Bill Humes
Ingram Micro Inc.
The recent recession was challenging on many fronts, though some of the challenges for Ingram Micro were somewhat different from companies with fixed capital requirements. We actually generate more cash during a downturn since our working-capital requirements shrink dramatically as demand decreases. With that said, one of our biggest challenges was to align our cost structure with our anticipated revenues, and more importantly, determine how deeply to adjust in a highly uncertain demand environment driven by decreasing visibility into the world’s economies.
From 2008 to 2009, Ingram Micro’s global revenues dropped by 14%, which equated to nearly $5 billion dollars in lower revenues. … The demand environment throughout the world deteriorated early in 2008 … and these challenges were compounded by the fact that Ingram Micro is a global company, requiring that we carefully navigate multiple regulatory environments when evaluating our cost-cutting options.
We quickly implemented plans to move functions and activities to newly established shared-services centers across the globe, which enabled us to significantly reduce costs while maintaining the ability to service higher revenue streams when they returned. While we did directly reduce headcount in most countries, we tried to do this as much as possible through attrition.
We emerged from the recession, growing worldwide revenue in 2010 by more than 17% over 2009, while increasing our net income by more than 50%.
While the U.S. economy certainly appears to have emerged from the recession and we are seeing many solid signs of recovery, we are a global company, and other regions—particularly Europe—have continued to face challenges, as there is still a level of uncertainty around the demand environment in several countries. We have expectations for solid revenue growth in many countries, which presents the additional challenge of ensuring we are prepared to capture any incremental opportunities brought by an improving spending environment.
Capital allocation becomes a critical aspect of driving future success. We have to balance short-term revenue and profit opportunities with long-term strategic initiatives, including M&A opportunities, to drive value for our shareholders. All of our regions—North America, Europe, Asia and Latin America—have been bringing forth plans to capture new revenue and profit prospects.
In each area, we need to get comfortable with the direction of the business and determine how aggressively and in what manner to deploy capital to ensure we don’t miss out on opportunities.
It is not an exact science, and increased scrutiny by the finance teams and additional time from executives throughout the world are key ingredients. We recently made our largest acquisition to date—the $870 million acquisition of BrightPoint Inc. And we have been making good decisions on other capital-allocation priorities, as evidenced by the fact that we grew our worldwide revenue on a year-over-year basis in both 2011 and 2012 and delivered record net income in our 2012 year. I am confident we will continue to respond to this challenge, and we are driving the business in 2013 to grow revenues and profitability.
Scott Savoie
Universal Services of America
My biggest challenge came in 2008 when a bank participating in 50% of the company’s senior credit facility—which included a line of credit and a senior-term loan—was having liquidity issues and on the path to being taken over by regulators. Of biggest concern was our lead bank not having the contractual obligation to fund the struggling bank’s 50% commitment.
This left me in a situation to find alternative banks, which prior to the recession should not have been a problem, because the company was performing very well, growing profit and increasing cash flow. … To bring in a new participating bank was difficult, given the lending environment of 2008.
Universal is a high-growth company that requires working capital investment funded primarily from the line of credit. Losing 50% of our borrowing capacity would have been crippling. Fortunately, we were able to maintain 100% funding commitment for the line. This experience led to a recapitalization of the company in 2009. We refinanced the senior-term debt with our mezzanine partner, which included additional funds available for use on future acquisitions. Since 2009, the company has completed 18 acquisitions while maintaining strong organic growth.
One of my biggest challenges currently is recruiting and hiring highly qualified employees to fill positions the company has created through growth. Generally, great employees are most likely not open to leaving current employment to take on the risk of starting a new position. Since the recession, I think most employees have become risk averse, choosing to stay with what they know versus the unknown. In addition, through the recession and currently, we are all being asked to do more with less because there remains the risk of a double-dip recession.
Mike Frobenius
Think Together
During the recession, Think Together has been in the unique position of having gone through significant growth. Over that period of time, we more than doubled the size of the organization to over $50 million and 2,500 employees. Much of this growth has been a result of the recession, as Think Together often can provide a more cost-effective model to delivering out-of-school-time programming to school districts, who themselves have come under great fiscal pressure with the decline of state revenues.
