Reducing and rightsizing to realize a positive outcome.
This $140 million manufacturer had lost approximately 50% of its sales, was reporting negative EBITDA and was close to filing for bankruptcy.
- The company was manufacturing and carrying excess inventory.
- Several key product lines were unprofitable.
- The company had an inefficient manufacturing process.
- The company’s supply chain management function was weak.
- The company had substantial excess personnel on its payroll.
- RSI evaluated the executive management structure and recommended changes at the executive level that were ultimately implemented.
- Mr. Kasoff took on and fulfilled the role of Chief Restructuring Officer.
- Working closely with management, RSI guided the company in the formulation of a comprehensive, detailed turnaround plan.
- The company’s physical operations were consolidated from five plants in four states to three plants in three states.
- The overall footprint of the company was reduced from 1.5 million square feet to approximately 400,000 square feet.
- RSI recommended and implemented outsourcing to a third-party provider of certain unprofitable manufacturing product lines representing $25 million of sales. The outsource agent offered competitive pricing that resulted in approximately 20% margins to the company.
- Inventory levels were rationalized from 27,000 SKUs to approximately 5,000 SKUs.
- Obsolete inventory and raw materials were identified and sold, resulting in a reduction of more than 65% in inventory levels.
- Unused machinery and equipment was disposed and the proceeds used to reduce outstanding loans.
- The company’s supply chain management was significantly restructured and strengthened.
- The IT/computer systems were consolidated from three systems into one.
- Personnel at the company were reduced by about 600 individuals (or approximately 55% of staff), thus right-sizing the workforce relative to the company’s new earnings level.
- In eight months, the company was turned around from negative EBITDA to positive EBITDA, with a projected full-year EBITDA of $8 million.
- The company avoided bankruptcy.
- An existing subordinated lender, believing in the turnaround and the company’s prospects, agreed to make a further substantial investment in the company to bolster liquidity and improve the capital structure.
- The company maintained a component of its manufacturing capability, to take advantage of increases in revenue in the future.