Retail Fixture Manufacturer

Situation

Our client was a roll-up of eight companies that produced high-end retail store fixtures for customers like Macy’s, Neiman Marcus, Guess, Polo, the Limited Brands as well as cosmetic companies. In addition to its headquarters in St. Louis, the company had factories in Louisville, Minneapolis, Seattle, Miami and Toronto.
The company had generated revenue of $140 million in 2000 but suffered a decline in new business from the economic downturn in the retail market following September 11, 2001. The market downturn led to retail store chains curtailing their new store openings. Furthermore, retail bankruptcies and other restructurings caused lower orders for new retail store fixtures.
As a result of these and other factors, the company had a highly leveraged balance sheet common to companies formed through roll-ups in the late 1990s. EBITDA had dropped to nearly zero with a balance sheet showing more than $100 million in debt. The company’s equity sponsor successfully negotiated an out-of-court restructuring that would significantly cut debt in exchange for limited equity. As a condition of the restructuring, the company brought in a chief restructuring officer to improve operational and financial performance.

CRP’S Approach

CRP was retained in August 2002 as CRO/COO to improve operating performance and increase EBITDA. After an assessment of the entire enterprise, CRP began a multi-pronged effort to improve productivity, rationalize floor space in production and warehouse facilities, standardize the IT systems, create common business processes and improve the executive team’s performance. CRP also filled interim roles as plant general manager in some facilities.
To reduce fixed costs, CRP closed a Minneapolis plant, terminated all employees and auctioned off tools and equipment. CRP negotiated the termination of two leases, saving the company more than $6 million in future lease payments at a cost less than 5%. The largest facility was reorganized and new leaders were hired for several key positions. The plant in Louisville was changed to a customer-focused, team structure, improving customer service and shortening lead times. Lean manufacturing methods were deployed on the floor -- improving productivity, cutting scrap and reducing manufacturing lead-time.
CRP organized “common process” teams in estimating, engineering and manufacturing, creating standard ways of doing business (such as bidding work) and encouraging collaboration across the entire enterprise. A common IT system was selected and implemented, which streamlined the generation of corporate financials. CRP developed a pattern of weekly review sessions for the executive team (CEO, CFO and EVP of sales & marketing) and increased communication through all management levels. The company newsletter was revitalized to improve communication, boost morale and increase employee involvement in the restructuring plans and goals.

Results

• 40% of production and warehousing space were closed.
• Common performance metrics were designed and deployed at each location and periodic review processes were put in place.
• $12 million of annual fixed costs were eliminated.