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  • realshazard realshazard Apr 24, 2013 9:19 AM Flag

    it gets worse

    I didn't pay much attention to the details of UNTK's crushing debt and cash flow problems, because the debt alone was more than I wanted to pay for a mediocre outsourcing company, and moved on. But taking a look at the filings now, things are bad. Not only is there crushing debt, but the numbers are fudged. Mgmt says just $5M of capex, but that understates capex because all the capex takes the form of capitalized leases ie debt. And then there's about $7M of comp and interest that's capitalized. And then the huge working capital deficit. As the company grows, it consumes more working capital (ie pays employees before it gets paid), so the only way to generate cash from ops is to shrink. Damned if you do . . . . At this point, I don't see how the banks get repaid, much less the equity.

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