Background

• A Private Equity backed manufacturer and distributor of nutraceutical products and ingredients, performance deteriorated a year and half ago and and was in violation of bank and debt covenants.
• The investors did not see a viable plan to return the company to financial health.
• Investors were losing faith in the management team
• The Company was quickly running out of cash, was up against its bank lines and had very little runway left.

Activities

Phase 1 – Assessment

• Determined Historical sales had been well short of budget for the previous two years. There was a lack of sales leadership and a revolving door of sales VPs
• EBITDA and gross margin have been shrinking significantly over the past several years while expenses rose
• Cheaper raw materials from Asia further commoditized the core business
• The company had made a significant bet on its future with a foreign joint venture that was in trouble
• Inventory was a big issue – excess product, expired inventory and generally poor management and systems for management of inventory
• The failed bets on excess inventory, foreign plant investment and the purchase of poor quality raw materials caused the company to violate lender covenants resulting in onerous ongoing debt costs
• The Company was operating in crisis mode
• Made numerous suggestions to the BOD in terms of a go-forward plan and strategy

Phase 2 – Create and execute restructuring plan

• High priority inventory reduction plan to raise cash
• Developed a realistic go forward budget for the Board and lenders. Lender was familiar with KPCG and immediately backed off aggressive behavior upon our engagement
• Implemented new sales plan with rationalized product line and price increases consistent with higher raw material costs
• Identified numerous areas where cost savings could be made in administration and overhead
• Streamlined the sales/marketing & customer service teams and processes
• Installed teams to identify and fix processes to increase efficiency and reduce costs

Results

• Monthly profits now significantly positive
• Re-focused the company on its core business
• Negotiated an operating line with the bank permitting a 6-month recovery runway allowing the shareholders to keep the opportunity alive rather than giving up
• Company is now going forward with a new business plan resulting in modest growth with positive EBITDA and cash flow (EBITDA projected to increase 3X – 4X over prior fiscal year)