Post by alexweihmann on May 28, 2007 18:32:54 GMT -5
From the OGR forum
By Locolawyer
locolawyer Posted May 27, 2007 09:32 PM
FRIENDS
May 27, 2007-In my article dated May 22, 2007, I stated that Lionel had filed its bankruptcy reorganization plan with the court on May 21. This was an important and necessary step in moving the trade secrets and patent infringement litigation forward, and in beginning the process to exit from bankruptcy.
I recently reviewed Lionel’s bankruptcy reorganization plan filed with the court. It contains some surprising and interesting legal, financial and hobby related information. Is Lionel opening a new office, now much does Lionel spend a year on new tooling, how much does it earn a year in royalties based on its trademark, and what are MTH’s annual sales based on Lionel’s estimates? If you would like to know the answers to these questions and more, then read on. The information for this post was obtained from Lionel’s reorganization plan filed with the bankruptcy court.
The bankruptcy plan states that both secured and unsecured claims will be paid at the rate of 100%, plus post petition interest. It is very rare for creditors to be paid at such a high percentage when a corporation emerges from bankruptcy. Usually, its pennies on the dollar.
According to the plan (page 9), Lionel “has plans to establish an office near San Francisco California”, and “is in the process of establishing a small office and lab” near there, “to support continued development of its technical systems and assets.” It appears this is related to the recent hiring of Chief Technical Officer John Zahornacky whose Electric Railroad Company is California based. He has been recently working with Lionel to work out the remaining problems with TMCC 2 (Legacy). Opening an office in SF is an interesting move in that some may remember that during the postwar era, Lionel’s boxes for a time stated “New York, Chicago, San Francisco." Lionel is going back to the future by opening an office in SF.
The plan (page 7) estimates there are 300,000 model train consumers in the United States who spend $300 million a year on the hobby. HO is the most popular gauge, followed by O gauge. 95% of Lionel’s projected 2007 sales are expected to come from O gauge.
Lionel spends 3-4 million dollars a year on new tooling. It earned $691,000 in 2006 from royalty based income of licensed products using the Lionel name, such as the Christmas tree ornaments sold by Hallmark, and others.
Lionel’s gross sales were $48,155,000 in 2003, $52,329,000 in 2004, $56,651,000 in 2005 and $62,154,000 in 2006. We already knew the 2005 and 2006 gross sales figures since Lionel is in bankruptcy and I had previously published them, but the 2003 amount may not have been public because Lionel was not in bankruptcy then. These figures show that Lionel has increased its sales over the last 4 years. They also show increases since Jerry Calabrese became CEO in September 2004, showing his marketing plan of putting Lionel trains in to non traditional stores like Macy’s and Target is working.
As stated in the plan, In the O gauge market, Lionel’s most significant competitor is MTH, with estimated annual sales of 30 million dollars. Surprisingly the plan also states, “during the late 1990s, before Lionel completed its successful development of the Asian supply chain, MTH gained significant (market) share by delivering high quality, competitively priced merchandise.” Its surprising Lionel’s plan would state MTH was building “high quality” trains. However, the plan then states, “As Lionel completed its Asian ramp-up, it quickly recaptured much of the market share MTH had gained.”
The plan also notes that Lionel’s other competitors, Williams, Atlas O and Weaver, together earn 5 to 10 million dollars a year. If you combine the $62 million that Lionel made last year, with the 30 million estimate that MTH makes, the two companies together account for about 90% of the approximately $100,000,000 O gauge market.
75% of Lionel is owned by Train Acquisition LLC, with rock and roll singer Neil Young owning 20%, and Richard Kughn owning 5%. These percentages are well known and have been published previously. The reorganization plan confirms them.
Lionel and Creative Trains (CTC) each own a 50% interest in the development of TMCC 2 (Legacy).
Lionel’s principal manufacturers are Sanda Kan and Early Light. Sanda Kan is Lionel’s largest unsecured TRADE creditor. After entering in to a licensing deal with Sanda Kan for K-Lines assets last year, Lionel was granted an option to purchase them for $4,790,000, but to date has not done so.
Lastly, the plan states that during the 1980s, Lionel CEO Jerry Calabrese was an Executive Vice President for Playboy, a magazine known for its three page centerfold. This may finally explain why there are three page centerfolds in both of Lionel’s 2005 catalogs. Like the Play boy models, the locomotives in the catalog centerfolds have a nice caboose and smokin’ stack! With that said its time to go. Who said lawyers had no sense of humor.
