Paneltech files for bankruptcy

Hoquiam-based composite panel manufacturer Paneltech International filed for Chapter 11 bankruptcy this week as the company works to reorganize operations amid mounting debt and unexpected decreases in sales.

Paneltech has served as a prominent local example of green manufacturing, producing resin-reinforced composite panels out of recycled materials. The 16-year-old company has recently reported declines in commercial and military sales of its household countertops, construction frames, ballistic armor panels and other products.

Company President and CEO Roy Nott and Chief Financial Officer Scott Olmstead filed bankruptcy papers Wednesday acknowledging difficulties keeping up with increased debt after expected military contracts and other sales failed to materialize. They requested court approval to continue operations as the company works to refocus its production toward growing markets.

The market environment remains difficult in the short term, but the business is on the right track for long-term success, Olmstead wrote to the court. I believe we will be profitable after reorganization so long as we are able to continue operations through the life of this bankruptcy case.

Olmstead wrote that the company took on significant debt as part of an extensive expansion in 2009 aimed at keeping up with potential demand for military armor panels and other contracts. The company has since struggled to keep up with debt payments when those armor orders dropped off.

Military orders did not increase as expected, and sales in other areas declined with the drop in manufacturing over the last few years, Olmstead wrote. In order to meet the bottom line in these circumstances, (the company) was forced to lay off employees, and Leroy Nott and I skipped paychecks. Despite these efforts, (the company has) been unable to pay their debts as they have come due.

The Chapter 11 application, filed Wednesday in U.S. District Court, lists more than $1.2 million in unsecured debt to more than 50 creditors. Those debts listed more than $350,000 owed to the Starbucks Corporation in a disputed liability claim and dozens of other corporate expenses.

Court records also list about $1.7 million in loans from Anchor Bank.

Olmstead said the company employs 39 people. He noted the company recorded more than $17 million in sales in 2008, saying he believes the company remains worth more as a functioning business than it would if its assets were liquidated.

He asked for court approval to continue operations and payroll as the company works to return to profitability.

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Paneltech files for bankruptcy