Chapter 84

My Dad and I were once again trying to put together a new financing package to cover the higher than anticipated financing costs for expanding several areas of our business. We were being hamstrung because of the success we were enjoying in growing our nationwide market share. The vending business was expanding just as rapidly as the Quick Snacks program, and we were in the process of buying up many of the smaller regional bakers that were unable to compete with the proliferation of big national bakeries such as our own.

It seemed like all any of us had time for anymore was to search out ways to pay for all the growth we were experiencing. It was a double edged sword, this growth. We couldn't afford to slow down and consolidate what we'd built, because our strategy was to go all out now that we still had a jump on our competition. We knew the window of opportunity wasn't going to be open to us for much longer. We had to keep going if we were going to maximize our overall potential.

Sometimes, success doesn't seem very satisfying. Ours was causing us as many problems as it was solving. With my Dad and I spending so much of our time trying to put the financing in place, we were being forced to delegate more and more of the daily operating decisions to our managers. Problems started cropping up that were caused by there being something of a vacuum at the top. There just wasn't a single person available who understood how all the separate components went together to make up the whole. My father was beginning to lose the finger he had on the pulse of the companies. This level of awareness was something that he'd always maintained in the past. We were beginning to show signs of suffering in our productivity and overall efficiency because of that loss of control over the big picture.

I had been back in Ridgeline for a little more than a month when my Dad and I got into our first really huge business disagreement with each other. It all started when I suggested that things might be a lot better if he were to concentrate on operating the companies, and delegated the financing to someone we could bring in from the outside. Someone who specialized in finance and bank negotiations.

"That's a sure recipe for disaster, Kenny. Once you give up control of the money, you've given up control of the company. I've seen twenty or thirty good companies go under after they made the kind of move you're suggesting I make."

"I didn't say you wouldn't be there to check over everything before we sign off on it. You can't do everything, and the company needs you to look at the big picture, to coordinate things and make sure everything is being given its right priority. You're the only one who understands everything we're trying to get accomplished. You know how it all is supposed to come together."

We argued for several hours about whether having another bank negotiator and finance specialist was a practical solution. It seemed to me that my Dad felt like I was trying to push him out of being in control of the companies. That wasn't what I wanted. In fact, the opposite was true. I was worried that we'd end up making a critical miscalculation without him being in overall command of the various divisions.

Maybe I presented my idea too forcibly to him. I should have broached it from the point of view of creating a department of finance with him in control of it. He would be able to save time by using people to look into some of the most time consuming aspects of putting financial data together. As it was, he and I were the only two working on putting all the future forecasts and current sales numbers into shape for him to make his presentation to the consortium of lenders we were using.

In any event, we needed an additional half a billion dollars of credit, and it all needed to be in place sometime within the next few months. Part of the tension we both were feeling was from knowing that the bakery acquisitions we needed to make in order to produce the product to fuel our sales growth were skewing the numbers against making the loan request viable.

We were incurring a lot of expense immediately without having the commensurate current earnings from those acquisitions. All of the new bakeries we wanted to acquire were going to require extensive retooling in order to handle what we were planning for them to do. The retooling was another current expense that wasn't going to result in any immediate offsetting income stream.

Seventy five percent of the new money we were after would be used to acquire and retool those bakeries. Less than twenty five percent would be going to finance the sales roll out of the vending and the Quick Snack programs.

Bankers looked at growth and potential, but they needed underlying collateral to secure the loan until the income started streaming in. We knew the income was going to come, and so did our lenders, but they wouldn't assume the downside risk by themselves, in case something did go wrong. They were right too.

As they now stood, those bakeries weren't worth the money they were going to cost us. Their liquidated current value wouldn't justify the loan that we needed. My father and I were both frustrated by knowing this was true. It was in a moment of temper from that frustration when I lit the fuse that sent our argument into the stratosphere.

"If we want to keep on growing like we've planned on, we're going to have to take the company public. There's no other way to get the money we need."

As soon as I said it, I regretted having spoken the thought out loud. The idea had come up from time to time over the years, and we'd always decided against doing that. My father was very proud of the fact that we were now one of the largest privately held family owned and managed companies in the world.

"When I'm dead, you can do that, Kenny, but not before then."

"By then, it won't matter. Someone else will have beaten us into all those markets that are open to us right now."

"We're family owned and family operated, and we're going to stay that way as long as I'm the one in charge. You popping off and saying things without thinking it through first is starting to have a bad effect on more than just your private life, son."

