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FINANCIAL INFORMATION MANAGEMENT AT LEGO

1. INTRODUCTION TO THE LEGO GROUP

2. FINANCIAL MANAGEMENT ON COMPANY LEVEL

3. FINANCIAL MANAGEMENT ON GROUP LEVEL

4. FINANCIAL INFORMATION MANAGEMENT SYSTEM (FIMAS)

69

"-I o

LEG 0 A / S

~LEGO Futura ApS I ~KKC, LW AG, LW GmbH I

Y LEGO Produktion AG I

I LEGO System A/S

I LEGO Systems, Inc. I

'-15 companies '-Canada in Europe

LEGO GROUP CO~lPANIES

I LEGO Overseas A/S h I LEGO Japan

I I IBraZil I IKorea

- 2 companies 115 countries in Asia and Australia

Internat. Management

Product Developmt.

Mould Production

Manufact.

Area Companies

Market Oriented Factories

Sales Companies

t~~-:~::S~Y;-~'<':;::2~.;"'~~"5~t;:.,:::::,:.~-,,-"'L'-::-""~'":"'-"--'"'-:-'<""-""-'"':""

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FINANCIAL MANAGEMENT ON COMPANY LEVEL

r . . .. . l·.· .. I. 1- ......

!

EX. JAPAN

FOCUS ON:

· MONTHLY FIGURES · YEAR TO DATE FIGURES · TOTAL YEAR FIGURES · CASH FLOW · LOAN PEAK · INVESTMENTS · BUDGET FOLLOW UP

71

"'-l N

PLANES/BUDGETS

1/1 1992 1/1 1993

I t

Plan I plan II Financial Plan III 1993 1993 statement 1993

----------- --------- 1992 ----------Investment Basic Revised bud~et 199

bud~et 199

bud~et 199

Comments:

plan I - Is worked out with basis in centrally made marketing plans - Background for the capacity for the comming year

Plan II - Updating of Plan I (the countries expectations) Background for preparation of basic budgets for the comming year

plan III - Updating of Plan II - Background for preparation of revised budgets for this year

1/1 -+

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1/1

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31/5

r . 1st financial re~ort 19 2

Comments:

1st financial report:

5 year STP:

CURRENT REPORTING

1992

15/8 30/9

r I . 2nd 5th year

STP financial 1992-96 re~ort.

19 2

Revised budget for this year

5 year forecasts for the period 1992-96

2nd financial report: - Estimat for this year

1/12 31/12

r r

Ba~ic Financial bUd~et statement 199 1992

Basic budget: - Basic budget for next year + latest estimate this year

Financial statement: - Financial statement for this year

>:

-- -.... '-~':'":'---------- --,. '<'~-'''-'''-''- ---- .. -~

,~ .. ,_._- .- ..

SUMMARY SHEET - PROFIT AND LOSS -ACTUAL YEAR TO DATE - 1992

Profit and loss Rev.budg.1992 Amount Pct.

Standard sales Price difference

Gross sales Discounts

Net sales Cost of goods sold Trade related expenses

Gross profit Marketing expenses Sales force expenses Overhead sales and mark. Administrative expenses Premises expenses Depreciation ex. build.

Working result Royalty Interest expenses Profit on buildings Stockappreciation Secondary expenses

Result before tax Tax calculated

Net result

Keyfigures

Debtor days Stockdays Total investments Loan peak

----------------------------

74

Actual 1992 Amount Pct.

----------------------------

FORECAST CASH-FLOW 1992-93 MONTHLY BASIS

ACCOUNTS 1992

Opening liquid resources

Net payments from debtors

Total pay in

Opening short term bank debt

Net to KIRKBI A/S Investments Rebate Royalty Tax Interest bank Interest expo INTERLEGO AG Landing costs VAT Marketing expo Sales force expo Overhead sale/mark Administrative expo Other expo Short term loan

Total payout

Ending liquid resources Ending short term bank debt

13019-2

JAN *

15

* * DEC

:,\

YEAR TO DATE - BUDGET CONTROL PROFIT AND LOSS - ACTUAL MONTH - 1992

Profit and loss Rev.budg.1992 Year to date Amount Pct.

Actual 1992 Year to date Amount Pct.

