CSC Capital’s expertise covers the world’s major industries. Combining unparalleled experience
with comprehensive capabilities the firm’s Industry Practices Division’s Global Leaders are at the cutting edge in their industry field or sector. Besides maintaining a portfolio of prospect and current clients, the firm’s industry experts conduct extensive and continuous research on the world’s most successful companies within their industry specialization. This up-to-date knowledge allows CSC Capital to collaborate with clients more successfully during an engagement or transaction. Widgets are fine in Business Schools, but in the real world truly understanding a client’s industry is critical. This deep industry knowledge is demonstrated to clients as the firm moves quickly from analysis and due diligence to the execution and implementation of client services.
Nothing can replace two decades of experience with a variety of industries and sectors both within the U.S. and internationally. From a global marine products manufacturer to a international shipbuilder, from a national utility products wholesaler to a national paint and coatings manufacturer, from a high-profile U.S. high technology retailer and distributor to a Canadian automobile dealership, from a regional civil and mechanical construction contractor to a federal government naval hospital, from the largest of building materials suppliers and lumberyards in the U.S. to family owned mom and pop hardware stores, and from the growing market of senior care facilities to the organizational confusion of property management companies, CSC Capital has seen it all. International hospitality and transportation, over-the-counter retail and contractor sales, multi-state distribution centers and global internet products sales, the firm’s professional services are uniquely capable of conquering the most difficult of specific industry challenges.
And though the firm prides itself on its industry diversification, the challenges and solutions throughout all sectors often are similar. In fact, the commonalities of organizational issues whether problems or opportunities are striking, and importantly the solutions are often applied equality no matter the industry. In other words, sometimes the best solution for a client in one industry is borrowed from another industry. Combining the firm’s wide range of industry expertise with its depth of functional and specific knowledge in restructuring, mergers and acquisitions, financing and consulting optimizes our ability to transcend an industry’s bias and sometimes paralysis of accepting outside the norm business advice and solutions. This is where CSC Capital’s track record of measurable and sustainable business solutions has made us one of the most respected middle-market advisory firms, both national and internationally in several industries and sectors.
The following is CSC Capital’s global industry practice groupings:
|Retail and Consumer
Transport and Logistics
Health and Medical
High Tech and Electronics
Media and Telecom
Travel and Hospitality
Energy, Power and Metals
Public Sector and Non-Profit
Retail and Consumer
Retail and Consumer companies face an increasingly wide range of challenges that were not
considered a problem a decade ago. Not only do they face the challenge of increased global competition but the internet has caused them to strive to reinvent themselves from face-to-face over the counter interaction with consumers to the retailer’s non-personal internet web site. Therefore, Retail and Consumer companies must successfully navigate through today’s global retail economy.
CSC Capital has over twenty years of experience in applying solutions to Retail and Consumer clients. In fact the firm’s first few clients were mid-size retail hardware and specialty product stores. Since that time, the firm has engaged dozens of retail and consumer companies in many sectors where CSC Capital has been assigned to address their most important strategic, operational, financial and organizational issues. Take for example, purchasing and inventory management; the actual “Achilles Heel” of most retailers though most of the time this area goes unnoticed by management teams. The firm has within its arsenal of solutions to save retail companies hundreds of thousands to millions of dollars just by applying a different approach to purchasing and inventory. This unique method may actually eliminate the need for additional financing in those situations where it may seem that new financing is the only solution.
Besides internet retailers, brick-and-mortar retailers generally have one profit center per location, namely the walk-in retail consumer. Pricing strategies therefore focus exclusively on this type of customer. However, it has been the firm’s experience that retailers often have multiple types of customer bases. Large commercial accounts, government accounts, contractor accounts, small business-to-business accounts and so on. And accounting for these differences in organizational and financial terms is a critical path to greater success. Even with automobile dealerships and similar consumer businesses there exists multiple classes of customer accounts; new and used cars have different gross margins, the parts and service departments have higher margins than new cars, and the finance department is a separate revenue center as well as being highly profitable. Therefore, not only can pricing strategies be flexible by customer class, but additional organizational efforts can be designed to facilitate more revenues and profits.
It is often stated that traditional retail establishments are under attack by the internet and new technology in general. And while it is indeed true times have changed and that retailers must adapt to the rapid changes in technology, the Retail and Consumer Industry will not perish. CSC Capital’s holistic restructuring and unique profit center formulation provides the basic framework to capitalize on the new technology that is currently transforming large aspects of the industry.
