Kibel Green Intro2010

For over 25 years Kibel Green has advised over 1,500 clients in
• Unlocking operational potential
• Securing new sources of capital
• Turning around struggling companies

Firm Overview

Jonathan J. Wernick| Senior Consultant
Kibel Green Inc. | 2001 Wilshire Blvd, Suite 420 | Santa
Monica, CA 90403
Direct: 310.829.0255 x205| Mobile: 310.909-6121| Fax:
702-554-2625
jwernick@kginc.com | www.kginc.com

Firm Overview
We offer three synergistic capabilities for middle market companies

 Over 1,500 clients since 1984  Primary focus on public and
 $5B in transactions private middle market companies

Turnaround Operations
 Lender negotiation  Profitability improvement
 Cash flow maximization  Organization simplification
 Business plan vetting  Supply chain efficiency
 Cost management  Project management
 CRO services

 A one-stop solution

Broad experience
Financial  Strong partnership with
management
 Retail Restructuring
 Senior-level professionals
 Manufacturing  Debt negotiations
 Distribution  New funding sources  Resources and expertise
 Service  Bankruptcy plans for urgent situations
 Real Estate  Sale of assets
 A regional presence in
 Technology the Western U.S.

2

Client Profile – Sample of Recent Engagements
We have broad industry experience and strong expertise in distressed situations

1
Size $M Description Service Provided
360 Consumer Product Manufacturer Turnaround
190 Residential Real Estate Developer Turnaround, Bankruptcy
1,125 Sporting Equipment Manufacturer Operations
300 Print & On-line Media Publisher Operations
85 Home Furnishings Retailer Turnaround, Bankruptcy
135 Consumer Products Retailer Turnaround, Bankruptcy, Sale
75 Physician Network Turnaround
350 Real Estate Developer Turnaround
100 Res/Comm'l Real Estate Owner Turnaround
300 Automotive & Parts Manufacturer Turnaround, Bankruptcy, Sale
n/a County Gov't Health Svcs Provider Operations
10 Oil & Gas Producer Turnaround, Bankruptcy
110 Aftermarket Auto Parts Mfg Turnaround
70 Foreign Auto Parts Distributor Turnaround, Operations
120 Storage & Data Center Mfg Turnaround
100 Staffing Services Fin Restructuring, Capital
350 Specialty Retailer Turnaround, Operations
330 Print & On-line Media Publisher Turnaround, Sale
180 Residential Real Estate Developer Turnaround
130 Automotive & Parts Mfg Turnaround
1 - Annual Revenues except for Real Estate clients which represents the amount of Debt.
3

Service Offerings - Turnaround
Our turnaround service offering concentrates on four key activities to address visibility, cost
and business model issues

Reducing Developing a
Projecting and Improving
Costs – Plan – Current
Managing Management
Lowering State vs.
Cash Flow Reporting
Break Even Future State
 Develop a rolling 13-  Renegotiate real estate  Develop a detailed  Create weekly
week plan and personal property current state income information package
leases statement
 Tie projections to  Develop company
balance sheet  Evaluate facility  Build a target future dashboard / key driver
consolidation state – profitable report
 Create goals and business model
assign responsibility  Reduce payroll  Improve
expense  Identify actions communication among
 Identify potential necessary to lenders, equity and
sources of cash  Reengineer processes
implement plan management

4

Service Offerings - Operations
Kibel Green offers a full suite of operations capabilities across our clients’ value chains

R&D and Sourcing and Manufacturing Distribution Sales and Customer
Product Procurement and Logistics Marketing Support and
Development Service

 Ideation to  Vendor  Manufacturing  Warehouse  Sales process  Call center
prototyping management strategy operations improvement process
improvement improvement
 Improve speed  Low-cost  Production  Sales
to market country outsourcing  3PL vendor compensation  Service parts
sourcing selection and cost reduction
 Reduce  Lean  Pricing
management
development  Spend manufacturing effectiveness
costs analytics  Inventory
 S&OP  Marketing ROI
reduction

Human
 Organization design  Compensation benchmarking
Resources

Finance/
 Driver Analysis  Improve speed of close  Improve reporting
Accounting

Information
 IT strategy  IT vendor selection  IT risk mitigation
Technology

5

Service Offerings – Financial Restructuring
Helping clients get difficult deals done quickly

 Extensive experience assisting Companies with Plans of Reorganization.
Design Plans of
Reorganization  Deep knowledge of restructuring mechanics.

 Has the confidence of the lenders.

Credibility
 Can vet the Company’s information and projections, thereby lending an independent “stamp of
approval.”