I got up and left his office before I had a chance to say anything else to make matters even worse than they now were. Like I said, I was just frustrated. What I'd said was just me giving vent to some of that frustration.

I needed a place to hang out to give enough time for both my Dad and me to cool down again. I knew I was going to have to apologize to him, but I wasn't in the mood to be doing that anytime soon. He and I had different philosophy's about what the business actually was now. All of us had more than enough money to last us forever.

To me, growing the business was a competition. I wanted to see how big and successful we could make it. Not for the money alone, but for the satisfaction of creating something. To my Dad, this business was practically his whole life. He was the business, and he wanted it to stay that way. He wasn't in such a hurry. He would take his time and wait until he found a way to do what he wanted to do, on his terms.

One thing I already knew was that I was the one intruding on his domain. He didn't deserve having me spouting off and threatening his control like I had done.

I needed to talk to someone that would understand what had happened. Someone who would be able to give me some good advice about what I should do to get things back to normal between my Dad and me. I soon found myself outside the door to Joyce's office. I hadn't had the conscious thought that this was where I was heading, not until I turned down the corridor that led to her office door.

In the time that I'd been back, I'd only been alone with Joyce that one Sunday after the second dance at the club. We'd gone out with the kids a couple of times since then, and had some good talks together, but neither of us had suggested we do another sleep over like that first time. I knew that Joyce was waiting for me to make some sort of move concerning Emily. She didn't want me getting distracted from doing that.

I opened her door and walked into her office. She wasn't there, but I heard voices in the next room, the one we'd set up as a bedroom years before. When I went over and opened the door, I found Joyce, Cindy and Brenda involved in a heated discussion about something. The way all three of them shut right up when they saw me made me think that I might have been what they were arguing about.

"What's this? Are you three plotting the overthrow of the government?"

"Hi, Kenny. No we were arguing about something more important than that. Brenda wants to throw Emily and the children out of her house." Joyce seemed anxious to be the first to speak.

"It's Brenda's house. Emily's only a guest. Why do you want her to leave, Brenda?"

"I never said she had to leave, Kenny. What I said was she was driving me crazy and I wished she'd leave. I'm not thinking about asking her to though." Brenda was dividing her time between smiling at me and frowning at Joyce while she said that.

"Maybe she and I should start looking for a place together then. My Dad and I just had a big fight, and he'll probably kick me out of the house when I go back there tonight." I was laughing while I said it, letting them all know that it was a joke I was making. I certainly had no intentions of moving in with Emily anywhere.

"That's a good idea, Kenny. It would solve a lot of problems we've all been having. Cindy doesn't like living at Mama's house either. She said she'd like you to move out of there and either back to our house, or else get another place of your own."

When Joyce said that, I looked over at Cindy, and I knew Joyce was telling me the truth. Cindy hadn't said a word to me about not liking living at Mama's house. I wondered why she hadn't.

"How come you didn't tell me that you weren't comfortable, Cindy?"

"I didn't want you getting upset with me. I know you like living there, and being with your family. It isn't anything bad, I just don't feel that comfortable with us living with your parents and doing things together. Your mother finds out everything we do, and she has been looking at me funny ever since I went to Brenda's house for that visit. It embarrasses me." Cindy was having a gentle pink flush on her face and neck, obviously uncomfortable with being the subject of our discussion.

"I'm not upset. You should have said something to me about it earlier. If you'd be more comfortable, we can move back to our house. You don't have any problem with that, do you, Joyce?"

"It's your house too, Kenny. All I'd need to do would be to change the sheets on the big bed. I can move my things out of your room in about fifteen minutes. The kids would be happy to see you back living with them again."

"If we did that, I'd have to go back to see my Dad and apologize to him. I wouldn't want him thinking I'm so mad at him that I'd move out of the house because of it."

"What are you two fighting about now?" Joyce was used to my Dad and me having our disagreements, but never big ones like this one.

"I told him we needed to go public with the company, to raise money for the expansion."

"I've heard the two of you talking about that before. You've always decided not to do it. Why is it different now? Why do you think you should do it?"

"I'm not sure we should. I was just frustrated because we can't justify increasing our credit facility by enough to afford buying up those new bakeries, retooling them, and still paying for the vending and the Quick Snack sales roll outs."

"He's always gotten us the money we needed before. You should let him keep working on it. He'll figure out a way to do it. I still don't see why either of you are mad at each other."

