Global Nature & Wildlife Toy Manufacturer

 

Background

  • $90 million privately held, manufacturer of nature & wildlife toys primarily sold in zoo, museum, and aquarium gift shops

  • With an emphasis placed on innovation and the introduction of new product lines, the Company’s on-hand inventory became inflated causing a critical working capital issue

  • Working capital issues supplemented by an additional $9 million of inventory scheduled to arrive from international vendors led to a default on the Company’s bank agreement

  • The Company was placed into forbearance by its lender (~$6.0 million of senior debt) and was tasked to reduce operating expenses by $1.0 million - $1.5 million, implement an improved inventory purchasing strategy, and convert-to-cash $3.0+ million of excess / obsolete inventory

CM&A Role / Turnaround Process

  • Worked collaboratively with the Company’s Sales and Marketing department to develop an ‘opportunity buy’ program focusing on excess and obsolete on-hand inventory

  • Assisted the Company in sourcing and retaining a permanent Chief Operating Officer (COO) to oversee global purchasing operations

  • Developed and implemented a cash flow forecasting process to provide the Company foresight into future-looking seasonal periods of the business to effectively manage liquidity

  • Developed a cost reduction program to achieve $1.5 million of expense reduction, which was driven by: (i) SKU rationalization to eliminate obsolete SKUs as well as the introduction of new product lines, (ii) vendor consolidation / rationalization, and (iii) improved inventory purchasing controls

  • Negotiated a revised structure to the Company’s debt agreement with the existing lender to include: (i) varying advance rates to account for seasonality of the business; (ii) eliminate ownership personal guaranty’s; (iii) reduce the interest rate of the loan

  • Led weekly communications with the Senior Lender to present operating performance updates and demonstrate successful management of available liquidity

Outcome

  • $3.0 million inventory reduction driven by the ‘opportunity buy’ program of excess and obsolete products

  • ~$2.0 million of incremental EBITDA

  • Approximately $2.0 million debt balance reduction to achieve a successful financial restructuring with its current lender