Tonka Corporation
Tonka Corporation, the fifth-largest toy company in the United States, had two of the most
successful years in its history in 1985 and 1986. The company=s sales of $293 million and
profitability of $22 million were unprecedented; Tonka had also issued more than one million shares
of common stock in December 1986 and had retired its long-term debt in January 1987, both of
which contributed to its low leverage and high liquidity.
Becoming and remaining financially sound was a difficult task in the toy industry because of
the typically short life spans and “hit-or-miss” nature of most products. Now, in February 1987,
Tonka=s management was undergoing a capital-structure policy review in an effort to determine
whether the company could use its financial resources more efficiently and yet remain conservative.
The Toy Industry
Over the past several years, a trend toward consolidation was evident within the toy industry.
In 1983 the top five toy companies in the United States were responsible for 32.7 percent of total
sales; by 1986 that figure had risen to an estimated 44.2 percent. In 1984, Hasbro, Inc., acquired
Milton Bradley, best known for the board game Monopoly, and in 1985, it acquired certain assets of
another toy company, Child Guidance. In 1986 alone, Coleco Industries had acquired two other
companies (including Selchow & Righter, the producer of Scrabble and the blockbuster board game
of 1984, Trivial Pursuit), the product line of another company, and the North American subsidiary of
Tomy Kogyo, a toy company that specialized in high-technology applications. The results of these
consolidations are shown in Exhibit 1.
Of the approximately 800 toy companies in the United States, only the largest were able to
minimize sales and profit volatility through diversification. Even they were not always successful,
however, as shown in Exhibits 2 and 3. Each company=s fortunes rose and fell with the success or
failure of its latest products, and even the biggest “hits” tended to have life cycles of only one or two
years. In 1984 Coleco=s sales, for example, rose from $597 million to $775 million, then declined to
This case was prepared by Casey S. Opitz, under the supervision of Professor Robert F. Bruner.. It was written as a
basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation.
Copyright  1988 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To
order copies, send an e-mail to [email protected]. No part of this publication may be reproduced, stored in a
retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical,
photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Rev. 11/97.
-2$501 million in 1986. Kenner Parker=s sales rose from $539 million in 1983 to $648 million in
1984, before falling back to $503 million in 1986. Mattel=s sales rose rapidly for two years then
stabilized for two years at about $1.06 billion. Tonka=s sales, however, grew rapidly for four straight
years.
Exhibit 4 provides a breakdown of total industry sales by product type. With the exception
of games and puzzles, plush toys, and infant and preschool toys, estimated 1986 sales by category
were flat or down by as much as 25 percent, as was the case with action figures, dolls, and electronic
games. As a result, overall industry sales were down $27 million in 1986. Within each segment, the
basic and technology-enhanced toys did well, and industry analysts expected retailers to limit
inventory risk in 1987 by concentrating on those types.
Regarding the strength of the toy industry as it moved into 1987, a December 1986 report
stated,
Aggregate industry shipments remain flat. . . . The industry has essentially been
unable to offset this softening with any meaningful new or exciting category of
products.1
The toy industry was also susceptible to changes in demographics, in seasons, and in the
economy. By early 1987, the factors that contributed to toy-company sales were sending mixed
messages. According to an August 1986 industry report,
Demographic trends are increasing demand for toy products. A rising number of
births is creating more toy recipients for the next ten years. Also, an increasing
percentage of births (over 40 percent) is now firstborn children, and more dollars
(estimates as high as 45 percent more) are generally spent on firstborn. Finally, an
expanding population of grandparents due to divorce and the increasing number of
two-income families are resulting in more buyers with more money to spend on
toys.2
As shown in Exhibit 5, the U.S. economy had just experienced its fourth straight year of
economic growth. Growth of real gross national product was down, but so were unemployment and
interest rates, and real per capita disposable income rose 2 percent in 1986.
