Hobbico - BANKRUPT!

[modeladdict]

You guys realize that buying a Revell kit from a club member or ebay doesn't directly help them right? Unless you buy directly from Great Plains/Tower/Hobbico, they have already been paid for the kit and don't see any of your money. Even if you buy from a hobby store Revell/Hobbico have already been paid for the kit. All your purchase does is give the hobby shop the data they need to determine what and if they should buy Revell kits in the future. Again those kits will already be paid for and if they don't sell it's the hobby shop that loses out not Revell.

[highway]

2 minutes ago, modeladdict said:

You guys realize that buying a Revell kit from a club member or ebay doesn't directly help them right? Unless you buy directly from Great Plains/Tower/Hobbico, they have already been paid for the kit and don't see any of your money. Even if you buy from a hobby store Revell/Hobbico have already been paid for the kit. All your purchase does is give the hobby shop the data they need to determine what and if they should buy Revell kits in the future. Again those kits will already be paid for and if they don't sell it's the hobby shop that loses out not Revell.

Very well said!!! 

Other than the "I'm helping Revell by buying a kit" posts, the other ones that I'm finding quite humorous are the numerous "Round 2 should buy Revell" posts. First, if that would happen, it would make Round 2 a monopoly in the US, which isn't allowed the last time I checked. Also, most of the same saying Round 2 should buy Revell would be the same that would criticize Round 2 for all the reissue kits they put out, because other than the latest full detail Camaro and all of it's various versions and maybe a few of the "Showroom Replicas" curbside kits, Round 2 hasn't put out much of anything BUT reissues.   

[Ace-Garageguy]

30 minutes ago, highway said:

Very well said!!! 

Other than the "I'm helping Revell by buying a kit" posts, the other ones that I'm finding quite humorous are the numerous "Round 2 should buy Revell" posts. First, if that would happen, it would make Round 2 a monopoly in the US, which isn't allowed the last time I checked. Also, most of the same saying Round 2 should buy Revell would be the same that would criticize Round 2 for all the reissue kits they put out, because other than the latest full detail Camaro and all of it's various versions and maybe a few of the "Showroom Replicas" curbside kits, Round 2 hasn't put out much of anything BUT reissues.   

I seriously doubt that the FTC would look askance at R2 acquiring the tooling assets and Revell name after a bankruptcy. It's good to have some understanding of the law prior to making legal pronouncements.

From the Federal Trade Commission's own website  https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/monopolization-defined     :

"The antitrust laws prohibit conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power. Most Section 2 claims involve the conduct of a firm with a leading market position, although Section 2 of the Sherman Act also bans attempts to monopolize and conspiracies to monopolize. As a first step, courts ask if the firm has "monopoly power" in any market. This requires in-depth study of the products sold by the leading firm, and any alternative products consumers may turn to if the firm attempted to raise prices. Then courts ask if that leading position was gained or maintained through improper conduct—that is, something other than merely having a better product, superior management or historic accident. Here courts evaluate the anticompetitive effects of the conduct and its procompetitive justifications."

As far as the other point goes, R2 has spent money restoring tooling to close to its original condition, replacing deleted parts (which has been well received by many modelers, me included) and the AMT label has had new releases recently, but the reissue strategy makes perfect economic sense when there's still a thriving market of old guys who are more than happy to be able to buy NEW versions of kits they had when they were younger.

If R2 were to actually acquire the assets of Revell, that would presumably include the above referenced "in development" projects, and we'd likely still see all-new kits in the not too distant future.

But when a company's debt-to-asset ratio is what has been referred to above for Hobbico (who knows how correct THOSE numbers are, however), there's something very wrong. Those figures are not representative of a company that would seem to be "profitable" and well-managed.

https://www.investopedia.com/terms/t/totaldebttototalassets.asp

Edited January 11, 2018 by Ace-Garageguy

[Allen Wrench]

58 minutes ago, modeladdict said:

You guys realize that buying a Revell kit from a club member or ebay doesn't directly help them right? Unless you buy directly from Great Plains/Tower/Hobbico, they have already been paid for the kit and don't see any of your money. Even if you buy from a hobby store Revell/Hobbico have already been paid for the kit. All your purchase does is give the hobby shop the data they need to determine what and if they should buy Revell kits in the future. Again those kits will already be paid for and if they don't sell it's the hobby shop that loses out not Revell.

