Hanson Ski Products
I
n early July 1986, Alden (Denny) Hanson, president and chief executive officer of Hanson Ski Products, was preparing for a meeting with his executive commit¬tee on the company's current and longer-term financing needs. For one thing, Mr. Hanson wanted to review the plans for fiscal year (FY) 1987.1 Although the com-pany's bankers had provided a $4-2 million line of credit to meet the year's seasonal cash needs, Denny wanted to recheck his figures to be sure that this credit would be sufficient, particularly since Hanson Ski Products was scheduled to repay stock¬holder loans of $841,000 in November.
COMPANY BACKGROUND
Hanson Ski Products was a leading manufacturer of high-quality ski boots located in Boulder, …show more content…

Discounts ranging from 4% to 12% were offered to customers, and accounts were typically payable on the tenth day of the second or third month following shipment, depending upon the date of their requested shipment. These terms were similar to and slightly tighter than the terms offered by Hanson's competitors.

The reorder period accounted for the remaining 10% to 20% of Hanson's sales and started in July, when dealers reordered to replenish their supplies. A 2% dis¬count was available to these customers for payment by the tenth of the month fol¬lowing shipment.

Sparse snow years affected the order phase in two fiscal years. The first effect was felt almost immediately in the year there was no snow and manifested itself as a re¬duction in the reorders received. The second and more pronounced effect was felt during the stocking order period in the following spring. At that time, dealers' in¬ventories were higher than their normal levels, and dealers were wary of placing large initial stocking orders for fear of experiencing two consecutive poor snow years and the consequent falloff in demand.

Shipments began in July, peaked in August, and remained at a high level until December, when they trailed off. The largest part of Hanson's collections of accounts receivable began in December following the shipment phase. In a normal business year, the collection period was about 75 days. However, a poor snow year