Sanderson Plumbing set to lay off three quarters of its 230-person workforce
by Ted Carter
Published: April 28,2014
COLUMBUS, Mississippi — Three-quarters of the 230-person workforce at bankrupt toilet seat maker Sanderson Plumbing Products are out of a job by the end of this week unless an investor steps in with money to keep the company running.
The layoffs likely would have occurred already but for a federally required 60-day plant closing notice that expires April 29. The prices at which big box retailers such as WalMart sold the well-known Beneke and Tuffy brands toilet seats could not match the costs of making them, according to CEO Tom Whitaker.
“I expect the layoffs at the end of April,” he said late last week.
Workers who remain at the 360,000 square-foot plant will fill pending orders before a total shutdown occurs, Whitaker said.
Potential buyers have shown interest, according to Whitaker and Fred Cross, managing director Heritage Equity Partners, an Erie, Pa., firm that specializes in selling distressed properties.
Whitaker said one scenario is that a potential buyer could inject money into the plant to keep it operating and viable until a full purchase can be made. He added he does not see that a happening in the short term.
Buyer interest, according to Cross, has come from bath-and-kitchen manufacturers as well as investment groups look to enter the fixture business.
A month-long auction on the plant and equipment closed at noon last Friday. Cross indicated the auction has not produced a viable buyer.
A dozen years ago, Sanderson Plumbing Products was Columbus’ largest manufacturing employer with more than 1,000 workers. Lower product pricing attributed to Chinese competitors forced the company to file for Chapter 11 bankruptcy protection on Oct. 30.
Sanderson Plumbing has two main lenders — the Mississippi Development Authority (MDA), which has an approximate $1.5 million first lien on the plant situated on 30 acres, and New Orleans-based BizCapital BIDCO II LLC, which has a $1.9 million first lien on the plant’s equipment, inventory, patents and other assets, bankruptcy court documents show.
The MDA also has an $800,000 second lien on equipment and other assets, according to the court filings.
The MDA and Small Business Administration-backed loan from BizCapital came as part of a purchase of the company in 2012 by Whitaker and other Sanderson executives. They have operated Sanderson under the Beneke Magnolia name.
In the two years since, big box retail customers such as HomeDepot and Walmart have refused to pay higher prices to accommodate increased costs Sanderson incurred in making the toilet seats and in importing foreign-made seats for U.S. distribution, Whitaker said.
Sanderson has moved half of its production to China since 1999. The seats made in China came through Sanderson and on to the market. “Then the customers started going directly to China and cutting us out as middleman,” he said.
When the 58-year-old Whitaker and the other investors bought the company in 2012, they believed the price pressures from the direct buying of lower priced toilets seats had gone as far as they would go, Whitaker said.
“We kept thinking things would turn around.”
Today, Chinese manufacturers can make the product, ship it to the United States and distribute it for sell at prices lower than Sanderson can make the seats, Whitaker added..
The CEO said he expects the long-established Beneke and Tuffy brands to live on. “Everybody we’ve talked to is interested in the Beneke and Tuffy names,” he said.
Sanderson sells the Tuffy brand on the wholesale plumbing market under the Beneke logo and on the retail market under the Magnolia line, according to the Heritage Equity Partners sales listing for the company.
Whitaker, who has been with the company since graduating from college more than 35 years ago, said he is willing to stay on under new ownership. A new owner who installs more modern and efficient equipment could make a quality toilet seat to compete at prices offered by foreign seat makers, he said.
“It’s a great opportunity for someone who can come in here and put some capital into it,” Whitaker added. “I feel that in a couple of years they could own the market again.”
New levels of manufacturing can be reached “with robotics and other things,” he noted. “It doesn’t replace workers. You just retrain the workers to use the equipment.”
Sanderson has one of only a few woodflour manufacturing units in the nation. The process, which Sanderson began doing in 1955, involves recycling soft and hardwood scrap lumber and grinding it into granular particles that bring a smooth sturdiness to plastic. Beyond toilet seats, the Sanderson plant uses woodflour to make furniture parts such as arm chairs and casket handles for other manufactures.
Sanderson used to ship the woodflour to its Butler, Ala., plant for making plastic and vinyl toilet seats. The woodflour manufacturing has been done in Columbus since the Butler plant’s closing a couple years ago, according to Whitaker.
The main woodlfour line can produce 12,000 toilet seats in an eight-hour day.
Woodflour is but a small part of the operation compared to the plant’s use of plastic injection molding and extruders, he said.
At nearly 50 plastic injection molders, the plant has one of the largest inventories of that kind of machinery in the South, Whitaker noted. The equipment can produce 6,000 toilet seats in a 24-hour day, Heritage Equities Partners’ sales material notes.
That sort of capacity explains why nearly every aircraft in the world today has a plastic seat produced through Sanderson’s mold injection process, he said.
The plant’s 15 extruders clean recycled materials and pelletize them for manufacturing use, Whitaker explained.
While the plant’s equipment has value all its own, Whitaker said the best value is for a buyer to buy the plant and all its furnishings.
Sales literature for the plant note its equipment capacity makes it possible for a new owner to come in and gain an increased market share. The owner can also use Sanderson’s excess injection molding and woodlfour molding equipment to make new products in “any number of different industries,” Heritage Equity Partners say.
“The plant could be refitted for any type of manufacturing,” Fred Cross, the Heritage Equity managing director, said.
The depressed national economy became a major factor for Sanderson beginning with shrinking sales in 2008. Still, the company reached sales of $50 million in 2009. But by 2012, sales dropped to $29 million, of which about half came from distribution of toilet seats made by foreign manufacturers.
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