This is the first time I've seen this at CCA and it could be an aboration or it could be a negative sign:
CCA has accumulated no new cash this year. Despite what looks like an excellent half a year where CCA continues to earn significant net income, accounts receivable have expanded by nearly all of the cash that CCA should have been accumulating.
I know that most of CCA's accounts are good credits (Walmarts, CVS, etc.), but expanding Accounts Receivable can be a very negative sign or an early warning of pushing through unneeded product today (in order to make a quarter) but accepting payment later (when they really need the product). I doubt that's what's happening here, but I'm surprised that ZERO of the cash earned since November has made it onto the balance sheet. It's unlike CCA.
AGree with them being overpaid. I will give them kudos for one thing though: they receive zero dollars from the cash dividend. It is only for the non-insider class of shares. That said, they get paid aggregiously and the 6% "inflation" raise they receive every year is disgusting considering they take a big chunk of EBITDA.
Which leads to the point about why they did not buyback more shares: they are compensated based on total EBITDA and not per share cash flow. They are incented to increase the overall size of the business even if it makes each individual share worth less. This is partially offset by their ownership of 30% of the business, but it always makes me nervous to see poorly structured comp systems.
Agreed. I just wish they didn't own 30% already so that they'd stop taking so much cash out of the business and take more stock.
I see your point on the dividend (misunderstood this as a cash dividend before).
They own 30% of the company (and the majority of the vote), I'm not sure you could be much more incentivized.
The special dividend is not a dividend at all: It's a 2% STOCK dividend which means you'll receive 2 new shares for every hundred you already own. No different from a tiny stock split. Calling it a dividend is much more shareholder friendly sounding but isn't at all. They just want to increase the float.
The ongoing cash dividend of 14 cents per share per year also won't put a dent in our cash hoard. They aren't doing anything with our cash right now besides investing in high grade bonds. They ought to give it back to the owners unless they are going to use it soon. I'm sure they can borrow money for any acquisition if needed (unless it's a mjor acquisition).
They are doing something with the cash...paying a special dividend of 2%. I'm all for this Company except for the fact that the guys running it aren't as incentivized with stock as I'd like them to be, but they already own such a large portion that I'm not sure you could have it set up any other way.
Actually, it is to be able to opportunistically buy a company or a product line from another company. At this point though, the cash balance is getting excessive. They should have been buying back shares hand over fist for the last couple years. It was a mistake by mgmt not to buy back a lot more, but they've done a pretty good job with the business so we can't complain too much.
Adamantane stated - Doing that would make me question the fiduciary responsibility of management and the board that allowed management to do so. So I'm very glad they are not doing that.
R_hub, why did you conclude they might be playing precious metals?
To answer Adamantane's question, I have worked for small companies in the past, unrelated to this company or this situation, who have successfully used excess cash flow to invest in commodities gold and silver. A dangerous and gutsy move but in some cases very successful. My statement was a gut reaction "a quick read" and admit I have no knowledge either way. I do believe however this is a small smart organization willing to take calculated risk(s)with internal resources leveraging marketable securities and cash flow. All said I think this company will show alot of muscle in the next three months.
The cash they are keeping will be used to pay the planned enhanced dividend I would assume. Also, lots of companies like to keep cash on hand in liquid securities in order to have financial flexibility (to buy product lines, for example).
Check the 10k - mostly short term bonds plus some equity in utilities.
I would rather have them sell most of this and buy back their shares.
Ther implication is that the return of short term corporates is likley to be better than the return of CAW shares.
Hey, somebody is actually looking at the numbers behind the numbers?????
Granted, I only spent about 20 minutes looking, but it appears to me that receivables as a function of sales are in line with historical seasonal norms, per last years 10Q, in fact they are a little better than last year AND 2002. So that is good.
Since this seems to occur every year, it probably has to do with shipping product/getting paid as a function of where holidays/customer orders fall with respect ot qtrs end and payment terms.
In so far as the slight reduction in cash, there is a considerable cash draw for deferred advertising. If I understand this correctly they've paid ahead for advertising that won't get accrued for or used until later in the year. The hope would be that they got better pricing by committing early.
Heck, on the bright side it looks like they've upped the advertising budget a little. And as all those marketing folks keep saying, you gotta advertise if you want to sell.
Current ratio is over 2:1 with nearly $3.5MM in cash and short term investments. Balance sheet in fine shape.
Do you see it any different?
In comparing this to the same quarter last year, it appears according to their SEC filings that last year they profited a fair bit of cash from marketable securities transactions, while this year they lost a smaller amount, so instead of adding to their cash position they kept it about even.
What do you suppose are the securites they trade in and out of?