The Industrial Goods Industry crosses over many types of manufactured products as well
as companies that sell commodities directly to commercial, contractor as well as retail customers. From building materials and construction supplies to machinery, components and infrastructure Industrial Goods comprise a major sector of the world’s economy. In fact many of CSC Capital’s clients are industrial goods suppliers and manufacturers, including HVAC suppliers and distributors, heavy construction and lumber and building material suppliers, and construction goods manufacturers like truss companies and window and door assembly operations. However, since 2008 this industry in general has faced the most challenging business environment since the Great Depression. While the media was obsessed with the crisis in the financial and credit markets, they failed to pay much attention to the daily destruction of the Industrial Goods Industry.
While retail housing and construction was often cited as one of the hardest hit sectors of the Great Recession of 2008, economists seemed to forget about the suppliers to the housing market; from wood products companies, wholesale buying groups and the mills, to household appliances, engineered wood products, stone masonry and ready-mix cement. It was this huge market that beneath the news headlines was collapsing. It is the firm’s opinion that the trickle-down effect of the housing and banking crisis hit this industry the hardest and has accounted for the majority of the unemployment and underemployment in recent years.
CSC Capital was not only restructuring and turning around companies as well as advising in mergers, acquisitions and financing in the Industrial Goods Industry almost two decades before its collapse in 2008, the firm was also at “ground zero” at the collapse. In the fall of 2008, CSC Capital was assigned to turnaround the largest building materials supplier in southwest Florida (arguably the hardest hit housing area in the U.S. at the time) that had seen its revenues drop by over 80% in just over a year. In most situations, a drop of such amount would force bankruptcy or liquidation.
Not so in this case, as a crisis turnaround program was implemented with the bank supporting the restructuring which resurrected the failing company. In short, CSC Capital’s reputation in this industry has been nothing short than legendary. The owners of some of the largest building materials and construction supply companies in the U.S. as well as the largest buying groups in the industry will support the claim that CSC Capital is first and foremost the top financial advisory firm in restructuring and turnaround services.
Transport and Logistics
The transportation industry is more than just trucking, airplanes, and shipping. And logistics is conducted by more companies than just UPS, FedEx and the military. Actually most companies that transport finished goods or raw materials is acting as a transportation company. And if that same company that delivers a product also manages the flow of product(s) between the point of origin and the point of destination to meet a time requirement may also be called a logistics company. In fact if your company has a dispatcher who conducts the tracking of materials you are conducting logistics. In many cases, a furniture store for example, same day delivery is as important to the customer as the product itself. Thus, transport and logistics is a very broad term that applies to many companies within many industries.
CSC Capital also views transportation and logistics very broadly, and for a very good reason.
A pure transport company like a trucking company has the trucking of materials as its major profit center or if the trucking company uses different types of trucks or airplanes for shipping different products the profit centers may be expanded to accommodate different revenue and costs structures like UPS and FedEx. However, if your business is a furniture store or a lumber company that ships products and materials, your delivery operation is a cost center (even if you charge for delivery). The point is that the difference between transportation and logistics as a profit center or as a cost center are vastly different from a management accounting perspective. And understanding this difference alone can result in business success or failure.
Since its founding CSC Capital has provided both the expertise needed for transport operations to run successfully through its ability to separate the traffic and warehousing cost centers from the corporation’s other overhead factors and for transportation and logistics’ companies to compete in an ever increasingly global environment. And while the global economy has offered additional growth opportunities for the industry it has also brought with it more intricate supply chains, higher costs and more regulatory demands. Over the years the firm has helped transport and logistics companies integrate acquisitions, provide more value-added functionality and financing, and reformate aging financial and operating systems to accommodate the complexities of a more competitive U.S. business environment as well as global transportation in general.
Like industrial goods the Building Projects Industry virtually collapsed after the 2008 financial crisis. Housing general contractors, their sub-contractors, even realtors took a direct financial hit unlike any other in modern history. Even the Great Depression’s slide in construction projects pales in comparison to the most recent recession. Just talk to the owners of these companies and one cannot walk away with a sense of total destruction. In many family owned companies that go back four or more generations even the financial statements give testimony that today’s so-called “Great Recession” is in fact the greatest depression in their history.
