Turnaround Restores Profitability of Giftware Distributor

DistributionLitigation SupportTurnarounds & Restructuring

60M

Annual Sales

40M

in Debt

Giftco , Vernon Hills Illinois

Challenge

Giftware distributor for the fundraising industry. $60 million annual sales. $40 million highly seasonal revolving line of credit.

  • The Company served the fundraising industry primarily the elementary and middle school areas, recognized as the clear industry leader for years it was extremely profitable.
  • Fundraising as an industry was down 30% or more from previous levels.
  • Ownership was reluctant to make changes to the cost structure.
  • Over a five year period the company was breakeven, latest fiscal year showed a $4 million loss, the bank group was unwilling to go forward given the seasonality of the loan.
  • 70% of inventory not in current sales line

Solution

  • Morris Anderson was brought in to assess the viability of the business and to identify opportunities to reduce overhead costs.
  • The initial analysis suggested upwards of $4 million of savings and working capital improvements.
  • Acting on the recommendations, management implemented only $200,000 of the savings; Morris Anderson was immediately installed as CEO by the Board to implement the larger savings plans.

Results

  • Acting as CEO, MorrisAnderson was able to implement the structural changes necessary to obtain the $4 million in savings.
  • Inventory was reduced from $14 million of which 70% was not in the current line to $4 million of which 80% was current season goods.
  • The Company returned to profitability, making $2 million the first year.
  • The seasonal line which had never gotten below $6 million was reduced to $2 million.

Contributors