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Republic Files Bankruptcy: N.Y. Firm May Buy Employee-Owned Business in Canton

Posted on: Thursday, 16 March 2006, 09:00 CST

By Gloria Irwin, The Akron Beacon Journal, Ohio

Mar. 16--Flood damage, high material prices and skyrocketing medical costs combined to put the employee-owned Republic Storage Systems Co. Inc. into bankruptcy, its president and CEO says.

The Canton maker of school lockers and other steel shelving products filed its Chapter 11 bankruptcy petition on Tuesday.

Republic has 290 hourly and 90 salaried workers, President James T. Anderson said. That's down from about 600 total employees in November 2003.

Republic's workers bought the company in 1986 after it was put up for sale by LTV Corp. Its hourly workers are members of Local 2345 of the United Steelworkers of America, and labor holds three of the seven seats on the board of directors.

Employee ownership would end if the U.S. Bankruptcy Court in Canton approves an offer from Monomoy Capital Partners, a private equity firm based in New York City, to buy the company for $20 million.

Republic expects to terminate its pension plan in the bankruptcy, which Anderson said is underfunded by $8 million.

The plan is $30 million short of the total needed to pay pensions to all eligible employees, he said.

Republic expects the plan to be taken over by the Pension Benefit Guaranty Corp., Anderson said.

Republic was profitable for years before a severe flood hit on July 28, 2003, Anderson said. Republic had to close temporarily, causing it to miss its peak season. Republic also had to remanufacture $5 million in inventory damaged by the flooding.

In all, the flooding caused $11 million in damage. Insurance covered only $5 million of the loss, and Republic had to take out a $5.9 million loan, Anderson said.

Then, in the spring of 2004, steel prices doubled. That especially hurt Republic, which had many fixed-price contracts based on outdated steel prices.

The final blow, though, was medical costs for retirees. Those costs jumped from $800,000 in 1998 to $3.2 million in 2005, Anderson said.

"We just couldn't fund pensions and pay the retiree health-care costs," he said.

Both Anderson and Local 2345 President Adam Niemeyer agreed that business issues that couldn't be controlled caused Republic to file for bankruptcy relief.

Niemeyer said he continues to support employee ownership.

"An ESOP (employee stock ownership plan), if it is administered in the correct manner, is the best way for employees to go. I strongly believe that," he said. "I think we lost sight of what our goals were as an ESOP."

The company "ran out of ingenuity," and was unable to deal with competition, he said.

The union has negotiated a proposed new agreement that includes new profit sharing and incentive programs along with changes in job classifications. Union workers averaged about $30,000 a year under the old contract, he said, but won't do as well under the new proposal.

Niemeyer said a ratification vote has not been scheduled.

The bankruptcy process is intended to save the 400 jobs that remain at Republic, Anderson said. Workers will lose the equity they had built up in the employee stock ownership plan, and the 270 retirees will lose health-care coverage.

Gloria Irwin can be reached at 330-996-3720 or at girwin@thebeaconjournal.com

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Copyright (c) 2006, The Akron Beacon Journal, Ohio

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Source: Akron Beacon Journal (Akron, Ohio)

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