CSC Capital foretold the upcoming collapse in the industry several years before the crisis began.
In August of 2002, the founder of the firm in an article in Pro Sales Magazine entitled “Up Up and Away: The Current Construction Bubble Won’t Float in the Economic Atmosphere Forever. When it Bursts only the Lean Dealers will Survive,” wrote that an upcoming banking, credit and housing crisis will lay flat an industry that had always seen positive annual growth. He went on to say that not only will housing builders and contractors be affected but all their material suppliers as well. By the fall of 2006 signs of the upcoming destruction was starting to be felt by builders in certain areas in the U.S., though by 2008 it was evident throughout the U.S.
Unlike other financial recessions, credit and financing completely dried up for the industry. Workouts, debt restructurings and turnarounds were not supported by the commercial banks who had working capital facilities with companies in this industry as well as companies who supported the industry. Like homeowner’s mortgages, the balance sheets of these companies were also under water, so the concept of selling the company was to most a “garage sale” transaction. Though today there maybe a little relief in sight, it is unlikely that the U.S. economy will see another building projects explosion in decades. Even the gradual annual increases in construction activity and real estate prices that generally over the past half-century the industry has enjoyed may be over.
However, CSC Capital was not only at the forefront of engaging the huge expansion of the industry when restructuring, financing and acquisitions were in vogue, but also when the industry was collapsing under the weight of a credit, banking and construction crisis. Designed to fulfill the needs of the industry’s multiple profit and cost centers, the firm’s corporate restructuring program was exactly tailor-made to not only turnaround very distressed situations but also create innovative financing opportunities. Even in mergers and acquisitions the ability
to attract buyers (sometimes overseas) to distressed U.S. companies was facilitated by combining a holistic restructuring with the sale of the company.
Building projects clients have included civil and mechanical highway construction operations, commercial buildings and residential home construction contractors, project installation and remodeling contractors, including flooring, kitchen and bath and other building specialties, demolition and restoration companies, as well as building material suppliers who conducted construction and installation projects in-house.
Health and Medical
There is no doubt that the Health and Medical Industry is and will be a booming industry for several more decades. Thanks to the “Baby Boom Generation,” and the fact that people are just living longer, this industry will not only expand it will also become more competitive with new entrants into the industry. It will also become more regulated and complex thus adding to the complications of management. It is estimated that sky-rocketing costs and government mandates will actually transform the industry – from the back office to the doctor’s office health care provider’s account for approximately 80% of all health care spending. The corporate leaders of hospitals, managed senior care facilities, academic medical institutions, and pharmacies must devise strategies that not only delivery excellent patient services but also provide the necessary financial results to remain competitive.
CSC Capital has a long history in providing advisory services in the Health and Medical Industry; first many years ago working with a San Francisco Bay Area hospital and most recently with a regional chain of hospitals in the Southwest. The firm also has provided an advisory role to the corporate revitalization of an internationally based conglomerate of independent and assisted senior care providers.
CSC Capital’s services are uniquely appropriate for the Health and Medical Industry because larger institutions, including hospitals and senior care facilities have multiple profit centers that are not in most situations separated as individual financially managed profit centers. It has been the firm’s experience that the tradition of health and medical financial management generally combines all revenue, costs and expense streams per location. Without the separate break out of profit centers leaders of health care institutions are blind to the actual opportunities and wasteful activities within each profit center. Acquisitions are often miscalculated due the absence of critical information, and in an industry that is in the midst of health care facility consolidations such miscalculations can be very expensive to the buyers and very disrupting to the health care employees.
High Tech and Electronics
Probably no other industry has such a demanding customer base than the High Tech and Electronics Industry. Companies within this industry must embrace frequent change, accelerate innovative processes that create new profitable products, and continually re-invent their product driven organizations as technology changes. Staying at the cutting-edge in gadgetry and technology is not just smart business it is the essential for survival, as the life cycle of high technology and electronic products continue to shorten. Importantly, the industry is consumed by pricing trade-offs due to its highly competitive market that has become the most price sensitive in the modern era. Upon this backdrop the High Tech and Electronics Industry is also one of the fastest growing consumer markets in the global marketplace with no signs of slowing.
