The Company is a cheese manufacturer with two production facilities in the US.
The Company produces various cheese types, including blue vein cheese, which requires specialized manufacturing capabilities.
The Company faced margin erosion due to economy-wide challenges, such as increased commodity, labor and freight expenses and inability to pass on cost increases to customers. The margin erosion led to cash burn, which resulted in an overadvance on the Company’s borrowing base.
The Company retained Fort Dearborn to work with management and create a turnaround plan to return to acceptable operating profits and eliminate the overadvance. FDP:
–Reviewed internal financial reports and discovered an inadvertent $5 million overstatement in the Company’s inventory valuation methodology;
–Found additional overstatements and errors throughout the balance sheet. These misstatements, collectively, showed a $7 million overadvance position;
–Acted as interim CFO to clean up the financial reporting process, designed and implement a standard monthly close process, and worked with the Lender to maintain financing through the turnaround process;
–Performed product costing and profitability analyses to identify products that needed price increases;
–Developed the turnaround plan with Management that included:
oSale of the Company’s joint venture operating facility; and
oTwo rounds of price increases; and
–Assisted in hiring a controller to lead the organization’s finance and accounting function.
Within 12 months of FDP’s engagement, the Company had returned to profitability and exited the lender’s Special Asset Group portfolio by:
–Enacting two rounds of price increases to raise margins on existing products ,where possible, and jettisoned unprofitable customers and products;
–Closing on the sale of the Company’s joint venture operating facility, which generated $4.25 million in cash that was used to significantly reduce borrowings; and
–Reestablishing the lender’s trust in the Company’s finance and accounting function, thereby maintaining the Company’s access to liquidity and eliminating the need to pursue a refinancing.