Operations Turnaround Leads to Good Sale Price at Auction

Consumer Products & ServicesFiduciary ServicesLitigation SupportPerformance ImprovementTurnarounds & Restructuring

70M

Annual Sales

20M

in Debt

Cosmolab (Specialty Packaging), Lewisburg Tennessee

Challenge

Interim management, investment banker, and financial advisor. $70 million in revenues. $20 million debt. Color cosmetics manufacturer, wood case eye pencils. Key customers: P&G, Avon, L’Oréal, Estee Lauder. Private Equity ownership.

  • Failed expansion into direct retail business combined with recession reduced revenues 35% to $45 million and created losses.
  • Excess inventory approached 50%, margins neared 6%, and 37% of products sold at a loss.
  • Senior secured lender over-advanced $3.7 million.
  • Liquidation analysis showed potentially impaired $10 million on a $19.8 million note.
  • Private equity sponsor winding down and unable to fund additional losses.

Solution

  • MorrisAnderson engaged by the Company as CRO and Interim CEO to manage the turnaround process and sell the company.
  • MorrisAnderson worked quickly with senior management to implement cost savings opportunities.
  • Reduced workforce by 284, implemented salary reductions of 10-25%.
  • Increased pricing on 65% of line, improving margin to 21.6%.
  • Eliminated non-strategic assets in China and Oxnard, CA.
  • Negotiated terms with vendors and forbearance agreement with the lender.

Results

  • EBITDA improved from negative $1.0 million to positive $2.1 million.
  • Revenue stabilized at $42 million, while forecasted full-year EBITDA was $5.5 million.
  • 54 NDAs signed by potential buyers, with five getting to due diligence.
  • Three bidders were present at the §363 auction, which pushed the final price 27.7% over stalking horse bid.
  • Company sold for $16.6 million.
  • The sale closed just 78 days after a bankruptcy filing.
  • Senior lender improved recovery by $7.5 million.
  • 400 jobs saved.

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