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

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Overview

  • Transportation
  • Assessments

Engagement Team