Assignment: ATH Part II: Founding

You are now Casper and/or Frost and are developing an action plan for the next two years (2011 and 2012) for the ATH division of Scepter. What does this plan look like? Also, how do you get 95 people aligned to achieve this plan? Please submit a memo detailing your responses.

Read HBS ATH Technologies Inc. Case Pack, Part II: Growth Phase: 2011-2012 . Submit a memo that details your responses to the questions on page 5 of the case.

236 .nl 56 if) ATH Case Study.pdf v 2023 [0 mar ZUZJ. Done 117-012 ATH Technologies: Making the Numbers 11. Growth Phase: 2011-2012 After the acquisition by Scepter in 2011, the original ATH management team (Casper, Frost, and the other managers hired from 2007 through 2011) decided to stay with the business. They were given a great deal of autonomy to manage the newly acquired business. Corporate managers at Scepter Pharmaceutical believed that the culture of this entrepreneurial startup was fragile, and could be destroyed by forcing the use of bureaucratic planning and control techniques on this small company. In addition, any attempt to meddle in the decision making authority of the founding managers could be construed as impeding the ability of ATH to meet its earn-out goals. The overriding objective of ATH senior managersand their corporatelevel counterparts at Scepter Pharmaceuticalwas to acquire market share through new product development and aggressive marketing efforts. Casper, Frost. and the other senior managers made it clear how important it was to build ATH'S acceptanceand franchise Senior managers talked about the importance of market share in their frequent, informal management meetings, and pored over weekly shipment data to learn how they were faring in the competitive marketplace. Market share targets were not formally linked to the compensation of individual managers. Instead, annual bonuses were established subjectively, based on the perceived contribution of each individual to the success of the business. When the FDA approved the new generation of products in 2012, the first installment of the earn- out was paid. However, the study of the competitiveness of the technology had shown that a new technology developed in Europe could challenge ATH's position. Therefore, this portion of the earn out was not paid. Unfortunately, profit performance for 2011 and 2012 proved to be very disappointing (see Table C}. Although sales revenue had increased dramatically, losses had mounted precipitously. The plan had been to build market share while holdingat worsta break-even profit position In fact, 2011 and 2012 had generated $48 million in 105595. Part of this was due to the heavy investment in development costs. which were expensed directly. If senior management wanted to meet the requirements for the final $150 million earn-out payment, they needed to turn around the bottom line for 2013 Table C Financial Performance, 2007-2012 2007 2003 2009 2010 201' 1 2012 (in thousands. except headcount) Net sales 9 354 1.684 5.377 12. 641 23.349 Gross margin (275) (688) (1,143) 333 (774) 3288 Marketing and sales 38 386 1.595 2.965 5.404 12666 Research and development 1.009 1.716 2.827 4.284 8.299 13.342 Net income (loss) (1.561) (4.000) (7.057) (8.829) (18.114) (30,525) Cash and short-term investments 1.300 7.643 10.550 2.341 (545) 546 Other current assets 16? 839 1.570 2.280 9.123 11,291 Net xed assets 613 1.698 2.149 2.523 7. 576 13. 030 Total assets 2.425 10.557 14.839 7.755 16.509 25,236 Long-term debt ~ - . - 24.046 61, 758 Common stock 4.745 15.081 26.493 26.493 26.493 26,493 Retained earnings (2.570) (6.570) (13.627) (22.455) (40.570) (71,095) Headcount [year-end) 17 41 65 95 221 252 [:4 2:37 .1 5G ATH Case Study.pdf V Done TH Technologies: Making the Numbers 117-012 Questions: 1. How would you evaluate the performance of ATH Technologies during the growth period? 2. What is the strategy of the business? 3. How should performance be measured and analyzed? (a) Which additional measures would you use to implement the strategy? (b) What are the characteristics of a good measure? 4. If you were president of ATH Technologies, what would you do to focus the attention and efforts of your employees? for use only by Brent Cottrell in Accounting to 2023 to Mar 2023 Q A