Amit Chokshi

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  • Analyst Estimates for Jarden in 2009 Look Ridiculously Optimistic
    My whole write up is based on how much cash I think JAH can generate in the coming year. Q4 is a seasonally strong cash generation business for JAH but they burn through it in Q1-Q3, it's a seasonal business and they use a lot of cash in terms of working capital. Just look at how much operating cash flow JAH produced in the first 3Qs of 2008 and 2007, it's $55MM and $23MM. That's their operating cash flow, and then they still had capex of $70MM and $55MM meaning they were burning cash on a purely operational level. The only way they've managed to handle their debt load is refinancing, just look at the cash flow statement www.sec.gov/Archives/e... here and under page 5, financing cash flows, these guys pay back some debt, like $20.7MM but tap their revolver/short term debt for $69MM and issue new debt of $25MM. Look what they did in the previous period.

    Q4 is basically JAH's entire year and is generally a strong operating cash flow period but they still don't get very far with their total cash production. Look at the 8-K www.sec.gov/Archives/e... for their Q4 07. They had $282MM in operating cash flow but still spent $32MM in investing cash flows and then they had to pay back about $150MM in debt, so the total net impact was $100MM in cash flow. Notice I didn't count the $40MM share repurchase either, I'm giving these guys as much lee way to show real, operating-related free cash flow. The biggest driver for JAH's cash flow in Q4 was the big swing in inventory since last year's xmas was much better than 08 will be.

    The potential risk I see is that JAH has roughly the same inventory level of $1.3B going into Q4 08 that it had in Q4 07 and those quarters were comparable with K2 and Pure Fishing. If sales are not as strong in Q4 08 as they were in Q4 07, inventory turnover will be weak and a big part of JAH's cash flow won't show up meaning there will be very little net cash produced for Q4 08 and likely until Q4 09. Even with a "good" Q4 07, keep in mind that JAH at $2.7B in net debt in Q3 07 going into JAH's strongest quarter, and ended 2007 with net debt of $2.5B and that was a good Q4. They have roughly the same level of net debt going into a worse holiday season with the same level of inventory, I'm not too confident they can pare much debt back in the next few months.
    Dec 06 22:48 pm |Rating: 0 0 |Link to Comment |View article
  • Jarden's 'Rope a Dope' Investor Relations
    I'll have a follow up in a few days but if you're that "anxious" post with your real name and email address and I'll send you my thoughts on JAH or do you prefer to post anonymously? LEH is one of my favorite research houses, if it wasn't for Bruce Harting, CFA and his views on DSL, it would have been much harder to make $ off shorting since his institutional clients would not have been holding the bag.

    What's so slanted about what I've written in regards to JAH over the past year I've followed the company? What is not factual in what I've presented?

    1) Did Franklin and Co issue a press release covering their paltry $2MM insider purchase? YES, and what the hell is the point of something like that, how many companies put out PRs highlighting a $2MM purchase? AP wires may pick up on the Form 4 filings but do companies release a statement about it?
    2) Where are the JAH filings that indicate Marlin Equities (Franklin) and Ian Ashken have gone on to create two SPACs on JAH time while JAH shareholders have lost 40-50% of their investment value? If you're happy to have your CEO and CFO spend their time investing in GLG and raising capital during the time they're supposed to be running your company while being paid by JAH shareholders, fine. But what have I said that was slanted with respect tothat?
    3) Any press release covering the acceleration of equity grants to Franklin and Co recently? NO, and I wonder why there would be a PR on Franklin spending a few bucks to buy shares but then no PR to cover the fact that they are getting equity grants accelerated.

    So what have I stated that is slanted or tabloid journalism, everything I've presented in FACT. Is your long position preventing you from reading anything that contradicts your position with an objective mind? Seems that way.

    You find it amazing that SA allows people to post contradictory but factual based work with real analysis? If I was long on JAH and published a rosy piece saying ignore the fact that Franklin and Ashken are making a fortune off other investments and investing their time in creating and directing these SPACs while they're supposed to be running your company, ignore the incredible debt load because those Margarita concoctions and bicycle playing cards are hot sellers, or ignore the difficult Q4 comparisons since they jammed that K2 acquisition in their to gum up any comparable analysis, then that would be fine with you?

    You see right through me? You're a pathetic anonymous poster upset about a contrary view to a position you hold. I do this for a living and put out any comments/analysis along with my real contact info. Do you think I'd publicly discuss any idea if I did not vet the idea and believe there was tangible analysis to back my viewpoint from the start, have you read the prior postings on JAH here? If I put out anything that resembles tabloid journalism, how does that benefit me from a professional standpoint? Seems you think people are that foolish to think that 1) writers here can move actually markets 2) that people can't distinguish between objective work and slanted short work (although slanted long views are fine).
    Feb 17 16:57 pm |Rating: 0 0 |Link to Comment |View article
  • Jarden Remains a Compelling Short
    Daniel, yeah excess cash is the right way to do it. It's at it's low so so realize it could easily kick up for a bit and probably do your own dd, I was short DSL at $68-70, was around $75 for about 6 months after I started shorting before it corrected so the point for me is if something doesn't make sense to me i'll stick with it for a while. I've been following JAH since last year and I wouldn't be surprised if it sees $30 before $15. My approach to shorting and sticking it out with a position might not makes sense/fit with others either, depends on the entire portfolio composition.

    prophets - K2 + JAH capex based on historical figures would seem to indicate they'd need about $100MM in capex, the run-rate interest expense based on the blended interest rate for their debt would be about $200MM and then factor in cash taxes of $116MM or so once you account for D&A of about $110MM. Those fixed charges before any principal amortization (which would be minor since the senior debt is 3 tranches of B loans, another move where the bankers are dopes) and capital leases is $420MM. EBITDA less capex would be around $500MM, resulting in a fixed charge ratio of 1.2x. Interest coverage is under 3.0x. Those are aggresive leveraged finance multiples for buyouts by LBO shops and would be a challenge in today's market against a fresh buyout. Conversely, JAH has a dwindling business with bad credit stats on a totally pro forma run rate basis. It's LTM EBITDA just about $360MM so once again people are betting that JAH will realize all these "synergies" they boast of with K2, if they don't or if K2's own deals (it bought a bunch of companies) fizzle out these guys slow down, the interest expense stays the same, principal amort, not much capex can be scaled back, and then their stuck with $1B+ in stale inventories with the majority as finished goods vs work in progress/raw material.

    Also, guys like TGT, WMT, SHLD might have heavier push backs during the holiday season, JAH argues that they have "leading brands" but many of these business were bankrupt before despite those leading brands. Don't know if you really have to have that CrockPot for the xmas or how many Margaritaville's can be sold through. Also, last call, good choice of words by JAH to indicate sell-in was good for sporting goods but based on GMTN and other results, sell -through probably won't be and there could be some returned products.

    All that said, JAH's CEO and CFO are wall street heavies, the banks and sellside are in their back pocket but I see some similarities between JAH and other failed consumer products platforms. SPC looked great on a pro-forma basis, had TH Lee running things and that got crushed by debt from $40 to $5, PBH had a similar experience, that was led by GTCR. So smart money, heavy debt, but exposure to big box retail that just squeezes you once you become dependent on them. Those margins don't leave much room for error when you have that heavy interest expense let alone principal amortization to deal with.
    Dec 20 09:52 am |Rating: 0 0 |Link to Comment |View article

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