re: CREB.OB - Champion Parts - OTC/BB : $1.20
AUTOMOTIVE & MACHINERY PARTS
Adding Champion Parts to the portfolio due to surprising earnings performance - to the level that even cured negative shareholder's equity - and possible further accretive acquisitions
Business Summary:
Champion Parts, Inc. remanufactures and sells replacement fuel system components (carburetors and diesel fuel injection components), air conditioning compressors and constant-velocity drive assemblies for a variety of makes and models of domestic and foreign automobiles, trucks and marine applications. The Company also remanufactures and sells replacement electrical and mechanical products for certain passenger car, agricultural, marine and heavy-duty truck original equipment applications. During 2002, the Company's net sales of parts for automobiles (including light duty trucks) accounted for 87% of total net sales, while sales of parts for heavy duty trucks, farm equipment and marine applications accounted for 13%.
In its remanufacturing operations, Champion Parts obtains used units (cores). A majority of the units remanufactured by the Company are acquired from customers as trade-ins (core returns), which are encouraged by Champion Parts in the sale of remanufactured units. The price of a finished product is comprised of a separately invoiced amount for the core included in the product (core value) and an amount for remanufacturing. Upon receipt of a core as a trade-in, credit is given to the customer for the then-current core value of the part returned. The Company limits trade-ins to cores for units included in its sales catalogs and in rebuildable condition, and credit for cores is allowed only against purchases by the customer of similar remanufactured products within a specified time period.
The Company's products are marketed throughout the continental United States and, in a limited way, in some foreign countries. Champion Parts sells carburetors to aftermarket retail chains that distribute products through their stores. In addition, the Company sells electrical, mechanical and constant-velocity drive products to manufacturers of automobiles, trucks and farm equipment, which purchase its products for resale through their dealers. The Company also sells carburetors, air conditioning compressors, electrical and mechanical products to automotive and marine warehouse distributors, which, in turn, sell to jobber stores and, through them, to service stations, automobile and marine repair shops and individual motorists.
Champion Parts adopted a plan in 2001 to consolidate the manufacturing operations of its Beech Creek, Pennsylvania, facility into its Hope, Arkansas, facility. The consolidation of these facilities eliminates having to operate two significantly underutilized plants, and allows the Company to reduce costs and improve operating efficiencies. Operations ceased at the Pennsylvania facility on March 15, 2002 and all of the inventory and capital equipment were transferred to the Hope facility, as of December 31, 2002.
Valuation is rather low for it's industry position - biz.yahoo.com
Shares out : 3.65m Sh#, Float : 2m
Core Holders:
RPG owns around 18% (Ronald Perelman)
Dana Corp owns 15%+
Shareholder's equity turned positive recently due to newfound profitability
TTM figures: : $24m sales, $1.84m EBTIDA, $1.15 Income
PerShare : $6.58 sales, $0.17 EPS
Gross margin shot up on a well executed strategy of consolidation of declining business into one location supplemented by an acquisition in growing fields (marine, air conditioning comrpessor) from 10% to 21% in the last quarter
Strategic points:
1) most do know that I'm certainly not a tree hugger falling in love with "green type" of investments. However Champion parts' remanufacturing operations are not only "easy" on the environment they also make good business sense.
2) In light of recent profitability levels and commercial sucess, RPG group (18% owner) increasing it's stake in the company (see recent 13D filing)
3) CREB has been succesfully managing decline in it's core carburetor oeprations, succesfully completed by shedding a marginal plant in Pennsylvania, concentrating automotive activities in Hope, Ark
4) At the same time they were able to build an airconditioning services (remanufactured compressor) division which is enjoying stellar growth and profitability
5) CREB earned $0.17 last quarter (Q2) and $0.08 in Q1 - for the first 6 months $0.25 in total on gross margin improvements from under 10% last year to 21% recently
6) further accretive acquisitions were hinted in the last 10Q report
all the best
CROSSY |
