CKI - Clarke Inc.

[Guest 50centdollars]

RESULTS OF OPERATIONS

 

Net income attributable to equity holders of the Company for the year ended

December 31, 2013 was $52.7 million compared with net loss of $0.9 million in

2012. During the year ended December 31, 2013, the Company had realized gains on

its marketable securities of $8.4 millioncompared to realized losses of $2.8

million in 2012. The Company had unrealized gains on its marketable securities

of $25.2 million for the year ended December 31, 2013, compared to unrealized

losses of $4.8 million in 2012.

 

The Commercial Tanks & Home Heating segment generated EBITDA of $10.4 million in

2013 compared to $8.5 million in 2012. This increase was due in part to the

acquisition of 90% of Pro-Par Group ("Pro-Par") that was completed during the

third quarter of 2013. Subsequent to year end, the Company sold its Commercial

Tanks & Home Heating segment ("Jerico") to TerraVest Capital Inc. The

transaction valued Jerico at an enterprise value of $54.0 million. The Company

received $24.9 million for its 75% interest in Jerico in the form of a 6.50%

promissory note with a three year term.

 

On October 31, 2013, Clarke announced that it had entered into an agreement to

sell its truckload, less-than-truckload and freight logistics businesses (the

"Freight Transport Business"), which was included in the Company's former

Freight Transportation segment at the time. The transaction was completed on

January 1, 2014 and the Company received proceeds of $100.5 million on the sale

including an estimated net working capital adjustment of $12.5 million. The

Company had net income from discontinued operations of $11.2 million for the

year ended December 31, 2013 compared to $11.0 million for the year ended

December 31, 2012 which represents the results of the Freight Transport

Business.

 

Basic earnings per share for the year ended December 31, 2013 was $3.17,

compared to a basic loss per share of $0.05 for the year ended December 31,

2012, an increase of $3.22 per share. Book value per share at December 31, 2013

was $8.32 compared to $5.15 on December 31, 2012after deducting the payment of

$0.34 per share of dividends in 2013. Adjusting solely for the estimated gain on

sale of the Freight Transport Business (to be recognized in the first quarter of

2014) and reflecting the Common Shares outstanding as at March 6, 2014, the

Company estimates that its pro forma book value per share is $11.72 of which 75%

is held in cash and marketable securities. The Company's current trading price

represents a 34% discount to this pro forma book value per share as at March 6,

2014.

 

Clarke's Board of Directors also announced a quarterly dividend of $0.10per

Common Share payable on April 15, 2014 to shareholders of record at the end of

business on March 31, 2014.

 

Also subsequent to the end of the year, the Company redeemed $12.0 million

principal amount of its 6.00% convertible unsecured subordinated debentures due

December 31, 2018 (the "Debentures") using cash on hand.  The Company presently

has $34.5 million principal amount of Debentures outstanding.

 

 

[phil_Buffett]

RESULTS OF OPERATIONS

 

Net income attributable to equity holders of the Company for the year ended

December 31, 2013 was $52.7 million compared with net loss of $0.9 million in

2012. During the year ended December 31, 2013, the Company had realized gains on

its marketable securities of $8.4 millioncompared to realized losses of $2.8

million in 2012. The Company had unrealized gains on its marketable securities

of $25.2 million for the year ended December 31, 2013, compared to unrealized

losses of $4.8 million in 2012.

 

The Commercial Tanks & Home Heating segment generated EBITDA of $10.4 million in

2013 compared to $8.5 million in 2012. This increase was due in part to the

acquisition of 90% of Pro-Par Group ("Pro-Par") that was completed during the

third quarter of 2013. Subsequent to year end, the Company sold its Commercial

Tanks & Home Heating segment ("Jerico") to TerraVest Capital Inc. The

transaction valued Jerico at an enterprise value of $54.0 million. The Company

received $24.9 million for its 75% interest in Jerico in the form of a 6.50%

promissory note with a three year term.