The Company
Tonka Corporation was best known for its traditional line of sturdy metal toy trucks,
bulldozers, backhoes, and construction vehicles, which were responsible for about $70 million of
corporate sales in recent years. Over the past several years, however, the company had diversified
1
2
Steven Eisenberg, Toy Industry Review (Bear, Stearns & Co., December 1986), 1.
Keith J. DeVore and Stephen M. Carnes, Research Update (Piper, Jaffray & Hopwood, August 1986), 2.
-3into other products, including dolls and other toys that would be more appealing to girls. One of
Tonka=s greatest successes over the past two years had been GoBots—small vehicles that could be
changed into action figures; they competed directly with Hasbro=s Transformers, which generally
outsold them. GoBots contributed $132 million to sales in 1985, but in 1986—even though 41 new
characters were introduced, including large Super GoBots, and even though 33 episodes were added
to the Saturday morning cartoon series Challenge of the Gobots—only $25 million worth were sold,
a signal of the end of the product=s life cycle. The company closed out the GoBots product line later
in the year.
Even more successful for Tonka had been its line of Pound Puppies, which contributed $34
million to corporate sales in 1985 and $156 million (53 percent of sales) in 1986. Pound Puppies
were plush toys with broad age appeal across genders. In addition, Tonka introduced Puppy
Newborns, Super Pound Puppies, and Pound Purries in 1986, as well as accessories such as a
doghouse, dog dish, and clothing.
As a result of its recent successes, built on its relatively nonvolatile sales of toy trucks,
Tonka=s revenues rose from $81 million in 1982 to $293 million in 1986. (Exhibit 6 gives the last
three years= income statements.) Between 1982 and 1986, earnings per share rose from !$0.12 to
$3.04, despite the stock offering of 1.1 million shares in December 1986. Between 1984 and 1986,
return on assets rose from 6.9 to 14.1 percent, and return on average equity increased from 16.7 to
28.8 percent. See Exhibit 6 for information on Tonka=s consolidated income statements. Exhibit 7
provides information on Tonka=s stock price during this growth period.
Tonka=s consolidated balance sheets for 1985 and 1986 (Exhibit 8) indicated a rising current
ratio (from 1.66 to 2.52). This liquidity stemmed not only from the company=s strong sales, but also
from the December 1986 stock offering, which netted $22 million, or $20.27 per share. Exhibit 9
details the company=s debt structure, which totaled $8.1 million and $8.2 million for the past two
years.
Company Prospects
Stephen Shank, Tonka=s president and chief executive officer, stated the greatest challenge
facing the company:
First, Tonka=s performance is still too dependent on the success of a single line of
products—be it GoBots in 1985 or Pound Puppies in 1986. The challenge is to
expand our base of stable toys.3
Tonka reviewed between 3,000 and 4,000 new toy ideas each year. For 1987, the company=s
hopes were pinned on Pound Puppies, its traditional line of trucks, and the nine other toy lines
described in the Appendix. (See Exhibit 10 for current and projected Tonka sales by product line.)
3
Tonka Corporation, 1986 Annual Report, 4.
-4The company=s objective was to increase the number of product lines to the point where no single
toy would account for more than 25 percent of sales. One industry analyst stated, however,
After reviewing the company=s 1987 line, we can find nothing particularly distinctive
or exciting of a breakthrough nature that would dramatically enhance the company=s
industry presence or market share.4
As another challenge, Mr. Shank also said, “. . . we have the need and the opportunity to
build our sales base internationally, where Tonka=s market share is much smaller than in the U.S.”5
The estimated $5-billion developed-country toy market was witnessing increased penetration
by U.S. companies, except in Japan. In most markets, non-U.S. companies tended to be smaller and,
therefore, had fewer strong brands and weaker marketing programs than U.S. companies. Exhibit
11 provides information on Tonka=s domestic and international operations. The decline in
international revenues and the resulting $100,000 operating loss (which led to a $1-million net loss)
were primarily caused by a sharp decline in GoBot sales in Canada. Total sales in the United
Kingdom and Australia improved in 1986. Management stated Tonka=s objective for its
international business in 1987 was
. . . to achieve significant sales growth and a return to profitability. For the longer
term, our goal is to build international sales to 30 percent of consolidated revenues
compared with 11 percent in 1986. Our strategy is to continue to strengthen Tonka=s
position in its existing international markets, primarily Canada, the United Kingdom,
and Australia, and to enter other major markets.6
In 1986, Tonka began to introduce other products in addition to its traditional line of trucks
internationally, and it planned to make most of its toys available in its larger international markets in
1987. The company had also just agreed to become the exclusive distributor in Australia and New
Zealand for Bandai Company, Ltd., Japan=s leading toy company.
