On December 7, 2011, pursuant to the resolution of the Snokist Board of Directors, Snokist Growers will file for reorganization protection under chapter 11 of the United States Bankruptcy Code.

During 2009 and 2010, Snokist’s strained relationship with its operating lender and its unwillingness to provide Snokist sufficient operational funds disabled Snokist’s ability to process the volume of fruit necessary to support sustainability and profitability.  In March, 2011, Snokist entered into agreement with a replacement lender more familiar with seasonal varieties of agricultural endeavors which allowed Snokist to access a new operating line of credit.  Management and the board were hopeful the new line of credit would reverse the company’s losses of the prior years.

In May, 2011, a small number of North Carolina school children became mildly sick as a result of consumption of their school lunches, which included applesauce produced by Snokist.  In response to the incident, the Federal Food and Drug Administration (FDA) conducted a routine inspection of Snokist’s facilities, in which nothing was found wrong with Snokist’s applesauce product. The FDA chose to expand the inspection and conducted an unsubstantiated, broad range investigation which resulted in a notice of certain claimed deficiencies at the plant.  This report caused Snokist’s two biggest customers, including the United States Department of Agriculture to suspend any further orders of Snokist’s products until Snokist could each a positive resolution with the FDA.  In addition, the USDA  required Snokist to recall delivered product pursuant to USDA contracts, even though these   had been   approved by an on-site USDA inspector at the time of production.

Although Snokist responded immediately by initiating a voluntary recall of the suspected product  from the marketing chain and provided solutions to  FDA’s claims as quickly as commercially reasonable, the FDA delayed their approval of Snokist’s resolutions by  nearly five months; causing, Snokist to suffer millions of dollars in lost sales.  FDA’s action caused an already stressed financial situation to become unworkable.

From FDA’s delayed response to the new lender’s reluctance to provide Snokist the necessary funds to cover these large losses, Snokist will seek protection through Chapter 11 reorganization filing.  Although the lender has requested liquidation of Snokist’s existing inventory to satisfy its obligations, they have been cooperative as Snokist explored options.  Snokist believes an orderly movement of its inventory is in the best interest of all its creditors; including employees, growers, trade creditors and members, as well as the lender obligation.

The Board of Directors, management team, and advisors are pursuing a managed sale of inventory and other assets to generate sufficient funds to pay  Snokist’s growers and creditors. The board and management are concurrently in the process of exploring a number of different options for the potential sale, lease or operation of the facilities.  Snokist Growers is actively seeking a positive solution to provide a home for growers to bring their fruit for future processing.