NEW YORK — After finally returning Industrial Services of America Inc. (ISA) to profitability in the third quarter, company president Sean Garber said he is evaluating organic and acquisition-based growth opportunities moving into 2015.
"Our goal is to hit 2015 in stride. ... Growth is a big focus, absolutely," Garber said in an interview with AMM.
"We think that there (are) growth opportunities in both (ferrous and nonferrous recycling); the auto parts market as well," he said. "Regardless of where those are, we’re looking for value. We want to be very thorough and methodical in our approach, and we want to bring value to the organization."
Twelve months ago, Garber and his team at Louisville, Ky.-based metals recycler Algar Inc. signed a three-year management services agreement with ISA to take over the struggling company and improve its operating performance and financial position (amm.com, Dec. 4, 2013). Louisville-based ISA was in turmoil, struggling to restructure its debt as it fell out of compliance with the Nasdaq Stock Exchange after failing to file its third-quarter financial report on time (amm.com, Nov. 26, 2013).
"ISA was a company that at the end of 2013 had come off almost three and a half years of straight losses," Garber said. "It was underperforming and had a lot of challenges, quite frankly. Obviously, the problems weren’t caused by one person. It was just a cultural (issue) and a lack of execution."
Garber’s team focused "on changing the culture" at ISA, which involved making "some hard cuts," he said, noting that 20 percent of the work force was slashed and costs were reduced "well into the seven figures."
Such measures "in their very nature are extraordinarily challenging to a culture" that had bred underperformance, he added.
The new culture at the company revolved around "four corners of business," Garber said. "Surround yourself with good people, listen to your customers, check your ego at the door and check your greed at the door."
Instituting that attitude "allowed us to bring back customers that weren’t doing business with the company, that didn’t have confidence in the company," he said.
It also involved cutting losses, with ISA announcing early in the year that it would cease production of stainless steel blends and effectively end its stainless and specialty alloys recycling business (amm.com, Jan. 13).
Garber described the business as "a non-contributing part of ISA," with a "return on investment that was nonexistent." While it made sense logistically—the recycler’s Louisville operations are in close proximity to Ghent, Ky.-based stainless steel producer North American Stainless Inc.—ISA had become victim to the "extraordinarily volatile" stainless scrap market, he said.
"(The now discontinued stainless scrap operations) required a lot of capital and drew away from our core business," Garber said. "The core (of ISA) has been a ferrous and nonferrous recycling business, and the alloys business—which was glamorous and high-performing for a short period of time—became detrimental."
Raising the equity necessary to move the company forward was also an issue.
"When we got involved with ISA, the company was in forbearance. The banks were tightening the noose around the company," Garber said. "In order to get away from that, we had to recapitalize the business and we needed to find some equity infusion."
The company in June received a $17.8-million credit facility from San Francisco-based Wells Fargo Bank NA, as well as an investment from Recycling Capital Partners LLC (RCP), which provided $3 million (amm.com, June 16).
In addition to much-needed financing, the investment by RCP—an investment entity principally owned by Daniel M. Rifkin, president and chief executive officer of Waterloo, Ind.-based MetalX LLC and former president of Fort Wayne, Ind.-based OmniSource Corp.—provided ISA with a valuable resource in Rifkin and his team, as well as a platform to develop future commercial relationships (amm.com, June 18).
"MetalX believed in the company and in investing in the company, and stepped up and gave us what we needed in order to refinance and bring in new lending partners," Garber said. "We got the knowledge of Danny Rifkin and his team to call upon and help us as we continue to turn ISA around. ... Every aspect of the industry, he’s been very helpful in being available to us. We’ve developed a great relationship with him and his team."
ISA returned to profitability in the three months ended Sept. 30, with sales rising 4 percent from the year-earlier period and—excluding its discontinued stainless scrap blend operations—recycling volumes increasing 61 percent year on year (amm.com, Nov. 10). The results were boosted by a 26-percent decline in selling, general and administrative expenses and a 65-percent drop in interest expenses, highlighting the company’s restructured operations.
The considerable improvement in recycling volumes was achieved by "listening to our customers and knowing what their expectations are," Garber said. "In our business, the prices are the prices for the most part. Maybe there’s a $5 difference here and there, but you’ve got to have a high level of customer service and accessibility."
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