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Opportunities

Steel Manufacturing & Ag Focused Project Management

CASH FLOW
$5,240,040

Specifications

  • Price
    $10,500,000

  • Cash Flow
    $5,240,040

  • Revenue
    $39,434,598

  • Equipment
    $4,128,796

  • Account Receivable
    $1,405,633

  • Inventory
    $1,091,675

  • Location
    Nebraska

  • Reason for Sale
    Retirement

  • Service Area
    Nationwide clients with a concentration in the Plains states

  • Employees
    60 FT

  • Valuation
    $10,544,699

  • Industry
    Manufacturing/Fabrication

A leader in the manufacture and fabrication of livestock housing facilities, this ag-focused project management company recently erected one of the largest dairy facilities in North America. Over $71,000,000 is out to bid for projects over the next 2 years, with one project for a dairy facility in Texas worth $48MM. The company has a finely-honed process, with a Sales Team securing bids, in-house Designers and Engineers leading the planning stages, and Project Managers overseeing the construction process for facilities and the confinements inside.   

Four buildings house offices, a warehouse, a mild steel manufacturing shop and a stainless-steel manufacturing shop. Looking to increase margins, the company purchases materials from other manufacturers and then customizes orders to client needs. The majority of projects take about 90 days for completion, but larger projects can span from 6 months to 1 year in length.

While a majority of customers are located in Nebraska and Iowa, many more come from other Plains states, with multi-million-dollar contracts in place in Utah and Idaho. Priced at $10,500,000, this is a Midwestern-based company with great potential to grown in ag and to break into other industries.

Business Highlights

  • Years in Business: 30+
  • Location: Eastern Nebraska
  • Service Area: Nationwide clients with a concentration in the Plains states
  • Sales Breakdown: 51% Project Management / 39% Manufacturing / 10% Equipment Sales
  • Construction Breakdown:
    • Swine – 73%
    • Dairy – 10%
    • Commodity – 9%
    • Cattle – 7%
    • Remodel/Rebuild – 1%
  • Steel Fabrication Breakdown:
    • Transport/Trailer – 41%
    • Food/Water Processing – 26%
    • Retail – 9%
    • Ag/Farm Equipment – 7%
  • Building: 4 – Office (6,816 sq. ft.); Warehouse (7,848 sq. ft.); Mild Steel Mfg. Shop (18,840 sq. ft.); Stainless Steel Mfg. Shop (21,560 sq. ft.)
  • Reason for Selling: Retirement
  • Employees: 68 FT
  • Seller Training Period: Negotiable
  • Growth Opportunities: Increase online presence
  • Current Owner’s Responsibilities: President

Financial Highlights

  • List Price: $10,500,000
  • Gross Sales
    • 2017 - 2018: $37,504,617 Annualized
    • 2016 - 2017: $39,434,598
    • 2015 - 2016: $21,808,046
    • 2014 - 2015: $20,797,106
    • 2013 - 2014: $24,937,276
  • Cash Flow
    • 2017 - 2018: $5,399,364 Annualized
    • 2016 - 2017: $2,571,878
    • 2015 - 2016: $1,477,253
    • 2014 - 2015: $1,245,994
  • YOY Growth Trends: Large project is projected to bill $30MM over a 2-year period, which has contributed to the jump in sales for 2016
  • Assets Included in Purchase Price:
    • Equipment:
      • Manufacturing - $2,891,264
      • Heavy Equipment - $577,680
      • Office - $659,852
    • Vehicles: $1,200,529
    • Inventory:
      • Building Materials - $324,591
      • Finished Goods - $158,395
      • Raw Material - $608,689
    • Backlog: $14,182,000 ($13.5MM in construction)
    • A/R: $1,405,633
    • Work in Progress: $1,812,568
  • Bids out for 2018/2019: $71,770,000

*amounts may vary – equipment & vehicles are listed at replacement value

Cash Flow Analysis

Description of Financial StatementP&L Statement
Audited Financials
P&L Statement
Audited FYE May 31
Tax ReturnTax ReturnTax ReturnTax ReturnNotes
2017-20182016-20172016-20172015-20162014-20152013-2014
GROSS SALES$21,877,693$39,434,598$39,434,598$21,808,046$20,797,106$24,937,276
Annualized$37,504,617
Net Income Shown on Financial Statement$1,696,989$561,021$790,492$178,914$223,685$458,613
ADDBACKS
Compensation to Owner$43,500$84,102$84,102$78,000$92,487$80,000
11% Tax on total W2 Salaries$4,785$9,251$9,251$8,580$10,174$8,800
Depreciation$31,520$330,524$331,264$584,597$385,591$676,884Non-cash item
Interest$0$438$438$3,389$7,858$4,812Non-onward going expense
Contributions/Donations$2,350$7,215$7,215$3,650$1,556$3,205Non-onward going expense
Life Insurance Premiums$27,116$30,760$30,759$15,015$15,877$59,221For owner
ESOP Contributions$331,090$500,357$500,357$379,876$308,650$271,297Non-onward going expense
Provision for Income Taxes$314,613$302,619$0$0$0$0
One-Time Professional Fees$23,727$35,000$35,000$0$0$0Professional Fees never more than $35,000 for 4 years prior
Consulting$581,000$983,000$983,000$425,232$400,116$166,983Paid back to owner
Rent$-116,666$-200,000$-200,000$-200,000$-200,000$-200,000Rent Adjustment
TOTAL ADDBACKS$1,243,035$2,083,266$1,781,386$1,298,339$1,022,309$1,071,202
Seller's Cash Flow = Total Addbacks + Net Income$2,940,024$2,644,287$2,571,878$1,477,253$1,245,994$1,529,815
Annualized$5,040,041
Profit Margin13.44 %6.71 %6.52 %6.77 %5.99 %6.13 %

