Case Studies

Situation

• The company began incurring operating losses that cumulated to negative EBITDA.
• The losses resulted with defaults on financial covenants with its bank lender and the company had no ability to cure or any realistic plan to regain compliance. 
• The lender escalated actions by terminating the credit facility, the company exhausted its cash resources and had no ability to refinance.
• The company needed a turnaround plan, and bankruptcy was not an option it could recover from.

Consultant’s Actions

1. Met with long-time customers to accelerate collections of AR.
2. Restructured equipment leases with seven lessors. 
3. Shutdown money-losing non-core businesses.
4. Reduced headcount in over-staffed G&A positions.
5. Divested non-core and underutilized assets.
6. Assessed WIP’s profitability, assessed bid process and post-job reviews.
7. Revised and implemented policies and procedures to improve management of jobs. 
8. Developed turnaround plan, supported by definitive actions, to merit loan forbearance.

Outcome

• Survived cash liquidity crisis by working closely with all major stakeholders.
• Reduction in fixed costs + margin improvements generated a $16 million EBITDA improvement within twelve months. 
• The bank lender was refinanced, and the company reduced its overall debt obligations by $40 million.

Situation

• Family-owned, second generation, glass fabricator and glazier.
• Incurred significant issues with implementation of new laminating production line, resulting in financial losses, missed order delivery times which impaired relations with customers.
• The deterioration in financial performance resulted in defaults to financial covenants with bank lender.
• Budgets were not achieved, the losses continued, the company did not have any cash flow planning, and the bank lender was not satisfied with the company’s explanations and belief it could fix itself before running out of cash.
• The bank lender offered to forbear with stipulated the company engage a turnaround consultant.

Consultant's Actions

1. Negotiated terms with bank lender for maintaining the credit facility for reasonable period of time for an assessment and a plan.
2. Assessed the business operations and connectivity between the two divisions. 
3. Assessed the production process flow, yields and metrics, conducted time and motion studies, reviewed labor productivity, safety, and particulars regarding recruiting and onboarding.
4. Identified and implemented several changes to production that improved gross margin by increasing yields and increasing labor efficiency.
5. Identified and implemented changes that improved safety, which resulted in reduced labor costs and reduced insurance costs.
6. Identified and implemented changes in recruiting and onboarding which resulted in reduced labor costs in production, and increased productivity and satisfaction within the human resources department.
7. Reviewed and validated the selling and bidding process; recommended modest changes to incentives for sales personnel.
8. Identified and implemented changes with order flow and process flow that improved customer satisfaction. 
9. Identified and implemented changes in managing working capital that improved cash flow.
10. Developed detailed forecasting for monthly financials and weekly cash flow.

Outcome

• Gross margin and profitability improved significantly. 
• Financial and cash flow forecasts achieved their targets.
• The company regained compliance with financial covenants within nine months.
• The bank lender regained confidence with the company and the credit was moved back from the bank’s special assets group to the bank’s relationship team.

Situation

• Company lagged competitors in investing in technology and training, gross margins were in steady decline as operating expenses and costs of timber continued to increase.
• Company needed to develop a plan to upgrade equipment and overhaul its dated processes, instill costing standards and performance metrics.
• Engaged Dawi’s consultants to identify, develop, and implement process improvements and performance metrics, assist with developing costing standards. 

Consultant's Actions

1. Worked with Company's engineers and maintenance personnel to develop a ROI proposal for capital equipment to improve yields, improve automation, reduce labor costs, improve safety, increase uptime, improve production planning, and reduce process times. Identified key metrics to compare before/after.
2. Presented proposal and obtained approval.
3. Assisted with soliciting and obtaining financing for capital equipment.
4. Monitored project's implementation, tracked costs, measured cost and timeline to communicate status vs project plan.
5. Established real-time operational KPI reporting to timely address deviations.
6. Worked with company’s accounting personnel to develop new costing standards and variance measurements. 
7. Established financial metrics to accompany and explain financial statements, established interim financial metrics with weekly scorecard reporting.

