OCA (5)
Financial insights on OCA (2)
by: chfriend03 08/31/05 12:53 am
Msg: 37510 of 37781
OCA had experienced a lot of bad news (if we also include the hurricane). Short of another hurricane, I would say all bad news is out by now. I will explain my reasoning now.
The first bad thing that happened to OCA was its acquisition of Apple Orthodontix (before 2001) and OrthoAlliance in 2001. We all know that the acquisition resulted in a lot of lawsuits.
Apple Orthodontix was relatively small. In case of OrthoAlliance acquisition, OCA assumed a long term debt of $71.644 million, including $59.5 million of credit line debt, in addition to spending millions and millions of cash to purchase management agreements from OrthoAlliance affiliates. The acquisition was very costly for OCA. The following exodus of OrthoAlliance affiliates cost OCA a big fortune.
OCA in May 2005 settled with 60 OrthoALliance affiliates at a loss to the balance sheet. The issue is almost at end although we should expect a few aftershocks. Since OCA has by 2004 phased out the corporate expenses (total $4+ million per year) from the affilates, the argument on OCA's breach of agreement due to its "overcharge" can no longer be valid. The best argument is that OCA's management agreement violates state law, and this is probably a valid argument in Texas. Even in Texas, I believe doctors will be expected to repay OCA the loans and its initial expenses in the affiliates. If OCA paid cash to "purchase" the management agreements, then I would expect the doctors to pay back a portion of such cash (depending on how long the affiliates stayed with OCA).
OCA has also mis stated its accounting. The issue is unearthed, and investors have good reason to shy away from OCA's stock because there is no reliable financials.
Now comes the hurricane. I expect OCA will have further delay in its financial filing, and refinancing.
All these bad news are out. How worse can it get??
OCA also reminds of HealthSouth, although the latter also cheated the government (in addition to investors).
It is clear that by putting $3 million of his personal money into the company, the CEO (who owns about 3 million OCA shares) is clearly betting on the positive outcome of OCA. This is just one more justification for me to invest in this stock.
Conclusion: I would not have much problem in putting 10-20% of liquid assets in this stock. ---- end for now
by: chfriend03 08/31/05 12:53 am
Msg: 37510 of 37781
OCA had experienced a lot of bad news (if we also include the hurricane). Short of another hurricane, I would say all bad news is out by now. I will explain my reasoning now.
The first bad thing that happened to OCA was its acquisition of Apple Orthodontix (before 2001) and OrthoAlliance in 2001. We all know that the acquisition resulted in a lot of lawsuits.
Apple Orthodontix was relatively small. In case of OrthoAlliance acquisition, OCA assumed a long term debt of $71.644 million, including $59.5 million of credit line debt, in addition to spending millions and millions of cash to purchase management agreements from OrthoAlliance affiliates. The acquisition was very costly for OCA. The following exodus of OrthoAlliance affiliates cost OCA a big fortune.
OCA in May 2005 settled with 60 OrthoALliance affiliates at a loss to the balance sheet. The issue is almost at end although we should expect a few aftershocks. Since OCA has by 2004 phased out the corporate expenses (total $4+ million per year) from the affilates, the argument on OCA's breach of agreement due to its "overcharge" can no longer be valid. The best argument is that OCA's management agreement violates state law, and this is probably a valid argument in Texas. Even in Texas, I believe doctors will be expected to repay OCA the loans and its initial expenses in the affiliates. If OCA paid cash to "purchase" the management agreements, then I would expect the doctors to pay back a portion of such cash (depending on how long the affiliates stayed with OCA).
OCA has also mis stated its accounting. The issue is unearthed, and investors have good reason to shy away from OCA's stock because there is no reliable financials.
Now comes the hurricane. I expect OCA will have further delay in its financial filing, and refinancing.
All these bad news are out. How worse can it get??
OCA also reminds of HealthSouth, although the latter also cheated the government (in addition to investors).
It is clear that by putting $3 million of his personal money into the company, the CEO (who owns about 3 million OCA shares) is clearly betting on the positive outcome of OCA. This is just one more justification for me to invest in this stock.
Conclusion: I would not have much problem in putting 10-20% of liquid assets in this stock. ---- end for now
posted by jajabin at 3:23 PM
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