Pace Industries LLC, headquartered in Fayetteville, Arkansas, says the company and its U.S. subsidiaries have initiated a voluntary prepackaged Chapter 11 process in the U.S. Bankruptcy Court for the District of Delaware. The process is part of an agreement Pace reached with its senior secured lenders on the terms of a comprehensive financial restructuring plan to deleverage its balance sheet. Pace says the holders of its senior secured notes as well as its revolving credit facility lenders support the agreement.

Pace is a full-service aluminum, zinc and magnesium die casting company that offers end-to-end nonferrous die cast supply chain solutions and a wide array of capabilities and services, including advanced engineering, tool and die fabrication, prototyping, precision machining, assembly, finishing and painting. Pace has 12 divisions, 21 manufacturing facilities and more than 4,000 associates across the U.S. and Mexico.

The company’s operations in Mexico are unaffected by the filings, though they will benefit long-term from the actions Pace is taking to strengthen its financial position, Pace says.

The company idled operations in Fayetteville and Harrison, Arkansas, in March because of the coronavirus, putting nearly 600 workers on the sidelines, according to press reports. Pace also announced in early April that it was temporarily shutting down another plant in Michigan and laying off nearly 450 employees.

Upon implementation, the restructuring agreement will give Pace the financial foundation necessary to resume normal operations following the COVID-19 outbreak, realize the full benefit of its cost-savings initiatives and strategic investments recently executed and continue to serve its customers as a fully integrated provider of die cast aluminum, magnesium and zinc components, according to the company.

Pace says its senior secured noteholders, along with its existing revolving credit lenders, will provide commitments for up to $175 million in debtor-in-possession financing to help ensure Pace can meet its commitments during the process. Under the terms of the proposed prepackaged plan, the company will convert its existing senior secured notes into 100 percent of the equity in the reorganized company. As a result of its noteholder and lender support, Pace says it expects to complete the process in the second quarter of 2020, emerging as a financially stronger company that is well-positioned to succeed in the post-COVID-19 environment.

“Over the past two years, we launched significant new programs for the automotive industry to further penetrate this important growth market and implemented a series of cost-saving initiatives to position our business for long-term success,” says CEO Scott Bull. “Unfortunately, we were not able to realize the full benefits of these new programs and initiatives before the coronavirus weakened demand, disrupted our supply chain and forced us to temporarily close many of our plants in the United States.”

He adds, “We are confident in our go-forward direction and the underlying strength of our business and are taking these actions now to ensure we are positioned to realize our full potential when we—and our customers—are able to resume normal-course operations.”

The company says it has filed customary motions that will allow it to maintain employee wage and benefit programs, honor customer warranties as usual and continue to pay suppliers. Although the motions remain subject to court approval, Pace says it expects all trade creditors, employees, sales agents and unsecured creditors to be paid in full and on time in the normal course of business.

Further information about the case can be found at www.kccllc.net/pace.

The National Waste & Recycling Association (NWRA), Arlington, Virginia, has issued guidance for its members related to screening employee temperatures during the COVID-19 pandemic. The Equal Employment Opportunity Commission (EEOC) updated guidance from 2009 that the current COVID-19 health crisis is within the “direct threat” exception to restrictions on employer medical inquiries and testing.

“Until businesses have access to COVID-19 testing, asymptomatic employees may unknowingly spread the disease to co-workers and the public," says NWRA President and CEO Darrell Smith. "The EEOC has stated that employers may take employee temperatures to test for fevers before they enter the workplace, as a means of limiting potentially infected employees’ contact with others." 

The EEOC’s guidance states that employers may report confirmed cases of COVID-19 to public health officials as required by applicable law. Employees who refuse to submit to an otherwise uniformly applied screening can be barred from the workplace. However, EEOC does not say that employers must take employee temperatures, and some employers may choose to simply inquire about COVID-19 symptoms or exposure to other persons with COVID-19 rather than administering temperature tests.

