I was just being overly conservative. What isn't in the numbers at all is the expansion of aafes et al to all vets later in 2016 (assumption)
Company could be sold by 12/11 but I am skeptical, especially if the company looks like it performed well through Black Friday and cyber Monday spurts. The 8k just filed increased the protective advances to $10mm. I find little reason to believe the lenders force the hand of spdc. They are workjng together.
Believe it or not your post is one of the most important here because it goes to valuation. The performance last year was atrocious on these sites and this year appears to be markedly better. You are correct that success during this season likely brings the sites opening up to all vets in 2016. The military contracts alone are worth a multiple of the current price.
The other pits that hit on the point here was the debt. The debt level is not a huge issue. The 12% interest rate is the issue. A better capitalized acquiror with a cost of capital far lower reaps significant benefits from spdc. Remember the public reporting expenses go away as well plus redundant salaries and operating expenses. If spdc can show it is now operating fine with aafes and other sites then the price will be a multiple in excess of current prices.
A BK reorganization here will bring lawsuits. A buy out for .30 or more likely avoids any suits.
The key was the day after earnings. The price did not drop much immediately. That told me the people in the know were not dumping the shares. The buyout likely will be in excess of .25 and probably appreciably more if the performance of the company holds up through this early season blitz.
there is little new here is correct. the loss is largely due to the goodwill impairment. if you look at the components of working capital, then you will see there is still adequate liquidity going into the strongest quarter. the lender is keeping the pressure on to sell the company, but it also has a date that it will be well known how the business is doing during this holiday season. there is still time here. any selloff will be scooped yup by buyers. again, there is value here. not a $1's worth, but value.
The key words are as of 9/30. The 8k filed in early October make clear the loan is not in default. GARS also is required to use a certain analytical model to determine reserves, etc. And as of 9/30 it resulted in a lowering of carrying value to par. It can go the other way too as you mentioned. additional monies were given to spdc after 9/30.
I am not saying the share price spikes immediately (though there should be some positive momentum at some point) but that the military contracts themselves are worth multiples of the current share price.
The significant increase in revenues and profits/Ebitda that comes with opening up the military websites to all veterans has to be factored into any sale now. This event alone guaranties the survival of SPdc as they handle all the military websites , including now the Canteen Services. This is huge for SPDC. The infrastructure is in place to leverage the huge spike in revenues coming later in 2016 and beyond. Incremental margins are substantial. As mentioned back in 2014, AAFES does $200mm in online sales. Head says that shoukd grow to over $1 billion within 5 years.
The AAFES, Navy, Marines and Canteen Services contracts together will be worth multiples of current share price.
Put another way, I will gladly be the lead plaintiff if and games are played to sell company on the cheap now.
Extremejim...I was at a conference in 2014 when some general numbers were thrown around if/when AAFES et al expands access to all veterans. Let's put it this way. The AAFES et all multi year contract with expanded access to all veterans itself is worth a multiple of the current market cap.
News came out yesterday that 1. Is very positive for current operations of SPDC AND 2. even better operationally for SPDC later on in 2016. Just google AAFES and read the article on the 3 military websites moving forward on opening access to all veterans. Not a done deal yet but very close now. Be up in 6 months once all is agreed upon. Huge spike in revenues for spdc without a corresponding like size increase in expenses. As if adding multiple new clients in 2016.
For current operations, the head of AAFES stated as much as 50% of shoppers complained last year when spdc rolled out the new website. This contributed to the poor December quarter results. The head of Aafes now states the website is fine now and only 4% of shoppers complain now. The website can now accommodate the increased volume coming up with opening access.
This also impacts value as it is significant growth in the pipeline. Obviously this has been known internally for awhile so it is no surprise the lenders are playing ball. Spdc can be a very profitable account with decreasing risk with this growth coming in 2016.
Enjoy your weekend.
I believe this is setting up with a nice run accelerating into earnings and then the holiday season. The last 8k really clinched it for me. Additional funds with no defaults and no material adverse effects from July amendment. Company appears to have stabilized and now should be in at least a moderate growth mode. It makes sense now if the turnaround advisor is no longer there (an assumption) as monies can be saved there. Either way, I see no reason why an additional $3MM is made available to SPDC if there are any material concerns about the direction of the business.