 

On October 31, 2013, Clarke announced that it had entered into an agreement to

sell its truckload, less-than-truckload and freight logistics businesses (the

"Freight Transport Business"), which was included in the Company's former

Freight Transportation segment at the time. The transaction was completed on

January 1, 2014 and the Company received proceeds of $100.5 million on the sale

including an estimated net working capital adjustment of $12.5 million. The

Company had net income from discontinued operations of $11.2 million for the

year ended December 31, 2013 compared to $11.0 million for the year ended

December 31, 2012 which represents the results of the Freight Transport

Business.

 

Basic earnings per share for the year ended December 31, 2013 was $3.17,

compared to a basic loss per share of $0.05 for the year ended December 31,

2012, an increase of $3.22 per share. Book value per share at December 31, 2013

was $8.32 compared to $5.15 on December 31, 2012after deducting the payment of

$0.34 per share of dividends in 2013. Adjusting solely for the estimated gain on

sale of the Freight Transport Business (to be recognized in the first quarter of

2014) and reflecting the Common Shares outstanding as at March 6, 2014, the

Company estimates that its pro forma book value per share is $11.72 of which 75%

is held in cash and marketable securities. The Company's current trading price

represents a 34% discount to this pro forma book value per share as at March 6,

2014.

 

Clarke's Board of Directors also announced a quarterly dividend of $0.10per

Common Share payable on April 15, 2014 to shareholders of record at the end of

business on March 31, 2014.

 

Also subsequent to the end of the year, the Company redeemed $12.0 million

principal amount of its 6.00% convertible unsecured subordinated debentures due

December 31, 2018 (the "Debentures") using cash on hand.  The Company presently

has $34.5 million principal amount of Debentures outstanding.

 

 

 

thanks 50centdollars :)

 

sounds very nice for me.  :)

[Guest Dazel]

$11.72 book value...I expect all the converts to be redeemed.

[Guest Dazel]

http://www.ft.com/intl/cms/s/0/3166ebfa-a493-11e3-9313-00144feab7de.html#axzz2vImMzqBz

 

This will benefit Sherritt greatly....as Clarke's largest holding it matters to them.

 

Dazel.

[Myth465]

Looks like they are buying in the market daily.

10k will be nice, 10Q for Q1 will be nicer.

 

http://www.canadianinsider.com/node/7?menu_tickersearch=cki

[bizaro86]

RESULTS OF OPERATIONS

 

Net income attributable to equity holders of the Company for the year ended

December 31, 2013 was $52.7 million compared with net loss of $0.9 million in

2012. During the year ended December 31, 2013, the Company had realized gains on

its marketable securities of $8.4 millioncompared to realized losses of $2.8

million in 2012. The Company had unrealized gains on its marketable securities

of $25.2 million for the year ended December 31, 2013, compared to unrealized

losses of $4.8 million in 2012.

 

The Commercial Tanks & Home Heating segment generated EBITDA of $10.4 million in

2013 compared to $8.5 million in 2012. This increase was due in part to the

acquisition of 90% of Pro-Par Group ("Pro-Par") that was completed during the

third quarter of 2013. Subsequent to year end, the Company sold its Commercial

Tanks & Home Heating segment ("Jerico") to TerraVest Capital Inc. The

transaction valued Jerico at an enterprise value of $54.0 million. The Company

received $24.9 million for its 75% interest in Jerico in the form of a 6.50%

promissory note with a three year term.

 

On October 31, 2013, Clarke announced that it had entered into an agreement to

sell its truckload, less-than-truckload and freight logistics businesses (the

"Freight Transport Business"), which was included in the Company's former

Freight Transportation segment at the time. The transaction was completed on

January 1, 2014 and the Company received proceeds of $100.5 million on the sale

including an estimated net working capital adjustment of $12.5 million. The

Company had net income from discontinued operations of $11.2 million for the

year ended December 31, 2013 compared to $11.0 million for the year ended

December 31, 2012 which represents the results of the Freight Transport

Business.

