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School Specialty Inc. Message Board

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  • topline1@sbcglobal.net topline1 Oct 31, 2012 9:46 PM Flag

    SCHS is an EBITDA and FCF story

    garbageingarbageout Your assessment seem reasonable. Where can you get a company with about $700 MM in sales for a market cap of less than $35 MM ? But don't you think some restructuring will have to be done? One of the reasons they are where they are is that they never assimilated the acquisitions that they did to properly take advantage of potential synergies. This might turn out to be benefit to them in some respects if divisions / business units can be sold off piecemeal to generate funding to reduce debt & pay off bills until schools start getting funding for deferred purchases. - any one else have thoughts on this?

    Sentiment: Buy

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    • The company used the refinancing to buy time to turn around the business which means both integrating the acquisitions and/or selling some of them and waiting for the inevitable turn in school spending. Whether a restructuring needs to be done depends on whether or not EBITDA can grow to $60-70mm in the next two years. If it does and assuming modest free cash generation, Debt/EBITDA becomes closer to 4x, which should be refinancable. You have to remember due to the small share count that $70mm of EBITDA becomes more like $1.66 in FCf per share. Again, one could easily see that giving you a mid teens stock price which could end up enabling a new convert or an exchange or a straight non dilutive junk deal.

      Sentiment: Strong Buy

 
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