Correct you are. It's a case of people not understanding the difference between being a "customer" and an "end user."

[bill_rules]

In its filing with the United States Bankruptcy Court in Delaware, Hobbico said it has an estimated 200 to 999 creditors, $10 to $50 million in assets, and $100 to $500 million in liabilities.

 

[mikemodeler]

55 minutes ago, modeladdict said:

You guys realize that buying a Revell kit from a club member or ebay doesn't directly help them right? Unless you buy directly from Great Plains/Tower/Hobbico, they have already been paid for the kit and don't see any of your money. Even if you buy from a hobby store Revell/Hobbico have already been paid for the kit. All your purchase does is give the hobby shop the data they need to determine what and if they should buy Revell kits in the future. Again those kits will already be paid for and if they don't sell it's the hobby shop that loses out not Revell.

Actually, buying a Revell kit DOES help Hobbico, regardless of where it's purchased as a sale is a sale. The difference is in the Gross Profit earned selling wholesale (to a hobby shop or other seller) versus buying from the Tower Hobbies website. Depending on what their labor, warehouse and shipping costs are, it is probably cheaper for Hobbico to box up and ship a dozen model kits to one location than it is to ship one model to 12 different locations. 

If you are referencing buying a kit that is out of production from a private seller, then yes, that has little benefit to helping Hobbico.

[Bert]

ok so I'm 66, and now this. Pisses me off. No one asked me if this was ok. Now i have to get those Ford models stocked up, and maybe even build one. 

[SfanGoch]

10 minutes ago, mikemodeler said:

If you are referencing buying a kit that is out of production from a private seller, then yes, that has little benefit to helping Hobbico.

Actually, Hobbico reaps no financial benefits at all, just as an auto manufacturer gets ugatz when someone buys a long discontinued make/model of car from a private seller. Any direct monetary benefit occurs at the distributor/dealer/retailer level. After that, the manufacturer has no skin in the game. Hobbico doesn't figure into the equation regarding possible additional revenues from a kit long before it's even listed on eBay.

[highway]

21 minutes ago, mikemodeler said:

Actually, buying a Revell kit DOES help Hobbico, regardless of where it's purchased as a sale is a sale. The difference is in the Gross Profit earned selling wholesale (to a hobby shop or other seller) versus buying from the Tower Hobbies website. Depending on what their labor, warehouse and shipping costs are, it is probably cheaper for Hobbico to box up and ship a dozen model kits to one location than it is to ship one model to 12 different locations. 

If you are referencing buying a kit that is out of production from a private seller, then yes, that has little benefit to helping Hobbico.

Unless you buy that new kit, as John said in his statement, DIRECTLY FROM HOBBICO, you yourself are NOT paying Hobbico for the kit but the hobby shop you are purchasing it from. This is an example: 

I own XYZ Hobbies in your hometown. I order 12 Ice Patrol Jeeps from Great Planes Distributors (since they also are a Hobbico branch) for my store. I pay them for the kits to have them on the shelf. 

You then come in to the store and buy an Ice Patrol Jeep and some supplies and pay me for the kit. Your money is paying me back for what I already paid Hobbico and a slight markup so I can keep the doors open for you. 

 

Whether it is a brand new issue kit or one that has been sitting on the hobby shop shelf for a year or two like a Revell Bronco for example, Hobbico has already been paid by the shop owner by the time it gets into your hands. 