 

Basic earnings per share for the year ended December 31, 2013 was $3.17,

compared to a basic loss per share of $0.05 for the year ended December 31,

2012, an increase of $3.22 per share. Book value per share at December 31, 2013

was $8.32 compared to $5.15 on December 31, 2012after deducting the payment of

$0.34 per share of dividends in 2013. Adjusting solely for the estimated gain on

sale of the Freight Transport Business (to be recognized in the first quarter of

2014) and reflecting the Common Shares outstanding as at March 6, 2014, the

Company estimates that its pro forma book value per share is $11.72 of which 75%

is held in cash and marketable securities. The Company's current trading price

represents a 34% discount to this pro forma book value per share as at March 6,

2014.

 

Clarke's Board of Directors also announced a quarterly dividend of $0.10per

Common Share payable on April 15, 2014 to shareholders of record at the end of

business on March 31, 2014.

 

Also subsequent to the end of the year, the Company redeemed $12.0 million

principal amount of its 6.00% convertible unsecured subordinated debentures due

December 31, 2018 (the "Debentures") using cash on hand.  The Company presently

has $34.5 million principal amount of Debentures outstanding.

 

I can't believe the market didn't react to this more. CKI is now my largest position.

[Guest Dazel]

 

 

Bizzaro,

 

Curious did you convert?

 

It is the first quarter report that is a killer quarter....they arranged the trucking deal to Jan 1... book value is now around $11.72!

 

Dazel

[bizaro86]

I did convert, and then bought a bunch more. I always looked at the convert as a play on the equity with a bit of extra margin of safety due to the capital structure seniority. I bought it exactly at the intrinsic value of the conversion (no time premium) so converting didn't hurt. I was surprised to see how few people converted before the tender, and I expect they'll probably offer for the rest soon, with the bonds trading at $1.10 per $1 of face value. I actually think they might get to buy in quite a lot of the bonds at par, because this type of paper is strongly pushed by brokers to retail investors in Canada who may not be paying attention, and the brokers have moved on to the next thing. It took me half an hour on the phone with my Canadian big bank discount broker to find someone who knew how to do a conversion, "since nobody ever does these." Would be a bit accretive for current shareholders if that's true.

 

I think this will be over $11 by summer, with very little downside risk, which makes it one of the better opportunities available (that I understand, anyway) in this market.

[Myth465]

I am thinking about adding substantially and its 20%.

There equity port will get hit with a downturn but they are making 30% returns on these purchases below.

 

They are buying them in the pension fund. I have no idea how pension accounting and taxation works, especially with Clarke basically buying shares in itself but its exciting. We had $34.5 million in Ds outstanding as of the 3/3.

 

http://business.financialpost.com/2014/01/17/clarkes-pension-fund-a-big-buyer-of-clarke-convertibles/

 

The fund controlled $7 million as of this article in Jan. Not sure if they redeemed or not, not sure if they have to act in the funds best interest or in Clarkes. Also not sure how the reporting works for the Fund. Will they redeem, or convert. Redeem means a loss to the fund and a reduction in the surplus which is owned by us. Converting leads to a 30% gain and addition to the surplus which is owned by us.

 

 

https://www.sedi.ca/sedi/SVTWeeklySummaryACL?name=W1ALLPDFC&locale=en_CA

 

Here is where it gets interesting. In March the fund bought another $18 million in converts, at par. They could have between $20 million and $28 million of the $34.5 million of converts depending on what they have done. This kills the dilution either way and means the BV of perhaps $11 is very valid now. Weakness in the market allows greater buybacks, and the dividends from the holdings will keep coming in.

 

Clarke appears to be that rare holding that lets you sleep at night in a pullback for now. They can withstand a 30% correction in the Oil Patch / Markets and still be at par while paying 5%. They also have a war-chest should said correction happen.

 

Clarke has also been in the market daily since the release buying 2000 shares. That eventually adds up and will also generate a 30% return. Clarke is earning $2k a day on buybacks.

 

2434780 Indirect Ownership -$1,852,000 100.0000 $6,119,000

Trustee of the Clarke

Inc. Pension Plan

2014-03-04 2014-03-10 38 - Redemption,

retraction,

cancellation,

repurchase

2434781 Indirect Ownership -$200,000 100.0000 $5,919,000

Trustee of the Clarke

Inc. Pension Plan

2014-03-11 2014-03-12 10 - Acquisition or

disposition in the

public market

2436652 Indirect Ownership +$46,000 110.0000 $5,965,000

[Guest Dazel]

 

 

Bizzaro,

 

Thanks for the update...I agree with your logic...that is why I converted. The dividend yield on the common is excellent.

