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ITT Educational Services Inc. Message Board

thedeathrace 307 posts  |  Last Activity: Dec 23, 2014 5:18 PM Member since: Jan 10, 2013
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  • I would love to see the Citibank financial analysis regarding their $1 price target. We all know the Bloom Lake and coal situation. Australia was $50 million EBITDA positive last quarter, but let's assume that goes to zero EBITDA. The US EBITDA was $250 million last quarter, and $540 million for the nine months. The US and Australian businesses take zero capital expenditures. If the US business gets cut in half (that is a huge haircut), that gives EBITDA of $400 million per year. $400 million in EBITDA can easily handle the debt load of $3 billion.

    The $1 price target means that the company is worth $150 million and the $3 billion in bonds are currently valued at $1.7 billion in the market. That is a combined enterprise value of $1.85 billion. Petsmart just got an LBO at 10 times EBITDA and most LBOs have been at that price point. So, if CLF at $1 has an enterprise value of $1.85 billion, the US business must be thought to earn in the future only $185 million in EBITDA (versus the current +$800 million). I really doubt that we are going to see anything like this happen in the US iron ore business. I just don't get the math. The $1 target makes zero sense. And the book value of the very profitable US assets are $1.8 billion.

    Someone post the numbers from the Citibank report. I would love to see them.

  • This is going to get interesting. CEO stated to everyone that he has $200 million ready to buyback stock. In the conference call he indicated that it was like a loaded gun he was keeping under his pillow at night to use when it was appropriate. I took that statement to mean that he would use the buyback if the stock price got attacked and was low enough. My thought was that this price was $5.

    At $5, the market cap is $750 million. A $200 million buyback retires almost 30% of the shares.

    Interesting thing about an analyst saying that CLF is only worth $1 is that this would mean a market cap of $150 million - and therefore the $200 million buyback would retire more than all the shares. And if the analyst thinks that CLF is worth $1 let's say 2 years from now because the company has financial problems, then he must think that shares are only worth $1 right now as things in his mind are not getting any better. And if the shares are worth $1 and the market cap is $150 million, how do you reconcile the company's $200 stock buyback plan? Well, clearly you can not unless you conclude that the buyback plan is just a bunch of hot air. If the buyback plan turns out to be a joke, that is a problem for the CEO as he looks like an idiot. But we do not know yet. The CEO said he has the buyback ready if it is needed.

    In the meantime CLF's US business generated $250 million in EBITDA last quarter and $556 million for the nine months. That business also uses up little capital expenditures. Australia generated $46 million EBITDA in the quarter. We will see how the EBITDA numbers look this coming quarter. Compared to the company market cap and the $3 billion debt load, these EBITDA numbers are significant. The loss making businesses are being sold/closed (CEO said Bloom Lake will not be on the books in 2015).

  • thedeathrace thedeathrace Dec 16, 2014 5:23 PM Flag

    I heard all the same garbage when Apple fell from $700 to $400 when Steve Cook took over. All the bitter moaning about how he was a joke and terrible and so on and so forth. All from a bunch losers. It is the same here. You all want instant gratification. Let the CEO do his job. If you cant take the heat, sell the shares and go short.

  • thedeathrace thedeathrace Dec 16, 2014 5:06 PM Flag

    ohtaegun, you are some piece of work. When did your parole office let you out? Who did the CEO alienate? He alienated the Wells Fargo dope who was slamming his stock with all sorts of commentary about the China spot iron ore price? As if the Wells Fargo guy was even on the CEO's side. The Wells Fargo dope never even gave the CEO a chance to do anything on the job before he was slamming the company. So, the CEO called him on it. It was one of the greatest moves I have ever heard by a CEO on a conference call. I suppose you just expected the CEO to roll over for the Wells Fargo guy on the earnings conference call and look like a dope. Instead he stood up for himself and the company and told the analyst to hit the road. Now today you say that the CEO should come out and defend CLF or that he should say something in response to the latest Wells Fargo stuff. But in your post above, you complain about the CEO alienating the analyst because he did respond to the analyst on the conference call. Are you for real? You are just so lame. All you want to do is have it both ways, which is not surprising from someone who acts like a spoiled brat and has no intellectual fortitude. The CEO steps up to the analyst and that leads you to opine that the CEO has alienated all the analysts (which he hasn't) and now you want him to step up to the analyst again in response today's analyst report (which you have not even read). Dude, you got problems.

  • thedeathrace thedeathrace Dec 16, 2014 4:53 PM Flag

    You are a total idiot. Why should the CEO spend time responding to every single analyst price target change? It is a waste of his time. And you should know better than to blabber on about such junk. Why do you care about perception? Perception and mis-perception are what create opportunity. Reality is what you buy. Perception never turns into reality. It would be more appropriate if you said that the negative perception re CLF is the business reality. If the negative perception is the reality it must mean that the very large, profitable US iron ore business does not have the value to support the current stock price and overall business (even as the other businesses are being sold and shutdown). That's all. So with your constant moaning about CLF, why just you don't come out and say that about CLF's US business and support that conclusion with some numbers and analysis - instead of harping on some report that you have not even read. Your blabber is just pathetic. It does not mean that you won't be right, or wrong. It just means that you have absolutely no clue what you are doing and that if you are correct, you are just like a broken clock that tells time correctly twice a day.

