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Coleco Case

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Coleco Case
STRATEGIC FINANCE

COLECO CASE
TOY STORY

Coleco INC. Profile
• • • • • • • Name – Coleco Industries Time – the end of 1980s Industry – toys Market - USA Market share – the fifth-largest manufacturer in the USA Head quarter - West HartFord, Connecticut Production line – Cabbage Patch Kids
Plush Alf dolls and puppets Couch Potato Pals Play sets (The Flintstones,Sesame Street, Sylvanian Families)

•
•

Company`s issue - annual sales were behind expectations negative equity position of $84 million The challenge - to determine whether the company’s capital could be restructured in a way that would satisfy its creditors without diluting the stock any further than was necessary

Product line

Economy and Industry Analysis 1988
• the economy - raising • unemployment and interest rates – low • demographic factors favorable • interest rate is decreasing • debt is becoming cheaper

Economy

Industry

• favorable conditions toy industry • approximately 800 toy companies in the United States • diversification for reducing sales and profit volatility - only for the biggest companies

Sales of Coleco and its Major Competitors
• In millions USD

1400 1200 1000 800 600 400 Coleco Hasbro Kenner Parker Mattel Tonka

200
0

Company Analysis
Sales growth
40,00%

30,00%
20,00% 10,00% 0,00% -10,00% -20,00% -30,00% -40,00%

1983

1984

1985

1986

1987

Company Analysis
Current ratio
3,00 2,50 2,00 1,50
Very fluctuating

1,00
0,50 0,00 1981 1982 1983 1984 1985 1986 1987

Company Analysis
Debt ratio
1,4 1,2
High dependence on debt

1
0,8 0,6 0,4 0,2 0 1981 1982 1983 1984 1985 1986 1987

Company Analysis
Net profit margin
0,15 0,1 0,05 0 -0,05 -0,1 -0,15 -0,2 -0,25 1981 1982 1983 1984 1985 1986 1987
Negative profits in last years

Company Analysis
Return on equity
20 15 10 5
Non meaningful figures (Equity is negative)

0
1981 -5 -10 1982 1983 1984 1985 1986 1987

Company Analysis
Return on assets
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