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Case Study: Industrial Filtration Design and Manufacturer

Cash Flow Forecasting, Business Plan Review, Evaluation of Management

Company: $180 million engineering design and manufacturer of filtration devices for textile, chemical, and heavy industry

Situation/ Tasks Performed: The Company incurred high debt levels through the acquisition of a number of companies in the filtration industry both domestically and internationally. A general downturn in the manufacturing sector along with a substantial decline in the domestic textile industry reduced demand for its products resulting in cash generation significantly below the amount necessary to service its indebtedness.

TRG was engaged by the bank syndicate to review the Company's financial forecast, cash needs, and restructuring plan. TRG concluded that the plan overstated the Company's ability to generate profits at the forecast revenue levels. The Company's cash flow projection methodology was not complete thereby causing it to be an unreliable forecasting tool. TRG reviewed the various divisions and endorsed the sale of non-core operations. TRG advised the bank syndicate that it was unrealistic to expect any cash to flow from the international operations to the United States where it could be used to reduce the debt - only the outright sale of international assets could be expected to generate cash for debt reduction.

Results: The Company revamped its cash flow forecasting methodology to provide more accurate forecasting to the bank syndicate and for its own use. The bank syndicate allowed the sale of one domestic operating unit and encouraged the sale of another. The Company divested an international operating unit with the proceeds being applied to the indebtedness. The Company continues to investigate methods to monetize its international assets.

Nature of Assignment:
Primary: Cash Flow Forecasting
Secondary: Business Plan Review
Tertiary: Evaluation of Management

Industry: Manufacturing