 Turnaround, financial restructuring and operations groups under one roof.
One Firm: Unique
Capabilities
 Creates options for distressed companies.

 Strong relationships with lenders and investors at all levels of the capital structure.
Access to Capital/
Creative
 KGI has seen hundreds of transactions; seek the best result in each situation.
Structuring

 Strong relationships with most of the key professionals, enabling more effective negotiations.
Negotiation and
Structuring
 “Parallel Path” leads to streamlined process and optimal solution for client.
Expertise

Service Offerings
When to contact us

 The earlier Kibel Green is brought in, the wider the range of restructuring options.
 As operations and enterprise value deteriorate, the probability of a successful turnaround or
restructuring declines dramatically.

Potential Distress Signals Checklist
 Breaches of key performance covenants (i.e.,  Late filing of financial statements/other
minimum EBITDA, maximum leverage or information
interest coverage, minimum FCCR)
 Tightening of availability/taking more reserves
 Failure to meet business plan
 Vendors tightening terms
 Significant declines in cash flow
 Significant litigation
 Increases in days payables
 Capital infusion by owner
 Piecemeal asset sales
 Large write-downs
 Loss of key customer or vendor
 Transfer to special assets division
 Layoffs
 Sales of debt obligations to other parties
 High turnover at officer level
 Death/incapacity of owner

7

Kibel Green’s Approach
Our standard approach translates objective, fact-based analyses into tangible client benefits

Objectivity and Experience
A 3rd party that is the Honest Broker and can achieve results with key constituents

Critical, Thorough Analyses
Detailed cash flow, financial forecasts and valuations, and analysis of stakeholder interests

Development of Strategies and Plans
Vetting and/or development of business plans that are believable to all key constituents

Practical Solutions and Action Steps
Converting the Plan into action and guiding the client through the process

Positive Results for Clients
Achieving the client’s objectives

8

A Selection of Professionals
Our team can flex up & down – here are a few of our professionals

Steve Green
Steve Green Bruce Conklin
Bruce Conklin Jonathan J. Wernick
Jonathan J. Wernick
President
President Senior Managing Director
Senior Managing Director Senior Consultant
Senior Consultant

Expertise:
Expertise: Expertise: Expertise:
Expertise: Expertise:
 Co-founder of Kibel Green
 Co-founder of Kibel Green  Principal of Kibel Green  18+ years of financial, business
 Principal of Kibel Green  18+ years of financial, business
 30+ years of capital markets
 30+ years of capital markets  30+ years or experience in the development and management
development and management
 30+ years or experience in the
and turnaround experience
and turnaround experience business management,  Served in senior management
business management,  Served in senior management
 Personally managed over one
 Personally managed over one operations and turnarounds
operations and turnarounds roles for public and private
roles for public and private
hundred financial and
hundred financial and  Interim CEO and CRO for companies in retail,
companies in retail,
 Interim CEO and CRO for
operational restructuring
operational restructuring numerous companies manufacturing, technology,
manufacturing, technology,
numerous companies
assignments, capital raising,
assignments, capital raising, construction, heath care and
construction, heath care and
 Extensive experience with
 Extensive experience with
sale/ acquisition transactions
sale/ acquisition transactions real estate
real estate
creditor negotiations
creditor negotiations
 Frequent speaker at USC
 Frequent speaker at USC  Experienced in creditor
 Experienced in creditor
 Raised and managed several
 Raised and managed several
Marshall School of Business and
Marshall School of Business and negotiations
negotiations
regional legal and business billion dollars in equity and both
billion dollars in equity and both
regional legal and business  Financial analysis, budgeting,
 Financial analysis, budgeting,
conferences secured and unsecured
secured and unsecured
conferences cash flow projections,
cash flow projections,
financing
financing
forecasting, valuations
Education:
Education: Education:
Education:
 MBA, University of Southern
 MBA, University of Southern  BS, Lehigh University
 BS, Lehigh University  MBA, University of Southern
California
California California
California
 CPA
 CPA
 BS, Northeastern University
 BS, Northeastern University  CPA. KPMG
 CPA. KPMG
 BA, Yeshiva University
 BA, Yeshiva University