~--------------~----------------------------------------------

Trade communication Trade activities Magazines TV Mass communication other

COOP retailers

* * * *

COOP last year

Total marketing expenses

Salaries sales force field Salaries demonstrators Travel and accom. sales force Motor expenses sales force

* * *

Total sales force expenses

Salaries marketing Entertainment marketing Motor exp. marketing Travel and accom marketing

Total overhead marketing

Salaries sales Entertainment sales Motor exp. sales Travel and accum. sales

Total overhead sales

13010-2 76

i

~ ..

SUMMARY SHEET - PROFIT AND LOSS -TOTAL YEAR - 1992

profit and loss Rev.budg.1992 Amount Pct.

Standard sales Price difference

Gross sales Discounts

Net sales Cost of goods sold Trade related expenses

Gross profit Marketing expenses Sales force expenses Overhead sales and mark. Administrative expenses Premises expenses Depreciation ex. build.

Working result Royalty Interest expenses Profit on buildings Stockappreciation Secondary expenses

Result before tax Tax calculated

Net result

Keyfigures

Debtor days Stockdays Total investments Loan peak

13019-2

----------------------------

77

Est year 1992 Amount Pct.

----------------------------

FINANCIAL MANAGEMENT ON GROUP LEVEL

FOCUS ON:

· TOTAL YEAR · BUSINESS SEGMENTS · MARKET AREAS · GROUP VERSUS COMPANY · FUNCTIONS · TYPE OF COSTS · INVESTMENTS · CASH FLOW · FINANCIAL TARGETS

78

~~'M"

l £

STP 1994-96 FOR THE LEGO GROUP

PROFIT AND LOSS Mio. DKK

Gross sales

Discounts

Net sales

Materials and dir labour Direct prod. costs Indirect prod. costs Depreciation. prod.

Gross profit

Development costs Sales and marketingexp. Related business areas cash discount etc.

Contribution

Administrative costs Rent Depreciation admin. Licens and royalty

Primary result

Net int. exp. Factoring Secondary e & p Affiliated companies Currency gains

Result before tax

Tax

Net result

13019-2 79

Actual 1991 STP 1996 Amoun t % Amoun t %

t ."


CALCULATED BALANCE Mio. DKK

Assets:

Liquid resources Accounts receivables Inventories Other curro assets

Total current assets

Fixed assets

Total assets

Liabilities:

Dividend payable Bankdebt Tax payable Other short term debt

Total current liabilities

Loan holding companies Other long term debt Deferred tax

Total long term liabilities

Equity

Total liabilities

13019-2 80

Actual 1991 Amount %

STP 1996 Amount %


CALCULATED CASH FLOW ACTUAL 1991 STP 1996 Mio. DKK

Gross sales

- Operating expenses

= Profit before tax

- Tax payment - Increase debtors - Increase inventories + Increase in creditors

= Cash flow I

- Investments

= Cash flow II

- Dividend

= Net cash flow

Liquid resources begin of period

+ Net cash flow + New loans + New sharecapital

= Liquid ressources end of period

13019-2 81

rr -~~=~-. ~~-c·'~-_'~_'

S


INVESTMENT IN FIXED ASSETS

Mio. DKK

European salescompanies

LEGO Australia Pty. Ltd. LEGO Singapore Pte. Ltd. LEGO Korea Co. Ltd. LEGO Brazil LEGO Overseas A/S

LEGO Japan Ltd.

LEGO Systems, Inc. LEGO Canada, Inc.

LEGO System A/S System Plast A/S LEGO Production AG

LEGO Building Corp. LEGO Est. Ltd., England LEGO Est. pty., Australia

Kirk Kristiansen & Co. LEGO Werkzeugbau AG LEGO Werkzeugbau GmbH

LEGO A/S LEGO Futura ApS. LEGOLAND A/S

Total

13019·2

Actual 1991 STP 1996

82

FINANCIAL TARGETS FROM MANAGEMENT/BOARD

GROUP LEVEL

ACTUAL 1991 STP 1996

GROWTH

PROFIT RATIO

RETURN ON ASSETS

RETURN ON EQUITY

DISPOSE OF PROFIT

CASH FLOW

SOLVENCY RATIO

13019-2 83

13019-2

FINANCIAL TARGETS FROM MANAGEMENT

COMPANY LEVEL

Contri- Result before tax bution % of sale

...................... .............................. .......................