 

Myth,

 

You are on to something. I have a good chunk...for a time I thought Armoyan might take the company out or pay a large special dividend. However, I am to happy collect dividends and wait for appreciation.

 

Armoyan's character was talked about here and characterized him as a great businessman...I did not know at the time he was Harvard business school educated...as were Leucadia legends Steinberg and Cummings...they are similar in style. They know company structures better than anyone in the world.

 

Dazel.

[jm25]

I bought some yesterday.

[Guest Dazel]

 

Myth,

 

Where do you see that they bought $18m at par? I do not see it on sedi.

Dazel.

[Myth465]

https://www.sedi.ca/sedi/SVTReportsAccessController?menukey=15.03.00&locale=en_CA

 

I hate Sedi but I was looking at the weekly report sorted by class of security.

Then I searched for Clarke.

[Pauly]

This is 100% a personal opinion (and I'm sure there are others with differing views!) but I wouldn't touch anything Armoyan is behind, especially Clarke. Some very shady dealings in the past...

 

Can you, or anyone else, shed more light on this negative opinion on Armoyan? I'm curious about this company but in businesses as small as this I'm very concerned with the character of the management team. A quick Google search hasn't turned up much, so what's the scuttlebutt on this guy?

 

 

[Myth465]

From what I have seen he plays hardball with everyone.

 

Think about it. He issued convertible debentures. Used that money for years to buy stocks and collect a yield which was more then the 6% he was paying out.

Stumbled the stock fell big, and then hit a home run. The converts have collected 6% for a while and now get to convert into 7:50, collect a 5% dividend and own a stock with a book value of $11 or perhaps $9.5-$10 after the convert.

 

He has said screw you all. I am making it so this doesnt convert. Then said screw that I will just buyback the converts at par even though they are worth perhaps 40 percent more. I told you via press release the book value so its not my fault if you are dumb enough to sell.

 

I believe he has done similar things with other companies and developed a bit of a reputation. I have watched the Canadian oil patch, and activism is more looked down upon there then the US. I was interested in Royal Host 3 years ago, but couldnt for the life of me figure out the long term plan. He has been buying the converts for years and essentially runs the thing. One day he will take it over or force a sale to a related party and let us know where he saw the value. The current share holders will get screwed though. Similar to Prem you typically dont want to own one of his control holdings. Though he appears to be looking after TerraVest, I dont like the 6% 3 year note we received. Prefer cold hard cash.

[plato1976]

I suppose if there is a big one-time dividend, we need to pay big tax on such a dividend;

so it's really bad and I'd rather they don't issue a one-time big div

 

From what I have seen he plays hardball with everyone.

 

Think about it. He issued convertible debentures. Used that money for years to buy stocks and collect a yield which was more then the 6% he was paying out.

Stumbled the stock fell big, and then hit a home run. The converts have collected 6% for a while and now get to convert into 7:50, collect a 5% dividend and own a stock with a book value of $11 or perhaps $9.5-$10 after the convert.

 

He has said screw you all. I am making it so this doesnt convert. Then said screw that I will just buyback the converts at par even though they are worth perhaps 40 percent more. I told you via press release the book value so its not my fault if you are dumb enough to sell.

 

I believe he has done similar things with other companies and developed a bit of a reputation. I have watched the Canadian oil patch, and activism is more looked down upon there then the US. I was interested in Royal Host 3 years ago, but couldnt for the life of me figure out the long term plan. He has been buying the converts for years and essentially runs the thing. One day he will take it over or force a sale to a related party and let us know where he saw the value. The current share holders will get screwed though. Similar to Prem you typically dont want to own one of his control holdings. Though he appears to be looking after TerraVest, I dont like the 6% 3 year note we received. Prefer cold hard cash.

[Myth465]

I dont think they will do a divi.

