Viking Freight, Inc.
This publicly traded manufacturer of fiber optics was encountering serious financial and strategic problems. The Company had just completed a major capital expansion program in two operating divisions. Both came on-line late and well over budget. Selling prices of Spectran Fiber Technologies ("SFT") single and multi-mode fibers fell by 40% within a six-month period when demand fell precipitously in Asia during the Far Eastern economic crisis and because several large manufacturers brought new capacity on-stream at the same time. To make matters worse, Spectran Specialty Optics ("SSO") had spun out of control and reported large losses. The Company failed to comply with financial covenants and management lost the confidence of its lenders. The Board of Directors appointed a member as President and Chief Executive Officer and moved the Chairman and Founder into a non-executive role.
The Company's General Counsel, who also served on the Board, asked Mr. Schmitz to join the Board in July of 1998. Shortly thereafter, the CEO retained Quest to help formulate a new strategy for the Company, to normalize relationships with the lending institutions and to help him negotiate a series of partnership opportunities. Mr. Schmitz advised the CEO and Mr. Rogers assumed an interim management role at SSO and subsequently as the interim CFO of the corporation.
Mr. Schmitz, Mr. Rogers and the CEO worked closely to develop turnaround plans to resolve major strategic and operating issues. In 1998 SSO had an operating loss of $1.6 million. Within 6 months, SSO was operating on plan to achieve operating income in 1999 of $7 million. Fixed costs at SFT were slashed to enable the division to operate profitably despite heavy ongoing development spending for new high performance single mode fibers. Quest recommended that the Company partner with or be acquired by a large competitor or cable customer. As a small manufacturer, operating under highly restrictive licenses from Corning and Lucent, the company was in a vulnerable position. To help implement this recommendation, Mr. Schmitz introduced and the Company retained Lazard Freres to lead a search for the right strategic partner. Mr. Rogers completed the financial analysis and forecasts to support this effort. Mr. Schmitz and Mr. Rogers led negotiations with lenders and re-established the Company's credibility.
Lucent Technologies acquired Spectran's shares at 80% above the share price before the project began. Shareholders approved the transaction in January 2000.
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