Sonderen Packaging Inc., a longtime Spokane paperboard carton maker, is acquiring new equipment to increase its capabilities and is asking a state agency to issue up to $7 million in bonds to help finance the cost of the machinery.

The agency, the Washington Economic Development Finance Authority, has set a hearing on the application for Tuesday, April 8, at 10 a.m., at its Seattle offices, and is accepting written comments about application until that date. A Sonderen executive expects the financing to be approved.

“It’s right in their goal of economic development, supporting manufacturing, and making sure that jobs stay around and keep our state competitive,” says Matt Sonderen. The authority was created by the legislature to act as a financial conduit to businesses through the issuance of what are called nonrecourse revenue bonds, which offer income-tax benefits.

Sonderen and his sister, Keva Humbert, are in the process of taking over ownership of Sonderen Packaging from their father, Mark Sonderen.

The 51-year-old company expects to use proceeds from the bond issuance to help pay for a $1.2 million, 106-foot-long folder-gluer machine it installed late last year and a roughly $5 million sheet-fed, offset printing press that it expects to install later this year, Matt Sonderen says. The printing press won’t be as long as the folder-gluer, but will be taller and bigger overall, he says.

Overall, the two German-built pieces of equipment will give Sonderen Packaging greater automation, increased production capacity, and enhanced quality control in two of its carton-manufacturing processes, he adds.

Located in a 135,000-square-foot plant at 2906 N. Crestline, in northeast Spokane, the company currently employs 128 people—up a few workers from six months ago—and handles all printing, cutting, and gluing of the cartons it makes.

The company doesn’t disclose sales figures, but has said in the past that its annual revenue consistently exceeds $20 million, and Matt Sonderen says it has gotten off to a “great start” this year as measured by customer demand.

Sonderen Packaging makes paper cartons largely for the food and beverage industry, including containers for fish, tea, pasta, and confections, among a number of other food products. The company’s largest customer is Reser’s Fine Foods, the Beaverton, Ore.-based company that produces refrigerated fresh foods, such as deli-style salads, side dishes, and dips.

While food makers comprise the largest share of Sonderen’s customers, it has noted that ammunition makers represent the fastest-growing segment. Mark Sonderen told the Journal last fall that the company specifically had seen an uptick from ATK Inc., making cartons for its CCI brand of bullets. That company has emerged as one of Sonderen’s top five customers in recent years.

The company doesn’t expect to need to hire additional employees to operate the new equipment, Matt Sonderen says, but he adds, “We’ve been growing as it is. We recently had to add another press crew, just because we’ve been busy.”

Of the company’s continuing growth, he says, “A lot of it is organic within our customer base.” However, the company also brought on more than 20 new customers last year in a mix of sizes, from mom-and-pop operations to large corporate entities, he says.

Sonderen says he foresees continuing “moderate” growth for the company during the rest of the year. A variety of industry and political variables make it impossible to predict how it will be doing further into the future, he says.

The Heidelberg Diana X115  folder-gluer that the company bought, used in its finishing processes, is “actually three pieces of equipment, more automated for easier setup than our current equipment, and it runs faster,” he says.

One of those pieces of equipment, he says, is an auto packer “so that rather than having someone pick up stacks of boxes and packing them by hand, we can use this to automate (that process) and we can have someone there to inspect, but not do the heavy lifting. It’s a pretty neat piece of equipment to see run.”

Sonderen says, “The goal is it should increase our capacity for that department and allow us to pull work out, rather than have it back up. It should give us a capacity boost and really a quality increase. It can eject bad cartons on the fly.”

The folder-gluer isn’t intended to replace an older piece of machinery at the plant, but rather is an addition, he says. ”We currently have three other, similar pieces of equipment—just 15 years older.”

The KBA Rapida 145 printing press that the company is acquiring will have “a much larger footprint” than the folder-gluer and will require installing new reinforced concrete flooring at the plant to support it, Sonderen says.

It’s designed for printing on paperboard packaging and can produce a 57-inch-wide printed sheet that’s much larger overall than what’s capable on typical commercial-scale printing press, he says.

Also, he says, “It definitely has a speed factor.” Rated at 17,000 sheets an hour, he asserts, “this press will be the fastest sheet-fed offset printing press of that size on the West Coast once it’s in.”

Like the new folder-gluer, he says, it also will be more automated and have much better quality-control capability than the 15-year-old press it will be replacing, which the company plans to trade in on the new one. It ordered the press in January, and the press is to be delivered by the middle of August for installation in some former warehouse space, he says.   

“It’s probably a six-week or seven-week process to put one together. That’s before you can turn it on,” Sonderen says. “Then there’s another couple of weeks of testing.”

The Economic Development Finance Authority is an independent agency that operates within the executive branch of state government. Its website says it has the authority to issue such bonds on both a taxable and tax-exempt basis in support of qualifying projects, most of which involve manufacturing, processing and waste-disposal facilities.

Under the typical transaction, the website says, the agency borrows the money from a bank or bond purchaser, then lends the proceeds to the applying company in return for the company’s agreement to repay the agency an amount equal to debt service. The agency then assigns its rights in the loan repayments to the bank or bond purchaser.

The biggest benefit to this type of financing is that the bank or bond purchaser doesn’t have to pay income tax on the interest it earns on the investment. That means they’re willing to accept a lower interest rate, and the agency passes on that lower interest rate to the borrower, reducing the borrowing cost.

As the Journal mentioned in an earlier story, Matt Sonderen and Keva Humbert have been acquiring interest in Sonderen Packaging for about 15 years and now are majority owners. Mark Sonderen said last September that he expects to complete the ownership transfer by the end of this year and to retire from day-to-operations at that time, though he likely will remain board chairman.

Matt Sonderen, who joined the company in 1998, is focused on lean manufacturing and finance, and Humbert, who has worked there since 2004, is involved in sales and marketing.  Mark Sonderen’s father, Al Sonderen, started the company in 1963.

Mark Sonderen said that company sales returned to pre-recession levels in early 2012 and have stayed consistently above that mark since then.

The company’s last significant expansion and equipment purchase occurred in the mid-2000s, just before the recession hit. 

At that time, the company added $3.5 million in equipment, including a die cutter and gluer, as well as a print press and sheeter. It also added roughly 40,000 square feet of floor space to its facility.