Good News: Expiration of Bush Tax Cuts Won't Kill Recovery [View article]
Thank you. And you do have a point about the intro; I'm just kind of fed up with modern CEOs complaining about regulatory and economic uncertainty, as if they're the only generation of businesses that have had to deal with it. CEOs in the 40s had to worry about whether there would even be a Europe to sell to, and after the Iron Curtain it can't have been much easier in the 50s through the 80s.
Stone Energy: Don't Expect a Post-BP Rebound [View article]
I explained my calculations; what is deducted from revenues is depreciation, depletion, and amortization, and if that does not track capital expenditures then the result is free cash flow that runs below reported earnings. I'm not subtracting it twice; I'm subtracting it once and adding DD & A.
As I explained, resource extraction companies have to make new capital expenditures to replace the reserves that they have consumed, so that what for normal firms would be a growth asset would in this case simply be replacing what is lost. But don't take my word for it; in the last four quarters the company has made $295 million in capital expenditures, which represents 20% of the current value of the firm's assets. In that time, production volumes have increased by less than 7% as compared to last year. Production volumes are still well under the 2007 peak, despite (or perhaps because of) the purchase of Bois d'Arc Energy when oil prices were over $110 a barrel.
And I do know a fair bit about the oil and gas business. My investments in Linn Energy and Breitburn Energy Partners were highly satisfactory to me; the companies were more or less unscathed by the BP spill; and most importantly they do not suffer from the free cash flow problem that Stone does.
There are better places to bet on a post-BP bounce than this company.
Entercom Still Undervalued Despite Recent Run-Up [View article]
A good point. ETM's last renegotiated its interest in March of 2010, and their bank facility ultimately expires in June of 2012, when they will have been able to cut down their debt by only around $100 million if my projections hold.
However, Entercom has a higher operating margin than Radio One, and less apparent financial distress. And it could be that the financial distress itself is to blame, as Radio One's advertisers are deserting them simply because they may not be around in a few years, and of course that informs their creditors when it comes time to set interest rates.
If a similar development should occur at Entercom the company's current position would be imperiled. It is a significant risk you point out.
By any measure (operating earnings, free cash flow, even the number of employees), CenturyTel is between 1/2 and 2/3 the size of Qwest. And now they're merging as equals?
I'm afraid the corporate ambulance chasers have it right this time. This is an unfortunate deal for Qwest shareholders.
Conn’s Teaches a Vital Lesson in Inventory and Receivables Analysis [View article]
The reason that receivables have been increasing is that before 2008, Conn's transferred all its receivables for the goods it sells on credit to a securitization entity. In 2008 they obtained a line of credit that gave them a lower cost of funds than the securitization, so they kept the receivables on their balance sheet instead. The average lifespan of their receivables is 19 months, and so it takes a while for principal payments on their receivables to equal new receivables acquired. But that should happen in a quarter or two.
If you sum the receivables on their balance sheet and still in the securitization entity, you find that the total has barely increased at all for several years. Likewise for the debt picture.
Good News: Expiration of Bush Tax Cuts Won't Kill Recovery [View article]
Stone Energy: Don't Expect a Post-BP Rebound [View article]
As I explained, resource extraction companies have to make new capital expenditures to replace the reserves that they have consumed, so that what for normal firms would be a growth asset would in this case simply be replacing what is lost. But don't take my word for it; in the last four quarters the company has made $295 million in capital expenditures, which represents 20% of the current value of the firm's assets. In that time, production volumes have increased by less than 7% as compared to last year. Production volumes are still well under the 2007 peak, despite (or perhaps because of) the purchase of Bois d'Arc Energy when oil prices were over $110 a barrel.
And I do know a fair bit about the oil and gas business. My investments in Linn Energy and Breitburn Energy Partners were highly satisfactory to me; the companies were more or less unscathed by the BP spill; and most importantly they do not suffer from the free cash flow problem that Stone does.
There are better places to bet on a post-BP bounce than this company.
Entercom Still Undervalued Despite Recent Run-Up [View article]
However, Entercom has a higher operating margin than Radio One, and less apparent financial distress. And it could be that the financial distress itself is to blame, as Radio One's advertisers are deserting them simply because they may not be around in a few years, and of course that informs their creditors when it comes time to set interest rates.
If a similar development should occur at Entercom the company's current position would be imperiled. It is a significant risk you point out.
Great News: Stocks Are Hated [View article]
Don't Sell Your Qwest Shares [View article]
I'm afraid the corporate ambulance chasers have it right this time. This is an unfortunate deal for Qwest shareholders.
Conn’s Teaches a Vital Lesson in Inventory and Receivables Analysis [View article]
If you sum the receivables on their balance sheet and still in the securitization entity, you find that the total has barely increased at all for several years. Likewise for the debt picture.