With reluctance from ownership, Sutker Moran was hired and instantly plugged itself into the Company’s cash situation to create a 13-week cash flow projection to help gain comfort with the adequacy of the company’s near-term liquidity.  Simultaneously, Sutker began working on a Zero-Based Budget exercise to find the optimal structure of the company.  The resulting plan including downsizing to a two-shift operation, selling excess equipment to pay down term debt, and shifting focus away from identified underperforming segments while investing more resources those segments that were determined to generate incremental profits.  When presenting the financial plan to their bank, it was satisfying to listen to our once-reluctant client explain the zero-base process to our lender.  Based upon the plan, the lender loosened its lending limits. Fast forward a year later and the Company is generating consistent profits, and the upcoming bank renewal will be far less restrictive.

We analyzed each category within each product line, and each product within each category, and recommended a 40% reduction in SKUs. Selective price increases were implemented for the remaining products. In addition, we scrutinized each non-direct labor position, resulting in over $400,000 of savings from job eliminations. Finally, by narrowing the product base and instituting an inventory reduction program, the space required to support the operations was reduced, allowing for one of the three operating facilities to be sold.

Through extensive interviews of all levels of management, we helped to assemble a less complacent, more cohesive hands-on management team. We then guided the new team to take action – consolidating departments, eliminating shifts, and discontinuing unprofitable product lines.

Through a zero-base exercise, eight unnecessary positions were identified and eliminated for a net annual savings of $450,000. We also conducted a lengthy activity-based cost analysis and discovered opportunities for $750,000 in annual price increases. A minimum order requirement was established for non-major customers, eliminating unprofitable short production runs. In addition, activity-based set-up charges were instituted to encourage major customers to order in larger lots.

The first step was to improve operations – implementing various manufacturing efficiencies, reducing production capacity, and eliminating non-essential personnel. Next, it was time to convince ownership to push back on the major customers, one of which was supplying a majority of the raw cheese. Either our “partners” would allow us to make money or would lose a good supplier and, in one instance, also a good customer. The Company entered into a tolling arrangement with the largest customer and negotiated price increases with the second-largest customer. These steps would dramatically increase margins and eliminate a significant amount of cash required to pay for product. Through these restructuring actions, the Company’s operating deficit was reversed the following year.

After a very successful year, a project-based international marketing firm invested in its infrastructure — started a regional office, hired a senior sales executive, etc. After developing the monthly financial projections at the beginning of the new year, Sutker, as the Outsourced CFO, reforecasted the projections monthly incorporating updated potential projects and changes in the expense structure. Starting in July, Sutker/Management saw softening in the backlog for the 4th quarter and into the following year. This softness increased when Sutker reforecasted in August. Seeing the financial impact to the reduced business, both in profits and liquidity, Management took proactive steps to reduce its expense structure in anticipation of the lower 4th quarter revenue.

Through various financial analysis and working with the management team, $6.1 million in profit improvements were identified and implemented. Through negotiations with each secured lender, the annual principal and interest payments were reduced by $5.3 million or $442 thousand per month. The Combination of profit-enhancements and principal re-amortization provided sufficient liquidity and resulting profitability.

Sutker began its onboarding process of reconciling every balance sheet account. During this process, Sutker identified a significant overstatement in inventory. The restated financial statements revealed the Company was losing money.

Sutker and management conducted a thorough analysis of the business resulting in $600,000 of profit enhancements that included position eliminations, insurance cost reductions, and reductions in discretionary expenses. Sutker further helped enhance liquidity by facilitating the restructuring of the Company’s bank term loan, saving $50 thousand per month.