% of % of per sale assets empl

LEGO System AjS

LEGO Systems, Inc.

LEGO Overseas AjS

LEGO Produktion AG

84

Solvency ratio

FIMAS

STARTING POINT

1. MANAGEMENT AND STAFF OF HEADQUARTER REQUIRES MORE INFORMATION

l' 2. BUSINESS SYSTEM }-,

~ I t

DISTRIBUTIO

R&D

CONSUMER

3. FROM DATA TO INFORMATION

4. INFORMATION ISLANDS

85

FIMAS

MANAGEMENT AND STAFF OF HEADQUARTER REQUIRES MORE INFORMATION

SALES & MARKETING ~

~ MANUFACTURING

PERSONNEL ~

~ FINANCE

86

FIMAS


1. SALES AND MARKETING

CONTRIBUTION

· TOTAL BUSINESS · MARKET AREAS · COMPANIES · BUSINESS SEGMENTS . . BRANDS · CUSTOMERS

SPENDINGS

· DISCOUNTS · DATING · DISTRIBUTION · TRADECOMM · MASSCOMM · IN SHOP COMM · OVERHEADS · INVESTMENTS

87

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I ~.

L.

FIMAS

. MANAGEMENT AND STAFF OF HEADQUARTER REQUIRES MORE INFORMATION

2. MANUFACTURING

CONTRIBUTION

. GROUP

. FACTORIES

. BRANDS

SPENDINGS

· MATERIALS · DIR LABOUR · OVERHEADS · LOGISTICS · PURCH VARIANCES · PROD VARIANCES · INVESTMENTS . PROCESSES

88

i I .

FIMAS


. 3. PERSONNEL

SPENDINGS

· SALARIES · MANDATORY BENEFITS · VOLUNTARY BENEFITS · SEMINARS AND EDUCATION · TRAVEL & ENTERTAINMENT · STATIONING · EMPLOYMENT EXPENSES · EMPLOYEE ACTIVITIES

STAFF

. NUMBER

. FUNCTIONS

89 I I

l .. ,

FIMAS


4. FINANCE

CONTRIBUTIONS

. SALES & MARKETING

. MANUFACTURING

SPENDINGS

· FUNCTIONS · LOCALITIES · TYPE OF COSTS · INVESTMENTS

KEYFIGURES

· RATES OF RETURN AND EARNING · CASH FLOW · LOAN REQUIREMENTS

90

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LEGO GROUP - BUSINESS SYSTEM

I SUPPLIERS I INPUT

I R& D I COSTS

I PURCHASING I CONTRIBUTION

I MANUFACTURING I \0

[ DISTRIBUTION I - <- EXPORT -)

I MARKETING I

I RETAILERS I <- STD. WHOLESALE -) :::::::::::::::::=:::::::::::::

I CONSUMERS I <- RETAIL -)

COMPETITORS [--- > [ -TiCiINOLOGY> [- ENVIRONMENT>

LEGO GROUP - MANAGEMENT SUMMARY

PROFIT AND LOSS - MIO DKK ACT 1992 Ln DKK PCT

GROSS SALES 1

CONTRIBUTION SALES & MARKETING 2

CONTRIBUTION MANUFACTURING 3

SALES I MANUFACT ADJUSTMENTS 4

TOTAL CONTRIBUTION 5

RESEARCH & DEVELOPMENT 6 :

RELATED BUSINESS AREAS 7

GENERAL ADMINISTRATIVE SUPPORT 8

PREMISES EXPENSES 9

WORKING RESULT 10

SECONDARY RESULT 11

RESULT BEFORE TAX - STD RATES 12

CURRENCY ADJUSTMENTS (STD - ULT) 13

RESULT BEFORE TAX - YEAR END RATES 14

CALCULATED TAX 15

NET RESULT 16

92

PAGE 1

SS 1993 RS 1993 DKK PCT DKK PCT

- -----".--." . . ~. _~_,v"~~c_~r_~~··~'-. __ -r_~_.~~ ___ ·~ _ ~

[ .

