Why did MTH sell some of their tooling to Lionel and Atlas?
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MTH was going out of business. Still are, maybe, later, who knows?
Hope not. Of course everything does, pretty much.
One might assume that they needed to raise some cash to proceed with the transformation to BTO.
You missed the whole MTH divesting of large parts of the business and nearly closing when Mike semi-retired?
I'm disappointed about the excellent MTH tooling that seems to have been sold.
MELGAR
@MELGAR posted:I'm disappointed about the excellent MTH tooling that seems to have been sold.
MELGAR
Would you rather it be scrapped?
Mike tried selling MTH as a whole company and there were a number of suitors, however, either none were interested in buying the entire company or willing to pay the price he was asking.
So in order to recover at least some of his investment, he decided to sell off the tooling that Lionel and others were willing to purchase.
Its a mystery to me why he chose not to allow the people running the day to day operations of what's left of MTH today to continue operating the whole company and pay a negotiated price over time. This would not only have allowed Mike to recover more of his investment, but also keep his Legacy alive as pioneer in o gauge innovation and scale modeling.
Sadly, today MTH is but a shell of what it once was, however, there rumors that some new tooling for Gauge 1 may be on the horizon.
Yes it seems a cash flow stream over time would be an advantage for tax purposes too, rather than a big lump in one year.
@prrjim posted:Yes it seems a cash flow stream over time would be an advantage for tax purposes too, rather than a big lump in one year.
If we are to assume that he sold the tooling for a profit, which is doubtful, then there would be a tax liability. However, it is doubtful that he made a profit on the tooling. Perhaps he did better than the depreciated value of each tool creating a tax liability. Otherwise, he created a tax loss.
When you sell something over time and carrying the paper, you are hoping beyond hope that they are successful and can actually meet those obligations. Having been down that road, it not even money that they will. The other way of looking at it is that they want to pay me with my own effort in building the company. If I wanted money over time I could just keeping on doing what I am doing.
Personally, I find it amusing when one of my tenants (usually behind it the rent) wants to buy my building and I finance it. Their assumption is that I am making a killing and if they just owned the property everything would be peachy. Well, Joe, it ain't so.
@Andrew B. posted:You missed the whole MTH divesting of large parts of the business and nearly closing when Mike semi-retired?
Nope, remember the day. It is etched in stone!
I see a lot of rumors and suppositions here.
Gunny
@gunny posted:I see a lot of rumors and suppositions here.
Gunny
Since there are few facts to be had, that is what you get.
@jim sutter posted:Why did MTH sell some of their tooling to Lionel and Atlas?
Money is the obvious reason. 
@NYC 428 posted:Its a mystery to me why he chose not to allow the people running the day to day operations of what's left of MTH today to continue operating the whole company and pay a negotiated price over time. This would not only have allowed Mike to recover more of his investment, but also keep his Legacy alive as pioneer in o gauge innovation and scale modeling.
Mr. Wolf sold the MTH warehouse in Columbia, MD before he sold the company. They would have been unable to continue the business the way they had without a warehouse. So, the business had to change somehow.
Part of a result where the employees take ownership usually means that you have enough people willing to form a partnership. Part of that means being secure enough financially to take the risk of continued success. Often, an employee buyout often involves some upfront capital investment too. Not everyone can swing that. How do we even know that wasn’t offered.
The current operating profile of the two (or is it three?) remaining components isn’t all that far off, with at least some former employees taking over different parts.
I have my opinions on how things should have ended up for Mike, but talking about that here would probably not go well. Let’s just say though, that Mike Wolf has probably been the most passionate person since Joshua Lionel Cowen in designing, manufacturing, and selling toy trains.
@MELGAR posted:I'm disappointed about the excellent MTH tooling that seems to have been sold.
MELGAR
Well, at least it is being used by other companies. Atlas has used their tooling purchases very well producing some really nice stuff and holding the line well on pricing given they will try to recoup their purchase costs over time. Unlike another purchaser who seems to have cranked the price up significantly to recover their costs in much less time.
