Restructuring Advisors

National Transportation Company Engagement Results

Company: Lower middle market trucking company
Industry: Transportation / Trucking
Revenue: $22 million
Region: Midwest based with nationwide service
Services: Financial and Operational Restructuring

The Challenge

A leading regional bank had moved the company’s credit facility to their workout group. This move was precipitated after the company had lost money 3 years in a row and was in default on a number of the covenants from their lending agreement. Availability on their line of credit was very limited. From the banks viewpoint the company had not taken significant action to improve their cash position nor had they undertaken appropriate steps to resolve their operating issues. Restructuring Advisors was brought in to perform a critical needs assessment, build a restructuring plan and to advise the bank if they would be best served in maintaining the credit or exiting the relationship.

Our Actions

The team at Restructuring Advisors completed a comprehensive assessment on the company’s financial position and the current state of their operations. Upon completion, our team met with the company executives and bank official’s to present our conclusions. We were able to determine that the company could generate nearly $1.0 million off their balance sheet by changing the structure of several insurance policies and focusing on a small number of high value receivables with significant aging. Those actions would solve the immediate cash flow problems. Longer term, the operations analysis led us to believe that through better pricing management, a focus on higher margin shorter haul business, and improved efficiencies in their fleet maintenance, administrative and dock/warehouse operations, an additional $1.8 – $2.5 million in profit could be realized annually without factoring in any benefit realized through additional sales. Upon review of our plans and budgets, the bank determined it would continue to work with the company through the turnaround process. A nine month forbearance agreement was negotiated and agreed upon by all parties. The Restructuring Advisors team continued working with the company to a) complete an intensive cost analysis, apply these costs against current customer pricing and help negotiate new pricing agreements; b) enhance their working capital by reducing days outstanding on receivables and extending payables by 15 – 18 days; c) to implement a business process improvement program to reduce time and waste; d) to oversee the transformation of their fleet maintenance operations; and e) mentor the management team on being more proactive and monitoring newly defined KPI’s.

The Results

The bank has a performing credit and good communication with the company on their activities and results. The company’s line of credit has been consistently running with full availability and they are generating positive cash flow. Key associates were provided with a well-deserved and long awaited wage increase. Gross profits have increased dramatically due to the price increases, operating income is positive and they are well positioned for future growth. At the same time, should there be an economic downturn they have a strong cash position and are better prepared to take actions quickly so as to not jeopardize the long term viability of the business.