How do you run an activist shop without capital.

 

He inmo will force investee companies to pay a divi but wont pay one himself. He said he is patient on the last presentation. They will wait for a pullback inmo then move all in on a few holdings.

 

Now that I think about it. I think they will shift all operating companies (of scale) to Terravest, and Clarke will eventually just be an activist equity shop.

 

Either way I hold in my Roth so a divi wouldnt bother me.

[Guest Dazel]

 

Myth,

 

 

Looks like the pension fund owns $6m in convertibles from sedi..I have double checked.

 

Dazel.

 

 

 

[Myth465]

Looks like you are correct, I misread the column

 

Balance of

securities held

as of

transaction date

 

. The $6 million is the balance of shares left.

Looks like they are redeeming them at par or cancelling them.

 

Very tough to follow, each buy is followed by a redemption for both Clarke and the Pension fund. Tough to know total outstandings. I may take the 3/3 number reported and manually add up all insider activity since then. Looks like my total numbers were way off, but they are definitely trying to put these away before Q1.

 

Transaction

ID

Date of

transaction

(YYYY-MM-DD)

Date of

filing

(YYYY-MM-DD)

Ownership type

(and registered

holder, if

applicable)

Nature of

transaction

Number or

value

acquired or

disposed of

Unit price or

exercise price

Balance of

securities held

as of

transaction date

Conversion or

exercise price

Date of expiry

or maturity

(YYYY-MM-DD)

Underlying

Security

Designation

Equivalent

number of

underlying

securities

acquired or

disposed of

Closing balance

of equivalent

number or value

of underlying

securities

2014-02-21 2014-03-07 38 - Redemption,

retraction,

cancellation,

repurchase

2433185 Direct Ownership -$11,000 $33,000

2014-02-24 2014-03-07 38 - Redemption,

retraction,

cancellation,

repurchase

2433186 Direct Ownership +$4,000 103.5100 $37,000

2014-02-24 2014-03-07 38 - Redemption,

retraction,

cancellation,

repurchase

2433187 Direct Ownership -$11,000 $26,000

2014-02-25 2014-03-07 38 - Redemption,

retraction,

cancellation,

repurchase

2433188 Direct Ownership -$11,000 $15,000

2014-02-26 2014-03-07 38 - Redemption,

retraction,

cancellation,

repurchase

2433189 Direct Ownership -$11,000 $4,000

2014-02-26 2014-03-07 38 - Redemption,

retraction,

cancellation,

repurchase

2433190 Direct Ownership +$11,000 104.0000 $15,000

2014-02-27 2014-03-07 38 - Redemption,

retraction,

cancellation,

repurchase

2433191 Direct Ownership +$11,000 103.9800 $26,000

2014-02-27 2014-03-07 38 - Redemption,

retraction,

cancellation,

repurchase

2433192 Direct Ownership -$4,000 $22,000

2014-02-28 2014-03-07 38 - Redemption,

retraction,

cancellation,

repurchase

2433194 Direct Ownership +$11,000 103.5100 $33,000

2014-03-04 2014-03-07 38 - Redemption,

retraction,

cancellation,

repurchase

2433196 Direct Ownership -$11,000 $22,000

2014-03-03 2014-03-10 38 - Redemption,

retraction,

cancellation,

repurchase

2434780 Indirect Ownership -$1,852,000 100.0000 $6,119,000

Trustee of the Clarke

Inc. Pension Plan

2014-03-04 2014-03-10 38 - Redemption,

retraction,

cancellation,

repurchase

2434781 Indirect Ownership -$200,000 100.0000 $5,919,000

Trustee of the Clarke

Inc. Pension Plan

2014-03-11 2014-03-12 10 - Acquisition or

disposition in the

public market

2436652 Indirect Ownership +$46,000 110.0000 $5,965,000

[jouni1]

 

 

Bizzaro,

 

Thanks for the update...I agree with your logic...that is why I converted. The dividend yield on the common is excellent.

 

Myth,

 

You are on to something. I have a good chunk...for a time I thought Armoyan might take the company out or pay a large special dividend. However, I am to happy collect dividends and wait for appreciation.

