Dolco Is Alive and Kicking : Manufacturing: The company is profitable again after emerging from bankruptcy, but problems remain.

Dolco Packaging Corp., a Sherman Oaks-based maker of egg cartons, meat trays and other foam-like plastic packaging goods, two years ago looked like a company rapidly approaching its death.

Plagued by losses totaling $11.5 million in 1987-88 and straining to meet payments on a $32-million debt, Dolco sought refuge from its creditors by filing for bankruptcy court protection in May, 1989. In early 1990, Dolco’s outside auditors said there was “substantial doubt” about the company’s ability to continue as a going concern.

But Dolco, which merged with its then-parent company, Olson Industries Inc., during the Chapter 11 bankruptcy reorganization and then kept the Dolco name, is still alive and kicking.

Having emerged from Chapter 11 in July, 1991, Dolco is making money again. It earned $868,650 on sales of $28.5 million in the first half of this year and Dolco President Larry E. Rembold doesn’t argue with suggestions that Dolco will post additional earnings for the just-ended third quarter.

“We would hope our profitability would continue,” he said.

Dolco is benefiting from lower prices for polystyrene, a resin that’s the main raw material in Dolco’s products. The company’s losses in the late-1980s stemmed in large part from a sharp rise in resin prices that Dolco was unable to pass on to its customers because of fierce competition, mainly from giants Mobil Corp. and Amoco Corp., which together have about half the plastics-packaging market.

At the same time, Dolco has “eliminated a lot of overhead costs and restructured our other costs to match the size of our business,” said Rembold, 51, who’s been Dolco’s president since 1980.

Dolco’s sales this year are running about even with last year, and the company now operates four production plants in Washington, Texas, Georgia and Indiana. It formerly had another plant in Pico Rivera, but that facility was closed during Dolco’s bankruptcy proceedings, eliminating 130 jobs.

The company, which now employs 550 people, also has generated enough earnings lately to pay a 9-cent-a-share quarterly dividend to its preferred stockholders last week. (With 2.5 million preferred shares outstanding, that amounts to $225,000.)

Dolco’s common stock, meanwhile, has tripled in price since mid-July, closing Monday at $8.25 a share on the NASDAQ market. It was the biggest gainer among stocks of companies in the San Fernando Valley region in the third quarter.

Lest anyone get carried away, however, Dolco’s outlook remains clouded. The company’s profit in the first half of this year amounted to only 3 cents per dollar of sales. The total market value of Dolco’s common stock--even with its recent gains--and preferred shares is a modest $15 million.

Also, as of June 30, Dolco’s excess cash was a paltry $18,000, down from $219,600 on Dec. 31. That’s because most of the excess cash Dolco is generating is being reinvested in its operations, Rembold said.

There’s also no guarantee that if resin prices start climbing again, that Dolco this time would be able to pass those costs along to its customers. “There’s no certainty that you could,” Rembold acknowledged.

Nonetheless, Rembold said that because there’s now more resin factories than in years past, “we’re in more of a balanced supply-and-demand” position in the market that is keeping resin prices stable. “That certainly helps us,” he said.

Another question mark is how long Dolco’s biggest stockholders will stay with the company. The two biggest are Dow Chemical Co., which owns 37% of Dolco’s common and 43% of its preferred stock, and the financial unit of Whirlpool Corp., which owns 11% and 13%, respectively.

Those two giants became Dolco stockholders because they had little choice. Dolco owed Dow Chemical--its biggest supplier of resin--and Whirlpool about $6 million and $2 million, respectively, when the company filed for Chapter 11. As part of Dolco’s reorganization, they agreed to convert their creditor claims to Dolco’s common and preferred stock (as did some other, smaller creditors).

Dow Chemical and Whirlpool also agreed to keep their Dolco shares for two years. But that agreement expires next July 29.

Howard B. Ducker, an assistant treasurer of Dow Chemical who’s also one of Dow Chemical’s two representatives on Dolco’s five-member board of directors, declined comment. Mary Beth Curtiss, a spokeswoman at Dow Chemical’s Midland, Mich., headquarters, said “we’re not ready to make any decision” regarding its Dolco stock. She also said “it’s not appropriate for us to comment” on Dolco’s business prospects. Whirlpool also declined comment.

Dolco was formed in 1966 as a joint venture between Olson Industries, then mainly an egg-farming operation, and Dow Chemical. It became an Olson subsidiary in 1974 and, after a family feud between the company’s founding Olson brothers resulted in Olson Industries abandoning the egg business in 1986-87, Dolco became Olson’s primary business.

Dolco then ran into a string of setbacks. In 1987, McDonald’s Corp., one of Dolco’s major customers for foam-like sandwich trays, stopped using containers made with chlorofluorocarbons (CFCs) because of the CFCs’ damaging effect on Earth’s ozone layer. That forced Dolco and McDonald’s other suppliers to find another way to make the containers, at additional cost.

At the same time, Dolco was suffering from the rising polystyrene prices, which soared 87%, to 58 cents a pound from 31 cents, between 1986 and 1988, according to Dolco.

Yet its inability to pass those costs along--for fear of losing market share to Mobil, Amoco and the others--saddled the company with losses.

Then after Dolco filed for Chapter 11, McDonald’s in early 1991 abandoned foam-like containers entirely in favor of paper wrappings, wiping away about 15% of Dolco’s sales.