Erol Gurcan
By Locolawyer
locolawyer Posted May 27, 2007 09:32 PM
FRIENDS
May 27, 2007-In my article dated May 22, 2007, I stated that Lionel had filed its bankruptcy reorganization plan with the court on May 21. This was an important and necessary step in moving the trade secrets and patent infringement litigation forward, and in beginning the process to exit from bankruptcy.
I recently reviewed Lionel’s bankruptcy reorganization plan filed with the court. It contains some surprising and interesting legal, financial and hobby related information. Is Lionel opening a new office, now much does Lionel spend a year on new tooling, how much does it earn a year in royalties based on its trademark, and what are MTH’s annual sales based on Lionel’s estimates? If you would like to know the answers to these questions and more, then read on. The information for this post was obtained from Lionel’s reorganization plan filed with the bankruptcy court.
The bankruptcy plan states that both secured and unsecured claims will be paid at the rate of 100%, plus post petition interest. It is very rare for creditors to be paid at such a high percentage when a corporation emerges from bankruptcy. Usually, its pennies on the dollar.
According to the plan (page 9), Lionel “has plans to establish an office near San Francisco California”, and “is in the process of establishing a small office and lab” near there, “to support continued development of its technical systems and assets.” It appears this is related to the recent hiring of Chief Technical Officer John Zahornacky whose Electric Railroad Company is California based. He has been recently working with Lionel to work out the remaining problems with TMCC 2 (Legacy). Opening an office in SF is an interesting move in that some may remember that during the postwar era, Lionel’s boxes for a time stated “New York, Chicago, San Francisco." Lionel is going back to the future by opening an office in SF.
The plan (page 7) estimates there are 300,000 model train consumers in the United States who spend $300 million a year on the hobby. HO is the most popular gauge, followed by O gauge. 95% of Lionel’s projected 2007 sales are expected to come from O gauge.
Lionel spends 3-4 million dollars a year on new tooling. It earned $691,000 in 2006 from royalty based income of licensed products using the Lionel name, such as the Christmas tree ornaments sold by Hallmark, and others.
Lionel’s gross sales were $48,155,000 in 2003, $52,329,000 in 2004, $56,651,000 in 2005 and $62,154,000 in 2006. We already knew the 2005 and 2006 gross sales figures since Lionel is in bankruptcy and I had previously published them, but the 2003 amount may not have been public because Lionel was not in bankruptcy then. These figures show that Lionel has increased its sales over the last 4 years. They also show increases since Jerry Calabrese became CEO in September 2004, showing his marketing plan of putting Lionel trains in to non traditional stores like Macy’s and Target is working.
As stated in the plan, In the O gauge market, Lionel’s most significant competitor is MTH, with estimated annual sales of 30 million dollars. Surprisingly the plan also states, “during the late 1990s, before Lionel completed its successful development of the Asian supply chain, MTH gained significant (market) share by delivering high quality, competitively priced merchandise.” Its surprising Lionel’s plan would state MTH was building “high quality” trains. However, the plan then states, “As Lionel completed its Asian ramp-up, it quickly recaptured much of the market share MTH had gained.”
The plan also notes that Lionel’s other competitors, Williams, Atlas O and Weaver, together earn 5 to 10 million dollars a year. If you combine the $62 million that Lionel made last year, with the 30 million estimate that MTH makes, the two companies together account for about 90% of the approximately $100,000,000 O gauge market.
75% of Lionel is owned by Train Acquisition LLC, with rock and roll singer Neil Young owning 20%, and Richard Kughn owning 5%. These percentages are well known and have been published previously. The reorganization plan confirms them.
Lionel and Creative Trains (CTC) each own a 50% interest in the development of TMCC 2 (Legacy).
Lionel’s principal manufacturers are Sanda Kan and Early Light. Sanda Kan is Lionel’s largest unsecured TRADE creditor. After entering in to a licensing deal with Sanda Kan for K-Lines assets last year, Lionel was granted an option to purchase them for $4,790,000, but to date has not done so.
Lastly, the plan states that during the 1980s, Lionel CEO Jerry Calabrese was an Executive Vice President for Playboy, a magazine known for its three page centerfold. This may finally explain why there are three page centerfolds in both of Lionel’s 2005 catalogs. Like the Play boy models, the locomotives in the catalog centerfolds have a nice caboose and smokin’ stack! With that said its time to go. Who said lawyers had no sense of humor.
Erol Gurcan