Robert: I just looked at the results for the last quarter. UGLY.
I am no longer tempted. This stock could open tomorrow under 3. They now have a negative book value of almost $2/share. They have 16 $MM in bank debt plus 100 $MM in other debt, meaning that servicing this debt requires cash flow of at least $9 MM/ year or lets be generous and say $2 MM/quarter. Now if their margins from the Wales acquisition were good, then some increase in sales could possibly get them in the black, but look at their cost of goods and at their (Oh God!!!) SG&A, they'll have to sell more than $40 MM per quarter to cover this SG&A, unless they do something with their staffing. I see big troubles, cut backs, restructuring and fire sale in the future.
Then look at the account receivables, I just finished looking up KLIC recent quarterly, and their receivables are at less than a quarter's sales (much less), but TRKN have (at their current selling rate) 6 months of receivables. This is usually an indication that some of these receivables are not collectibles (probably booked sales of trial systems, that have been tried for too long shall we say?).
Was there a conference call and did anyone hear something about these problems?
Right now, stay away as if it was the plague. This company, unfortunately has a major question mark above it, it cannot survive unless some drastic measures are taken and taken at once. If I were to run the company, I would consolidate all the operations back home, close the Wales office except for some European service centers, and slash all that fat that permeate this organization. They need to cut at least $30 MM annualy from their overhead budget (SG&A and R&D), and the only way you can do that is to close Wales down. If they do not, they will bleed to death. If someone can estimate by how much their sales can grow in the next quarter with all the positive pronouncements (impending orders), fine, but these increases have to be momentous and there is no reason to see their sales doubling in the next quarter.
The next step will be the bank not extending additional loans. If their CFO knows how to collect some of these receivables, it can inject another $10 MM cash into the operation. But How much of the $49 MM in inventory needs to written off?
I am also missing some millions of cash in all this garbage, they reduced since last december their rec. by about $4.5 MM and their Inventories by about $4 MM, so their cash and investments should have gone down by about 13-8.5 MM, or only by $4.5 MM, but these went down by the full $13 MM pre tax losses they have incurred. Anyone knows where did these $ 8.5 go (should have been more like $9.5 since a million of their losses is "goodwill amortization" not a cash requirement.)
I have seen bad balance sheets but this is for the history books, yet, not unexpected, six months ago I said they will run into debt servicing problems, and I am afraid the time is close for that. This one might have chapter 11 in its future. I do not see an aquirer taking a position that leaves anything to the stock holders, if this thing goes on the block it will be to satisfy the banks and bond holders (and the latter have a fat chance of coming out whole as well).
Zeev |