[mikemodeler]

20 minutes ago, SfanGoch said:

Actually, Hobbico reaps no financial benefits at all, just as an auto manufacturer gets ugatz when someone buys a long discontinued make/model of car from a private seller. Any direct monetary benefit occurs at the distributor/dealer/retailer level. After that, the manufacturer has no skin in the game. Hobbico doesn't figure into the equation regarding possible additional revenues from a kit long before it's even listed on eBay.

Pretty much what I was inferring Joe- the only benefit  to Hobbico is on new, current production kits, regardless if it is off an eBay store, LHS , some plastic pusher at a local club meeting or from Tower Hobbies' website as it originated from them. Long term the benefit to Hobbico is on the re-orders from any re-seller/retailer of Revell kits.

 

[mikemodeler]

Just now, highway said:

Unless you buy that new kit, as John said in his statement, DIRECTLY FROM HOBBICO, you yourself are NOT paying Hobbico for the kit but the hobby shop you are purchasing it from. This is an example: 

I own XYZ Hobbies in your hometown. I order 12 Ice Patrol Jeeps from Great Planes Distributors (since they also are a Hobbico branch) for my store. I pay them for the kits to have them on the shelf. 

You then come in to the store and buy an Ice Patrol Jeep and some supplies and pay me for the kit. Your money is paying me back for what I already paid Hobbico and a slight markup so I can keep the doors open for you. 

 

Whether it is a brand new issue kit or one that has been sitting on the hobby shop shelf for a year or two like a Revell Bronco for example, Hobbico has already been paid by the shop owner by the time it gets into your hands. 

Not disputing your statement entirely, what I am stating is that as long as you are buying kits from a seller (LHS, Hobby Lobby, eBay store, etc.) and that seller reorders from Hobbico, it DOES benefit Hobbico. If myself and 10 friends come into your hobby shop because we heard you have the new Ice patrol Jeeps and buy 11 of them, isn't it safe to say you will re-order more of them? And that re-order will benefit Hobbico?   That is the point I am making- whether I buy a kit from Tower Hobbies or from you, it counts as a sale and will drive more purchases. 

[Reegs]

As long as the retailer re-orders those kits because of those sales.

Edited January 11, 2018 by Reegs

[Erik Smith]

Maybe Meng will buy them. Or another Chinese company...molds are already there, right?

 

From other news stories:

“In order to support the financial requirements of several acquisitions over the years, the Debtors incurred and began carrying a heavy debt load.  Beginning in 2016, the Debtors’ businesses began to struggle due to a number of factors which included…a lack of investment in product innovation and its core platform coupled with a systemic shift in the drone market. In the second half of 2016, these challenges became more acute with the disruption of the Debtors’ supply chain in Asia due to the financial distress of multiple key suppliers. These factors all combined to negatively impact the Debtor’s sales and profitability and, in conjunction with elevated debt service obligations, resulted in defaults under these debt obligations and a sharp decrease in liquidity and financial flexibility.”

 

[426 pack]

I am trying to follow along but I still don’t understand what is going on with revell are they directly tied to Hobbico and shutting down to?

[Brett Barrow]

9 minutes ago, 426 pack said:

I am trying to follow along but I still don’t understand what is going on with revell are they directly tied to Hobbico and shutting down to?

Nobody's shutting anything down until April at the earliest.  Revell is owned by Hobbico, which also owns Tower Hobbies, Great Planes Distribution, Estes Rockets, Axial R/C, and a bunch of other brands.  They've filed for Chapter 11 protection this week.  It's been coming for a year or so.  I have no doubt that Revell will make it out under new ownership but who knows how they'll be changed?   

Edited January 11, 2018 by Brett Barrow

[mikemodeler]

Thanks for sharing that information Brett, sheds some more light on the subject and probably answers some questions we all had. I will hang on tight and see what happens over the next couple of months. In the meantime, I have over 200 kits I COULD build, but most likely won't!

