in my body is dedicated to getting her name back to the iconic status it deserves," Muoio said in December 2006, recalling a conversation with the company's founder. "Those were the right words. I think that brought a tear to her eye."
A hearing on the case is scheduled for today at the Delaware bankruptcy court.
Bloomberg News, The Associated Press and staff writers Carolyn Shapiro and Tom Shean contributed to this report.
Gregory Richards, (757) 446-2599, gregory.richards@pilotonline.com
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oh well look on the bright side
I was one of the people laid off a week ago.i guess steve roles could look for another job which i seriously doubt any one would hire him cause he is one of the reasons why lillian vernon is going down.didnt mike m say other companies were interested in buying lillian vernon. if so buy why arent they buying it now.if they do buy lillian vernon get rid of the darn management and hire new ones
My condolences...
...on everyone being laid off. It may seem like the worst time in your life, but this is a BIG positive. I've been laid off twice and it always ended up in a BIG improvement in my career. Be patient, good things await!
That being said, doesn't LV have a documented severance package as part of their benefits? I don't know of any large company that doesn't. Yet from what I'm reading, they are all over the board on who gets what, opening themselves up for a HUGE lawsuit. LV is starting to sound more and more like it's being run by a group of monkeys than business executives.
bottom of the barrel
Well now they have told the remaining people that they will not get any accrued vacation pay like everyone else has gotten.(Unless they just go ahead and quit now). But by staying there til the end they get screwed over with the vacation pay. Everyone left should just take their vacation now, no one would be there to work! What a mess!! They should not do those guys and gals there like that after they have stuck in there til the end with them.
lv
the first group laid off in december got a severance package ***if they did not talk *** they were told to not talk to the press, they weren't allowed to clean off their desk, of any personal items( some one else had the task of doing it for them). they were given papers to sign that had in bold print across the top do not sign before contacting a lawyer. the second group was expecting it to happen just didnot know the day it would. when it did,( unlike the first group who were led to believe they were going to a training class, when they were asked to go to a meeting room) knew and actually had time to clear off their desk, say goodbye to cherished friends. knew what to expect, their two week pay check and any vacation time they had still not used, if you were paid by direct deposit it was already a done deal, if you you got your papercheck before leaving that day. the paper work was short and sweet. it was your separation papers. no speak to a lawyer first, no pages and pages of explanation. the third group remaining were to be paid today but because of the bankruptcy were told you are getting paid just a couple days later. those left have nothing on their desk but paper and pen.
Business is still going on at LV
There are still hundreds of calls coming in and they do have alot of loyal customers. There are still people out there who love LV products. And the talented, hard working people who are still there must be there because they want to be. Surely they can find jobs elsewhere when the time comes.
LV
I just want to say I worked at LV when I lived in VB ten years ago and they had the laziest employees I have ever worked with. They were constantly messing up orders and the managment there was too scared to say anything to certain groups of people so they got paid to do nothing so this company and it's employees are getting what they deserve.
Why not Unionize? DEMs & All us Taxpayers Lose too. Think again
WOW, why they did not unionize years ago? They would still have jobs selling crap. Us other hard working taxpayers could have footed the bill for all their company mistakes. Of course we all support the Democrat for President to guarantee getting bailed out for our support. When will they realize the LV product/business no longer attracts customers. Who needs embroidered & initialed paisley watchmacallits anyway? Go find a job & get on with life. Do you think neighbor STIHL would not downsize & make drastic changes to their product if they had customer demand decline-like FORD did? Move on, everything changes, the weather, trends in demand for products & GIFTS too. Or choose the EZ button-vote in the democrat for president. Oh yes BC or HRC will save us from mean & mismanaged companies & every other issue that disrupts our life. All working Taxpayers unite & send money now to LVs dwindling crew so they can have their pie & eat it too. But hey, now I cannot pay my bills. Oh its OK the government will help just remember vote BC/HRC they will save us. Think again, get real. Go get another job!
please be accurate
Bankruptcy laws set priorities regarding the payment of creditors in the following order: salaries, taxes, secured creditors and lastly unsecured creditors. None of the employees will go unpaid for their work.
Today is the first day of the rest of your life.
