Apache Hose and Belting, Inc.
Industry
Light Manufacturing and Wholesale Industrial Distribution
Size
Undisclosed
Expertise
Financial Restructuring and Strategic Consulting
Assignment
The company had been facing a continuous erosion of EBITDA causing them to violate their bank covenants. MainStream was engaged by the board of directors to evaluate the company and provide strategic options.
Actions
MainStream performed an assessment of the company’s operations including its sales and distribution operations. The company is a wholesale industrial distributor of hoses and conveyor belting products providing customized value-added manufacturing/fabrication for its customers. The company primarily sells its products through large retailers like Tractor Supply, Northern Tool & Equipment and Lowe’s. It also sells directly to large manufacturing companies and provides counter service for local purchasers through six distribution centers. MainStream found that most of the company’s problems stemmed from inadequate management. As early as four years prior to MainStreams assessment, management had allowed the organization to become preoccupied with branch profitability (driven by counter service and customized products) and ignored ballooning inventories and eroding pricing margins. MainStream recommended and assisted in redesigning the financial reporting system to enable better management of the business. MainStream also helped develop a market and pricing strategy that would strengthen customer relationships, eliminate below market pricing, and expand the company’s retail focus. In addition, Apache changed the way it priced freight allowing it to recover over a third of its EBITDA erosion with a simple decision. Lastly, MainStream recommended an overhaul of the branch distribution network including downsizing their store fronts and reducing employment.
Results
The board of directors assumed greater involvement in the governance of the company hiring a new president and restructuring the management team. Strategically the MainStream recommendations were implemented and the company reversed its fortunes with improved earnings and eventually sales growth. Financially, the company was able to renegotiate its existing loans including a grace period from the banks required covenants. Within two years of MainStream's involvement the company had returned to solid footing.