i

LEGO GROUP - MANAGEMENT SUMMARY PAGE 2

ACT 1992 BB 1993 RB 1993 KEYFIGURES - MIO DKK Ln DKK PCT DKK PCT DKK PCT

GROSS SALES 17

RESULT BEFORE TAX 18 TOTAL STAFF 19 RBT PER EMPLOYEE (T. DKK) 20

TOTAL ASSETS 21 RBT IN PCT OF EQUITY 22

NET RESULT 23 EQUITY 24 NET RES IN PCT OF EQUITY 25 EQUITY SHARE 26

NET CASH FLOW 27

DEBTOR DAYS 28

STOCK DAYS 29

TOTAL INVESTMENTS 30 INVEST PER EXTRA DKK IN SALES 31

93

LEGO GROUP - SALES & MARKETING

SALES & MARKETING - MIO DKK ACT 1992 "BB 1993 RB 1993 TOTAL BUSINESS Ln DKK PCT DKK PCT DKK PCT

STD SALES ASSORTMENT YEAR 1

EARLY SHIPMENT THIS YEAR 2 EARLY SHIPMENT LAST YEAR 3

STD SALES CALENDER YEAR 4

VARIATIONS TO STD 5

GROSS SALES 6

DISCOUNTS AND DATING 7

NET SALES 8

COGS AT TRANSFER 9 ROYALTY 10 EXTRA PRODUCTION COSTS 11 MISCELLANEOUS 12

TOTAL COGS 13

CONTRIBUTION FROM SALES 14

SALES RELATED EXPENSES 15 SALES FORCE EXPENSES 16 SALES MANAGE MENT EXPENSES 17 LOGISTICS SALESCOMPANIES 18

TOTAL DISTRIBUTION EXPENSES 19

PROMOTION DISCOUNTS 20 TRADE DIRECTED COSTS 21 MASS COMMUNICATION 22 IN-SHOP COMMUNICATION 23 GENERAL MARKETING EXPENSES 24 MARKETING OVERHEAD 25

TOTAL MARKETING EXPENSES 26 \,


94

i

I ~ " ::..~" ~ - -

LEGO GROUP - SALES & MARKETING - REVISED BUDGET 1993

SALES & MARKETING - MIO DKK BUSINESS SEGMENTS

STD SALES ASSORTMENT YEAR

EARLY SHIPMENT THIS YEAR EARLY SHIPMENT LAST YEAR

STD SALES CALENDER YEAR

VARIATIONS TO STD

GROSS SALES

DISCOUNTS AND DATING

NET SALES

COGS AT TRANSFER ROYALTY EXTRA PRODUCTION COSTS MISCELLANEOUS

TOTAL COGS

CONTRIBUTION FROM SALES

SALES RELATED EXPENSES SALES FORCE EXPENSES SALES MANAGEMENT EXPENSES LOGISTICS SALESCOMPANIES

TOTAL DISTRIBUTION EXPENSES

PROMOTION DISCOUNTS TRADE DIRECTED COSTS MASS COMMUNICATION IN-SHOP COMMUNICATION GENERAL MARKETING EXPENSES MARKETING OVERHEAD

\ TOTAL MARKETING EXPENSES

CONTRIBUTION SALES & MARKETING

Ln

1

2 3

4

5

6

7

8

9 10 11 12

13

14

15 16 17 18

19

20 21 22 23 24 25

26

27

95

RETAIL DKK PCT

" ,~- -

.-~ -<.~--~~--~-

EDUCAT CO-PROM DKK PCT DKK PCT

r--"""""-.. ~'.~~=s::..,:~,-,.,---,--~~,-, ,

~ ~ LEGO GROUP - SALES & MARKETING - REVISED BUDGET 1993

SALES & MARKETING - MIO DKK DUPLO LEGO SYSTEM TECHNIC BRANDS Ln DKK PCT DKK PCT DKK PCT

STD SALES ASSORTMENT YEAR 1

EARLY SHIPMENT THIS YEAR 2 EARLY SHIPMENT LAST YEAR 3

STD SALES CALENDER YEAR 4

VARIATIONS TO STD 5

GROSS SALES 6

DISCOUNTS AND DATING 7

NET SALES 8

COGS AT TRANSFER 9 ROYALTY 10 EXTRA PRODUCTION COSTS 11 MISCELLANEOUS 12

TOTAL COGS 13

CONTRIBUTION FROM SALES 14

SALES RELATED EXPENSES 15 SALES FORCE EXPENSES 16 SALES MANAGE MENT EXPENSES 17 LOGISTICS SALESCOMPANIES 18

TOTAL DISTRIBUTION EXPENSES 19

PROMOTION DISCOUNTS 20 TRADE DIRECTED COSTS 21 MASS COMMUNICATION 22 IN-SHOP COMMUNICATION 23 GENERAL MARKETING EXPENSES 24 MARKETING OVERHEAD 25

