ARCI's 1999 earnings would have been 50% higher without the non-recurring Y2K and litigation settlement costs expensed to SG&A, and after adjusting for noncash depreciation/amortization expenses, true cash earnings power was 100% higher than reported earnings.
According to 99Q3 10-Q, ARCI expensed $193,000 of Y2K costs and a $74,000 litigation settlement payout, for non-recurring expenses thru Q3 of $267,000.
Add this to $505,000 reported earnings, and the adjusted total earnings would have been at least $772,000, 50%+ higher than reported.
I say "at least" because I'm excluding unknown Q4 non-recurring expenses, and the absence of Edison on Q1.
Also, you can add in $301,000 of noncash depreciation/amortization expense thru Q3 to get an adjusted cash earnings power of at least $1,073,000, which, again, excludes Q4 d/a. This is 100% higher than reported earnings.
Thus, the TRUE earnings power of the new ARCI in 1999 was $1,073,000, not $505,000. These adjusted numbers are clean since ARCI had little, if any, capital expenditures in 1999, according to 10-Q's, and should have little, if any, in 2000 since company is focused building balance sheet and growing earnings to get stock up to fair value.
This $1,073,000 of "owner earnings" represents $0.47 per share on 2,274,000 weighted average diluted shares, and $0.40 per share assuming 2,700,000 diluted shares in Q4 going forward.
$0.40-0.47 in true EPS power reveals how cheap ARCI @ $2.50 still is, especially in light of likely revenue and earnings growth well beyond 1999's reported levels.
Retail network will be tight and efficient for entire year, same store sales up again from 1999's strong growth; Edison is already kicking in this year vs nothing until April last year, and DWP recycling contract is also in operation from Q1 vs nothing until Q2/Q3 last year.
1999 EBITDA was $1,471,000, $0.65/0.54 on 2.3M/2.7M shrs
1999 EBITDA excluding non-recurring exps listed above was much higher:
$1,471,000 + $267,000 = $1,738,000, $0.76/0.64 on 2.3M/2.7M shrs
2000 EPS(e) = $1,350,000
2000 cash EPS(e) = $1,350,000 + $400,000 d/a = $1,750,000
2000 EBITDA(e) = $1,750,000 + $800,000 int exp = $2,550,000
Assuming 2.7M diluted shrs:
2000 EPS(e) = $0.50, up 127%+ from 1999 EPS $0.22
2000 cash EPS(e) = $0.64
2000 EBITDA/sh(e) = $0.94
Current ARCI @ $2.50 valuation:
5 times 2000 EPS(e) on 127%+ EPS growth
3.9 times 2000 cash EPS(e)
2.7 times 2000 EBITDA/sh(e)
2000 price target:
10-15+ times $0.50+ EPS = $5-10
1 times revs(e) = $6+
10+ times cash EPS(e) = $6+
5-10 times EBITDA/sh(e) = $5-10
What a deal. |