9


Tim Vadney
Tim Vadney Matt Covington
Matt Covington Jay Maddox
Jay Maddox
Managing Director
Managing Director Managing Director
Managing Director Managing Director – Real Estate
Managing Director – Real Estate
Expertise:
Expertise:
Expertise:
Expertise:  Real Estate financial advisory
 Real Estate financial advisory
 Sales and operations planning
 Sales and operations planning  Over a decade of experience in and Capital Markets
 Over a decade of experience in and Capital Markets
 Demand planning and
 Demand planning and financial restructuring and M&A
financial restructuring and M&A  15+ years commercial real
 15+ years commercial real
forecasting
forecasting transactions.
transactions. estate finance and workouts
estate finance and workouts
 Direct and indirect materials
 Direct and indirect materials  Deep understanding of financial
 Deep understanding of financial  Completed over $1B of
 Completed over $1B of
sourcing and procurement
sourcing and procurement restructuring mechanics and
restructuring mechanics and transactions and restructurings
transactions and restructurings
 Manufacturing strategy negotiation dynamics.
negotiation dynamics.
 Manufacturing strategy  10 years financial and
 10 years financial and
 Returns management  Has advised companies,
 Has advised companies, operations management
 Returns management operations management
creditors and financial sponsors
creditors and financial sponsors experience with small
 Customer and channel
 Customer and channel experience with small
in both in-and-out-of-court
in both in-and-out-of-court technology companies
segmentation
segmentation technology companies
restructuring transactions
restructuring transactions
 Sales force effectiveness
 Sales force effectiveness across a variety of industries.
across a variety of industries.
 IT strategy and effectiveness
 IT strategy and effectiveness

Education:
Education:
 MA, American University
 MA, American University  JD/MBA, University of Chicago
 JD/MBA, University of Chicago  MBA, UCLA Anderson School
 MBA, UCLA Anderson School
 MA, Ritsumeikan University
 MA, Ritsumeikan University  BA, University of California at
 BA, University of California at  BA, Claremont McKenna College
 BA, Claremont McKenna College
Berkeley
Berkeley
 BA, Emory University
 BA, Emory University

10

Contact Information – Los Angeles Office
2001 Wilshire Boulevard  Suite 420  Santa Monica, CA 90403
866.875.0255 Tel  310.453.6324 Fax  www.kginc.com

Steven J. Green, Co-Founder & President
310.829.0255 x220
sgreen@kginc.com

Jonathan J. Wernick, Senior Consultant
310.829.0255 x205 Office
jwernick@kginc.com

11

SUPPLEMENTAL
INFORMATION

12

Introductions
An investment with Kibel Green creates immediate and lasting value

Benefits of an Introductory Meeting with Kibel Green
 Client will receive valuable insights and ideas
 We provide an initial assessment of the business model and identify options and strategies
 The initial consultation is at no charge

Fee Structure
 Affordable – fees are based upon hourly rates
 Engagements are at-will
 Transactions – based primarily on contingency fees

Kibel Green wrote
the book on crisis
San Francisco and turnaround
We primarily serve clients in management and
the 11 Western States but do Los Angeles
Orange County
understands how to
perform engagements across navigate the
the U.S. and internationally in economic downturn.
support of key relationships.

13

Kibel Green’s Team
We have substantial professional resources available that can be quickly mobilized to tackle
either short-term or large and complex projects
 We are a boutique firm offering
Partners Directors custom, highly specialized
services throughout the Western U.S.
Manage engagements and lender  We staff based on the size and
negotiations complexity of the engagement.
 We have 7 people at the Managing
Director level or higher and have a
staff of about 30 people.
Managing Consultants
 We actively recruit and maintain a
highly-qualified reserve of 50+ senior
Prepare detailed business plans, financial
executives to provide additional
forecasts and presentation outputs
functional or industry-specific
expertise as needed.

Sr. Consultants Consultants

Conduct ground level due diligence,
analysis and research

14


Guy Schneggenburger
Guy Schneggenburger Matthew Getty
Matthew Getty Jonathan J Wernick
Jonathan J Wernick
Director
Director Managing Consultant
Managing Consultant Senior Consultant
Senior Consultant