 

  • Business has not been largely affected by the economic downturn in past years
    • This is due to diversification of revenue stream via steel fabrication

Revenue Analysis

 

  • Construction revenue is dependent on contracts and some market swing
  • There is a current contract that should bill 30MM over a 2-year period

 

 

  • 73% of construction comes from the swine industry
  • Aftermarket retail is mostly for the swine industry as well

Steel Fabrication


 
Transportation/Trailer 41%
Food/Water Processing 26%
Miscellaneous 13%
Retail/Store Industry 9%
Ag/Farm Equipment 7%
Home/Hospital 4%
Pharmaceutical1%

 

While one segment of the company is focused exclusively on the ag industry, the fabrication segment balances out with concentrations in other areas to ensure that the company is less subject to industry swings.

Clients

Livestock Confinement

  • Concentration in Nebraska and touching states
  • Also working in Illinois, Indiana, North Dakota, Utah, Idaho, Oklahoma, and Minnesota
  • Dairy customers are large individuals and feedlots
  • Beef producers are smaller operations
  • Mid-range construction

Steel Fabrication

  • Majority are not in agriculture
  • Large presence in transportation
    • Has contract with major client for manufacturing back bumpers, tire carriers and more

Services

Facilities

  • No prefabrication
  • Custom made to producer’s needs
  • Materials sourced from third party that can manufacture on a cheaper margin
    • A lot of material comes from China

  • In-house engineering & design utilizing CAD technology for geometric data transfer
  • Custom nesting software
  • Ability to stack material
  • MIG, TIG, ARC and spot welding
  • SS Finishing
  • Plating – electro polishing, chrome, zinc
  • Powder Coating

Machinery

Haas ST 30 Haas VF 2 SS Fadal Mazak 400w Optiplex Calypso 50hp
Accushear 625 HMI 7810-25 Accupress 60 Ton Euromac 1250 30 ton Accupress 400 ton

 

Equipment – gestation, farrowing and finishing equipment developed with each producer’s special requirements

  • Flooring systems
  • Feed systems
  • Alarms
  • Ventilation systems & parts
  • Cooling systems
  • Watering
  • Plumbing
  • And more!

*Some equipment is fabricated and sold by the company, however, the company is a dealer for many brands and most equipment sales are for those brands

Work

  • Average project is $1MM - $1.5MM
  • A majority of projects last about 90 days
  • Large projects span between 6 months – 1 year

Work Orders

  • 100 – 200 manufacturing work orders per month
  • 10 – 20 construction work orders at any time

For the year ended May 31, 2017:

  • 11 uncompleted contracts of $43MM
  • Estimated Gross Profit of $9,434,107

Assets

Inventory - $1,091,675

  • Building Materials - $324,591
  • Finished Goods - $158,395
  • Raw Material - $608,689

Equipment - $4,128,796 (replacement value)

  • Manufacturing - $2,891,264
  • Heavy Equipment - $577,680
  • Office - $659,852

Vehicles - $1,200,529 (replacement value)

A/R - $1,405,633

Work in Progress - $1,812,568

Backlog - $14,182,000

  • $13.5MM of this is construction

Employees

  • 68 FT
    • Most are laborers
  • 95% of construction/installation is handled by subcontractors
    • Electricians, plumbers, carpenters, concrete workers
  • Sales Reps make contact with clients
    • Designs for what the client wants
    • Visits sites
    • Prepares proposals
  • Super Intendent creates blueprint
  • Sales Manager (2)
    • One for the confinement operations
    • One for the steel fabrication operations
  • CFO
    • Risk management, HR, financial oversight
  • Tech Sales Rep for buildings and equipment

Growth Opportunities

  • Increase online presence
    • The company has a working website that could use some revamp
    • A catalog of dealer equipment options is available, but online ordering is not
    • There are endless possibilities to showcase work and capabilities
  • Attend more trade shows
    • Company attends targeted trade shows, but attendance could be increased to further network
  • Increase marketing/advertising
    • Customers receive flyers, but not much marketing is done
    • There are a multitude of agricultural periodicals and websites that are great for small ads

Valuation Details

The Firm Business Brokerage used a Cash Flow Valuation methodology to determine the Purchase Price of the business. 

The formula used is as follows:

2016 Cash Flow          x          Prescribed Multiple     =          Fair Market Value

Cash Flow is the sum of business net income plus any owner perks and any non-onward going expenses.

A multiple is prescribed by a 20 question, 100-point parameter ranking system that is used to analyze the current business health. Each question is based on a scale from 1 to 5: 1 being low, 2 below average, 3 average, 4 above average, 5 high. The average of the responses sum is the business’ prescribed multiple.

With this information, the computation is as follows:

$2,571,878      x          4.1       =          $10,544,699

The Fair Market Value found above positions the business List Price at $10,500,000

Funding Example

Purchase Price:                  $10,500,000

 

Option 1

100% Buyout

            10% Buyer Down Payment:   $1,050,000

            20% Seller Financing:             $2,100,000

            70% Bank Loan:                     $7,350,000

 

Option 2

65% Buyout

            15% Shareholders Remain Owners

            20% Seller Remain Owner

            65% Buyer Equity Buy

                        20% Cash Down:        $2,100,000

                        80% Bank Loan:         $8,400,000

 

Option 3

66% - 99% Buyout

 

Please note that the decision of whether to extend a loan on any sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available. 

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