Dairy Giant Borden Files for Bankruptcy Protection

[kscarbel2]

The New York Times  /  January 6, 2019

Borden, the 163-year-old dairy producer, has filed for Chapter 11 bankruptcy protection, the latest victim of an industry battered by declining prices, rising costs and changing tastes.

The company, which is based in Dallas and reported $1.18 billion in sales in 2018, has been trying to adjust to those unfavorable trends but was hampered by debt, Borden’s chief executive, Tony Sarsam, said on Monday.

“The biggest cause, if you dial it back, is a circumstance where we have debt that is inappropriately sized for the company,” he said.

Executives at Borden, which employs 3,300 people, had been trying to renegotiate its debt agreements for months, Mr. Sarsam said, but filed for bankruptcy on Sunday after talks with lenders fell through.

Just two months ago, Dean Foods, the largest milk company in the United States and one of Borden’s biggest competitors, also said it was seeking bankruptcy protection.

Borden’s financial troubles extend to 2017. After arranging for about $275 million in loans that year, the company, known for its “spokescow,” Elsie, suffered net income losses in each of the next two years.

The company, whose business is largely focused on the Southeast, attributes that misfortune to dairy industry trends, including shifting consumer preferences and increased competition.

Consumption of fluid milk, which accounts for the vast majority of Borden’s revenue, has been declining for decades, with per capita consumption down about 40 percent since 1975, according to Agriculture Department data. Meanwhile, dairy alternatives like milks from soy, oats, almonds and other sources have been on the rise.

More recently, raw milk prices have spiked, with the cost of milk up 27 percent since last January, according to Borden, which expects inflation to continue this year, too.

“We’re at a high point, and that’s been one of the more significant market challenges that we’ve been enduring this past year,” Mr. Sarsam said.

In filing documents, Borden also highlighted eroding profit margins caused by industry consolidation and rising costs for fuel and the resin used in its bottles. A truck driver shortage has propped up transportation costs, too, it said.

Borden also said the cost of various pension and retirement obligations had contributed to its bankruptcy filing, including a $33 million pension settlement.

This isn’t the first time that Borden has suffered financial distress. After making a number of acquisitions in the late 1980s, the company entered a turbulent period resulting in its 1995 sale, for $2 billion, to the private-equity giant KKR. Over the next decade, the company was slowly whittled down, with many of its divisions and brands sold off, Borden said in the filing.

While following Dean’s path into bankruptcy, Borden sought to distance itself from its competitor, arguing that it was in a better position to recover from a reorganization.

“Our operations are running in a way that gives us confidence that when we come out of this we’ll be in better shape,” Mr. Sarsam said.

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[ws721]

That's a shame. around here the dairy farms are going out so fast its scary. 

[Rob]

Dairy and cattle farms used to be very commonplace around here too. Not many left and certainly not many "family" type operations.

[Rob]

I did a bit of welding at the Borden chemical plant in Illiopolis, IL back in the late 1970's of which that division was sold off in later years. I think they made parts of adhesive there but not really certain. Just down the road was the WWII bomb making complex and the two were built at the same time during that turmultuous event.

[Maxidyne]

The common thread in a lot of these bankruptcies is Walmart- They were a major Hostess customer, had their hands in Hostess business, demanded special treatment and kickbacks, and were months late in paying Hostess when they filed for bankruptcy liquidation. Walmart recently opened their own dairy plant in the midwest which may have caused the Dean and Borden bankruptcies. And Celedon trucking, which recently went bankrupt too, was hauling dairy products out of Walmart's dairy. 

[ws721]

Walmart's and Insurance companies are going to be the ruin of small business in America. Family farms support local business. Where the  "Big dairy's" don not do much for the local economy.  They buy in bulk on line, have their own vet staff, buy meds on line.  

[HeavyGunner]

1 hour ago, ws721 said:

Walmart's and Insurance companies are going to be the ruin of small business in America. Family farms support local business. Where the  "Big dairy's" don not do much for the local economy.  They buy in bulk on line, have their own vet staff, buy meds on line.  

That’s true but it’s such a complex subject that I could argue both sides. No I don’t want to see small businesses go away. They bring customer service that a lot of times is second to none bringing comfort to doing business with them. On the other hand the small grocery store where I live charges outlandish prices for most everything and my wife and I can go once  a month to the big city (100 miles away one way) and do our grocery shopping for a month And save big bucks. $4.50/gal milk, $5/8oz of cream cheese $10/big jar of Adams PB gives you an idea of how high prices can be here locally. So I understand why bigger stores are waltzing in and taking over. 

[Maxidyne]

I agree- There's a grocery chain around here that specializes in buying out small grocery stores in towns that are at least 25 miles from a Walmart. They invest little in the business, until recently they couldn't even handle credit cards, and charge about twice Costco or Walmart prices. I make the Costco runs at least once a month, they're only a bit over an hours drive away and the savings are well worth 3 gallons of diesel fuel, especially if I stop at Fleet Farm too. I was at the Billings Costco a few times and was impressed with the numbers of farm trucks in the parking lot- Folks would bring their livestock to market then load up a "backhaul" of what looked like a couple month's supplies at Costco!

[david wild]

Truth is they never make a profit their accounting  methods are like the Government, they never balance year to year they roll over gains or losses as needed and never truly produce profit unlike mom and pop companies which have to produce true profit or joey the banker will cut them off and then they go out of business, Just like GM with it's shady deals and General Electric if truly profitable there debt ratio would go down at some point there's just continues to go higher.