Latest News - Turning Point Management Advisors, LLC

Ramco Innovations, Inc.

May 18, 2011

Minneapolis, MN. – Turning Point Management Advisors, LLC (“Turning Point”), a leading consulting firm providing business recovery solutions, interim executive management and business brokerage services, is pleased to announce their client, Ramco Innovations, Inc. ((“Ramco”)), Des Moines, IA, has sold Humboldt Controls and Fabricating LLC (“HCF”), Humboldt, IA, a division of Ramco, to Voyager Aluminum (“Voyager”), Brandon, MN effective April 30, 2011.

The Seller HCF was established in 2001 in Humboldt, Iowa as a strategic expansion of Ramco. The division started in a 25,000 square foot facility specializing in the design and fabrication of custom stainless steel material handling and packaging equipment for food stock environments. The division was envisioned as an extension of Ramco and its controls business. HCF was designed to have the capability, resources and experience to offer certain upgraded levels of both fabrication and controls. HCF operated as a stand-alone entity with large, quality customers, including exclusive manufacturing agreements with companies like Wells Dairy (Blue Bunny) in Le Mars, IA.

Situation – Ramcos long-term plans for growth and profitability in the HCF expansion and strategic alignment with their controls business did not meet the strategic benchmarks of Ramco. Ramcos core business was growing, and therefore, decided to focus resources on that business.

Relationship with Turning PointRamco retained Turning Point to advise the Company and determine the best options to optimize HCFs value to Ramco. Options included selling the Division, continue current operations implementing a viable turnaround plan and/or invest in and grow the business. Turning Point determined the best option to be a sale of the division. Turning Point, through its broad base of contacts, identified a number of buyers that fit the profile.Voyager was an excellent fit as it was seeking to expand its market base, add product lines and establish a new distribution location.

Turning Point Management Advisors, LLC is a leading consulting firm providing business recovery solutions, interim executive management and M&A Advisory services to companies and their stakeholders that have reached a critical juncture, a “turning point”.Their focus is on restoring business value for all stakeholders, while leading organizations through transition. Their professionals have extensive executive level experience leading companies. Turning Point provides “decisive leadership guiding you through business crisis.”

Turning Point Wins the 2014 Transaction of the Year Award

The Minnesota Chapter of the Turnaround Management Association congratulates Turning Point Management Advisors LLC, winner of the Chapter’s 2014 Transaction of the Year Award for its work with Mansfield Brass & Aluminum Corporation of New Washington, Ohio. The Transaction of the Year Award recognizes excellence and extraordinary achievement by turnaround and insolvency professionals working with a distressed business in a complex restructuring, sale or other transaction to preserve and realize value for stakeholders.

The TMA Minnesota Chapter will present the award at its monthly meeting on November 20, 2014 at the Minneapolis Club.

www.turnaround.org

www.turningpointmgmt.com

Originally published in Volume 24, Issue 11 of Minnesota Business magazine.

Case Study – Turnaround Distribution Industry

Situation:

A family-owned, 95 year-old, wholesale distribution business that provided the highest quality brand name supplies and equipment to institutional and industrial launderers and dry cleaners in the upper Midwest had experienced three years of declining revenues along with operating losses. The downward trend in financial results had caused the Company’s lender for over 20 years, to become concerned about the Company’s future ability to repay its $2.0 million asset-based line of credit which was fully collateralized by accounts receivable, inventory and cash surrender value of life insurance policies. As a result of the continued operating losses, the Company was also experiencing cash flow issues. Consequently, the bank indicated to the Company that it may not renew its credit facility unless the Company retained a turnaround management firm to address its deteriorating financial results. Turning Point was engaged to assess the Company’s financial performance and business operations, organization, prepare recommendations and a plan to drive a financial turnaround. Additionally, Turning Point was engaged to develop a cash forecasting process and re-establish the basis from which to renegotiate the current credit facility or seek a new lending partner. Turning Point was selected based on its in depth due diligence of the situation, the Principals business experience managing and operating companies through turnaround and their successful track record of renegotiating and sourcing new bank credit facilities.

Challenges:

Three years of declining revenues and operating losses
Low gross margins in the Supplies business segment
Excessive warehouse space and costs due to multiple, inefficient Company-owned locations
Unionized warehouse workforce
High inventory levels with declining sales
Lack of sound financial management including gross margin analysis, inadequate cash flow reporting, minimal key metrics tracking plus no financial plan to monitor actual results against
Bank relationship was strained; new credit relationship may be necessary

Our Process:

We completed a thorough review of the Company’s operations and financial performance to date including an analysis of gross margins for all product lines. We analyzed current cash flow and prepared a 13-week rolling cash flow forecast for the Company to operate within.We completed an organization review to assess the strengths and weaknesses of management and employees. Turning Point then prepared a SWOT (strengths, weaknesses, opportunities and threats) analysis on the Company, generating a realistic operating and financial plan for the upcoming fiscal year with recommendations for immediate action necessary to improve the financial results of the business. Additionally, we prepared a longer range operating and financial plan with specific recommendations to be implemented. The analysis and the short and long-term operating and financial plans along with our recommendations were presented to the Bank.

