Dive Brief:
- Dean Foods has increased its borrowing base availability to $265 million, which CEO Ralph Scozzafavasaid in a releasewould enhance financial flexibility and liquidity for the Dallas-based milk and dairy products processor and distributor.
- According to a Form 8-Kfiled July 1 with the Securities and Exchange Commission, Dean decided to include in the borrowing base equipment and real property at 16 of its facilities, with an appraised value of more than $450 million.
- Scozzafava noted the company's existing $450 million accounts receivable securitization facility provides another source of flexible, low-cost access to capital.
Dive Insight:
Dean Foods has been going through a difficult time as milk sales continue to slump. The company also lost a major client last year afterWalmart openedits own milk processing facility in Indiana.院长已经多样化through investments in juices, waters andplant-based products, but those moves haven't made enough of a dent.
Includingthe first quarterof this year, the company has posted five consecutive quarterly losses and suspended dividends for the past two quarters. In response to these challenges, Dean has cinched in its collective belt by cutting costs, closing seven milk processing plants, eliminating jobs and pursuing a sale of all or part of the company.
Nevertheless, Dean Foods CEO Ralph Scozzafava remains optimistic things can be turned around this year with positive cash flow, and he told investors the company believes it has passed the inflection point,The Wall Street Journal reported. He added Dean has introduced new items — itdebuteda line of ice cream dessert cups in April — and added new consumers.
Despite this good news, though, the company was carrying about $991 million in total net debtas of March 31, and its stock is down more than 75% year-to-date,according to MarketWatch.
Now that Dean has increased its borrowing base availability, it may explore more M&A activity to further diversify its portfolio and build up revenue. In 2017,Dean bought aminority stake in Good Karma Foods, which sells non-dairy milk and yogurt, and later announcedit was taking a majority positionin the company. That same year, Dean also purchasedUncle Matt's Organic, a maker of probiotic-infused juices and fruit-infused waters. In 2016, it bought the manufacturing and retail business of友好的冰淇淋.
The company may also be hoping the move will buy more time during which it can more aggressively pursue a sale of the entire company or perhaps just parts of it. Friendly's and Garelick Farmsare for sale, although bids havereportedlybeen rejected.
JPMorgan analyst Ken Goldmanpredictedearlier this year there may not be many interested buyers for Dean Foods. And rumors thatSaputo, a Canada-based producer of cheese and other dairy products, might be interested in buying Deanwere recently squashedby CEO LinoSaputo.
"If Dean Foods does happen to find a buyer (unlikely, in our view), the stock will probably be purchased at a discount to the current price," Goldman told Seeking Alpha. "Dean is a levered company with a fast-deteriorating business and numerous out-of-date production facilities."
现在,增加借贷基础,它没有t clear whether Dean has actually bought more flexibility or will have less of it as it tries to right the ship and satisfy both creditors and investors.