From a Northwest electronics manufacturer of Italian speedboats to an international billion dollar corporation whose manufactured components are found on commercial airplanes, CSC Capital’s years of experience in this diverse industry centers on one strategic, though surprising fact: The importance of organizational structure and design to a constantly changing and quickly evolving competitive environment. The reason organization is so important is because of the cost factors associated with maintaining a winning competitive advantage. The culture of efficiency must be at the heart of every successful company in this industry.
CSC Capital’s restructuring program is uniquely situated for the High Tech and Electronics Industry because every aspect of the program promotes an efficient and lean organization and efficient processes. Take for example, the firm’s breakeven costing and pricing package that is integrated into the financial structure, which is mirrored to the organizational structure. Instead of pricing being based upon a mark-up from costs as is typical with most pricing schemes, CSC Capital years ago invented an innovative approach that computes the price of a single product item (or assortment of product items) after all costs and overhead have been applied to the product item. Therefore, pricing is marked-up from the actual breakeven of the product item. When the organization is efficiently structured and managed costs and overhead are lowered thus producing a lower breakeven. Using this as a basis for pricing in well structured and managed companies creates enormous competitive advantage. And for a highly price sensitive and competitive industry such as High Tech and Electronics such a pricing method is not only desirable but critical if the company’s strategy is to be the industry leader.
The current financial crisis has more than just destroyed value, it has redefined what financial services companies must do to compete and win. From commercial banks, credit unions, stock market brokerages, credit card and insurance companies, and asset based financing groups; to succeed in this new environment requires a discipline never seen before. How many of us seen the regional bank disappear to be replaced by another regional bank. Since 2008 the Financial Services Industry has become more demanding and less forgiving than ever before. It is unlikely that this industry will change its current tactics in the future. Besides that customers have become savvier, government oversight is tighter and competition is increasing.
The Financial Services Industry needs to answer a few questions due to the current financial crisis: 1) How is the structure of the industry evolving? 2) Are any new business models emerging? 3) Is this crisis changing customer behavior? 4) How do we better understand risks? 5) How do we realign our cost structure to better accommodate lower margins?
CSC Capital understands the Financial Services Industry from both the institutional and customer perspective. Having been on both sides of the fence, the firm is in a better situation to advise those who lend capital and those who insure. Why? Because financing and insuring is based on trust; trust in financial statements and trust in equity. First, CSC Capital analyses financial statements from a reformatted management accounting point of view; no stone left unturned. Second, the firm understands real assets and real equity. In other words, you finance and insure what is real; we count the “widgets” and document their real value – no more, no less. The firm understands that financial institutions often provide working capital facilities secured by assets that are overstated on the balance sheets. Many times inventory levels include obsolete materials that only worth 50% of their book value and receivables sometimes are not as reliable due to poor internal credit standards. In this situation an aged receivable over 60 days may be uncollectable.
Therefore, even today with all the government regulations imposed on lenders, financial institutions can still fail to truly understand a company’s true worth. CSC Capital has on dozens of client engagements assisted lenders in realizing an increase or decrease in a company’s value. Moreover, to succeed today financial institutions need a renewed focus on the opportunities of mergers and acquisitions. With the global capabilities and specific expertise in corporate development, CSC Capital can assist financial institutions in capitalizing on distressed situations providing the necessary due diligence and risk assessments for wise mergers and takeovers.
Media and Telecom
The Media Industry is in turmoil and the Telecommunications Industry is operating in a rapidly changing environment. But in many ways the two industries are converging as technology advances particularly through internet services and mobile technology. In fact, in the academic world a curriculum called “New Media Communications” is bridging the gap between what had been old media and entertainment like radio and television and the new social media revolution in telecommunications. Thus, today media companies must adapt to the realities of the digital age of communications, or perish. Yet in all this complexity of science and technology, companies in the industry need more than ever to simplify operations. CSC Capital maintains that in the end a simple business model is necessary for such a complex and rapidly changing competitive environment. Further, to capitalize on acquisitions or organic growth opportunities a consistent business structure must be able to be easily replicated and easily managed.
For example, WorldCom failed not because top management was unethical, committed accounting fraud and broke the law; but rather because their acquisition strategy was disorganized from the start. In a conglomerate as complex as WorldCom with its hodgepodge of people and cultures, central management could not control let alone understand the mixed-bag of acquired companies. This inability to strategically integrate the on-going acquisitions into a cohesive structure and culture with strong central management and financial controls fueled losses and debt, which could only be maintained by the continuation of misguided acquisitions –in essence piling more debt upon debt. When the acquisitions stopped WorldCom’s top management, in their continuing efforts to be the number one telecommunications company on Wall Street, decided to commit accounting fraud to hide the massive losses. Nearly 17,000 employees eventually lost their jobs and the fallout included several indictments and jail sentences, including Bernard J. Ebbers WorldCom’s CEO.
