It was a rocky period, but the Heffingtons still had their family and health — and a marriage they describe as unshakable. Everything else in their lives was up for grabs.

If tears are being shed at Allen Printing Inc. in 2012, they are tears of joy.

The 77-year-old family-owned business is racking up record sales. Last year’s revenue of $5.7 million marked an approximately 25 percent growth rate compared to 2010’s revenue of $4.3 million. The first two months of 2012 are the best in the company’s history.

“We haven’t spent a dime on marketing,” said Paul Heffington. “We focus on making sure we are better and quicker [than competitors].”

When it comes to Allen Printing’s 180-degree transformation, the Heffingtons are clear about one thing. It would not have happened without the guidance of turnaround professional Steve Curnutte of Tortola Partners.

Curnutte coached the couple through every detail of the reorganization. That meant coming up with negotiated payment terms with more than 60 creditors and implementing financial diagnostic tools that closely track cash flow and profit margins. Before the restructuring, some of the company’s accounts were more than 90 days in arrears. That’s not likely to happen now because there are tight reins on billings and collections. Payments are now entirely COD.

Allen Printing, which is located on Spence Lane east of downtown, now holds weekly “dashboard” meetings, disciplined gatherings where the company’s vital signs — from accounts receivable to cash on hand — are monitored and analyzed.

“I think we have always done a good job with customer service,” Shannon said.” But before the Chapter 11, we didn’t use this very valuable tool.

“We would not wish this on anyone, but we are incredibly grateful we bit the bullet, rolled up our sleeves and got through it with Steve and Tortola Partners,” Shannon added. “There are a million traps to run, and you must stay focused and be informed every day. There are no sacred cows. You must be willing to look at all options, even if you later disregard some of them as unrealistic. You have to scrutinize and audit everything.”

As a result of their voluntary Chapter 11, the Heffingtons were required to auction the family farm in Rutherford County, the only home the couple’s two children had ever known. It was a drastic measure, but one that reflected the Heffingtons’ deep commitment to the success and legacy of Allen Printing.

“We knew if we kept the business, we could always buy another house,” Paul said. “We wanted to try to retain our employees. Once we understood what was happening, we were at peace with it. We never had one family fight about it.”

The Heffingtons also knew that every step they took during the restructuring was eliminating debt and freeing up cash.

“They have essentially become their own bank,” said Curnutte, who now has a small minority stake in the company. “This is the new economic world order. Credit is restricted and underwriting is difficult. Cash is king, and it’s OK to hoard it.”

The company has beefed up its sales force and has bought two small printing businesses. Digital printing services have been upgraded, ensuring quick turnaround times for printing.

“Shannon and Paul were willing to be very courageous,” Curnutte said. “They made enormous sacrifices in order to save this business.”

With Curnutte on board, the Heffingtons also felt freed up to focus on the company’s core strength — sales and service.

“Sales were never our problem,” Paul said. “But we were overextended, and the bank called in our loan.”

Allen Printing may be on the forefront of a Chapter 11 trend.

Katie Stenberg, a partner at Nashville law firm Waller Lansden Dortch & Davis, said she is seeing an uptick in business-related bankruptcies. (Stenberg works in the finance and restructuring group of Waller Lansden and did not work on the Allen Printing Chapter 11 reorganization.)

“During the recession, the banks just kind of froze up,” Stenberg said. “Many took an ‘extend and pretend’ approach by granting extensions or other modifications” to financially troubled companies.

“Towards the end of 2011, we started to see more [business] bankruptcies and foreclosures,” she added. “I fully expect to see more activity this year.”

Turnaround expert Gary Murphey said some businesses wait too long before considering a Chapter 11 because of misunderstandings about what it means.

“The most common misperception is that bankruptcy means liquidation, that creditors will not get paid or that the company can cancel all contracts and/or leases without consequences,” said Murphey, who is managing director at Atlanta-based Resurgence Financial Services and was recently named trustee in the high-profile Chapter 11 bankruptcy of Franklin-based Citizens Corp. (He did not work on the Allen Printing bankruptcy.)

