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Coleco Loses $79.8 Million in 1984

March 12, 1985

Coleco Industries Inc. on Monday reported losses of $79.8 million and $93.2 million for the year and fourth quarter, respectively, as the company abandoned its failed Adam home computer and turned greater attention to its lucrative toy business.

Coleco reported a loss of $7.4 million in 1983, but revenue soared more than threefold to $676 million from $193 million.

Revenue jumped 36.9% for the quarter on Coleco's hot-selling Cabbage Patch Kids line of dolls and accessories.

Coleco reported that results for the year and the fourth quarter were affected by a one-time charge of $119 million, representing the final disposition of the Adam line. The company halted production of the Adam home computer Jan. 2.

Coleco's loss for the quarter ended last Dec. 31 compared to a loss of $35 million for the same three-month period of 1983. Revenue climbed to $241 million from $176 million.

Company spokesman Morton Handel said Coleco has contracted to sell the remaining Adam inventory in 1985 to an unnamed retailer for a considerable markdown.

He said a number of problems contributed to Adam's troubles: "We didn't get enough good products down by Christmas, 1983. We ran into market problems and less-than-kind treatment from the press even after that was resolved."

West Hartford, Conn.-based Coleco had hoped to produce as many as 500,000 units of the home computer for the 1983 Christmas season. However, in the end, production and development problems forced it to ship far less. Analysts said the market also failed to hold as anticipated.

Handel said the Adam can now be purchased for under $300, which compares to its original price tag of around $700.

The computer is sold with a letter-quality printer and a high-speed storage system as standard equipment.

Handel said Coleco hoped to have written off all of its anticipated losses for the Adam computer in order to turn its efforts to its toy sales. He said that will translate into a profit for the first quarter of 1985.

Analysts agreed with that assessment, calling the company's Cabbage Patch sales "beyond expectation." Coleco reported Cabbage Patch sales of $540 million for 1984.

"We thought $500 million was an extraordinarily optimistic estimate for the year. So it's phenomenal beyond expectation," said Barbara Dalton Russell, an analyst with Prudential-Bache Securities in New York.

Russell said Cabbage Patch sales could continue at a robust $400 million next year and could possibly exceed 1984's figure.

"We're talking $3 a share of profit this year, assuming there are no skeletons in the closet of consumer electronics," she said.

The analyst said that seemed unlikely in the case of Adam, calling it "a pretty clean write-off."

H. J. Heinz Profits Up 10.2% in 3rd Quarter

H. J. Heinz Co. said it was on course toward another year of record earnings with third-quarter profits of $55.9 million, which is a 10.2% rise over the year-earlier period, when it earned $50.7 million.

Consolidated profit for the nine-month period ended Jan. 30 rose 13.2% to $197.6 million, compared to $174.6 million in the previous nine-month period.

"The financial accomplishments of the nine-month period keep us abreast of our growth goals and place the company in a good position to achieve another record year," said Anthony J. F. O'Reilly, president and chief executive of the Pittsburgh-based company.

Heinz, a worldwide processor and marketer of food, has seen its profit climbing steadily for the last two decades.

O'Reilly said the third-quarter and nine-month improvements came despite the financial drain caused by the strength of the dollar against currencies in other countries where Heinz operates.

Revenue for the nine months totaled $2.9 billion, a 4.7% increase over sales of $2.8 billion in the comparable period of 1984. Third-quarter sales reached $908 million, up 2.2% over the year-earlier figure of $889.2 million.

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