Expertise:
Expertise:
 25+ years of industry and
 25+ years of industry and  17 years of financial, marketing
 17 years of financial, marketing  18+ years of financial, business
 18+ years of financial, business
consulting experience
consulting experience and operations management
and operations management development and management
development and management
 Warehouse operations
 Warehouse operations  Managed a business unit of a
 Managed a business unit of a  Financial analysis, budgeting,
 Financial analysis, budgeting,
 Distribution network planning public company and ran a
public company and ran a cash flow projections,
cash flow projections,
 Distribution network planning
division of a $1B private
division of a $1B private forecasting, valuations
 Transportation management
 Transportation management company
company  Structured and sourced $1B+
 Structured and sourced $1B+
 Demand planning and
 Demand planning and  Business planning, new product
 Business planning, new product of corporate debt
of corporate debt
forecasting
forecasting development and introduction
development and introduction  Due diligence
 Due diligence
 Production capacity planning
 Production capacity planning  Sales operations and demand
 Sales operations and demand  Business process reengineering
 Business process reengineering
 Lean manufacturing
 Lean manufacturing planning
planning
 Turnaround and restructuring
 Turnaround and restructuring
 Inventory management
 Inventory management  Turnaround expertise
 Turnaround expertise
 Project management
 Project management
Education:
Education:
Education:
Education:  MBA, University of Southern
 MA, Cal State Fullerton
 MA, Cal State Fullerton  MBA, UCLA California
California
 MBA, UCLA
 BS, UC Irvine  CPA, Deloitte & Touche  CPA, KPMG
 CPA, KPMG
 BS, UC Irvine  CPA, Deloitte & Touche
 BS, University of San Francisco  BS, Yeshiva University
 BS, Yeshiva University
 BS, University of San Francisco

15

Retail Case Study – Turnaround

Business Challenges Results Delivered
 $350M regional retailer with ten  Prepared an objective independent
locations with 90% of sales on bank report that provided clarity
credit to immigrant community and assurance on the Company’s
with no previous credit history turnaround efforts
 $150M term debt  Built a cash flow modeling tool to
 Downturn in economy resulted in navigate tighter loan availability
higher defaults and slower  Created a dashboard of key
payments performance drivers (KPI’s) to
 Financial and purchasing practices assess and improve financial and
did not keep pace with rapid operational results
expansion over the last 3 years  Identified operational opportunities
 Running out of ABL loan availability to improve cash flow, profitability
 In forbearance with lender group
and utilization of working capital in
and credibility deteriorating excess of $10 million

16

Distribution Case Study – Operations

 $1B sporting goods manufacturer  $4.0M EBITDA improvement in 3
was staffed for day-to-day months
operations and needed immediate  Lead the Asian-market supply chain
expertise for strategic project selection and implementation
implementation activities
 Executives observed that cost  Completed supply chain partner
reductions should be available from selection and implementation in
improvements to distribution three countries
operations and improved  Established knowledge base for
outsourcing relationships activities in five additional countries
 Market pressure to show results on
 Cross-functional project
a quarterly basis increased urgency management between executive
of capturing identified opportunities leadership, internal departments,
 Underperforming Asian (China, and external vendors
Korea, Japan) distribution partners

17

Distribution Case Study – Turnaround, Operations, Financial Restructuring

 $70M regional automotive and  Stabilized the bank relationship
marine parts distributor  Approved a $2.0M over-advance
experiencing a cash shortage  Downsized the footprint to liquidate
 $18M asset-based loan inventory and increase near-term
 Lenders were not cooperating by cash flow by $3.1M
providing an overadvance  Used increased funds to improve
 Strained supplier relationships were stocking levels
constraining inventory levels  Created time to run a sale process
 Fill rates declined from 90% to  Effectuated a sale transaction
72% resulting in a noticeable within 4-months that paid the
impact to sales secured lender 100%

18

Distribution Case Study – Operations

 $2B telecommunications products  $18M EBITDA improvement in 6
distributor had a new management months
team leading a leveraged buyout -  100% improvement in distribution
needed to reduce costs quickly center productivity from process
 Network of over 70 regional engineering
distribution centers with varying  Reduced average order processing
policies and performance results time to two hours
 Flagship distribution center  Facilitated installation of WMS
averaged two days to process an across the distribution network
order  Led and provided project
 Operations management team had management for four facility
difficulty translating financial goals consolidation and relocations
set by the Board into action  Created departmental KPI program
to translate financial goals into
work standards

19

Manufacturing Case Study – Turnaround, Operations

 $225M medical products  $2M EBITDA increase in 4 months by
manufacturer had a 5-year history removing the barriers of an
of losses or breakeven organization built on functional silos
performance
 $4.5M EBITDA gain with design and
 Private equity investor and senior
debt holders wanted an exit implementation of new transportation
program
 Senior management recently
completed a restructuring project,  Reduced the number of SKUs from
but did not achieve breakthrough 350 to 75 resulting in simplified
results manufacturing processes and
 More than 85 cost reduction increased purchasing leverage
projects were in motion without  Increased product availability and
coordination decreased finished goods inventory
 Company had difficulty expressing through a significant reduction in
its value proposition for the market changeover times
place