Conclusion
Tonka=s management wanted to determine what the possible financial results of different
degrees of leverage might be. Exhibit 12 provides pro forma financial summaries for Tonka in 1986
under alternative capital structures. The exhibit assumes debt-to-total capital ratios of 20 percent, 40
percent, and 60 percent, which reflects the range of leverage for the major toy companies in 1986, as
shown in Exhibit 2. It also assumes that the recapitalizations would have been achieved through
stock repurchases. Revenues, cost of debt, and payout ratios are assumed to be the same as Tonka=s
actual 1986 results.
4
Eisenberg, 8.
1986 Annual Report, 4.
6
Ibid., 8.
5
-5As part of its review, Tonka=s management also studied the interest-rate data provided in
Exhibit 13. Management was trying to determine whether the company could use its financial
resources more efficiently than at present; but in light of the cyclical and seasonal nature of the
business and the company=s dependence on strong toy introductions, it wanted Tonka to remain
conservative.
-6Exhibit 1
TONKA CORPORATION
Percentage of Industry Sales by Company
(dollars in millions)
Coleco Industries
Hasbro, Inc.
Kenner Parker Toys1
Mattel, Inc.2
Tonka Corporation
Subtotal for 5 largest
toy companies
1982
1983
1984
1985
Est.
1986
7.8%
2.1
N.A.
21.1
1.2
9.4%
3.5
8.5
9.9
1.4
10.2%
9.4
8.5
11.6
1.8
9.2%
14.7
7.6
12.5
2.9
6.0%
16.1
6.0
12.6
3.5
32.2%
32.7%
41.6%
46.9%
44.2%
____________________________
1
2
Kenner Parker was a wholly owned subsidiary of General Mills until November 1985.
In 1982, Mattel sales included revenues from Ringling Brothers, Barnum & Bailey circus.
Sources: Steven Eisenberg, Toy Industry Review (Bear, Stearns & Co., December 1986), 1; Value Line Investment
Survey.
-7Exhibit 2
TONKA CORPORATION
Comparative Financial Data, 1986
(dollars in millions, except per-share data and stock prices)
Coleco
Sales
Net income
Hasbro
Kenner
Parker1
$500.7
(111.3)
$1,344.7
99.2
$502.8
16.0
Current assets
Current liabilities
Long-term debt
Net worth
393.5
287.7
307.9
(7.7)
601.5
272.4
125.0
580.3
329.1
109.0
99.6
199.7
Return on sales
Return on equity
NMF
NMF
7.4%
17.1
Earnings per share
Dividends per share
($6.52)
0.00
$1.71
0.09
Average P/E
Beta
NMF
1.30
14.0
1.15
Stock price range:
High
Low
Book value
$20.5
8.3
(0.5)
$30.9
16.6
10.4
3.2%
8.0
Mattel
$1,058.7
(1.0)
587.5
252.5
297.5
152.4
Tonka
$293.4
22.3
134.6
53.5
8.2
96.3
NMF
NMF
7.6%
23.2
$1.22
0.00
($0.20)
0.00
$3.04
0.07
16.8
N.A.2
NMF
1.20
8.1
1.10
$24.0
15.1
17.1
$15.5
7.8
2.5
$32.3
15.9
12.6
_____________________________
NMF: Not a meaningful figure.
1
Current assets and current liabilities as of 3/29/87.