"The important thing is to get the financing in place, but Dad is so busy lining up new financing that he isn't running the companies anymore. Each division is operating on its own and no one is coordinating things. We're not as efficient as we once were, and it's starting to be a real drag on our profitability. That's what Dad needs to do, run the company. Hire someone to work on financing. He disagrees. He thinks he'd have to give up control of the company if someone else was handling our finances."

"The important thing is for you to continue to show support for your father. What makes you the expert on what the company needs to be doing? He's been running this company since you were in diapers. I think he can manage things just fine without you telling him what he needs to do."

Joyce said that last part as an emotion laden attack on me. She was as upset with me as my father had been. She was right, but she was wrong too. I should be supportive of my father, but I also knew I was right that he needed to go back to running the operational side of our companies. I might not know as much about the business as my Dad, but I had eyes, and I had seen for myself that the company was beginning to suffer from not having a single unified vision at the top, leading the company. I didn't just make that up to try to bolster my position or my argument.

"We need to get that money, and we need it soon. With all the money we already owe, we're stretching things a lot trying to get another half a billion to do what we want to do. With all the numbers we have now, there won't be enough collateral for that big of a loan. We're a hundred million short just on operating capital for the next six months sales roll out. You can't add assets worth two hundred million and ask for five hundred million in new money."

"Let your father handle it. At the very worst, he'll slow things down until sales catch up with expenses. When we have more income, they'll let us have the money."

"That's how it used to be, Joyce, but it isn't like that anymore. We used up the forward income increases by spending money to upgrade some of our plants and by converting them over to vending product producers. The increase we're seeing now is all pledged to support the last credit line increase. All our current assets are already pledged to secure that line. At current levels of production capacity, our income is going to top out at just enough to service all our debt and still take care of our other expenses. The only way we're going to grow out of the crunch we've created is to add more production capacity while the market is wide open enough to accept the increase."

"Does your father know this? I'm betting he's the one who told you about it. Kenny, you need to let him run things. You always said there has to be one person in overall charge. Your job is to provide him with whatever assistance he needs that you can give to him."

"He needs another two hundred million dollars in underlying assets that he can pledge. I don't have anything to assist him with."

"Can't you borrow on the grain trading company? It makes a lot of money. Can't you borrow that much on it?"

I had never thought of the grain trading company as a real company. It was mostly me and Billy Ray. It had no tangible physical assets to use as collateral. What it did have was a track record of increasing annual earnings. It might be worthwhile to have someone knowledgeable looking at it to see if there was enough value there to justify a loan. One thing I already knew it did have was plenty of current income to service whatever debt amount I could generate for it.

I'd definitely have to change the way I had everything set up, including separating the charitable trusts and the private investments I was handling for other family members. With the cash reserves I had in the company, I could still show a little more than forty million dollars a year of earnings and revenue.

I called Frank Clooney from Joyce's office phone to ask him about what I'd need to do to get the grain trading business set up so I could borrow against it. As he had in the past, Frank started right in recommending that I secure a loan as a private placement with a group of investors. He'd said the same thing to me, back when we were looking for more financing for the bakeries some years earlier. His contention was that it was easier to secure financing from private investors. They didn't have a long list of lending criteria and fixed asset needs. If they thought a loan would make them a profit, they made it. If not, they didn't. Frank stressed how much more flexible they could be.

"I'm going to need at least two hundred million dollars, Frank. I might need it for up to five years and all I want to have to pay is the interest on the loan each year. I can pay up to eight percent out of the income I'm generating. Do you think that's possible?"

"I really don't know. I can set up an offering for you and then shop it around. We'd know soon enough if there was any interest. You might need to pledge some of the assets from your other trusts too, like the note you have from your father's company in your main trust, just in case something happens to you. I can get an insurance policy on you to pay off the loan in case you die. At your age, the premium would be very reasonable. Still want me to go ahead with this?"

"Go ahead and set it up for people to look at. I'd need this in place fairly soon. We're going to be closing on some bakeries in the next ninety days. I want to use most of the money for that."

After I got off the phone with Frank, I went back to my father's office. We talked some after I had apologized to him. He apologized to me too about the comment about my personal life. I didn't mention my phone discussion with Frank, or talk about the idea that Joyce had given me. I had forgotten about the note I had from the company having a value on its own. I was receiving quite a bit of income from that note, and had been for some years now. There was over seventy million in fairly liquid investments in my main trust that my father had purchased, using the annual interest the company had been paying to me. If necessary, these could be converted into cash as well.