TOTAL MARKETING EXPENSES 26 I,.


96

LEGO GROUP - MANUFACTURING

MANUFACTURING - MIO DKK ACT 1992 BB 1993 RB 1993 Ln DKK PCT DKK PCT DKK PCT

PROD OF FIN GOODS AT TRANSFER 1

RAW MATERIALS 2 SEMIMANUFACTURES 3 PACKAGING 4

PARTS AND COMMODITIES 5

DIRECT LABOUR 6

PRODUCTION AT STD 7

ALLOCATED TO SALES I MARKETING 8 PRODUCTION VARIANCES 9

VARIANCES AND ADJUSTMENTS 10

CONTRIBUTION 1 11

PACKING AREA 12 PROCESSING AREA 13 MOULDING AREA 14

VARIABLE OVERHEAD 15

DEPRECIATIONS 16

GENERAL PRODUCTION COSTS 17

CONTRIBUTION 2 18

PURCHASE VARIANCES 19

FG INVENTORY I CENTRAL STOCK 20 TRANSPORTATION 21 OTHER LOGISTICS 22

LOGISTIC COSTS 23

CORPORATE OVERHEAD

CONTRIBUTION 3 24

97

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FROM DATA TO INFORMATION PRESENT SITUATION

--~OV-'l . ~

LOCAL COMPANY LEVEL:

.. LOCAL GIl

\ ... --

MANUAL INPUT DATA FILES

/

DETAILLED DEPARTEMENTAL REPORTS FOR BUDGET CONTROL

.. MODEL SOLUTION

.. NON DETAILLED ESTIMATES ON COMPANY LEVEL

ASSUMPTIONS FOR ESTIMATES

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LEGO GROUP lEVEL:

NON DETAILLED ESTIMATES ON LOCAL COMPANY LEVEL

+ .. .. -- --MANUAL INPUT DATA FILES MODEL SOLUTION

---- MANAGEMENT REPORTS - ANALYSIS· - GRAPHICS

I

'-,--

NON DETAILLED ESTIMATES ON LEGO GROUP LEVEL

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MANUAL INPUT

MANUAL INPUT

INTERNATIONAL LEGO GROUP REPORTS

INTERNATIONAL LEGO COMPANY REPORTS

LOCAL LEGO COMPANY REPORTS

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SALESI MARKETING

FINANCE

PERSONNEL

INFORMATION ISLANDS

DATA

MANAGEMENT

MANUFACTURING

RESEARCH & DEVELOPMENT

-I ---~-~-~~'-~~~~--""",'

f ~ ~ !; ~'

FINOS

Financial Objectives and Strategies

OBJECTIVE

"Int. Finance will secure that management on all levels especially

management and staff of LEGO NS are provided with optimal

information of the financial development on all levels".

WHICH LEVELS ?

13019-2 102

r''''''''''''''-'''''"'''''''''''''"'''''?~-~"O_~~>'i'';'''>'' 'oy. ~>-,.-.-.-,. - -

I I l: INFORMATION-LEVELS

1) GROUP COMPANY

, 2) MARKET AREAS

"

~ 3) BUSINESS SEGMENTS

'.

