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  • Janet Yellen's Impossible Task [View article]
    Great comment JasonC. Also, Filipo, the data he is referring too is published by the Federal Reserve in the Flow of Funds tables. I suppose if your the type that likes to doubt governmental data then this won't satisfy you. However, it should. Here is a link:
    Feb 6 09:50 AM | 2 Likes Like |Link to Comment
  • What Accounts For The Decrease In The Labor Force Participation Rate? [View article]
    I agree with Gettin'Long. The problem seems like it will be enormous when it comes home to roost. We have grade inflation because schools cannot graduate enough kids. My Alma mater just lowered its grade point average requirement from low to VERY low. Almost 70% of students have debt with an average load around $27,000. Most are not getting jobs which satisfy them financially and very few are getting jobs which satisfy them existentially.

    The younger generation will be fine, but the level of debt is a bit ridiculous. Also, it is worth pointing out that many educational systems need increases in future student enrollment levels to make the math work on projects which are *currently* in place.

    Demographics do not favor the plans of the current educational system. We have already topped out over the demographic peak of college aged students a year or so ago. It seems like this whole thing will be a big problem in the future.
    Jan 21 04:37 PM | 1 Like Like |Link to Comment
  • Rebuttal: Crystal Rock Holdings: Almost 100 Years! (And Counting) [View article]
    No problem, thanks for reading Brian.
    Jan 2 01:49 AM | Likes Like |Link to Comment
  • Rebuttal: Crystal Rock Holdings: Almost 100 Years! (And Counting) [View article]
    Hey Financial Analyst, thanks for reading.

    I have thoughts on the points you brought up and definitely agree that there is a lack of liquidity in the shares.

    "They have virtually no competitive advantage to sustain market share." Well, they have maintained market share and have grown volume in recent quarters. When I try and find customer reviews and compare them with local competitors (I doubt I have covered their entire territory however so please inform the discussion with specific competitors) the company appears to do pretty well.

    "Coffee and water sales are flat while larger competitors have highly sophisticated distribution systems and marketing strategies that allow them to grow." It is true that revenue is flat -- fair point. Which competitors are you talking about specifically? How are their marketing strategies better? I am absolutely willing to concede the point if it is a fair one -- but I am not sure it is.

    "CRVP burned HALF of their cash/equivalents between 2011 and 2012." I am not sure the fire metaphor is a useful way to describe how they spent their money over the last year and three-quarters. Let us take a look:

    B/S -- Cash and cash equivalents Oct 2011: $5.37 million
    Cash from operations fiscal 2012: $4.1 million
    Less: Capex: ($3.3 million)
    Less: Acquisitions: ($0.5 million)
    Add: Asset Sales: $0.1 million
    Less: Pay downs of debt: ($2.7 million)
    B/S -- Cash and cash equivalents Oct 2012: $3 million
    Cash from operations 9-months ended July 2013: $3.5 million
    Capex: ($1.64 million)
    Pay downs of debt: ($2 million)
    B/S -- Cash at July 2013 - $2.88

    So from the above where did all the money go? Across the period $7.6 million in cash was generated, $4.94 million was spent on capex, and $4.7 million paid off debt -- with a net result in a $2 million decrease in cash which you referenced ("CRVP burned HALF of their cash/equivalents between 2011 and 2012").

    The debt which was paid down was high yield -- sounds like a pretty good use to me. What about the capex? Is the burn metaphor really necessary? The money was spent in part on new coolers and brewer inventories, and there was an increased amount of spending on computer system upgrades. (Further, keep in mind that there is huge IT spending which suppressed margins which is not likely to be fully recurring -- if any of it is recurring at all.)

    "You can also compare this company to a retailer with SSS, if their sales are dropping to non-temporary circumstances (aka cemented trends), it usually bodes poorly for the company."

    CRVP's sales are not really dropping although it is perhaps a reasonable analogy to say they have a high fixed cost business like retailers. But retail sales declines are damaging in part due to the 5 year leases, the seasonal selling cycle (if you missed your chance during the selling season you have to wait till next year) and due to the fact that many retailers have to deal with fads. In my opinion, water is not a fad. Nor is the business built with cycling 5 to 10 year leases. Also, it is worth noting that sales are not on the decline but stagnant.

    "No growth = no gains."

