A daily recap and a first look at the LPS report…
It was a pretty ugly day masked by some flattish action in the broader indices. I did sell down the stocks and calls I’d mentioned I was looking to and I still have a little bit more working on the same sell orders tomorrow.
LPS is out and it’s pretty darn ugly, IMHO. Recall that they’d preannounced that earnings would be horrible this quarter, and they were, coming in at 56 cents, down huge from last year’s 89 cents a share. But much more important than the so-called earnings this quarter are tidbits like this in the report:
The company noted that, in light of current market conditions, it continues to evaluate its cost structure as well as potentially underperforming assets. As a result, the company recognized a pre-tax restructuring charge of $7.9 million during the quarter primarily relating to continued personnel reductions. Also, the company recognized a $31.8 million pre-tax asset impairment charge ($26.6 million for certain services now classified as discontinued operations and $5.2 million in continuing operations) relating to the write-down of certain investments that the company is evaluating for potential sale or wind down.
Or how about the fact that they’re suddenly looking to raise a billion dollars…asap:
The proposed financing is expected to consist of a $400 millionrevolving credit facility, a $350 million 5-year Term Loan A and a$550 million 7-year Term Loan B. Proceeds will be used to refinance existing indebtedness, pay related fees and expenses and provide for other general corporate purposes. The new senior secured credit facilities are expected to enhance liquidity, extend maturities, and provide more flexibility under the covenants.
This is looking more and more like the vicious cycle we were looking for when we started this short. The company’s desperate for cash just as their stock is crashing and the terms of financing are looking increasingly onerous.
We won’t know how she trades tomorrow til she trades tomorrow…but I’d be surprised if this report is received well from the Street. After seeing these results, my confidence in this short increases yet again and hopefully, the stock will pop some or even stay here early in the morning so we can short even more.
Rock n roll. Oh, and if your free trial is ending, be sure to come sign up permanently at http://tradingwithcody.com.