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Ice is hot stuff, especially when you own the ice factory. Ice maker Reddy Ice does, and its proprietary technology lets grocery and convenience stores make and package their own ice automatically. With a daily ice-making capacity of about 17,000 tons, Reddy Ice is the largest US maker and distributor of packaged ice products. In addition to its Ice – more... Factory machines, it sells ice in a variety of shapes (cubes, crescents, cylinders, and crushed) and sizes (ranging from four-pound bags to 300-pound blocks) to retail, commercial, and industrial customers in some 35 US states and the District of Columbia. Following a recapitalization, Reddy Ice emerged from Chapter 11 bankruptcy protection in mid-2012.

The ice maker filed for bankruptcy in April 2012 citing weak consumer demand, reduced credit availability, and higher commodity costs. Despite selling a mind-boggling 1.7 million tons of ice and logging more than $328 million in revenue in 2011, Reddy Ice suffered losses of $69.5 million as it drowned in liabilities amounting to $516 million. During just 50 days in Chapter 11, the company cut its debt by about a third, or $145 million, closed on a $50 million revolving credit facility, and received $25 million in new equity. Post bankruptcy, the company is majority owned by affiliates of Centerbridge Partners.

Following the confirmation of its plan of reorganization, the ice maker expects to emerge from Chapter 11 in late May. Australian investment firm Macquarie Bank has agreed to provide Reddy Ice with $70 million in debtor-in-possession financing to operate as it reorganizes and another $50 million to fund its post-bankruptcy operations. Meanwhile, Reddy Ice hopes to acquire fellow ailing ice maker Arctic Glacier, which filed for bankruptcy in February, helped by hedge fund and Reddy Ice major creditor Centerbridge Partners.

Reddy's Ice's woes began a few years ago. Sales in 2010 were flat, up just 1% over the previous year, following a 5% slip in sales in 2009 vs. 2008. Under the weight of debt and lack luster revenues, the company has amassed some $120 million in losses since 2010.

To regain its financial footing, Reddy Ice is focusing on inking deals with retailers that have not traditionally sold packaged ice, such as value-priced chains, as it expands its diverse customer base. Wal-Mart and SAM'S CLUB together account for 14% of sales. The company's other major customers include Food Lion, Kroger, Dollar General, ExxonMobil, 7-Eleven, Safeway, and SUPERVALU.

The highly-fragmented, regional structure of the packaged ice and ice machine industries presents Reddy Ice with a pool of acquisition opportunities. In its effort to become the "Total Ice Solution," a vision for the company, the ice maker between 2003 and 2011 acquired 78 businesses for an aggregate purchase price of more than $162 million. In 2011 alone Reddy Ice made nine acquisitions totaling $13.1 million.

Reddy Ice operates some 60 ice-manufacturing plants, about 75 distribution centers, and approximately 3,500 Ice Factories (equipment located in customers' high-volume locations which make, package, and store ice using a self-contained automated process). The ample number of Ice Factory machines accounted for 10% of Reddy Ice's 2011 sales, while traditional ice manufacturing contributed the rest. Reddy Ice also has a dedicated Emergency Management unit that works to provide ice following disasters.

An investigation by the Civil Fraud Division of the US Department of Justice concluded in 2011 with no action taken against Reddy Ice or its employees. The inquiry (launched in 2008) centered on possible conspiracy to fix prices and allocate markets in order to control prices for packaged ice. – less

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