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Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments -- Ignore unavailable to you. Want to Upgrade?

To: Mad2 who wrote (3975)	10/10/1998 10:54:00 PM
From: InvestorLady	Read Replies (1) \| Respond to of 18998

OK lets get it straight: << Darrell, data you posted is old. While the Mycogen and future high value seed story sounds good, financially ABTX is a sick puppy. They are consuming cash quickly and their business is deteriorating. >> As of the fiscal year end June 30th, they were cash flow positive 4.5 million dollars. Their business is deteriorating? Unlike corn and other crops, there is a shortage of hay and potentially some crops may need to be re-planted earlier than the 3-year cycle due to El Nino damage. Additionally, the recent findings that feeding cattle hay 5-7 days prior to slaughter eliminated ecoli bacteria may increase demand for hay. Cattle producers lose millions in a recall for an ecoli scare and hay is a cheap way to get insurance. As for turf, lots of golf courses are beaten up from the horrendous weather and suburbia is expanding, not declining. <<Some facts as of 9/28/98: Short term debt - 84 mil -, up from 50 3 mo's ago>> True, they purchased several companies in July and added $129 million in revenues for that added $34 million in debt which will begin to appear in the next reported quarter. <<Long term debt - 15 mil addl Deutch bank bridge - 14 mil Of the 84 mil of their 100 mil short term line from Bank of America they paying 18% on 15mil of it because of violation of loan covenant.>> I think you read something wrong. It appears there is 15 million in long term debt and the bridge loan is NOT at 18%. Should they take an additional 15 million (the credit line was expanded) then and only then will the company pay 18%. Please read the K again. The current rate is closer to 3 plus prime. Easy to misunderstand that one. <<Gross Margin is deteriorating>> Pardon? From what to what? Margins were about 23 % this last report. And they have just completed the consolidation of ancillary product lines (approximatley 20% of product sold) to a managable 2-3 from 3 times that amount plus which CARRY HIGHER MARGINS. NOW they are working on the forage and turf lines to do the same with proprietary seeds. Consolidating 33 companies takes time to work off inventory. The new year which began July 1, will being to show owning companies for a full planting and harvest season. Margins are expected to increase due to the conoslidation of lines and the elimination of middle men, buying power and product offerings or proprietary seeds closer to the 26% margin mark. << They don't cite amount of business done in forigen countries (total of 51) hawever South America is mentioned as important.>> They have 10% foreign exposure per the conference call. << Additionally US farm and cattle producers have been in the toilet.>> Yep, El Nino hurt the spring planting. <<Cash burn won't let up as they have 1000 employees and are entering their low sales period (seasonal).>> They are prepared for this. And I need to double check that employee number, seems high to me. << On the stock side they have around 6-7 million of warrents and options not including issued stock and 7 million dollars of conv perf (not sure how it converts) that was issued a few years ago.>> The conv preferred was done some time ago, and yes they do have about 45-48 million shares oustanding diluted. << ABTX needs help. They better hope that Merrill can put togeather a good deal, unfortunatly now is not a good time.>> Now is the perfect time given the high race to life sciences expansion by the chemical/drug concerns as the consolidation in the industry has accelerated. What the street doesn't recognize about this industry, the industry does. <<Pink called it accuratly when he called ABTX a seed distributer (and processer).>> So was Cargill Seeds and they went for $650 million for $139 million in revenues. ABTX has a forward run rate of $460 million. You do the math. <<The only technology they have is the promise (good long term) of their development with Mycogen.>> ABTX owns R&D with libraries as old as 100 years of data. They have world class germ plasm to partner with for the 45% market share they control. They have proprietary seeds, sell biotech (gene shot) ancillary seeds from Monsanto and are taking the next steps to utilize the huge distribution channel that has been put together. Instead of looking at ABTX's outdated balance sheet due to accelerated acquisitions, perhaps you ought to be researching the cash of DOW, Dupont, Monsanto, and Novartis to see what kind of bidding war is possible for an industry that is not as cut up as corn. One last thing, ABTX suprised to the upside last year for Q1 due to the grass companies doing well. Have given you guys WAY too much help. You want to short, go right ahead. It is your money. Lady