Insufficient data were available to calculate a beta, because Kenner Parker had been a wholly owned subsidiary of General
Mills until November 1985.
2
Source: Value Line Investment Survey, 1986.
-8Exhibit 3
TONKA CORPORATION
Toy IndustryCCompany Sales
(dollars in millions)
1982
Coleco
Hasbro
Kenner Parker
Mattel
Tonka
$510.4
137.9
N.A.
1,341.9
81.1
Source: Value Line Investment Survey.
1983
1984
$596.5
225.4
539.3
633.4
87.8
$774.9
719.0
648.1
880.9
139.0
1985
$776.0
1,233.4
638.3
1,050.9
244.4
1986
$500.7
1,344.7
502.8
1,058.7
293.4
-9Exhibit 4
TONKA CORPORATION
Toy IndustryCSales by Category
(dollars in millions)
Action figures/dolls
Electronic games
Games/puzzles
Cars, boats, planes, trains
Infant/pre-school
Plush animals
Sports/outdoor
Arts/crafts/models
Riding toys
Total
1982
1983
1984
1985
Est.
1986
$882
2,605
617
752
459
281
348
353
232
$1,036
2,397
514
707
508
300
328
326
255
$2,316
1,094
1,043
789
715
544
419
391
285
$3,000
800
1,100
800
900
800
400
350
250
$2,300
600
1,300
850
1,000
1,300
423
300
300
$6,529
$6,371
$7,596
$8,400
$8,373
Source: Steven Eisenberg, Toy Industry Review (Bear, Stearns & Co., December 1986), 1.
-10Exhibit 5
TONKA CORPORATION
Summary U.S. Economic Data
1980–86
1980
1981
1982
1983
1984
1985
1986
Real
GNP
Growth
!0.2%
1.9
!2.5
3.6
6.8
3.0
2.9
1986CQ1
Q2
Q3
Q4
5.4
0.6
1.4
1.5
Per Capita
Annualized
Disposable
Personal
Income
Unemployment
(1982 $)
Rate1
$9,722
7.1%
9,769
7.6
9,725
9.7
9,930
9.6
10,419
7.5
10,622
7.2
10,947
7.0
10,842
11,024
10,968
10,956
________________________________
1
Quarterly figures are end of period.
Source: Economic Report of the President.
7.1
7.1
7.0
6.7
Change in
Consumer
Price
Index
13.5%
10.4
6.1
3.2
4.3
3.6
1.9
Average
Prime
Lending
Rate1
15.27%
18.87
14.86
10.79
12.04
9.93
8.33
(0.4)
0.3
0.5
0.6
9.00
8.50
7.50
7.50
Net
Merchandise
Exports
($ in MM)
($25,480)
(27,978)
(36,444)
(67,080)
(112,522)
(122,148)
(144,339)
(34,978)
(33,651)
(37,115)
(38,595)
-11Exhibit 6
TONKA CORPORATION
Consolidated Income Statements
(dollars in millions, except per-share data)
Fiscal year
1985
1986
$139.0
93.9
$244.4
131.9
$293.4
159.3
45.1
112.5
134.1
13.8
19.4
!1.9
5.5
40.2
29.9
2.6
3.6
45.7
43.1
1.2
3.8
8.3
36.2
40.3
Income taxes
3.3
16.7
18.0
Net earnings
$5.0
$19.5
$22.3
1984
Net revenues
Cost of goods sold
Gross profit
Advertising expense
Selling, general, & administrative
Other expenses (income)
Interest expense, net
Earnings before income taxes
Net earnings per average share
Shares outstanding (millions)
____________________________
Source: Annual Reports.
$0.78
6.46
$2.99
6.56
$3.04
7.67
-12Exhibit 7
TONKA CORPORATION
Common Stock Prices1
1985–86
1985 Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
1986 Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.2
1987 Jan. 2
9
16
23
30
Feb. 6
__________________________________________________________
1
2
Adjusted for 2-for-1 stock split July 15, 1985.
1.1-million-share stock offering.
Source: ISL Daily Stock Price Index.
