This case study reviews the successful turnaround of a middle market construction company. The case offers an illustration of the extreme value creation that is possible in a turnaround, as well as the many challenges of engineering a successful turnaround.

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Abraxas Group
www.abraxasgp.com
RadicalValue Creation
Case Study of a Successful Middle MarketTurnaround
Date: June 28, 2016
David Johnson
Interim Executive (CRO, COO, CFO)
Restructuring and Turnaround Advisor

2. “If you want something new, you have to stop doing
something old”
‒ Peter Drucker
Abraxas Group
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3. • David Johnson is a career change agent who has served as interim
manager or financial advisor on over $5 Billion of distressed middle
market transactions.
• In his nearly 20 years as a change agent, David has served as an advisor,
board member, interim manager, investor and operator at
organizations ranging in size from pre-revenue startups to Fortune 500
organizations.
David Johnson
Abraxas Group
www.abraxasgp.com
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Email: david@abraxasgp.com
Ph: 312-505-7238
Twitter: @TurnaroundDavid

4. SEVERE CHALLENGES
Abraxas Group
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5. Overview
• In the summer of 2015, a $160MM construction company was undergoing
an accounting restatement, placing the company in default of loan
covenants on $100MM of debt facilities.
• The company’s owner, a middle market private equity firm, appointed a
new CEO in July 2015 with a mandate to lead a turnaround of the
company.
• On July 31, David Johnson was retained to provide finance leadership in
the turnaround, and shortly thereafter was named Interim CFO.
Abraxas Group
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6.  Company begins to miss financial targets, leadership fails to assess root
causes and the decline continues
Downward Spiral
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 Leadership sets increasingly aggressive targets, focus is on a
single contract or quarter to turn things around
 Decline becomes evident to outside
stakeholders
 Lenders press for a fire sale
or liquidation process
Underperformance
Envelope Pushing
Severe Business
Erosion
Fire Sale /
Liquidation
Companies in distress tend to follow a similar pattern, the goal of any turnaround is to provide a sharp and
definitive break from the downward spiral

7. • The new leadership team had a
number of challenges to deal
with immediately:
– Capital structure (financial sponsor
and lenders highly uncertain)
– Toxic relationships with key
customers
– Communication breakdown with key
material suppliers and subcontractors
– Plummeting morale
Challenges
Abraxas Group
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8. NO MARGIN FOR ERROR
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9. Hit the Ground Running
• August and September saw the new leadership team absorbed in a
number of issues critical to the survival of the company:
– Lender Relationship. As a result of the company being in default of its loan covenants,
lenders were insisting on formalizing a Debt Amendment Agreement. Absent support
(even reluctant support) from lenders, the company would not be able to execute on a
turnaround plan.
– Mending Fences. Confidence in the company was low, both internally and externally.
Customers, vendors, and staff were confused, angry, and scared, sometimes all at once.
Leadership needed to get out with a new story for why the turnaround could work.
– Building a Team. Prior management had lost all credibility, and by July senior leadership
had been fired. The new leadership team was being assembled in real-time as the issues
facing the company continued to multiply.
Abraxas Group
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10. Lender Relationship
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Reporting Cadence Normal Course Workout
Quarterly Quarterly Covenant
Compliance and Borrowing
Base Certificate
N/A
Monthly Monthly financial results Covenant Compliance,
Borrowing Base Certificate,
Monthly financial results
Weekly N/A Rolling 13-week cash forecast,
weekly variance analysis,
general update
 When a company is placed into workout by its lenders, the focus shifts from one of a collaborative
partnership focused on growth to one of risk management and downside protection.
 This is a shift from “grow together” to “get out whole”.
 Companies in workout should never lose sight of this change.

11. Customers
• Key customers were losing faith
in the company’s ability to
execute
• Revenue was down, litigation
expenses were up
• Customer complaints were not
being addressed
Vendors Staff
• Critical Material Suppliers and
Subcontractors were frightened
that the company would fail
• Vendors were accelerating
payment demands
• General managers were
overwhelmed
• Inside the company, formal
communication channels had
broken down
• A sense of fear and resignation
prevailed
• Rumors were everywhere, and
morale was falling
Mending Fences
Abraxas Group
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12. Building a Team
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Position New to Company? New to Role
CEO Yes Yes
COO No Yes
CFO (Interim) Yes Yes
Vice President, HR No Yes (role expanded)
Head of Sales No Yes
Corporate Controller No Yes
General Managers (7) No Yes
 The company’s leadership was remade beginning with the appointment of a new CEO in July 2015.
 The leadership team, composed largely of existing staff elevated to leadership, were energized to drive
the turnaround, and outperformed the expectations of all outside observers.

13. A SHORT LEASH
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14. Now Prove It
• Entering Q4 (Oct – Dec), the company had addressed legacy issues, and
bought some time with lenders.
• Nonetheless, the factors weighing against the company were
considerable:
– Calendar. Q4 was going to be a make or break quarter for the company, but all were
aware that Q4 was traditionally the weakest quarter of the year.
– Stakeholders. Relationships were at a fragile point in October 2015, with many inside
and outside the company taking a “wait and see” approach to the turnaround.
– Liquidity. The company had a severely constrained liquidity position, and the
agreement negotiated with lenders had provided only modest relief.
– Potential Fire Sale. Lenders had insisted on the retention of an investment banking firm
to run a “dual track” (sale or refinance) process, with a deadline of a completed
transaction by June 15, 2016.
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15. • The company rapidly began
showing improvement in both
revenue and gross margins.
• Revenue growth. Core customers
reengaged after meeting with
new leadership, leading to strong
revenue increases.
• Gross margin expansion. A focus
on costs allowed the company to
execute “better, faster, cheaper”.
Performance Improvement
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128.4 126.1
139.3
114.2 109.9 110.3 106.1
112.8 108.0
Revenue Trends
Rev Baseline
148.7
164.6 166.6
176.9
154.7
138.2
150.5
140.2
179.9
Gross Margin Trends
GM % Baseline
(July 2015 = 100.0)

