Citing competitive pressures and rising resin costs, housewares molder Cornerstone Products Inc., dba Custom Molded Plastics Inc., has filed for Chapter 11 bankruptcy protection.
The firm issued an emergency request to Judge Brenda Rhoades for use of cash collateral to continue operating its business, relying on an $11.6 million loan from Fleet Capital Corp.
The privately held injection molder, whose manufacturing facility is in Durant, Okla., filed July 5 in U.S. Bankruptcy Court in Plano, Texas. Cornerstone operates corporate offices in Plano and has sales offices in Atlanta, Detroit and Bentonville, Ark.
Officials said operating under bankruptcy protection gives the company a chance to solidify its business, preserving operations for its 300 employees.
``We view this as a good thing for the company,'' President Bo Rosenthal said in a July 8 telephone interview. ``We fully plan to continue operations and never miss a beat. Our intent is to enter bankruptcy, recapitalize and exit as soon as possible.''
Rosenthal said the reasons for the bankruptcy filing are pretty simple, including rising resin costs and reliance on an ever-decreasing number of retailers.
``Ninety percent of housewares is concentrated on 10 retailers,'' he said. ``We do business with all the majors.''
Despite sales that grew from $47.5 million in 2003 to $96 million in 2004, Cornerstone's resin costs doubled in 2004, according to court documents. In 2003, it consumed 60 million pounds of resin; in 2004, it processed more than 140 million pounds.
Those increases, coupled with static retail prices, caused Cornerstone to experience financial losses. In effect, it diminished the company's ability to service its credit facility and real estate and equipment loans.
In its court filing, Cornerstone reported assets of nearly $60 million, and debt of $65.7 million. Its largest unsecured creditors include Triangle Tool Corp. of Milwaukee, at $5.9 million; Formosa Plastics Corp. of Livingston, N.J., $2.8 million; and Akro-Mils Inc. of Akron, Ohio, $877,605.
Triangle Tool has asserted a lien against the molds, according to court documents.
Although Cornerstone molds its own products at the 520,000-square-foot site in Durant, the firm also relies on contract molders in Ohio, Texas and Southern California. Cornerstone owes those molders more than $3 million, the documents said.
``All of the molders are still on board with us,'' Rosenthal said.
Cornerstone began business in 1978, largely as a supplier to Rubbermaid. During the years, it branched out, and Cornerstone began making its own product line in 1999, when Rubbermaid brought its contract molding in-house.