Tonka
$21.250
29.750
15.750
18.750
20.375
21.750
29.750
26.875
22.750
23.500
28.625
27.500
29.125
27.625
33.750
22.125
25.250
28.000
28.325
29.625
24.875
26.625
26.625
19.875
20.500
21.325
21.625
22.625
23.000
24.500
S&P 500
179.63
181.18
180.66
179.83
189.55
191.85
190.92
188.63
182.08
189.82
202.54
211.28
208.19
219.37
232.33
237.97
238.46
245.30
240.18
245.00
238.27
237.36
245.09
248.61
246.45
258.73
266.28
270.10
274.08
280.04
-13Exhibit 8
TONKA CORPORATION
Consolidated Balance Sheets
(dollars in millions)
December 28,
1985
Cash & short-term investments
Accounts receivable, net
Inventories
Prepaid items
Other current assets
Total current assets
Property, plant, & equipment
Less: accumulated depreciation
Net property, plant, & equipment
Other assets
Total assets
Accounts payable
Accrued liabilities
Current portion long-term debt
Other current liabilities
Total current liabilities
Long-term debt
Other liabilities
Total liabilities
Common equity
Additional paid-in capital
Retained earnings
Cumulative translation adjustments
Total stockholders’ equity
Total liabilities & equity
_____________________________
Source: 1987 Annual Report.
January 3,
1987
$22.9
44.1
25.7
6.0
4.5
$44.8
58.4
20.8
5.8
4.8
103.2
134.6
53.0
(33.1)
56.5
(34.1)
19.9
22.4
0.2
1.6
$123.3
$158.6
$21.4
34.7
0.1
6.0
$17.6
23.5
7.9
4.5
62.2
53.5
8.1
1.7
8.2
0.6
72.0
62.3
4.3
3.0
46.4
(2.4)
5.1
25.3
68.2
!2.3
51.3
$123.3
96.3
$158.6
-14Exhibit 9
TONKA CORPORATION
Debt Structure
(dollars in millions)
December 28,
1985
Bank term loanCinterest due on
a current basis 12.1%, due
January 5, 1987
Revolving credit agreement
Other notes
January 3,
1987
$7.8
-.0.2
$7.8
8.0
0.1
8.0
15.9
Capital lease obligations
0.2
0.2
Total debt
Less amounts due within 1 year
included in current portion of
long-term debt
8.2
16.1
!0.1
!7.9
$8.1
$8.2
Total notes
Total long-term debt
In January 1986, Tonka established a $20 million revolving-credit and term-loan facility. The
company had the option of converting borrowings under the facility into term borrowings of up to 5
years at a time prior to December 31, 1987. The $8 million outstanding carried an average interest
rate of 7.5 percent.
In 1986, Tonka had seasonal credit lines that allowed the company to borrow from $32.6 million to
$80.3 million. At this time, the company had $46.3 million of credit lines available.
Interest expense on all debt was $4.3 million in 1986 and $4.3 million in 1985.
__________________________
Source: 1987 Annual Report.
-15Exhibit 10
TONKA CORPORATION
Company Sales by Product
(dollars in millions)
Trucks
GoBots
Pound Pets
Rock Lords
Steel Monsters
Legions of Power
Keypers
Bathing Beauties
and Hollywoods
Other1
Total
1984
1985
1986E
1987E
$73.7
52.8
0.0
$68.4
132.0
34.2
$73.0
25.0
130.0
30.0
10.0
10.0
12.0
$75.0
10.0
100.0
15.0
15.0
15.0
20.0
13.0
9.8
10.0
15.0
30.0
90.0
$139.5
$244.4
$315.02
$370.0
_____________________________________________________
1
2
Includes licensing fees and incremental international sales in truck line.
Actual sales in 1986 were $293.4 million.
Source: Keith J. DeVore and Stephen M. Carnes, Research Update (Piper, Jaffray & Hopwood, August 1986).
