With recapitalization efforts complete, CEVA CEO is confident about the future
May 10, 2013
In recent weeks, global third-party logistics (3PL) services provider CEVA Logistics has made considerable strides in regaining its financial footing and setting a course for future growth in the 3PL marketplace.
Earlier this month, CEVA Logistics reached an agreement with its major note holders to recapitalize its balance sheet and raise new capital. CEVA said that through these efforts it will reduce its consolidated net debt by more than $1.7 billion ($1.3 billion euros) and its annual cash interest expense by more than $170 million ($130 million euros) and also receive a capital infusion of a minimum of $301 million ($230 million euros) for investment in its business plan.
CEVA CEO Marv Schlanger that these efforts will make for a stronger balance sheet for CEVA, which will enable the company to grow faster and better compete in the logistics and supply chain marketplace, as well as give CEVA the flexibility of making additional capex investments, which will allow it to better serve its customers as they grow globally and build and sell new supply chain products.
LM Group News Editor Jeff Berman recently spoke with Schlanger about CEVA’s plan for the future now that the recapitalization efforts are complete. A transcript of the conversation is below:
Logistics Management (LM): What is your overall take on the recapitalization process now that it is behind you?
Schlanger: With this recapitalization, we actually accomplished more than we had set out to do and achieved more than we originally estimated we would, with the final figures for consolidated debt being higher and additional cash on the balance sheet than previously estimated. We consider the transaction to be successful and are very appreciative of the support shown to the company by our investors and lenders and think this represents and endorsement of support for CEVA’s business model of CEVA as a value proposition for our customers.
LM: What are the next steps for CEVA?
Schlanger: We have several intermediate activities and longer-term activities planned out. From an intermediate perspective, our first objective is to make sure our customers and suppliers—whom I refer to as our “commercial partners”—understand what we did and the fact that CEVA is now a stronger competitor in the logistics marketplace. This is important to highlight in the logistics world, because there were a number of incorrect statements made by third parties regarding CEVA’s future, which were obviously wrong. We are working hard to correct the record so our commercial partners understand what is true and that all the rumors, we suspect and believe, were put into the market by those who would have hoped to have benefitted from those incorrect stories.
LM: While the recapitalization efforts are certainly a positive, the ongoing global economic malaise is a negative, especially in Europe. How does that situation impact business operations and where do you go from there in terms of providing and creating value for your customers?
Schlanger: We operate in a global economy just like everybody else in the industry so we are subject to the environment each of us finds ourselves in. The environment is not great. Europe is relatively weak, and China is not growing at a pace people would have hoped for compared to a year or two ago. The United States is reasonably strong but not booming, with brighter prospects ahead in the near-to-intermediate term. We have some things we are working on internally that are not dependent on the economy, so we have talked to the market about our core structure and infrastructure moving forward. Those efforts are continuing, and every day we get a little bit smarter and a little bit wiser, and we operate a little bit better. It is an ongoing effort and we are working really hard at that. Secondly, we had a number of underperforming contracts that we continue to work on and are making progress in cleaning up these longstanding contract issues. This is also internally-based even though there is a customer component to it. In almost every case, we have had a really good response from our commercial partners.
LM: How do you view your position in the marketplace?
Schlanger: First, we believe on the contract logistics side that we have the ability to generate solutions for our customers that are unsurpassed by nobody that are cutting edge. And on the technology side we have created a vehicle for demonstrating it to our customers in our Logistics Center of Excellence in Jacksonville, Fla., where we demonstrate all the work we have done for our customers. They can not only see the presentation but they can go out on the floor and see how it all works. By recapitalizing the balance sheet and removing doubt amongst the marketplace about our long-term sustainability and viability, we see a natural market that is open to CEVA that was not open to us just a few months ago. That is the market we are attacking. We are being aggressive in the marketplace and using our recapitalized balance sheet as a competitive weapon to help us sell our state-of-the-art solutions. The same goes for our Freight Management business, too, which is interchangeable, based on type of commodity being moved and we all recognize that. We also stand behind our Supply Chain Solutions products, which we believe is as good as anybody’s and better than most.
LM: What some of the other things are in the pipeline?
Schlanger: We are building a new selling approach called TIGER, which is a consulting practice where we can sit down with our customers and look at their supply chain from end-to-end and develop a program that will build value for the customer by helping them redesign their supply chains in order to take costs and inventory out of their system to allow them to grow their business faster and better. That is an area of focus to us. What we think the recapitalization has done is clear away a hurdle for us to sell the products that we have.
LM: How do you view the role of technology in the 3PL marketplace?
Schlanger: IT is an ever-increasing component of what we have to offer. Modern management techniques are based on shorter information cycles and clearer visibility into transactions and technology-assisted transactions. We all manage our personal lives that way, and we know how that has changed by using technology and the business world is changing also. And now that our balance sheet is stronger it will allow us to make stronger investments into IT so that we can continue to develop and offer cutting-edge technologies as part of our Supply Chain Solution offerings.
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