The Success:

The Bank concurred with our assessment and recommendations for a business turnaround and our short and long term financial/operating plans. The Bank agreed to maintain the current credit facility for the Company until a new credit facility was secured. Turning Point assisted the Company with the implementation of certain recommendations. One of the most critical recommendations was the sale of a warehouse location which converted an under-performing asset into needed cash. The sale of the warehouse location was completed within six months. With an improved balance sheet, the Company secured a new credit facility with lower rates and better terms from a local bank. The Company is now operating successfully and profitably.

Case Study – Turnaround Manufacturing Industry; Interim Executive Management

Situation

A family owned investment firm, focused on building a portfolio of growth oriented, privately held, companies throughout the local region, acquired two outstate, Minnesota-based, manufacturing companies providing bulk material transportation equipment to the over-the-road tank and trailer industry. The two companies were merged in mid-2010 to gain operating efficiencies. New executive management was brought in to lead the newly combined entity. Unfortunately, under the new management, the company was not profitable, experiencing significant cash flow losses every month plus the integration failed. In the beginning, sales had increased every month; however, the operating and cash flow losses continued to mount and the Company had drawn down $2.8MM on a line of credit. Half way through the year, the CEO, acting CFO and other management personnel left the organization. Turning Point was engaged to provide interim executive management services and to assess whether the business was truly a going concern. Turning Point assumed the roles of executive management and were charged with running the Company’s day to day operations and reported directly to the Company’s board of directors.

Challenges

Number 1 question – Going concern?
Improving revenues while continuing to generate operating and cash flow losses
Large build up in line of credit to fund losses
Low gross margins in trailer products
High inventory levels given sales volume – History of material and sizable book to physical inventory write downs
Board was lead to believe backlog was close to $3MM yet order backlog was nonexistent
No targeted or concerted sales effort in place
Lack of sound financial management including gross margin analysis, inadequate cash flow reporting and minimal key metrics tracking
Vendor payments were well past due creating raw material/supply delivery concerns

Solution

We immediately set out to stabilize the business operations, implemented communication meetings with all employees as to our process and conducted the following:

Cash flow analysis to understand opportunities to reduce cash needs immediately
Completed a 13-week rolling cash flow model to manage against
Reviewed all product gross margins analyzing costs associated with current orders and backlog to determine level of profitability and determine if immediate price increases were necessary
Addressed inventory levels reviewing excess inventories, valuation and purchasing management
Operations review and assessment to understand production scheduling, process flow and floor layout, throughput, etc.
Organization assessment to determine correct number of employees, skill set and job responsibilities
Addressed the vendor past due situations with immediate communication
Created a business plan and forecast
Conducted a market opportunity and competitive analysis for the Company’s current and potential future products
Developed a three year strategic and financial plan

Results

The Company was cash flow positive for the entire second half of the year due to increased sales, greatly improved product gross margins, a 30% smaller organization and reduced cost structure. Through Turning Point’s market and competitive analysis, the business altered its product offerings and the vertical markets served creating an extremely viable business going forward. Turning Point’s three year strategic plan has provided the roadmap for long term growth and profitability. The Company’s board of directors has retained Turning Point to provide interim executive management and execute the strategic plan on an ongoing basis

Case Study – Turnaround, Manufacturing Industry; New Credit Facility

Situation

A mid sized iron foundry in the Upper Midwest had been losing money for 3 years in a row and had defaulted under their credit agreement. The Company was operating under a forbearance agreement with the Bank and the Bank had lost confidence in management. The Bank insisted that the Company hire turnaround professionals. The principals of Turning Point were engaged to assess the Company’s financial and operational plans, to manage the cash crisis, drive a turnaround and re-establish the basis from which to renegotiate the credit facility. Turning Point was selected based on their manufacturing, operational and financial backgrounds

Challenges

The Company was operating under a Bank forbearance with high banks fee and interest.
Cash burn was over $150,000 per month.
Management had no operating plan to run the business day-to-day, much less turn the business around.
The owners wanted help to solidify the company’s position for the future and keep the 150 jobs in place.

Solution

After months and years of losing money, the Company, with Turning Point guidance, began turning a profit in within 3 months of engagement. Cash burn was eliminated and positive cash flows began within that 3 month period. We assessed the Company’s strengths and weaknesses, analyzed their financial situation and revenue streams. Since the Company did not have a lot of time, selected pricing and surcharge adjustments and focused cost cutting measures were implemented. The quickest and most effective strategy was going to be driven largely by aggressive pricing and cost cutting as well as aggressive cash management. The price increases were focused on those customers identified with low margin products. Expense were cut and the Company streamlined the organization.

Results

Within 3 months, the Bank renewed its Credit Facility with the Company, removed the forbearance agreement and implemented standard terms and conditions.
The Company paid down around $5,000,000 in debt owed to the Bank and was consistently profitable.
Top operation’s and sale’s leadership were hired and the organization improved its processes with frequent communication with its employees.
The Company was able to retain a majority of its employees based on this turnaround effort.