@rplst8 posted:Mr. Wolf sold the MTH warehouse in Columbia, MD before he sold the company. They would have been unable to continue the business the way they had without a warehouse. So, the business had to change somehow.
Part of a result where the employees take ownership usually means that you have enough people willing to form a partnership. Part of that means being secure enough financially to take the risk of continued success. Often, an employee buyout often involves some upfront capital investment too. Not everyone can swing that. How do we even know that wasn’t offered.
The current operating profile of the two (or is it three?) remaining components isn’t all that far off, with at least some former employees taking over different parts.
I have my opinions on how things should have ended up for Mike, but talking about that here would probably not go well. Let’s just say though, that Mike Wolf has probably been the most passionate person since Joshua Lionel Cowen in designing, manufacturing, and selling toy trains.
Remember, Mike has his fingers in all of those entities, he bankrolled much of the transition.
There was a detailed discussion by Andy Edleman of what happened. Don't believe this communication is still available. So, if not facts, information from someone high up on the inside, indeed the second in command of the former MTH entity. If not for the fact that a few long time associates like Andy wanted to continue to work, Mike Wolf would have dissolved the company completely according to Andy. So be grateful for what is, not what you hoped for. Amongst the speculation as to why the company was not bought in its entirety by someone are lots of possibilities, but the reality is no one wanted to buy the company for the price and conditions Mike Wolf required. Selling tooling was likely just another way of realizing cash for hardware they weren't planning on using. This tooling was not limited to diesels, as another point.
I can't answer the question why the decision was made, only Mike can give the true answer.
That said, based on some discussions I have had, the new MTH still has a fair amount of tooling.
This hobby has a unique and nearly universal problem of succession after a business founder is ready to retire. Many smaller businesses either get gobbled up by a corporate hobby company (or their assets) or they simply disappear. Not many manage to successully sell the business to another individual.
The larger companies seem to be worse off on this front because the assets are often too valuable for any one person or group of persons to buy and I imagine to corporate hobby companies would have to see significant value (or a dirth cheap price) to expend the capital. A lot of risk to take, especially with an industry that isn’t growing.
@Landsteiner posted:There was a detailed discussion by Andy Edleman of what happened. Don't believe this communication is still available. So, if not facts, information from someone high up on the inside, indeed the second in command of the former MTH entity. If not for the fact that a few long time associates like Andy wanted to continue to work, Mike Wolf would have dissolved the company completely according to Andy. So be grateful for what is, not what you hoped for. Amongst the speculation as to why the company was not bought in its entirety by someone are lots of possibilities, but the reality is no one wanted to buy the company for the price and conditions Mike Wolf required. Selling tooling was likely just another way of realizing cash for hardware they weren't planning on using. This tooling was not limited to diesels, as another point.
Here is the Blog from Andy about MTH.
@MartyE posted:Here is the Blog from Andy about MTH.
Please, everyone here commenting on the situation, click on the link and read this. These are the facts.
@Bill DeBrooke posted:One might assume that they needed to raise some cash to proceed with the transformation to BTO.
Or to pay taxes on the profit from selling the warehouse. 
@Lehigh74 posted:Or to pay taxes on the profit from selling the warehouse.
Gee, I hope the profits exceeded the taxes or what would be the point?
It's in the public record that Mike sold the warehouse for about $13.5 million more than he paid for it.
@Bob posted:It's in the public record that Mike sold the warehouse for about $13.5 million more than he paid for it.
I know that Bob, I was responding to the taxes comment.
@gunrunnerjohn posted:I know that Bob, I was responding to the taxes comment.
Edited with smiley face.
I’m sure he took depreciation deductions all along the way for the 30 years and paid little or no taxes on the proceeds to the new owners of the various categories of his holdings.
@RixTrack posted:I’m sure he took depreciation deductions all along the way for the 30 years and paid little or no taxes on the proceeds to the new owners of the various categories of his holdings.
Huh?
That’s not how any of this works.
If you depreciate an asset and the sell that asset you will owe taxes on the difference.
