How bad does it stink? Well for the year they were off $47 million in sales AND $51 million in gross margin. It is like they cut their prices and their sales went down.
In the fourth quarter---thankfully, loss of a dollar in sales only meant a loss of 82 cents in margins counting the inventory write down.
I haven't listened to the conference call yet but from the press release it looks the company actually made more in the fourth quarter than they did last year in the fourth quarter before goodwill and inventory write downs. About $4 million more.
I will have to examine the cash flow statement and the income statement to confirm this. It looks to me like margins on the income statement will be $11 million less from the inventory write down and the $7 million in good will be taken as a balance sheet hit and expenses outside of other income.
Sales continue to slide, and there is no evidence I can see they know how to grow their branded sales.
Could very well be the time to buy if they can return to profitability without growing sales. If that is the case any uptick in gross margin from sales will hit the bottom line
I think the market has priced this stock anticipating ugly earnings. If not and it goes down further it is worth a serious look.
No way a Latin American customer is worth as much as a North American customer revenue wise.
I doubt their ability to meet claimed growth in revenue simply because their base market--North America is their highest revenue per customer market and that growth has stopped. They will lose more customers here to streaming and to ISPs and those customers are high revenue customers.
Both companies are stupid in their pricing models. They encourage churn.
I think growth in new customers for both is over and growth in new services to existing customers will slow.
Their pricing and teaser deals are too complicated and just not competitive.
I think the company will break even for the year after taking $8-12 million in inventory write downs. I am just guessing on the write down and assuming it will be aggressive as a new CEO takes hold. All of that assumes that they have the same 4th quarter as last year operationally AND they take a large inventory write down.
If the current assets and current liabilities change the same in the fourth quarter as they did last year (about $23 million) they should still have a good current ratio and a good debt to equity ration even though the company will have invested about $80 million more cash in the business than last year excluding financing activities.
I don't expect covenant issues as one poster suggested---yet. He is right that if this trend continues they will certainly have revolver covenant issues.
One thing I really want to be assured of is that sales going forward will be improving and will be improving at better margins.
The other thing I want to see is CAPEX being reduced. EDITDA is a useless number to shareholders in this company as they seem to invest all their D&A in CAPEX. If this remains true shareholder should value on real earnings and beware if those earnings end up in CAPEX or increased current assets.
Any CEO should be able to straighten out the out of whack investment in inventory if they can save sales and all of that will free up cash.
I don't think there will be any significant profit for the year with write offs.
I am going to be listening for signs sales have stabilized. Could be a buy if garden can stop sales slide.
With a new CEO and year end earnings coming up I expect announcements concerning asset write downs. Hopefully the new CEO will clean up the balance sheet and take the hickeys now.
I would be very surprised if there are not inventory write downs. Their inventory sky rocketed this year, and we all know the launch of power flex was bad. They will lose placement for 2014 so now would be a good time to take some write downs there.
In the notes of the quarterly reports we see they have capitalized a huge number for the SAP switch over. I think it has been $70 million thus far. Prudent investors should already reduce the stockholder equity number by that amount, and when looking at historical earnings know that net income was overstated because they capitalized these expenses. Same for some marketing cost in launching products that was capitalized.
I am sure the credit line lenders are leaning hard on management to stop the trend of expanding inventory and accounts receivable while sales are not growing. Those capital turns have to improve.
All that said, Weil is gone from the top spot. He was a disaster. (How stupid was opening up the Boise facility to accommodate his hire for CFO??) If the company can maintain sales and stop pouring cash into black holes this stock is a bargain.
If they maintain sales the inventory and AR should correct itself. CAPEX is basically equal to depreciation and amortization so debt retirement must come from earnings and reduction in other company assets. If they could lower that CAPEX (the SAP black hole is supposed to end in 2014. That will be $10 million) a little they could easily service their debt at break even performance.
Maintain sales it's a bargain. Continue to loss sales and fail to get current asset investments under control and it is MAJOR trouble. The lenders are not going to stand for another $100 million invested in current assets like the first nine months of this year without sales and earnings improvements.
I did an IOS7 upgrade on my iPhone 5 and have had a bad time with it. I have had to wipe and restore three times. I have changed two hard drives out of 8 iMacs my company owns in the last six months.
As Apple backed up on quality? Are they just trying to be too cute with their IOS upgrades?
How will this impact their business?