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Principles of finance ah la shmoop forecasting molded plastics All

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right so there's a bit of a departure from our

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normal thing we're going to mumble isa purposely rambling but

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structured mumble is we read through the published annual numbers

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from mattel corporation makers of ken and barbie and american

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girl and value added plastics of all shapes and sizes

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We're reading through the numbers from a few perspectives potential

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equity investor potential debt lender existing competitors like hasbro potential

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foreign partner in the whole bunch of others now that

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we could wear So just to stare at this charge

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for a few moments and we're going to mumble here

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booth all right so well what do we see here

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The future goes to the left that is two thousand

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thirteen is on the far right and we can see

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that revenues are basically flat in north america flat is

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not very good in the context of flat is compounded

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by the fact that this period of time was a

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very good one in full economy north america So the

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first thing we need to figure out is how mattel

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did against the rest of the market Maybe we're in

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a recession and flat was the new up now off

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of an economic bottom in two thousand ten while the

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region recovered nicely So for mattel to be on ly

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flat on revenues there well that means the company lagged

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in progress versus the overall market So there must be

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other things going on Like what Well one potential problem

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is that a competitors building market share and eating away

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our own share Are there other dolls eating the lunch

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of american girl in the gang Maybe nothing obvious to

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see here yet Or maybe kids just aren't into dolls

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anymore and the barbie iphone well just isn't that big

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of a deal when a real life phone isn't that

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much more expensive than a standard barbie plastic setup But

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regardless revenues which should look robust are anemic at best

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All right moving on how international is ugly so there

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isn't one big competitor that's the problem second potential issue

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here is the problem global or just us based or

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just international more mumbling looking at numbers tryingto seek an

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answer here Well let's See the company went from three

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point three billion in two thousand thirteen only two point

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Six billion in two thousand fifteen and it's likely they're

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fixed Recurring cost didn't drop by much shmoop well in

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international markets companies have to maintain offices relationship with retailers

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stocking fees marketing arrangements with media et cetera The international

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revenues are particularly bad here Domestic on the other hand

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well grew nicely If you believe the numbers the tells

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cost for international stayed the same while revenue went down

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All right well if the company was a seven hundred

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million dollars in operating profit company in two thousand thirteen

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from international markets well they're likely a zero margin business

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at the end of two thousand fifteen so basic math

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would say that operating profit took a massive hit All

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right so check international is a problem We have other

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problems Well let's look at some specific product lines Mumbling

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mumbling Interesting That american girl has her own line Wow

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she's powerful she's A pip All right Well she comprises

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such a large part of mattel's revenues while she deserves

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her own line And she was an acquisition by the

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company So breaking her out is likely a good accounting

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decision And well easy todo but sadly she's not doing

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well six hundred sixty million dollars in revenues in two

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thousand thirteen down under six hundred million in two thousand

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fifteen The trend is not her friend All right ignore

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adjustments for now and just look at net sales here

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Six point five billion in two thousand thirteen down to

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five point seven billion two thousand fifteen ouch were declining

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here And just to drive the last nail into the

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very negative assessment of the company Well look at the

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bottom line here Free tax income two thousand thirteen was

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one point one billion It was way less than half

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that in two thousand fifteen Well what happened We've identified

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two big potential issues American girl product line kind of

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dying and international Definitely dying Well toa do good diligence

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is a financial manager You just start calling around If

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you were good you'd go as low as you can

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go on the food chain as you could The best

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call you could make would be to the people actually

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directly interfacing with customers The sales clerks If you were

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an investor you'd call and ask why barbie in american

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girl aren't selling and you might get a lot of

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it is kind of boring or who we're selling a

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lot of high tech toys now instead or we don't

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stock or any more the image is offensive to modern

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women Yeah stuff like that Well in this case we're

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focused on revenues here Why are we focused on revenues

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Because the marginal cost of stamping ah hunk of plastic

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and painting it is relatively whoa if the dolls cost

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five bucks or six bucks or seven bucks when it

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doesn't really matter when they retail for thirty and wholesale

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for twenty the problem here isn't just an expenses related

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one it's a revenues related one and kind of both

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meaning that expenses have been flat particularly internationally while revenues

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have declined at a spurious rate Well at this point

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we're going to stay cursory on the analysis but over

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time will cover low margin businesses in painful detail and

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how a change in one tiny cost in foot like

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fuel prices for an airline that can crush profit margin

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especially when they're highly leveraged like most airlines are the

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bottom line is that a good financial manager will go

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over everything that comprises elements to make their bottom line

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Revenues operating expenses interest expenses taxes the logic of dividends

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and payout ratios And don't worry that we didn't cover

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all these issues In this video There will be coverage

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of them and all the next set of videos In 00:05:40.04 --> [endTime] a painful detail we promise Okay

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