Murphey agrees that lenders are showing a new willingness to work with business bankruptcies.

“More times than not, it makes sense for the company to continue to operate and stay in control — even if it is an orderly liquidation,” he said.

Allen Printing has been in the family since the mid-1970s when Shannon’s father, who worked at the business for many years, purchased it from the original owner. Shannon bought the company in 2006.

Being family-owned and family-centered is a critical part of the brand, Shannon said.

“Family-run businesses have a heart that customers feel, vendors feel and employees feel,” she said. “That heart is consistent through the years. This business is our lives — it’s
everything to us.”

He has significant restructuring experience with operating companies ranging in size from $1 million in revenue/20 employees, up to $100 million in revenue/1000 employees. Steve also advises investors who have deployed capital into circumstances that have fallen into distress, as well as worked through multiple distressed acquisitions. He has re-tooled the operations of businesses in a wide range of sectors including retail, printing, smelting, manufacturing, healthcare, and financial services.

His commentary on credit markets and the economy has appeared in publications such as The Wall Street Journal, FORBES, USA Today, Business Week, Chicago Tribune, Market Watch, Money Magazine, and FastCompany.com. He has appeared on national news media broadcasts, and been featured on radio programs such as The Final Word on Bloomberg.

CRO for Movie Gallery/Hollywood Video, a home entertainment specialty retail chain that operated more than 2600 stores in North America, as well as Friedman’s, Inc., a retail jewelry business that at its peak operated more than 700 stores in 22 states.

Plan Administrator and CRO for Service Merchandise, a retail business that once generated $4 billion in annual revenues. Managed all aspects of the retail liquidation process, including planning and negotiation of section 363 sale process and resulting asset purchase agreement, provision of central services, overhead reduction, conversion to wind-down platform, claims resolution and avoidance action recovery.
CAO and General Counsel and Secretary at both Friedman’s and Service Merchandise. Led a variety of functions including real estate, construction, human resources, legal, loss prevention, I.T., purchasing, and communications. Former lawyer with Boult, Cummings, Conners & Berry.

Steve Moore is a former Boult Cummings partner who rose to prominence in the restructuring world more than a decade ago as the point man for Service Merchandise’s winding down. He has more recently also worked extensively on the restructuring of national concepts Friedman Jewelers and Movie Gallery.

Moore’s arrival at Tortola comes at the same time the principals of West End accounting firm Whisenant Stewart Watrous & Associates have come on board as principals. The firm specializes in forensic work and Tortola has repeatedly leaned on that expertise, particularly in the form of Trent Watrous, during other assignments. Tortola’s other new principals are Bob Whisenant and Geoffrey Stewart.

Tortola co-founder Steve Curnutte said the addition of those principals — as well as six support staffers — has the two-year-old company primed to be a national player in a sector dominated by firms on the coasts and in Chicago.

“There are going to be more patients on the field of battle that need triage,” Curnutte said of the renewed/ongoing economic slowdown. “It’s only a matter of time before Tortola works on a really big deal.”

Moore said he and Curnutte first met a few years ago but hadn’t caught up in depth until his Movie Gallery schedule and its attendant travel requirements began to slow down. When they did, they quickly realized their approaches to restructuring work meshed well.

“I want to try to build something meaningful and Steve is the perfect partner for that,” Moore said.

Moore will move all his restructuring work under the Tortola umbrella but retain a role at Atlanta-based CorlissMoore & Associates, which also provides merger and acquisition consulting, among other things.

Curnutte said the growth of Tortola also comes at a time that the mediocre economic environment will bring more opportunities for turnaround specialists as opposed to traditional financial players and managers.

“The economic engine of corporate renaissance and growth is no longer the investment banker or the PE fund,” he said. “It is the highly skilled restructuring professional with crisis management skills.”

