Received the following by email. The profit seems high in relation to the sales, but read the whole posting.
LIONEL’S GROSS SALES IN 2006 TOP $62 MILLION
Company’s Operating Statement Shows $36.8 million dollar yearly profit
January 17, 2007-On January 16, 2007, Lionel filed its monthly operating report with the bankruptcy court. It is required to file a monthly operating report since it is in bankruptcy. The report was affirmed to by its Chief Financial Officer, Scott Turkington. December’s numbers were obtained directly from its profit and loss summary filed with court.
The interesting thing about December’s numbers is that it allows us to see how Lionel did as a company for the calendar year 2006, rather than just a monthly snapshot, which I have reported on in the past.
For the calendar year 2006, Lionel’s gross sales were $62,153,000, and its net sales were $59, 301,000. This is an increase when compared to calendar year 2005, when its yearly gross and net sales were $56,652,000 and $54,850,000 respectively. These figures represent increases in gross sales of $5.5 million, and $4.4 million in net sales between the two calendar years. December 2006's gross sales were over $6.8 million, and its net sales were over $6.1 million. Lionel’s best month in 2006 was November, where its gross and net sales were $11.4 million and over $11 million, respectively.
Part of Lionel CEO Jerry Calabrese’s business plan, is to sell a diversified line of Lionel products in more mainstream stores such as Macy’s and Target, in addition to the hobby store market (the funnel theory). This plan is having a positive effect on the company’s sales, based on the increases from 2005 to 2006.Perhaps the most interesting thing about Lionel’s December 2006 report is the monthly profit stated in it. For the month of December, Lionel posted a profit, or net income of $36,111,000. That figure is correct, over $36 million dollars. By contrast, Lionel posted a profit of $2.8 million in November, $1.1 million dollar profit in October, $1.6 million in September and $460,000 in August. Between January and July 2006, Lionel posted monthly losses, but that is to be expected, at least in part, since its business is seasonal.
For the year, Lionel posted a profit of $36,871,000.
Some may be thinking that the yearly profit (net income) seems very high in relation to the gross and net sales figures. Also unusual is that through the end of November, only one month earlier, Lionel’s year to date profit was $760,000 (the difference between the $36,871,000 yearly profit figure and December figure of $36,111,000).
The answer lies in the appeals court decision of December 14, 2006, where it vacated MTH’s $38.6 million dollar jury verdict in its trade secrets lawsuit against Lionel (the total judgment was $40.7 million, but the remaining $2.1 million was against the other two defendants, including Korea Brass). Up to and including November 2006’s monthly report, Lionel’s balance sheet carried a “litigation reserve” amount of $38.6 million on it. In December’s statement, that amount was reduced to zero, due to the court’s decision.