-16Exhibit 11
TONKA CORPORATION
Summary of World Operations
(in millions of dollars)
1984
Net revenues:
United States
International
Transfers
Fiscal Year_______________
1985
1986
$117.2
25.8
!4.0
$216.2
33.4
!5.2
$265.5
32
!4.1
139.0
244.4
293.4
10.6
1.3
39.4
3
45.4
!0.1
11.9
1.9
!5.5
42.4
!2.6
!3.6
45.3
!1.3
!3.7
$8.3
$36.2
$40.3
Assets:
United States
International
$57.2
14.9
$106.2
17.1
$141.7
16.9
Total assets
$72.1
$123.3
$158.6
Liabilities
United States
International
$34.4
5.8
$64.0
8
$54.8
7.6
$40.2
$72.0
$62.4
Total net revenues
Operating profits:
United States
International
Total operating profits
Other
Interest, net
Earnings before taxes
Total liabilities
____________________________
Source: Annual Reports.
-17Exhibit 12
TONKA CORPORATION
Pro Forma Capitalization Changes, 1986
(dollars in millions except per-share data)
Earnings before income taxes
Interest expense--net (1)
Earnings before taxes
Income taxes (45%)
Net income
Dividends (millions)(2)
Shares outstanding (millions)
Earnings per share (3)
Dividends per share (2,3)
Book value:
Net working capital
Long-term assets
Total assets (4)
Actual
20%
Debt/Total Capital
40%
$44.1
3.8
40.3
18.0
$22.3
$44.1
4.4
39.7
17.9
$21.9
$44.1
6.5
37.6
16.9
$20.7
$0.50
7.67
$2.91
$0.07
$0.49
7.38
$2.96
$0.07
$0.46
6.37
$3.25
$0.07
60%
$44.1
8.7
35.4
16.0
$19.5
$0.44
5.47
$3.56
$0.07
$89.0
24.0
$113.0
$89.0
24.0
$113.0
$89.0
24.0
$113.0
$89.0
24.0
$113.0
16.7
96.3
$113.0
22.7
90.3
$113.0
45.2
67.8
$113.0
67.8
45.2
$113.0
Market value:
Net working capital
Long-term assets
PV of debt tax shield (45%)
Total assets
$89.0
75.7
7.5
$172.2
$89.0
75.7
10.2
$174.9
$89.0
75.7
20.4
$185.0
$89.0
75.7
30.5
$195.2
Debt (6)
Equity
Market value of capital
16.7
155.5
$172.2
22.7
152.2
$174.9
45.2
139.8
$185.0
67.8
127.4
$195.2
Debt (5)
Equity
Total capital
Price per share (7)
Shares repurchased (millions)
Assumes:
$20.27
0.00
$20.62
0.29
$21.94
1.30
$23.27
2.20
1) Interest expense of 9.5% on new debt + $3.8 million net interest on old debt (January 1986 prime lending
rate).
2) Dividends of 2.24% of earnings (actual 1986 rate).
3) No dividends paid or earnings per share calculated on treasury stock.
4) Total assets remain constant.
5) The debt balance as of January 3, 1987, includes the $16.1 million of total debt indicated in Exhibit 9, plus
$.6 million of “other liabilities” indicated in Exhibit 8. The analyst assumed the other liabilities were
fixed-interest obligations.
6) Assumes market values of debt equal book values.
7) Stock repurchase prices based on maintaining actual end-of-year 1986 company market value of net assets.
__________________________
Source: Casewriter estimates.
-18Exhibit 13
TONKA CORPORATION
Interest Rates and Yields
Bills
3-Mo 1-Yr
1982
1983
1984
1985
1986 Jan.
Feb.
Mar.
April
May
June
July
August
Sept.
Oct.
Nov.
Dec.
1987 Jan.
10.61 11.07
8.61 8.80
9.52 9.92
7.48 7.81
7.04 7.31
7.06 7.11
6.56 6.59
6.06 6.06
6.15 6.25
6.21 6.32
5.83 5.90
5.53 5.60
5.21 5.45
5.18 5.41
5.35 5.48
5.53 5.55
5.43 5.46
____________________________
Source: Federal Reserve Bulletin.
