Monday, January 15, 2007
Bad News For Model Car Collectors and Retailers
RC Ertl, a major force in the model car hobby just announced that they will discontinue their automotive collectibles lines. This is bad news for car collectors and retailers like me. Below is an excerpt from a January 11, 2007 press release.
As previously announced, the increased cost of zinc, which is a key component in die-cast products, is expected to result in lower profit margins during the fourth quarter of 2006 compared with the fourth quarter of 2005. Increased zinc costs will likely continue to negatively impact margins in the first half of 2007. The Company intends to partially offset these increases with selective price increases in 2007 and continued product design and supply chain cost management efforts.
During December 2006, the Company made the decision to discontinue its Racing Champions(R), JoyRide(R), Ertl(R) and AMT(R) die-cast and model kit automotive collectible product lines that on a combined basis generated approximately $36 million in net sales in 2006 and approximately $60 million in net sales in 2005. Discontinuing the automotive collectible product lines is consistent with the Company's strategy to focus on sustainable, organic growth and on allocating resources to its higher growth infant products and children's toys categories. Excluding these discontinued collectible product lines, preliminary net sales from continuing operations increased approximately 12% for the full year of 2006 compared with the 2005 year. As a result of discontinuing certain of these product lines, the Company expects to record in the fourth quarter a non-cash impairment charge in the range of $6 million to $9 million, net of estimated income tax benefits, to write-off undepreciated tooling costs and unamortized intangible assets and to provide inventory and royalty reserves. The Company plans to continue its agricultural collectibles business, which has been a relatively solid performer and has not been as impacted by the overall declining collectibles market. The Company will continue to invest in its strategic long-term relationship with John Deere. In addition, the Company plans to continue with its strategy to reposition its Johnny Lightning(R) brand targeting younger consumers.
As previously announced, the increased cost of zinc, which is a key component in die-cast products, is expected to result in lower profit margins during the fourth quarter of 2006 compared with the fourth quarter of 2005. Increased zinc costs will likely continue to negatively impact margins in the first half of 2007. The Company intends to partially offset these increases with selective price increases in 2007 and continued product design and supply chain cost management efforts.
During December 2006, the Company made the decision to discontinue its Racing Champions(R), JoyRide(R), Ertl(R) and AMT(R) die-cast and model kit automotive collectible product lines that on a combined basis generated approximately $36 million in net sales in 2006 and approximately $60 million in net sales in 2005. Discontinuing the automotive collectible product lines is consistent with the Company's strategy to focus on sustainable, organic growth and on allocating resources to its higher growth infant products and children's toys categories. Excluding these discontinued collectible product lines, preliminary net sales from continuing operations increased approximately 12% for the full year of 2006 compared with the 2005 year. As a result of discontinuing certain of these product lines, the Company expects to record in the fourth quarter a non-cash impairment charge in the range of $6 million to $9 million, net of estimated income tax benefits, to write-off undepreciated tooling costs and unamortized intangible assets and to provide inventory and royalty reserves. The Company plans to continue its agricultural collectibles business, which has been a relatively solid performer and has not been as impacted by the overall declining collectibles market. The Company will continue to invest in its strategic long-term relationship with John Deere. In addition, the Company plans to continue with its strategy to reposition its Johnny Lightning(R) brand targeting younger consumers.
# posted by RW : 9:59 AM
