The Company is a $100+ million machine shop with plants across the Midwest and multiple blue-chip customers. The Company experienced:

• Declining revenues and margin compression making its fixed overhead burdensome
• Five prior years of consecutive losses
• An overadvance on its line of credit

The Lender wanted an external consultant to provide an independent opinion on the business operations and ongoing viability, particularly given persistently falling sales and Management's continued inability to meet forecasts.

Engagement Overview

The Company retained Fort Dearborn to review its operations and financial performance and prepare a turnaround plan.

FDP interviewed Management and reviewed the Company's operations, financial statements, and relevant processes and controls. As part of the Operating Plan, FDP developed multiple monthly financial forecasts to evaluate the financial consequences of various restructuring alternatives and prepared regular 13-week cash flow forecasts for internal cash management purposes and communication with the Lender.

FDP worked with Management to develop analyses and plans to return the Company to positive cash flow by:

• Evaluating profitability by part and customer to gain price increases or jettison unprofitable business
• Raising capital to pay down debt through the sale of a plant facility and excess equipment, reducing the fixed overhead burden
• Reducing the remaining cost structure to align with current sales levels
• Reducing inventory, including selling old and yet-to-be-machined castings to customers to free up capital

After reviewing the turnaround plan developed by FDP and Management, the Lender deemed it acceptable and was willing to exercise patience while Management worked to execute it, particularly as the financial forecast proved accurate. Thus, Management's credibility with the Lender was restored.

The Company returned to ongoing profitability by raising specific prices, decreasing negative manufacturing variances by implementing continuous improvement strategies, and, over time, increasing sales to outperform forecast. 

Within 18 months of FDP's engagement, the Company had restored adequate cash flows to service debt and return to a regular banking relationship with its Lender.