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Career Education Corp. Message Board

  • everynameistaken42 everynameistaken42 Nov 30, 2012 3:56 PM Flag

    CECO is NOT a value play

    I don't understand the frequent point that CECO trades for less than it's cash. Current assets plus other net assets (muni bonds and treasuries, apparently) total $587mm. All of the other Long Term assets (goodwill, intangibles, PP&E in not-owned real estate) are worth $0 or a small fraction of the $558mm carrying value in a liquidation. It's liabilities of $473mm are senior to any shareholder recoveries. BEst estimates from Bloomberg (combination of projections from various research firms) project free cash flow of negative $105mm from 9/30/12-12/31/14., $50mm of which is in Q4'12 alone. I'd like to think they have a real and profitable business in the future, but my current math is $587mm tangible assets minus $473mm liabilities minus $50mm of cash burn this quarter equals $64mm, or approx. $1 per share if liquidated in the near future...

    Sentiment: Sell

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    • why to talk about liqudation? CECO is not even close to BK

      Sentiment: Hold

    • CECO has $170M off balance sheet debt. see its 10Q

    • Where do you get the negative cash burn numbers from?

      The depreciation and goodwill amortization are non-cash items. Add those back (and those numbers are big for CECO -- $60.6 million for the most recent quarter) and you end up with the company showing net cash provided from operations in the amount of $32.5 million.

      Take a look at the 10-Q for more detail on this.

      • 1 Reply to harvardhomeboy
      • I think you are looking at YTD (9 mos) figures in the 10Q, not just the most recent Q, but that is a better balance sheet starting point b/c all cos only provide cash flow statements on a YTD basis, which is the real place to look to see what is happening. Positive CF from operations is good, but you can't ignore capital expenditures (Property Plant and Equipment) that are recurring uses of cash. D&A isn't a free add-back, you generally need to replenish PP&E. In their case, they have cut CapEx by over 50% since the same nine mos last year (and previous years), which should make you wonder how under-investing will affect them later. The YTD capex are about $30mm (running way behind prior years) so their current real CF from ops is approximately $0. In the coming quarters and years, as revenues continue to decline, CF goes negative to the tune of the numbers I cited (all from Wall St. research firms, aggregated by Bloomberg) even if they can maintain the currently very low rate of annual CapEx. Keep an eye on Cash and Equivalents as well as net working capital (=CA-CL). Those are negative $68mm and $47mm YTD, respectively and Long-term assets have declined by alot more than long term liabilities. EVERY aspect is in decline and that is before true FCF (EBITDA - CapEx) turns negative, which is an apparent certainty per wall st research. I am not long or short this stock, it just piqued my interest due to the crazy decline. As a firm, they are a disaster because their business was over-built on a government debt bubble (student loans) with a bad management team (look at the wasteful share buybacks, personnel turnover, compliance issues) in an industry that now bears significant regulatory scrutiny. I hope they survive and it is definitely possible but, per my original point, don't bank on the cash being there if that's what gives you comfort in the valuation.

        Sentiment: Sell

    • Love seeing someone on the message board with an analytical bent vs. "off the cuff" emotional input. Nice work. The other liability against them is the huge exposure on operating leases. While not on the balance sheet as debt, it's a real obligation and they can't get out of it unless they file Chapter 11 which is extremely unlikely since I believe that cuts off their ability to gain access to government loans for students.

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