 

[niteowl7710]

I like the double speak of saying that customers won't be impacted, but they also don't know if the entire thing will be sold as one chunk, or split apart - which no matter which nice business speak you want to call it - is called liquidating assets.  They can call them underperforming and dump all the dinky little companies that don't impact the bottom line by in large, or like Revell which is profitable, selling off the stuff that gets them the most money to dig themselves out of this huge hole they bought themselves into trying to be everything to everyone's hobby.  Sell the R/C stuff to Traxxas and kill off the lawsuit in the process since they it's hard to sue someone over using your IP when you then own the IP...that might be cheaper in the larger picture than whatever punitive settlement of all past sales profits or the like.  If someone were to pick up the entire thing and it's debt load they would of course ransack the management (which sounds like it's needs a good going over anyways) and then anything becomes possible in terms of what stays and what goes.

As far as the generalized broad numbers, that's all bankruptcy speak.  Just like when you answer a survey and it asks which your household income is and you're given a range.  They're worth between x and y, and have between x and y amount of debt to between x and y amount of creditors.

[martinfan5]

Hearing the Reno warehouse has already been shut down

[Joe Handley]

1 hour ago, martinfan5 said:

Hearing the Reno warehouse has already been shut down

That happened last week.

[ranma]

Wasn't there a company called Hostess that done this also? Another factor in this is how much they pay their CEO'S? As the company that made twikies gave their Ceo a multi million bonus while employee's took pay cut's ect. Yet Hostess was bought out and has returned to store shelves. along with wonder bread! The real issue is quit giving CEO's Multi million dollar bonus's !

[Mr. Metallic]

1 hour ago, ranma said:

The real issue is quit giving CEO's Multi million dollar bonus's !

Yeah, like that's going to happen. The people in power structure it so they give themselves the bonuses. It's like asking the members of Congress to write term limit legislation. They have no interest in it because it limits their own power.

[Daddyfink]

1 hour ago, ranma said:

Wasn't there a company called Hostess that done this also? Another factor in this is how much they pay their CEO'S? As the company that made twikies gave their Ceo a multi million bonus while employee's took pay cut's ect. Yet Hostess was bought out and has returned to store shelves. along with wonder bread! The real issue is quit giving CEO's Multi million dollar bonus's !

Twinkies and Model Cars may go together, but, they are not the same thing. People hoarded Twinkies when they announced their impending doom. I have not seen a scramble for model kits at all. 

Bad Union Contracts and lack of new product in a changing world doomed hostess. Not big payouts. 

[Erik Smith]

1 hour ago, ranma said:

Wasn't there a company called Hostess that done this also? Another factor in this is how much they pay their CEO'S? As the company that made twikies gave their Ceo a multi million bonus while employee's took pay cut's ect. Yet Hostess was bought out and has returned to store shelves. along with wonder bread! The real issue is quit giving CEO's Multi million dollar bonus's !

There are many companies that file chapter 11. Kmart, Sears, Hostess - not unusual at all. While there are large discrepancies in pay from truck drivers to CEOs, I don’t think it’s ever the soul cause of a companie’s failure - and I really doubt it with Hobbico. 

[mikemodeler]

1 hour ago, Erik Smith said:

There are many companies that file chapter 11. Kmart, Sears, Hostess - not unusual at all. While there are large discrepancies in pay from truck drivers to CEOs, I don’t think it’s ever the soul cause of a companie’s failure - and I really doubt it with Hobbico. 

I had a customer file Chapter 11 this week and it wasn't because they were paying big salaries to the top execs, it was a series of business issues that led them to file. It is quite possible that once Hobbico can reorganize, they will come out of the bankruptcy a better company. There will be some pain and suffering along the way, most likely a smaller company will emerge and the loss of jobs will affect a lot of people, but hopefully in the end we will see them continue on.

[The Creative Explorer]

I read this post in Germany today: http://www.nw.de/lokal/kreis_herford/buende/22028763_Revell-Mutterkonzern-in-den-USA-stellt-Insolvenzantrag.html

Revell Germany states that they will not be affected by this, other than having a new investor/owner, From what I understand, they will continue, no matter the outcome in Germany. Plus they state, they have a very healthy prospect.

So, it seems like good news for this part.