|K-Line Announcement from Jerry Calabrese
I must confess that I so enjoyed the speculation and armchair lawyering about the future of K-Line that I almost hate bringing it to an end. But, as one of my former mothers-in-law used to say, “Appoint a day and it will come.” After a lot of legal wrangling, the K-Line transaction has finally been concluded. As of last week, right before York, Lionel took control of all K-Line assets, including its inventory, intellectual property, tooling, and trademarks.
Lionel’s deal is with Sanda Kan, K-Line’s principal manufacturer and creditor, who, in turn, worked out its own deal with K-Line’s bankers before we could move forward. Under the terms of our arrangement, Lionel will control and run the K-Line brand, in all respects, and will have the exclusive right to buy it outright sometime in the near future.
Our first step was to take possession of the existing K-Line inventory and move it from its former headquarters in North Carolina. As of today, that’s just about done. Our next challenge is to sort through K-Line’s books and records to make sure that everyone who pre-paid for products receives them. This will take some time, as most of what’s owed to individuals and clubs is not in existing inventory and will have to be manufactured.
As I’ve said before, Lionel is committed to making good on unfulfilled orders. I anticipate that it will take us at least 60 days to sort out what is owed to whom. During that time, I cannot stress strongly enough how much we will need your patience and cooperation. As hard as it may be to control the urge to call us throughout this transition, I would really appreciate it if you will give us a couple of months to figure things out.
One bit of good news is that we’ve already managed to get most of the trains that had been stuck in K-Line’s repair department during its bankruptcy fixed and shipped back to their owners.
Once the smoke clears, we plan to re-launch K-Line later this year, in our second catalog. Because getting the deal done took so long, there will be only a limited line of new products in 2006. But we plan to make them very special. Next year, in 2007, we plan to make K-Line a larger part of the Lionel product line, positioning it with our own LionMaster offerings, in our ongoing effort to offer you even more quality mid-priced choices.
Finally, I’d just like to say thanks to all of the people who worked so long and hard to get this deal done.