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Corrections Corporation of America Message Board

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  • rainbowroygbiv rainbowroygbiv May 18, 1999 10:30 AM Flag

    A simple and elegant solution

    Take ~$120mm from PZN, send it down the operating
    company, have it send $100mm back to PZN and call it rent,
    and then PZN expenses nothing against that so they
    book a $100mm increase in FFO. I seriously question
    the merits of this treatment.

    For those not
    familiar, Boston Chicken was one of the biggest disasters
    of all time, I think it is now Bankrupt. Boston
    Chicken was a restaurant franchisor that had a bunch of
    franchisees that were paying it big fanchise fees. Boston
    Chicken was booking a lot of earnings from the franchise
    fees, but the franchisees were actually losing money
    after paying Boston Chicken the fees. On top of that,
    Boston Chicken
    was actually loaning money to the
    franchisees to send
    the franchise fee back up to the
    parent. Meanwhile,
    the franchisees were going broke,
    and ultimately couldn't pay
    back the loan. So even
    though Boston Chicken
    corporate was reporting good
    EPS (becasue you can do a
    lot w/accounting
    relative to how you treat cash expenses), the system as a
    whole was failing. Eventually, the Ponzi scheme
    collapsed on itself.

    Not sure if what PZN is doing
    is much different. Granted, PZN is a great company
    with some very positive charasteristics. However,
    numbers are numbers and aggressive acounting can only
    mask so much. Think is the part of the reason the
    auditors forced so much disclosure in the Q, so we would
    know about all the monies moving back and forth. Will
    be interesting to see how this plays out. JMHO.

 
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