Why did DCA Outdoor file for bankruptcy?

Kansas City-based DCA Outdoor filed for Chapter 11 bankruptcy Feb. 20, according to court documents from the U.S. Bankruptcy Court of Western Missouri.

The company was founded in 2016 by Tory Schwope as a parent company to house the green industry brands he was operating across the supply chain. Currently, the DCA Outdoor umbrella includes 12 brands operating in six states. These brands integrate nursery stock production, landscape distribution and retail garden center operations.

Schwope’s first business was the landscape distribution center KAT Wholesale. In 2005, he purchased land in Missouri and re-established Schwope Brothers Tree Farms. He stayed aggressive with planting during the 2008 recession and experienced significant post-downturn growth as a result.

In 2016, he expanded the scope of the business with three major acquisitions. At the beginning of 2016, he acquired Colonial Nursery in the Kansas City suburb of Blue Springs, rebranded it as Colonial Gardens and developed it into a destination garden center with a focus on agritourism and events. In the summer of 2016, he acquired the 400-acre Anna Nursery in Illinois and rebranded it as Anna Evergreen. Finally, in December 2016, he acquired Brehob Nurseries, a wholesale nursery and landscape distribution center in Indianapolis.

The company has continued to acquire more brands since then, including two other nursery operations.

The GIE Media Horticulture Group talked with Schwope in March to learn more about what happened and what's next for the green industry giant.

What went wrong

It was all going according to Schwope’s plan to create a national vertically integrated business, controlling the supply chain from propagation to finished goods and the distribution of those goods.

The danger of acquiring so many nurseries is that real estate carries a lot of debt, and wholesale nurseries require a lot of real estate. Typically, Schwope would buy the operating company and set the real estate up on a lease-option contract. Over the last four years, several of those options came due. Because of how much land value had appreciated, Schwope saw an opportunity and asked his lender, Farm Credit, to borrow funds to exercise his options to purchase the land.

However, as the nurseries continued to build inventory, the company’s debt-to-equity ratio tightened, and its overall borrowing continued to increase.

He always planned to recapitalize the business by selling some equity and thought there was still time, he says. At the end of 2023, Farm Credit told him, “You’re maxed out on the credit we are willing to provide. You need to get an equity deal done this year.”

Instead, three events occurred in 2024 that combined to create what Farm Credit considered to be a financial crisis.

First, a unique crop failure at DCA’s bare root fruit tree crop in Oregon led to discarding $3 million in sold inventory due to root imperfections and quality and disease issues. Second, a USDA quarantine because of a Phytophthora issue led to $20 million of inventory sitting for five months — a $4 million-plus disruption to revenue at that farm. Third, a major customer’s refusal to pay for spring shipments led to a $2.7 million uncollectible receivable. DCA Outdoor filed a lawsuit against the customer in September 2024, and it is progressing through court. However, Schwope is not optimistic about the chance of making up the loss.

“From a nurseryman’s perspective, all of these things would be considered your worst nightmares,” he says. “A crop failure, a USDA quarantine and then your largest customer failing and not paying you. We had all three of those things happen the same year.”

In early February, DCA Outdoor’s primary lender, Frontier Farm Credit, issued a notice of acceleration and reservation of rights on DCA’s $95 million debt with it.

“The old saying in the nursery business is be careful, don’t have much debt and be conservative because there’s a lot of things that can go wrong in this business,” Schwope says. “I don’t really consider myself a victim. I was fully aware that in this business, things can go wrong, and I didn’t have the company in the right kind of financial shape to be able to survive that kind of major disruption, so it’s on me.”

The plan to get out

The first rule of bankruptcy is don’t get in without a plan for getting out. DCA Outdoor broke that rule.

“We were not expecting to have to file Chapter 11…since the filing, we have been laser-focused on getting everything set up,” Schwope says.

He says the company’s first hearing went well. The court approved DCA’s Debtor-in-Possession (DIP) loan and 13-week DIP budget, which allows the company to continue operating through the spring. The business has until June 20 to present its restructuring plan to the court for approval.

When we spoke in late March, Schwope and his team were developing a number of different plans to restructure, refinance and exit bankruptcy. Working through these potential plans, he says, the company has been able to capture cost savings and create efficiencies that will make the version of DCA Outdoor that exits bankruptcy more profitable than the version that filed.

Next steps include an appearance to receive a final order from the bankruptcy court. When this interview occurred, DCA was operating under an interim order, which grants the company time to present its restructuring plan. As long as the company is meeting or exceeding its budgets during this time, it can continue to operate inside of Chapter 11 bankruptcy.

Other than some cost-cutting measures, this spring will be business as usual for DCA, Schwope says. All its distribution sites and its retail site are open and stocked. Farms are fully staffed. Shipping, potting, packaging and all typical activities are occurring, he adds.

What’s next

Schwope’s No. 1 goal for the restructuring is for DCA Outdoor to avoid a forced asset sale. He’s confident the company will be able to do this, and he wants to keep all of the brands that are part of the DCA portfolio.

“Everything we acquired had to be retooled, from the infrastructure on the farm, the equipment, the organizational structure, the technology, the product line,” he says. “We have been aggressive investors in all the businesses we acquired. We just basically finished rebuilding the entire thing to get it to work together the way it was designed. It would be incredibly wasteful and heartbreaking to bust it up right as we were finishing putting it all together.”

Schwope is optimistic that DCA Outdoor can restructure and continue on the path it’s been on for the last 10 years.

An unexpected lesson he’s learned through the bankruptcy process is that perception is reality. When your business faces bankruptcy, it’s a reputation hit, both for the company and the leader running it. Schwope underestimated how quickly sentiment would change.

He’s seen a change in the investors and lenders that are interested in talking to him, as well as a shift in the criteria they use. Before filing for Chapter 11, Schwope says investors were frequently excited about the upside of the business. Now, all they want to talk about is the downside.

Getting that label adds to the degree of difficulty substantially. It’s a challenging environment, but Schwope believes the only way to approach it is with a positive mindset.

“This is a tremendous opportunity to take a bad situation and overcome it. To have that on my resume and on the company’s resume is something that, once we accomplish it, nobody will be able to take it off.”

Matt McClellan is editor of Nursery Management magazine. Contact him at mmcclellan@gie.net.