RE: RE: RE: financials look goodTalked with Jason Krueger, IR. Jason is quite different from most IR reps. He is a cofounder and on BOD. He is also a CFA.
Anyway had a good talk with him. Biggame posted the explanation of the big pop in amortization from the MD&A. He added some additional information about last qtr and the rest of 2011.
The $400k downward adjustment in coiled tubing inventory should be a one time adjustment that won't happen every qtr. In fact new accounting regulations, IFRS, will mean that Leader will expense all coiled tubing when it is purchased, even though it can be used 1-2 years after purchase. This will mean lumpier earnings but will net out the same over time.
Since coiled tubing will no longer be amortized, amortization expense will be down in 2011 but cost of goods sold will be up by the same amount.
Another factor in Q4 earnings drop was bonuses. Leader had a great recovery in 2010 and so there was 530K in bonuses that were expensed in Q4. Some companies reserve for these bonuses by expensing a portion each qtr. Leader didn't do that so all of the annual bonus expense was done in Q4. Going forward, the new CFO has decided to reserve for bonuses qtrly.
The upcoming report for Q1 will be mixed bag. Revs have already been announced at $10million. That is a nice increase from the previous qtrs of 6.2 and 8.77million gross revs. Ebidta is above recent levels but there will be a one time non cash charge for the recent refinance that eliminated the huge convertible debt overhang. The charge will be 1.4 to 2 million but NON CASH. The qtr will be profitable but the focus should be on cashflow.
Of course after Q1, there will be the slowdown from spring breakup. This typically causes a loss in Q2.
Following that, Q3 & 4 should be fine and get Leader moving up in later 2011.
He said they were focused on debt reduction for the remainder of the year and a modest capex funded from cashflow. 2012 is more aggressive in terms of capex and expected expansion. He said they don't intend to do dilutive financing at current stock prices and is not sure if they could efficiently use a big capital raise because trained labor is in short supply.
This is all covered in the company's latest presentation but it was easier for me to understand when I heard it from Krueger.
Bobwins