I hope in writing this my thoughts will crystalize.
Let us say worst case is that they need to reserve another 50 million (for total of 70 million), thereby giving EPS most of what it wants because negotiations are very unfavorable.Since they would be paying out over a number of years, perhaps they might need to raise 40 million, and use cash flow and accrued interest on the 40 million to make up the extra 10 million.
Would investors be willing to pay $15.00 a share? If they did, then dilution is 2.7 mil shares (i.e.,40/15). That would leave continuing eps for 2011 at (4.6/7.3) x 2.80 = $1.76, but would also leave company shielded from Federal taxes for a long time, so $15 seems low. Diluted eps excluding taxes for 2011 would be $2.44
If investors were willing to pay $17.50 when they tried to raise the 40 million in equity, then dilution is 2.3 mil shares, and diluted eps is (4.6/6.9) x 2.80 = $1.87 (2.60 excluding taxes) so it would seem that investors should pay at least $17.50.
Of course to attract new investors you do have to give them a great deal, and who knows what eps projection for 2012 is.
I am convincing myself I don't need to rush to sell. Questions or comments welcomed.
Well(no pun intended), I went to the EPA site and looked up the Superfund site in Pennsauken. This has been a concern since the 1970's. When you get to the home page for this site (link below), there are also links to pages with engineering documents, etc. Take a look at just a couple of the drawings and you can see how these take on lives of their own.
EPA added the Puchack Well Field Superfund site in Pennsauken Township, New Jersey to the National Priorities List on March 6, 1998 because the site’s ground water was found to be contaminated with hexavalent chromium. The 450,000-square-foot Superfund site, located in Camden County, contains six public water supply wells that are no longer in use. Contaminants were first discovered in well water in 1970 and included chromium and volatile organic compounds (VOCs), which are potentially harmful chemicals that can evaporate easily in the air. All of the Puchack Well Field’s ground water wells have been shut down and residents have been connected to a municipal water supply, thereby reducing the public’s potential exposure to contamination. Sampling indicates that no currently operating municipal wells are being impacted by the chromium ground water plume. EPA’s cleanup has targeted both the contaminated ground water and the source areas that have contributed to the pollution.
I just looked at SLI for the first time, and for only a matter of minutes, so I could have this wrong. The company took a $20 million charge against earnings for the remediation and created a long-term liability. However, little cash was paid out (enviromental liability stands at $18.5 million). In your worst case, I doubt the company could raise ~$70 million of cash without massive dilution (more than 100%). The stock is very illiquid and the total market cap is only ~$84 million.
It would be nice to think that a secondary offering could be done at over $20 per share. After all, they just repurchased $20 million of their stock at around $14.50 per share a year and a half ago. Still, your numbers make me feel a little more comfortable with the possibility of them needing another $40 million or so for EPA troubles.
PR on share buyback>>>>>>>>> 10/14/2010
SL Industries, Inc. Announces Preliminary Results of its Tender Offer to Repurchase Up to $20 Million of Shares of Common Stock --------------------------------------------------------------------------------
MT. LAUREL, N.J., October 14, 2010 — SL Industries, Inc. (Amex: SLI) (the “Company”) today announced the preliminary results of its modified “Dutch Auction” tender offer, which expired at 12:00 Midnight, New York City Time, on October 13, 2010.
Based on the preliminary analysis by the depositary, an aggregate of 1,335,059 shares were properly tendered and not withdrawn, including approximately 33,186 shares that were tendered through notice of guaranteed delivery, at prices at or below $14.50. Accordingly, pursuant to the terms of the Offer to Purchase, the Letter of Transmittal and applicable securities laws, the Company expects to accept for payment up to an aggregate of 1,335,059 shares of its common stock at a purchase price of $14.50 per share.