GDP, M&A, EBITDA, P/E, NASDAQ, Econo-thread Part 11

[TCO]

Colon,

Thanks for your take.

I work as a ski instructor there. They generaally have a good rep, fininacially. Especially as compared to Intrawest or American Ski corp which are much higher leveraged. Real Estate is small at Vail (6% of revenue). The ski slopes themselves are federal land (leased). They do real estate on associated developments. I don't think they could have a liquidity crunch because they have a large line of credit available.

Regarding outsourcing: usually the revenue remains the same (based on end product sales). COGS remains ABOUT (maybe small incr or decr.) the same...what changes is portion of COGS spent on manuf versus raw materials...but that is usually not broken out anyway...for external eyes.) Also some other effects lower CAPEX, lower PPE, lower working capital, one-time charges/benefits (associated with sale of assets, cleanup of facilities, severances, etc.), lower depreciation.

The one example I'm familar with is drug manufacturing.

[Colon™]

Could you tell me how large that credit line is and what the conditions are?

Finances indeed look worse at those other two, but that doesn’t necessarily mean they’re “good” at MTN. All those companies went through rapid growth the past few years and it could be the sector collectively over-extended itself. (compare it to the movie-theater business)
The least you could say is that growth at this rate may not be attainable in the future.

Of course, I’m saying this with reservation because I don’t know much about the sector. Actually, I’m surprised it has such large stock market-listed corporations.

What’s COGS?

[TCO]

COGS = cost of goods sold
PPE = property, plant, and equipment

According to Yahoo message boards:

They have a $400 million revolving line of credit that is untapped....no problem closing this deal and soon....bonus for quick closing. Expect it by mid to late April.

Looking at the 2001 10K:

it is up to 450 mil useable up to 2003. And currently Vail is only using 120 mil of it. It is described on page F-12.

[Sten Sture]

MTNs line of credit is lead managed by Bank of America, however as is common with large corporate loans, it is syndicated, which means that the lead bank keeps some of the loan (or commitment) and sells off the balance to other banks/finance companies.

The line matures in '06 and carries a 0.375% commitment fee and a 1.375% + 3mo Libor interest rate if drawn. (revolving lines are like credit cards - they carry a maximum and can be drawn and paid back - used a lot for seasonal businesses)

The loan commitment is 146 pages long, but it does have some language about minimum EBITDA coverage, debt to cap and other stuff like that.

EBITDA to interest coverage has been running about 4x, which is not bad for a B/B2 rated company, but the rating is there because of the highly seasonal nature of the business. I would expect that a decent chunk of the value of their business is the real estate that they own some of their development subsidiaries, so P/E may not be super relevant. Those properties would be carried at book, and if the real estate has appreciated, like all good real estate does in the USofA, then they should have a significant unrealized gain on the books.

[TCO]

Sten, I just read the 10k. Is the 146 page loan commitment public? How does one look at it? just curious.

[Colon™]

GP, thanks for explaining the acronyms.

Sten, at which point would they revalue RE in the books?

When you said that P/E may not be super relevant, did you meant that the analysts following the corp don't pay much attention at it, or that there shouldn't be paid much attention at it? (there's a difference between principle and practice)

[TCO]

Originally posted by Colon

Sten, at which point would they revalue RE in the books?

Colon it's one of those things about accounting. Book value of land is initial purchase price...sometimes for decades. Just one more reason to be very wary of accounting or simple ratios when doing valuations.

When you said that P/E may not be super relevant, did you meant that the analysts following the corp don't pay much attention at it, or that there shouldn't be paid much attention at it? (there's a difference between principle and practice)

I think his point is that EPS doesn't reflect real value.

[Colon™]

Yes, but what do the analysts think about it? I'm interested in how much influence it has on the share price, not so much whether it in fact is a good tool to measure the corp's real value.

[Sten Sture]

Originally posted by GP
Sten, I just read the 10k. Is the 146 page loan commitment public? How does one look at it? just curious.

It is Exhibit A of the 10-Q, should be public; I got it on the Bloomberg. I think it is page 146 of 365 or so, rather than 146 pages long... my bad. Might be accessable because there is a secondary market for bank loans now - didn't used to be the case before this new-fangled internet thing.

Not at all sure how MTN disloses their real estate ownership. Some is probably in whole or partially owned subsidiaries and partnerships. If I were going to evaluate the company thoroughly, I would try to find out what property they own, how it is listed on the books and what, if any, difference there might be between book and market.

Real estate and finance companies are notoriously hard to analyze properly - give me a manufacturing company anytime.

colon - I'll dig up an analyst report on MTN and see what they say about valuation metrics...

[Colon™]

Ok, thanks.

[TCO]

Sten, the company only had 6% of revenue from real estate last year...and typically doesn't have much real estate income. This makes them different from Intrawest which started life as a real estate company and still gets substantial income from real estate.

Colon if EPS is a flawed metric and if analysts rely on it/taut it, how would that affect your evaluation of the company? (Not a rhetorical question...am asking seriously how that would affect your view of the company as an investment or as an operation?)

[pchang]

income vs. book value

Income from Real Estate and Book Value from Real Estate are very different things. Lack of income doesn't necessarily mean lack of book value.

[TCO]

Agreed. And I expected somebody to say that. But if the company traditionally has low % of income from real estate...and if they lease all their slope land from the forest service, that info should help some...

[faded glory]

holy hell. AOL/TW posted 50 billion...im pretty sure it is billion and not million..

anyway they said it was a concern, but did better than expected

[Urban Ranger]

Quick question

What is the difference between GDP and GNP? Or are they the same, just that GDP is more... in vogue?