This $75 million company called us in to conduct a comprehensive business assessment and planning. We identified 18 underperforming retail stores to close, reduced SG&A expenses by $2.7 million, liquidated $1 million of excess and slow inventory, negotiated with vendors to decrease and postpone $7.5 million in unnecessary raw materials deliveries, precluded a Chapter 7 bankruptcy through successful negotiations with the top three unsecured creditors, was involved with the out-of-court restructuring of $4.8 million of unsecured debt with a three-year repayment plan, identified non-core assets to be sold, successfully renegotiated more than a dozen leases reducing rents by $1.6 million over the life of the leases, performed market research and developed three new very productive stores, identified $500,000 in production inefficiencies and overstaffing, determined methods to reduce the growth of sales goods by more than 30%, established their first import department as they entered into the overseas procurement of goods, and prepared a business plan for potential investors. Prior to this engagement, the company reported $25 million in net losses. By contrast, the company was positioned to report a positive $3 – 3.5 million EBITDA by the conclusion of our engagement.
Elevator Component Manufacturer: Timely Intervention Averts Liquidation
Before bringing us in, this second generation-owned company was strongly considering a self-liquidation after recording four consecutive years of losses, including a loss of 15% of sales in the most recent year. We increased sales by 10%, reversed the losing streak by recording a profit of 15% of sales, substantially improved cash flow by strengthening the billing and collection processes, negotiated for a payment plan with a key supplier, improved ontime deliveries to 95% (within two months) from less than 5% and automated inventory. We performed a market survey of existing customers and learned that the customer perception of the quality of the company’s product was much higher than management realized. Through increased earnings, the negative net worth was successfully reversed within two years. In 2011, the company was purchased by a large European elevator OEM.
Commercial Printer: A Classic Turnaround Case
We were called in by a key stakeholder to assess the viability of this father and son-owned business. We prepared a detailed cash flow analysis, successfully initiated an out-of-court restructuring of certain trade debt, recommended that management focus its efforts on a less competitive and stronger cash flow facet of the business, modified customer payment terms and decreased overhead so that the breakeven point was reduced by $1.2 million per year. Prior to our work with this company, they had experienced three consecutive years of losses. They had overextended themselves with an acquisition, physical expansion and equipment purchases. Their secured commercial loan was over-advanced and payroll taxes were delinquent. After working with us, sales grew by 5%, cash flow became positive, and the company became current with its suppliers and taxes. Through improved cash flow and the sale of an investment property, they were able to reduce their loan to within formula with the lender. Three years after this engagement, sales doubled.
Commercial Flooring Sub-Contractor: Shaky Financial Situation Turned Around
For this struggling privately-held company, we identified problems and recommended solutions which included improved production staging, reducing overhead, modifying the target gross margin, modifying payment terms with customers and shifting the target market away from government projects toward private industry. Prior to working with us, this company experienced a 50% decline in sales in one year with a loss representing 32% of sales. The net worth was in the negative six figures, trade payables were stretched, payroll taxes were delinquent, and the company was overadvanced on their secured line of credit. At the completion of our work, the company had a cash flow positive, was current on payroll taxes, began paying vendors more promptly and they were making timely payments toward reducing their over-advanced loan balance.
At the request of a stakeholder, we assessed the credit and collection policies and procedures and identified numerous deficiencies for this $15 million third generation-owned company and made recommendations for sustainable changes that were executed by management. Before we came on board, receivables were turning in 65 days, 20% aged over 90 days, and probable write-offs totaled more than $400K. As a result of our efforts, receivables began turning in 50 days and less than 10% of balances aged over 90 days. The stakeholder who originally recommended us for this engagement was very satisfied with the results of our work.
Wholesale Video Equipment Distributor: Embezzlement Uncovered
For this privately-owned company, we negotiated a forbearance agreement with the commercial lender which provided an inventory flooring line. We determined methods to reduce fixed overhead by 15%, prepared detailed cash flow projections, located a long-term lender and successfully negotiated with major suppliers to provide credit terms (previously COD) to supplant the flooring line from the commercial finance lender. Extensive questioning led to the discovery of an embezzlement-in-progress which was one of the primary causes of the financial difficulties for this company.
Human Serum Wholesale Distributor: Preparing for New Financing
We prepared this $60 million company’s first ever analysis of inventory by product category, turnover, age, months of product on hand, sales and gross profit in conjunction with their need for a secured line of credit. With this data in hand and a professional appraisal of the inventory, management was successful in obtaining new financing which was needed to emerge successfully from Chapter 11 bankruptcy.
