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Fred Hill Materials closes with Chapter 7 bankruptcy
POULSBO — In the front office of Fred Hill Materials, display cases reveal decades of public service: Sponsorship ribbons from prize-winning livestock at the Kitsap County Fair, certificates of appreciation, and Little League team photos of the many teams sponsored by the company.
The 66-year-old company at one time had 130 employees. Now, Fred Hill Materials, a three-generation concrete materials supplier to the Kitsap and Olympic peninsulas, has closed, having been petitioned to convert from Chapter 11 to Chapter 7 bankruptcy. The last day for the company’s 42 employees was April 20.
“During the past few years, we had hoped that we could survive the depressed state of the construction industry ... further burned by the banking credit crisis,” President Alex Hill wrote in a letter to employees. He wrote that first quarter sales had decreased by 70 percent since 2005.
In a statement to the Herald, Hill wrote, “At some point, you have to stop the bleeding. I realize some in their disappointment will want to blame, engage in conjecture or just get personal, unfortunately. However, I’m deeply appreciative of the fine people who worked here who I know did their best.”
The company was founded by Fred Hill in 1946 and was run by his grandsons — Alex and his brother, Adam, as vice president. The company produced and delivered concrete to residential, commercial and military customers in the West Sound area. The company has operations in Poulsbo, Bremerton, Port Townsend and Sequim.
The company first hit financial trouble in 2009 and sold its sand and gravel mining operation at Shine Pit, located between Port Ludlow and Port Townsend, to Auburn-based Miles Sand and Gravel. The company filed for reorganization under Chapter 11 bankruptcy in February 2010. Offices remained open while the company restructured its finances. Forms filed at the time indicated the change in Shine ownership allowed the company to reduce its debt and allowed it to focus on its “core business” as a concrete supplier.
“The financial projections … [for] the [Fred Hill Materials] plan were based upon very conservative concrete volumes going forward, with only modest increases in future years,” according to the response to convert the case to Chapter 7.
“Unfortunately, the reality has become that volumes have declined even further from the historically low levels the debtor experienced prior to its bankruptcy filing.”
The company was unable to comply with the Chapter 11 bankruptcy plan, and in March 2011 the U.S. government and Western Conference Teamsters Pension Trust petitioned the court to begin proceedings to convert the company’s Chapter 11 bankruptcy to Chapter 7.
The Teamsters stated that the company had not made any of its payments between February 2010 and March 2011 — more than $480,000 in delinquent trust fund contributions, liquidated damages, interest, and attorney’s fees and costs.
Chapter 11 bankruptcy, also called rehabilitation bankruptcy, allows a firm to reorganize its debt and try and change the terms on loans from its creditors. Chapter 7 bankruptcy, also called liquidation bankruptcy, occurs when Chapter 11 is unsuccessful and firms must sell off any non-exempt assets to pay creditors.
Dean Moergeli, president of Port Orchard Sand and Gravel, said he had an “excellent relationship” with the company for many years. He said Bunker Hill, the second-generation owner, was a good friend.
“A handshake was all you need with them,” he said.
Moergeli’s company supplied Fred Hill Materials with sand and gravel aggregates for its concrete ready-mix operation, and said companies like Miles Sand and Gravel, of which his company is a subsidy, will probably “fill the void” in concrete suppliers.
“It’s very sad when you see a company when its been in business for 60 [plus] years go out of business,” he said.
Moergeli said no matter the business you are in now, everyone is facing the same economic struggle.
According to the Kitsap County Department of Community Development, “permit activity can demonstrate ... economic health.” Residential single-family home permits have decreased from 1,000 in 2006 to 242 in 2011. Long-term land use permits, large lots, have decreased from 32 to 3, and small-lot permits have decreased from 42 to 5 in the same time period.
Doug Weese, communications director for Fred Hill Materials, described the market as “grisly.” With no one building new houses, there is no need for concrete driveways and foundations.
“To look for a scapegoat is disingenuous,” to the employees, he said. “In the grand scheme of things, Fred Hill provided a whole lot of livelihoods for 66 years.”
According to the filing, Fred Hill Materials had attempted to sell part of the operating assets to a buyer, who was not disclosed. “… Despite the best efforts of all involved, the parties have been unable to come up with a transaction that was acceptable to the buyer.” Weese said those talks are continuing.
Fred Hill Materials was a supplier to many of the area’s major projects. In the 1950s and ’60s, Fred Hill Materials poured concrete ammunition bunkers at Bangor and concrete for the Bangor Polaris submarine facility, increasing its fleet from seven to 75 trucks. From 1979 to 2009, the company leased Shine Pit sand and gravel operations, providing materials for reconstruction of the Hood Canal Bridge in 1980, according to a company statement.
Weese is also the communications director for Thorndyke Resource, known for its “pit-to-pier” project along the Hood Canal. Fred Hill Materials provided a loan to Thorndyke in 2005, the payment of which will now be handled in bankruptcy court, and Alex Hill is a principal of the company. Beyond that, Weese said, Thorndyke is a separate company that is continuing with the mining and shipping project.