Timeline
A look at what led to and followed the W.S. Lee & Sons Inc. bankruptcy:
2004
October: State awards $250 million contract to Lee as its food distributor for its facilities; contract later blamed for company's woes.
2005
October: Forty jobs cut.
December: Robert S. Donaldson named executive vice president and general manager.
2006
February: Twenty jobs cut.
March: S&T Bank files complaint in Blair County Court against Lee for defaulting on a $1.75 million loan; Lee files for Chapter 11 bankruptcy protection.
April: Lee cuts another 25 jobs and closes its Altoona warehouse.
May: Omega Bank owed in excess of $20 million, court filing states.
September: Bankruptcy judge grants extension to company filing its reorganization plan; company asks Judge Bernard Markowitz to force Lee family members to return more than $1 million to the company or justify use of its money.
October: Company reaches a settlement with Omega Bank and a committee of unsecured creditors to pay Omega $2.3 million and $1.1 million to unsecured creditors.
November: Company says it will emerge from Chapter 11 without founding family at the helm; $2 million investment announced, mostly from Altoona businessmen Stephen Sheetz and Donald Devorris.
2007
January: Bankruptcy judge approves W.S.Lee & Son's disclosure statement as part of the company's proposed reorganization plan.
March: More than 94 percent of W.S. Lee's creditors vote in favor of reorganization plan.
April: Bankruptcy judge delays approval of reorganization plan because of objection filed by Robert E. Lee. Lee later drops his objection in return for company stopping its attempts to repossess four company cars. On April 30 the judge signed a court order confirming the reorganization plan.
May: Lee Food Service Inc. was launched after W.S. Lee officials signed loan-closing documents with Omega Bank.
November: Lee Food Service and Hoss's Steak and Sea House Inc. announce business partnership under which Lee will assume responsibility for Hoss's purchasing, warehousing and distribution components.
2009
Nov. 2: Company announces that it will be enter a plan of voluntary liquidation with its lender, First National Bank, and wind down operations, affecting 90 employees.
Source: Altoona Mirror archives
A food service distribution company with longtime ties to Blair County is winding down operations under a voluntary liquidation plan with its bank, the company's president and CEO said Monday.
The closing of Lee Food Service Inc., which was created after the 2006 bankruptcy of W.S. Lee & Sons Inc., will eliminate 90 jobs. Details of the liquidation plan have yet to be worked out.
Company employees were notified of the decision Monday.
"Like a good football team that didn't have enough time on the clock, our great team ran out of time on the game clock," President and CEO Robert S. Donaldson said. "We have a great group of employees who have been through a lot over the last four years."
W.S. Lee's Chapter 11 bankruptcy plan was approved in April 2007, with Lee Food Service opening for business in May 2007. The new company was on the right path to outperform its five-year plan, Donaldson said.
In August 2008, sales were 70 percent higher than the year before, bolstered by a new contract with a purchasing, warehousing and distribution agreement for the Duncansville-based Hoss' Steak & Sea House Inc., Donaldson said.
Then the economic meltdown struck with full force the next month, putting Lee on the wrong path as the restaurant industry was hit hard by the downturn. Sales flattened and started to decline slightly, Donaldson said.
Lee tried earlier this year to restructure its debt with First National Bank, the successor to Omega Bank, but the bank wasn't receptive during a time of great uncertainty in the banking industry, Donaldson said.
The company spent most of the year looking at its options - including a sale to a potential suitor. The decision to voluntarily liquidate the assets occurred about 10 days ago.
"We'll work with the bank, our vendors and our employees for the softest landing possible," Donaldson said.
The new company came to fruition with the investments of local businessmen Steve Sheetz and Donald Devorris, who didn't want to own a food service distribution company but wanted to save local jobs, Donaldson said.
Devorris deferred comment to Donaldson.
"But Mr. Sheetz and I are very saddened by this. We were hoping for a better outcome," Devorris said.
The decision also created a great deal of sadness in the business community.
"You hate to see any business go out of business," said Martin Marasco, president and CEO of the Altoona-Blair County Development Corp. "It's a very unfortunate situation. I'm sure they looked at every option."
The employees and the Lee facilities are very marketable, Marasco said.
"These are very difficult times," he said. "We'll work with the bank or who will own the assets and help the employees try to find other employment opportunities."
Joe Hurd, executive director of the Blair County Chamber of Commerce, also called the business' decision unfortunate but one that was not surprising based on what it had to battle to come out of bankruptcy.
"That's a tough battle to win under good economic conditions," Hurd said. "It was a valiant effort, but one that was an uphill battle from the start.
"It's a huge setback - one, because of the loss of jobs, and two, the loss of a longtime prosperous business to this area."
The news hurts even more with F.L. Smithe Machine Co.'s sale in September to a Wisconsin company and pending departure from Blair County.
"It sends a message that in this current economy, everybody is a little more vulnerable than if things were more robust. We'll also provide whatever assistance we can as the chamber," Hurd said.
Robert E. Lee, who was forced out of the company because of the bankruptcy, also expressed concern about the decision. He and his brother Walter J. "Jamie" Lee III opposed the bankruptcy plan but later dropped their opposition to it.
"The Lee family is very saddened to hear of the demise of Lee Food Service and the impact it will have on the employees and the community," Lee said. "Unfortunately, we had said that the reorganization plan was flawed and it was highly improbable that it would succeed.
"I wish all the employees and partners of Lee Food Service the best going forward and appreciate what they did for the community."