  • Reply to

    Analysts are not letting this company alone

    by redposition Dec 16, 2014 4:30 PM
    thedeathrace thedeathrace Dec 16, 2014 4:40 PM Flag

    Nothing has changed except that management has sold an asset as they indicated they would and management has kept everyone up to date re Bloom Lake and what is being done there.

  • Reply to

    Wells Fargo NEW PT: $1-$3

    by ohtaegun Dec 16, 2014 3:13 PM
    thedeathrace thedeathrace Dec 16, 2014 4:31 PM Flag

    The Wells Fargo clown was already at a $4 target so what's the difference. The guy is clearly a huge bear on the stock. Nothing new here from this analyst. Shorts should short more if they buy the Wells Fargo price target. Longs should add if they don't believe the Wells Fargo guy. Everyone knows that there is bad blood between the Wells Fargo guy and the CEO, so check out what he wrote in his report.

    I haven't seen anyone post a thing about what was in the Wells Fargo report, which means to me that no one here has read it. If they haven't read it, not sure why anyone would ever treat it as gospel.

  • CLF has been a beast for sure, but I would say that it is far from alone. Let me take a look.


    IBM down from $215 to $152

    WYNN down from $248 to $144

    TWTR down from $72 to $36

    AMZN down from $407 to $296

    PXD down from $233 to $134

    and so on. There is plenty of carnage in the market even though many tout that we are in some kind of huge stealth bull market. It is a fake bull market supported only by the largest cap companies i healthcare and finance. Most stocks outside the largest 50 s&P 500 companies are performing very poorly and are actually down significantly on the year. CLF is no exception.

  • Reply to

    another suckers trap

    by ohtaegun Dec 16, 2014 2:05 PM
    thedeathrace thedeathrace Dec 16, 2014 2:11 PM Flag

    ohtaegun, Short away. Short more. And then some more. And then some more. Keep on going. Why stop? And don't bother with posting that CLF is a short. Post that you are shorting the stock at the current price. Then you put your money where your mouth is. Otherwise your commentary is just useless noise.

  • thedeathrace thedeathrace Dec 16, 2014 12:32 PM Flag

    If the debts are to be retired at par, that would be the most awesome news for CLF as it would of course mean that the company has the cash to do so, which means that the much hyped looming demise of CLF is just a concoction of the short sellers.

  • thedeathrace thedeathrace Dec 16, 2014 12:30 PM Flag

    CLF bonds can be bought or sold in the marketplace at current prices which are 63 cents on the dollar. Anyone can buy them, including you.

  • thedeathrace thedeathrace Dec 16, 2014 11:18 AM Flag

    Well, if that is the case, get ready to join the army as a patriotic volunteer.

  • Reply to

    Ore Gonna Stay Low, Contracts will Reset

    by shmickersmack Dec 16, 2014 9:33 AM
    thedeathrace thedeathrace Dec 16, 2014 11:17 AM Flag

    Your debt reduction figures are a little bit off. CLF can buy any of its bonds in the market for 63% of par, or 63 cents on the dollar. Thus spending $175 million buys back $278 million in face (book value) value in bonds. Thus debt would fall from $3 billion to $2.72 billion.

  • Reply to

    Who is holding on to ESI?

    by dahnshaulis Dec 16, 2014 9:59 AM
    thedeathrace thedeathrace Dec 16, 2014 10:15 AM Flag

    Why don't you call up Nantahala Capital Management, Barnstar Opportunities Fund, or Clifton Park Capital Management and ask them.

  • Icahn gave a great interview the other day. I am generally not a huge fan of his, but his investment record speaks for itself. He said flat out that investors have no patience. They all want instant gratification and are unwilling to be patient. He indicated that on average it takes 3 years for his investments to work. And that is "on average", which means half take 4 years or longer. Now, I will say that the CLF shareholder's who have ridden the shares down from $100 to below $10 should not be happy. But stockholders threw out the previous management just this summer. So now we have new management with a solid plan to get CLF back on track. It will take a bit of time, and great progress has already been made. This is where the patience is required. The turnaround will take a bit of time. If you are unwilling to wait to give new management time to get the job done, you have no business owning this stock. The shorts can #$%$ and moan about how CLF is a disaster and iron ore prices in China are down and so on. No worries. They are correct. Ore prices in China are down and CLF has been a disaster. But that means nothing about where CLF is going in the future under its new management or whether the current share price is a good risk/return proposition. So, as I often say...time will tell (which is another way of saying patience is required).

