As part of its debt-driven restructuring, packaging and tubing manufacturer Tekni-Plex Inc. will shut another of its Dolco Packaging plants.
Meanwhile, Somerville, N.J.-based Tekni-Plex is investigating possible accounting irregularities reported by an unidentified employee.
Dolco's plant in Memphis, which makes polystyrene foam, will begin closing Sept. 11, the company said in a July 29 filing with the Tennessee Department of Labor and Workforce Development. The plant, which employs 83, will be shut down by Nov. 30.
Tekni-Plex in April closed a similar facility in Fullerton, Calif., laying off 60 workers.
``Our plant guys have made valiant efforts to keep those plants profitable,'' Chief Executive Officer Paul Young said in an Aug. 6 telephone interview. ``Despite those efforts, we could not keep the locations [open], for the overall health of the company.''
He would not speculate on future downsizing at Tekni-Plex, which employs about 3,100 in North America, Asia and Europe in its Colorite Polymers, Tekni-Films, PureTech Plastics, Dolco Packaging and American Gasket & Rubber Co. divisions.
The restructuring was needed after Tekni-Plex failed to make a $20 million interest payment in December, causing it to default on part of its debt. As a result, private equity firms Oak Tree Capital Management of Los Angeles and Avenue Capital Group of New York now own more than 80 percent of the firm.
In the acquisition, $340 million of Tekni-Plex's debt was converted into equity for Oak Tree and Avenue. That step will save Tekni-Plex $40 million in annual interest payments, Young said.
The company has not shown an annual profit since 2003. Tekni-Plex reported losing almost $87 million in the first nine months of its fiscal year, which ran through June double what the firm lost during the same period in 2007. Tekni-Plex's full-year loss for fiscal 2007 was $61 million. Nine-month sales for fiscal 2008 were up 1 percent to $545 million.
Tekni-Plex is investigating allegations that the company may have incorrectly recorded certain inventory and accounts receivable for its Colorite division from 2000-06.
On June 26, the company placed Chief Financial Officer James Condon on paid leave pending the outcome of the investigation. Gary Schafer, a director at Chicago-based turnaround firm Alix Partners, was appointed interim CFO on June 30.
Tekni-Plex spokesman Michael Freitag's only comment on the investigation was, ``These things have to run their course,'' he said.
CEO Young joined Tekni-Plex in June, bringing 20 years of experience as an executive with Graham Packaging Corp. and its predecessors, Owens-Illinois Inc. and Continental Can Co. Young said the decision to close the Dolco plants was made before his arrival at Tekni-Plex.
``It's not a Dolco issue per se, but one of looking at what needs to occur within the larger look at all of the Tekni-Plex units,'' he said.
Young added that he wants Tekni-Plex to integrate its various businesses, eliminate areas of overlap and develop a comprehensive plan for dealing with raw materials costs.