 

Armoyan's character was talked about here and characterized him as a great businessman...I did not know at the time he was Harvard business school educated...as were Leucadia legends Steinberg and Cummings...they are similar in style. They know company structures better than anyone in the world.

 

Dazel.

 

this harvard mba thing seems odd. did he just get it? i googled his name and came up with this:

 

"In 1976, Armoyan's father sent him to live with an aunt and uncle in Boston; the rest of the family followed a few years later. When it came time for George to go to university, the family couldn't afford Harvard or other elite U.S. schools, but Lebanese friends in Halifax suggested the city's own Dalhousie University."

 

http://www.theglobeandmail.com/report-on-business/rob-magazine/the-lone-raider/article694584/?page=all

 

 

[SharperDingaan]

You might want to keep in mind that CKI is a fairly well known value-trap. The man is good at what he does, but as an investor in CKI over the long term, you will make little more than you would on a Canada.

 

If you do go with him, match his trades; you will eventually get a liquidity event.

 

SD

 

 

 

 

[Green King]

You might want to keep in mind that CKI is a fairly well known value-trap. The man is good at what he does, but as an investor in CKI over the long term, you will make little more than you would on a Canada.

 

If you do go with him, match his trades; you will eventually get a liquidity event.

 

SD

 

whats a liquidity event ? he will buy you out?

[plato1976]

CKI was a value trap?

I thought it appreciated well before 2007 and then fell hard just like other stocks, nothing special

 

You might want to keep in mind that CKI is a fairly well known value-trap. The man is good at what he does, but as an investor in CKI over the long term, you will make little more than you would on a Canada.

 

If you do go with him, match his trades; you will eventually get a liquidity event.

 

SD

[Myth465]

 

 

Bizzaro,

 

Thanks for the update...I agree with your logic...that is why I converted. The dividend yield on the common is excellent.

 

Myth,

 

You are on to something. I have a good chunk...for a time I thought Armoyan might take the company out or pay a large special dividend. However, I am to happy collect dividends and wait for appreciation.

 

Armoyan's character was talked about here and characterized him as a great businessman...I did not know at the time he was Harvard business school educated...as were Leucadia legends Steinberg and Cummings...they are similar in style. They know company structures better than anyone in the world.

 

Dazel.

 

this harvard mba thing seems odd. did he just get it? i googled his name and came up with this:

 

"In 1976, Armoyan's father sent him to live with an aunt and uncle in Boston; the rest of the family followed a few years later. When it came time for George to go to university, the family couldn't afford Harvard or other elite U.S. schools, but Lebanese friends in Halifax suggested the city's own Dalhousie University."

 

http://www.theglobeandmail.com/report-on-business/rob-magazine/the-lone-raider/article694584/?page=all

 

Thanks for the link

 

http://www.newswire.ca/en/story/1239055/geosam-capital-inc-increases-its-investment-in-holloway-lodging-corporation

 

I noticed in the Terravest presentation they mentioned Geosam. I think they will eventually merge Royal Host into Holloway in a stock for stock transaction.

 

 

plato1976, that was my read on the situation. They did quite well and then fell apart in 2007. SD why do you say value trap?

[SharperDingaan]

Not a popular view, but ... use the TMX site & chart CKI versus FFH over a 20 year period, over 1 year intervals.

 

CKI. For long periods of time, 2000-2003, 2009-2012, CKI doesn't change much in price; then there is a liquidity event, 2004-2007, &  today, which spikes the price. Research the names under these events, & rest periods, & there are some commonalities. Given that there has been more than one extended rest period, if you were a CKI investor during one of those rest periods; the term value trap is exactly correct.

 

CKI versus FFH. The big 2007 CKI drop off is akin to the old short raid on FFH, but even when FFH is resting - its value rises by more than CKI does during equivalent rests. And many folks on this board have suggested that while FFH is hedging, there are many better opportunities elsewhere; ie: FFH itself is a value trap while they insist on hedging.

 

Nothing wrong in any of this, but do you want to be the one getting the tip - or the one giving it?

 

SD