Micheline Rousseau, CEO and owner of Delisle Industries received the $2010$ financial statements from the company$$s auditors and compared these results with previous years. She was very happy with the company$$s rapid growth but had some serious concerns about its future. What should be done about the operating problems resulting from such rapid expansion? Was the company overly dependent on Costco to distribute its products? Is the establishment of a new production facility in Winnipeg advisable? What can be done about its poor cash management and over$-$reliance on debt financing? How can future growth be financed?

After discussing these issues with her vice$-$presidents it was agreed that a management consultant Jolly Jeffers, CMC should be retained to conduct a financial review of Delisle. Based on his report, Rousseau would implement operational improvements and decide whether to open a factory in Winnipeg and add plastic fencing to its product line.

Company Formation

Delisle is a manufacturer of plastic products. It was formed in $2005$ in Saskatoon, Saskatchewan by Micheline Rousseau, P$.$Eng. who had worked for over twenty years at Rubbermaid, a U$.$S$.-$based plastics manufacturer. At Rubbermaid, Rousseau held positions in operations and was very familiar with the specialized injection moulding equipment used in production. Later in her career, she worked as a designer and earned an excellent reputation for her innovative products. After failing to be selected for the VP$-$Research and Design position at Rubbermaid, Rousseau decided to return to her hometown of Saskatoon and start her own company.

Rousseau$$s father had been a successful Saskatoon businessman and owned a manufacturing company that produced laminated oak staircase components such as railings, steps, and risers. Her father decided to close the business in $2003$ after suffering a heart attack but kept the building and equipment and continued to hope his daughter would someday return home and take over the operation. When she eventually returned, her father was overjoyed, but she explained her expertise was in plastics and that industry held more potential than wood products. With her savings, severance pay from Rubbermaid, and a gift of the facility by her father, Rousseau began operations.

Rousseau$$s first hire was Frank Dempsey as VP$-$Marketing and Sales. Together, the two thoroughly researched what products should be produced and decided on storage sheds which most households in North America had in their backyards. These sheds contain various items such as gardening supplies, tools, tires, and bicycles. Historically, they were built on cement blocks and made of wood. They were expensive to buy or have built because construction was so labour$-$intensive and the materials so expensive. There was also considerable maintenance as the buildings had to be painted regularly and were subject to rot in more humid climates. If the sheds were made of plastic panels they could be produced more cost$-$effectively and would last longer with little maintenance. The sheds could also be easily produced in different colours to match existing home designs.

Rousseau and Dempsey agreed to distribute sheds using two channels. A website was developed showcasing the company$$s products. Customers can order the sheds online and they are shipped in $$knock$-$down$$ form to reduce shipping costs using a third$-$party carrier. The sheds are easy to assemble, so customers only have to ensure a proper cement pad is in place $$ basic paving stones are all that is needed. Costco Wholesale also agreed to carry the sheds. Several standard designs and colours are available in$-$store for customers wanting to take immediate possession, but Costco also accepts orders for all the variations and delivers them to their stores for pick$-$up$.$ Costco offers the sheds through its website as well.

Company Expansion

Delisle$$s products proved to be very popular and sales expanded quickly. Merchandisers at Costco immediately asked the company to develop additions to their product line. By $2008,$ Delisle began producing rain barrels, patio furniture, and plant holders in varying designs and colours. Rain barrels were a success as competitor$$s products were made from metal and prone to rust and were not visually appealing. Patio furniture was also very popular as Delisle reproduced many of the traditional wood designs that other plastic furniture makers did not. They could be produced at a fraction of the cost of wooden furniture and were much more durable and did not need painting or refinishing. The plant holders were less of a success as there were already a large number of competing products on the market with many coming from low$-$wage countries.

By late $2010,$ Delisle$$s production facility in Saskatoon was reaching its limit$.$ The building had been expanded several times, but there was simply no more room on the lot and the company was not able to b