Rail Manufacturer
The Situation
- Third-generation, family-run company that designed, manufactured, installed, and maintained track components and systems for railroads and industrial facilities
- Business grew revenue to $120MM and EBITDA $8MM – significant portions of each generated via joint a venture to remove and resell scrap rail for Class 1 railroad operators
- Company’s ABL supported expansion by increasing line of credit from $20MM to $35MM to accommodate increased working capital, growing outstandings to $33MM
Role(s)
Consultant:
- Financial Advisor
The Work
- CR3 professional served as Financial Advisor as business was in violation of several loan covenants and eight-month EBITDA was ($2MM) – decrease in EBITDA caused by failure of joint venture, onerous contracts, and a $5MM+ inventory write-down
- Developed and helped implement a plan to shutter the scrap business and liquidate the inventory and associated equipment from numerous scrap yards around the country
- Led negotiations with customers to transfer contracts to new service providers and minimized dilution of accounts receivable
- Developed inventory control and standard cost processes and procedures for the manufacturing group and trained the staff
- Formulated and executed a strategy which saw the assets of the construction business sold to another family entity in order to raise cash
- Scaled headcount to reflect the new level of operations and installed a new president for manufacturing
The Results
- Proceeds from the liquidation of inventory, transfer of contracts, asset sales and collection of accounts receivable reduced the loan balance to $8MM
- Manufacturing business was refinanced with a new lender as a standalone concern
- Remaining manufacturing operation saw margins increase by 600 bps by the time of the refinancing and service levels were measurably better
- Though under a different structure, the businesses were retained by the family