The following are some highlights from EEOC’s guidance on taking employees’ temperatures:

• If an employer opts to apply temperature screens, it should do so only on the grounds that the COVID-19 pandemic is widespread or an imminent threat in the community in which the employer will use such screening based on assessments by state and local health authorities or the U.S. Centers for Disease control and on the grounds that testing would help to protect the employer’s workforce and others in the workplace against the spread of COVID-19.
• Temperature screening should not be done on a selective or case-by-case basis but rather should be done uniformly within job groups and across similarly situated job groups.
• Strict temperature testing protocols should be uniformly followed in administering any temperature screening program. Medical advice should be obtained in establishing these protocols, and guidelines from public health authorities should be followed.
• Employee names, temperature readings and other medical information (including information that is either documented or simply known to employer officials) should be kept strictly confidential.
• Personnel who administer the temperature screening should be provided with proper personal protective equipment (PPE) and trained how to use it, given clear testing protocols, trained in how to follow those protocols, trained in proper disposal of biowaste (if any) and monitored and screened for signs of COVID-19 themselves.
• An employer that undertakes a temperature screening program should keep up to date on updates from public health authorities. 

This guidance is not intended to provide legal advice. Qualified legal advice should be sought for how the law applies in any particular situation.

The Indiana Department of Environmental Management (IDEM) has announced the availability of $2 million in grant funding for recycling projects.

According to a news release from IDEM, public and private businesses, local governments, schools and nonprofit organizations located and doing business in Indiana are eligible to submit proposals for recycling grants ranging from $10,000 up to $500,000. Proposals are currently being expected from now through May 29, 2020.

“This grant funding supports environmental sustainability by helping organizations promote, create and develop recycling and waste-reduction efforts, while expanding Indiana’s recycling markets through economic development,” says IDEM Commissioner Bruno Pigott. “IDEM and the Recycling Market Development Board are happy to make this opportunity available again in 2020 and hope to award $2 million to organizations across the state.”

Grants are funded through IDEM’s Recycling Market Development Program, which operates under the Recycling Market Development Board. The grant money for the program comes from the Recycling Promotion and Assistance Fund, an account generated by a per-ton fee on solid waste disposed at Indiana landfills. The fund supports source reduction, reuse, recycling and composting to prevent solid waste from permanent disposal.

Eligible projects must focus on reuse, reduction and recycling methods of municipal solid waste, and a 50 percent match is required. IDEM states that proposals should demonstrate an understanding of the changing economy for recyclers and look at where monies can be used most effectively by businesses and communities to increase statewide recycling goals.

In addition, sustainability of the project is key and proposals must show a need, an increase in recyclable material collection or consumption, a reduction in municipal solid waste shipped for final disposal, or improved partnerships with communities, including economic impacts and increased public awareness of recycling opportunities through tangible outreach and education efforts.

The Recycling Market Development board will make final funding determinations by the fall of 2020. To apply, visit IDEM’s website. For additional information about the program, individuals can call 800-988-7901. 

Sonoco, a diversified global packaging company based in Hartsville, South Carolina, reports that its first-quarter 2020 net sales declined compared with figures in the same time frame in 2019. First-quarter 2020 net sales were $1.3 billion compared with $1.35 billion in the first quarter of 2019, the company reports in a news release on its latest earnings report.

The sales decline was driven by lower volume and mix, reduced selling prices and a stronger U.S. dollar. Sonoco reports that these negative impacts were somewhat offset by increased sales from acquisitions.

Gross profit was $266.6 million in the first quarter of 2020 compared with $270.1 million in the same period in 2019. Gross profit as a percentage of sales was 20.5 percent, an improvement from 20.0 percent in the same period in 2019, the company reports. First-quarter selling, general and administrative expenses decreased $18.7 million from the prior year to $123.9 million. According to Sonoco, this decrease was driven by a significant focus across the business on reducing controllable costs, which were partially offset by the addition of expenses from acquisitions. 

