OCA (4)
Financial insights on OCA (1)
by: chfriend03 08/31/05 12:12 am
Msg: 37508 of 37781
From its press release in June, we learned that OCA misreported on its financials in the past. Clearly, the account receivable was probably grossly misstated, and they also messed up on depreciations and write-down on assets of closed offices, etc.
The question to investors is the following? Is there any value in OCA? If yes, how much?
I have spent some time in the past few weeks in digesting OCA's financials, as well as its press releases during the past few years.
I have come to the conclusion that OCA's stock is worth $6 (or more). It has the ability to make $0.40 per share profit once everything is straightened out. A few facts on OCA's financials from end of 2001 to end of 2004:
1. OCA added 55 "de novo" offices in 2004. (It added another 15 "de novo" offices in first quarter 2005, and stopped afterwards due to the loan default caused by its failure in filing timely financial reports.) OCA needs to use cash for the lease improvement, equipment and supplies, operating loss in the first 12 to 18 months (doctors always get their full salary, even during the initial period). OCA stated that it would take an average of $375,000 to open a single "de novo" office. I believe this is probably about right.
The cash used in openning these "de novo" offices came from OCA's operations.
2. Since late 2001, OCA has (year after year) paid down on its loan, and has reduced its debt owed to doctors and other parties. The rate: at about $10+ million a year. I think the loan amount reported in the balance sheet of its filed financials should be reliable (whereas the account receivable or "intangible" might not). The cash used in the debt reduction over the past 3 years came from OCA's operations.
3. OCA has repurchased its shares back from open market. The total spending was about $15+ million. On the other hand, it has issued new shares (thru stock options, stock warrants, etc.) and collected less than $2 million. So the net cash used in stock repurchase subtracted by the collection from stock issue was more than $13 million. This $13+ million cash came from OCA's operations.
4. OCA's cash position did not change much. OCA settled with some orthodontits and got a few million dollars from affiliates' buy-out (as of Dec. 2004). But it also paid for attorney fees, and paid for lawsuit losses. So all these cancelled out up to a couple of million. Note: I am not sure about the amount of May 2005 settlement with more than 60 OrthoAlliance affiliates. I guess OCA did not receive much cash from the settlement.
Summary: OCA's operations had made good money from end of 2001 to end of 2004.
I like to talk about OCA's problems, and why I think its worst news are out by now.
I like to compare OCA with UHAL that experienced liquidity problems in 2003.
Here are some of my old posts on UHAL board in 2003 when UHAL was trading at single digit. I was fighting the shorts and negative posters. There were a couple of hedge funds that had shorted 1+ million shares of UHAL at $4-5 a share, and eventually covered in a single day in September 2003 at $20+ (a big short squeeze on that date as UHAL's normal trading volume was under 80,000 shares).
by: chfriend03 08/31/05 12:12 am
Msg: 37508 of 37781
From its press release in June, we learned that OCA misreported on its financials in the past. Clearly, the account receivable was probably grossly misstated, and they also messed up on depreciations and write-down on assets of closed offices, etc.
The question to investors is the following? Is there any value in OCA? If yes, how much?
I have spent some time in the past few weeks in digesting OCA's financials, as well as its press releases during the past few years.
I have come to the conclusion that OCA's stock is worth $6 (or more). It has the ability to make $0.40 per share profit once everything is straightened out. A few facts on OCA's financials from end of 2001 to end of 2004:
1. OCA added 55 "de novo" offices in 2004. (It added another 15 "de novo" offices in first quarter 2005, and stopped afterwards due to the loan default caused by its failure in filing timely financial reports.) OCA needs to use cash for the lease improvement, equipment and supplies, operating loss in the first 12 to 18 months (doctors always get their full salary, even during the initial period). OCA stated that it would take an average of $375,000 to open a single "de novo" office. I believe this is probably about right.
The cash used in openning these "de novo" offices came from OCA's operations.
2. Since late 2001, OCA has (year after year) paid down on its loan, and has reduced its debt owed to doctors and other parties. The rate: at about $10+ million a year. I think the loan amount reported in the balance sheet of its filed financials should be reliable (whereas the account receivable or "intangible" might not). The cash used in the debt reduction over the past 3 years came from OCA's operations.
3. OCA has repurchased its shares back from open market. The total spending was about $15+ million. On the other hand, it has issued new shares (thru stock options, stock warrants, etc.) and collected less than $2 million. So the net cash used in stock repurchase subtracted by the collection from stock issue was more than $13 million. This $13+ million cash came from OCA's operations.
4. OCA's cash position did not change much. OCA settled with some orthodontits and got a few million dollars from affiliates' buy-out (as of Dec. 2004). But it also paid for attorney fees, and paid for lawsuit losses. So all these cancelled out up to a couple of million. Note: I am not sure about the amount of May 2005 settlement with more than 60 OrthoAlliance affiliates. I guess OCA did not receive much cash from the settlement.
Summary: OCA's operations had made good money from end of 2001 to end of 2004.
I like to talk about OCA's problems, and why I think its worst news are out by now.
I like to compare OCA with UHAL that experienced liquidity problems in 2003.
Here are some of my old posts on UHAL board in 2003 when UHAL was trading at single digit. I was fighting the shorts and negative posters. There were a couple of hedge funds that had shorted 1+ million shares of UHAL at $4-5 a share, and eventually covered in a single day in September 2003 at $20+ (a big short squeeze on that date as UHAL's normal trading volume was under 80,000 shares).
posted by jajabin at 3:22 PM
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