Outcome

• The improved performance favorably exceeded expectations of reduced material waste and improved productivity. 
• Additional cost savings were realized by the improvements in safety and labor efficiency which had a positive effect on employee retention while reducing cost of worker compensation insurance.
• Quality and on-time delivery to customers improved.
• The processes established for timely review of KPIs and metrics reinvigorated accountability of supervisors and managers.

Situation

• Family-owned business lacked successor for deceased patriarch who ran the business for 30+ years.
• The business operating under replacement management incurred deepening financial losses that managers were not able to clearly explain or fix.
• The deterioration in financial performance resulted in defaults to covenants with bank lender.
• Family members were not in harmony on who should run the business, or how; created confusing and conflicting directives to managers. 
• The bank lender stipulated the company engage an independent consultant to assess the business and its prospects.

Consultant's Actions

1. Assessed personnel, systems, processes, contracts, and relationships with suppliers. 
2. Reviewed jobs and margins; bid process for new jobs including pricing methodology for materials.
3. Assessed overhead costs.
4. Assessed inventory mix and cost in relations to consumption for existing  jobs and planned jobs.
5. Reviewed and validated the selling and bidding process; recommended modest changes to incentives for sales personnel.
6. Developed detailed cash flow forecasts with key assumptions related to jobs and working capital. 

Outcome

• Operational changes generated stability and began an upwardly positively trajectory.
• Merged the business with a related-party entity whose management assumed leadership of the rebar business. 
• Bank lender was refinanced.

Situation

• 20+ year business with a history of consistent profitability began rapidly incurring losses after beginning transition management to the next generation.
• Financial forecasts were continuously unfavorable to actual results, could not explain causes.
• The company’s credit facility was based on cash flow, the negative financial performance triggered a financial covenant default. 
• The lender was second to surety on accounts receivable, and other collateralized assets were insufficient coverage. There was no personal guarantee.
• The company’s owner initially funded losses, however, was no longer willing to provide any additional capital or collateral.
• The surety underwriter refused to bond any more jobs.
• There were no prospects to refinance.
• The lender engaged a financial consultant to advise on options for recovery.

Consultant's Actions

1. Reviewed historical financial performance, margins on jobs.
2. Reviewed current jobs for stage, costs incurred, costs billed, and remaining costs. Assessed and opined on reasonableness of company’s WIP reporting.
3. Reviewed feasibility and assumptions for profitability for jobs in pipeline.
4. Reviewed procedures and assumptions for bidding jobs. 
5. Engage in discussions with management regarding financial improvements.
6. Developed options for the lender.

Outcome

• The assessment revealed a significant overbilling deficit without any means for the company to fund completion of remaining jobs.
• The surety underwriter worked with the company’s owners for funding solutions and collectively devised an offer to assume the lender’s credit at a discount.
• The future pathway was uncertain, with high execution risks, and low likelihood the lender will ever recover in full. After some negotiations, the lender sold its debt to exit the credit and the company was able to restructure its organization.

Situation

• Economic slowdown and changing consumer preferences diminished demand for certain hardwoods.
• Increasing operating expenses and costs of timber further constrained profitability.
• Financial performance declined, triggering a default with credit agreement.
• The company was not successful in efforts to improve financial performance.
• The bank lender was fatigued and decided to exit, believing its loans were sufficiently collateralized.
• Lender introduced the company to Dawi’s consultants to assess the situation and develop options. 
• The bank lender stipulated the company engage an independent consultant to assess the business and its prospects.

Consultant's Actions

1. Negotiated a loan forbearance for sufficient time to develop a plan. 
2. Assessed the business operations and implemented actions to stabilize the financial prospects of the sawmill business while preserving value of the distribution business.
3. Prepared a marketing summary, information memorandum, and financial and other data pertinent to prospective interested parties for financing or purchase.
4. The refinancing prospects were not sufficient to pay off or otherwise satisfy the bank lender and therefore the process evolved to a sale.
5. Solicit prospective buyers and managed all discussions with interested parties.

Outcome

• Closed on sale of the distribution business within 90 days. All employees retained jobs.
• For the sawmill, the value of the individual assets, primarily the real property, exceeded offers for the sawmill business. The sawmill business was shut down and all assets sold.
• The lender was satisfied with recovery and the Company’s owners were relieved of their personal guarantees.