The WorldCom case study above illustrates the lack of top management to fundamentally understand the importance of corporate restructuring as applied to an acquisition strategy. CSC Capital’s core competency is its restructuring-based approach to financial advisory services. To conduct a merger or acquisition growth strategy without a restructuring program included is doomed from the beginning and the Media and Telecom Industry is specifically susceptible to this failure due to a rapidly changing and chaotic environment. To companies in this industry restructuring is often like old-fashioned “block and tackling”; they would rather throw the “long pass” for faster results despite the risks. However, the history of both media and telecommunications demonstrates the risks associated with bypassing restructuring efforts thereby focusing only on growth opportunities is a flawed strategy.
International Telephone and Telegraph (ITT) under Harold Geneen during the 1960s successful embarked on a series of acquisitions and leverage buyouts conducting 300 of such transactions in a decade. But Geneen was an accountant by trade and strongly believed in extensive budgetary controls and central oversight over his diversified holdings. Founded in 1920, ITT Corporation was split into three separate public companies in 1995, though ITT Corporation still exists today. AT&T Inc. originally founded as American Telephone and Telegraph in 1885, held a virtual monopoly over the phone service in the U.S. for most of the twentieth century using the slogan “One Policy, One System, Universal Service.” Today, even after the federal court forced the break-up in 1984, AT&T is still the largest provider of mobile telephony and of fixed telephony in the U.S. Lastly, out of the five largest global media and entertainment companies, Walt Disney was founded in the 1920’s, Comcast in the 1960’s, and News Corp. and Time Warner in the 1970’s demonstrating their abilities to organizational reinvent themselves over the decades. Only Google founded in 1998 is the only one established during the internet era.
CSC Capital is committed to providing the same time honored organizational solutions to Media and Telecom clients that has maintained the longevity of the largest companies in the industry.
Keep the structure and operations simple, hold management accountable through centralized budgetary controls, acquire, organically grow and finance using a consistent restructuring platform and keep ahead of the competition through providing the most advanced media and telecommunications technology to consumers.
Travel and Hospitality
World travel, hospitality and leisure continue to expand despite regional dangers in some parts of the globe. And despite the on-going recession in the U.S. domestic services in travel and tourism are starting to see slight to moderate gains. All in all, the industry needs to manage either rapid growth or a continuing sluggish growth or stagnation in revenue. With some larger providers in the industry they have to deal with both realities at the same time and operate and forecast accordingly. CSC Capital can advise travel and hospitality service companies, including motel hotels chains, resorts, casinos, airlines, tour operators, cruises, car rental agencies, and tourist destinations meet the challenges of a diverse market by improving customer satisfaction, operating efficiencies, and business processes.
To achieve greater competitive advantage in an environment where industry deregulation, consolidation and privatization are simultaneously raising the bar for operational performance and profitability, the firm utilizes a proven method for companies in the industry to increase customer satisfaction, revenues, and thus profits. The method centers itself upon the customer experience, which is the most important factor in the industry. Yes, some companies in travel and hospitality are price sensitive though some are clearly not. However, in both situations providing award winning customer service is the key strategy for market domination. From checking in to leaving or departure, the entire customer experience must be perceived as superior, no matter the price tag.
CSC Capital approaches the industry with this concept in mind whether the client is in a distressed situation, engaged in the expansion of locations or services, or contemplating an acquisition strategy. Further, because megatrends such as the aging of populations and security issues will produce alternatives in the traditional forms of customer service, it will be necessary to companies in the industry to create niche markets. Here also the firm maintains the customer experience will play the most important role in achieving competitive advantage as the industry creates different types and new segments of travel and hospitality.
But also true to its core beliefs, CSC Capital understands that expansions or contractions in services or locations must follow a sound holistic restructuring program. Because marketing and advertising are so critical in the industry, the restructuring approach will set the stage for a focused marketing and advertising campaign. The firm believes that profit center alignments should determine this focus. Therefore instead of an overall general and “shotgun” marketing and advertising campaign which is the common approach, companies in the industry must focus their promotions around those areas that the business does very well and very profitably. Determining these profit center areas and exploiting their potentials, is accomplished through the systematized application of strategic change which CSC Capital created at the firm’s founding. This is and always will be the difference between a highly successful travel and hospitality company and one in decline.
