Autobiography - The Galindo Group

Ram Galindo THE MAKING OF AN AMERICAN Page 146
To accomplish the purchase, Charles and his father contracted a company bank loan
guaranteed by them personally, the proceeds of which were split between the two
senior Ducotes. The part received by Charles’ father became an unsecured loan from
the corporation to him. He used it to settle pressing personal and family loans. While the
guarantee to the lender was from the buying Ducotes, the remainder of the loan went to
the buyers’ uncle. It was used to buy some of his stock. The company signed a
separate long-term note, also guaranteed by Charles and his father, to the selling
brother for the rest of his stock. From the very start the note owed by Charles’ father to
his company was the single largest asset the corporation owned. It soon became nonperforming,
which added to a precipitous fall in the volume of business and the loss of
the departing brother’s management talent sent the company into a tailspin.
Despite the daunting nature of the problems and the distance at which they were
located, I decided to accept the offer. In October 1990, R. A. Galindo, Inc. signed a
management contract and I was designated as the executive in charge. For the next
two years I flew to San Angelo twice a month and stayed in daily telephone contact with
my managers at the plant.
As a business saga it was thrilling to me and of magnetic interest only to a turn-around
expert or specialized public accountant. Over the next two years I brought the company
back to profitability. In the process I totally renewed the executive team, reducing it from
six to three and cutting the salaries of the remaining managers by one third. All
employment went from 125 to 63. Both Charles and his father were overburdened with
other debt and bad real estate investments and had to take bankruptcy. This caused me
to write off Mr. Ducote’s note, thereby producing a negative net worth, event that served
as a deterrent to vendor creditors who otherwise might have forced it into involuntary
bankruptcy. I renegotiated the note to the selling family member. I also renegotiated the
bank loan and came up with valid catch-up payment plans with all the suppliers who
were on the verge of cutting off their continued business. We redoubled our marketing
efforts, trying to secure new clients and hold on to the old ones. We sold the less
profitable routes in far west Texas but continued supplying product to the new route
owner. We sold every stranded asset the company had, and I found more than I cared
to find. I revamped some accounting procedures and instituted a daily cash
management system that I controlled directly. I established internal communications
channels so that everyone knew my directions and what everyone else was doing in the
company. We bolstered morale by providing incentives to the more successful
employees. We adopted a system of “just in time” feedstock purchase that produced
significant savings in warehousing expenses and inventory financing. In addition, we put
in place many other cost saving actions that also helped compensate for the drop in
sales volume.
By early 1992 I was ready to hire a new fulltime chief executive officer, and did so. At
the end of 1992 the company was back to profitability, smaller, leaner and hungrier.
Because of my own need for funds, in mid-1993 I opted to get paid in cash, rather than
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