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.
Disclosure
Long Conrad
Iv owned CNRD since Jan 2011, didnt know you owned it as well. You left out the most important part of the quarterly report:
Our board has authorized management to retain a financial advisor to our board to assist in its evaluation of strategic initiatives in order to determine potential alternatives that will enhance shareholder value and provides us with flexibility to respond to potential future business opportunities and risks.
What a coincidence, or probably not, that we both own this stock :). Do you still own URB? Didn’t miss the statement you quoted above by the way, but agree that it is going to be interesting to see how the future is going to look like. The last time they used a financial advisor they started to buy back shares. A sale, big special dividend or a tender offer could all be nice catalysts to enhance shareholder value.
I still like URB but had to sell out to make room for companies with bigger upside and more immediate catalysts. Once those play out and I have cash freed up im putting it back into URB.
Im hoping for a privatisation. It wouldnt be very expensive for them to buy out the minority public shareholders, with all that cash on hand. My guess was it wouldn’t happen until Conrad Sr passed though, but hopefully im wrong.
At least the first part of that, it appears 🙂
Yes that was a nice surprise 🙂