  • Reply to

    BHP Expected To Earn $5 BILLION Next Year

    by shmickersmack Dec 15, 2014 10:05 PM
    thedeathrace thedeathrace Dec 16, 2014 9:54 AM Flag

    Stop being an idiot. The people who have half a brain on this board know exactly what is going on with CLF and have commented at length about the company's US operations, which are hugely profitable. CLF is cleaning up its loss making businesses. I will bet you that CLF's US iron ore business does hugely better than BHP's iron ore business in 2014 and 2015 in terms of growth percentages and margins.

  • Reply to

    We Need to Wait Out 2 More Weeks...

    by vipinkot47 Dec 15, 2014 9:50 PM
    thedeathrace thedeathrace Dec 16, 2014 9:46 AM Flag

    I am not sure what the major confusion is about regarding Bloom Lake. Here is the company's press release...

    "Cliffs Natural Resources Inc. (NYSE: CLF) announced today that it is pursuing exit options for its Eastern Canadian iron ore operations which may result in the closure of the Bloom Lake mine.

    Lourenco Goncalves , Cliffs' Chairman, President and Chief Executive Officer said, "Despite the continued interest of the prospective equity partners in Bloom Lake and in its high quality ore, the potential investment is not achievable within a time frame acceptable to Cliffs. With expansion no longer viable, we have shifted our focus to executing an exit option for Eastern Canadian operations that minimizes the cash outflows and associated liabilities."

    I really have no idea what the difficulty in understanding this is. The company can not get investors in place in the designated end of year deadline. That is it. Not too complicated. So, they are figuring out how to "exit". The market has already assumed a complete shutdown of the mine. Thankfully the new CEO has addressed the Bloom Lake problem promptly while the previous management was doing nothing but watching money go out the window. An "exit" could mean a sale of the asset, but that is simply gross speculation and the price for the asset, if they were able to sell it, is anyone's guess. I am not sure that CLF will "announce" a final exit plan for Bloom Lake by the end of the year. It is already clear that "exit" is the modus operandi. I am not too worried about any year end announcement. Every knows that the Bloom Lake project is total history. It has been written off in full.

    The only issue worthy of discussion is closure costs. The CEO did clearly say that Bloom Lake liabilities are not guaranteed by the parent company and therefore the US operations are protected. If the Canadian operations declare bankruptcy, I think it would be great. Clear the decks and wipe the slate clean.

  • thedeathrace thedeathrace Dec 11, 2014 4:26 PM Flag

    I think that your approach is wrong. I feel it best to establish a base case for what CLF will look like 1 year from now and then on can make adjustments to that for various economic scenarios. For instance CLF will probably have debt of $3 billion (but maybe less if the company uses proceeds from coal sale to buy back discounted bonds). Shareholders equity will be significantly negative due to the latest coal sale writedown. Australia will be at xyz level of revenues and profits and EBITDA. The US business will be doing xyz level of revenues and profits and EBITDA. The other coal business will be sold for $xyz. Maybe Canada gets put into bankruptcy and CLF has much reduced closure costs. And so on.

    So put together your base model and adjust from there. Then it should be clear to the shorts if bankruptcy is in the cards or to the longs if a huge run up in the share price is warranted.

  • thedeathrace thedeathrace Dec 11, 2014 4:19 PM Flag

    oilg, Go read my past posts. I have posted a ton of numbers on CLF for everyone to read. But I always advise both longs and shorts to do their OWN work. Do not rely on the opinions or posts of others. Most posts here are garbage. Fortunately there are a few people that have something of value to write.

  • thedeathrace thedeathrace Dec 11, 2014 4:14 PM Flag

    Now this is a very legitimate and interesting question and worthy of a response. I am surprised however that ironore himself did not pose various reasons for keeping or discarding the dividend.

    1. Keeping the dividend obviously gives the shareholders some form of return for holding their position in the company. This return right now is quite substantial on a percentage basis - assuming that the dividend is maintained. The CEO did say on the last conference call that the company's budget did support paying the dividend and that he would recommend such to the board. The board then agreed to pay the dividend. I am not sure if the CEO meant that the budget supported the dividend for just this quarter or for the next year. That was not clear. I suspect that the dividend will be reviewed every quarter.

    2. Discontinuing the dividend saves money which could go to debt reduction or other corporatpurposes, such as capital expenditures. However, capital expenditures have been cut way back and the company is in a divesting mode, not in a reinvesting mode for the moment. They could reinvest in the US iron ore business more, but CLF has bigger fish to fry right now for the next few quarters.

    3. Discontinuing the dividend would probably chase out some stockholders that like to collect dividends and would not own the stock otherwise.

    4. Even though the dividends are paid out after tax, if one takes the dividend monies and pays off debt , this reduces interest payments that then eliminates a tax deduction.

    5. The dividend payments put a huge hurt on the short sellers. With 64 million shares short, a $0.60 annual dividend means that the short sellers must pay out nearly $40 million a year to CLF stockholders. This $40 million is above what the company itself pays out itself, which is about $100 million. Paying the dividend in effect is like giving CLF stockholders an additional $40 million a year courtesy of the short sellers. That is not chump change.

10.12Dec 26 4:02 PMEST

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