The Industrial Development Authority agreed Tuesday to give Pallet Kraft until early March to pay $28,000 in past-due rent and additional fees, as long as the company’s owner signs a personal guarantee for the debt and a new lease agreement.
The IDA has had trouble getting information from the company located in the county’s industrial park and had begun legal action to start eviction, but Pallet Kraft Chief Executive Officer Michael Olvey appeared before the IDA board Tuesday and asked for more time.
He agreed to the IDA’s terms and said he appreciates all the help the authority has offered his company over the years. He said he wants to keep the company in business in Sylvania.
“We love this community,” Olvey said. “You guys have been great to work with.” He said local people have been like a silent partner in his business. “We have so much admiration for those people,” he said.
Olvey said IDA Executive Director Gayle Boykin has been tremendously helpful and was part of the reason why the company came to Sylvania in the first place. He lives in Statesboro and said there were many other places he could have chosen to locate his business.
Olvey said Pallet Kraft has been devastated by the economic downturn and has been barely hanging on for the last six months while doing massive amounts of paperwork necessary for an initial public offering of stock.
He said underwriters have told him that $6.5 million worth of stock has been pre-sold. The overall offering will be held in at least three stages and will total $22 million. He said the money from the offering will start coming in before the end of February and he will settle his debt with the IDA then.
“As soon as everything meets up with SEC requirements, money starts pouring our way,” he said. “I expect funds from the offering no later than the 20th” of February.
Olvey said plans eventually call for opening plants worldwide that will operate his patented machinery to make his patented corrugated pallets. He said his pallets are lighter, cheaper and more sanitary than wooden pallets and can be customized to fit customers’ needs. They are meant to be used one time and then recycled.
The company operated rent-free in a building in the industrial park for five years before it was supposed to start paying rent in May of 2009. Boykin said Pallet Kraft has paid only one month’s rent – about $3,500. She said that leaves $28,000 due in rent.
The company owes an additional, undetermined amount of money because it didn’t have as many employees as it had promised to have. The IDA hasn’t been able to calculate that amount because the company has failed to provide information about employee counts, despite the IDA asking repeatedly for the information, Boykin said.
She estimates that debt could be $10,000 to $15,000.
“We’d like to work with you and have you here if you can make us whole,” said IDA board member Jim Adams. “All your problems with us go away when you pay your rent.”
IDA board member Jimmy Griner said he would like to see the company succeed and stay in Sylvania, but the board has a duty to protect the taxpayers’ investment in the industrial park. “We’ve been backed into a corner,” he said. “I don’t like being in a corner.”
Olvey said he probably should have closed the plant six months ago while paperwork for the IPO was completed and opened up again somewhere else. He said he could have found “another building because they’re everyplace.”
But he didn’t want to put the remaining employees, which he says numbers about nine, out of work. He said they are vital to the company’s success and he wanted to keep them on the payroll.
Closing the business “would have been the smart thing to do,” Olvey said. “Trying to stay with it was the right thing to do.”
He said the stock offering has gotten a boost recently because of Johnson and Johnson’s Tylenol recall stemming from problems with contaminated wooden pallets. Wooden pallets can be used at a poultry plant one week, a candy plant the next and a pharmaceutical company the next, he said.
Wooden pallets have problems with beetles and bacteria that cardboard pallets don’t have. The corrugated pallets can be customized to fit customers’ needs and can have advertising on them and be designed to become store displays.
Olvey said the company has developed and patented a machine that can automatically make corrugated pallets from two pieces of cardboard, as compared with competitors who use 21 pieces of cardboard and have workers cut and glue them by hand. His machine, which he developed along with engineer George Jenkins, can make up to 1,800 pallets an hour.
Olvey said his goal is to have another building in the industrial park, where 30 workers per shift would assemble the machinery to make pallets. The machines then would be shipped to plants worldwide, so pallets can be made close to end users. Eventually, about 120 would work at Pallet Kraft in Sylvania, he said.
The Sylvania operation has concentrated on product development and makes enough pallets on the side to try to keep the business going. That’s been tough in recent months, however, since customers have dwindled in the poor economy.
One of Pallet Kraft’s big customers, a company in Chattanooga, Tenn., that makes massage tables, went out of business suddenly and without warning, leaving Olvey’s company with pallets specially made for them.
Business also slowed from another customer, which provides shelving for new Wal-Marts, he said. “Two-thirds of our business all of a sudden went away,” he said.