Company Overview
The Company is a packaging company providing full-service printing and converting of flexible film and paper substrates for food, pet food, lawn and garden, nutraceutical, and other markets. The Company operates three manufacturing locations and a warehouse/distribution center.
Under the direction of the former president, the Company embarked on a poorly managed, aggressive growth strategy during which the Company's profitability and liquidity declined:
- $30M Capex for printing and converting equipment and facility expansion
- Significant cost increases that were not timely/fully passed on to customers
- Operational errors caused significant manufacturing variances and order delays
- Inventory grew to unacceptably high levels
- Twelve consecutive months of losses and negative EBITDA
Engagement Overview
Although the owner injected significant capital, the Company's financial performance deteriorated, causing loan covenant defaults. At the urging of the Company's lender, the Company retained FDP to help stabilize the Company and improve profitability.
Working closely with the owner and management, FDP helped develop and implement several initiatives to improve liquidity, hold management accountable, and return the Company to sustainable profitability. Those initiatives included:
- Eliminating the president's position and restructuring plan management to improve shop floor performance and quality with a focus on scrap and machine efficiency
- Establishing a weekly meeting cadence to instill accountability and maintain focus on critical elements of the Operating Plan
- Aggressive inventory reduction to reight-size inventory and generate liquidity
- Targeted price increase strategy
- Headcount reduction
- Preparing a comprehensive 13-week cash flow forecast model and updating it weekly for presentation to the Company's lender
- Preparing monthly financial statement forecasts for the balance of the current fiscal year and the next fiscal year
Results
The Company restructured senior and shop-floor management, resulting in improved operating efficiencies, reduced scrap, improved communications, and increased accountability throughout the organization.
A new position - VP of Supply Chain and Scheduling - was added to better control inventories.
Three consecutive quarters of positive net income and significant EBITDA, far outperforming the Plan.
A Fixed Charge Coverage ratio over 1.1.
The COmpany's lender continued to support the Company.