I also attended the shareholders meeting. I took some notes, which
I may not have time to post until next week, but a few things I think
are worth noting. One, of course, is the $2M cost reduction package.
Director and officeholder salary reductions amount to $500K, and
manager salary reductions, another $250K. Consultant expenses will
be reduced $475K. The Austin office will be closed.
For the last three years, the EBITDA (cash flow) has equalled approx.
2 times net income.
Mr. Hilliou said employment agreements are being renegotiated, including
reduced salaries (see above) and shorter terms. I was told offline
that some previously granted stock options are being given back, also.
Mr. Hilliou stressed that an important part of the acquisition strategy
and the plan for building management is to recruit local talent to
acquire local familiarity with the markets. Target acquisitions should
have local monopolies.
Target expansion areas include Montana, Louisiana, and Nevada, but there
are no management teams in place in these areas. Getting them in place
should not take long.
Some board members have issued a mandate to re-enter Florida this year.
Not all of the 15 bingo halls are good performers. There will be
efforts to turn the laggards around, but the company will not wait
indefinitely for positive results.
Mr. Hilliou will post his speech on the Internet. John Orton will
also post his slides, except for projections.
The FY98 projections were essentially Q1 results multiplied by 4, and
were given as a baseline, assuming no further expansion. The plan
appears to be to get the management changes and cost cutting in place
in Q2 and proceed with expansion in Q3 and Q4. This should result
in revenue and earnings growth in the out quarters, though the
tax loss carry-forward, which coming into 1998 was just over $2M, will
probably be exhausted, putting pressure on earnings.
The company is holding some high interest (11-12%) notes payable.
When questioned about doing this when there is cash available, Mr.
Hilliou said the cash should generate a higher rate of return.
(My thoughts were, well, OK, but shouldn't those notes at least be
refinanced?}
Larry |