Treasuries_________________
Notes & Bonds
3-Yr
10-Yr
20-Yr
12.92
10.45
11.89
9.64
8.41
8.10
7.30
6.86
7.27
7.41
6.86
6.49
6.62
6.56
6.46
6.43
6.41
13.00
11.10
12.44
10.62
9.19
8.70
7.78
7.30
7.71
7.80
7.30
7.17
7.45
7.43
7.25
7.11
7.08
12.92
11.34
12.48
10.97
9.59
9.08
8.09
7.50
7.81
7.69
7.29
7.28
7.56
7.61
7.42
7.28
7.25
Moody’s
Aaa
Baa
13.79
12.04
12.71
11.37
10.05
9.67
9.00
8.79
9.08
9.13
8.88
8.72
8.89
8.86
8.68
8.49
8.36
16.11
13.55
14.19
12.72
11.44
11.11
10.50
10.19
10.29
10.34
10.16
10.18
10.20
10.24
10.07
9.97
9.72
Prime
Lending
14.86
10.79
12.04
9.93
9.50
9.50
9.00
8.50
8.50
8.50
8.00
7.50
7.50
7.50
7.50
7.50
7.50
-19Appendix
TONKA CORPORATION
Sales Prospects for 1987
Pound Puppies and Pound Purries, the company=s line of plush toys, were to be supported by
continued airing of an ABC-TV show and a feature-length movie, Dog Days of Summer, later
in 1987. This product line was the company=s strongest in 1986.
Keypers were plastic and plush characters for girls aged 4 to 10, based on a collection of greeting
cards. Plastic Keypers had a hidden storage compartment and a large plastic key. Plush
Keypers were more like handbags. They were introduced in the second quarter of 1986 and
had good initial sales ($10 million, estimated).
Bathing Beauties and Hollywoods were for girls aged 3 and up. They both had hair that changed
color either in warm water or by touch. Bathing Beauties, introduced in the third quarter of
1986, were 14-inch baby dolls, and newer Hollywoods were 5 inches long and had a modern,
trendy appearance.
Love Me Tender was designed to be a girl=s first doll. It was soft and frilly, to appeal to girls aged 18
months and older.
Aurora was a line of fashion dolls with shiny metallic or crystal-like bodies, long brightly colored
hair, and gemlike eyes.
Maple Town was composed of a broad line of poseable vinyl miniature animal characters and play
sets for children aged 4 to 7. Its introduction in Japan had been successful, and its sales in the
United States were to be supported by a 52-part syndicated Maple Town TV show that would
begin airing later in 1987.
SuperNaturals were the first action figures that used holographic technology (mirrors) to create
three-dimensional images on the surface of photographic film. They were designed to appeal
to boys 5 years and older.
Spiral Zone characters were futuristic action figures with accessories based on a military theme. The
line was to be introduced through a 65-part syndicated TV show in the fall of 1987. Spiral
Zone targeted boys aged 7 to 11.
-20Appendix (continued)
Rock Lords, based on the GoBots theme, were rocks that sprouted heads (sometimes more than
one), legs, and arms to become action figures. The toys were to be introduced through a
movie, GoBots: Battle of the Rock Lords, to be released at Easter 1987; a comic book to be
released at the same time; and 13 episodes of the Challenge of the GoBots TV series.
Revenue estimates in 1986 were between $20 million and $30 million.
Tonka Trucks had been the company=s longest success. The company was estimated to hold about
75 percent of the mature, preschool toy truck market. Tonka began to raise the operation=s
gross margins in 1985. In 1986, it introduced a new line for even younger children: My First
Tonka.
Steel Monsters, based on the Tonka Truck line, were designed to appeal to boys aged 5 to 9. They
were similar in construction to the traditional line of trucks, but with names like Assassin and
Executioner, they looked like vehicles from the postapocalyptic Mad Max movies. Revenue
estimates in 1986 were between $10 million and $20 million.