Sonoco’s Paper and Industrial Converted Products business segment (which includes paperboard tubes, cones and cores; fiber-based construction tubes; wooden, metal and composite wire and cable reels and spools; and recycled paperboard, linerboard, corrugating medium, recovered paper and material recycling services) achieved $475.0 million in sales in the first quarter of 2020, which is down from $496.0 million in the same time frame in 2019. Segment operating profit was $54.0 million in the quarter compared with $48.4 million in the same time frame in 2019. 

Sonoco reports that sales in this segment declined 4.2 percent in the first quarter of 2020 from the prior year’s first quarter as lower selling prices, declining volume and mix and the negative impact of foreign exchange offset sales from the company’s acquisition of Corenso Holdings in August 2019. The lower volume and mix was driven by weakness in global tubes, cores and cones, which was partially offset by improved volume and mix in North America’s paper and recycling operations. 

Additionally, the company’s Paper and Industrial Converted Products segment operating profit improved 11.6 percent in the first quarter above the prior year’s first quarter as earnings from productivity improvements and the Corenso acquisition offset general inflation and issues related to volume and mix. 

Outlook for Q2 of 2020

In the company’s latest earnings report, it made initial projections on second-quarter 2020 base earnings; however, the company states that actual results could vary substantially due to COVID-19 and other risks and uncertainties.

“The only thing certain about the rest of 2020 is there will be tremendous uncertainty,” says Howard Coker, CEO at Sonoco. “After a strong first quarter, we are projecting a difficult second quarter as the pandemic is expected to continue impacting the vast majority of the U.S., and most of the world, resulting in rising unemployment and market disruption. That said, we expect our consumer-related businesses to continue performing well in the second quarter as food consumption trends should continue to be driven by stay-at-home consumers.”

Coker says the company expects its paperboard operations in North America to remain “relatively steady” in the second quarter of 2020 in response to increased demand for board in the tissue and towel market. He says the company also expects recovered paper prices to rise in the second quarter of 2020 as well.

“We expect recycled fiber prices to continue to increase during the second quarter, which is expected to benefit our recycling operations,” Coker says. “However, despite many of our sales contracts having material cost recovery mechanisms and an expected cost-driven increase in general market pricing for recycled paper-based products, we expect these higher input costs will provide a difficult headwind to our paper and industrial converted products businesses.”

Response to COVID-19

Across the world, Sonoco is considered an essential provider of consumer, industrial and medical packaging. The company reports that its associates are deemed “essential critical infrastructure workers” under the guidance of the U.S. Department of Homeland Security and have received similar designations by the majority of other governmental agencies in the 36 countries where the company operates. 

Sonoco reports that nearly all of the company’s global operations continue to operate and serve customers’ critical needs. However, certain customers whose products have not been deemed “critically essential” have had to suspend operations due to the COVID-19 pandemic while others have been unable to fully staff their operations and are taking downtime as a result. Sonoco reports that it’s monitoring these developments closely. 

In addition, the company is putting the health and safety of its associates, contractors, suppliers and the general public as a top priority. In response to COVID-19, the company reports that it is conducting health screenings for personnel entering its operations, routinely cleaning high-touch surfaces, following social distancing protocols, prohibiting noncritical business travel and encouraging associates to work from home when possible. The company also has a COVID-19 microsite to keep its associates up to date on the company and health authority information, guidelines and protocols. 

Additionally, the company formed a global task force to develop and implement business continuity plans to ensure its operations are prepared to continue producing and shipping product to its customers without a disruption. The company reports that it has a diverse global supply chain and to date has not experienced raw material or supply disruptions. However, certain raw materials pricing has increased significantly since January, including old corrugated containers (OCC), which is the largest raw material used by the company’s recycled paperboard mills. Sustained OCC pricing at current, or higher, levels is likely to pressure near-term operating margins. 

Coker adds, “One of the strongest aspects of our company, culture and people is our ability to rally ourselves through a crisis. Over our more than 120-year history, we have successfully navigated through floods, fires, hurricanes, financial market distortions and now one of the worst pandemics in generations. Sonoco is a financially strong company. We believe our diverse business mix will remain resilient during the expected pandemic-driven recession and that we will come out of this crisis as a much stronger company.”