    That is entirely your opinion. I am of a different opinion. One can look at businesses as if they were a bond -- and one can value the business accordingly. Sure, there will not be "more and more money produced over time" but I am a value investor. The cash return, in my opinion, looks attractive although the future is unknown to me like it is to you. So it may turn out that I am mistaken.

    "This is really a speculative trade."

    Speculative is a very porous word and I disagree as you might expect. TWTR is speculative at today's prices. Treasuries -- the "riskless" paper of the world -- are surely "speculative" at today's prices. Half the market is selling at speculative prices -- particularly the small cap market! There is always a chance one doesn't make money on an investment but, in my opinion, I don't think there is much downside at today's prices and, importantly, I think catastrophe risk is low. But this is my opinion and I encourage you to form your own and stick with it.
    Jan 1 09:15 PM | 2 Likes Like |Link to Comment
  • Perry Ellis: A Branded Apparel Stock On Sale [View article]
    Hey Christopher, good points.

    I don't have a breakdown but we do know that some of the one time costs were pushed into COGS as you mentioned. My understanding is that when they choose to exit the private label business, orders fell off more rapidly than management expected hitting sales and probably some inventory. I could be wrong about that but that is my interpretation. In the most recent 10-Q we have reasons like:

    "[The decrease in gross profit] is attributable to the reduction in contribution from our direct-to-consumer segment as well as mid-tier channel revenues...[Management said the latter seemed to correct at the start of the most recent quarter]...Gross margins were positively impacted by the expanded margins in our collection business driven by reduced markdowns. This margin was offset by decreases due to the lower contribution from our direct to customer segment."

    I think it is tough to see through some of the moving parts which, by managements account, are temporary and currently a drag on results.

    "But there was a point when these exited lines were not this way and management thought highly of them. Can you articulate why you think this phenomenon won't spread to other lines of the business?"

    I cannot say definitively so this is just an interpretation. Basically, the private label business was strategic -- it provided a diversified revenue stream, nurtured long-term relationships with mid-tier retailers, and was probably a relatively stable business. Today, the company is much larger and the revenue contributed by that side of the business has become small relatively speaking. So, having a small segment with low gross margins which takes up a disproportionate amount of managements time is not wise when it doesn't serve a strategic purpose anymore. That is how I think about it and I am not particularly concerned that it will spread to other parts of the business. Given that we are talking about exiting the *private label* businesses, I don't think the fact that management exited them reflects poorly on the fair value of their current trademarks. Good questions.
    Dec 18 12:32 PM | Likes Like |Link to Comment
  • Perry Ellis: A Branded Apparel Stock On Sale [View article]
    Sure, this is no Michael Kors but we are looking for value in a fully valued market. And Perry looks like the sort of business which can course correct and improve its temporarily poor results. If it weren't for the recent set backs, the stock wouldn't be cheap.

    The biggest difficulty I see facing the company is the decline of department stores to internet shopping given the internet's superior ability to service fashion niches. Perry Ellis, however, has been growing at a handsome clip in this category. They said in the last conference call:

    "Our business with pure e-com retailers like Amazon and Zappos is excellent and has grown by 65% compared to last year. We continue to invest in our E-Com business and we are very satisfied that our brands are resonating so strongly with our consumers in the Internet."*

    Also, I am not particularly impressed by Rafaella. But that said, there is a level of safety in the shares which is difficult to find else where in the market. Given that the company only has a small fraction of their sales through the direct-to-consumer channel, the company needs cache with department store purchasing agents -- not necessarily the public at large.

    Dec 17 05:12 PM | 1 Like Like |Link to Comment
  • Perry Ellis: A Branded Apparel Stock On Sale [View article]
    Hey Paul, I just wanted to put the debt in perspective. The current assets of the company stand presently at about $393 million -- the *total liabilities* of the company are at about $347 million.

    Further, over the last three years, the company has had the following fixed charges coverage:

    2010 - 3.7x
    2011 - 3.4x
    2012 - 2.4x

    The coverage is obviously worse in the most recent nine months but, as I argued above, I believe this will swing back in time as actions are taken to course correct. Lastly, the debt is due in 2019 so the company has plenty of time to improve results before any principle payments can be demanded.
    Dec 17 05:03 PM | Likes Like |Link to Comment
  • An 11.5% Yield Investors Must Avoid [View article]
    Good discussion here.

