NORTH SALT LAKE — Three years ago, North Salt Lake-based Companion Systems Design & Manufacturing was $24 million in debt, with no credit, no cash reserves and no sales team.
But the company did have a few things going for it: a committed core of 120 employees, a marketable product, a new chief executive and a plan.
Founded by brothers Ralph and Dennis Merrill, Companion Systems makes enclosures, toppers and other accessories for automated teller machines. The business started with one prototype, built in Ralph Merrill's garage, and by the late 1990s served clients nationwide. The Merrills sold the business in 1996 to a venture capital (VC) firm, which had a five-year plan for the business.
"For a number of reasons, their strategic plans didn't work," said Companion CEO Al Tiley. "They ended up burying the business in $24 million in debt, where before we were debt-free."
In order to save the business, Tiley said the VC firm asked him to step in and buy the company. He did, buying all the outstanding stock of the business and all the debt.
That was late 2002. It seemed impossible, turning around a company that was up to its eyes in red ink, with no cash coming in and an entire sales staff that resigned. But that's not what Tiley talks most about. What he talks about are the employees, the product and the plan.
"We had 120 employees, who averaged 10.5 years seniority," he said. "Every one of them knew when I bought the business how deep in debt we were. We couldn't get any smaller, people-wise. So every single person at Companion Systems took a significant wage reduction in order to keep us afloat. I was off payroll. The senior staff took a 45 percent cut. Management took a 25 percent pay cut, and the people on the line took 15 percent."
And through the whole turnaround process, Tiley said proudly, "We didn't lose a single person."
Companion worked with the bank to forgive a portion of its debt. Suppliers stepped in and extended credit to make sure products kept coming off the line. And with jaw-clenched determination, the company began its recovery
"Progressively, we built our way back out," Tiley said. "Our sales for the last two years are up about 38 percent between both years. The business is profitable again."
Seven months into fiscal 2005, the company has surpassed results for all of fiscal 2004, said Companion spokesman Trent Howell.
Last year, the Davis County Chamber of Commerce named Companion Systems its business of the year. The company won the same recognition from the Utah State Chamber of Commerce later in the year.
"More than anything else, Companion just encompasses the entrepreneurial spirit," said Chris Dallin, Davis Chamber president. "It's what America is all about — there comes a time when you jump over the edge, or you don't, and it takes so much intestinal fortitude to make that decision to jump. They did it, and they did it incredibly well."
Tiley attributes the company's success to its people, product and an eye fixed on the future.
"Our goals are very simplistic," he said. "We want to have a work environment that fosters creativity and innovation, which is also fun. I know it sounds corny, but it's our number one priority. We want growth at a comfortable pace, a pace we can control. I want the company to be profitable, and to share that profit with each of our employees."
The venture capital firm — which Tiley did not name — had a five-year exit plan. Tiley has other ideas.
"Theirs was five years, mine is death," he laughs. "I'm 47 years old, and I plan to be here for many, many, many years."
E-mail: jnii@desnews.com