Company Highlights
- Founded in 1987
- Leading U.S. manufacturer of Halloween costumes
- Core clients: ghosts, witches, devils, vampires, werewolves, zombies and other creatures of the night
- Star clients: Austin Powers, Dr. Evil, X-Men, Pokeman, Teletubbies, PowerRangers, Sabrina the Teenage Witch, Buffy the Vampire Slayer, Cinderella
- Growth: Strong due to innovative designs, proprietary licenses, and the growing popularity of Halloween.
- In addition to an existing factoring arrangement, CIT provided a $35 million asset-based revolving line of credit including out-of-formula advances
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A Tale of Startling Growth
Based in San Diego, CA, Disguise is the second largest U.S. manufacturer of Halloween costumes, a $1.5 billion industry. About 65 percent of Disguise's product comes from licenses: Disney, Marvel, Pokemon, Nickelodeon. Customers include Wal-Mart, Party City, Target, Spencer Gifts and Toys R Us. It is owned by Cesar SA, a more than 100-year old French company specializing in costumes. Cesar acquired majority ownership in 1997 and full ownership in 1999. Together, Disguise and Cesar are the largest costume makers in the world.
Frightening Seasonality and Terrifying Trends
While some manufacturers rely heavily on the Christmas holiday season, Disguise is virtually dependent on one day: Halloween. More than 80 percent of annual orders are received by June in anticipation of the October 31 celebration. Disguise's core staff of over 100 employees is supplemented by approximately 900 temporary employees during the height of the June-October Halloween season. Halloween costumes can be extremely trendy with success dependent on owning the hot character license at the right time.
A Cry in the Night: Refinancing
Disguise needed to consolidate its former three credit facilities with one lender. Given the seasonality of its business, Disguise searched for a credit line that was flexible enough to allow for the build up of inventory prior to its core season without being penalized when their needs are nominal after the season.
CIT Scares up Some Value
Supported by its knowledge of the retail market, CIT is very comfortable lending to manufacturers. As the nation's leading factoring company with comprehensive credit files on over 250,000 retailers, CIT perceives value in accounts receivable and inventory that other lenders may not. In addition, with many clients dependent on certain seasons or weather conditions, CIT is familiar with seasonality. Indeed, the seasonality calls for a facility in which advances are tied to the rising-and-falling levels of receivables and inventory. Finally, CIT realizes that strong licensing programs, efficient inventory controls and proven management can offset fashion risks.
CIT Unmasks a Solution
CIT worked with Disguise to structure a $35 million revolving credit facility secured by accounts receivable and inventory. The facility included out-of-formula advances. In addition, CIT will continue to provide credit protection and receivables management under its factoring agreement, which dates back to 1997. Disguise can now save considerable time and effort by working with only one lender. And with fresh financing, Disguise can continue to build on its dominant position in the expanding Halloween costume industry.
A Parent's Dilemma:
What to do When Good Inventory Goes Bad?
A long time ago, shortly after the French Revolution, the Barthelemy family of Saumur, France made a nice living selling quill pens. The industrial age, however, roiled the business as the discovery of steel nibs effectively made quill pens obsolete. What was the Barthelemy family to do with a warehouse full of feathers? In 1842, the family began converting the raw materials to make feather masks.
The masks became a necessary accessory at masquerades taking place in ballrooms in France and throughout Western Europe. In 1905, Jules Cesar took over and soon the company's masks were seen worldwide, including major festivals such as Carnival in Brazil and Mardi Gras in New Orleans. Today, Cesar SA has evolved into the world leader in manufacturing costumes and masks. And they also solved an inventory problem. |
| CIT Commercial Services
CIT Commercial Services is the nation's largest provider of factoring, accounts receivable management and lending services. We tailor financial solutions that help companies of all sizes increase sales, improve cash flow, reduce operating expenses and eliminate customer credit losses.
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