16. Customers
• Leadership focused on meeting
with key customers, to apologize
and reset expectations
• Workable releases increased, and
the turnaround became a growth
story
Vendors Staff
• Key vendors were contacted, and
payment plans were negotiated
where necessary
• As the company made good on
its commitments, vendor
relations quickly normalized
• Employees noted the common
sense changes and they quickly
bought in
• Sensible RIFs, clear
communication, and savvy
promotions signaled a break with
the status quo
Rebuilding Trust
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17. • It was immediately clear that a substantial improvement in cash
management would be necessary to fund the turnaround.
• Weekly cash reporting was initiated, and disbursement controls were
implemented.
• Absent these improvements, the company would have had insufficient
liquidity and a fire-sale would have been the only option.
Cash Management
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18. Cash Management (Cont.)
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82.1
87.5
78.8
88.1
94.5
70.8
58.8
78.5
64.5
Days Sales Outstanding
DSO Jul15 Value
(July 2015 = 100.0)
$9.2
$6.4
$7.9
$22.1
$9.8
$14.6
$24.3
$7.9
$10.0
Cash Flow Impact from Improved
Collections
CF +/-
($ millions)

19. FINANCE FUNCTION IN A
TURNAROUND
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20. Special Projects
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 Turnaround situations give rise to enormous
workloads on the accounting and finance function.
 At this company, there was the added handicap of
a deficit of institutional knowledge (due to 100%
turnover in the corporate finance function).
Project Name
Debt Amendment Agreement Negotiations
Development, Implement and Oversee Cash Management
Support Working Capital Field Exam
Support Fixed Asset Field Exam
Sales & Use Tax Analysis
2015 Audit
Five Year Forecast
2016 Operating Budget
Flash / Three Month Forecast Revamp
Backlog Analysis
Insurance Renewal
Misc. Policies & Controls
Month-End Close Process Revamp
New Accounting System Rollout
Sale/Refinance Process

21. Support of the Business
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Function Points of Contact Nature of Support
Strategy CEO Strategic plan development,
change management
Capital Structure CEO, Financial Sponsor Scenario testing, forecasting
Operations COO Collections, vendor relations,
capex priorities
Sales Head of Sales Market intelligence, reporting
for licensing submissions
HR / Admin Vice President, HR Insurance submissions, IT
issues
In addition to managing the one-time items tied directly to the turnaround of the company, as Interim CFO
David also had considerable responsibilities for supporting the business during his tenure.

22. GOINGTO MARKET
Abraxas Group
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23. Testing a Hostile Market
• In January 2016, with the high-yield
market in the throes of a “risk off”
spasm, the company’s investment
banking firm contacted prospective
capital providers.
• By this point the company had logged
only one solid quarter of post-
turnaround performance (Q4), and
expectations were low.
Abraxas Group
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24. Dual-Track Process
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 Through the diligence and
connections of a well-respected
investment banking firm, the
company was able to reach out to a
broad cross section of prospective
capital providers.
 The benefit of this approach, in
addition to creating tension among
multiple bidders, was in speaking
with prospective investors with
widely divergent risk tolerances.

25.  For the 9-month period Aug15
– Apr16, the company saw a
76.8% YoY increase in EBITDA.
 With each month of
outperformance, the
company’s value increased.
Robust Profit Recovery
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EBITDA (Aug
14 – Apr 15)
Change in GM
($)
Change in
SG&A
All Other
Changes
EBITDA (Aug
15 – Apr 16)
100.0
45.5
6.6
24.7 176.8
Values Common-sized with Aug14 – Apr15 EBITDA = 100

26. Sale
• Offers recognized value created in the turnaround,
with substantial equity value for sponsor
• Immediate pay-off of lenders and realization of
investment gain for sponsor
• Validation of new leadership team’s
accomplishments
Refinance
• Offers allowed company to continue generating
value for current sponsor
• Successful exit for incumbent lenders and responsible
capital structure moving forward
• Opportunity for leadership team to continue to
execute on 5-year plan
Optionality
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27.  The company was able to
refinance its entire capital
structure, and beat the June
15, 2016 maturity date by one
day.
New Capital Structure
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Sep15
Senior Debt
Jun16
Subordinated Debt

28. OUTCOMES
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29. Keys to Turnaround Success
1) Runway. Diligent cash management allowed the company to fund normal
operations through an intensive sale/refinancing process.
2) Performance. For the 9-month period of Aug15 – Apr16 the company
saw the following YoY improvement:
– Sales: 9.8% increase
– Gross Margin ($): 20.1% increase
– SG&A: 5.1% decrease
– EBITDA: 76.8% increase
3) Team. A cohesive team, encompassing staff, new leadership, as well as
outside advisors, were able to work together, overcome constraints, and
in the end drive considerable value creation.
Abraxas Group
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30. Bottom Line
• In July of 2015, most of the lenders to the company would have been
happy to get out whole, implying no equity value for the company.
• In choosing the refinancing option, the company’s financial sponsor
turned down offers that implied a doubling of enterprise value (>$70MM
increase in equity value) over 11 months.
• Not only was radical value created, but all involved (new lenders, financial
sponsor, leadership) were in agreement that the company had become a
platform for further value creation in the years to come.
Abraxas Group
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31. RadicalValue
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$0
EquityValue in July 2015
>$70MM
EquityValue Increase
11
Months ofTurnaround