Energy, Power and Metals
It is this industry sector that created America’s industrial success. Everything from automobiles to computers owes their existence to the energy and power that ran their machines and provided electricity to their facilities. This critical sector founds it roots over a century ago when a different management theory than commonly espoused today dominated industry.
The theory known as “scientific management” spoke of functional organizational structures and manager accountability, budgetary controls and efficiency standards, pay based upon performance, and a strategy that was managed as well as planned. In short, the theory demanded not the rhetoric of excellence, but loyalty and hard work. Today CSC Capital strongly believes in the management lessons of this theory and ultimately from the roots of this industry sector.
Take for example the construction of the Hoover Dam between 1931 and 1936, completed two years ahead of schedule and under budget. The consortium called Six Companies, Inc. that constructed the Dam applied this theory to practice; from their functionally structured divisions and departments, to their tight budgetary controls and management accountability requirements, the construction of the Hoover Dam has far exceeded quality and efficiency standards to this day. But it was not only an engineering marvel, but a testament to great organizational skills. It should be noted that compared to the mangers and engineers who built the Hoover Dam, CSC Capital contends that the present trends in management and organization are counterproductive. Indeed if the Hoover Dam was constructed today, would it be completed ahead of schedule and under budget? Doubtful!
Today the energy, power and metals industrial sector finds itself in a complicated and evolving landscape, with challenges such as skill and talent shortages, cost pressures and the need to invest in new technologies. Further operational cost concerns and value chain challenges has exposed the industry sector to increasing uncertainties and complexities. Though just like a century ago, the industry in general is on the edge of emerging as a catalyst for global economic growth. Natural Gas, alternative sources of energy and power, as well the traditional oil and hydroelectric segments, though some challenged by the threat of negative regulations, cannot escape the enormous consumer needs of the future. However, the current competitive pressures beg questions such as should companies in the industry invest in more large capital projects and infrastructure needs, or new technologies to secure future energy supplies in a carbon- constrained world? However, CSC Capital believes the first question should be how can companies in the industry increase operational efficiencies, reduce overhead costs, and protect revenues and margins. Just like Six Companies, Inc. answering the latter question first is paramount to achieving and protecting the costly investments brought up in the first question.
Public Sector and Non-Profit
Often the best solution for the public sector is ironically is a business one. If the problem is insuring maximum return on the taxpayer’s dollar, governments should desire improvements in efficiency and economy of operations. Moreover, a public agency should have administrative procedures that are not abused, accountability that is traceable, and transparency that is insured. CSC Capital contends that the concept of “bottom line” management can be easily applied to a government agency. Today governments; local, state and federal need to engage an restructuring advisor with experience and expertise, though also with a public sector perspective, to take common sense management basics and apply them to government.
CSC Capital has many of its roots in both the public and non-profit sectors. The firm is an expert in the application of strategy and restructuring to government and non-profit problems, having worked with several institutions over the years. Consistent with the firm’s private sector philosophy, a budgetary control system based upon line-item analysis offers the most versatile as well as strategic approach to solving public sector problems. In this way, CSC Capital provides a unique perspective – a business perspective – on how efficient management procedures and public policy can work together. In precise configuration with a complete agency or non-profit restructuring, a budget can also identify excellence in administrative performance, spot weaknesses and waste, and reduce administrative overhead.
Government is one of the most complex and challenging sectors with work with, especially today when the public sector global environment is so burdened with much duplication of efforts within and between agencies. And such duplication of administrative expenses, manpower, and programs also exists between similar local, state, and federal institutions. Though the task of navigating through complex stakeholder landscapes is challenging, to CSC Capital the benefits of achieving remarkable outcomes when restructuring government agencies and non-profits are worth all the efforts defeating the bureaucratic obstacles to change.