20


 $125M high-performance appliance  $12M EBITDA improvement in 6
manufacturer was undervalued months
versus investor expectations in a  Increased capacity 30% in existing
sales process facilities
 A history of late delivery to its  Reduced lead time from 153 to 6
distribution channels days for product delivery to the
 WIP inventory required a separate customer
material handling staff to track and  Established Office of Continuous
move it Improvement to sustain changes
 Company was contemplating the  Reduced WIP investment by 80% by
purchase of additional machine incorporating parts tooling into
tools to solve parts shortage assembly lines
problems  Led sales process that resulted in
achievement of the investors’
financial goals

21


 $150M manufacturer and supplier  Stabilized the bank relationship
of furniture  Negotiated over-advance and long-
 A cash shortage and operating term forbearance agreement
losses  Downsized headcount and
 $14M asset-based loan increased production flexibility by
 Borrower moved into special assets changing to a cell manufacturing
 Facing decreased demand for
methodology
domestically made furniture and  Created time to continue to
pricing competition from overseas operate
 Currently operating under extended
forbearance agreement with same
lender

22

Consumer Goods Case Study – Financial Restructuring

 $100M designer and direct-  Created an offering memorandum
marketer of educational products  Ran a successful sale process
 $90M syndicated debt targeting 16 strategic buyers and
 Rapid dissipation of customer base 18 financial buyers worldwide
due to construction industry  Achieved a consensual agreement
implosion and heightened scrutiny avoiding bankruptcy
of immigration issues  Structured and negotiated key
 Y-O-Y Revenues down 19% and elements of the transaction
forecasted to drop another 10%  Provided critical input to stabilizing
 Dramatic reversal in EBITDA within and improving cash flow
a short timeframe
 Syndicated loan with a difficult and
fragmented lender group

23

Real Estate Case Study – Turnaround, Financial Restructuring

 $60M Los Angeles urban in-fill  Stabilized the lender situation and
homebuilder restored management’s credibility
 $28M of construction loans and  Developed the Company’s financial
unsecured debt in default, all restructuring plan
personally guaranteed by principals  Created robust financial models for
 Home values substantially lower lender presentations
than secured debt, resulting in  Negotiated a repayment of debt
potentially massive personal obligations at a 44% discount with
recourse exposure full release of personal guarantees
 In forbearance with lender group, and dismissal of legal proceedings
with one lawsuit filed and  Facilitated new $10.8M capital
credibility deteriorating infusion
 Company retained equity in
projects

24


 Major California homebuilder  Stabilized the lender conflict
 $70M of senior secured and $62M situation
subordinated parent company debt  Prepared detailed project budgets
in addition to $100M of project and cash flow analysis and roll up
construction loans with 12 different financial projections for corporate
banks and co-lenders in California guarantor entities, stratified by
and Texas lender
 Project debt guaranteed by  Created bankruptcy analysis at
corporate entities, creating heavy corporate and project levels to
liquidity pressures due to loan re- support lender negotiations
margining demands from banks  Advised in lender negotiations and
 In conflict with lender group, with helped avoid a run-on-the-bank
existing and pending loan covenant that would have crippled the
defaults company

25


 Family controlled commercial  Prepared detailed business plan
developer/owner based in Southern and financial forecasts including
California liquidation analysis to support
 Multiple commercial and land lender negotiations
development projects that  Educated client on available
encountered difficulty in the recent defenses in response to aggressive
economic downturn tactics by lead bank
 $40M of bank debt subject to re-  Assisted in successful effort to
margining demands and/or obtain long term extensions of
maturing with no viable repayment bank debt thereby providing for
source, posing a significant threat long term financial stability
to liquidity and long term viability
of the portfolio

26

Service Offerings – Financial Restructuring
Maximizing client value in various types of Financial Restructurings

Restructuring Balance Sheets Renegotiating Debt Covenants/Terms
 $645M meat processor and sandwich maker  $140M mobile phone distributor
 $250M contract manufacturer of field rations for  $200M chain of regional casinos
the military
 $96M global provider of telecommunications
 $366M natural gas plants in the Northeast services
 $150M chain of furniture stores  $350M chain of electronics and furniture stores

Raising Capital Selling Distressed Assets/Companies
 $350M manufacturer and distributor of medical  $100M Group of wineries in Northern California
consumables for the elderly
 $114M Jeweler targeting low-middle income
 $126M manufacturer and distributor of dairy Hispanic market
products
 $200M retailer of denim and casual clothing for
 $75M chain of Mexican restaurants teens
 $100M integrated media publishing company  $125M manufacturer of consumer and
(trade magazines, journals, conferences) commercial cooking equipment

27

Kibel Green Intro2010

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