Snokist files for bankruptcy

Amid a pile of debt and safety concerns over its products, Yakima-based Snokist Growers filed for bankruptcy Wednesday, leaving the fate of the food-processing operation and hundreds of seasonal employees in the air.

The 108-year-old company cited orders lost in the wake of a critical federal Food and Drug Administration report and inflexibility on the part of its lender.

Snokist employs more than 600 mostly seasonal workers in its food processing plant in Terrace Heights and several warehouses across the Yakima Valley.

The cooperative is owned by more than 150 growers who bring in their apples, pears, cherries and plums to be canned or turned into fruit cups, purees and juices.

Because apple and pear production is ending for the season, many employees were already in line to be laid off, said Tina Moss, the company's local public relations representative from Enigma Marketing.

Depending on how the company is restructured under the Chapter 11 bankruptcy filing, some warehouse and shipping employees will stay on to move inventory for the next 12 to 18 months. The number of administrative jobs will also shrink, as those duties are no longer needed, Moss said.

But at this time, she said, there's no way of knowing how many will stay.

"There's an unlimited number of options for what happens to the processing plant in 2012," Moss said, but Snokist plans to have some resolution in place in time for cherry season in early June.

The company's financial woes include a debt of nearly $73.4 million to more than 2,000 creditors; its total assets are $69.6 million, according to bankruptcy documents filed in U.S. Bankruptcy Court.

The company's biggest creditors include agricultural lender Rabo AgriFinance at $26.5 million; Community Bank, which is owed $9.5 million for a loan taken out against its Terrace Heights cannery; and Key Bank, owed $1.3 million for a loan taken out against a fruit warehouse in Sawyer.

It also owes more than $315,000 in wages and benefits to employees. But court documents did not provide any additional information.

The bankruptcy culminates a series of setbacks for the company, which was founded in 1903 and was once a powerhouse in the Yakima Valley.

As recently as 2002, Snokist employed up to 1,000 people at the peak of harvest season and worked with several hundred growers. But over the past decade, the company has cut employees and benefits and struggled with a massive strike, falling revenue and, most recently, the contamination complaints from the FDA that scared off customers and reduced sales.

This spring, Snokist voluntarily recalled 3,300 cases of gallon-size cans of applesauce, with six cans in each case, after the food was linked to temporary upset stomachs among nine schoolchildren in North Carolina.

Snokist said it determined that a malfunction of the applesauce cans could have caused spoilage and exterior damage. However, company officials at the time stressed that the FDA never established that the applesauce caused the illnesses.

The recall was followed by an in-depth investigation by the FDA, which said it found nine major food safety violations, including dozens of instances of mold in containers of applesauce and puree that was later reprocessed for consumption.

The FDA also cited leaky fruit containers, fruit flies, bird feathers, and a lack of hand washing sites in the plant's warehouse and production areas.

The U.S. Department of Agriculture, one of the cooperative's biggest customers with its National School Lunch Program, suspended its fruit orders until the FDA's complaints were addressed by the cooperative.

Moss said Snokist immediately set out to resolve the FDA concerns, but the agency took five months to fully approve the company's facilities and products. Meanwhile, the suspension of the USDA's fruit order caused Snokist to lose millions of dollars in sales during those five months, Moss said.

For the current fiscal year, revenue is down by an average of about $1 million per month, she said.

"FDA's action caused an already stressed financial situation to become unworkable," a Snokist release said.

As part of its bankruptcy filing, Snokist's board of directors and management team plan to sell its inventory and other assets to generate the money needed to pay off all the growers and creditors.

The company's news release said that although its lender wants Snokist to liquidate its assets to pay off the debt, it has cooperated while Snokist "explored options."

As for the future of the Snokist name, Moss said there are too many options to speculate. Among them: Snokist could become the landlord while growers come in to use the processing plant; another company could buy the plant and rename it or lease it and have Snokist still operate the facility.

"There's just a lot of different variables," Moss said.

* Reporter Mai Hoang contributed to this report.

* Molly Rosbach can be reached at 509-577-7628 or mrosbach@yakimaherald.com.