USA Detergents (USAD). A Table Pounding Buy... Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : USA Detergents (USAD). A Table Pounding Buy...

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Greg Ballinger who wrote (42)	5/1/1997 4:05:00 PM
From: Rob Bonner	of 143

To all: I seem to detect a bit of negative emotion and resentment toward monagement due to the recent stock price decline. I, too, would rather the stock doubled from my $22 entry point than half itself! Do not forget, however, that management is trying to build and run a growing company and has little influence over what the street does. I attribute this latest massive selloff to the street's expectation that the growth pains experienced in the 4th quarter were going to be a one quarter event. They weren't, and the effects spilled over to the first quarter of '97. So what is going on. Making soap suds isn't exactly rocket science, but growing any company as fast as this one has grown over the last year presents logistical challenges especially when the product is bulky and inexpensive. The real question to ask is has demand for this company's products fallen off or has management failed to execute. If the answer is the latter, what is being done to correct it. Revenues in 1995 were $105 million; $174 million in 1996 with about $48 million of that falling in the 4th quarter. The company today informed me that they expect 1st quarter sales to be up about 20% over, not the prior year quarter but the prior quarter! This tells me that demand is not falling off. The company firmly admits that the problems arrise from rapid growth in both distribution and manufacturing capacity and that management has failed to control costs in the face of this rapid growth. Sounds reasonable. They went from one manufacturing/distribution facility to four in a year and quadrupled their capacity. Is the company in denial that they failed to maintain profit margins? No. Then what are they doing about it? They replaced key management with personel whom they feel are up to the unique challenges of managing this rapid growth starting with a CEO who was the Comptroller and VP of Finance with Toshiba, a $2 billion company. They hired someone to head distribution with logistics experience at Clorox and Officemax. They replaced about 50 people in distribution. They upped throughput from 60 to about 160 trailers per day and are still working on obtaining enough inexpensive wharehouse space. They have reduced case lot inventory. They are replacing outdated machinery on the N. Brunswick production line with modern machinery that will reduce labor costs. Management are stock holders and will prosper as the company and other shareholders prosper. The risk is in whether the new management can execute and return margins to prior levels and if so in what time frame. Based on their willingness to accept responsibility and make changes, I think it is likely that they can execute on this plan. That is why I keep buying more shares as skitish growth investors flee. Great...it makes room for us value investors! My last point is that I hate to see these threads turn into a bunch of whining and namecalling of management every time a risky stock price declines. If you can't take the heat, stay away from the fire! May we all make the right investment decision, at least most of the time. Rob

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next