Logan Industries Inc., the Spokane contract electronics manufacturer that filed for Chapter 11 bankruptcy protection last spring, has emerged from that reorganization filing after resolving a dispute with a key lender.
U.S. Bankruptcy Court Judge John Klobucher dismissed Logans Chapter 11 filing on Aug. 1, leaving in force an earlier court order that allows Logan to use its available cash to pay bills, but requires it to pay off nearly $2 million in bank loans by the end of the year.
Company owner Harold Alexander, a former Telect Inc. executive, says the filing simply gave Logan time to work out its issues with its lender, and to begin selling off surplus inventory that had piled up when the technology market weakened. The company was current with its suppliers and creditors, he says.
Alexander says the companys brief stint under Bankruptcy Court protection allowed it to accomplish those goals, and that Logan is now making modest gains toward recovery.
Logan, which was spun off from Liberty Lake-based Telect in 1999 and once employed 200 people, filed for protection from creditors in March after a significant decline in the technology industry had cut sharply into its 2001 revenues.
At the time of the March filing, Logan owed its main lender, Bank of America, about $2.1 million on equipment loans and a revolving line of credit. Logan had pledged to the bank as collateral nearly all of its assets, including its cash and receivables, and said in court documents that bank-mandated restrictions on those liquid assets would make it impossible for it to pay its bills and ultimately to remain in business.
Late last spring, however, Logan and Bank of America reached a court-approved agreement through which, under specific conditions, Logan could use its available cash for normal operating expenses and debt payments, rather than setting it aside as frozen collateral. In the agreement, Logan agreed to pay off both its term loans to the bank by July 22 and its revolving loan by Dec. 31, and consented to other conditions.
Alexander says Logan is on track to meet those obligations and has since paid down its debt by half. He says whatever is left owing on the revolving loan likely will be refinanced through another bank before the end of the year.
Logan is located in the Spokane Business & Industrial Park and currently has about 70 permanent employees. Alexander says that in recent weeks the company has been able to call back some workers it had laid off during the previous year, but that they technically are employed by a temporary help agency. He says Logan has between five and 15 temporary workers on board at any time.
Logan, like other contract manufacturers here, suffered as the high-tech industry crumbled in 2001. Its sales that year totaled about $8.2 million, down from $14.9 million in the previous year, according to documents it filed in Bankruptcy Court.
As of the end of May this year, Logan had posted net sales of about $2.4 million, slightly below what court documents said it had budgeted. For the year, the company has budgeted for net sales of $8.4 million. Alexander says Logan budgeted for gains in the second half of this year, but its too early to tell whether the market will improve.
Things are at least stable at this point, he says. What we have been doing is trying to gauge what is going to happen.
Logan primarily assembles cable harnesses that are used in electronic devices, but also builds finished electronic assemblies. Among its customers, according to its filing, are Agilent Technologies Inc., Output Technology Corp., and Avista Labs.
Alexander launched the company in 1999, after buying Telects diversified-products group, which did contract manufacturing. Logan began with about 130 employees and expected its annual sales in its first year to top the $10 million it had generated as a Telect division. It later, with a partner, opened a plant in Guadalajara, Mexico, that employed 30 people, but sold its interest in that plant to its partner last summer, Alexander said.
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