SCP provides immediate, collaborative and hands-on advisory services for companies, management teams and other stakeholders facing a change process, finding ways to improve efficiencies and reduce costs, and thereby increase a company’s profitability.
Our firm delivers the technical expertise and additional resources required to face extraordinary challenges.
Activities performed with management on a day-to-day basis include:
Create and implement plans to immediately improve cash flow and restore earnings by:
Systematically reviewing and addressing all cost items that would drive EBITDA growth (COGS, logistics, operations, customer acquisition, SG&A, etc.)
Developing revenue strategies and executing plans to create growth, and optimize the product portfolio (product lines, salesforce effectiveness, pricing, etc.)
Transform and implement operating practices to improve productivity and profitability
Implement a focus on root causes, critical issues and achievable solutions for capital preservation
Improve controls and drive positive change to achieve long-term sustainability
Re-establish credibility and communication between the company and its customers
francesca’s is a Houston-based fast fashion women’s retailer that operated in 460+ stores nationwide in traditional malls, lifestyle centers, and outlets.
The Company filed for bankruptcy in December of 2020 and sold its assets via a 341 sale at the end of January 2021.
A factor in the Company’s financial difficulty was the fact that it had become heavily promotional in recent years under interim leadership.
Post-emergence, the Company struggled with fundamental issues such as completion of landlord deals, avoidance of cure payments through contract renegotiation, basic bank account management, and extensive management turnover.
February results were extremely poor, and the company faced an immediate liquidity crisis.
The sponsor initially retained SCP to “stand up” the Company’s finance and accounting function post-emergence.
SCP’s initial work focused on improved trustee communication, implementing a cross-functional approach to contract assumption, and analyzing the Company’s discounting practices.
SCP was eventually retained as Interim Chief Financial Officer.
SCP pursued a number of projects and strategies focused on changes in culture and operational efficiency, as well as improving communication and collaboration with the debtor trustee.
Gross Margin improved from 40% in February to 51% in March and 69% in April 2021.
Sales and Margin exceeded budget every month from March-August.
The Company saved over $1 million in cure costs on operational contracts (no landlords).
Equity holders have been able to make meaningful equity distributions.
A full-time Chief Financial Officer was hired in mid-August 2021.
All remaining debtor items were successfully transferred to the trustee advisor.
Manufacturer of Color Representation Marketing Tools
A Chicago based, $60 million manufacturer of color representation marketing tools experienced a rapid decline in liquidity driven by a sharp drop off in sales and a lack of internal controls which led to an over-advanced line of credit.
After the senior lender froze the company’s working capital line, SCP was retained to serve as the Chief Restructuring Officer, develop a near-term cash flow forecast and explore exit strategies to maximize recovery to all stakeholders.
Identified and implemented $5.5 million of cost reductions within the first two weeks of the engagement. Demonstrated the company’s viability and reconstructed internal procedures to strengthen internal controls.
Created a short-term weekly cash flow forecast and exit strategy to negotiate a forbearance with their senior lender.
After a failed attempt to refinance the company’s senior debt, SCP was named as the Interim Chief Financial Officer. Despite improved operating performance, the legacy internal control issues forced the process towards a sale. SCP prepared formal marketing materials and engaged an investment banker to broaden the pool of prospective buyers.
Successfully sold the company to a financial buyer within six months resulting in full recovery to the lenders.
Despite the operational headwinds and the 30% decline in revenue, the business was generating 15% unadjusted EBITDA margins.
Maintained communication with all management, production employees, customers, vendors, lenders and prospective buyers.
Built a series of business analyses without an ERP system to demonstrate the company’s viability despite obvious challenges.
Worked along side the buyer’s team of professionals to facilitate a successful transition.
Family-Owned Restaurant Chain
Family-owned restaurant chain with two Vietnamese restaurants and a separate full-service breakfast and lunch concept with three locations in the Los Angeles area.
The Company was facing a liquidity crisis as it had stretched all its vendors and was struggling to make payroll or pay for product.
Mopho, Inc. had expanded too fast as the owner/entrepreneur had gotten ahead of his skis. A bankruptcy or liquidation was days away.
SCP dove in headfirst and, within 24 hours, visited all locations to test quality and observe operations and service.
A detailed cost analysis was the first part of the analysis, concurrent with key supplier negotiations. This resulted in SCP advising the Company to cut its menu offerings from 180 items to less than 80. This reduction in items reduced input (food and beverage) costs and significantly reduced labor costs. Additionally, beer and wine were promoted more during lunch and dinner.
As these cost rationalization and labor reduction initiatives were implemented, it became apparent that a location needed to be closed until a later date as the owners were stretched too thin. This ultimately saved the Company $800k EBITDA on a run-rate basis each year.
The Company reduced from 5 locations to 4, improved cashflow by $1.2 million in one year, and improved margins and reduced headcount.
Mopho, Inc. was able to pay down over $300k in past-due vendor debt and negotiate more favorable vendor terms because of debt paydown, consolidating the menu and shrinking vendor base.
Company is now more focused on profitable growth rather than growth for revenue.
Protein Powder Co-Packer
The Company was having issues with its lender as a result of material inventory write-offs and the subsequent impact on its borrowing base.
The inventory accounting issues also led to challenges in preparing reliable budget forecasts for the lender.
SCP worked with the Chief Financial Officer to analyze the details of the inventory and created different inventory classifications that better reflected the inventory as it flowed through the supply chain.
SCP worked with the lender to materially amend the borrowing base to reflect the modified inventory categories and costs.
SCP created a new forecast that reflected the accounting and borrowing base changes.
With more accurate inventory accounting, the Company was able to provide a better financial projection model to the lender.
Further, the Company didn’t have unexpected inventory write-downs that they experienced in the past.
The Company was able to get a long-term amendment to its credit facility that reflected the inventory modifications and revised forecast.
The 2022 crypto winter resulted in several high-profile bankruptcies, including Celsius Network, Three Arrows Capital and Voyager Digital.Winery was operating for several years with negative cash flow.
Owner funded losses for several years but eventually faced personal financial constraints and failed to put in additional capital to allow the company to operate.
Resulted in the winery handing the keys back to the bank.
SCP was engaged to devise a plan to return the Company to profitability, stabilize performance and explore exit strategies.
Identified a series of costs saving opportunities and reduced labor expense by over 20%.
Developed and implemented a plan to use the existing bottling line for other local wineries to maximize equipment utilization and generate incremental cash flow.
Formed partnership with a large retailer.
Liquidated excess inventory to gain liquidity and then developed a private label to lock in contractual revenue stream.
Private label partnership with large retailer allowed the Company to grow sales by 40%.
SCP ran the Company for approximately 12 months to demonstrate viability and position for a sale.
Successfully sold the winery to an international wine producer in Argentina.