Conrad reported results for the third quarter of 2012 yesterday. Results are pretty good: income is up and the backlog is growing. The amount of cash on the balance sheet is also growing while the share count is shrinking. But what I found really interesting was the following disclosure:
We are preparing to submit claims to the BP Settlement Fund in accordance with the Deepwater Horizon Court–Supervised Settlement Program. We plan to submit these claims to the BP Settlement Fund by November 30, 2012, and estimate a response before the end of the first half of 2013. Certain of our businesses are located within the economic zones included in the class settlement and we believe that the damage calculations have been made in accordance with the guidelines established for the BP Settlement Fund. The cumulative amount of the claims is anticipated to be approximately $22 million to $23 million.
While it’s uncertain if they will in fact receive this money this could be a pretty significant event, even after accounting for taxes. The company has at the moment just a ~115M market cap and it has already 43.7M in cash on the balance sheet. It looks like they are not planning to let it sit idle and waste value:
Management is currently engaged in a detailed business planning process to identify potential uses of the Company’s cash.
There is of course always a risk that money will be wasted on something stupid, but given the fact that management owns more than 50% of the company I think they have a strong incentive to do something smart with it. Maybe it would make sense for them to issue a big special dividend and try to take Conrad private? That’s what I probably would try to do if I would be in their shoes.