~ 4) BRANDS AND PRODUCT LINES *. ;' :;: :;: 'R.' \ " '\

I ~ t ~ ~:

5) INTERNATIONAL CUSTOMERS

6) VALUE ACTIVITIES

7) AGGREGATED DETAILED

103

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- ...... -.. _- .. _. -- -~. ~.<-,, __ ~ __ ' __ ~._"_:.;:_:;_.--::~-::..:-_~~~-: ~r '~_'J __ __ .~_ __ __." ,," __ ~ J __ J_ ~. '.". _ ~. ,_ :,,:"_ • ..'c -._"/,:_". ;.--

FINOS

Financial Objectives and Strategies

STRATEGIES

"It is our strategy to continue developing the reporting in a direction

that provides management on all levels with more detailed

information which can lead to an improved basis of decision for the

LEGO Group"

"In order to be able to rep<?rt on a more detailed level and new

dimensions (ex. business segments) we have established the

following requests:

- Establish a central database

- Establish an . international chart of accounts

- Implement a stratetic information system

13019-2 104

Corporate Request versus Local Influence

- Corporate Request (red)

- Discussed (yellow)

- Local influence (green)

...

r r r

105

Corporate

Local

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-~ Inpvc FacJ/it/es

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LESSON LEARNED

put Faci//ties

"THE WINE WILL ONLY, BE AS GOOD AS THE GRAPES"

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LEGO GROUP LOCALITY COMPANY I BUSINESS BRAND I CUSTOMER

AREA SEGMENT PRODUCT LIN E

PROFIT & LOSS

A. MAIN ACCOUNT

EX.:

-o 1. Marketing Expenses -...J 2. Manufac. Reciepts/-expenses

'c'

B. MAIN TYPE ACCOUNT

EX.: 1. Mass Communication 2. Parts and Commodities

"'0

C. SUB TYPE ACCOUNT I

EX.: !

~ 1. Brochures inserted 2. Variance Packaging

--:-;-,-:~'--~--'- --------.• - -'. ----~.~.- T;-~: .• -._-

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COMPANY

XX ----- ... _-

INTERNATIONAL CHART OF ACCOUNTS

TYPE OF INTER- BUSINESS PRODUCT ACCOUNT LOCAUTY COMPANY SOURCE SEGMENTS BRAND LINE CUSTOMER

XX.XX.XX XXX XX XX XX XX XX XX

II

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NEW FINANCIAL DATA MANAGEMENT, INFORMATION &

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ACCOUNTING GUIDELINES

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Requirements· from a users point of view

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B. Securities

o Constraints on Database

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TRANSLATION TABLES

LOCAL CHART INTERNATIONAL CHART

TYPE OF ACCOUNTS TYPE OF ACCOUNTS

5001 SALARIES " -'" ARIES /' p 9002 ROYAL TV YALTV

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DEPARTMENTS LOCAUTIES

413 DUPLO BRAND MANAGEMENT 280 MARKETING MANAGEMENT

530 FI ELD SALES - EAST 100 SALES FORCE

801 CONTROLLER 820 FINANCE

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MOULDING MACHINES AMOUNT

ACCOUNT

28 01 10 Accumulated purch price, year start 10000

28 02 10 New investments 2000

28 07 10 Disposals -500

28 08 10 Appreciation 0 11500

28 09 10 Accumulated deprec at year start -4000

28 10 10 Depreciation this year -1000

28 11 10 Accumulated deprec disposals 500 -4500

GENERAL LEDGER

MOULDING MACHINES

ACCOUNT

10 01 Accumulated purch price 11500

10 02 Accumulated deprec -4500

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Est 9305 - 9312

Budg 9401 - 9412

STP 9501 - 9712

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Cash Flow

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ACCOUNT REFERENCE REPORT LAYOUT

L1NENO DEPART ACCOUNT LINE NAME LlNENO SUMREF

10 100 4*** SALES 10 30

10 100 5*** COSTS OF GOODS 20 30

20 ~ ** 6*** CONTRIBUTION 30 **

REPORT DATA

DEPART ACCOUNT AMOUNT AMQUNTID MONTH YEAR

100 4100 -10000 ACT 1 1993 100 4200 -20000 ACT 1 1993 100 5100 -10000 ACT 1 1993

200 6100 20000 ACT 1 1993 200 6200 10000 ACT 1 1993

CONTIBUTION FROM SALES

ACTUAL 1993

SALES -40000

COSTS OF GOODS 30000

CONTRIBUTION -10000

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International Reports

International Chart of Accounts

Local Chart of Accounts

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Sales I Costs

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Main Account

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Total Marketing Expenses

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TV Commercials

Local chart of Accounts

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. SYSTEM SPECIALIST

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