Harrington
Harrington Corporation
Professor Kevin Rock
1
Background
• The Harrington Corporation is the leading producer of commercial desk calendars in the US at the time of the case
– Founded by Joshua Harrington in 1920
– Headquartered in Boston
– Currently owned by Thaddeus Baring, a descendant of the founder • Thaddeus Baring is contemplating retirement
– The stress and strain of the calendar business is taking a toll on his health
– “Every year another calendar: It’s relentless!”
2
Background
• The prospect of Baring’s retirement is a source of concern to the CFO, Paul Brooks
– Baring intends to divest the business and relinquish control
– Baring is already soliciting offers in the $10M range and finding some interest among corporate buyers
• Notwithstanding Baring’s assurances that the current management team would be protected in the event of a change of control, Brooks is skeptical the new owner would leave everything as is
– Two CFO’s?
• Twice the trouble and half the effectiveness of one CFO
3
Background
• Brooks is not optimistic of duplicating his current situation at another employer
– Current responsibilities include
• Shareholder reporting: one individual
• Capital budgeting: major capital expenditure program just completed – Harrington facilities the most modern in the industry, excellently maintained • Financial forecasting and planning: level production; 98% re-order rate for product
• Working capital management: pay cash for all orders when due
• Debt issuance: two unutilized $1M lines of credit
• Equity issuance and dividend policy: as Owner decides
4
Background
• Brooks is not optimistic …continued
– Brooks currently enjoys a compensation package of $45,000 per year plus 2.5% of pre-tax profits
• For a total of $80,000 in the most recent year, 1970
• Equivalent to $463,724 in 2011 dollars
– The prospect of an extended search and possible relocation does not appeal, particularly
Professor Kevin Rock
1
Background
• The Harrington Corporation is the leading producer of commercial desk calendars in the US at the time of the case
– Founded by Joshua Harrington in 1920
– Headquartered in Boston
– Currently owned by Thaddeus Baring, a descendant of the founder • Thaddeus Baring is contemplating retirement
– The stress and strain of the calendar business is taking a toll on his health
– “Every year another calendar: It’s relentless!”
2
Background
• The prospect of Baring’s retirement is a source of concern to the CFO, Paul Brooks
– Baring intends to divest the business and relinquish control
– Baring is already soliciting offers in the $10M range and finding some interest among corporate buyers
• Notwithstanding Baring’s assurances that the current management team would be protected in the event of a change of control, Brooks is skeptical the new owner would leave everything as is
– Two CFO’s?
• Twice the trouble and half the effectiveness of one CFO
3
Background
• Brooks is not optimistic of duplicating his current situation at another employer
– Current responsibilities include
• Shareholder reporting: one individual
• Capital budgeting: major capital expenditure program just completed – Harrington facilities the most modern in the industry, excellently maintained • Financial forecasting and planning: level production; 98% re-order rate for product
• Working capital management: pay cash for all orders when due
• Debt issuance: two unutilized $1M lines of credit
• Equity issuance and dividend policy: as Owner decides
4
Background
• Brooks is not optimistic …continued
– Brooks currently enjoys a compensation package of $45,000 per year plus 2.5% of pre-tax profits
• For a total of $80,000 in the most recent year, 1970
• Equivalent to $463,724 in 2011 dollars
– The prospect of an extended search and possible relocation does not appeal, particularly