Defense Sub-Contractor: Key Stakeholder Stays the Course
At the request of an unhappy stakeholder, we performed an assessment of this $15 million company’s management, reviewed operational and financial systems and procedures, reviewed the approach to estimating/costing out contract bids, reviewed work-in-progress and new bookings and made recommendations to management. Before engaging us, the company had a large loss attributed to the dramatic slowdown in the final approval of government contracts as a result of the diversion of federal funds for disaster relief after Hurricane Katrina. Payroll taxes were delinquent and the company was over-advanced on their secured line of credit. We ultimately recommended that the stakeholder continue the relationship because of the many significant positive changes-in-progress, the DOD’s shift in focus/funding toward products produced by the company, and the pending sale-leaseback of company-owned real estate. Since completing this engagement, the factors which supported our recommendations were realized – DOD contracts came through, sales increased, the company earned a profit, had a positive cash flow, and the cash proceeds from the sale of company facilities reduced secured debt back to formula. The stakeholder was happy with their decision to continue their relationship with the company.
Restaurant Chain: Increasing Sales While Negotiating Tax Obligations
For this celebrity chef-owned, four-unit company, we increased sales by 5% by implementing several creative promotional techniques and educating management on the value of using a psychological pricing strategy. We helped them reduce operating expenses by $250K/year through lease negotiations, lay-offs in corporate staff, and salary decreases by senior and mid-level managers. In addition, we successfully negotiated the out-of-court restructuring of unsecured debt for 10 cents on the dollar, negotiated with employment and sales tax authorities for installment payment plans and for approval under an amnesty program, worked with the state employment tax authority to correct a $100K tax liability error and successfully avoided the filing of any liens from all taxing authorities.
Retail Jewelry Chain: Emerging From Chapter 11
We prepared detailed cash flow projections for this publicly traded $165 million retailer that was in Chapter 11 bankruptcy. We analyzed the consumer credit card portfolio, reviewed and critiqued the credit approval and collection policies and procedures and prepared a benchmarking comparison of the company with other national jewelry chains. The company successfully emerged from Chapter 11 within one year of filing and was able to maintain its independence.
Collision Repair Center: And Then There Were Three
For this privately-held company, we negotiated the structure, terms and conditions for the purchase of a third unit with debt taken back by the seller, prepared and presented a business plan to several banks, negotiated the terms and conditions of new debt to finance the purchase price and physical improvements, and negotiated the amount, terms and conditions of an investment by a primary vendor to fund the equity portion of the acquisition. After the closing, we assisted with post-integration issues and established more structure and discipline within the combined organizations. We also improved the profitability of the original operation from 7% of sales (pre-tax) to 15% of sales (pre-tax), primarily through the reduction of operating expenses.
Educational Travel Service Provider: From Negative Net Worth to Buying a Building
This family-owned company had a negative net worth as the result of many years of losses. We helped them increase sales, strengthen gross margin and improve profitability. The changes implemented were so successful, within two years the negative net worth was reversed and a 401(k) plan with employee matched contributions was established. Within five years, the owner was able to use increased earnings to purchase a building and lease it back to the business.
Commercial Finance Lender: Needed Analysis and Recommendations
We prepared this company’s first ever analysis of its loan portfolio including average ROA, average days outstanding, write-offs and performance per borrower. We also assessed the company’s management, financial and operational policies and procedures, internal controls and prepared a list of recommendations to help them move their business forward.
Vertically Integrated Apparel Manufacturer/Retailer: An Assessment Realized
We were hired by a concerned stakeholder to evaluate a publicly traded, vertically-integrated apparel retailer which had reported a loss representing 16% of sales, had a qualified opinion on its audited financial statements and was rumored in the media to potentially fail soon. After a thorough examination of the publicly available documents and a lengthy meeting with the CFO, we recognized that the company was on the correct path to return to profitability given the many significant changes instituted by new management. This included the growth in sales despite the recent shuttering of unprofitable stores, the increase in gross margin, the reduction in operating expenses, the continual quarter-by-quarter reduction in losses and the high likelihood of the refinancing of bank debt with a larger line of credit by a commercial finance company. The stakeholder was very pleased with the depth of our due diligence efforts and the rationale behind our recommendation. Since our report was completed, the apparel company has reported more good news in terms of sales growth, decreased losses and the booking of a larger line of credit with the commercial finance company.
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