Home Decor Distributor

The Client

A privately held $75 million importer/distributor of House Ware and Home Decor Products specializing in sales through major national and regional big box retailers.

The Challenge

Phoenix was engaged on three separate occasions throughout the eighteen-month period. The client at the request of their secured lender, originally retained Phoenix after certain accounting irregularities were discovered that further deteriorated an already significant over advance situation.

The Company was not properly managing its inventories and concurrently was experiencing significant pressure from its overseas trade vendors. The Company required a complete restructuring of its operations as expenses were not in line with revenues in the face of a severely contracting retail sector.

The initial phase of our engagement ended with the conclusion of secured party sale (Article 9) and the ultimate merger of the Company with a non-competitive distributor to retailers in the same markets.

Phoenix was re-engaged six months later by the client at the request of the secured lender. The company continued to under-perform according to forecast and a plan we designed in order to migrate the warehousing and logistics operations from the existing distribution center to a variable cost, third party logistics facility.

Phoenix was engaged again for the third time five months later as the Company continued to miss their sales targets. The retail sector of the economy continued to deteriorate at a rapid pace. The scope of the last phase of the engagement was to manage the liquidation and wind down process of the Company. This included the sale of the inventories and customer orders to a third party who consolidated them into their existing operations.

The Solution

After the removal of the President by the secured lender, Phoenix, through its PMCM, LLC subsidiary, assumed the interim management roles of Chief Restructuring Officer and Chief Operating Officer of the Company. The existing secured debt was high and the company was in a significant over advance position.

Phoenix began immediately to manage the company and developed the following initiatives:

• Develop a new financial forecast for the current and succeeding years including a revised Borrowing Base Roll Forward
• Design and implement a cost reduction program that identified over $2,000,000 of cost reduction benefits. These included a reduction in force, reduction of the Company’s commercial insurance package, reduction in corporate T&E expenditures, creation of a plan to significantly reduce warehousing and distribution expenses, elimination of overseas offices, and the elimination of major employee perquisites.
• Daily operational control of the Company’s cash management function. This involved much tighter controls on overseas trade vendors and related payment plans, management of inventories in order to increase turnover and reduce slow moving inventories, and management of daily/weekly operating disbursements.

These efforts reduced the over advance situation from its high of over $5,000,000 to less than $2,000,000 at the conclusion of the interim management phase of the engagement. Phoenix successfully managed the liquidation and wind down of activities of the Company culminating the sale of the inventories and order book to a third party.