Appleton Coated of Combined Locks, Wisconsin, has filed a voluntary state Chapter 128 petition for receivership to allow the company’s operations to continue under the supervision of a court-appointed receiver named by the Outagamie County Circuit Court.
Company officials said the petition and appointment of a receiver will allow Appleton Coated to continue operations under the direction of the receiver, who will lead a process aimed at selling the company’s assets to a buyer who will continue operations.
Appleton Coated is a manufacturer and distributor of coated, uncoated, specialty and technical papers sold under Ethos, Utopia and other brand names. The company’s products are used in commercial printing, textbook publishing, label papers, transactional printing and a variety of specialty and custom applications.
In December 2014, Appleton Coated was purchased by Virtus Holdings LLC, a new company formed by members of Appleton Coated’s management team. The company’s manufacturing facility has an annual production capacity of 400,000 tons on three paper machines, and an adjacent coating and finishing complex with processing capacity of 280,000 tons. The company employs around 570 workers.
“Despite the best efforts of our employees and ownership group and the introduction of new products, this step is the best option at this point,” said Doug Osterberg, Appleton Coated’s CEO. “While the company has made significant progress in diversifying its product offerings and entering new markets, the overall business climate is very challenging, and operating under a state court-appointed receiver is the best route to transition the business to sustained profitability.”
Osterberg stated that profitability in the North American graphics paper sector has deteriorated in recent years due to digitization of communications and currency exchange rates that favour imports. These factors produced a decline in domestic demand, excess capacity and aggressive price competition in the company's traditional coated and uncoated paper businesses, he said. Osterberg also noted that these market conditions combined with recent increases in raw material costs, especially market pulp, yielded lower sales volumes and declining profit margins.
Osterberg said the filing will also relieve the company’s burdensome debt and help attract an appropriate buyer. Operating results, he said, are expected to improve in the near term as the company fills unused capacity by moving into both the high-value graphics and commodity segments of containerboard packaging.
Osterberg said the company’s bank has agreed to fund operations during the receivership and that the business will continue to operate during the transition. He added the company will be able to pay salary and wages and fund benefits for current employees.
“The strategic location of Appleton Coated, coupled with the experience, knowledge and work ethic of its employees and the size and capabilities of its paper making machines and equipment, make it a logical candidate to transition to high value segments of the packaging market,” stated Osterberg. “We therefore, expect, but cannot guarantee that a suitable buyer will be identified who will value the company’s strong workforce and be willing to invest in the future.
“This has not been an easy decision for the ownership group that bought Appleton Coated three years ago,” Osterberg continued, “but market changes and world-wide economic conditions have forced our hand, and as difficult as this decision is, it’s the best move at this point.”
Appleton Coated Files for Receivership
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