    First, if you are going to buy one of their fixed yield securities and the bonds yield more than the preferreds, buy the bonds. Second, the fact that the company needs to sell the preferreds is not a good thing. Even the size of the preferreds is worrisome -- why such a small amount? Particularly when the company has historically produced strong cash flows? The company has produced operating cash flow that is nearly double the current stock price -- making it unique in terms of market capitalization relative to operating cash flow.

    Also, it is worth pointing out that TPG Specialty Lending, Inc and Tennenbaum Capital partners took over the debt which was coming due in the next 12 months. Tennenbaum Capital is a serious high yield investor. They do their due diligence and are not working altruistically. They are looking to profit. But if the bonds are safe (according to them) the common equity is way more attractive.
    Tennenbaum Capital would not have helped the company pay off its revolver if they thought that the multi-client library could not be monetized. (Also, their *cash* investment in their data library is only $634 million -- it is only if you count "capitalized depreciation" do you get near $700 million.)

    Further, Nelson is quite correct that some of the land which is covered by their multi-client library ought to be profitable for the company in the long-run (but I am no expert).

    The difficulty facing the company, in my opinion, is whether they can be profitable on the proprietary side. The debt is not too big a worry *if* monetizing the data library works out as planned -- so far, things look alright in this regard.

    Also, one point for tigersfirstwhore. Global Geophysical Services doesn't look like Geokinetics. Geokinetics had far more debt.


    GGS debt to operating cash flow is around 4 on a TTM basis (and less than 3 if we are talking about a 3-year average or something)

    GEOKQ, on the other hand, had debt which was around 9x operating cash flow. Further GEOKQ had mandatorily redeemable preferred stock which puts the total senior capital at 12x operating cash flow. GGS certainly faces challenges but they are not a GEOKQ.
    Dec 16 10:16 PM | Likes Like |Link to Comment
  • Otelco Is An Attractive Post-Reorg Investment [View article]
    Well, if we knew the company wasn't going to go back in bankruptcy and would stabilize, the equity would certainly be cheap. But your right, who wants to invest in something which is putting out numbers which indicate a dwindling future. If it makes it through, however, there will probably be some upside since it currently has a FCF yield of 50%+ and, according to Evercore, it could still be producing a FCF of 50% in 2017.
    Dec 12 04:16 PM | Likes Like |Link to Comment
  • Tuesday Morning: An Expensive And Troubled Retailer Makes For A Good Short [View article]
    Well said.

    I think your right that the company's problem is its merchandising and hence the problem is organic to the whole system. As evidence that this is the case, management is attempting to change the company's merchandising strategy:

    Michael Rouleau:

    "Now I want to spend a little time today talking about our merchandise strategy. While operations make it all work, our business is really about the merchandise. The merchandise will determine our ultimate success. Here are some of the key components of our new merchandise strategy. We are focusing on brand names, names that customers know and trust, and are rebuilding the buyer relationship with the suppliers to continue with this trend. We are focusing on better best quality merchandise.

    And the next one is key. We are now selecting broader assortments of merchandise and purchasing less quantity of each item versus narrow assortments and very deep purchases like we have done in the past. This broad assortment direction is a major change for us and is significant as it supports these five objectives: number one, new fresh merchandise arriving in our stores every week providing the customer with more and varied treasures.

    Number two, this direction will allow us to have a lot less clearance markdowns as we now will buy a lot less of each item. Number three, our inventory turnover is increasing and we are constantly refreshing and turning the merchandise in our stores. Number four, unlike the past, we are in seasonal merchandise when customers want it and out quickly when they lose interest resulting in minimal markdowns and no inventory carry over making way for the next wave of seasonal merchandise which keeps our stores looking really fresh and exciting.

    And number five, this direction will eliminate the problems of messy-looking stores and major inventory write-offs like we have taken in the past. **This is a very, very big and logical change for our company, the direction that we believe we must make and we are making now to maximize customer interest in our stores and increase future sales and profitability.**

    A good question could be, what will it take to make this transition happen and how long will it take? Basically it takes this. Our buyers have to be and are much more proactive with suppliers of the merchandise that we want to carry. There's plenty of clothes merchandise out there whether it's from manufacturers or distributors or bankruptcy firms or canceled orders and warehouses all around the world. It's there and we're out getting it. To address the question of how long it will take, it's happening right now and will continue to evolve over the next few quarters."*

    Dec 11 05:56 PM | Likes Like |Link to Comment
  • Tuesday Morning: An Expensive And Troubled Retailer Makes For A Good Short [View article]
    It is hard to say, I would guess people have not run the math. The company has to be as prosperous as it was ten years ago for today's prices to make sense -- in both revenue and gross margins. Further, Tuesday Morning, in my opinion, lacks differentiation and therefore faces an even tougher turn around. The stock market is wrong all the time for many different reasons -- e.g., try to rationally explain twitter's investment value. Buyers at today's prices are speculating that the company is able to (1) turn around and then (2) perform better than Tuesday Morning did in 2004 and 2005.

