MorrisAnderson Cost Reductions and Price Increases Stabilize Company

Challenge

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Plastics Injection Molder. Sales declined from $262 million in 2007 to $182 million in 2009. $130 million debt.

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• Gross margin declined from $31 million to $16 million over two years.
• EBITDA declined from $24.2 million to $4.2 million during the same period.
• Reduced demand for automotive and construction structural plastic injection molded parts, which was fueled by the recession,severely impacted margins and EBITDA.
• Most of the $30 million transfer work from key customers was single digit or negative margin work, which was inadequate to support the fixed operating expenses.
• Utilization fell to under 60% at the three smaller plants, and fell to 30% to 50% at the two primary plants.
• Company lost critical mass and economies of scale following the automotive volume declines.

Solution

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• MorrisAnderson was engaged as the operations and financial advisor to validate the company’s business plan and projections, implement cost savings initiatives, and identify additional restructuring opportunities.
• MorrisAnderson determined that the business model was sound but was dependent on successful implementation of cost reduction initiatives and successful price increase negotiations with the OEM’s.

Results

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• MorrisAnderson confirmed that the cost reductions were realistic and being implemented.
• With MorrisAnderson’s support and counsel, management successfully negotiated price increases that provided adequate margins to profitably operate the business.
• With MorrisAnderson’s help, the company projected cash flow to be sufficient to fund operations.
• The company reduced annual costs by over $6 million.