Escalating steel prices, tight margins and an extremely competitive environment during economic recession took their toll on HVAC sheet metal contracting company Superior Air Handling Corp.'s (www.sahco.com) market niche after years of profitable operations. In this tough situation, the company did not panic, but instead, it turned to an integrated financial services firm for help.
Superior Air engaged Aequitas Capital Management (www.aequitascapital.com) to help identify an enterprise-wide solution. Aequitas formed an advisory team that worked with Superior Air to review the company's infrastructure and pinpoint the root cause of the downturn in business.
"When a business problem occurs, companies often find they are too close to it and can not identify the exact reason why things are not working. Plus, even when they know what is not working, it is not always clear how to turn it back around. And since we do this every day, we can bring an objective viewpoint and apply enterprise-wide solutions," explained Brian Oliver, Aequitas senior managing director.
After working with Superior Air's executive management team, Aequitas identified opportunities to leverage for greater efficiencies and made recommendations about how to access the cash needed to affect a turnaround. Tapping into its experience in offering creative alternatives to reconfigure a company's balance sheet and generate cash flow, Aequitas recommended that Superior Air consider a bundled equipment sale and leaseback that incorporated a $700,000 sale of equity as an unsecured component of the lease.
By implementing this approach, Superior Air completed a $1.8 million equipment sale/leaseback transaction that allowed it to payoff $900,000 in existing senior bank debt. In addition, after the transaction, Superior Air netted $800,000 of new working capital to fund its growth opportunities. The company also strengthened its organization by restructuring its senior management team, including replacing some select project managers, recruiting a slate of new board members from outside entities, making additional reductions in overhead expenses and implementing other project and financial controls.
As a result of its partnership with Aequitas, Superior Air has generated profits for 12 consecutive months. And with a completely restructured and recapitalized balance sheet, the company has experienced its highest backlog in history of more than $60 million in extremely solid margin projects that should take the company well beyond 2007.