Governments, especially in the U.S. and Europe are today heavily bureaucratic and debt burdened; though at the same they are also claim be under funded. CSC Capital takes the business perspective through 20 years of successful corporate restructuring that in order to fix these major economic and social problems, governments must do “first things first.” In business turnarounds, it is impractical or often impossible to increase revenues or supply financing as fast the distressed company is burning through cash. To wait upon future increased revenues is delusional at best – the company will fail, and fail quickly. And even if debt financing suddenly appears, it is never the remedy that solves the actually problems and corrects the organizational issues that created the distressed situation. A band-aid at best the debt financing soon becomes additional unwanted liabilities with more debt service to be paid. Debt financing merely prolongs though does not prevent the eventually death of the corporation, unless it is accompanied with a full-scale corporate restructuring.
“First things first” means in business that a swift and successful turnaround requires that the distressed corporation first conducts a formal restructuring in order to eliminate and restructure debt, sell unnecessary assets, reduce expenses and overhead and increase gross margins if applicable. If debt financing is still necessary, its application will “oil” the corporate machinery in the appropriate areas thereby increasing the chances for additional revenues.
Therefore, with macro-economies “first things first” means that governments must eliminate and restructure debt where appropriate, stop funding unnecessary programs and services, and reduce expenses and overhead line-item by line-item, in all remaining agencies. While gross margins don’t exist, per se, in public accounting and finance, governments can choose their vendors more wisely, purchase fewer materials and supplies, and at lower prices. CSC Capital strongly believes that this business-like approach is essential for governments worldwide.
The Forest Products Industry is perhaps the oldest industry sector in the U.S., though still today it is a major provider to the global infrastructure; and it is very likely that will not change. However, the industry is also finite in its global resources and requires constant re-harvesting and manufacturing of wood products for a growing worldwide population. As a commodity, wood products are especially prone to rapidly changing overall price volatility which is particularly risky for wholesalers who use re-load centers, and manufacturing at the mills is extremely capital-intensive. The industry can also be plagued by overcapacity within some product lines and under-capacity in other product lines which further complicates price volatility. CSC Capital has had numerous forest product clients among the industry’s vertical supply chains. From harvesting and mill manufacturing operations to wholesalers, commodity traders, and associated buying groups, the firm has been very successful in dealing with the most vexing of organizational challenges.
Since the banking and credit crisis of 2008 the global business world has fundamentally changed for the Forest Products Industry. Companies that existed for decades received a huge blow due to the economic recession that rattled the housing and construction markets. Milled lumber that sat a month or two in a re-load center could take a multi-million dollar three generation commodity trading company or wholesaler down fast. These stories did not make national headlines but the industry that used to think itself “bullet-proof” for generations had to start asking themselves serious strategic questions:
1) Is it worth to harvest timber at all and replant because of the environmental costs? 2) It is worth to mill and manufacture lumber at all, especially since all the new environmental regulations are so strict? 3) It is worth to broker lumber when the risks of price valuations are starting to outweigh the benefits? and 4) Is it worth to buy and re-sell wood products when the competition is so aggressive and the margins are so low? Of course, all the answers are yes.
However, serious strategic questions demand serious strategic answers and CSC Capital has provided the serious solutions for most of the firm’s existence for the Forest Products Industry. Actually, most of the solutions are organizationally and financially simple, though difficult to implement because of top management and even owner’s resistance. Many of these companies are family owned and family operated, thus the correct changes are difficult to swallow by family members. Even, Georgia Pacific and Boise Cascade are very large corporations and industry titans, managed by professional top management teams, but even they have fell victim to “rouge and vogue” industry standards that simply are not suited for the industry, or any industry for that matter. Sadly, the firm has witnessed this happen on several occasions.
On one such occasion CSC Capital was hired after one of the largest forest products buying groups in the U.S. (roughly half a billion in annual revenues), suffered a near death blow through industry accepted weaknesses in its credit and collections policies. Acting as the Interim CEO, the firm had to take decisive and swift actions to prevent the major working capital lender from forcing the closing of operations. It was late 2007 and early 2008, and the housing and construction market had already been suffering for over a year. With gross margins no higher than 1% there is little room for error, however in this situation the firm’s client had over $10 million in unsecured bad debt over exotic wood products shipped from China to a customer in Florida. It was determined after visiting the customer they had no intention to pay the owed money, and to make matters more troubling the material was gone. At this point, the bank had little patience with the overall situation – they just wanted their money.
