Edmonds-based Skipper's files bankruptcy; $2 million in taxes owed

Edmonds-based Skipper's Inc., a seller of fried fish for 37 years, has run aground.

The long-struggling company, which operates 59 Skipper's Seafood 'n Chowder House restaurants in five Western states, filed Tuesday for Chapter 11 bankruptcy protection.

Skipper's says it hopes to shut five unprofitable restaurants and to negotiate a repayment plan with the Internal Revenue Service, its largest creditor.

"The company has been carrying underperforming locations for quite some time and was unable to close them because of long-term lease commitments," said Skipper's Seattle bankruptcy attorney, James Day. The bankruptcy will allow the company to get out of long-term leases on the five stores and six others that already have been closed, he said.

Skipper's owes $6.7 million, including nearly $2 million to the IRS, according to documents filed with U.S. Bankruptcy Court in Seattle.

The company operates 35 restaurants in Washington, and employs 507 people, most of them part-time. That's down from 78 restaurants in 2002, when Skipper's was bought by the current owner, Seafood Restaurants Northwest.

Sales went from $30 million in 2004 to $23 million in the first 11 months of 2006, according to court documents.

Company CEO and Seattle resident Kenneth Williams, who owns most of Skipper's, said in court documents that the company's tax troubles started after it outsourced all of its accounting functions to another firm. Unbeknownst to him and others at Skipper's, federal employment taxes went largely unpaid for more than a year, he said.

Williams said he borrowed $750,000 against his personal assets to begin settling Skipper's debt after getting a call from the IRS, and Day said he hopes to work out a "manageable" repayment plan.

The company is a subsidiary of Seattle Crab Company, which also has a stand-alone restaurant in the Northgate area; Seattle Crab is not part of the bankruptcy filing. Skipper's also has four restaurants operated under franchise agreements and sells a line of packaged products such as clam chowder and tartar sauce at local retail outlets.

Founded in Bellevue in 1969, it was a publicly traded company until 1989, and grew to about 220 restaurants.

Kansas-based National Pizza Company, a large Pizza Hut franchisee, bought Skipper's in 1989 amid talk of growing the chain to 700 stores. That never happened. Seattle-based Meridian Capital bought Skipper's in 1995 and sold it seven years later to Seafood Restaurants Northwest.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com

Seattle Times researcher David Turim contributed to this story.