RE:well Tkrik ? Lately I've come across as a bear, mostly to balance out what I see as irrational exuberance on this board, so take what I say with a grain of salt. I still like the company.
- For a company that often claims to have no debt, they have quite a bit,. They've drawn over $6 million from their credit line this FY. I like a compay to use leverage (it's stupid not to borrow money at 4% if you're investing it at 20%). But the company also claimed it could fund its busines, and pay a dividend. That so far doesn't seem true.
- If you take out the $4.9 million from the sale of land, and the $1.1 million, the company's cash decreased by $7.3 million even after borrowing $6 million.
- In this blockbuser year, through 9 months, the company had operating cash flow of $14.5 million (4 million lower than last year). And cash flow from continuing operations investments (not land sales) cost $26 million. To cover this net outflow, the company borrowed $6 million, but they also paid out $1.6 million of dividends. These numbers aren't good. The investments will lead to cash flow, but it's not showing up yet.
- Share options are up. I'm not a fan, I'm not sure that management has "earned" all of these options so far. And I'm as big a fan as they have. I know management stock incentives are par for the course but I don't have to like it. This isn't much of a negative, but investors should keep their eyes on it so management can't enrich themselves at our expense.
- Expenses are up and I'm not sure there's much to show for it. Investor relations spending is up, yet where is the return on that investment? Board and executive exenses tripled, why? What has been done to earn that? Salaries are up (there's more sales staff) but it's up more than I'd think it should be. Salaries are up almost $500,000 through 9 months. To me, that should be 8-9 new sales reps. I don't know if they hired that many. So I think a few employees got raises, but I'm not sure performance justifies that. Office expenses are up $150,000 - the company rents the office from Elmsley & Associates - owned by the CEO, so I don't like that expense going up. You can see the office lease expense is going to increase even mor in the future as well. One good thing is management salary expenses are down YoY.
- Total canola interests increased just $1.4 million in the past nine months.That's a bad number. On a positive note it's actually increasing (which it didn't last year). That does include buying back $7 million of contracts. But for a company that's growth depends on growing the canola it has rights to, this is poor growth.
- $1 million of cash is essentially useless, as it is collateral to the Grain Commission should Input not be able to honour a future commitment. If oyu calculate book value you should remember that.
- Good news, the company sold 8,000 MT more than last year. Ultimately the company makes money by selling canola, so we need to see this number go up in addition to deployment numbers.
- More good news, canola prices are up right now, and the company should be able to improve on its average selling price ($475 this year, $483 last year).
The numbers that we already knew in July are okay, but the numbers I learned from the release of earnings today I don't like. If there aren't some hard hitting questions on the conference call tomorrow I'll know that either I'm looking at the numbers all wrong or that simply nobody cares to look at them. Like the company, don't like the quarter.