    The sector is indeed easy to value -- makes you wonder whom is buying at today's prices.
    Dec 11 12:09 PM | 1 Like Like |Link to Comment
  • The REIT Numbers Don't Lie, Check The Score Board [View article]
    "Price is truth."

    I disagree, "prices always distort the underlying fundamentals."
    Nov 19 02:05 PM | 3 Likes Like |Link to Comment
  • Nicholas Financial: Facing Increased Competition From Subprime Auto Loan Originators [View article]
    Michael, great comments. I think it is very difficult to determine how successful subprime auto loan securitization will be but I absolutely agree that it allows capital to ramp up rapidly. And since it allows capital to exist just as rapidly, it should produce some interesting effects. But the securitizing process is not going away and it promises to funnel huge capital flows into certain industries at certain times. In a way, it reminds me of rapid international capital flows where a countries security prices get pummeled because foreign money seeks to exit the country at the same time (e.g., the Asian financial crisis in the late 90s).

    But since these flows are domestic, it seems possible that there will be mini booms and mini busts in industries which have influxes of securitizations. We will get to see whether this is the case with the subprime auto lenders. Also, I agree about using CPSS as a gauge of the market.

    Do you know of any one else who is similar to CPSS?
    Nov 19 02:02 PM | Likes Like |Link to Comment
  • The REIT Numbers Don't Lie, Check The Score Board [View article]
    I thought the whole REIT interest sensitivity was resigned to mREITs? For instance you write: "One of the biggest myths today is that REITs are "fixed income" instruments; however, that's far from the truth."

    Some REITs are REITs to be sure -- but there are many mREITs which are basically shadow banks. Those probably have high interest rate sensitivity.
    Nov 19 11:33 AM | 2 Likes Like |Link to Comment
  • Consumer Portfolio Services: An Example From The Subprime Auto Securitization Market [View article]
    Good points chaset. They mentioned last June as the date to redeem the Levine bonds. Also, when I mentioned above that there are more insider sellers than insider buyers, Levine Leichtman has been the main seller. I believe the $0.40 per quarter was an estimate of an analyst which he bounced off management. There exchange is quoted below:

    "Analyst K.C. Ambrecht:
    But it seems like [Levine Leichtman is] selling the stock because if they don't own the bonds, they don't want to own the equity. I mean, their first interest seems like it's in the bonds, which makes sense.

    Charles E. Bradley - Chairman, Chief Executive Officer and President:
    I don't know. I mean, if we’re him, I'd sit on it until the stock got to 14, but that's just me.

    K.C. Ambrecht:
    Yes, okay. And then, just a question on EPS. It looks like you guys are tracking like a $0.03 to $0.04 quarterly EPS improvement every quarter. As we thought, a year ago, I think on one of the conference calls, it looks like you guys are going to be on that run rate for $1 by 4Q '13. Should we kind of continue to expect that kind of quarterly sequential EPS improvement into '14?

    Charles E. Bradley - Chairman, Chief Executive Officer and President:
    I don't know. I kind of expect the company to continue to do really well. How's that?

    K.C. Ambrecht:
    Okay. Well, if you do, do $0.04 improvement a quarter, that kind of gets you around $0.40-ish by 4Q '14. And the only reason I bring that up, if you begin annualizing that, there's a lot of specialty finance companies out there who are trading 10x or 11x. If you're doing $0.40, they can put you right around $1.50 or 4.5x earnings right now. So I just want to see if something that we're missing something.

    Charles E. Bradley - Chairman, Chief Executive Officer and President:
    No. My technical view of that is sort of like the Field of Dreams. "If you build it, they'll come." So I wasn't really following what you said, but we're just going to build and see what happens.""

    From here:
    Nov 18 11:14 AM | Likes Like |Link to Comment