The turnaround guy has set up a cottage industry during the recession and slowed recovery, as more businesses need help to stay afloat.

It’s that part of business that nobody wants to talk about. But turnarounds — or “the dark side” as local attorney Bobby Guy puts it — are a reality that fewer companies can ignore.

The business of getting companies back on track is becoming an increasingly developed, sophisticated industry in its own right on the local level.

“Today’s different, because everybody’s beat up,” said Steve Curnutte, founding principal of Tortola Turnaround, a Nashville restructuring firm. The economic pain “is agnostic to region or sector.”

Curnutte, who announced this week the expansion of Tortola into a range of turnaround functions, is among those in Nashville exemplifying how engaging distressed businesses has become a fatter marketplace. It’s a phenomenon that includes players in numerous sectors — business consultants, attorneys, accountants, investors and others — and is forcing conversations about issues most businesses once ignored.

It’s difficult to quantify a “turnaround industry” that literally runs through every sector of the economy. The closest measure is bankruptcies, though turnaround experts say they work with scores of companies before they reach that point.

In the 2011 second quarter, Tennessee saw more than 11,650 business and individual bankruptcy filings. That’s down from the 2009 second quarter high of more than 14,450 but still nearly 80 percent above pre-recession levels in 2006.

While economists debate the health of the economy, the best-case scenario of a continually feeble recovery means the turnaround business will continue to develop. It’s a dynamic that’s creating new resources for companies but also underscores the pitfalls even a relatively healthy company can face.

Companies can pay anywhere from $15,000 to a few hundred thousand dollars per month in fees; the biggest bankruptcies can generate millions of dollars in fees. But the cost depends on size, types of problems and what sorts of experts join the fray. Turnaround experts tell companies fretting over costs that without the right expertise, a liquidation or reorganization may yield far less for creditors or owners.

Curnutte’s response to the rise in turnarounds has been to bring in four new principals — Steve Moore, Geoffrey Stewart, Trent Watrous and Bob Whisenant — spanning a range of expertise. Moore, for example, is an executive and attorney who worked on the massive liquidation of Movie Gallery/Hollywood Video. Watrous and others have expertise in forensic accounting, scouring for deep-seeded financial issues like fraud.

Guy, a Nashville attorney with Frost Brown Todd   who mainly helps debtor companies restructure, shifted toward that work about five years ago. He’s since written a book, “Distress to Success,” and fashions himself as more than a bankruptcy attorney.

Too many companies, he said, view turnarounds as the “dark side,” incorrectly assuming that as long as they’re not yet in bankruptcy, they’re not in need of serious turnaround work. He views his role not only as negotiating for clients with banks but in guiding a restructure that saves jobs.

“The market is extremely robust right now,” Guy said.

Of course, as more people rush toward the turnaround industry, such as it is, the meaning and quality can dilute. Tom Lawless, a Nashville attorney who represents banks in negotiations with struggling borrowers, said he’s encountered attorneys and other financial professionals who pivoted quickly in the downturn and don’t have the chops.

“You screw it up, and all hell breaks loose,” Lawless said.

Do you need a turnaround expert?

Anybody who’s been part of a deteriorating company knows time is of the essence — and they may wish they’d realized that much sooner.

Turnaround experts of various kinds likely have existed as long as business itself, but their expertise has developed and has virtually formed a market in and of itself. Jeff Cornwall, director of the Center for Entrepreneurship at Belmont University, offers the following tips for when and how to handle turning your company around.

• Look for early signs. While he says experts can be helpful, the best scenario is to recognize the problems on your own. The issues are smaller, and the turnaround can be less costly or consequential. If this sounds obvious, Cornwall and other experts say many good business people remain optimistic and regret it. “Unfortunately, the longer you wait the more difficult the cure,” Cornwall said.