A nice uptick on good volume will be the sign that this will be making an accelerated run soon. Let's see how this week plays out. A nice PR would help but not needed if business concerns are headed in right direction..
I am surprised no one commented on the 8k filing on Friday. The Lenders agreed to fund an additional $3mm, with $1.5mm drawn down immediately. The company uses cash through the holidays and gets it back post holidays as receivables are collected. Once again, this is a positive sign business is growing and expected to grow into the holiday season.
At least as important is the representation in the amendment agreement that there are no defaults under the credit agreement as of the effective date and there were no material adverse effects to the company since the effective date of the fifth amendment back in July. This is very positive that no negative surprises are in store. One could also read this as saying the company met its Ebitda and related financial covenants for the quarter ending 9/30 as the 7th amendments effective date was October 6. My take on it.
Shares are attractive. I will leave it at that for now.
Next were the announcements on major customers staying with SPDC...Yankee candle for example. Given the level of scrutiny involved with SPDC right now, and the sensitivity to legal consequences, I believe it is highly unlikely SPDC puts out a PR about Yankee Candle unless its operations are fairly stable. You can't condition the market with positive news, especially when there are doubts about the viability of your company, if other events are going on from the negative side. You are simply opening yourself up to a potential lawsuit. I highly doubt that is the situation here. So I take it at face value that operations are likely stable and probably improving year over year.
Finally, the timing of certain corporate events going forward supports the notion that operations are indeed improving. I am not saying SPDC is going to a certain price. I have no idea. But I do believe SPDC will see its share price appreciate measurably through the balance of 2015 and into early 2016 as it is oversold based on doubts about viability. I believe those doubts are being put to bed. Shorts have covered for the most part. Reports of positive execution should have a significant effect here.
Just some thoughts.
Just some thoughts on SPDC:
You have to respect that a stock that is trading at these levels only has a relatively small subset of the universe interested in trading it. The assumption that something is not right comes into play and many therefore simply stay away and are not interested at all in a story or possible turnaround, or the reverse. That being said, the stock world is full of distressed companies that fly under the radar as they try to regain some footing. Some make it, many do not. But emphasize some do make it. I believe SPDC is in the latter and will make it through all of this in one manner or another to give current equity holders a nice premium.
There is a misconception that SPDC is so dire in terms of liquidity that it will file for BK. Not true in my opinion. The credit facility has been adequately amended to provide for flexibility through the holiday season. Cash levels, or anticipated cash levels once receivables turn into cash, will provide SPDC with ample cash to move forward. The interest payments on the credit facility are significant, but still manageable. The key is the company hitting, or better yet, exceeding, revenue and ebitda targets over the next 2 quarters (with particular emphasis on the December quarter).
The recent news is encouraging on a few fronts for me. The amendment back in September removed certain undisclosed non-financial covenants. There is speculation that it removed the requirement that the turnaround specialist remain with SPDC through December, but there likely were others as well so that is not a certainty. However it does make some sense. Unless SPDC was going to file for reorganization, the primary purpose of the turnaround specialist was to integrate Fifth gear and generate the synergies and cost savings expected from the acquisition. There was progress noted as of June 30 on this front. It is entirely possible that suficient progress was made as of September to no longer require them
What is interesting is that there were opportunities to lower guidance but it was not done. There were explanations relating to games being moved into and out of Q3, Q4 and 2016, but no warning was given even when discussing the earlier lower guidance.
Really no reason for shares to sell off, and frankly none to see them take off toward $6 yet, but a move toward $5 should be forthcoming very soon. Then news is necessary to move it.
Some color as to games moving into/out of 3Q, 4Q and Q1 2016, but no earnings warning as to Q3. In fact, there was every opportunity to guide lower than already discussed back in early August but none was given. This would seem to be modestly positive for the shares for this quarter. No big pop, but a move to $5 is possible, if not probable, by end of quarter in my opinion. Q4 is setting up well.