Unfortunately this has been unfolding since Sun Capital acquired LV in May 2006. Check out their record. They do not care about the employees or the community. Mike M was either a divine fool or a well paid puppet.
I wish all the fine folks that were employees at LV the best. Keep the faith. In particular, my heart goes out to the numerous employees that believed in the new leadership and left the home of LV in White Plains, NY. They uprooted family to try to renew this company. Also, to those that Mike M. persuaded to follow him to Virginia Beach from Wisconsin. Note the number of those that purchased houses, moved family while he did not.
As they say, this is business. I hope you all find businesses with a conscience but they are becoming so few these days.
caring
I dunno.... the long term core employees who are still there, yes, probably do care. But the new kids on the block mgrs, I don't know why they are there now, or were there to begin with. They managed to crash the company. I don't believe they ever cared about the customers, the product, the company or the hired help. But hey, it's the 2008 & in America we don't care about anybody. It's all about the numbers.
Yeah, well it was PEOPLE who were trying to order and were on hold this past season. Mgmnt so busy looking at numbers, they couldn't pick up the phone and take a call and increase sales. They had to beat us down to get off the phones fast, even in off Season when the calls were slower, when we could have sold more. Maybe that was why sales were down. For all the money spent on automated voice systems and fancy piece of cr*p computer systems versus our low wages, we could have out produced the automated systems. I know, bcuz we used to. Check those numbers. We used to have a Call Center full of reps selling, selling, selling. Lillian took care of her people.
Love the Good Ship sinking analogy.
Get those resumes ready!
Don't be stupid---get out while the getting is good. Believe me---the executives are already pounding the pavement looking for a new job, and you should be too!
A lot of great people lost their jobs---a lot more will lose theirs in the next few days---be careful out there----get out now, before you start working for free!
Do not confuse good memories---with a loyalty that is worth following to the end. The good ship LV is sinking and sinking fast---faster than you think!
all gone
too bad they did not get rid of their call center MGMT team years ago before they were able to retire comfortably and sit back and watch the ending of what they actually created(the mess) unfold on the news. The click is gone now...I wish the people remaining could build it back up but I doubt that can happen. The call center MGRS there now are GREAT and really care about the company not just themselves.
Very sad days ahead
The sadest part of the whole story, is that Ms. Vernon's name gets run through the muck in all of this. She built a fabulous business and it would have been great if her legacy could have lived on.
Of course, the second sadest part, is the people who will be let go with no severance. Based on the bonuses that have been paid to the executives, you would think they could have squeeked out a little extra for those left to turn out the lights. Corporate America strikes again!
maybe
If their products weren't crap, people would buy them.
Oceana needs a landing field
Oceana needs a landing field. If the Navy can raconteur the City to divert London Bridge Rd again, problem will be solved. LV will be empty. Look at all that land. The Navy said don't build there way back when. Solutions, not problems.
when I worked at LV
When I worked in the LV Call Center we were paid more or less depending on the quality of our work. We were monitored for every single second when we were on the phone. My only benefit was that I had a part time job, hours subject to calls coming in. I earned every single cent I was paid. I think any pay for Quality Achievement should be held back for the Management who has mismanaged LV. How have these debts accumulated?
This parallels a lot of what our US Govt is also doing. Over-spending, paying the wrong people and not making proper use of assets. Not listening to the little people at the bottom who do see how things could be fixed. I am so sad to see LV crash. It will be even worse for more people if the US economy goes bankrupt.
Some speculate ** tanked LV bcuz years ago ** wanted LV & Miles Kimball to be one catalog company. Since Sharper Image also filed today, some are speculating maybe both to be bailed out by a catalog conglomerate, which now owns Miles Kimball & others. It would be great if that conglomerate were able to use the VB Distribution & Call Center - doubt it tho' - just pondering...
So Long...Farewell...
Will this company make it through 2008? Is this the start of more to come? time will tell.
This means...
They just told their employees that they have enough money to make it thru April. This mean they have till then, more likely sooner, to find another job!
update
They just told their employees that they have enough money to make it thru April. What does that mean? Will they get paid for continuing to work there?
No comfort
All this really means is there will be more money left over to send big execs off with huge paydays when everyone else is let go with nothing.