CNRD - Conrad Industries

[Foreign Tuffett]

CNRD currently worth more dead than alive ($10.97 in net current assets per share vs $8 last market price) based on year-end annual that was posted by the Company yesterday.

 

So there’s that - FWIW.

 

wabuffo

 

One thing to note about their current assets is that a big chunk of the receivables are from a deadbeat customer:

 

"One of our significant customers is not making payments on terms agreed upon in the contracts and has an outstanding balance of $15.2 million. Although we believe we will collect the full amount, it could be delayed beyond the completion of the vessels. The two vessels were approximately 99.3% and 97.9% percent complete as of December 31, 2019. We have taken legal action in accordance with our contract provisions which allow, among other things, us to sell the vessels to another buyer and recover the deficiency, if any, between the contract prices (and other amounts due under the contracts) and the amount of the selling prices plus funds already paid to us by the customer."

[bskptkl]

Ok - take 15 million out - it's still got 40 million current assets less liabilities divided by 5 million shares = $8 per share.

Just saying - how low can it go...

[mjohn707]

Ok - take 15 million out - it's still got 40 million current assets less liabilities divided by 5 million shares = $8 per share.

Just saying - how low can it go...

 

I’m sure they’re fine, but this is a question you never want answered from any of these names that use percentage of completion accounting, which I’m remembering to be the case here

[bookie71]

But if they can sell it for the amount they are owed it should be good, just delayed.  They don't have to sell for FMV just their bill plus associated costs.

[wabuffo]

I’m sure they’re fine, but this is a question you never want answered from any of these names that use percentage of completion accounting, which I’m remembering to be the case here

 

For sure ("cough, CBI, cough") - but CNRD's GAAP earnings have tracked pretty closely to operating cash flows which provides some comfort that mgmt isn't engaging in any accounting shenanigans.

 

One issue I would worry about is a take-under.  It wouldn't be too hard.  Common stock public float is only 2.8m shares not owned by the family.  It would take $22.5m - something they could do with cash on hand and still have money left over. 

 

The reality is that they are probably better off going private given the cyclicality of the business.

 

wabuffo

[mjohn707]

I’m sure they’re fine, but this is a question you never want answered from any of these names that use percentage of completion accounting, which I’m remembering to be the case here

 

For sure ("cough, CBI, cough") - but CNRD's GAAP earnings have tracked pretty closely to operating cash flows which provides some comfort that mgmt isn't engaging in any accounting shenanigans.

 

One issue I would worry about is a take-under.  It wouldn't be too hard.  Common stock public float is only 2.8m shares not owned by the family.  It would take $22.5m - something they could do with cash on hand and still have money left over. 

 

The reality is that they are probably better off going private given the cyclicality of the business.

 

wabuffo

 

It's not so much the fraud I'd be worried about, and there's probably a higher incidence of that sort of thing generally in names with this sort of accounting, but really that you can sometimes underbid a contract or mess us a job and it costs you a bundle to fix it.  I'd never suspect this current management of engaging in any sort of fraud or anything of that nature to be clear. 

 

In reference to selling, the price has come down over the last few days and I wasn't able to sell many shares.  I'd think it's anyone's guess on how this works out from here as far as future contracts and profitability

[Foreign Tuffett]

I agree with mjohn707. Every indication is that management here is honest.

 

The core issue here is that shipbuilding is a difficult business, something I first learned from the classic 1990 romantic comedy "Pretty Woman"