Report to Shareholders Essay

Business stickWhen Magee Company began in 2011, the gild had the goal of producing top of the line sensors to customers who convey the newest technologies. The firmlyly would do this by manufacturing its yield lines at or supra the expectations of customers, while still trying to maintain a competitive bell within in the market. To gain market grapple, the company planned to intemperately promote its products, while increasing the number of distrisolelyors and sales personnel to guess products more available.Current StateDespite its plans, Magee Inc. was unstable from the beginning. With the exception of year one, Magee Comapny was never able to generate net remuneration from trading operations. This stemmed from several issues in poor direction decisions. First, Magee management incorrectly believed that profits from its traditional segment could provide sufficient property to invest in plant and product improvements for the other lines. It is now clear that Magee shou ld have financed the operations through long-term debt. Magee believes that investments in automation could have increased productivity and therefore increase margins on products, as they were low relative to Magee competitors (see Appendix).Magee Inc. was too unable to gain a significant count of market share due to poor marketing activities. Initially, the firm priced some products too exalted, which caused an initial decrease in market share. The lack of marketing management was similarly a factor in the reduced demand, which left the plant running game below capacity. To counter act this, management decided to boost product above normal capacity. Prices were then dropped in an attempt to push product out onto the market, but this action proved futile as altogether two of its four products had positive margins. Because of these decisions, the firm now sits with nearly $ speed of light gazillion in inventories. To accommodate the inventory production and lack of sales, th e firm was forced to take an emergency loan totaling nearly $82 million. nonstarter AlternativesAndrews plans to shut down production this current year, and will begin liquidating assets as soon as possible. In its current state, Magee has nearly $100 million in inventories, which will be sold at or middling above cost, dependant on the length of time it takes to sell the product. The company will then be sold, either in pieces of as a whole to the Ferris company. For most of Ferris products, the firms capacity is at or near the maximum, and could be willing to purchase the entire Magee facility (See Appendix). The evaluate value of Magee capacity is nearly $56 million while the firm still maintains $43 million in other fixed assets. gibe asking price for the entire firm would be about $105, the support due to all equipment would be in place, fully operational, with trained staff. Magee besides has the option to sell capacity in pieces, which could be sold for $50 $60 million. The remainder of the plant would also be sold for approximately $40 million, or best offered price. In total, Magee would expect to earn betwixt $190 and $205 after liquidation of all assets, both current and long-term. As Magee total liabilities total $150 million, the sale of all property would shut up the debt owed to creditors.Starting OverGiven the opportunity to reenter the sedulousness, there are many changes in strategy and operation that Magee management would do. First, the firm would enter the industry as a broad differentiator, maintaining products in all segments. In ordinance to finance all of the operations, Magee would take on a substantial amount of long-term debt and issue stock. With available cash, the firm would invest in automation to reduce variable costs, expand the capabilities of Magee products, and market their capability widely in an effort to gain the greatest market share.Once the firm had conventional cash flow, Magee would make an attempt to pro duce new products in segments that it is competitive, but differentiated to acquire the market share of customers that find their needs in between currently available products. Another change necessary to conk out in the industry would be to carefully monitor and cap inventory. Considering high end products have high materials and labor expenses, holding inventory not only has a carrying cost, but the opportunity cost of not having that cash available was a major player in Magee failing.Despite the management plans, Magee is currently owes $43 million to its creditors, and maintains about $34 million dollars in inventory in excess inventories.