• Watch your financials. The best way to spot early warning signs is to be mindful of how liquid your company is. Has cash flow altered? Have other numbers taken major swings?

• Understand your business. Some businesses may be accustomed to swings. But others with high overhead or many fixed costs may find themselves in dire straits much earlier than some if revenue is interrupted.

• Don’t lose hope. The consequences can be serious, but it’s important that you see the matter through. Companies can restructure; business people can rebuild.

The Capstan Fund has been in the works for several months and will focus on buying claims and notes from distressed circumstances, providing debtor-in-possession financing to operating companies in Chapter 11, and making direct equity or debt investments.

Curnutte isn’t disclosing the amount of money committed from private investors who are staying behind the scenes, but said he expects Capstan’s deals will range from $250,000 to $5 million. With the fund, he aims to fill a market gap created by the exit in recent years of a number of finance players.

“Over the past 20 years, a struggling company could look for salvation in a stronger competitor with growth aspirations, or look to be recapitalized by a bank with an appetite for price-adjusted risk taking,” he said. “But the depth and length of the downturn have left many businesses short on expertise to manage crisis and short on options for fresh capital.”

For Curnutte, Capstan completes a turnaround ecosystem he has been building since selling Finworth Mortgage to InsBank more than two years ago. Soon after that deal, he helped launch Tortola Partners, which provides debt restructuring and operational management know-how to struggling businesses or investors in them. Tortola also works closely with Emerge Law, a firm launched last year that specializes in workouts. Curnutte said Capstan gives him “the capital to move decisively” once turnaround opportunities present themselves.

Curnutte said the Capstan Fund expects to make its first investment soon and is eyeing a life cycle of about four years. He intends to follow up with larger funds after that.

“A ‘distressed circumstance’ usually means ‘depressed pricing’, but it should not always be mistaken as a ‘good deal,’” Curnutte said. “Our focus will be on assets we know a lot about, on mechanisms to remain well protected, and on companies who have a lot to offer.”

The kicker: Family-owned Allen, which has been in business for almost eight decades and has annual sales of about $5 million, didn’t lose any of its 40-odd employees during the arduous process.

“It’s been like going back to school and getting an MBA in three months,” said co-owner Paul Heffington.

Allen’s 60-plus creditors late last month agreed to a reorganization plan drawn up by Emerge Law attorney Elliott Warner Jones. The company shed almost half of the $4.2 million debt on its books four months ago – which will save it almost $400,000 in debt service payments – mostly by laying out a plan to repay Pinnacle National Bank’s $1.8 million secured loan. It has cost the Heffingtons and their in-laws their homes – sold at auction – but it has kept the company alive.

Selling their homes “was an easier decision than to go looking for a job and to have 40 other people do the same,” Heffington said.

With the help of turnaround consultant Steve Curnutte of Tortola Partners, the Heffingtons and other Allen employees also squeezed $190,000 of annual operating costs out of their system.

“This was a good company to begin with,” Curnutte said. “It has a loyal customer base, a close relationship with its vendors and it could still generate cash. It just got caught in the economic crunch.”

Those involved say Allen’s reorganization can be a model for other troubled companies. Jones said the key was building consensus by convincing creditors it had is “a better alternative than liquidation.” Curnutte, the Heffingtons and Jones laid the groundwork for Allen’s restructuring months before the company’s Chapter 11 filing. They talked to Pinnacle, other creditors and many of Allen’s vendors about the company’s troubles. They also got all employees up to speed and solicited ideas on how to shave spending.

“We’ve tried to be as open and transparent as possible from the very beginning,” Heffington said. “It took a ton of time, but [the employees] have helped me as much as I’ve helped them.”

Heffington said his team’s work with vendors resulted in some of them opening up new bidding opportunities for Allen. That new revenue, combined with the company’s cost savings, means Heffington said Allen now has “a bit of a buffer.”

“In this economy, we can make it on what we’ve got,” he said.