Infiltrator Systems Inc., an innovator in the use of recycled plastics for septic leach field systems and storm-water drainage, has filed for Chapter 11 bankruptcy protection. But an Infiltrator official said the move does not spell the final chapter for the firm.
The company, based in Old Saybrook, Conn., sought protection Feb. 6 in U.S. Bankruptcy Court in Hartford, Conn. So far nearly 70 creditors seeking $1.14 million in payments have filed claims, according to court records.
The firm also faces at least one pending product liability lawsuit. A construction company in June filed suit against Infiltrator in U.S. District Court in New York.
Infiltrator broke onto the scene a little more than a decade ago with interlocking, injection molded chambers designed to allow fluids to seep slowly into surrounding soil. Unlike similar extruded pipe products, Infiltrator's corrugated chambers are open on the bottom and contain narrow, horizontal slots. Both post-consumer and post-industrial polyolefins figure prominently in the chambers' composition. The firm holds nine patents on its products and the gas-assisted method of producing them, according to a search of U.S. Patent and Trademark Office records.
Privately held Infiltrator reported $60 million in 1996 sales and employs nearly 400. It operates plants in Winchester, Ky., and Ogden, Utah.
The firm's products, technology and management style were touted in a January 1997 article in Inc. magazine. And the company still has a lot going for it despite the bankruptcy, Jim Nichols, co-founder, president and chief executive officer, said in a March 12 telephone interview.
Nichols called the bankruptcy filing a ``strategic move'' related to product liability lawsuits against a minor product line: the Maximizer storm-water drainage chambers used to drain water from commercial parking lots.
``We didn't design the chambers quite strong enough,'' he said, adding that the product ``worked fine'' during the company's testing, but did not stand up as well to the kind of abuse dished out by contractors during installation.
``A number of systems failed in the field,'' Nichols said.
Infiltrator withdrew the Maximizer product from the market in August and expected its insurance carrier to help settle liability claims raised by a number of customers. But Infiltrator and its insurance company got into a dispute over coverage of customers' claims, Nichols said.
Infiltrator plans to bring legal action against the insurance company to compel it to help cover the costs, Nichols said.
``We filed for Chapter 11 to gain control of this situation,'' Nichols said, adding that filing bankruptcy was in the best interests of everybody, even those with liability claims against the company.
``We would not have been able to settle the claims by ourselves,'' he said.
Other than the issues with the Maximizer line, which represented 3 percent of Infiltrator's sales, the company is still going strong, Nichols said.
``The rest of our product line is still healthy,'' Nichols said, referring to the line of injection molded chambers used to replace traditional pipe and stone for residential, commercial and community septic system leach fields. ``We will be profitable this year on our other products. Other than the extra paper work, it's pretty much business as usual.''
The company also has been involved in patent litigation, particularly with PSA Inc. of Topsham, Maine, which makes a similar product for septic systems. But Nichols said those suits were a fairly routine matter of protecting Infiltrator's patents and have no impact on the current situation.
Infiltrator, which grew from three employees in 1986, had planned to go public in a few years. Those plans may be delayed until the firm can show Wall Street it can emerge from Chapter 11 and still turn a steady profit, Nichols said.
Nichols credits strong relationships with suppliers and customers in easing Infiltrator's way through the financial trouble.
``We expect to emerge from this as strong as ever,'' he said.