Of course, we have had our challenges along the way. Think Together operates as a public-private partnership. In our business, public-sector funding, primarily in the form of state grants, is matched and leveraged with private-sector philanthropic dollars to run our high-quality programs. It’s easy to understand the impact the economic downturn has had on the philanthropic side of that equation. Levels of individual, corporate and foundation giving have tightened up, and this in turn has put pressure on Think Together to respond in a number of ways, including widening our donor base, becoming more effective at demonstrating results, and developing more innovative product offerings.
Remaining adequately financed to accommodate our growth has been another significant challenge in light of the recession. The ripple effects of the downturn impacted California’s state finances. This in turn [has led] to delayed passage of state budgets, significant delays in state payments, and short-term cash flow pressures for service providers such as ourselves. At the same time, the lending environment has tightened up as well, and along with that the need to strengthen our balance sheet. We’ve been fortunate to have long-term, committed partners to help us meet these challenges. Some of this pressure has been relieved with the passage of Proposition 25, which allows passage of the state budget with a simple majority.
The impact of the recession has also been felt on the human-capital side of our business. Given the overall slowdown in hiring at a time when we’ve experienced significant growth, we’ve enjoyed the benefit of having a very strong pool of candidates seeking employment with Think Together. However, as the recovery continues and we continue to grow, we expect that we will feel the pressures of a tightening labor market.
Joe Binotto
Raj Manufacturing LLC
Throughout the recession, our biggest obstacle was the lack of certainty in the business community and the economy in general. There were issues with customers regarding payments and terms, issues with banks and financial firms regarding their solvency, and regulatory issues related to taxes, healthcare and government policy toward business. All this was occurring at a time when consumer spending was slowing down quickly and shopping for price point and value became the norm. It was a challenging time indeed, but we are happy to report that we were able to grow through the recession by focusing on new business opportunities and geographies.
Now that the overall economic picture is brightening a bit, we are focusing on executing our plan. Our core business has growth potential, and we are excited to see how far our new businesses can take us, now that the economy is improving. We continue to be concerned about our state government’s attitude toward entrepreneurial businesses, as well as how Obamacare will affect our suppliers’ costs. Recently, we have become concerned about the lack of skilled workforce in our area and are actively looking at building a new facility out of state.
Thomas Masuguchi
Yokohama Tire Corp.
As with most manufacturers, we at Yokohama Tire were forced in 2009 to balance our need to provide timely delivery of product to our customers while trying to manage inventory levels in the face of great uncertainty. [The question was to figure out] how to … effectively service our customers while managing our balance sheet without having a good idea of the depth or length of the recession.
When the economy strengthened and demand increased, the question turned to how real the recovery was. Everyone understood the increase in demand was due in part to the restocking of shelves following a period of significant reduction in orders during the worst part of the recession. Could we count on this renewed strength in demand to take decisive action on hiring or capital investment? What we have seen, obviously, is a prolonged phase of tepid growth with mixed indicators, and again, great uncertainty about the future of the economy.
So the challenge is and always will be how we balance the risk of continued low growth or even another recession with our principal objective to continue to grow profitably and strengthen our position in the marketplace and support our customers.
Bill Sanderson
Golden State Foods Corp.
It was important to keep a continuous improvement mindset throughout the recession, even though we fared quite well the last few years, as our customers operate in the quick-service restaurant space and are fairly recession resistant. However, their expectations were focused on costs and value. The challenge is that our biggest cost is people, and our people are our greatest asset, so re-ducing cost by cutting our greatest asset doesn’t serve us or our customers well. So we continually challenged the status quo and looked for new ways to be more efficient—ways to create value for our customers and keep our products and services relevant.
And as the economic environment improves, our customers are looking for cost leverage, meaning leverage and efficiencies that incremental volume [and] a recovery should bring. We believe that our success is a reflection of our customers’ success. Therefore, we are focused on world- class quality; speed to market, efficient, assured supply; and great value. This can only be accomplished through transparency, trust and alignment of goals with our customers.