Working under the Board’s direction, CSC Capital executed a complete restructuring of company which included downsizing operations, the creation of a new top management team, the new appointment of a CFO, and a redesigned (though unpopular with current customers) credit and collections process. After stabilizing relations with the bank, the firm went into full restructuring mode and changed practically everything in the company from the IT department to the outside and inside sales departments. Compensation changed for all positions, gross margins increased to 5% through pricing changes, and the new management team was taught management accounting with a newly designed financial package and budgetary control system. In the end, a new nationwide business development plan was implemented and negotiations with the bank resulted in a more favorable financing package with an approved write-off plan of the bad debt. All this was accomplished in less than two months, and to this day the company is exceeding performance expectations.
In such a low margin industry with such a massive debt, the outcome for this company would have normally been at bankruptcy at best or more likely a court ordered receivership. Since then CSC Capital’s ability to provide solutions for the Forest Products Industry has become legendary.
CSC Capital has been involved with the Real Estate Industry since the early 1990’s. Whether dealing with investments and acquisitions in commercial, residential, and agricultural properties, the oversight and restructuring of commercial and residential property management companies, creating debt and equity financing arrangements for real estate investment companies, or negotiating lease agreements, the firm’s experience through the rise of the real estate market and its fall demonstrates CSC Capital’s unparalleled advisory and market forecasting skills.
The firm’s talent in the Real Estate Industry also goes well beyond the industry itself. In most corporate restructurings, mergers and acquisitions, and financing in all industries real estate is a major component of the engagement or transaction. Indeed, it is difficult to find a company large or small that does not either own or lease real estate. Or on occasion a business owner who has not mortgaged his personal property and/or other real estate holdings separate from the business, to help secure asset based working capital or other business financing arrangements. Thus, it is practically impossible for CSC Capital to conduct any of its services without having to factor in real estate, one way or another, into its analysis of client situations and solutions.
While CSC Capital is not a licensed real estate broker, the firm has often advised clients in the merits of buying and selling real estate, and in the selection or termination of a real estate agent or brokerage. Foreseeing the housing bubble and banking crisis as early as 2002, CSC Capital advised several clients that the sale of highly mortgaged properties was to their advantage. The firm knew the apex of the housing and construction market was fall 2006, and advised appropriately that real estate values were going to start descending. In particular, many clients in other industries such as retail and industrial goods were advised not to start the construction of real estate development projects that were separate from their corporation, such as housing developments. After 2007 several of CSC Capital’s restructuring and turnaround clients, were distressed precisely because they did recently invest in real estate development projects and were “under water” on their mortgages. The firm’s solution at that time was to sell the real estate development anyway, as a company’s “first loss is its best loss.”
However, by 2010 it was no longer a separate real estate development that was just losing value, but now the businesses’ own facilities; office buildings, stores, warehouses, plants and factories were all losing value. Even if the business owned the facilities outright with no mortgage there was the possibility that the entire balance sheet was “under water.” Selling a location or more, or a warehouse or office building was an option for increasing cash flow if there was no mortgage. But if a mortgage existed on the real estate the actual business could be in real trouble due to shrinking sales and profits with a fixed debt service on under-valued real estate. CSC Capital’s advisory services in real estate investments, and the buying and selling of properties over the past two decades have been seen by some as market prophecy.
A segment of the Real Estate Industry that the firm has close connections are companies that provide property management services. Organizationally these companies are more complicated than a real estate brokerage or investment company, because they consist of several separate divisions that perform unique functions. Property management companies also operate on the relatively low gross margin of 10% or even lower. Lastly, competition is intense between large companies and small boutiques, with a property management license as the only barrier to entry. Therefore, not only do these companies need the correct organizational structure and divisions of labor but they also must be managed efficiently.
Large or small, the typical property management company’s client is a commercial or residential property owner who desires to have someone else manage their property. After finalizing a listing agreement with a client which closes the sales process, the management company must now find and screen potential tenants; show available properties or units to prospect tenants; select vendors and conduct vendor relations regarding maintenance, repairs and restorations; authorize tenant agreements and collect deposits; maintain the quality of client’s property through periodic inspections; contact the authorities on security matters; collect from the tenant monthly rents; distribute rental income to the client; insure that units have been properly maintained and cleaned after the tenant leaves or provide through vendors the necessary cleaning, repairs or maintenance; return tenant deposits or collect any outstanding funds as specified by the tenant agreement; and finally represent the client in collections court if necessary.
CSC Capital’s deep knowledge of property management companies gives the firm an advantage when advising on structure and efficiency procedures as well as assisting in financing or expansion opportunities and acquisitions.